Five important tips to ensure a financially stable future

FERGUS –  The new year is here, and now is the time to create financial goals to help you set yourself up for a more financially stable future. 

Sometimes, organizing your finances can be daunting, but setting a few yearly goals can start your year off right.

Know your spending to draft a budget

Even though this may seem like an obvious goal, many people find it hard to draft a budget each month and stick to it. 

Knowing where your money goes is the beginning of gaining better control over your finances, and the more detailed it is, the better. 

When creating your budget, ensure every penny is accounted for, including savings, investment, and money for clothing, food and entertainment. 

This will direct your focus to areas where you can improve and help you decide where to allocate the extra money you get from sticking to your budget.

Once you determine your savings plan, automate it around your pay days to ensure you pay yourself first.

Take control of debt

Debt can be one of the primary roadblocks to your financial success. Make a reasonable plan to reduce your debt and stick to it. You can start by determining a reasonable amount of debt to pay off for the year and divide it into manageable (ie. monthly or every pay day) increments. 

Ensure your goal is attainable so that excess spending doesn’t back up into  credit cards. 

Finally, you will need to look at your budget to find a way to fit in this amount each month, even if it means cutting back in other areas. It is also important to make sure that you do not add any more debt throughout the year.

Make an emergency fund a priority

Medical costs, major vehicle repairs, job layoffs, and house maintenance can quickly derail a budget. 

Make sure that you have a savings account to handle these unforeseen expenses so that you don’t have to alter your monthly budget to accommodate. 

A good rule of thumb for an emergency fund is to start with a month’s income plus $1,000. 

Budget an amount each month to build up your emergency fund. 

If an emergency were to require the funds sometime during the year, you will need to regrow your funds.

Prioritize retirement savings

Saving for retirement is often put on the back burner until it is too late and sometimes an employer funded pension isn’t enough. 

The power of compounding means the sooner you begin saving for retirement, the more time these savings will have to grow for a better long-term return on your investment. 

Work with your financial advisor to create your retirement plan and to determine which retirement savings vehicles may be best for you.

Create a long-term financial plan

Goals can be more difficult to set if you struggle envisioning the rewards that come with financial stability. 

Consider any long-term financial goals you may have, such as buying a house or retirement. 

Draft a plan that includes saving, investing and other ways to build the wealth you need to achieve these goals. 

You can start with smaller goals so that they seem less daunting. A plan will help you stay on track and guide your financial decisions. 

Again, work with your financial advisor to determine which  savings vehicles work best to achieve your goals.

Make this the year that you take control of your finances and get on the right track to achieve your goals.

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Dan Allen is a senior financial advisor and retirement income and protection specialist at Manulife Wealth Inc. in Fergus.