It’s all planning until you turn it into reality…it’s not as tricky as you might think! It helps to be organized in terms of your filing system but the organization essentials are more about minimizing the administration.

• Credit Cards – Hold and carry 2 (put away or cancel the rest)
• Bank Accounts – 1 Chequing & 1 Savings (+ 1 Savings account for each additional person)
• Investment Accounts – Hold in as few places as appropriate and keep your own tracker with them all in 1 place
• Income – Automate through Direct Deposit
• Payments – Automate through Direct Debit
• Savings – Automate through Monthly/Continuous Contribution Plans (direct from your account into your investments, RSP’s or RESP’s)
• Large/Irregular Expenses – Pay monthly through direct withdrawal from your account or set up a monthly transfer to your Savings Account so the money’s there when you need it

Some people like to use money tracker software that combines the information from accounts and credit cards or if you prefer, do it yourself. Either way, the key is to track and monitor your actual income, spending and saving to your plan so that you can take action if you’re getting off track.

This is Part 1 of a 2 part process to get your plan developed and implemented because it’s one thing having a plan but it’s another to make it happen! That’s the key – put your ideas into action to make your dreams a reality.

There are essentially 2 steps to Part 1:

1. Understanding the cost of your goals
2. Designing a solid budget

1st – Take each of your goals and convert it to a monthly target to include in your budget. For example, if your top priority is to repay debt then start with knowing how much debt you have, what each debt costs you (the interest rate) and what minimum amount you must pay each month to remain in good standing. Total the total and divide by the number of months of your debt repayment target. If you have $20,000 debt and want to repay it in 3 years, then you can expect to put between $600 and $700 towards debt repayment to meet your goal. TIPS:

• Always make the minimum required payment by the statement due date (to keep your credit rating in good standing)
• Repay the debts with the highest interest rate first

2nd – This is where you develop a budget based on real information, include your goals and ensure that it all adds up. Your expenses and savings and/or debt reduction (goal) plans must be covered by your income. If they don’t, you have 2 options which are to reduce expenses or increase income. Using the information you gathered that tells you what you spend on a monthly basis (on average), develop a budget. With any luck, your income covers your expenses and goals. If not, it’s time to decide how badly you want to achieve your goals and what you are going to do to make it happen. TIPS:

• Always work with net monthly income (after taxes and deductions)
• If you are paid bi-weekly, try to budget using 2 pay cheques per month rather than 26 pay cheques over the year and if you are paid over 10 months, either set aside enough each month so you have enough over the remaining 2 months or have another plan to bring in what you need.
• Total up large or irregular annual expenses and divide into monthly savings instalments that you stash in a separate account so the funds are there when you need them – think property tax, vehicle insurance and vacations.

Next week I’ll blog about Part 2 of ‘How’ – putting a system in place to support your plan.

Last week was the ‘why’ and this week is the ‘who’ and ‘what”. Who is you! Now you need the ‘what’ to put together a picture of your finances.

• Your prioritized goals from last week.
• A list of your assets and liabilities. Assets = Things like real estate, vehicles, savings and investments and Liabilities = Money owing on mortgages, loans, lines of credit and credit cards (don’t forget to include any money you owe the taxman).
• Your monthly income – Before and after taxes and deductions (net).
• Your regular monthly expenses such as housing, utilities, food, clothes, entertainment, gifts and transportation. 
• Monthly savings
• Large (annual amounts) expenses such as insurance (home and vehicle), property taxes, trips and travel.

I suggest you organize the information by putting the assets and liabilities (in separate columns) on 1 page and the income and expenses (separate the large expenses) on another.

This information is most meaningful if it’s real and an easy way to be sure you’re using the right numbers is to review your cheque book, cash withdrawals, credit card and bank statements. 

The probability you’ll meet your goals is increased greatly if you’re working with accurate information – even if it’s not a pretty picture today 🙂

Next week’s post will be about using this information to develop the plan to reach your goals.

My girls are always asking ‘why?’ and much of the time I’m not able to provide a good answer. The question this morning was about the colour of planets, specifically Neptune. I was able to pin it on gases but couldn’t be any more scientific than that.

However when they ask ‘why’ about finances, I can answer their questions and here are some reasons that may resonate with you:

• You’ll sleep better at night
• You can work towards achieving your goals
• Greater financial fitness = greater options
• You’ll be in control of your financial future

Sure there are lots of reasons (aka excuses) to avoid or delay it but if you start slowly and do it well, you will make a huge difference to many areas of your life.

And there is no time like the start of a new year to begin!

The best place to start is at the beginning. What 3 goals do you have? You can certainly list more than 3 if you like! A bigger place, vehicle, reduce debt or a retirement plan? Put them in priority order but note any that a long term (5 years or greater) because even though retirement may seem a long time in the future, the advantages of starting to save now are huge.

If you are keen and want to jump ahead, get started on the next step by gathering your financial information to document a starting point – your financial picture. Using credit card, bank, savings and debt statements note your monthly net income, monthly expenses and larger/annual expenses on one sheet and on another note the balances of any savings and debts.

Between our recent vacation, new snow tires, dental surgery and some holiday gifts the big bill has arrived early this year. I always assume that it will come after the holidays and although that one might be big too, this feels a bit of a shock.

In one way, it’s a good thing because it means we’ll deal with it before the new year because I always forget that the new year brings smaller pay cheques with CPP and EI deductions starting afresh.

The good news is that we planned for the tires and the dental bill. Most of the vacation was paid for in advance and although we did a little shopping, we didn’t do too much damage. The bad news is that this bill has already been reduced by our credit card loyalty dividend payment so it must have been a whopper!

