Financial success…me?
Yes, you.
Every one of us has the power to achieve financial success, but it won’t come easy! You must be diligent, patient, and disciplined. There are certain tips and tricks that will propel you to achieving financial success, so stay tuned. With my eight pillars of financial success, you will unlock practical practices to get you one step closer to your goals!
Where Does Your Money End Up?
Who controls your money? The obvious answer is you! But do you really have control over your finances? While many people might think they have complete control over where their money ends up…they don’t.
Honestly, have you ever asked yourself where your money goes? Is it working for you, or do you feel like there’s always something to pay for? Do you feel financially comfortable, or are you stressed because of your finances?
It’s normal to feel out of control of your finances in some aspect of your life!
Almost everyone has felt they need to change their spending, saving, and money management habits at one time or another, so realize you are not alone!
Photo by Julio Lopez
Take Control of Your Finances
Fearless Financial Journey is about educating and helping you take control of your money! It’s time to stop letting others silently dictate where your hard-earned funds end up. With our eight pillars to financial success, you can turn all the stress and confusion about finances into confidence and start making your money work for you, not against you.
Always remember that the real mistake is doing nothing!
Getting your money in control gives you the power to make positive changes in every area of your life. We all work in one way or another, and for most of us, this can be for many, many years…Wouldn’t it be nice if all that hard work produced financial comfort right now? Giving you peace of mind that your future is financially supported no matter what!
Everyone has a chance for a secure financial future, but you have to start the process right now! Delaying the process will only put your financial success on hold; it’s time to break the chain.
By following our eight simple steps, you will become the boss of your money.
You are going to start dictating where those dollars are ending up. Don’t let everyone else, every advertisement, every promotion, no more mindless consumption!
Photo by Negative Space
The Cycle of Money
The most important part of breaking your spending habits and becoming financially successful is understanding what’s really happening behind the scenes.
First, take a minute and think about the cycle of your money. You make money, buy or pay for necessities, and then one of two things happens.
Either you save some of your discretionary income, or you spend it.
It could be a boutique, fast-food establishment, or retailer; do you need these products? These store owners and employees who collect your money turn around and face the exact same decisions, and it’s the informed and intelligent few who decide to save instead of spend.
There are always expenses in life.
But what if you kept some of the money you made each paycheque and didn’t give it all away? What if you changed your way of thinking so that you saved some of that money instead of going out to eat? Moderation should be your best friend. It is unrealistic to save every single dollar, but what about saving a percentage of your discretionary income? And then, spending on unnecessary products? By changing your habits to a save first, spend second mentality; you can start questioning the importance of your purchases.
Do I really need this product?
Photo by Tembela Bohle
Key Takeaways
Achieving financial success requires dedication and strategy.
Here are the key takeaways from today:
- Build an emergency fund: Start with $500–$1000, then work toward 3–6 months of expenses
- Use the snowball method to pay off credit card debt
- Fully fund your emergency savings
- Save for retirement, aiming to contribute 18% of your gross income
- Review your insurance needs, including life and disability insurance
- Pay off your mortgage early to save on interest and gain financial freedom
- Plan your legacy with a will and power of attorney
- Give back to causes close to your heart and reap both emotional and taxable benefits
Taking control of your finances is a journey, but with these steps, you’ll be well on your way to financial independence. Be sure to check out our other blog posts at Fearless Financial Journey for more insights and strategies to help you reach your financial goals!
The Time for Change is NOW
There’s no upside to delaying it any longer! Many people live paycheck to paycheck, barely getting by. Why not take control of every dollar that comes through your hands? It’s time to control the money; it doesn’t control you.
It’s time to start right now, starting with step one!
Step One – The Emergency Fund
If there’s one thing in this world you cannot plan for, it’s life!
But what you can do is be prepared to the best of your abilities, and it starts with your finances. That’s why the first pillar of financial success is an emergency fund for those unexpected expenses you can’t plan for! As quickly as possible, put away anywhere from $500 to $1000 into a savings account dedicated to your new emergency fund. Separate from your regular chequing account, but still somewhere you can easily access it when you run into an emergency.
We all run into emergencies, whether the muffler’s gone on your vehicle or something has broken down in your house. No matter the case, knowing the unexpected expense is covered provides peace of mind!
Do not underestimate the small emergency fund; it is critical to financial success!
Photo by Cottonbro Studio
Step Two – The Snowball Method
After the emergency safety net is implemented, it’s time to tackle the stressful part of finances: debt. The thought of debt is actually scarier to most people than the debt itself! With the Snowball Method (Pillar Number Two), you can aggressively pursue your credit card debt and quickly start paying it off. The first step is determining how much you owe on your credit cards.
