If your resolution for 2018 is finance-related, you’re not alone.
A recent survey by Tangerine found that 32 per cent of Canadians have made money-related resolutions in the past, and this year, 49 per cent of millennials are making finances their key focus for 2018.
Among the top concerns are spending less and saving more.
“When the New Year comes around, I link finances to health goals,” says Kelley Keehn, consumer advocate for the Financial Planning Standards Council.
“A lot of people vow to go on a diet and count calories, and I think about finances the same way. You need to get on the financial scale, and weigh what you owe and what you’re bringing in.”
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Just as you may be asked in a job interview where you see yourself in 10 years, try to envision your finances the same way, she says.
“Our brain is wired for instant gratification, but try to connect with your future self. Sit down for five minutes and write down what your finances would need to look like in order to support yourself in the future. That will give you the motivation to plan.”
Keehn offers some tips on how to mould your finances in 2018 to ensure long-term success.
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Map out the anti-budget
Just as diets are destined to fail because they focus on what you shouldn’t be eating, budgeting isn’t going to work if you only think about the things you shouldn’t be spending on.
“Start by tracking every cent you spend for 30 days; this will make you more mindful and reflective of your spending,” she says. “The message isn’t about sacrifice, it’s about choice and awareness.”
At the end of your 30 days, analyze where you’ve spent your money. Was it on eating out frequently or buying expensive bottled water? Multiply these numbers by 12 to arrive at a picture of how much you’re spending on these items yearly, then ask yourself if that’s where you want your money to go.
“You can have the things you want, whether it’s a new purse, a vacation or a car, but you can’t have them all at once. By tracking your finances, it’ll be easier to know where you can cut back to get the things you want. It’s a lot more effective than forcing yourself to stick to a budget or putting money in a jar.”
Disable any automatic pay settings
The convenience of storing your credit card information on a site like Amazon is great, but it also makes it far too easy to buy things when all you need to do is click a button.
“Sometimes you don’t realize how much you’re spending when you’re shopping online, so you want to find ways to trick yourself out of it.”
Make it more difficult to spend by disabling any auto click options, thus forcing yourself to rise up out of your chair, pull out your wallet and manually type in your credit card information.
Adding these extra steps may make you think twice before clicking “buy.”
Setting up automated savings on your bank account or getting an RRSP are steps in the right direction, but they may not necessarily be the most effective ones for you — and they’re certainly not the only options.
“So many people at this time of year will hire a personal trainer, but they won’t reach out for financial help,” Keehn says. “As a result, if they make the wrong decision in managing their finances, it’ll deter them from trying again. A certified financial planner or non-profit credit counsellor can help you map out the right steps.”
For example, she says, you may be inclined to top up your mortgage payments, but if you’re carrying a balance on a department store credit card that you’re paying 30 per cent interest on, the mortgage is not your best choice.
“If you’re feeling overwhelmed, it should be a signal to get some financial help.”
Set up an emergency fund
The latest statistics on Canadians’ finances are not encouraging — for every $1 of disposable income, Canadians owe $1.71 and more than half the population is $200 away from not being able to pay their bills.
“Canadians are taxed out and many don’t have an emergency fund,” Keehn says. “You may think that getting an RRSP is wise, but if you don’t have a cushion to fall back on in case of emergency, you’re not doing the right thing.”
Before thinking about investments or paying down a debt faster, put away anywhere from three to 12 months’ worth of emergency money to carry you through any unexpected expenses or job losses.
Don’t just cut
Of course, it’s wise to look at your superfluous expenditures and cut them out, but in some cases that’s not enough. That’s why you should also be thinking about ways to make more money.
“Sometimes it’s about finding a side hustle that will make you more money.”
Whether it’s looking for a weekend job, fixing up your basement and putting it on Airbnb or asking for a raise, finding a steady stream of extra revenue is just as valuable as figuring out how to cut costs.