How to practice financial self-care
Self-care entails more than just looking after your mental, emotional, and physical well-being. It's also important to look after your finances, especially since money is the #1 cause of stress in Canada.
Financial self-care is about developing habits that are beneficial to you and reflect your financial goals. It means putting your financial needs first because you can’t give from an empty cup.
That doesn't only imply spending money on things that make you happy right now, such as luxury handbags and bottomless brunch.
It's sometimes as simple as checking your credit score once a year and talking about money with your partner, for instance.
If you want to begin to practice financial self-care try this acronym: C.A.R.E.
C - Save CASH for emergencies and the unexpected
This is one of the only things the entire personal finance community can agree on. We all need an in a Life Happens Fund (money set aside for unexpected life events you can't plan for).
How much you set aside depends on your personal income, goals and values but we recommend at least $3,000 (or three months’ worth of living expenses) for your beginner emergency fund.
Whether your car breaks down, your health prevents you from working, or you need to aid a family member, having an emergency fund can help you start planning your financial objectives and make it easier to confront unexpected hurdles, so get started as soon as possible.
A - Look at your AMOUNTS DUE and pay off any high-interest debt
Debt can come with a slew of emotional consequences including insomnia, depression and social anxiety. Aside from reducing stress, eliminating debts can free up funds in your budget to invest more aggressively in the future in order to achieve your long-term objectives.
Write down each debt that you owe, along with its current amount due, minimum payment and interest rate. This will help you choose whether to use the avalanche method (highest interest rate paid first), the snowball method (lowest balance paid first) or another method (most stressful paid first) to begin to eliminate any high-interest debt in your life.
R- Invest in your RETIREMENT fund to build long-term wealth
Did you know that in retirement, 80% more women than men live in poverty? It's time to start thinking about retirement, regardless of your age.
Create a post-retirement budget to assist you in figuring out how much money you'll need to fund your ideal retirement. Remember to account for inflation as well as one-time purchases such as a new roof or car. You can also use tools like a retirement savings calculator to arrange your finances in a systematic way. You can also work with a financial planner if you prefer.
E- Cover any potential EXPOSURES with insurance
You are high-interest debt-free, you have a fully funded emergency fund and are investing for your retirement. Now it's time to ensure that your legacy is protected through insurance, estate preparation, and financial planning.
Because most people don’t like to contemplate their own mortality, estate planning is often a neglected aspect of financial planning. Buy life insurance, look at critical illness and disability insurance and make a will.
The scariest and greatest parts of life are the same - we never truly know what will happen.
Just remember that getting your money in order is also self-care.
