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by Marc Rouleau
The time for making resolutions for 2017 has come and gone. Many have signed up for gym memberships, made commitments to eat healthier and get various aspects of their lives in order. We often forget or avoid dealing with financial goals because money is a delicate topic. Although it influences just about every aspect of our daily lives, we often ignore our finances until it’s too late. Sometimes, we just don’t know where to start.
It really boils down to dealing with it head on. Taking the bull by the horns as they say. If you don’t have the skills to deal with your finances, you owe it to yourself to find someone that does. A Certified Financial Planner, a Chartered Professional Accountant, a Licensed Insolvency Trustee: you should know a trustworthy, respected and knowledgeable professional who can guide you through good and bad times.
Here are 5 tips to help you navigate the money management waters:
- Spend 10% less than you make. This is a refreshing twist on the “golden rule” that you should save 10% of what you earn for retirement. Most people carry credit card and other high interest debt and paying it down gets priority (as it should!) to putting money into an RRSP or other savings vehicle. Once your expensive debt is under control, set aside 10% of what you make (i.e. $3,000 or $250/month if you earn $30,000/year) into a savings account to reach your retirement goals. Your golden years will thank you.
- Reduce the limit on your credit cards. Did you know that reducing your credit card spending limits can actually improve your credit rating? Credit cards are not meant to supplement your income but many use them that way. The average interest rate on credit cards is approximately 20% so carrying a balance should be avoided. Paying down your balances every month or as quickly as possible should be the goal. If you can’t do that, your spending limits are too high.
- Find a budget tool that works for you. Yes, the “B” word. Budgeting or cash flow planning is the cornerstone of everyone’s financial reality. Cash flow is king. Most live from pay to pay knowing that they must rely on the next deposit to cover essential expenses and costs of living. Whether you use a pencil and paper or one of many excellent and free apps available on your mobile device, you need a budgeting tool that will help you dissect your spending habits, set goals and keep you on track.
- Unplanned expenses happen. Life happens. Your car needs repairs. Your fridge is on its last legs. Your brother-in-law lost his job and needs a place to crash for a few months. It’s impossible to plan for all expenses. If you don’t have some money set aside for emergencies and contingencies, you will likely use credit to finance theses expenses. They key should be to pay down the debt asap after the unplanned expenses occur.
- Ask for help if you have debt stress. You likely can’t tell if you have debt stress just by looking at yourself in the mirror. If you’re honest with yourself and simply making a list of all of your debt and monthly payments makes you anxious, you likely are suffering from some form of debt stress. If collection agents are calling, your bank account is in overdraft more often than not or you’re just running around in circles, it’s time to call a professional. Call someone you trust, someone who can get you back on track.