The start of the new year is the perfect time to set (and stick to) financial resolutions. The Senior Credit Counsellor at AAA Credit Counsellors & Debt Consultants says there is no better time to form new habits, start budgeting and; more importantly, start saving.
“How you begin to budget is really not that hard,” says David Lowe. “What you do is you track your money, you track it for an entire month. Every time you spend money you mark it down. Either in a book or on your computer.”
Lowe says that is the best way to see where your money is going. “At the end of the month you can say ‘this is how much I spent on chocolate bars, this is how much I spent on Tim Hortons, this is how much I spent eating out’. Then you can say ‘Oh wow, I don’t think I want to continue to do that’.”
After that, a budget can be made based on how much you intend to spend each month. It’s also important to begin saving. Lowe says your savings should equal 6 months of your net income.
“If the only thing you put in your budget is expenses, then you only live to the means of your money…which is very dangerous. You should always live to less than you make.”
“In terms of savings, some people can set up automatic contributions to a savings plan,” says Investment Advisor with Integris Financial Planning Services, Ryan McEachen.”Other people may accumulate a lump sum and come in with a cheque.”
Low recommends spending 80% of your income on living expenses, putting 10% into a savings account and putting the other 10% into a ‘givings’ account (for things like birthday gifts, anniversary gifts and charitable donations).
“Once you get a handle on that, you can gradually give more, save more and live on less.”