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Published : Oct 29, 2018

7 Things Canadians Need To Change About Their Finances

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In a recent poll, BDO found that 59 per cent of Canadians in a relationship would like to change at least one of their partner’s financial habits. Whether overspending, not saving or just not keeping track of what they buy, several couples have their own personal pet peeves when it comes to their partner’s spending. Here are the seven biggest concerns we found in our poll:

 

 

Here are some things to think about as you plan your financial future... you are planning right?

 

1. Overspending or a lack of budget.

 

There are definite long-term costs to overspending. For instance, when you overspend, you are wasting dollars that you could otherwise deposit into savings accounts or other investment vehicles. That becomes money that never has a chance to grow from compound interest.


Think, too, about how much better it'd be to take that extra $100 you spent on movies and dining out toward paying down your car loan or credit card debt. Moreover, if overspending forces you to put other purchases on your credit cards? Now all those extra iced coffees are adding to your high-interest rate debt.

 

2. Not saving enough for long-term goals like retirement and emergencies. 

 

Every household should have enough emergency savings to cover at least three to six months’ worth of bills and expenses. Some people are more vulnerable and may need to save more, including contract workers, people who are self-employed, single parents, and couples with one income. When calculating your monthly costs, be sure to include everything you need to pay for, from food and transportation, to the mortgage and electricity. Don’t forget periodic expenses as well, such as property taxes and biannual auto insurance payments.


According to CNBC, Fidelity Investments calculates that every $1,000 in monthly income you expect during retirement requires the following approximate monthly savings:

•    $160 if you start saving at age 25
•    $270 if you start at 35
•    $500 if you start at 45
•    $1,154 if you start at 55

 

It’s a good idea to consult a financial professional on these concerns. And, no matter how you develop your retirement saving strategy, remember to review it periodically to ensure you’re on track.    

 

3. Not keeping track of their spending.

 

Most people nowadays know the importance of keeping track of their finances and spending habits. That being said, many people still don’t bother to do it. It can often seem overwhelming or tedious having to keep track of spending, but in the end, it’s always worth it.

 

Tracking your expenses daily can really help you save a lot of money. One of the most important things you can do when trying to get your personal finances under control is to figure out WHERE all of your money is going each month.

 

4. Lack of knowledge about personal finance. 

 

When it comes to managing our personal finances, many Canadians are falling short and lack basic money-management skills. In a PwC study, which found that only 24 per cent of millennials have basic financial literacy, and eight per cent have high financial literacy.

 

“This lack of financial expertise may have an impact on the ability of millennials to attain the financial success they desire,” the report notes.


Talking to a financial advisor or your accountant should be the first step in your plan to a healthy financial future

 

5. Not investing enough. 

 

The consequences of not saving enough for retirement can play out in numerous, yet subtle, ways. The results aren’t always disastrous, but they’re almost always sad. Sometimes, not saving enough for retirement doesn’t spell disaster, but kills dreams instead. Think of everyone you know who wanted to travel the world during retirement, but sits at home watching their pennies instead.


Unless you have a secret plan to get free money or you're lucky enough to hit the lottery, not saving enough for retirement will leave you scrambling to get by in old age. At the very least, you'll need to work longer or make serious adjustments to your lifestyle to get by. 

 

6. Using credit cards to extend their income.

 

The worst idea and the most dangerous has to be this one. With credit card companies charging interest in the 20% range you will never be able to effectively manage a saving regiment if you are always chasing your credit card payments.


It's best to keep your credit card balance low enough that you can afford to pay it off each month, keeping in mind that any balance higher than 30 percent can have a negative impact on your credit score. To avoid maxing out your credit card by mistake, check your credit limit before making a credit card purchase.

 

7. Following the Crowd.

 

When it comes to investments, it can be easy to be talked into a decision when a friend, co-worker or family member regales you with stories of successes with a particular stock or strategy. After all, when people talk of great outcomes and returns, it’s only natural to want to get in on the action yourself ... great outcomes and great returns are why you’re investing, right?


Having this desire to follow the crowd isn’t a rare phenomenon; it adheres to the common mindset of “safety in numbers” and taps into people’s fears of feeling regretful in the case they had a “hot tip” they didn’t act upon. 


Stick to a solid plan and never invest more that you can comfortably watch disappear from existence.
 
 

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