You might have thought to have a well-settled life financially. However, these would not happen automatically and you must realize that you need to act to make the same happen. We at “The Accounting and Tax” have been into financial consulting in Canada since long and will provide here in 5 steps you could undertake to make this happen. The following is list of the smartest things that anyone can do for their finances.
1. Create a Spending Plan & Budget
It is always important for one to spend as per a budget. In case you spend much more than you earn, you will never get ahead. In fact, this is an indication that you are surely headed for trouble in terms of your finances. This is why you need to keep track of your spending on a regular basis and ensure that you spend as per a predetermined budget.
2. Pay off Debt and Stay out of Debt
Taking debts make indeed put you off track from achieving your financial goals. This is why it is best not to get into any major debt early on in life. However, in case you have got into one, it is best to pay off all of your debt as early as possible. To get started, focus on your most expensive debt—the credit cards and loans that charge you the highest interest.
3. Prepare for the Future - Set Savings Goals
It is most critical that you save money for your finances. You can only achieve a goal which you have set. The same principle applies for your financial goals too. It is important that set savings goals and steadily work towards achieving them.
You must realize the power and magic of compounded interest. This is even in times even when the rates are low. If you start to save for your retirement early doesn’t have to save as much as someone who starts saving later in life.
For e.g in case 2 people decide to save for retirement, but one starts at 21 and the other at 31, the 21 year old can save $100 per month till he reaches 65 and accumulates $253,000 for his retirement. Let us assume a 6% annual rate of return. The person who starts at 31 on the other hand, will have to save $190 per month to have the same amount by age 65.
So the 2nd person would have to pay almost twice as much per month to make up for waiting 10 years. Thus it is quite evident that it is never too late to begin saving, but the sooner you start, the better off you will be. Thereafter you need to maintain a financial discipline to save a certain amount after fixed periods.
5. Do Your Homework before Making Major Financial Decisions or Purchases
You must always plan your big expenditures. It is easy to get carried away and indulge in excessive unnecessary spending. So once you decide about making some major expenditures like buying a TV, a car, etc, you must plan well in advance and make the right spending so that you do not spend impulsively.
The Accounting and Tax