Key Takeaways:
Start with a budget; always keep income higher than expenses Pick a repayment strategy — highest interest first or smallest balance first — and stick to it
An emergency fund of six to eight months of expenses provides real security
Build in guilt-free spending so the plan survives real life
Build a budget
Creating and sticking to a budget is a great first step and will help your long-term financial health . List your income and expenses, then compare the totals. If your total expenses are higher than your total income, you’re spending above your means. If you can’t increase your income quickly, you’ll need to reduce your spending. Your budgeting goal is to always have your income higher than your expenses.
Reduce your debt
Use credit wisely and sparingly and create a repayment strategy. Some people suggest repaying the debt with the highest interest rate first. Others suggest listing all your debts from smallest to largest and starting with the smallest — the early “wins” help keep you motivated. You can also manage the interest on outstanding balances by transferring them from high-interest credit cards to lower-interest lines of credit. Whichever strategy you choose, committing to a consistent debt reduction program will improve your financial health.
Keep watch with credit monitoring
Credit monitoring services help you protect the credit you’ve worked hard to build. TransUnion Interactive, Inc.’s service monitors your credit file and alerts you to key changes, such as a new account opened in your name or a late payment reported by a creditor — keeping you informed and on track. Credit monitoring is part of TransUnion Interactive’s paid subscription; your consumer disclosure is always free.
Create an emergency fund
An emergency fund provides security and peace of mind, knowing you’ll have money in your account in the event of job loss, health issues or other unexpected events. Aim for enough to cover six to eight months of expenses and start by trying to save 10% from each pay cheque.
Prepare for the future
If you want to protect your children and other beneficiaries from future financial hardship, you need a plan. You can start by taking out life insurance, opening a retirement account and, if applicable, creating an education savings plan.
Have fun
Put aside a portion of your income for guilt-free spending. If you sacrifice too much on your mission for good financial health, you risk relapsing and spending the money you’ve worked so hard to save. Treat yourself occasionally — try opening a “fun fund” for special weekend trips, nights out with friends or a big-ticket purchase.
