Borrowing

On top of a pandemic to worry about, people are still losing sleep over their finances. In fact, a recent survey on financial stress found that nearly half of all respondents blamed money woes for keeping them up at night. More than one-third admitted that money was their number-one worry, while one-quarter cited personal health as their main concern. Not surprisingly, 44 per cent of participants said the COVID-19 pandemic has had an impact on their level of financial stress.

If you’re feeling stressed out about money, talking over the situation with your partner, family members or trusted advisor and then taking action can help relieve your financial worries. Here are some ideas.

WATCH: Money stress, a video about some of the things you can do to reduce stress about money.

Create a budget

If you don’t already have one, get started by creating a household budget – it’s an invaluable tool to help track income and expenses. When you know where your money is going each month, it’s easier to make adjustments to free up cash that can go towards savings or paying down debt. Examine your spending to see what can be eliminated or reduced, and take a hard look at discretionary (or non-essential) items. Explore free or lower-cost alternatives where you can. For example, try negotiating a better deal on certain products and services (think bulk purchases and bundled discounts). A budget works best when everyone in the household is on the same page, working towards common objectives.

Not sure where to start? Numerous online applications and tools are available to help. Some banking apps can analyze your bills and spending habits, track your spending, and even help you determine how much you can save and automatically transfer that amount into a savings account.

Pay down debt

Many of us have debt, and most of us don’t like to think about it. The key is being aware of how much interest you’re paying to carry that debt each month. If you can reduce the interest amount, more of your money could go towards paying down the principal. Concentrate on getting rid of debt that has the highest interest first. Consolidate wherever you can, for example, consolidating credit card balances onto a single line of credit at a lower interest rate. You could save money, plus it’s easier to pay one bill instead of several.

If you’re a homeowner who has available equity in your home, think about using it to pay off higher-interest debts. Or you can explore other options, such as an all-in-one account that lets you combine your mortgage and debts into one – a great way to help you pay both down faster at a lower interest rate.

Boost savings

There are three words to live by when it comes to saving: Pay. Yourself. First. Set up automatic payments to deposit a small amount from each paycheque into a high interest savings account or other savings vehicles, such as a Tax-Free Savings Account or Registered Retirement Savings Plan. You likely won’t miss it, and your savings could grow faster than you’d expect.

Start an emergency fund

It’s also a good idea to start a separate emergency fund for any unforeseen financial crises. Put in as much as you can afford weekly or monthly, whether it’s $5 or $50 – a little can add up to a lot. You could also consider opening a line of credit with a low interest rate as well, so that you don’t need to rely strictly on cash savings to pay for an unexpected expense.

Get professional advice

No matter your situation, a professional perspective can be invaluable. Let’s face it, most people have neither the time nor the expertise to tackle the complexities of their financial affairs alone. An advisor will learn about your situation and establish your risk profile. They will work with you to determine short-term and long-term goals and develop a flexible plan of action to ensure those goals are achievable.

Build a financial plan

Work with your advisor to build a comprehensive plan that balances your current needs and future goals. A good plan should be easily adaptable to changing circumstances, while including milestones to help you gauge progress. It will most likely include:

Disciplined savings
A customized investment strategy based on your risk profile and time horizon
Debt management and cash flow planning
Tax strategy
Insurance solutions (life, disability or critical illness) to help protect your family
Retirement plan
Will and estate plan to protect your legacy

And as we all know, life is full of unexpected change, so it’s wise to review your plan regularly.

With a few simple steps and some expert advice, you can take the worry out of your finances. Speak to your advisor to get started.

Many aspects of the economy are affected by forces well beyond our reach, but being attentive to the economic factors that you can influence directly, like spending, saving and investing, can give you greater control over your financial future. Knowing how to build and preserve a solid credit score can help expand your options down the road when it comes time to borrow funds.

What is a credit score?

Essentially, your credit score (also known as a credit rating) is a number between 300 and 900 that shows lenders how good you are at borrowing money and paying it back. Along with a credit report, it’s a key piece of information that they’ll look at whenever you apply for a loan, credit card, a line of credit or a mortgage. The higher the number, the more successfully it says you’ve managed your credit, debt and overall finances in the past – and the more likely you are to repay loans in the future. If your score registers near the higher end of the scale, you can enjoy advantages, such as access to better lending rates and more receptive responses to your applications. Lenders generally regard scores within the 660–900 range as good, very good or excellent.

WATCH: Improve your credit score a video with tips for raising your credit score number.

What makes a good credit score?

In Canada, two credit bureaus are permitted to collect information on your financial activity: Equifax and TransUnion. Equifax and TransUnion each use the information to develop a credit report, or profile, that reflects your financial status and evaluates your risk. Both bureaus make this report available to any lenders you have asked for credit, and you’re also entitled to see it for free once a year. The credit report forms the basis of your credit score. Here are some of the criteria that go into calculating your score:

Whether you carry a balance on your line of credit or credit cards
Whether you always pay your bills on time
Whether your current credit products are close to or exceeding their limits
How frequently you apply for more credit
Whether collection agencies have been notified of your debts
Whether you have unpaid taxes
Whether you have ever declared bankruptcy

Remember to check your credit score

A growing variety of online credit service sites, such as CreditKarma.ca or Borrowell.com, as well as many banks, offer access to your credit score for free. Generally speaking, as long as you don’t do anything too unusual in terms of credit activity, your score won’t change very much. However, it’s good practice to check it from time to time to know exactly where it stands, especially if you’re planning to apply for more credit in the future. It’s also a good idea to monitor your score in case of any errors that need to be corrected and to ensure it isn’t being affected by some element of fraud.

Directions on how to obtain your free credit report from Equifax and TransUnion can be found on the Government of Canada’s website.

Following these tips can help you preserve and improve your credit score:

1. Never miss a payment

Missing even a single credit or bill payment entirely can decrease your credit score. If you’re in danger of missing a payment, making a partial or minimum payment is necessary to preserve your credit score. If you anticipate difficulty making a mortgage or loan payments, contact your credit provider to learn more about other possible payment options and assistance.

2. Don’t rely too much on credit

Developing an appetite for too much credit can impact your score, as can carrying an excessive balance. Ideally, you should pay off any credit balances in full each month to preserve your score and to avoid costly interest charges. If this is too challenging, consider setting up a pre-authorized monthly payment plan for some or all of your credit balances. Your advisor may also be able to suggest ways to consolidate your debt at a lower rate of interest if your balances have become too difficult to pay down.

3. Keep your oldest credit line or card active

Your credit history says a lot about how responsible you are with money, so try to keep your oldest credit card or line of credit active, even if you rarely use it. Keeping it open and in good standing is a strong indicator of your financial behaviour over time.

4. Try to use different types of credit

Using a variety of credit products can show lenders that you can handle multiple payments at once. Managing credit cards, a car loan and a student loan all at the same time may help boost your score. Ultimately, you want to demonstrate that you can pay back any money that you borrow.

5. Limit your new credit applications

Sending multiple credit applications can raise red flags for lenders, so limit how many times you apply to help steer your score away from taking a hit. If you’re approaching multiple lenders for quotes, try to get to them within a short time. This way, the combined credit inquiries will appear as only a single request and reduce the damaging effect of too many inquiries.

Your credit score can be a powerful financial tool. Maintaining a strong score can ease the way forward to future funding that may help you achieve your goals. Speak with your advisor to learn more about what you can do to ensure your credit score stays in the good to excellent range.

Stressed about money? You’re not alone.