5 financial errors to avoid
Managing your finances can be challenging... Between unforeseen events, ongoing projects and everyday expenses, it’s easy to feel overwhelmed. Yet a few common errors can have a major impact on your financial security and that of your loved ones.
The key is recognizing these pitfalls and know how to steer clear of them. Here are 5 common financial errors, along with practical tips to help you avoid them and stay on track to achieve your financial goals.
1. Not having a plan
Without a clear financial plan, you're setting sail without a map. You put off saving until later. You end up living pay cheque to pay cheque. You overlook the importance of preparing for the unexpected. You fall into the trap of overwhelming debt, but every little step can help build lasting financial security.
Drawing up a budget that reflects your actual and occasional expenses is key. Remember, your budget shouldn't be set in stone. Revisit it periodically to account for life changes and adjust it to balance your needs and desires.
A rainy day fund is also essential for dealing with the unexpected without financial stress. Whether it's due to a job loss or an unexpected repair, having a financial cushion means you won't have to resort to emergency credit.
The real danger lies in living on credit. Credit cards, balloon financing or a heavy mortgage can drain your savings. Take the time to review your financing choices and change your habits to reduce your debt.
Ultimately, the key is staying vigilant about your finances. Reassess your finances, learn from past mistakes–let’s face it, we all make them–and realign your priorities.
You now have the keys to building a solid financial future.
2. Failing to protect your financial security and that of your loved ones
Neglecting your financial security and that of your loved ones can lead to serious consequences. While no one can predict the future, it’s always wiser to plan ahead than wait for a crisis.
Having the right coverage is key to safeguarding what matters the most. This may involve life, health or disability insurance. These coverages ensure that you and your loved ones can deal with the unexpected without compromising your financial security.
Take the time to review your coverage regularly, as important life events occur, such as the purchase of a home or the birth of a child. Make sure they cover your current needs and those of your family so that you can have peace of mind knowing everyone is fully covered.
Don’t have insurance? It's never too late to make the right choice!
3. Adapting your financial strategy in response to changing circumstances
When it comes to managing your finances, it's best to keep a cool head. Making rash or panic-driven decisions is never a wise approach, especially when your money is tied up in the stock market. No matter what’s causing your returns to take a hit–whether it’s the pandemic, elections, a recession, rising unemployment–we're here to help.
Market volatility has its highs... and its lows. When returns are plummeting, the urge to sell can be strong. But before making any decisions, take a deep breath. If your portfolio is diversified–combining both risky and safer investments–sticking to your long-term strategy is likely the best course of action.
Generally speaking, it's typically just a temporary setback, and over time, your investments will pay off.
4. Failing to improve your financial education
RRSPs, TFSAs, FHSA, RESPs... Not sure what all these acronyms mean? That's normal! Each of these plans has its own rules and tax advantages, and meets specific needs.
These terms may seem complex, but don’t worry. You can improve your financial knowledge, one step at a time.
How? Start by learning about the basic concepts. Talk to your advisor. Read our blog posts or sign up for our webinars. The important thing is to go at your own pace.
A clearer understanding of your finances will empower you to make smarter, more informed choices. You'll know which plan suits you best and how to maximize the benefits.
5.Investing on your own
Managing your own finances may seem like a good idea, but it comes with its fair share of risks. Even if you take advice from friends or family or turn to online resources, you may be making costly errors. To each their own, as they say, but proceed with caution.
That's why you need to entrust your finances to professionals in the field: financial advisors licensed by the Autorité des marchées financiers (This hyperlink will open in a new tab). They have the expertise and qualities to guide you. With their knowledge of market regulations, they can help you develop an investment strategy that aligns with your unique goals and circumstances.
Remember: everyone has different needs and goals. What works for your friend or colleague may not be the best option for you. Working with qualified professionals maximizes your chances of success.
Don’t have a financial advisor? We can help you find one.