It’s National Financial Literacy Month (FLM), where the Financial Consumer Agency of Canada (FCAC) helps equip Canadians with practical tools and tips to manage their money in a changing world. Throughout November, the FCAC is discussing the ever-changing financial marketplace and the importance of checking up on financial health. At Magenta,
It’s National Financial Literacy Month (FLM), where the Financial Consumer Agency of Canada (FCAC) helps equip Canadians with practical tools and tips to manage their money in a changing world. Throughout November, the FCAC is discussing the ever-changing financial marketplace and the importance of checking up on financial health.
At Magenta, our goal is to connect people with opportunities to build a better tomorrow. This month, we’re furthering our goal by supporting National Financial Literacy Month and sharing resources dedicated to helping Canadians:
For this week’s theme, “Check up on your debt”, we’ll be discussing the importance of checking up on debt, how mortgages can help, as well as sharing helpful resources for debt management. Whether you’re an investor, a broker, or simply looking to refresh your financial literacy, we hope this article proves useful to you.
Debt history plays a critical role in forming an impression when interacting with financial institutions. Your ability, or lack thereof, to handle debt speaks volumes about you to prospective lenders who may consider the following:
Your financial history will determine how trustworthy you are in the eyes of a lender and is a key determinant of the interest rates you will pay, or even if your loan is approved in the first place.
However, not all debts are created equal. As industry professionals, we know that some debts are more important than others. Debt can be an indicator of a borrower’s ability to uphold their end of a mortgage. For example, when it comes to credit card balances, if you consistently pay down only the minimum amount each month, this can affect your credit score and interest rates accordingly. Minimum payments can be an indicator of an inability to pay down more. Furthermore, even if you consistently pay down your balance entirely, incurring high balances negatively impacts your debt-service ratio (your ratio of your debts to your income), and thus, your credit score in turn. As a rule of thumb, a high balance is considered somewhere in the range of spending over 75% of your limit.
On the other hand, payments made over the span of many years, namely mortgages and other kinds of instalment debt (such as vehicle loans), are often less significant factors. This is due to the debt relative to your income being spread out over a larger period of time. In general, the lower the interest rates and the more flexible the payment schedule for a debt is, the less impact it will have on how lenders consider your applications.
Debt consolidation is a technique in which one exchanges two or more smaller loans for a single larger one. you gain the financial power to pay off your smaller loans. By acquiring a long-term loan, such as a mortgage, you gain the financial power to pay off your smaller loans. A mortgage can help you:
Debt consolidation is one of many tactics to get a drop in your outstanding payments, but it’s only as good as the budget you set to help you pay off your long-term loans. To help you plan your budget, consider using an automated tool such as the Budget Planner offered by the FCAC. It’s fast, easy to use, and best of all: completely free!
Equipping yourself with the knowledge and resources to tackle debt can be beneficial to your overall financial planning. Below, we’ve compiled some options you can use to help you manage your debt:
To learn more about how to manage your debt and how to get help, please visit canada.ca/money.
You can also read the first FLM blog for information on how to get a pulse on your financial health.
November is National Financial Literacy Month, where the Financial Consumer Agency of Canada (FCAC) helps equip Canadians with practical tools and tips to manage their money in a changing world. This year, they’re discussing the ever-changing financial marketplace and the importance of checking up on your financial health. At Magenta, our goal is
November is National Financial Literacy Month, where the Financial Consumer Agency of Canada (FCAC) helps equip Canadians with practical tools and tips to manage their money in a changing world. This year, they’re discussing the ever-changing financial marketplace and the importance of checking up on your financial health.
At Magenta, our goal is to connect people with opportunities to build a better tomorrow. This month, we’re furthering our goal by supporting National Financial Literacy Month and sharing resources dedicated to helping Canadians:
Throughout the month, we’ll be discussing weekly themes related to managing your money in a changing world. In this article, we’ll explore what financial health is, and why it’s important, as well as share helpful tips and resources. Whether you’re an investor, a broker, or simply looking to better your financial health, we hope this article proves useful to you.
Financial health encompasses elements such as your savings, expenses, and insurance, especially if you have dependents who rely on your income for their living expenses and more. Much like the health of our bodies, a key component of financial health is how well our financial situation can react to emergencies and sudden changes in circumstances. Just as a healthy immune system has the resources to respond to infections without us noticing the symptoms, when we’re financially healthy, it means we have plans in place for when we’re hit with unexpected expenses or reductions in the flow of income. Knowing you have savings to turn to in hard times is a sign of financial health.
Health is about more than our immune response, however. It’s also a question of nutrition- everyone has different caloric intakes and unique needs that must be met to function effectively. Your personal finances are no different. Depending on your income and style of living, what your pocketbook needs to stay healthy might be different from someone else’s. That’s why it can be useful to perform self-diagnostics when it comes to your earnings and spending habits. To get a more holistic picture of your financial health, a few self-diagnostic questions can include:
Knowing where you’re starting is critical to making plans to improve your finances, whether that’s in learning what numbers you have to work with when budgeting, or noticing if your investment funds might be put to better work elsewhere.
Helping Canadians confidently make financial decisions in the digital economy is a key priority of the National Financial Literacy Strategy. The objective is to reduce barriers by supporting increased digital access and digital literacy.
An example of increased digital literacy could involve keeping a handle on recurring payments. Many products that were once one-time physical purchases have evolved into digital subscription services, and monitoring recurring payments is important to maintaining overall financial health. If you find your subscriptions difficult to track by hand, there are many free apps that can assist you, such as Billbot, Hiatus, PocketGuard, or Rocket Money, among others- but be warned that while their basic subscription tracking and budgeting functions are indeed free to use, many such apps offer additional services at a premium subscription fee of their own.
To learn more about how you can assess and improve your financial health, please visit canada.ca/money.
Be sure to tune in next week when we discuss debt management and debt payment!