By Peter Boys, CAFA The Financial Coach
As you start into this New Year and are thinking of the things that you might want to change to better your situation, why not develop a personalized financial plan?
Many things we do in life come from habits we develop from early childhood through adulthood. If we are in the habit of spending all or more than we earn every month, sooner or later we will run into a financial brick wall. Here some simple steps to consider if you want to make some real financial changes in 2019.
You can’t control what you don’t track: If you had to pay cash for everything you purchase you might be shocked. As electronic payments are so easy and quick, you lose touch with what you’re spending. Tracking your spending and what you’re spending it on isn’t as hard as it may seem. Start by finding out where the money’s going every month. There are many methods from smartphone apps to a simple notebook.
Have a rainy day account: Set up an automatic monthly debit of $25, $50, or $100 into a savings account, ideally a tax-free savings account. This is a simple process called “paying yourself first”. You will be surprised how quickly the value builds up. I have a piggy bank on my dresser and put my change in this every night. It adds up fast.
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Pay you credit card bills in full every month: Try to not carry a balance over on your credit cards. If you currently have a balance on your credit card, work towards paying it off ASAP. If you want to change your financial picture and gain more financial freedom, you need to pay off your debt as quickly as possible. Start with your highest interest debt first. Put your credit card away for a while and only spend what you can afford at the time.
Stop eating out: One of the biggest ways to waste your money is by eating out. The occasional splurge is fine, but your savings can add up if you start cooking at home. To save even more, plan a weekly menu. People who shop this way spend considerably less than those who grocery shop on a daily basis.
Save first: When you want to buy discretionary purchase items that are “Wants” rather than “Needs”, save the money first. You make the choice every time you want to buy something that is not a need, as our basic human needs are shelter, clothing, food, companionship.
Go on a Spending Fast: Challenge yourself to stop spending money for a set period of time (a month maybe). Exceptions are made for gas and limited groceries. This can help you change your habits and evaluate priorities.
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Be Frugal: Being frugal doesn’t mean being poor, it means spending your money as wisely as possible. This may mean living in a home that is cheaper, finding free activities for entertainment or getting a library card. You decide where you want to trim the fat of spending.
Ask your employer to set up an RRSP payroll deduction plan. The deduction comes off your pay before tax for an immediate tax break. Employers often will match your contributions up to certain limits.
The beginning of 2019 is a great time to get thinking of how to better control your finances. Continuous small changes can have a huge impact. Make the decision today to better improve your financial situation.
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