Are you one of the many people who dreams of retirement, being mortgage and debt free? Or maybe you'd just like to have a little bit left over at the end of the month to stash away for a nice, warm vacation in the middle of winter. Whatever your financial goals are, there's no time like the present to begin working toward them. A great place to start is mastering the following 10 tips for fixing your finances.
Create a monthly budget (and follow it). It’s important to take control of your spending habits when you’re trying to secure your financial future. If you want to see a substantial and sustained change in your financial situation, it’s safe to say you’ll need to change some of your existing habits and develop some new ones.
Don’t spend more than you earn. This is one of the most significant ways to make a big impact on your financial situation. If you consistently spend more than you earn, and rely on credit to fill in the gaps, how do you expect to get ahead? Living within your means doesn’t mean you can’t have fun, it may just require a little bit of creativity.
Track your spending. Have you ever tried this? I mean, really tried this? Keep track of everything you spend by writing it down in a small notebook. If you have spouse or partner, have them do the same. At the end of each week, review your notebooks together and discuss which purchases were necessary and which ones could possibly have been avoided. This can be extremely eye opening!
Resist the urge to keep up with the Joneses. It’s easy to look at someone else’s new purchase and think we’d be so much happier if we could just buy a new car, bigger house, golf clubs, designer purse… and the list goes on. But, what you don’t know is how long they saved up or how far in debt that purchase put them. In most cases, extravagant purchases are wants, not needs, and they can hold you back from achieving your actual financial goals.
Don’t be like the Joneses. The Joneses are probably swimming in debt.
Buy used vehicles. There’s no doubt that a shiny, brand new vehicle can be the more attractive option. But did you know a used vehicle will typically cost about 30% less. There are plenty of quality used vehicle options, like lease buy-backs. It might not have all the bells and whistles like the latest model, but at the end of the day, a solid used car will still get you from point A to B.
Brown bag your lunch. Have you ever added up how much it costs to go out for lunch each day? If you spent an average of $12 on lunch for 20 years, you will be spending about $100,000! Just think what saving this could do for your retirement nest egg…
Pay with cash. Do you find yourself mindlessly pulling out your credit card for purchases without thinking twice about how much the item costs? If you notice this trend in your spending, try using cash. You might find that it’s a bit harder to part with your hard earned money when you are physically giving away cash versus swiping a card.
Carry only one credit card. If you find that you have more than one credit card with an outstanding balance on a monthly basis, make it a priority to pay off the card with the highest interest rate as soon as possible and consider cancelling one (or more). You may want to keep one for emergencies, but you don’t need to take that one out shopping with you. Do yourself a favour and just avoid the temptation!
Pay off your credit card each month. Carrying a balance on your credit card can cost you a tremendous amount of money in interest charges. For example, a balance of $1,000 will cost you approximately $200/month in interest. By controlling your spending and reducing your debt, you will soon start to see interest working for you (increasing your savings and investments) rather than against you.
Work with a financial coach. Establish a relationship with a quality financial advisor or coach. I suggest you interview three or more different people before deciding which one you’re most comfortable working with. Be sure to ask about their process for helping you pursue your financial goals. When people really want to take their health seriously, they hire a personal trainer or an athletic coach, right? In the same sense, if you’re serious about getting your finances in order, why wouldn’t you want the help of a trained professional?
I hope using these 10 tips will help you fix your finances, or at least help you take the next step in the right direction. If you have questions, or would like to chat further about any of the tips in this article, please contact us or book a meeting.