I suppose I could think that it doesn’t seem to matter how much we plan and budget, there are always surprises but I choose to keep planning and budgeting because so far it’s worked pretty well. I like the challenge of seeing if I can plan for the unexpected because that is life after all.

Not an easy task! There are so many sparkly and shiny things in the stores. I could suggest that you avoid stores and shopping altogether and advise you to make all your gifts however, unless you’re very crafty, it’s not a realistic suggestion.

Here are some ideas:

• Write down your holiday giving budget number
• Note any travel or holiday activity plans
• List the people you plan to give to this season including any parties you will go to
• Jot down some gift ideas including any hostess gifts 
• Estimate the costs of each item and add it up
• Is the total within your budget?

If it is, great! If not, time to do some Internet sleuthing to figure out alternatives and lower cost opportunities (sales and discounts). Doing this before you hit the stores will save you time and money because you won’t be tempted to impulse buy in order to get through your list. Either way, take your list with you (with your budget numbers) so you can keep on track and stick to your plan.

Good luck!

November is flying by but there are two weeks left to earn an ‘A’ in Financial Literacy. How do I do that you may ask? Definitions of literate include ‘to be knowledgeable’ or ‘to be well-read on a topic’. I don’t have a whole lot of time to read these days but thanks to the Internet, information is readily available readily through other channels such as the Internet, podcasts, radio and TV.

The key is to know what knowledge you must acquire to become financially literate. I suggest that you start with these concepts:

• Basic Definitions – Income, expenses, debts and assets
• Net Worth – What is it and why is it important to strive towards positive net worth?
• Personal Financial Statement – What’s does your money picture look like?
• Cash Flow – What is it and why is it important that it’s positive?
• Credit Rating – What is it and how do I develop and maintain a positive rating?
• Credit and Credit Cards – How do they work? How is interest charged?

These are the building blocks upon which you can base decisions and plans regarding your personal finances. Making smart money choices leads to great options in the future.

Aim for an ‘A+’ next week by translating the knowledge into action!

I can thank my parents for teaching me and my brother valuable first lessons when it comes to finances.

• Save for what you want before you buy it
• Always pay the full balance owing on your credit card by the due date
• Save for retirement
• Spend wisely – if it’s something you really, really like, it’s worth it (think a high quality, classic wardrobe piece or a great trip)

I clearly remember wanting a new bike. I’d chosen it from the Shepard’s Hardware catalogue and begged my mom to buy it. I’d pay her back! But until I’d saved my money (a slow process of marking the accumulation on the fridge), the bike wasn’t mine. Saving and buying that bike gave me great pride and represented a lot of hours of babysitting!

In Grade 2 I was lucky to be part of a small group that learned about money. We learned about the denominations, how to make change and how to add it up. Fast forward to planning for the start of university and my mom helped me make a budget. I did a fairly good job but had forgotten to put in anything for the occasional coffee or gift for friends. I also developed the budget based on the school year only which led to a scramble at the end of the year to get a summer job – good motivation!

I grew up in an era when people still used predominantly cash to buy everyday things such as groceries and a new car was a big deal. Today’s world is totally different and I notice that my girls’ understanding of finance requires some further education. We use credit cards as our primary payment mechanism so I explain about paying the bills. We use bottle and can currency exchange to put spending on ‘wants’ into perspective. To go for coffee or a treat costs a whole big bag of returnables! And we ask questions for them to consider:

• How much does a tank of gas cost?
• How to spend money or gift cards they are given? On consumables or something that lasts longer?

How did you learn about money?

I think most of us enjoy the little thrill that comes from a Halloween scare. My kids like to be surprised by just the right amount of ‘boo’ or mechanical spider lunging toward their feet as they cross the threshold.

What really frightens them though is the unknown, the uncertain and the down-right scary – like fireworks set off in the middle of the night or witnessing a car accident. As adults there may not be much that ‘scares’ us but there can be things that we worry about or are afraid of. Money worries can be one of those things. As with childhood fears, facing and addressing your financial foes is half the battle.

Learning about the unknown and setting plans in place to reduce uncertainty are key steps to moving past any type of fear into a position of confidence and strength. In the world of your money this equals choices and options.The first step is to gather your information, review it and understand your financial position. Does your income cover your expenses? Do you have debt? Do you have Assets? If so, how much of each?

Don’t let the Worry Witches get the best of you this Halloween!

It may seem like months away but yet it always seems to sneak up so quickly, settle in like a tornado and then depart leaving us a little heavier in body and lighter in the wallet. Here’s how to get a jump on the holiday season to make for less of a dénouement in the new year.

3 Simple Steps:

1. Planning (aka budgeting)
2. Start Saving Now
3. Check Your Progress

They sound simple but are they?

Planning – What do you plan to spend for gifts, travel and seasonal entertainment such as work functions, theatre, parties and get-togethers?

Start Saving Now – Based on the total you calculate in the Planning Step, divide by the number of pay cheques between now and the end of December – can you set aside this amount each pay cheque? This is typically a slow time of year which makes it a good time of year curb regular spending in favour of the festivities of the holidays. Set aside what you can into a separate account that you’re not tempted to ‘raid’.

Check Your Progress – Check your account balance against your target to see how you’re doing. If it’s unlikely that you will reach your target, now is the time to adjust your plan.

The bad news is that to be successful, it still takes some self-discipline but good news is that there are two months before the holiday season is here AND if you save what you plan to spend and stick to your planned spending….you will have the money set aside to pay your post-holiday bills!