Get in good financial shape

In an economy where wages are stagnating and expenses keep mounting, let’s not sugarcoat it: it’s getting tougher to live the life you dream of, however modest or grand that might be. But that doesn’t mean that you should feel your dreams are out of reach. It just means that you need to be smarter about how you manage your money, and the first step—just like with any new fitness regime—is to break yourself of old, unhealthy habits and establish new ones that will get you into financial shape.
Step one: your household budget.

Rethinking the household budget

Most of us think of a household budget as just a tool to help us save or to cut expenses, but it can be much more than that. Done right, your budget can become a blueprint for achieving any number of goals.

Before making your budget, take the time to truly consider your priorities. Is it avoiding credit card debt or paying off your line of credit? Setting aside a down payment for your own home, or paying off your mortgage early? Sending your kids to a local trades school , UVic, UBC or your alma matter? Retiring comfortably on one of the gulf islands or sipping wine in the Okanagan? Maybe your personal finances are in good shape, and you’d really like to contribute more to organizations doing good work in your community, say fighting homelessness or protecting a marine habitat. Deciding on your goals is the first step toward making a plan to achieve them.

Track your expenses

Before it can achieve anything, however, your budget must be grounded in real numbers, and that’s where many of us go wrong. The trouble is our expenses. Most of us don’t know what they really are. Some of us, if we’re honest, don’t want to track our expenses because we know what they’ll show and we’ll have some tough choices to make.

Dig deep and just do it. There are a couple of good ways to get a handle on this. One is to track every purchase you make over a four-week period. This is a bit of a chore, but it’s also the only way to get a true picture of where your money is disappearing to. The second is to take the time to itemize all of your annual expenses—your car insurance, the property taxes, etc.—and include them as a monthly cost.

Wherever possible, automate

Whatever your goals, setting up automatic monthly or bi-weekly payments is a smart way to go. This could mean payments toward outstanding debts, RRSPs, or any other life goal that comes with a price tag. Some people also make automatic monthly transfers to an account they’ve set up for annual expenses, ensuring the money is there when their bills come due.

No matter what you plan on using your money for, automating the transfers or payments to align with your paycheques will ensure that money goes toward your priorities. You can leave the more flexible goals to your self-discipline.

Manage your debt

Most of us have debt—and some of us have a lot of it. If you are one of the many, paying down debt will likely be a high priority, and paying more than your monthly minimums is an absolute must. Of course, this isn’t always easy, and it might mean cutting back in other areas or seeking new ways to generate income. Remember, though, that even small amounts add up over time, and taking a step in the right direction now is the only way to move toward a debt-free future.

Let your dreams be a motivator

Just as the benefits of exercise amount to more than just subtracting a 20 from the number on the scale, saving “X” amount of money can mean more to your life and your community than just a number in a budget. Remembering our dreams and goals—the real potential value of the money we save—can be a great motivator to stick with good financial habits.