Disclaimer: I am not an accountant, nor have I received any formal training. If you are looking for financial advice, please see a licensed professional.
Growing up my parents never taught me about how to manage my money. Fortunately I was not a kid who got an allowance for doing chores so, at the ripe old age of 15, I got my first job working at the Dairy Queen down the street from my house. Not only did this provide me with the disposable income my parents so horribly deprived me of (love you mom!), but it forced me to understand the value of money.
However, like most young adults, I never thought about the future so all the money I made I squandered on food and clothes. It was not until my second year of University, at the age of 18, that I decided I wanted to move out on my own and finally took a long hard look at what I was making and what I could afford to live (hopeful I would not be a starving student).
Here are 5 tips I used (and still use today):
TIP #1: LIVE WITHIN YOUR MEANS
It goes without saying that if you spend more than you make, you’re going to continue to live in debt; that’s personal finance 101. However, what this actually means is that you need to be realistic about what you can afford and come to terms with what you cannot. If you take anything away from this post, let it be this:
stop comparing what you have with others. You have no idea what kind of debt others have put themselves into living the lavish lifestyle you see them posting all over Instagram, Snapchat and Facebook.
Spend what you can afford and let go of “keeping up with the Jones”. Your bank account and your future self will thank you for it!
TIP #2: MAKE A BUDGET
This part is probably the hardest. Make a list of all the bills and expenses you need to pay every month and when they are due (this includes going out, eating out, shopping, etc.) Basically anything that is leaving your account needs to be put on paper. Now add up these amounts and compare them to what you are making monthly. Do they balance? If yes, great. If no, you have some work to do.
When I first moved out, I needed to get to the bottom line of what I could afford and what luxuries I needed to do without. For example, during my time in University, I didn’t pay for cable (not even the most basic package) because I couldn’t justify the amount per month. Writing down all your expenses makes you acutely aware of what is necessary and what is not.
TIP #3: NEGOTIATE YOUR MONTHLY SERVICES
There are certain expenses you cannot do without. Some examples include: internet, cell phones, insurance, car payments. However, what is the one thing they have in common? There are different providers for these services.
A good way to keep your monthly costs down is to regularly review what you’re paying with what is offered in the market. Setting reminders in your calendar one month before any of your services are expiring gives you the chance to do some research into deals and offers, use them to negotiate your current deal and move them if necessary.
TIP #4: STICK TO YOUR BUDGET
After creating your budget, sticking to it is a common struggle (and why it is a separate tip!). What I’ve always done is that I take my two week paycheque and I list all the bills I need to pay (yes every single one). If a bill isn’t due yet, I will put ‘$’ so I can keep using the same template every two weeks. This allows me to keep track of all the bills I have to pay so I don’t miss something by accident.
When I receive my paycheque, the first thing I do is pay all the bills which are owed for that two week period. I cannot start spending anything until this is done. If you are not as disciplined as me, you can set up automatic bill payments which will take the money from your account when the bill is due. I personally don’t like doing this for two reasons: 1) If the bill gets messed up, I will have to fight to get my money back 2) I like having the responsibility to pay the bills every two weeks as it keeps me accountable.
TIP #5: USE CREDIT CARDS AS A WAY TO EARN FREE STUFF
I’ll say it up front so there is no confusion: a credit card is not free money. It should definitely not be counted towards your income. If you cannot control yourself with one, you should not have one. However, if you are able to be responsible with using one, you can cash out on some great benefits.
The card I have has no annual fee and gives me cash back for specific types of purchases (like groceries). Every November I am credited about $80-100 for purchases I am already making. Therefore, if you have a credit card, I would recommend researching different cards types or booking an appointment with someone to talk about what card would work best for you. Rule of thumb: use your credit card for purchases you would make through your chequing account so you are able to pay it back before or by the due date (without interest).
Now as mentioned earlier, I am not a financial professional and these tips are not a magic bullet, however they are a good starting point to managing your money and living a less stressful financial life.
Have any tips you use? Tell me about them by commenting below. I’d love to hear from you!