Take Control Of Your Finances: 8 Top Tips

Kathy Chapman 6m 1,531 #finances

The views of this article are the perspective of the author and may not be reflective of Confessions of the Professions.

It doesn’t matter what industry you work in or how much you earn; effective financial management is essential. Without the right strategies in place, you could miss out on lucrative opportunities, get saddled with unnecessary debt and negatively impact your future. However, managing your money needn’t be as complicated as you assume.

In fact, there are some easy yet effective ways to protect your interests and safeguard your financial future. To get started, take a look at these eight top tips and take control of your finances now:

1. Calculate Current Expenditure

Knowing your total monthly and annual income is important but, for most people, this is easy to calculate. When it comes to expenditure, however, it’s much harder to keep track of what you’re spending. While bills and major expenses might be easily identifiable on your bank statements, it’s the smaller, day-to-day transactions that can add up and leave you spending more than you realise.

Go through recent bank statements and add up your total expenditure, from bills and taxes to subscriptions and takeout coffee. If you don’t have statements to hand, you can start collating the data you need by recording your expenses.

Then, you can compare your expenditure against your income to find get a better picture of your financial situation. Are you overspending without realising it, for example? Or do you have a significant amount left at the end of each month?

2. Identify Financial Goals

Once you have a clear idea of your current financial situation, you’ll be able to identify the goals you want to achieve. If you’re spending more than you realised, for example, you may decide to cut back in some areas so that you can increase your savings contributions or put the money towards something special.

Alternatively, if you have a healthy amount left over at the end of every month, you might decide to look for ways to increase your capital. Financial goals can be anything from getting out of debt or saving for the vacation of a lifetime but take the time to ensure they’re meaningful to you. Similarly, make sure your financial goals incorporate the essential things in life, like housing, as well as luxuries.

3. Create a Strategy

Now that you have financial goals in place, you’ll just need a strategy to help you achieve them. Creating a detailed plan turns dreams and aspirations into realistic objectives, no matter how long it might take you to hit your goals.

For larger financial goals, break them down into mini targets and calculate how long it’s going to take you to achieve them. If you need to save $30,000 for a deposit on a property and can save $1,000 a month, for example, it will only take you 2.5 years to hit your goal.

As you’re creating a strategy, you can compare the amount of time it will take you to hit your targets and make adjustments to your budget to help you achieve your objectives more quickly. With a clear strategy in place, you’ll have a sure-fire way to achieve your financial goals and the motivation to stick to your plan.

4. Get on the Property Ladder

For many people, buying a home is a top priority. If so, you’ll definitely want to make it one of your financial goals. When you can purchase a property, you’ll have the opportunity to build up equity in it and make a return on your investment. In contrast, paying rent to a landlord doesn’t provide any long-term returns, aside from securing you a place to live.

Although some people decide that they’re comfortable renting, buying a home is a major life goal for the majority of people. While taking out a mortgage does mean you’ll be in debt, a low interest rate and long repayment term will ensure that this is a manageable form of debt that doesn’t negatively impact your credit score. Furthermore, buying and selling property at the right time can increase the financial return you make from your investment and enhance your capital in the long term.

4. Check Your Tax Liability

If you have an income, you’re going to be required to pay some level of tax. Most people pay personal income tax on their earnings, for example. However, don’t assume that you’re being taxed at the right rate. Instead, check with the authorities that your tax code is correct, so that you’re not inadvertently paying too much tax.

In addition to this, it might be worth getting professional tax advice to protect your income from other sources or your capital. If you have an income from investments or you earn extra finds outside of your usual employment, for example, professional advice can help you to minimise your tax liability and reduce the amount you have to pay.

5. Plan Your Retirement

When you’re thinking about your financial goals and making plans for the future, be sure to factor in your retirement. Some employers may offer a retirement plan as part of your benefit package, so it’s worth finding out whether you’re eligible to join. However, there are numerous financial companies that offer private retirement funds that you can pay into on a regular basis with a view to drawing an income and/or taking a lump sum when you reach retirement age.

It can take decades to built up a large enough fund that will cover your expenses during your retirement, so it’s never too early to start preparing. In fact, the younger you are when you start paying into a retirement plan, the more you can accumulate throughout your working life and the more enjoyable your retirement can be.

6. Consider Investing

A retirement plan is one way of investing in your future but there are many other investment opportunities you might want to consider. A savings account offers a low-risk investment option, for example, although the returns are relatively low too.

If you want to consider higher risk forms of investing, take a look at this beginner’s guide on how to buy stocks with Wealthsimple. With their hassle-free trading platform, you can buy and sell stocks commission-free, while their automated investing service allows you to simplify the process and automate your investments.

Of course, buying stocks and shares isn’t the only way to invest your money. Many people choose alternative investments, like real estate, or even newer products, such as cryptocurrency. With so many options to consider, it’s always advisable to assess your risk tolerance and get professional advice before deciding where and how to invest.

7. Take Out Insurance

Insurance can be a valuable way of protecting your finances throughout your lifetime. If you’re hit with an unexpected bill, for example, it could wipe out your savings or even put you in debt. While medical care is publicly funded in Canada, private health insurance can enable you to access treatment more swiftly, if you need it.

However, it isn’t just medical insurance you need to consider. Critical illness cover will pay out if you’re diagnosed with specific illnesses, for example, and give you some financial breathing space while you deal with the situation. Alternatively, life insurance gives you peace of mind that your family will be taken care of if something happens to you.

Similarly, home, car and pet insurance can save you thousands throughout the years. When you have the right range of protection in place, you can safeguard your finances and enjoy peace of mind that you have the cover you need.

8. Plan Your Estate

Estate planning gives you the opportunity to arrange your finances so that they’re dealt with appropriately in the future. While some people assume that estate planning means making a will, there’s actually far more to it. Drafting a will can certainly be part of the estate planning process but deciding how to pass assets to beneficiaries or how to facilitate business successions is critical too.

When you use estate planning services, you can reduce the amount of tax that will need to be paid in the future. As inheritance tax can have a significant impact on what your beneficiaries actually receive, taking steps to reduce the tax liability can be a savvy way to ensure your assets and funds go to who you want them to.

Dealing with Financial Matters

Taking control of your finances can be seem difficult to begin with, particularly if you’re not sure where to start or what your goals should be! Fortunately, there is plenty of advice available, so you can work with professionals to understand your current situation and create a strategy to optimise your finances and achieve your monetary goals.

While ignoring your finances is a sure-fire way to miss out on changes to grow your wealth, taking a proactive approach puts you back in control and makes your money work for you. As a result, you’ll feel more confident in life and have peace of mind that your finances are being taken care of.

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