Seven steps to improve your financial health now

When you think about your health, what comes to mind? For many of us, physical and mental health is top of mind, but what about financial wellness?

Research shows that physical and financial health are closely connected, and how individuals feel about their financial situation can impact their physical and mental wellbeing.

Financial wellness is defined by your relationship with money. It’s more than the numbers that show how your investments are performing. It’s the ability to meet your financial needs today comfortably, a feeling of security about your future, and the freedom to make choices that allow you to enjoy your life now and in the future.

Specifically, your financial wellness can be impacted by the following factors:

• Whether you have a plan to meet short- and long-term goals
• Ability to cover costs related to unexpected life events
• Control over day-to-day and month-to-month expenses
• Ability to borrow what you need and understand/manage your debt
• Access to the information necessary to make sound financial decisions
• Peace of mind that future generations are taken care of

Here are seven steps you can actively take to improve your financial health:

1. Have a financial plan in place

A financial plan can help you prepare for future challenges and goals. It acts like a roadmap for your financial future, balancing your short- and long-term goals to help you prioritize. These goals may include major purchases, funding your child’s education, planning for your dream retirement, leaving a legacy, or preserving wealth for your family.

At Scotia Wealth Management, we can provide you with a Total Wealth Plan that focuses on your current needs while considering future goals and implementing strategies to help you achieve them. It can provide you with a strategic understanding of the steps to take so you can envision the future with clarity, peace of mind and certainty.

2. Set aside emergency savings

It’s important to create a robust emergency fund to cover costs related to unexpected life events. Make sure you earmark a certain amount on a regular basis should something arise, like a major home repair or a family illness. A common rule of thumb is to save up to six months of living expenses to protect against sudden financial burdens. If you don’t have the funds to set aside for emergencies, having access to a low-interest rate line of credit is a good alternative.

3. Save and invest for the future

No matter what you are saving for, planning early is a key aspect of future financial wellness. The earlier you start planning, the longer your savings will have to grow and achieve your long-term goals. To prioritize saving for the future, maximize contributions to your Registered Retirement Savings Plan (RRSP), Tax-Free Savings Account (TFSA), and Registered Education Savings Plan (RESP), where your savings will benefit from tax-efficient growth and government grants (RESP). If your employer offers a group retirement plan, pension plan or an employee share ownership plan, take advantage of any contribution matching available.

4. Understand your debt situation

Having some form of debt is normal and can even be beneficial, depending on your financial situation. Total financial wellness means fully understanding your debt situation, ensuring your borrowing is tax efficient and having a holistic plan to absorb any unexpected financial shocks or increases in interest rates. If you are a business owner, having access to the right credit solutions can help you move quickly to take advantage of investment opportunities.

5. Protect your wealth through insurance

The right insurance can help protect your finances and promote peace of mind. Should the unfortunate happen, insurance can help protect your family and business from financial loss. You can use insurance to help minimize, defer, or offset your tax liability and gain stable projected returns for the next generation as you maximize your wealth transfer. Insurance coverage can also address family concerns that come with estate and legacy planning by helping avoid strife from dividing wealth or selling cherished assets after death.

6. Manage the taxes you pay

A proper tax plan can significantly boost your assets and overall wealth throughout your working years, during retirement, and when your assets are transferred to your loved ones. A customized Total Wealth Plan can include different strategies to discuss with your tax advisor to help reduce or defer the amount of tax you owe. It can also offer you various options designed to deliver a regular stream of tax-efficient retirement income.

7. Create an estate plan

When the unexpected happens, it is crucial to have an estate plan in place to protect your family, your loved ones, and your assets. Creating an estate plan is so much more than just a will. It can help you plan for care in the event of a critical illness and ensure your wealth is preserved and properly transferred to your loved ones tax-efficiently. The key components of estate planning include preparing a will, tax planning, establishing Powers of Attorney, charitable giving considerations and insurance solutions.

Like physical or mental health, financial wellness is an ongoing journey. You need to take consistent and intentional steps toward the goals you want to accomplish in order to achieve total financial wellness. In the same way that individuals use a personal trainer to help them develop an actionable health and fitness plan, a Scotia Wealth Management relationship manager can help you create a Total Wealth Plan that will provide you with a roadmap to address your immediate needs, your goals for tomorrow, and your future aspirations.