Are you in control of your finances? Or is your budget on life support?
November is Financial Literacy Month in Canada, and we think it’s the perfect time to take a deep dive into your wallet, lose the debt and embrace a healthy strategy that puts you in control of your money.
The way to achieve all of the above can be summed up in one word, and that word is PLAN.
You’ve probably heard the saying by Benjamin Franklin, “if you fail to plan, you are planning to fail.” Financial literacy begins with knowing where your money comes from and where it goes. This holds true for business owners and individuals alike. To take back control of your bank account, you need to plan for everyday expenses and for the future.
Here’s our advice for creating and implementing that plan.
First, track your everyday expenses. This can be as simple as downloading the details from your bank account or as complex as using an online software to capture receipts and record all the details. The goal is the same, to identify where your money is going. Once you have a few months’ worth of details, you can plan or budget how to use your income. Note your monthly expenses, and then expand those out to cover the year. By setting a plan in place, you have a story to follow, observe and adjust.
Plan to pay down debt. Credit card debt for Canadians is overwhelming. The convenience of the card in your wallet or on your phone is a huge temptation. Think twice before adding to the debt that you cannot repay within the grace period. Set a reasonable repayment schedule to see the end. The cost of financing through a credit card is the costliest of all financing. The quicker this debt is eliminated, the quicker you can reach your financial goals.
Don’t be afraid to ask questions and learn as much as you can about lowering your expenses, especially when it comes to bank and credit card fees. Talk to your financial institution. Have them explain the services that you are paying for through your monthly bank fees. Check to see if there is a plan that better suits your spending habits. Talk to the credit card company. Are the fees you are paying for your current card giving you value or is a different card a better option?
Think of how much you can set aside each month in case of an emergency. This year COVID-19 surprised us all. It was fortunate that the Government of Canada stepped in to provide financial supports like CERB (Canada Emergency Response Benefit). Imagine if another major event happened and that in addition to the Government support there was also your own personal emergency fund you could rely on? That’s an achievable goal for anyone. Start small. $25 put away biweekly ends with $650 saved in a year.
Hold yourself accountable. If you’ve decided to allot yourself fun money of a certain amount, stick to the amount you’ve set. You’ll feel great at the end of the month when you attain the goals set out in your plan.
Understand your personal tax situation. Many folks are looking to enhance their income by becoming a freelancer and setting up a side hustle. This can be a great way to tackle that credit card debt or save for your emergency fund. There are also tax implications to these funds. Our Tax Team is available to analyze your income streams and determine if you are going to owe tax at the end of the year. It is no fun to receive a tax bill and not have a plan to pay it. Remember you only ever pay a percentage of your income in tax. The rest of the income is yours to make your plan happen.
The Government of Canada provides many tips and tools to understand your finances, including a handy budget planner and tools to help you compare credit cards, decide whether to lease versus buy a vehicle, a mortgage qualifier and many more. These will help you both develop and support your individual plan with your individual goals.
We’re always here to help, so feel free to reach out to us at Freedom Accounting Inc. with questions about your plan and personal taxes. We are your allies in creating financial freedom.
Give us your books – take back your life! ®