TAKING COMMAND OF YOUR WALLET CAN LEAD TO A LIFE OF FINANCIAL FREEDOM.
Growing up as a family of four, we led a pretty simple life as a middle-class household.
For many years my father worked two jobs and my parents set a goal to pay off their mortgage as soon as possible.
With that plan in mind, my parents did not often spend money on unnecessary items or activities.
With less than three years separating myself and my sister, you would think we would have the same or similar approach towards money.
Ironically, our parents raised us very differently in some areas, finance being one of them.
Once we were in our teens, my parents started making exceptions and giving my sister an allowance, purchasing brand name clothing for her while I did not receive these things.
While some of these differences in our upbringing were confusing at the time, I am forever grateful for the lessons they provided as they helped shape my views on money in general.
I quickly learned that I needed to earn my own money and how best to multiple the dollars I earned.
Let’s take a look at some of those personal finance lessons!
1. VALUE EVERY DOLLAR
While this may seem like an obvious statement, I find it the most important of them all.
In theory, most people know how hard it is for them to earn their paycheck but they often forget all that hard work when it comes time to spend their income.
When I began working at 15 as a shoe salesman, the minimum wage was around $7/hour.
Almost everything I bought came down to “How many hours do I need to stand to pay for this?”.
Was that $40 shirt really worth almost 8 hours of my efforts or could it be put the better use?
Take the time to evaluate the cost of something versus the effort it takes to afford it.
You will soon find yourself cutting back on purchases you don’t really need to make.
2. BUDGET, BUDGET, BUDGET
Did someone say Budget? Yep, there is unfortunately no way around this often scary word when dealing with finances.
Look at it this way, knowledge is power.
Without the knowledge of how you actually spend your money, how can you make the necessary changes to achieve your financial goals?
People often think that if they sit down and make a budget, then they will have to completely stop spending.
The goal is not to prevent all forms of spending but you should be striving for responsible financial habits.
Although we all have expenses in our lives and many are simply unavoidable, we can often still trim the fat in certain areas of our lives.
While the amounts will vary, most of us have similar fixed expense categories.
Our flexible expense categories will showcase more of our personal spending preferences.
Some common expense categories:
- Car/Transportation expenses
- Home, Car, Medical Insurance
- Utilities, Bills (Electric, cellphone, etc.)
- Groceries (can also fall under variable expenses to a certain degree)
- Entertainment (Movies, Concerts)
- Restaurants & Alcohol
- Shopping (Beauty, Clothing)
- Miscellaneous (Hair & Nails, etc.)
One of the first tips I give friends and family members who ask for financial guidance is to print out a few month’s worth of their chequing account and credit card statements.
I have been periodically doing this activity for over two decades and it always puts my spending habits in perspective.
Grab a couple of highlighters and highlight all the fixed expenses in one color and all the flexible expenses in another color.
I truly believe that seeing is believing. When you start to see your financial statements light up in color and realize where your income is going, only then will you be ready to start making changes!
Once you have that data, you can see which areas need improvement. If your savings account was previously ignored, then make sure that’s the first category to get some love after paying your fixed expenses.
Make a plan for the upcoming month, setting limits for yourself in each of the categories of expenses you have in your life.
Some small, easy cuts to look out for;
- If you see that you are spending $10/day on lunches for work, then try packing a lunch for yourself twice a week for the upcoming month. Go up to three times a week the following month.
- If restaurant/coffee shop expenses amount to $300 of your monthly expenses (which I often see among friends), cut it down to $200, that is still a large restaurant budget so you won’t feel the pinch as much.
- Can you cut your cellphone package down (Example: less mobile data, we often pay for more than we need with WiFi being readily available in most places).
Still a scary thought? Go easy, simply cut your flexible expenses by 10% to get yourself started.
And don’t forget to grab a copy of my free monthly budget printable to help you get started!
3. CREDIT CARDS ARE NOT FREE MONEY
Not only are credit cards, not your friend, in my opinion, they should be viewed as the enemy.
Has anyone ever offered you a large sum of money with no strings attached? I’m guessing the answer is no, so why would credit card companies be any different.
They are selling a service that you do not want to buy into! I use my credit exclusively to pay for online purchases or services that only accept credit card payments.
Another exception is using your credit cards for the sole purpose of building up travel or redeemable cashpoints. This approach is only logical provided that you pay off the entire balance (in full not just the minimum payment) each month.
*Tip: Do not be lured in by “Pre-Approval Offers” for a line of credit, or credit card limit increases, these are unnecessary temptations.
4. DON’T BE AFRAID TO BE FRUGAL
There often appears to be a negative connotation when it comes to the word “frugal”. It is often associated with someone being cheap.
I’ll be honest, this is something that drives me absolutely crazy. There is nothing more annoying than having people consider you cheap simply because your prioritize your spending based on your financial goals or preferences.
So if your serious about getting your finances in order, this often comes with the territory. What’s important is to not allow your annoyance or frustration to sway your resolve.
I’ve come to notice that is is always those that spend and waste the most that are the quickest to comment or judge.
But only you can decide your financial path. Many people are fine with working until retirement age or renting their entire lives but that does not have to be the goals you set for yourself.
So if your plan to cut costs includes using coupons, looking for online discount codes before making a purchase, checking flyers, match pricing, skipping takeout, then do what you need to do without worrying about anybody else.
5. AVOID DEBT LIKE THE PLAGUE
If you can only do one thing for yourself at this point in your financial journey, make it avoiding debt. Once you start down that slippery slope, it is hard to climb your way out.
Now, of course, certain types of debt are hard to avoid such as a mortgage when purchasing a home. Unless you were planning on paying for it upfront in cash, debt is sadly inevitable in this area.
