More than ever, physical and mental health is top of mind, but what about financial wellness?
Research shows that physical and financial health are closely connected, and how an individual feels about their personal financial situation can impact both.
Financial wellness is defined by your relationship with money. It’s more than the numbers that show how your investments are performing. It’s the ability to meet your financial needs comfortably today, a feeling of security about your future, and the freedom to make choices that allow you to enjoy your life now and down the road.
Here are ten tips to help you achieve financial wellness:
1. Have a Total Wealth Plan in place
A Total Wealth Plan can help you prepare for future challenges and goals. According to FP Canada, 85% of Canadians with a detailed plan reported higher levels of financial well-being compared to those without one.1 A Total Wealth Plan acts as a roadmap for your financial future, helping you balance and prioritize short- and long-term goals. These may include retirement, making significant purchases, funding your child’s education or preserving wealth for your family. The Rosenberg Dri Financial Group can work with you to develop a Total Wealth Plan and implement strategies to help you achieve your goals, enabling you to envision your future with clarity, peace of mind and confidence.
2. Undertake a strategic review of cash flow
Take the time to conduct a strategic review of your cash flow for the year. Reviewing your cash flow helps you keep track of your saving and spending and prepare for unexpected expenses. You may also find that you need to cut certain costs or increase your income or have excess cash you can put to better use. Strategically reviewing your cash flow can also help you earmark funds to reach future financial goals — for instance, making a large purchase like a new house or car.
3. Establish a “reserve” fund
It’s important to have a reserve, also known as a rainy day fund, to cover costs related to unexpected life events. A common rule of thumb is to save up to six months of living expenses to protect you against sudden financial burdens.
Having access to a low-interest credit facility is also an option to consider.
If you currently don’t have funds set aside, try to earmark an amount you can save regularly and access for something unexpected like a significant home repair or illness in your family.
4. Save and invest for the future
No matter what you’re saving for, planning early is key to financial wellness. The earlier you start, the longer your savings can grow and help you achieve your long-term goals. To prioritize your savings, maximize contributions to vehicles that create tax-sheltered growth, such as your Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA) and Registered Education Savings Plan (RESP). An RESP also allows you to benefit from government grants. If your employer offers a group retirement plan, pension plan or an employee share-ownership plan, take advantage of any available employer-matching programs.
5. Manage the taxes you pay
A proper tax plan can significantly boost your wealth throughout your working years, during retirement and when your assets are transferred to loved ones. A few items to consider: Are your investments held in the most tax-efficient type of investment account? Is there an opportunity to take advantage of strategies like income splitting, tax-loss selling, a spousal loan, charitable donations or an estate freeze? A customized Total Wealth Plan can include different strategies to discuss with your tax advisor that may help reduce or defer the amount of tax you owe. It can also offer you a range of options designed to deliver a regular stream of tax-efficient retirement income.
6. Understand your debt situation
From getting a mortgage to a line of credit, having some form of debt is common and can be a smart strategy in certain financial situations. Be sure to have a plan to pay off your debt and minimize interest charges. While interest on money borrowed to buy a home or for other personal use is not tax-deductible, the cost of borrowing to acquire assets to earn income (such as business, investments and rental property) may be tax-deductible. Speak with our office to discuss the merits of debt restructuring and innovative borrowing strategies to utilize borrowed funds for non-registered investments, which may improve tax efficiency and after-tax cash flow. And, of course, consult with your professional tax advisor before implementing any tax-driven strategies.
7. Consider insurance coverage
Insurance solutions can provide for the financial needs of your loved ones should something happen to you, your spouse or another member of your family. If the unforeseen happens, such as a disability, critical illness or a sudden passing, insurance can help protect your family and business from financial loss. It can also protect you, your family and your business by mitigating the risk of financial disasters and providing financial support when you need it most.
8. Consider making donations
If your budget and cash flow allow, making charitable donations is something you should consider. Not only will you feel a sense of pride by donating to a cause that is meaningful to you, but you will also save money on your taxes. For any donation made to a registered charity, you will receive a 15% federal tax credit on the first $200 of the donation and a 29% federal tax credit on any amount above that. In addition to the federal tax credit, each province offers tax credits that can also be claimed.
9. Create or review your estate plan
It’s crucial to have an estate plan to protect your loved ones and assets. Creating an estate plan is much more than just having a Will. It can help you prepare for care in the event of a critical illness and ensure your wealth is preserved and properly transferred to your loved ones in a tax-efficient manner. Key components of estate planning may involve preparing or updating a Will, tax planning, establishing Powers of Attorney (POA), charitable giving, updating beneficiary designations, and insurance solutions.
10. Take a financial inventory
Keep important documents like insurance policies, your Will(s), POAs and investment statements organized and readily available if needed. Also, note any valuable keepsakes, such as jewellery or artwork. It’s best to communicate with your loved ones regarding the location of these items, should they ever need to access them on your behalf.
Get started on a more secure and healthy financial future by contacting our office today.
1 Financial Planning Standards Council, The Value of Financial Planning, 2012.
source https://rosenbergdri.ca/10-tips-for-financial-wellness/
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