Ready to make 2020 a year that puts you back in control of your finances?
Canadians have the highest amount of debt in history with many contributing factors. An article written by Diane Francis, in the Financial Post on January 7, 2020 states that consumer debt in Canada has become the highest in the G7. Where do you fall in this? Are you ready to make some changes?
The New Year and new decade are underway and I think now is the best time to look at what you want in the year ahead. As in business, personal goals take time to plan and taking small steps will get you and your family where you would like to be.
Where do we start?
Let’s take a look at the big picture. Where do you want to be financially? Do you want to eliminate your consumer debt? Do you want to save for yearly family vacations, or your children’s future? Are you finding it hard to pay all the bills? Do you want your first home, a bigger home or even a suite for your parents?
Step 1: Consider the big things you want for yourself and your family.
This is your motivation. The ‘why’ behind the plan. We often talk about vision boards at this stage and if you feel that helps keep the focus, then hang it in a place where you will see it every day.
Step 2: Make a list of all of your monetary commitments.
Use an excel spreadsheet or any similar layout, and make a list of what you spend your money on and how much. Be honest with where you spend your money. Putting these figures into an excel spreadsheet will help to determine how much you spend on a monthly basis.
Step 3: Review the numbers to see on your bottom line.
Input your net income. Take your monthly expenses and multiply by 12. Then minus that figure from your yearly net income to get the amount that remains.
Is this number positive? Then that should be your savings for the year. You are in a good position to save but if you’re looking to save more, read more.
Is that amount negative? Then you’re going into debt and need to re-evaluate these monthly amounts.
Step 4: Analyze the information.
What items can you cut back on? Take a look at things like entertainment and discretionary items. Don’t cut out your fun, this is needed for balance. Consider how much you spend each time and how you can reduce it. I love to go to movies but instead of going on full price night, I’d go on Tuesdays when it was cheaper and skip the snacks. Here are some other ideas:
Taking transit instead of driving. Consider which is cheaper. Parking + Gas vs 2x$3.25
Coupons and apps. Research your everyday items and find out when they are on sale.
Review menus before you go out. Have water instead of expensive drinks.
Potlucks! These are a fun way to get together and socialize without the expense.
What items can you eliminate? This is difficult and will be very specific to each individual. Here are examples, instead, of what I have eliminated:
Stopped gym membership because I had a free gym at work. Saving: $35/month
Cut out buying coffee daily and made it at home. Saving: $2-5/day x5 days/week
Points or rewards to buy gifts cards.
Step 5: All savings go to debt pay down.
Know that your savings are going exactly where you budgeted. When you save $5 on that coffee, put $5 towards your debt. I had cancelled the gym membership which withdrew $35 from my chequing and set up an automatic transfer to my line of credit for the same amount at the same time.
I had a consolidated figure and wrote it on a white board to keep myself aware of the goal. Every time I paid off more debt, I would change that number. It became abundantly clear on a daily basis where my money was going.
When you focus daily on the facts, your perspective will change. It’s a difficult process to start but rewarding along the way. You’ll find you won’t be missing out on life by changing small habits but it is in these small changes that you’ll find satisfying results.
Avoid the complications of debt by planning to eliminate it. Live life with less stress.