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:
- manage their money and debt wisely;
- save for the future; and
- understand their financial rights.
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.
What is financial health? Why is it important?
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:
- How much of your income goes towards non-discretionary expenses, like food, utilities, or paying down debts?
- How much do you invest, and if so, where and what are your average returns?
- Has the cost of living increased more than your income can account for?
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.
Financial Health in the Digital Age: Resources to help confidently make financial decisions in the digital economy
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!