5 steps to move you in the right financial direction

December 23, 2014

Before you can properly analyze your financial situation, you need to have a clear picture of how much money is coming in and going out and take stock of your income, assets, debts, fixed expenses and investments.

5 steps to move you in the right financial direction

Good financial health begins with knowing how to properly analyze your finances.

Whether you have a specific goal in mind, such as buying a house, sending a child to university or retiring comfortably, or you simply want to improve how you manage your money, here are five steps that will move you in the right financial direction.

1. Make a budget

 You need to know exactly how much money is coming in and going out each month.

  • Be sure to include entertainment, groceries, eating out, gifts, donations, vacations and savings.
  • For one month, keep track of all your expenses to see how much you actually spend. Track your budget weekly and make any necessary adjustments.

2. Pay down your debts

Owing money is a financial burden you should do your best to get rid of.

  • Whenever you can, try to pay down credit cards, student loans, lines of credit, mortgages and any other forms of debt.
  • You should have clear goals and a solid plan for paying off debt.

3. Know all of your fixed expenses

 Between rent or mortgage payments, utilities, phone bills and other monthly expenses like groceries, newspaper delivery and gym memberships, it can become overwhelming to keep track of everything and everyone you owe.

  • Jotting it all down will help clear your head and give you a better picture of your monthly financial commitments.

4. Pay your bills on time

This is the best way to keep interest payments down and your credit score up.

  • It’s easy to ignore the ever-growing pile of bills on the kitchen counter, but do your best to stay on top of your minimum payments and pay them before the due date.

5. Have a long-term savings plan and invest wisely

In addition to a savings account at your bank, you should have longer-term investments, such as RRSPs, GICs and mutual funds, to ensure your financial well-being into retirement and beyond.

  • There are so many investment options available that it can be quite daunting to figure out the best place to park your money.
  • It’s a good idea to sit down with a financial planner who can help advise you on the best options for your situation and risk tolerance.

The big picture

Once you have completed these steps, you should be on more solid footing when it comes to your finances. With a bigger picture of where your money is coming, going and sitting, you can make smarter financial decisions and set and meet financial goals.

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