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Money Advice for Life
Celebrating Credit Union Day: building financial health
Today is Credit Union Day – a day to pause and reflect on what it means to be a Credit Union and why we exist. For us, it’s to improve the financial well-being of members and communities. This year’s theme celebrates Building Financial Health for a Brighter Tomorrow. At Conexus, we believe a brighter tomorrow is the result of a well-equipped financial toolbox. Having the tools, knowledge, confidence, and resources to help guide you through difficult decisions and situations and find balance in your finances. Let’s dive a little bit deeper into what that means.
Finding balance in your finances is key to reaching your goals – but it isn’t always easy to achieve. Knowing where you should be focusing your efforts, how much you should be saving, identifying goals, the list goes on. Even Eric Dillion, Conexus CEO, and Joel Mowchenko, Conexus Board Chair struggle with financial well-being from time to time. Eric shared, “your income doesn’t matter – people experience the same emotions around money, and they aren’t always positive.”
To make it easier, we’ve defined balance using four categories: Spend, Debt, Emergency, and Save.
Understanding your spending habits is about knowing the amount of money you have coming in versus the amount of money you have going out. AND this truly is the foundation of money management – getting to a place where you spend less than you earn on a consistent basis.
What is comes down to? Awareness of where your money is going.
You’re probably sick of hearing this, but managing your spending well is about understanding your wants versus your needs. Here are a few tips:
When you’re thinking about making a purchase that is a want, sleep on it! If you wake up the next morning with the same desire to purchase, it’s likely a sign it’s a better purchase.
Try considering your “want” purchases in terms of hours you’d need to work to pay it off. Does it still appeal to you on the same level?
Ask yourself, what are my money thieves? Those, often small, but compounding purchases that can quickly add up over time. Understanding what these are can be a good reality check.
Here are a few blogs that help break this down even further:
“Ouch, My Budget!” – Tips for Getting Your Finances Back on Track
What I learned From My 90 Day Spending Freeze
Kick-start your finances: tracking your spending
Debt is inevitable – but it’s often given a reputation for being bad. While not all debt is bad, regardless, it’s important to have a plan to pay it off. Here are two key things for managing your debt effectively:
1. Avoid carrying a balance on high interest debt products
Although appealing at first, it can cause you to quickly spiral into a sea of debt. For example, carrying a large balance on your credit card from month to month. This can be very expensive and impact your potential for saving.
2. Know how much of your income goes to paying debt (A.K.A “Debt Servicing”)
As I mentioned, debt is inevitable. It’s often needed to purchase a house, buy a vehicle, for school, etc., but having the right balance of debt-to-income is important. Its recommended to keep this percentage at or below 35%, and if you are more risk-averse, the lower the better with this number.
Looking to dive deeper? Check out these blogs:
Good Debt vs. Bad Debt
Top 5 Strategies to Pay Off Your Debt
Credit Cards 101
The Real Cost of Carrying a Balance on a Credit Card
We’ve all had them. Those unexpected situations that disrupt any financial stability or plans we might have had. From cracking your phone screen and needing to replace it, to your water heater breaking – having an emergency fund can ensure you’re financially prepared.
When you have your spending in check and you are not carrying a balance on high interest debt, it is time to build an emergency fund. Best practice is to have between 3 and 6 months of “usual expenses” available in case of job loss, sickness, family emergency, etc.
You are likely thinking… my goodness that is a LOT of money. It is. Trying to break it down into manageable steps will help you get there. Further, keeping your emergency fund in a separate account is proven to help keep you accountable.
Where should you keep your emergency account? A high interest savings account, redeemable term deposit or low risk investment fund are all possibilities, depending on your risk tolerance!
Check out, The importance of having an emergency fund, to learn more.
Okay! Made it. Spending is in check. Not carrying high-interest debt. An emergency fund is on its way. It’s time to think about short term and long-term savings goals!
For your short-term goals, be it a down payment on a house, a new bike or a trip to Europe, it’s key to plan for these expenses in advance. Like an emergency fund, it is ideal to hold these funds in a named separate account (keeping your eye on the prize) and contribute to them on an ongoing basis.
For long-term goals, like retirement, the concept of paying yourself first remains key here. Again, moving a certain percentage of your income towards your long-term goals on pay day is a great strategy. Making this automated, to remove any barriers or reasons not to contribute, can help keep you on track.
Want to know more? Give these blogs a read:
The Gift of Goals & How to Reach Them
What Does it Really Mean to Pay Yourself First?
The Key to Basic Savings
When should I ACTUALLY start saving for retirement?
Joel Mowchenko shared, “financial health is how we think about money, how we relate to it, how we interact with it”, and everyone’s version is going to be different. Having a well-equipped financial toolbox; the knowledge, confidence, and resources, will ensure you’re building a healthy relationship with money, ultimately enabling the life you want to live.