Wednesday, 30 December 2015

Financial New Year resolutions (making it simple to help make it work)




In the wake of over eating and over spending during the Holidays Season's.  It makes sense to visit the top new year resolutions, these usually involve fitness and of course finances.  Let's face it, we all make new year resolutions but to maintain them over 12 months is always the challenge.  To help you along, I've make financial new year resolutions as simple as possible, after all a simple idea is easy to think about and maintain in everyone's busy life.

1. I resolve to figure out my finances.

To make it simple, lets not discuss over spending or trying to figure out how much my bank is charging me in fees.  My suggestion here, tracking.  Why not make it easy, do what you are comfortable with.  There are many apps (Mint is a popular app) for smart phones that will help you track your expenses and income with ease.  Not everyone is comfortable with these apps, everyone has a reason.  I say start with a simple excel spreadsheet and separate by month and category.  I am not going to shove categories at you, you do what you feel are your categories, after all its you that will need to figure out your finances for the year. Bottom line, figure out your income and expenses using methods you are comfortable with.

2. I need a budget, I think I am spending too much but am not sure.

Once you get down to figuring out your finances, you will need to establish a budget, once you categorize your fixed expenses like car insurance, utilities, cell phone bill, etc you will see how much you have in variable expenses.  Most people who see in writing how much they spend each month just to maintain a basic standard of living are shocked.  Mortgage and car insurances are usually the biggest numbers in the fixed expenses area.  Bottom line, the 1st few months you can live normally before you can establish a budget.  All this time, track everything.

3. I resolve to get out of debt.

Now this resolution will require a bit of work.  Now before we get into debt, I would like to categorize debt into good debt and bad debt.  Good debt is something like rent/mortgage payments, we all need to live under a roof.  This is good debt.  Bad debt is a bit more obvious but needs to be put into writing.  Bad debt includes things like luxury vacations, renovations to the house, leasing a car.  Now before you lynch mob me, yes those are bad debts, most times these type of items go onto a credit car or line of credit which are not paid off completely to zero each month.  This could go into the budget section, think about it, do I need that luxury vacation 2 times a year?  Maybe cut it down to once a year and make it not a luxury getaway, make it a simpler vacation.  Do I need my basement renovated at the beginning of the summer and then do a deck in the backyard in August?  Budget those renovations.  Leasing a car, everyone thinks its good, a new car every 2 years.  No ownership.  This matches well to the Buy a house or rent an apartment idea, where renting is waste of money.  Do some thinking here, do you want to lease a car for 20 years?  Back to the heading, simple ideas to think about to get the mind thinking about things.  After all no one will be helping you with your finances but you alone, so get those ideas into your head and act on them.

4. I resolve to save more.

If you are reading this article, I hope that you have opened an RRSP or a TFSA account already.  If not, make it a point to open one this year.  Once when I was 27 years old and 2 years into my RRSP contributions, I had a friend who was 25 ask me why am I so crazy about RRSPs.  Her comment was "are you looking to retire soon?"  She thought RRSP were totally for retirement.  A bit of this is true, money should be withdrawn from an RRSP when annual income is next to zero which means in retirement or (knock on wood) in case of disability where you can not work and your annual income is close to zero.  How much should I save you ask?  There is no concrete answer to this question, it depends on the person.  Generally, it should be 5 to 10% of your after tax annual income.  You might want to either open up automatic withdrawals intros your RRSP.  Fees are another item that can be tracked and once again looked at carefully.  Am I sick and tired of the bank charging me $11.95 a month for my checking account?  Do you homework, there can be options.  Saving can also involve the dreaded Mutual fund MER Fee.  In my opinion, i found out of the MER fees while doing a new year resolution and it put ideas into my head for weeks until I found out all about them.  If you need to save money, read my previous posts on Mutual Fund MER fees.   It will open your eyes.

5. I resolve to stop wasting money.

This should really be an every day thing but as a new year resolution.  A big waste would have to be cell phone, television, and internet bills.  Cell phone plans in Canada are controlled by the big 3 providers in Canada, everyone has Rogers/Bell/Te;us.  How can I save there?  Well there are other options, a very good choice could be Wind Mobile.  They have unlimited data plans and are placed as a solid 4th place provider.  As of this article, yours truly has just switched to wind mobile from Telus.  I will post my experiences in a future post once I have more experience with their plan.  What happened to me is that I got sick and tired of Telus and did homework, there are options out there.  Once again planting ideas for future action.  Effective March 1, 2016, cable providers will need to offer customers an a al carte choice for television channels.  This is in response to customers complaining about bundles with channels they never use but have to pay for.  (there will be a future post on this topic also).  Internet bills, yes everyone has their stories with over priced internet.  Again, there are choices out there, you just need to plant the idea and think.  Now there are a lot of adds out there for COMWAVE for unlimited internet.  It features former Leaf Tie Domi saying stand up to the big guys.  Their internet is probably just as good as the big guys, they might be lacking in certain options or features like longer wait times for a service guy to come out or no coverage in certain communities but again plant that idea.


There you have it, a top 5 new year resolutions and how you can actually make it work.  I tried not to give examples in every section but some I had to, just to get you started off with and idea and making it work for the year.

How about you, do you have any resolutions that may fit into this article?