However, even then, buying a car or home that is above your financial means is an all too common issue.
You want a payment that can easily fit within your budget and have enough flexibility to account for any interest rate increases or unexpected events.
Before purchasing my home, I made sure to calculate my potential monthly payment should the interest rate triple (call me cautious).
At the time of the purchase, interest rates were at an all-time low so the odds of them increasing in the future were quite high.
I wanted to make sure I’d not find myself in hot water when they did eventually go back up.
READ: 11 MONEY SAVING TIPS
6. KEEP A POSITIVE BALANCE
Spend less than you earn, sometimes it’s as simple as that.
I am always in shock when I see friends complaining about covering their upcoming rent yet two days later are seen buying unnecessary bottles of wine, takeout, or a new pair of shoes.
Always aim for a positive figure at the end of the month and stick to your budget to make sure you achieve that goal.
7. BALANCE YOUR MONEY
Always try your best to balance your money.
I like to look at money as a series of different category boxes. Each box has a specific budget.
If something unexpected comes up in one category that blows its budget, I quickly like to see where I can pull extra my resources from.
Taking the money from my savings account to cover these expenses is always the last option on my list.
Do you have an unexpected medical bill or a leaking sink that needs repair? Where can you cut back on? Which areas can take a hit until you’ve paid that bill?
- Review your eating-out budget, clothing allowance, or maybe skip that upcoming concert.
- Anything you are not using that can be sold on Marketplace?
- You can also try a no-spend month or a pantry challenge to come up with the missing dollars.
By balancing your funds and not immediately turn to your savings account, you learn to prioritize what’s important and build great financial habits.
8. HAVE A DREAM
Set a financial goal for yourself a watch yourself achieve it.
Nothing gives me a greater sense of accomplishment than hitting a financial milestone that I have set for myself.
For example, my current goal is to build my passive income enough to move part-time to Greece.
So other great goals you can work towards are;
- Dream wedding/Honeymoon
- Down payment on a home
- Starting a business venture
- First emergency fund
- Save a milestone amount like $25,000
- Early retirement
Make your pick and start working towards that dream.
Once you get some momentum you will be eager to start setting other goals for yourself.
9. START YOUR EMERGENCY FUND
If recent world events have thought us anything, it’s that we should expect the unexpected.
Having an emergency fund is not only wise, but it also provides such a nice sense of relief.
Knowing that you’ve got your family’s needs covered until you can set a new plan in motion is such a comforting thought.
The ultimate goal would be to have enough saved to cover your family’s expenses for a year but realistically that is not always possible.
So get started with what you can, aim for at least 3-4 months of living expenses.
The last thing you want to have to worry about is how you are going to pay your bills.
Just remember, every little bit helps when times get tough!
10. FIND HASSLE-FREE WAYS TO SAVE
Years ago, I heard a story about a man who saved enough for his kids’ college tuition by placing his loose change each day into a piggy bank when he got home from work.
Well, since that time, many different companies/apps now offer this saving technique as a service, but it’s done automatically for you at each purchase!
It’s a great little way to add up those cents into dollars.
With physical money becoming less than less popular, it’s great having a service managing your spare change without having to collect it at home.
Do you have some debt lying around? You’d like to pay it off so that you can start saving more money? Then give Qoins a try.
Qoins will not only round up your purchases, but they will also collect small amounts of money from your account.
However, instead of investing that money, they will make an extra payment towards your debt each month so that you can be debt-free sooner rather than later.
11. INCREASE YOUR INCOME
If you’re serious about changing your financial situation, you may at some point find yourself getting a little impatient with wanting things to progress at a faster pace.
You’ve taken all the right steps so far, cutting back on expenses, saving every extra dollar, and even investing what you’ve managed to tuck away.
So how else can you get ahead?
Well, it’s a dollar’s game, dollars in versus dollars out.
Find another source of income to get back in the game.
I know, I know, everyone says the same thing but it’s the truth. You can only work with what you have.
While I was running our family business, I got my certification as a wedding and event planner on the side.
While running a business at that time did not allow me to plan full weddings/events, nothing was stopping me from selling wedding veils and accessories during my free time.
I was also able to offer my service on weekends for Day of Coordination.
These types of side hustles are an excellent way of earning extra money that can be directly put towards your financial savings goals.
Yes, it’s hard work but the goal is to work harder now for a brighter future tomorrow.
12. TIME TO INVEST
Yes, investing is scary. There are so many unknowns. What should you invest in? What will the outcome be?
As I grew up as a little saver, parting from my money was not an easy thing to do.
With time I learned that I had to decide to move forward and invest my savings to have any chance of multiplying those funds.
There are many options out there, a couple of my personal favorites are;
- Real estate
- Structured notes (Callable Yield; AutoCall, Accelerator, Boosters)
I like to diversify my portfolio and never place all my assets in the same basket.
I tend to look for real estate opportunities in up and coming areas where the potential for profits is higher than in the overpriced downtown areas.
Always remember to make your money work smarter and harder for you. Too many people decide to invest their funds without maximizing on opportunities available through a Roth IRA(US) or TFSA account (Canada). You fund these accounts using your after-tax income (limits apply) but then the growth earnings are tax-free.
So speak with your professional financial advisor (if you don’t have one, now is the time to find a reliable professional representative) to go over what works best for your comfort level, financial goals, and particular financial situation.
Ready to take on a new challenge towards building your personal wealth?
Get started on some of these tips today and you’ll be one step closer to achieving your goals.
Just remember to always d your own research and consult with a professional financial advisor before taking any important steps.
Each person’s financial situation is different so it’s not a one size fit all kind of decision.