There is no doubt that many people are feeling more financial pressure than they have had to withstand in years prior. That might be why 75% of Canadians are making financial wellness a priority in 2022, according to a study by CIBC. Yet 82% haven’t engaged a professional this year to discuss their retirement plans. In fact, only 5% said they plan to have a conversation about their retirement goals with a professional this year. 

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But if financial wellness is a priority, and we’re under so much financial strain, why are so few people connecting with a professional? It’s possible that the professionals who can offer advice on cash flow, debt and funding short-term goals may not be making those capabilities obvious to their clients. It may be that people feel like the professionals and institutions they work with are more focused on products, or broader long-term strategies, like saving for retirement.

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Of course, your retirement is a big part of your financial health but, too often, retirement plans and discussions neglect to include specific advice on spending and debt. This missing area of advice can ensure that current day-to-day financial stress leads to an underfunded retirement. These topics may not seem as sexy to professionals. But if retirement planning typically covers debt and spending, people trying to improve their financial health might be more likely to seek out advice from financial professionals. 

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So if you’re feeling financial pain at the gas pump or grocery checkout, or you’re trying to prioritize financial wellness, here are some tips to help you think about your financial health, and find a professional who can help you get on track. 

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Determining financial health

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There are various ways to measure financial health, but most of them are nothing more than surveys that measure a person’s self-reported financial confidence. It’s possible to be in a precarious place with your money and answer a confidence survey saying that you feel ok about your financial situation. It’s also possible to be in a fairly good financial condition, but still feel unsafe and, therefore, indicate a lack of financial confidence. There are three reasons that confidence scores are so dangerous to rely on as an indicator of true financial health. 

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  1. You may not have the tools you need to objectively compare your debt levels to other financial factors to verify that your confidence level is reasonable. 
  2. Humans are notoriously overconfident, regularly underestimate their vulnerabilities, and overestimate their capabilities. 
  3. There’s a tendency called social desirability bias, which causes people taking even anonymous surveys to respond in the way they think others will view them more favourably. 

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Surveys that measure financial confidence should only report just that; they shouldn't claim to be measures of financial health. 

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Financial health should be measured objectively. Financial confidence is relevant and should be measured too, but only counted as a small portion of a financial health score. Your financial factors should be compared to each other, as well as your age, stage of life and proximity to major goals, like retirement. Only by comparing facts and your personal scenario can objective financial health be measured. To know if you are financially healthy, questions like the ones below need to be asked.

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  1. How old are you?
  2. Do you have a partner that you share financial responsibility with? If yes, do both of you earn money full-time?
  3. What is your monthly after-tax household income?
  4. Do you have a written cash flow plan with specific spending recommendations that you follow?
  5. What is your personal household debt-to-income ratio?
  6. At what age are you on track to be debt-free?
  7. What is your credit score?
  8. How much is your car payment compared to your monthly after-tax income?
  9. Do you automatically save money for emergencies each month?
  10. How much emergency savings do you have?
  11. What percentage of your income do you save for retirement each month?
  12. How much have you saved for retirement in total?

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Take our free financial health score to get a more objective measure of your financial health.

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Finding a professional

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Next, how do you know that someone will deliver advice beyond products, get to the heart of your biggest financial goals, and protect you from money woes? If you already work with someone, it’s a good idea to give them a chance to see if they can offer the type of advice you need to improve your overall financial wellness. After all, they may not realize you want to dig into your financial health more deeply. So be upfront about that. 

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Below are some questions you can ask your existing financial professional, or someone you’re considering working with.

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  1. How do you help your clients manage their overall financial wellness?
  2. What type of debt advice do you give?
  3. Do you provide written cash flow and spending management advice? Can you share the type of advice that is typically included in those plans?
  4. How would you measure my financial health? 
  5. Do you use any formal health-scoring tools?
  6. How often do you measure a client’s financial health? 
  7. Can you provide me with any sort of written financial health report or scoring tool to help me track my progress?

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A financial professional who can help you measure, track and improve your finances should have solid answers to most, if not all, of the questions above. You should hear about specific services that are provided around financial health, and if there are any additional costs. They should also be able to articulate exactly what is included, and what you’ll walk away with. It’s crucial that they have a process that includes providing advice on debt and cash flow to avoid serious gaps in improving your overall financial health. 

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If you’re one of the many people who want to prioritize their financial health this year, it’s time to take action. The first quarter of 2022 is already gone. It’s never too late, but waiting can be expensive because it could leave you with less money to fund goals. Make sure part of your plan to improve your financial health includes your cash flow and debt. Set a recurring reminder in your calendar to check your progress quarterly, or even monthly to start, until your new financial habits begin to take hold. If you want to change something, you need to change something. Get started today!

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Are there areas of your financial capability you’d like to improve? Check out our on-demand Financial Capability Series. Topics include: 

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About CacheFlo

CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.

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About the Certified Cash Flow Specialist (CCS) program

CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.

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