How to Improve your Financial Health This Year

Do you want to improve your financial health in 2016? Start by ensuring these three essentials are in place.

Tips to Help you Improve your Financial Health

1. Make sure your Will is up to date.

It is important that everyone have an up-to-date Will and one that is properly drafted by a professional. This is especially important if you have young children. If you do not have a Will and should pass away, provincial law will determine how your assets will be distributed and to whom.

If you have prepared a Will, remember to review it any time a life change occurs – if you get married or divorced, become a parent or grandparent, or when a loved one passes away. If you and your spouse separate, you should change your Will if you don’t want your assets to pass to him or her on your death.

Finally, name someone you trust and who will be around to handle the settling of your estate – an ‘Executor’. This often is an adult child, sibling or a close family friend.
I would also suggest setting up a Power of Attorney/Representation Agreement at the same time you are meeting with a professional to draft your Will. So if you are ever incapacitated, this will be someone you trust to act on your behalf.

2. Review your insurance coverage to ensure you have adequate coverage.

Just as you would protect your car or home from misfortune, you need to also protect your family should you pass away while they are still financially dependent upon you. How much insurance is considered adequate will vary according to each person’s unique situation.

Do you have dependent children or grandchildren?

Are you the main “bread winner” for the family?

Do you have future costs, such as education or a spouse’s retirement, you want to ensure are taken care of if you were not around?

Generally, you need to have enough insurance to pay down the mortgage, any debts or outstanding bills and burial costs. It is then recommended that you have enough funds remaining to provide income for your family for the number of years you deem necessary.

In addition to life insurance, consider having adequate disability insurance in place. It is advised to have enough coverage to provide 60 to 70 per cent of your household’s income.

3. Set up an emergency fund.

As the saying goes, “Life happens when you’re busy making other plans,” and life tends to cost money. Having enough money put aside for such unexpected events can make the difference between staying afloat or sinking financially. One of the most important elements of your financial health is to ensure an emergency fund is in place – and sooner rather than later.

The general rule of thumb is to have between three and six months of your current living expenses set aside for emergency situations. However, this depends on many factors specific to each person’s situation such as, how employable you are, whether or not you carry substantial debt, if you have adequate insurance, if you are a dual income household and whether you have children.

A Will, insurance and an emergency fund are three essentials for financial health that should be considered by everyone. If you find it a bit daunting to get the ball rolling, find a trusted financial advisor who can help guide you in the process. An advisor should not only be able to provide guidance and recommendations unique to your individual situation, but they should also be able to put you in touch with trusted sources to prepare or update your Will or Power or Attorney.

Start 2016 off by looking after these three financial essentials.