Saving and investing can both help you reach your financial goals.
But are you wondering what might be a good strategy for you according to your current financial situation? Ask yourself these questions to help you determine the right fit for your money goals.
Do You Have an Emergency Fund?
No – Emergency Funds Explained
If you don’t have an emergency fund, you may want to consider building one before you look into investing.
What Is an Emergency Fund?
An emergency fund is money set aside to cover your living expenses in case you’re faced with sudden changes in your financial situation. Unexpected changes could include unemployment, medical emergencies, and essential repairs to your home or vehicle. Using your emergency fund to cover monthly costs could reduce the need to borrow money or use high-interest credit cards.
How Much Money Should Be in an Emergency Fund?
Some financial professionals recommend saving at least three months’ worth of expenses; however, this may vary based on individual needs.
Start by examining your expenses, tracking your spending, and then determining how much you can put away each month. You may consider working with a financial professional to help you learn how to manage your expenses and build an emergency fund.
Yes – Great Job, You’re Better Prepared for Unexpected Financial Changes
Your emergency fund is in place, but don’t forget to check in on it. It’s a good idea to routinely check your current income and expenses, and update your emergency fund as needed. Doing this will continue to help you stay prepared in case your financial situation shifts.
Have You Planned Out Your Short- and Long-Term Financial Goals?
No – Why It’s Important to Set Financial Goals
Whether you want to be a saver or investor, setting your financial goals is one of the first essential steps towards becoming more financially secure. When you have specific goals, you can better determine which money strategy will help you reach them. For example, a specific short-term goal could be to pay down high-interest debt or put a down payment on a home. One of your long-term financial goals could be to save for retirement or to pay off a mortgage.
Simple Steps to Help You Set Short- and Long-Term Financial Goals
- Find out what matters to you. List out your financial priorities, and what you’d like to achieve in the next five, 10, and 20 years.
- Set realistic goals. It can be deflating to set unrealistic goals and not be able to reach them. Examine your finances and expenses, and set goals that are within reach.
- Keep your goals specific. If your goal is to save for a down payment, zero in on how you can achieve this goal. For example, are you looking to save $100,000 in five years? That means saving about $385 per week, not including interest. Now that you have a more specific number, you’ll be able to figure out whether it’s realistic or not.
Yes – Keep Checking in With Your Goals
Nice work! If you have your short-term and long-term goals in place, it’s a good time to learn more about which money strategy will help you reach them. Click here to learn the differences between saving and investing to help you choose which strategy works best for you.
Also, be sure to check in on the status of your goals periodically. This will help you review your progress and determine if you’re still on track to meet your goals, or determine if they need to be updated.
Do You Understand Your Investment Risk Profile?
No – How to Assess Your Risk Profile
Your risk profile is a measure not only of your willingness to accept risk but also your ability to lose money. It will differ for each person.
A registered investment advisor can help you determine your risk profile, and help you choose assets that fit within it. Our free risk test can help you test your risk tolerance understand how much risk you’re comfortable with.
Remember, investing always comes with risk. Learning to choose investment products according to your risk profile is an essential piece of your personal investment strategy.
Yes – Revisit Your Risk Tolerance as Circumstances Change
Having a clear picture of your risk profile means you understand that there’s a possibility of losing some or all of the money you’ve invested depending on your investment choices, and that you’re in a good position to make more informed financial decisions.
But it doesn’t stop there. Financial markets are constantly changing, and sometimes global events will cause fluctuations. It’s crucial to re-visit your risk profile regularly and ensure it is still aligned with your current financial situation.
Have You Covered the Investing Essentials?
No – Where You Can Find Unbiased Investing Information
It’s important to have a solid understanding of the basics when investing. Knowing the essentials will help you make more informed decisions.
Our Get Started with Investing resource is designed with this in mind. Use the resource to learn about common investment types and accounts, differences between active and passive investing strategies, and to learn more about working with a registered investment advisor. We have recently updated the resource with a new video toolkit to boost your knowledge of more advanced investing concepts, including diversification and understanding investment fees.
Yes – Keep Reviewing Your Investments and Financial Situation
If you’re about to embark on your investor journey, stay in the loop with your investments. You can do this by researching companies that you’re considering investing in, regularly reviewing your financial statements, and aligning your investment decisions with your risk profile.
If you’re unsure about an investment, it’s a good idea to seek independent financial advice. You can speak to a registered investment advisor, or another financial professional such as an accountant or lawyer. Our new Investor Guide can help you work more effectively with a registered investment advisor.
The BC Securities Commission (BCSC) is also here to help you with questions or concerns about a company or individual.
Report a Concern
If you have any concerns about a person or company offering an investment opportunity, please contact BCSC Contact Centre at 604-899-6854 or 1-800-373-6393, or through e-mail at [email protected]. You can also file a complaint or submit a tip anonymously using the BCSC’s online complaint form.