If you’re a manager or business owner, you have employees who have financial questions they desperately want to have answered.
A survey from Maru Public Opinion found that just 50% of Canadians said they are somewhat financially literate. Research from the Milken Institute found that Americans are in a similar boat with only 40% possessing sufficient financial knowledge to make good financial decisions.
The public school systems in either country could certainly do better with teaching students the basics of healthy financial life, but until that becomes the norm we must take it upon ourselves to seek out the information we need. And that’s the purpose of this article!
Here are 15 of the most common questions employees have about financial matters. Please share this information with them!
What does it mean to create a personal budget?
Creating a personal budget simply means outlining a plan for how you will manage your income and expenses over a specific period of time, typically a month. This process helps you track where your money is coming from and where it’s going. It. also helps you prioritize spending and ensure that you have enough money to cover essentials, contribute to savings, and any other financial goals you may have. A budget can also highlight areas where you might need to adjust your spending habits to improve your financial health.
Should I hire a CPA to do my taxes?
Whether or not you should hire a CPA to do your taxes depends on your individual situation. A CPA can be beneficial if you have a complex tax situation, such as owning a business, multiple sources of income, or investments. They can help you take advantage of all available deductions and credits and provide valuable tax planning advice.
However, if your taxes are relatively simple, such as having a single source of income and taking the standard deduction, you may be able to do them yourself using tax software or online services. It’s important to weigh the cost of hiring a CPA against the potential savings and benefits they can provide.
Am I responsible for my spouse’s debt?
It often comes as a surprise to many that in Canada, spouses are not automatically responsible for each other’s debts to creditors unless they’ve jointly signed for them. In other words, just because you’re married, your spouse is not liable for paying off your debts unless they’re co-signers on those debts.
In the US, you’re generally not responsible for your spouse’s credit card debt unless you are a co-signer for the card, or it is a joint account. However, state laws can vary and divorce or the death of your spouse can also impact your liability. In either case, be sure to consult with a legal professional.
How important is my credit score and how is it calculated?
A credit score is an important financial tool that lenders use to assess your creditworthiness when you apply for financial products such as loans and credit cards. It’s calculated based on several factors, including:
- Payment history: Whether you’ve paid your bills on time.
- Credit utilization: The amount of credit you’re using compared to your total credit limit.
- Length of credit history: How long you’ve been using credit.
- Types of credit: The mix of credit accounts you have, such as credit cards, loans, and mortgages.
- New credit: How many new credit accounts you’ve opened recently.
Having a good credit score can make it easier for you to qualify for loans and credit cards with favorable terms, such as lower interest rates and higher credit limits. It can also affect other areas of your life like renting an apartment or even getting a cell phone plan. It’s important to monitor your credit score regularly and take steps to improve it if necessary.
How much money do I need for retirement?
The majority of both Canadians and Americans are unprofessional retirement. The amount of money you need for retirement depends on several factors, including the lifestyle you want to live in retirement, expected retirement age, life expectancy, and inflation. Most financial advisors recommend aiming to replace 70-80% of your pre-retirement income to maintain your present standard of living in retirement.
To estimate how much you’ll need, consider your current expenses and how they might change in retirement. Factor in expenses such as housing, healthcare, transportation, and leisure activities. Also, consider all sources of retirement income, such as Social Security/Old Age Security, pensions, and retirement accounts. A financial advisor can be extremely valuable in helping you create a personalized retirement plan based on your goals and financial situation.
How much money do I need to start investing?
Investing is one of the best ways to grow your money over time. Yet, many people are held back by a common misconception—that you must have a a lot of money to get in the game. The truth is, the amount you need might be less than you think.
How much you actually need to start investing can vary depending on the type of investment and the platform you want to use. Some investment platforms have no minimum deposit requirements, allowing you to start with as little as $1. More traditional investment accounts, such as mutual funds or exchange-traded funds (ETFs), you may need a minimum initial investment, which can range from $500 to several thousand dollars. If you have a workplace retirement plan, make sure to take advantage of it. Contributions are directly withdrawn from your paycheck with pre-tax dollars and many employers offer a match up to a certain amount.
Should I have life insurance?
While there’s no one right answer for everyone, it’s typically better to have it. If no one depends on you for financial support or you have sufficient financial resources, buying life insurance may not be worthwhile. But if your death would create a financial burden for those you leave behind or you wish to leave money for final expenses, life insurance is definitely a great idea.
Some reasons you might consider for purchasing life insurance include:
- To replace lost income for loved ones.
- To cover end-of-life costs.
- To provide an inheritance or gift to charity.
- To protect your business.
- To cover estate taxes.
- To diversify your investments.
These are some of the top questions employees have about their finances. It’s important to remember that everyone’s financial journey is unique. By addressing your concerns and seeking guidance when needed, you can take meaningful steps towards a more secure financial future.
