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Financial well-being depends more on behaviour than on income

How do you stack up?
Written by CMN News Service

(NC) The Financial Consumer Agency of Canada recently released a report entitled Findings from Canada’s Financial Well-being Survey, which indicates that our financial well-being depends more on good money management than on income.

This is striking because many of us believe that higher incomes guarantee better financial well-being. But this is not the case. Income is important, but behaviour is even more so.

For example, the study shows that Canadians who regularly save money have a higher level of financial well-being than those with similar incomes who do not contribute to their savings. It also showed that those who avoid borrowing to cover daily expenses have a higher level of financial well-being than those who borrow regularly, regardless of income.

It is encouraging to realize that, even if you cannot increase your income or change your employment status, you can definitely improve your financial well-being by changing behaviours to adopt sound management of your personal finances.

Here are some examples of simple steps you can take to achieve or improve your financial well-being:

Make a budget. A budget allows you to estimate your monthly income and expenses. This can help you determine needs, prioritize purchases and commit to a realistic spending plan.

Set up an emergency fund. Save regularly and set up an emergency fund for unexpected expenses. In doing this, set a goal to cover a minimum of three to six months of living expenses. You’ll be surprised at how quickly your savings can grow through such small acts as: starting with – and saving – a realistic amount each week, eliminating non-essential spending, automating your savings and increasing your weekly savings if you can.

Avoid borrowing to pay for everyday expenses. Living within your means is not always easy, but it is the best way to avoid excessive debt. Borrowing more money puts you at risk of no longer being able to manage your debt. You might hit your credit card limit or have trouble making bigger payments if your mortgage interest rates rise.

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