Take care of your health and wealth

Health Canada recommends 60 minutes of physical activity a day to stay healthy or see positive changes.

Considering money management is as big a responsibility as maintaining your well being, the same recommendation could be made for time spent on your personal finances. Unfortunately on both fronts – health and wealth – it seems we’re simply not putting in the hours.

The Public Health Agency of Canada says 63 per cent of us aren’t active enough to achieve the health benefits we need from physical activity. And a 2009 Certified General Accountant’s Association of Canada report not only reveals that household debt is at an all-time high ($1.3-trillion in 2008), but that a third of Canadians don’t allocate any resources to savings and more than eight out of 10 households have outstanding debt.

Improving our health and our wealth isn’t rocket-science. It takes more than “burn more calories than you consume” and “spend less than you make.” But once you’ve got your system in place and know the right information, you are on your way.

Just as there are important numbers to know when you’re getting into shape – blood pressure, cholesterol level, resting heart rate, etc – there are important numbers to know when you’re looking to improve your finances.

 

If your blood pressure is the measure of your heart’s health then your credit score is the measure of your financial health. Always keep a close eye on your credit score, as it has a direct impact on your ability to take out a mortgage, credit card or other loan and on the interest you’ll pay for it. You should have a copy of your credit report and your score on hand, so that you know where you stand and if you are not sitting at an ideal score of 720 or higher (scores range from 300 to 900), where you need to make improvements (your report will provide suggestions).

Credit cards and lines of credit make up the largest portion of consumer debt, with 85 per cent of indebted Canadians carrying outstanding debt on their cards. The Financial Consumer Agency of Canada is a great resource for comparing the features and rates of various cards.

Credit cards represent the worst kind of debt. Not only do they charge higher interest rates than, say, a mortgage or school loan or even a car loan, carrying a balance on these types of credit is a sign that you are overspending on a regular basis.

For a dose of reality on how much your debt is really costing . I warn you it can be a frightening graph.

For example, if you’re setting up a new pad and you’ve charged $3,000 worth of furniture on a credit card with an interest rate of 12 per cent and you send in typical minimum monthly payments, it could take you more than 185 months to be debt free. More sickening is that you’ll also have paid more than $1,800 in interest!

This little gem of information might be enough to prompt you up off your new sofa and on your way to making more to pay down that debt quicker.

And it’s not just knowing what you’re sending to creditors each month, you’ve also got to know what you’re making, saving and spending before you can adjust the figures to achieve your financial goals. That means taking an honest assessment of your current situation-not what you think or hope it could be, but what it actually is. And it might take hours, or even days, for you both to dig up all of the documents you need to compile the necessary information. But it’s worth doing. After all, how can you make a plan to manage your expenses, much less plan for your future, if you have no idea how much you make or spend first?

Having a spending plan allows you to check in on a regular basis. How many of us have one and more importantly how many of us use one? Once you’ve got this plan in place, consistent and productive steps – even if they are just baby steps – are the key.

The idea is to start working personal finance into your life so it becomes a natural part of your daily routine. Just like taking the stairs is better for your wellbeing than letting the escalator do all the work, swiping your library card is better than swiping your credit card when you’re looking for a new book to read.

You’re trying to build habits that will eventually make taking care of your finances feel less like work and more like a part of your everyday life.

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