Some Pointers on Personal Finance

Friday, April 24, 2015 by Michelle

My nieces are all independent young adults now. I created a quick "financial pointers" sheet for them of my (often hard won) lessons in life on finances. Everyday Living

  • Don’t let money run your life; money serves you, not the other way around.
  • Live within your means. Except for a mortgage, don’t go into debt if you can help it.
  • Ensure your credit card balances are paid off every month; pay automatically from your bank account and always be sure there’s enough to cover the payment.
  • Pay attention every month to bank and credit card balances.
  • Rock those points; use them to buy everything from fuel cards to appliances to RRSP contributions.
  • For medium- to large-ticket items, learn to comparison shop/price check (including checking online reviews).
  • When tempted to buy on impulse, ask yourself, “Will I love this in one year?”, then go have a coffee, take a walk or even better sleep on it. If it’s really worth it, go back.
  • Never buy something from someone who says, “this deal is only available right now/ today.” Don’t do it. Ever. Walk out of the situation.
  • Give to a registered charity on a monthly plan. The contributions help with taxes and it connects you to the community. Pick a cause or two you feel passionate about and establish a relationship with them.
Budgeting
  • Be realistic and tailor it to you (e.g., weekly cash envelopes, smart phone app and/or monthly reconciliations).
  • Don’t think of it as restrictive or feel guilty if you ‘cheat’ – it’s your money.
  • When you go on vacation, create a budget. A lot of expenses can be figured out ahead of time. Look for savings coupons for tourist attractions.
Savings
  • Start your Registered Retirement Savings Plan (RRSP) yesterday; think of it as “untouchable” until you retire.
  • Build up to and save three months worth of living expenses in a savings account. It will take time to build.
  • Save for ‘near future’ extras like vacations rather than going into debt. It adds to the anticipation and will help you from overspending.
  • For all kinds of savings, do automatic deductions every week or month (and don’t take out an annual RRSP loan – contribute a little each month instead).
  • If your company offers matching RRSPs, do it. It’s free money.
Mortgages
  • Don’t be mortgage poor (e.g., the bank says you can afford $150K, look for a place in the $130K range).
  • Pay your mortgage every week or every two weeks (not monthly or twice per month). It takes years off your payments.
  • When you can, do an ongoing top up on your payment each month and/or make a lump-sum payment before the end of each year; it pays onto the principle and shrinks the length of time you have your mortgage.
There are free online courses you can take that will help you develop your financial management skills. Free. As in, just do it! If you have any good pointers, please add to the comments below.