How to Become Financially Literate in Canada in 2020
With November being Financial Literacy month, it feels like the right time to talk about the need for basic financial planning and awareness. Here are 5 crucial details that you must learn about yourself as soon as possible.
1. How Much Do You Owe?
Don’t be discouraged by the thought of counting how much you owe. It’s okay to feel a little disheartened by this figure. Overcome this feeling and calculate your total liabilities right now.
Calculate the total amount of debt you have, including mortgages, student loans, credit cards, line of credit, personal loans, car loans, and taxes owed to the CRA. By tracking your liabilities and the interest rates on them, you’ll be in a much better position to plan your debt reduction strategies.
2. Your savings
Calculate your total income and subtract your variable and fixed expenses to find out whether you’re living a financially prudent lifestyle and if it’s helping you achieve your short- and long-term financial goals. You can use online budget worksheets to calculate all this in an organized manner.
If you don’t have any savings, immediately tinker around with your budget and allocate a fixed percentage of your income to an emergency fund that will protect you financially in case you lose your job, suffer from an illness or experience some other tragedy. We generally recommend saving at least 3 – 6 months of your living expenses in your emergency fund.
3. Credit Score
Having a high credit score can benefit you immensely. Aspiring or current homeowners can take advantage of high credit score to negotiate lower mortgage rates. Tenants can also find themselves being approved for rentals much faster with a higher credit score. It also affects your approval for lines of credit, car loans, and credit cards.
Keep checking your credit score every now and then, ensuring you’re not falling behind on your financial objectives. You can subscribe to an annual credit report service and ensure that you do owe money to the creditors listed there. This report can also protect you against identity theft.
4. Check Whether You’re Eligible for Any Pandemic-Related Relief Programs
With Canada currently experiencing a resurgence in COVID-19 infections, many institutions and government organizations are launching relief programs to help people who’ve lost their jobs, seen their incomes drop, or been afflicted by an illness.
Check your lender’s or bank’s website to determine whether you’re eligible for any reduced interest or deferred payments on your mortgage, personal loans, or credit cards. Reach out to your lender if you’re worried about making your payments. They might help you out with a solution that reduces your debt obligations temporarily.
5. Have A Backup Plan
Canada’s economy is now recovering slowly after the COVID-19 crisis. However, with virus infections resurging all over the country, there is speculation that another rounds of restrictions could be on their way.
It’s time to assess your job prospects honestly. If you’re in the tourism, hospitality, entertainment, or restaurant sectors, you might be in for some trouble. Home décor, groceries, gaming, and tech are seeing an upswing in growth though.
Having a backup plan can soothe your mind during times of uncertainty like this.