The most important thing about your money
Credit to Author: Staff Writer| Date: Fri, 28 Oct 2022 01:55:37 +0000
The most important thing to understand about your money is that no one gets to tell you how to take care of it.
To be clear, there is no shortage of people who’ll say you’re doing it wrong. That you don’t make enough, save enough, and don’t have a sufficiently detailed understanding of price-to-earnings ratios. Do not lose sleep over this. You do you.
Your financial wellness is as simple or complicated as you want to make it. If your money supports the life you choose to live — for as long as you need it to — then consider yourself successful.
We have so many choices available to us, that it can sometimes feel overwhelming. It doesn’t have to be.
Track your spending
Budgets are like dental floss. Boring, and sometimes a little painful. They’re also easy to do and worth the effort.
Know what your take-home pay is each month. Subtract the amount you need to commit to basics like your home, food and other obligations.
What’s left can go in one of two directions — in or out. Decide what you want to save each month and do your best not to spend it.
Credit cards are convenient, and a useful way to build a credit rating. But they don’t change any of this. If you can pay your full credit card balance each month, you won’t have to pay interest in addition to the amount you’ve borrowed.
Make money with your money
Think of the interest you can earn with your savings as the opposite of interest you might pay to a credit card company.
So, where you put your money matters. At one end of the spectrum, a standard savings or chequing account provides only a very small amount of interest. These aren’t designed to earn you money; they provide easy access to your savings when you need it.
You can opt for a high-interest savings account, or choose from a wide range of investments including stocks, bonds and funds that hold a collection of each.
What’s important is that your savings can grow over time. Think of it as a gift to your future self.
Expect the unexpected
If the 2020s have taught us anything, it’s that life can go sideways in a hurry.
Jobs can be lost, sometimes with little or no warning. A serious illness or injury can also put you out of work. For most of us, any one of several scenarios could mean real financial difficulty.
So, it’s important to manage these risks with the right insurance coverage. If you can build one, an emergency fund is also valuable.
Look ahead to your retirement
We’re fortunate to live in a country that combines the freedom to create a financial life for ourselves and our loved ones, with programs that can provide assistance. Understanding how these work helps ensure you’re covering what you need to with your personal savings, insurance and investments.
The Canada Pension Plan (CPP) is a prime example. It’s designed to provide you a portion of your retirement income, in addition to what you can save elsewhere. If you are at least 60 and have made one or more valid contributions to the CPP Fund, you qualify to receive CPP benefits.
There are a couple of important ideas running through all of this.
The first is the empowering nature of even a basic understanding of how money works. The more you know, the better. Don’t be intimidated by personal finance.
The second is the value of a long-term perspective. The more you’re able to think about money priorities over your entire adult life — as well as your immediate income and expenses at any given time — the more successful you’ll be in building real financial wellness for many years to come.
Want to learn more about CPP Investments and your financial future as a new Canadian? Check back here new content every month, or read more articles, access resources and watch videos at www.cppinvestments.com/commitment-to-canadians.
This content is provided for information purposes only. CPP Investments is not a financial advisor, and the content on this site does not provide financial advice. Every person’s financial planning needs are different. For advice on how you should prepare financially for retirement, please consult a credentialed professional financial advisor.
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