5 behaviours that can optimize your financial health
We are living through difficult economic times and unexpected situations such as a rise in interest rates and the cost of living and increasing debt levels can lead to financial difficulties. One proactive way to set yourself up for success is to optimize your financial health. You can do this by looking for and then making small improvements in how you manage your money.
Here are five behaviours that can optimize your financial health:
Behaviour #1: Learn the difference between good and bad debt
Knowing the difference between good and bad debt will help you borrow money and use credit more wisely.
Good debt is an investment in something that creates value or produces more wealth in the long run.
Bad debt is borrowing to buy something that goes down in value or that you can’t repay on time and in full, thus incurring interest charges and more debt.
Behaviour #2: Create and review your budget to manage your money and debt
A budget is a plan that helps you manage your money. It helps you figure out how much money you get, spend and save. Making a budget can help you balance your income with your savings and expenses.
Reviewing your budget can help you repay your debt faster. When reviewing it, put needs before wants and try reducing your expenses. You’ll be able to cut some expenses that are not necessary. This way, you’ll have more money available to repay your debts.
Behaviour #3: Shop around and compare your options to select the financial products and services that are right for you
Financial institutions offer many types of products and services. Before you get a new product or service, make sure it meets your financial needs. Research and compare the products and services that financial institutions offer. Make sure you understand the terms and conditions.
Behaviour #4: Set up an emergency fund for unexpected expenses
An emergency fund is money you set aside to pay for unexpected expenses.
Setting up an emergency fund helps you to:
- handle an unexpected expense without getting into debt
- avoid high-cost loans (such as a payday loan or a credit card cash advance)
- have financial control
- have peace of mind
Behaviour #5: Learn the basics about choosing and renewing a mortgage
When you shop for a mortgage, your lender or mortgage broker provides you with options. Make sure you understand the options and features. This will help you choose a mortgage that best suits your needs.
When your mortgage term comes to an end, you have to pay off your mortgage in full or renew it. This is a good time to review your mortgage needs and make sure you have the right product.
FCAC expects banks to help individuals who are identified as consumers at risk of mortgage default. These consumers may be struggling to pay their mortgages due to exceptional circumstances.
These expectations also apply to other federally regulated financial institutions offering mortgages.