29 May How to set good financial habits
According to a 2016 report from Statistics Canada, the ratio of debt to disposable income in the third quarter rose to 166.9%. It is easy to get lured in by low interest rates, sales and keeping up with the Joneses, but poor financial habits can have a ripple effect on your financial future – from being in debt, living paycheck to paycheck, and having little to put away for retirement. Fortunately, with time and effort, those habits can be corrected.
Here are four steps to help set (and maintain) good financial habits:
Assess your current actions
It’s hard to make a change if you don’t know where to start. Take stock of your current financial habits to determine where you need to make adjustments. Are you spending more than you’re saving? An advisor can help you assess your current situation and help you create a plan of action.
Create specific goals
What gets measured gets done. When you’re trying to correct a certain action or behaviour, a goal helps to keep you honest, by acting as a benchmark to measure yourself against.
If you want to save more money, for example, set a goal for how much you’d like to save and when you’d like to achieve this goal by. Take an inventory of your income versus expenses and determine how much of your monthly income can be put aside for this goal. Be realistic when it comes to setting a goal. One of the biggest reasons why anyone fails to achieve a goal is because of unrealistic expectations. Gradually work your way up to your ultimate objective.
Make your adjustments
Once you’ve set realistic goals and learned how to achieve them, it’s time to implement those changes into your daily routine. Forming new habits takes time, so in addition to setting realistic goals, be patient with yourself. You may not cut out unnecessary spending cold turkey, but you will over time.
If you want to save more money, but have never done so, now may be the time to set up pre-authorized payments. As your spending decreases over time, you can increase your contributions. If you’ve always wanted to start saving for retirement, but never had the disposable income to do so, now is the time to open a Registered Retirement Savings Plan (RRSP).
Check in on your progress
Success is the best motivation when you’re trying to accomplish a goal, so do your best to track your efforts. If you’re trying to save more money, you can download a mobile app to track your progress and stay up-to-date with deposits and withdrawals. Once you achieve your first goal, you’ll be motivated to set the next one. Before you know it, you’ll have a collection of good financial habits and be in better financial shape.
If your money management skills are less than perfect, there’s no time like the present to start making changes. For more financial planning advice, please contact Harry Perler or David Olejnik.
To read this article by Mackenzie Investments online, CLICK HERE.