Many people worry about properly managing their finances. Making informed decisions about investments, savings, budgeting, and insurance can be challenging. Many people share the same concerns when it comes to financial management. Tom Terzis, a Wealth Specialist based in Toronto, ON, shares the top concerns about money and explains how they can be managed for better financial health.
Many people find that they have difficulty putting any money away. 28 percent of adults have no emergency savings at all. High-interest credit card debt, student loans, and everyday expenses have a way of eating into people’s savings. The most important aspect of saving is to make it a weekly habit. Have your savings automatically withdrawn from your checking account each pay period. This will keep the money out of sight and out of mind.
Ideally, people should have a fund with three months’ living expenses, in case of job loss or other adverse event. People with high-interest debt should consider paying this debt down at the same time as putting some money into savings.
High-interest debt is a serious concern shared by many Canadians. When people carry too much debt, their credit scores can be negatively impacted. Most banks are looking for a favorable debt-to-income ratio. If this ratio exceeds 43 percent, mortgage lenders and other creditors will be reluctant to lend you any more money since you may have trouble making regular payments.
People should look for credit cards with the lowest possible interest rates, and should consolidate high-rate cards using balance transfers. Above all, people should not use credit cards to pay their monthly expenses. Ideally, people should pay off their credit card balances each month.
If it is not possible to pay off the balance each month, make sure that you are paying more than the minimum. If you only pay the minimum payment on a credit card, it could take you more than twice as long to pay it off compared to paying double the minimum payment. You will also be paying hundreds of dollars each month in unnecessary interest payments.
Many people who have graduated from college carry student loans. In Canada, the average student loan balance for a four-year university is over $16,000. Similar to credit cards, it is best to pay more than the minimum payment each month. If the interest rate is lower than that incurred on your credit card accounts, it is okay to put more of your money into credit card payments than student loans.
In order to minimize the amount of borrowing that you will need in order to graduate, it is smart to compare the prices of getting your desired degree across a number of universities. A flagship university may be the most prestigious, but you will probably be able to get an equivalent education if you attend a less expensive school.
In addition, it is smart to look for as many scholarships as possible. Scholarships and grants can significantly reduce the amount of money that you need to borrow to stay in school.
Tom Terzis believes that everyone should consider putting money into investment accounts, but many people are intimidated by investing. It is possible to invest money in small amounts, buying shares of index funds or other stocks. As with savings, it is best to deduct money from your checking account each month to support the habit of investing.
People need to be smart with their money when it comes to investing, claims Tom Terzis. It is important to learn how to balance risk with reward.
Above all, the key principle of investing is to stay in it for the long haul. Short-term investments, particularly in the stock market, are subject to greater volatility. Generally, the longer you have in the market, the more risk you can assume.
One of the leading concerns shared by most Canadians is having enough savings for retirement. As people live longer, they will need more retirement savings. Many people underestimate the number of years they will live past retirement. Relying on government programs is not enough to provide a comfortable standard of living.
Beginning at a relatively young age, people should begin investing in a Registered Retirement Savings Plan or RRSP. With an RRSP, money going in is not taxable, but withdrawals at the end of the term are taxed. As with other types of investments, the power of compound returns means that a longer-term investment will pay the most rewards. As people move toward retirement, they should invest in less risky securities and focus on preserving their capital.
Many people overlook the importance of insurance when it comes to financial planning, according to Wealth Specialist Tom Terzis. It is necessary for most people to carry life insurance, especially if they have children at home or others who depend on their income. Life insurance can help to pay off a person’s debts while setting up family members for their future.
Life insurance is available in term life and whole life products. Term life policies pay only when the holder is deceased. Whole life insurance provides a balance that can be borrowed against during the holder’s lifetime. People should consult with a Wealth Specialist like Tom Terzis to find out which product is best for them.
Taking Care of Your Money
When people follow sensible financial steps, they will be better able to meet the challenges of financial success. Paying attention to savings, credit cards, student loans, retirement accounts, and insurance can help to create a brighter financial future. Independent Wealth Specialists like Tom Terzis are able to help people make lists of their priorities and decide how they can meet the challenges in good financial health.