Look at images associated with the term “financial freedom,” and you’ll invariably see someone standing on a yacht, raising a glass of champagne. But financial freedom doesn’t have to be luxurious. If you feel financially in control, then you’re well on your way to feeling free. All too often, we tend to think that the gap between financial concerns and financial security is as wide as the Grand Canyon, but it’s often a lot smaller than you might imagine.
In this post, we’ll run through a few smart money moves that can give peace of mind that you (and your family) have a solid financial standing.
Build An Easily Accessible Emergency Fund
Many people are financially fine so long as they don’t experience unexpected expenses. Unfortunately, you can’t always control money-related matters. Jobs can be lost, cars can break down, and there are plenty of other things that can leave you with a big bill to pay. While you may be able to find quick financial fixes for unexpected expenses, you’ll have more peace of mind knowing you have funds set aside to cover anything that might come up.
An emergency fund is your plan for absorbing unexpected costs when they arise. With 3 – 6 months of living expenses set aside in a savings account, you’ll be able to live day-to-day without the psychological strain of worrying about how you’ll cope if things go wrong. Author and accountant Jessi Fearon shares some simple tips for building an emergency fund even if money is tight (and why NOW is the perfect time to do it).
Track Your Spending
Your spending habits have a huge bearing on your overall financial health, yet many people are reluctant to take a closer look at their incoming and outgoing money. This is a problem because you can’t fix what you don’t know. It’s possible you’re paying for subscriptions you no longer want/need, or that you’re spending more money than you thought on everyday purchases. Taking a look at your bank statements for the past few months can help identify where your money is going, as well as provide an opportunity to correct errors.
Have a Plan for the Future
It’s nice to live in the moment, but it’s also important to think about what’s up ahead (like those unexpected expenses we already mentioned). Two other things to consider for the future are your retirement plan and your death. It’s easy to avoid thinking about the future because of the uncomfortable thoughts that it can provoke.
Many of us are so focused on our careers, mortgages and children that we don’t have time to think about retirement. However, you do need a solid financial plan for what happens in your later years. Take some time to look at when you will have your mortgage paid off and whether you’ll be able to remain in your home long-term. Does your employer have a good pension for you or do you need to invest in your own RRSPs? Once you have that emergency fund set up, maybe it’s time to start putting money into a retirement fund.
Nobody likes to think about departing this world and leaving their family behind. And the truth is, you don’t need to dwell on that scenario — you just need to prepare for it. That involves researching how much does life insurance cost, how to put together a will, and spending some time making sure that your partner/family will have any financial account information they may need. This can all be done relatively quickly, and once you have done it, you’ll have the peace of mind that comes from knowing that your family will be OK should something happen to you.
Teach Your Children Good Financial Habits
Parents will always worry about their children, but that worry will be a lot more manageable if you know they have the financial literacy they need to be financially healthy in adulthood. Once they’re in their teens, start speaking to them about healthy financial habits — by the time they’re adults, they’ll be in a strong position to make the right money-related decisions.
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