After you’ve determined the amounts, attack the smallest balance!
By first paying off the credit card with the smallest balance, you gain a significant mental boost. You’re not looking at which interest rate is higher or lower—you’re just trying to get the smallest balance paid off first, boosting your confidence to keep going and tackle the rest. As we said, the scariest part of debt is actually the thoughts, not the amounts. So boosting your motivation is crucial to solving the problem!
In short, the strategy works like this: keep making the minimum payments on all of the credit cards when required. With all of the extra money which would go towards your debt, attack the smallest balance. Pay the card off as fast as you can! Now continue down the hill, and snowball to the next card, and so forth until your debt is no more!
Photo by Pixabay
Step Three – Filling the Emergency Fund
After you’ve paid off your credit card debt using the snowball method, your next priority should be fully building up your emergency fund. While your initial emergency fund was still a large amount of $500 to $1,000, in reality, emergencies can cost thousands!
Now that your debt is paid off, it’s time to strengthen your emergency fund by aiming for an amount that covers three to six months of living expenses. Here’s why and how you should approach this crucial step.
Why You Need a Full Emergency Fund
Life is unpredictable, and while you can’t foresee every challenge, you can certainly be prepared. A fully stocked emergency fund acts as a financial safety net for those major life events that can disrupt your income or force you to make significant, unplanned expenditures.
This could be anything from:
- Job Loss or Career Change: If you lose your job or need time to transition into a new role, an emergency fund can cover rent, mortgage payments, and essential bills while you seek new employment.
- Unexpected Repairs: Whether it’s your car breaking down or your home needing urgent repairs, you’ll have the peace of mind that you won’t need to rely on credit cards or loans to fix the problem.
- Family Emergencies: From needing to care for a loved one to unexpected travel for emergencies, an emergency fund ensures you can respond to these events without financial pressure.
Without an emergency fund, you may find yourself dipping into savings meant for other goals or, worse, falling back into debt.
Step Four – Retirement Saving
How much do you need to save for retirement?
It’s the question we all want to know the answer to. Well, the CRA allows us to save up to 18% of our gross income in a tax-sheltered RRSP (Registered Retirement Savings Plan). If you have a defined benefit workplace pension, you save an average of approximately 11% for your retirement through your employer (anywhere from 9% to 14%, depending on the pension plan). Then, you can save the difference of 75% on your own in your RRSP.
If you do not have a workplace pension, you are responsible for saving 18% of your gross income in an RRSP (Registered Retirement Savings Plan) for your retirement.
Remember, no one will do it for you!
This contribution will reduce your taxable income by the amount of your contribution, saving you tax. Your financial institution will mail you an RRSP contribution slip at tax time, which you can use on your tax return.
If retirement interests you, make sure to check out my Comprehensive Guide to the Canada Pension Plan (CPP). You don’t want to skip over this, trust me!
For more information, Fidelity Investments holds great resources informing you how much Canadians should save for retirement: Click Here
Photo by Cottonbro Studio
Step Five – Insurance
As we’ll cover again in pillar number seven, one of the important aspects of financial success is the ability to pass down this success to those closest to you after you pass. Primarily children, grandchildren, and parents.
To make sure there are no challenges when this time comes, it’s important to think about aspects such as insurance and legacy planning. This is why the fifth pillar to financial success is the aspects surrounding insurance.
Life insurance is required when others depend on your income.
It is not required by law in Canada as is car insurance. But life insurance can provide for your loved ones if you were to die. It can be used to pay off your mortgage, pay for your children’s education, and help to bring in a source of income to replace your income.
If you’re single or have no one that depends on your income, you may not need life insurance at the current moment. However, it may be a good idea if you have a mortgage or if you have debts that you would like to be paid off. Life insurance can also help in the event that you pass away and wish to avoid the possibility of the burden of repayment potentially falling on the shoulders of your loved ones.
There are Two Types of Life Insurance: Term Life Insurance and Permanent Life Insurance.
Term insurance – is insurance that will cover you for a specific period of time. This is the least costly type of insurance. If you die within the stated and agreed to period of time known as (the “term”) of the insurance contract, your beneficiaries will receive a tax-free payment.
Permanent insurance – is intended and is designed to be lifelong insurance and based on this underlying premise of lifelong protection, Permanent Insurance contracts usually seek a higher premium that must be paid in order to account for the lifelong benefits and features on offer.
Disability insurance – is very important if you are self-employed or your workplace does not provide it for you. This means that if something happens to you and you aren’t able to work, you will receive a monthly insurance payment in place of your regular paycheque.
