As the sovereign debt crisis makes its way around the world, creating havoc in its wake, we can be thankful that Canada has weathered the storm in fairly good shape. The media has given us a play-by-play on the action and many people are concerned with the outcome. While we can't solve the sovereign debt crisis individually, we can focus on our own financial situation. Here are 5 keys for achieving sanity in your personal finances:
Reduce Your Debt
If we have learned anything from the financial crisis, it's that too much debt can have a devastating effect on the economy. Not just the global economy, or national economies, but on our personal economies as well.
For most, the solution can be relatively simple - find ways to pay down discretionary debt such as credit cards and lines of credit. If your debt load is a little more than you can bear, you may be able to consolidate debt at lower interest rates and payment amounts. Avoid new consumer spending and think it over before using that credit card again.
Increase Your Savings
In any financial downturn, those that survive it best have savings they can fall back on. It is recommended that you have three to nine months of living expenses as an emergency fund. If you haven't already developed the discipline of saving this amount, a monthly pre-authorized deposit into a savings plan is a great start. With interest rates so low, only keep enough to handle emergency situations. A Tax-Free Savings Plan may be an excellent place to put these savings.
Invest Your Excess Savings
The stock market these days can be very volatile. It can be difficult to predict the markets. As we have seen, events elsewhere in the world can have a devastating impact on local stock markets.
Investment funds are generally considered a lower risk option for investing in the markets because you benefit from the built in expertise of professional money managers. You can also benefit from dollar cost averaging and lower your risk if you invest regularly and systematically over time.
Have a Sufficient Insurance Coverage
Whether its life, accident and sickness, home or auto, it's important to have adequate insurance protection. Most of us know of someone losing a family member without sufficient life insurance and the devastating effect it had on the survivors. Or of someone becoming disabled and not able to earn a living. We like to believe it won't happen to us but it's foolish to not plan for the possibility.
Protect Your Estate
The last thing you want is for the government to decide who gets your life savings. A properly prepared and valid will names a trusted executor and establishes guardianship for minor children. This is not something to be put off. Do-it-yourself wills are an option, but they can cause bigger problems if not completed properly.
A trusted financial advisor can take you through the options best suited to your individual circumstances and tailor make a solid plan for accumulating and keeping your wealth.
Questions about saving strategies?
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