How Financial Literacy Can Lead to Lifelong Financial Health

1) Reduce your debt

1) Reduce your debt

Perhaps one of the biggest drivers of financial stress is debt. If you’re dealing with high levels of debt, the burden can feel heavy and overwhelming. Debt can seriously affect your ability to manage your everyday expenses, let alone save for your future savings goals. As a homeowner, the cost of servicing debt can affect your ability to cover your mortgage costs, particularly during a time when mortgage payments are rising for many. If you’re aspiring to buy your first home, too much debt can hurt your chances of getting approved for a mortgage.

While becoming debt-free can feel like an insurmountable task, with the right approach, it is possible. Creating a budget, trimming unnecessary expenses and consolidating multiple debts are some of the ways you can reduce or even eliminate your debt altogether. Discover more tips to pay down your debt and improve your financial health.

2) Access lower interest rate credit for larger expenses

2) Access lower interest rate credit for larger expenses

If you have a bigger expense coming up – such as a home renovation, car repair or new appliance – you may need to borrow money to cover the cost. As you consider the credit you may need to access, keep in mind that now all credit is created equal – interest rates and borrowing costs can vary greatly between credit solutions.

To cover larger expenses with credit, consider borrowing solutions with lower interest rates so your cost to service the credit every month is less, and the total cost of borrowing is lower over time. A personal loan, personal line of credit and Home Equity Line of Credit (HELOC), for instance, come with interest rates much lower than you would find on a credit card. The option you choose largely depends on the type and size of your expense. Understanding the features and benefits of common borrowing solutions can help you decide on the one that best suits your needs.

3) Build a strong credit score

3) Build a strong credit score

A strong credit score can have a positive impact on your overall financial health. Not only does it affect whether or not you will be approved for a loan, it can influence the interest rates and terms you receive. So, if you’re seeking a lower-rate borrowing solution, as outlined above, a strong credit score can improve your chances of getting approved and qualifying for a rate that materially reduces your cost of borrowing. If you’re looking to buy a home, a strong credit score is integral to getting approved for a mortgage and qualifying for a favourable rate and term.

A credit score, which is a number generally between 300 and 900, helps determine your credit worthiness. A score of 660 or higher is considered good, 725+ is very good, and 760+ is considered excellent. Typically, the minimum credit score to be approved for a traditional mortgage is between 650 and 680.

You can check your credit score through one of the credit reporting agencies in Canada, Equifax or TransUnion. If it’s on the low side, there are ways you can improve it – such as by keeping up with all your payments, paying down your debt, limiting your credit applications and more. Take a look at our full list of tips for building a strong credit score for help in improving yours.

4) Build your savings tax-free

4) Build your savings tax-free

If you’re not yet a homeowner, you may be well aware of how hard it can be to save for your down payment. But understanding the options available to you can help you build your savings faster and buy your first home sooner.

For instance, the First Home Savings Account (FHSA) is specially designed to help first-time homebuyers save for a down payment on a home. A registered savings account, a FHSA allows buyers to save up to $40,000 tax-free. You can contribute up to $8,000 per year for up to 15 years.

5) Get familiar with programs and resources for first-time homebuyers

5) Get familiar with programs and resources for first-time homebuyers

Buying your first home is a significant milestone – and when you haven’t been through the process before, there can be a lot to learn.

The good news is there are several programs, organizations and resources available to help you achieve this important goal. From government incentives to savings programs to tax credits, there are specific initiatives designed to make homeownership more achievable for more Canadians. Plus, MCAP is here to help you every step of the way, offering advice and resources to guide you through the process of buying a home, getting a mortgage and budgeting for the cost of homeownership