Updated: Sep 9, 2019
5 steps to organizing your personal finances so that you can live within your means and save for the future, all while gaining peace of mind.
It seems all too easy to accumulate consumer debt these days. Lots of us start our adult lives with a student loan! However, it is possible to take control of your personal finances so that you can live comfortably while also saving for your future.
Step 1: Understand your financial circumstance
Take a look at your return from last year for a precise after-tax dollar figure
Look at your spending over the last 2 months
What are your fixed costs (accommodation, car payments, utilities, childcare, groceries)
What are your variable costs (entertainment, clothing, trips, restaurants, donations)
Step 2: Make a budget and track it
You don't have to get fancy with an excel spreadsheet, but it is important to decide ahead of time how much money you can spend on certain items and then try to stick to the allotted amount. Don't forget to account for items such as new clothes, gifts, and entertainment. Just don't overspend in those categories!
Track your spending and if needed, revise your budget so that it is more realistic. It isn't set in stone.
Step 3: Live within your means
Once you have a general idea of how much money you make versus how much you can spend then you can try and cut some of the excess spending.
Here are some suggestions:
Bring a bagged lunch to work, meal plan & cook food at home
Take public transit, carpool, bike or walk
Curb impulse spending by avoiding the mall or online stores, and if there is something you want to purchase, take a few days to think it over first
When it comes to celebrations with friends and family - spend time, not money
Step 4: Pay off debt
Ever wonder why it is so easy to qualify for a credit card or loan? It's because companies want to charge you 19% interest or higher! Therefore:
Make paying off your debt a priority
Pay off consumer debt as quickly as possible
Step 5: Save for your future
Once your debt is under control and you have a good grasp of your finances, start putting away money.
Make regular contributions to an RRSP for retirement
Aim to have three month's salary in a rainy day fund in case of unforeseen emergencies or loss of job
Contribute to a TFSA
Save for a big purchase such as a vacation, new home, renovation, piece of art
Tackling your finances might take a while, but there is great sense of empowerment when you figure out how to take control of your spending and saving.
One last note: If you are in a relationship, don't let money be a sensitive subject. Take the time to discuss your finances and make important financial decisions together.
The above is not all-inclusive and there could be other points to consider based on your personal situation. We are happy to discuss your circumstance and come up with a strategy that works best for you.
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The information in this publication is current as of May 30, 2019.
This publication has been carefully prepared; however, it was written in general terms and should not be seen as legal or tax advice. This publication should not take the place of professional advice specific to your own family circumstance. GGT Chartered Professional Accountants, its partners and employees do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken based on a decision made in relation to the concepts discussed in this publication.
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