Step Six – Tackling Your Mortgage
Once you’ve fully funded your emergency savings and are contributing to your retirement, it’s time to focus on pillar number six, the mortgage.
Paying off your home early is one of the most effective ways to achieve long-term financial freedom.
Your mortgage is likely one of your most significant financial obligations, and reducing or eliminating it ahead of schedule can free up a significant amount of cash flow and save you a substantial amount in interest over the life of the loan. Here’s how and why you should consider tackling your mortgage aggressively.
Why Pay Off Your Mortgage Early?
Paying off your mortgage early has several benefits that can positively impact your financial future:
Save on interest: Mortgages can stretch over 20, 25, or even 30 years, and over this time, you could pay tens of thousands of dollars in interest. By paying off your mortgage early, you reduce the overall interest paid, potentially saving a large sum of money.
Increased cash flow: Eliminating your monthly mortgage payment can free up significant cash flow, which can be redirected to other financial goals such as investing, saving for retirement, or enjoying more of your income without the burden of a housing payment. Just imagine the extra income you would have every month if you were not paying off a mortgage!
How to Pay Off Your Mortgage Early
There are several strategies you can use to accelerate your mortgage payoff:
- Make extra payments toward the principal: When you have extra cash, whether from a bonus, tax refund, or hard work, consider applying it directly to your mortgage’s principal balance. By reducing the principal, you lower the amount of interest charged over the life of the loan, helping you pay it off faster!
- Double-up payments: Some mortgage agreements allow for a “double-up” option, where you make two payments at once. The extra payment is applied directly to your principal, which can significantly shorten your mortgage term and reduce interest costs.
- Consider lump-sum payments: Some mortgage agreements allow for lump-sum payments, where you can pay a larger sum toward your principal once a year or on specific dates. This option can be especially useful if you receive large bonuses,
Final Thoughts on Tackling Your Mortgage
Paying off your mortgage early can be a powerful financial move that provides both immediate and long-term benefits. Whether you choose to make extra payments, refinance to a shorter term, or explore other strategies, the key is to remain consistent and keep your overall financial goals in mind.
By eliminating your mortgage, you’ll have more financial flexibility, save money on interest, and gain the security that comes with fully owning your home.
Photo by Jessica Bryant
Step Seven – Legacy & Estate Planning
The seventh pillar of financial success revolves around legacy and estate planning. After all, your financial success is most likely not just for you. Parents, children, and grandchildren can all reap the benefits of your financial success. But it’s essential to plan for your estate and legacy to ensure your wishes are carried out correctly after you pass away.
Start by creating a will outlining how your assets will be distributed after you pass. You should also prepare a Power of Attorney, which gives a trusted person the authority to make decisions on your behalf if you cannot do so.
Estate planning helps avoid confusion and legal complications for your loved ones. Having these documents in place brings peace of mind that your affairs are handled as you wish!
Step Eight – Giving to Others
If you are in a position to do so, which most of us are in some way or another, giving to a charity or cause that is close to your heart can really make a difference in people’s lives. The eighth pillar to financial success is using that success to help others!
It can put food on the table for those without, fund research for diseases and illnesses, or provide necessities for the less fortunate.
Not only can you change people’s lives, but if you give to a registered Canadian charity, you will also receive tax benefits for your generosity! Ultimately, your support can transform lives and strengthen communities in ways you may never fully realize.
Supporting a cause close to your heart not only helps others but also creates a ripple of positive change that lasts far beyond the initial act of giving.
Photo by Julia M Cameron
Key Takeaways
Achieving financial success requires dedication and strategy!
Here are the key takeaways from today:
- Build an emergency fund: Start with $500–$1000, then work toward 3–6 months of expenses
- Use the snowball method to pay off credit card debt.
- Fully fund your emergency savings.
- Save for retirement, aiming to contribute 18% of your gross income.
- Review your insurance needs, including life and disability insurance.
- Pay off your mortgage early to save on interest and gain financial freedom.
- Plan your legacy with a will and power of attorney.
- Give back to causes close to your heart and reap both emotional and tax benefits.
Taking control of your finances is a journey, but with these steps, you’ll be well on your way to financial independence. Be sure to check out our other blog posts at Fearless Financial Journey for more insights and strategies to help you reach your financial goals!
Eeva Niemi is a Wealth Advisor with Assante Capital Management Ltd. The opinions expressed are those of the author and not necessarily those of Assante Capital Management Ltd. Please contact Eeva at eniemi@assante.com or visit https://advisor.assante.com/Eeva-Niemi to discuss your particular circumstances prior to acting on the information above. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and the Canadian Investment Regulatory Organization. Insurance products and services are provided through Assante Estate and Insurance Services Inc.
