04 Jan Dollars and sense: Achieving better financial literacy in 2024
With the holidays now behind us, it’s time to focus on what’s ahead: a fresh year full of possibilities.
Many individuals have popular New Year’s resolutions involving better nutrition, weight loss and work-life balance. Yet others decide that now is the time to focus on enhancing their skills in money-related matters. And with rising inflation rates and essential expenses like food and housing rising, that’s a resolution that we all can benefit from.
No matter where you are on your financial journey, there are always ways to improve your financial literacy. Below, we outline five simple steps to develop better financial literacy skills in the new year.
1. Develop or revisit your budget
Before improving our financial literacy, we need to understand where our money goes each month. To find out, we’ll need to create (or review) a budget to get an up-to-date overview.
Throughout a minimum of one month, track your income and spending using a money management app, spreadsheet or notebook. Be sure to include fixed-price items, including housing, insurance, utilities, and include annual expenses divided by 12 to account for monthly spending. The greater the detail you include in your budget, the better!
2. Save more money
There are two ways to save money: increase our incomes or reduce expenses. But working more isn’t feasible for one in three Canadians since we’re already managing a second job to make ends meet. That leaves many of us figuring out where to cut our spending habits.
Categorize your spending as essential or desirable – or needs and wants. What do you require to survive daily, and which expenses are simply nice to have?
Once your expenses are categorized, you can identify obvious areas for reducing your spending. These spending habits might include using money to buy regular take-out for lunch, streaming services, or new trendy clothing on sale.
In addition, evaluate your less obvious savings areas. These are hidden opportunities for savings in areas where adjusting your habits can trim essential expenses. For example, is there a more affordable grocery store you can shop at weekly? What about your utility payments – do you get a discount if you switch to paperless billing?
3. Understand your credit score
Your credit score affects your overall finances – everything from loans to credit cards. Learning your current credit score can help you track your spending, identify errors or fraudulent entries, and improve your score over time.
4. Get ready for retirement
One of the biggest reasons we improve our financial literacy today is to prepare us for a better future.
Even if you haven’t yet had a chance to start saving for retirement, it’s never too late. Look into whether your employer already offers a retirement savings account, and contribute the maximum (if you can) to receive the employer match.
Meet with a financial advisor to consider opening an Registered Retirement Savings Plan (RRSP) and creating a diversified investment portfolio to reach your retirement goal.
And if you need help reducing debt, consult an unbiased debt counsellor. A debt professional can advise you on paying off your debts and reaching financial freedom by working closely with you.
5. Commit to lifelong learning
Becoming more financially literate is a long-term commitment that involves learning and practising various money-related skills. Here are some ways to stay up-to-date on the latest financial news:
- Subscribe to financial newsletters
- Listen to financial podcasts
- Read personal finance books
- Use social media to follow latest financial news
There are countless resources available to help you improve your financial literacy. Do your research and ensure they’re trusted sources before incorporating some of their suggested best practices.
ABC Money Matters: A free financial literacy program
Becoming more financially literate this year doesn’t have to cost you anything. With our free ABC Money Matters program, you can download financial literacy resources on topics such as:
- Spending plans
- Banking basics
- Borrowing money
- Way to save
- Smart shopping
To help you get started, download free copies of our workbooks today.