What is Personal Finance & Why Should we care about our finances?

What is personal finance? It’s how a person manages their money in the short- and long-term, but what does that actually mean?

This could mean something different to each person. We’ll take a stab at talking about personal finances in a different way and make it easier for you. For example, let’s say you were building a house (just pretend you actually know how to do this). In this scenario, the house is your personal finances and you are trying to build up your wealth.

When it is sunny out and you are equipped with the right tools, it is easier to build and maintain your financial house. You’re not thinking about a rainy day, because it’s been sunshine and puppies (or you’re in a clear state of denial…..).

However, what happens when it starts to rain and you aren’t prepared? You still have to build your house but now circumstances have changed. Small issues from the rainy day like an unexpected leak in the roof can turn into a major issue, like the roof collapsing on you. Same could be said about unexpected expenses.  In a short period of time, your car could break down or the furnace stops working. If you aren’t prepared for those rainy days, they can feel overwhelming and daunting.

Now, let’s say a major storm is rolling in while you are building the house (like a hurricane of expenses). All of a sudden it all comes your way at once. How do you think you would fair? Do you have all your finances in order?  If not, would you and everything you own get blow away? You never know when a major storm (like losing your job or becoming critically ill) could happen. If you aren’t even thinking about it and it happens, who knows what the end result might be.

To us, personal finance is about making sure your financial house is in order. Not just on the sunny days but for those rainy days that might set you back if not prepared. At the end of the day, if we are managing our finances properly, you could turn that small house into a mansion while managing the different storms that come your way over time.

In case you need some more reasons for why you should be prepared, take a look at these stats, courtesy of our friends at Stats Canada:

  • Canada’s household debt to personal disposable income is now 150%. This means that households owe more than $1.50 for every dollar of disposable income. Most people have already spent their money before they have earned it.
  • the average consumer debt is over $20,000 (excludes mortgages)

We hope you don’t look at these and say, “Eff it. We are all doomed.” But rather, try to see how important it is to care about your money. It’s your money! If you don’t care for it, who will?

Now that we have completely bummed you out, just know we are here to help! Our next post talks about how to get your financial house in order…while the sun is still shining.

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