A Quick Guide To Improving Your Financial Health In 2023
by Abdul Aziz Mondal Financial Planning Published on: 25 January 2023 Last Updated on: 24 July 2024
With 2022 coming to a close, many people are coming up with new year’s resolutions. Reexamining one’s habits and pledging to do better is an excellent way to start the new year.
Improving one’s financial health or spending habits is one of Canada’s most popular new year’s resolutions. Many Canadians want to save more money, budget efficiently, and start investing in 2023.
Navigating finances and making new habits can be difficult, especially if you’ve been used to handling finances a certain way. This quick guide will discuss the importance of good financial health and how to achieve it.
The Importance of Financial Health
Financial health covers various aspects of a person’s financial life. Numerical indicators of your finances, like your credit score and net worth, can be helpful, but they aren’t all-encompassing.
To understand financial health, you look at spending, borrowing, saving, and planning habits. These practices can influence your resilience and the opportunities available to you.
Taking steps to improve your financial health can affect other parts of your life. Being financially healthy helps you satisfy your needs, address various problems, and live a fulfilling life.
Tips for Improving Financial Health
There are many ways to improve your financial health. Some of them can be complicated, but others can easily be integrated into your everyday habits.
Below are some ways to help you build healthy financial habits in the coming year.
Calculate your net worth
Some assume that one’s net worth is only relevant to the ultra-rich. However, calculating net worth can be helpful for everyone, especially once you start making your own money.
To calculate your net worth, begin by listing everything you own and its monetary value. Then, list your debts, such as credit card debts, loans, etc. Your net worth is the difference between these two values.
Calculating your net worth can help you understand your financial standing and how to improve it.
Stick to a budget
A personal budget is essential to managing your finances effectively. It helps you ensure that you are spending your money in the right ways.
When creating a budget, prioritize your needs, such as your rent, bills, loan payments, savings, etc.
Laying out your budget gives you a visual cue of how much money you have and can realistically spend. If you’re having trouble sticking to your budget, you can assign an accountability partner to help you stay on track.
Pay your taxes
Every Canadian citizen and business owner must pay the appropriate taxes for their income category. Taxes serve as the government’s primary source of income, and not paying them could lead to legal trouble.
There may be times when you make inaccuracies or mistakes in your tax returns. In these instances, it’s crucial that you get your tax problem solved with a VDP, which is the Voluntary Disclosure Program of the Canadian Revenue Agency (CRA). A finance-savvy friend or tax professional can help guide you through the process.
Create an emergency fund
The economic instability seen in recent years has led to people experiencing financial issues. Many have lost their jobs and other income sources.
For this reason, having an emergency fund has become essential. You can create a separate account where you can save money to use for emergencies. Setting aside a certain amount each week or month for this purpose is advisable.
A robust emergency fund provides a cushion you can land on should you encounter times of economic uncertainty.
Your financial health can have implications on various areas of your life. Building it up can take some time, but the results can help you achieve material fulfillment and stability.
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