Tried and true personal finance strategies

The basics will take you a long way

There are some strategies that stand the test of time and don't change much over the years.

There's a reason why you will see some of the tactics below on every personal finance blog: they work. 

Pay yourself first

I'm sure that most of you have heard this much-used personal finance term. I don't love the phrase

but the concept is rock solid. This simply means that you should have an automated savings plan.

When you get your paycheque, some of its goes into your savings before you pay for anything else.

You simply get used to living on less.  The amount almost doesn't matter at first. My first automated savings plan was $25 every two weeks. It was all I could afford. As your cash flow situation improves, whether that's due to getting a raise in pay or having an expense drop off (like child care, for example), the amount you put

into your savings should rise. 

Always pay off your credit card balance

 

The amount of interest that accrues on an unpaid credit card balance is almost criminal. With rates

in the 18%-21% range, you will be drowning in interest charges if you don't keep an handle on it.

If you can't pay off the balance every month with your cash (and this might happen when you have big expenses like a car repair or a vacation), use your line of credit. The rate will be much lower. To see how quickly interest charges climb, play around with this credit card payment calculator from the Financial Consumer Agency of Canada. 

Know how you spend your money using a spending tracker

 

I know, everyone hates the word budget. I totally get it. So let's call it a spending tracker.

A budget/spending tracker is a basic personal finance tool for a reason. Everything about your financial health revolves around how much you have coming in and how much you are spending. You only have

to build this spending tracker once, and then revisit it once a year or so. Yes, it's work but you will have

the evidence, in black-and-white, of where your money is going. You might find some surprises and you will very likely see how you can cut back in some areas to save more or pay down your mortgage faster. Building your spending tracker is definitely something that you and I can do together.

Use the accounts that help you save, pay less tax and build wealth

 

The Canadian government created RRSPs, TFSAs and RESPs to help you save, so take advantage of them. Read my articles on these accounts on the Learn page. I can also explain them to you and help you decide how to use them through my coaching services. 

Invest your savings 

 

You should not keep your long-term savings in a savings account. Savings accounts are for money you will need in the short term or perhaps for emergency expenses. They don't pay enough interest to keep up with inflation. The stock market is where you will earn returns higher than inflation which will maintain your purchasing power. You need to understand how the stock market can fluctuate - some years you will lose money and in others you will hit the goldmine - but history has shown the your returns will average out to about 7 to 8% per year over the long-term.