November 19, 2020
Our personal finance skills are something we all want to improve, but where do you start? We look at practical ways to improve your skills and help your own situation here.
Money is a topic that impacts every aspect of our lives yet often remains shrouded in mystery and uncertainty. Many of us want to make better decisions with our finances, to understand how money works, and to navigate the complexities of personal finance with confidence.
Improving your overall financial literacy can help you make better decisions and feel more confident handling your money. There’s a variety of ways you can work to improve your financial literacy.
Improving your personal finance skills is a lifelong pursuit. In order to best manage your own personal finances, there will always be new skills to acquire.
There are some basic skills everyone should know, like how to create a budget and save for the future.
There are also more complex skills that require more effort to learn. Choosing the right savings and investment plans for your situation, for example.
Personal finance skills can also help keep you safe from fraudsters. Those who lack the proper skills are more likely to fall victim to a variety of scams.
If you’re unsure how much you currently know about personal finance the government of Canada has a self-assessment quiz on financial literacy you can take to find out where your skills are at right now. It takes less than 10 minutes to complete.
There’s a variety of ways you can begin to improve your personal finance knowledge. Here are some of the best.
We said that creating a budget is a basic skill, and that’s true, but during a time when one in four Canadians are unable to cover an unexpected expense of $500 or more, it’s vital to have one.
To start, begin tracking your spending. See if there are any areas or regular purchases where you’re spending more than you thought you were. Our budget planner tool can help you get started with this.
After tracking your spending, create a basic budget that outlines your income and expenses. Start by listing your sources of income, including your salary, government benefits, and any income you may receive if you do gig work.
Then, list all of your regular expenses, including rent or mortgage, utilities, transportation, groceries, and entertainment.
From here, you should be able to see where you can make cuts or adjustments. Look for areas where you can lower your spending and put that money to better use.
Once you have your budget set up, it's essential to track your progress regularly.
Your budget is not static; it should evolve with you and your needs.
Debt is a subject we don’t normally talk about; in fact, a 2023 BDO Affordability Index found it was the number one subject Canadians avoided discussing.
It’s something we need to discuss, though, and there are some basic questions you should be able to answer about your debt.
Number 1: Do you know what your total amount of debt is? If not, it’s something you should find out.
Number 2: Do you know when you’ll be debt-free using your current debt repayment strategy?
Knowing the answers to these questions will help you improve your financial literacy about your own situation. They’ll help you gain a sense of where you are financially and if you’re on track to meet your long-term financial goals.
Also, consider what kinds of debt you have. Not all debt is bad. A mortgage or student loan is an investment in your future, as long as you can afford them.
Credit card debt, though, is not a good thing to have. If you’re carrying a balance from month to month, then it’s time to begin prioritizing paying it off as fast as possible.
A great way to improve your financial literacy is to work on improving your credit score. Improving your credit score requires dedication and patience. It doesn’t happen overnight, but working on it will teach you a variety of financial skills.
The easiest and best way to improve your credit score is to pay your bills on time and in full. Making the minimum payment alone won’t do it. If you can’t afford to pay all your bills in full each month, prioritize the ones with the highest interest rates; often, this means credit card debt.
Paying down high-interest debt first will save you money in the long run and help improve your credit score at the same time.
There’s a variety of tools you can use to help you improve your credit score, too. A secured credit card, for example. This is a credit card where you deposit money, which also becomes your credit limit.
So, if you deposit $700, your limit on the card is also $700. Unlike a prepaid credit card, secured credit cards report your transactions to credit bureaus, which helps improve your credit score as long as you make your payments on time and in full.
There is no one right way to increase your skills when it comes to personal finance. It often depends on what matters most to your own situation.
The personal finance skills you learn should be allow you to help improve your own situation. You don’t have to become an economic genius on all financial matters.
Building your personal finance skills and your confidence will pay dividends by inspiring you to put even greater effort into your financial health.
If you are facing significant financial challenges and are unsure about your options, a Licensed Insolvency Trustee can provide valuable support and guidance. License Insolvency Trustees are federally regulated and can assist you in overcoming your financial issues.
They are bound to act in your best interest and offer a judgment-free environment where you can openly discuss your financial struggles without fear of stigma or criticism. The first consultation is always free of charge.
November 19, 2020
Our personal finance skills are something we all want to improve, but where do you start? We look at practical ways to improve your skills and help your own situation here.
