Financial Literacy

10 steps to Fiscal fitness

There are two ways to get enough: One is to continue to accumulate more and more. The other is to desire less.

~ G.K. Chesterton

Anyone who writes or reads about personal finance has its own list of what it takes to become financially independent. Some of the best have really stood the test of time and have been used as a basis for many other such lists. Dave Ramsey’s Baby Steps are probably the best-known version and, although I don’t agree with everything Mr. Ramsey says, you can’t go wrong following his basic principles. I don’t think that there can be just one definitive list. There are many ways to achieve the same goal.

The list I’m giving you here today is one that I came up with off the top of my head, and if I went through the same exercise again next year, I would probably come up with something slightly different. Still, these are fundamentals that almost everyone seems to agree on and are worth a look:

  1. Have an up-to-date will

    Make sure your wishes are accurately represented and that you have designated a trustworthy executor. Do-it-yourself kits are available, but if you want it done right, see a lawyer. We recently had updated wills and powers of attorney drawn up by a lawyer. For the two of us, it only cost about $400. For me, it’s well worth the peace of mind knowing that our children will be taken care of according to our wishes. Ray over at Financial Highway had a great post back in April on wills and power of attorney.
  2. Keep adequate insurance

    Make sure that you have enough life insurance to take care of your loved ones in the event of your death. And don’t forget about disability and critical illness insurance. Keep your vehicle and home insurance updated and don’t forget to shop around for the best coverage at the best rates. That’s worth revisiting once a year or so, maybe a month or two before renewal.
  3. Budget

    Most people agree that some form of budget is necessary. I am definitely in that camp.
  4. Stop adding to your debt

    If you’re in a hole, stop digging. Enough said.
  5. Keep an emergency fund

    This is extremely important as it gives you the peace of mind you need to focus on other financial priorities without worrying about unexpected expenses.
  6. Pay off consumer debt

    Consumer debt includes credit cards, lines of credit, retail store financing, student loans, and vehicle loans.
  7. Pay off your mortgage

    The rate of return for paying down your mortgage is equal to your mortgage rate, and it’s tax free since you’re using after-tax money to do it! Look at a mortgage calculator like the ones at dinky town.(I know – weird name, but great calculators.) Play around with different scenarios. It doesn’t take long to see how much interest you save by paying down your mortgage, and it’s way less risky than stocks.
  8. Save & invest for retirement

    This is more important than ever nowadays, as public and corporate pension funds are running into trouble. We all need to seriously look at how much we need to retire with the lifestyle that we want, and what we need to do to get there.
  9. Save & invest for education

    I put this one in here as it can be a big deal depending on how many (if any) children you have. For those of you without kids, go ahead and plow some extra cash into your retirement fund. You might even consider spending a few bucks on educating yourself. Take some courses, get some books, and invest in yourself and your future. Maybe you’ll be able to find a better job or just learn about something that really interests you. Maybe that could turn into a side project that earns you some extra cash.
  10. Give back

    I did not include this as the last step because I think you should start giving generously once all of your debt is eliminated and you have maxed out your RRSP. Rather, I think we should all give to whatever causes are dear to us throughout the year and throughout our lives. This is one step that should be part of all of the other steps.

    I encourage you to look at as many of these types of lists as you can on the web, in books, magazines, or wherever you can find them. Then make your own.

What would you add to this list?


  1. Doctor Stock

    Another great post. Interestingly, your first and last items are often forgotten! One item that is missing is the generational element. It is obvious that those with some financial smarts are not passing it along to their children. Let’s invest in our children and the future by teaching these principles… otherwise, we’ll end up with a new generation with financial diabetes.

  2. 2 Cents

    You’re right. Passing it on is really important. I would note, however, that today’s families have access to credit in a way their parents did not. Getting a zero down 35 year mortgage was not an option a generation ago. Today’s parents have an even greater challenge teaching their children how to handle debt. Just because a bank offers you credit doesn’t mean you can afford it. Years ago, that was not the case. Thanks for your input.

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