Although we all aim for financial equilibrium in our lives, too often our expenses creep up on us and threaten to overtake our best intentions. This can trigger a cash flow challenge that’s hard to turn around. But you can take some simple steps to ensure you’re on track with your finances, regardless of your current situation.
We spoke with Ian Whiting, CFP®, a financial planner with over 30 years of experience and a financial services instructor at Vancouver’s Ashton College, about his budgeting tips to help you wrestle back control of your finances and master a more stable financial future.
Change your mindset
Are you telling yourself that you can’t budget, that your income is too low to form saving habits, or that tracking finances is too difficult? Those may be valid concerns, but the reality is that you’re the only one responsible for your budget. Instead of worrying about what you feel you currently can’t do, be solutions-oriented and focus on developing new habits and skills that can help you succeed.
The word ‘budgeting’ has negative connotations for lots of people, so according to Ian, the key is to change how you think about taking control of your money. “I always talk about maximising value from your cash flow, and never about budgeting,” he explains.
Get it all out on the table
The first step towards developing a successful budget (and sticking to it) is figuring out your end goals and where you stand in relation to them. For instance, if you want to get out of debt within the next year or two, look at your current situation. What do you need to start doing right now to get on the path to achieving your goal?
Once you see things in black and white, it’ll be easier to decide what changes should be made to ensure you achieve your short-term and long-term goals. A good start is looking at your income and comparing it to your spending patterns. Look at how much you earn, your fixed monthly bills (such as rent, internet and phone), variable expenses (like food, entertainment and clothing), and how much you’re allocating to debt repayment and/or savings.
Ian also suggests identifying money leaks. “Look at your frequent habits: relying on takeout or food delivery, buying a weekly supply of magazines or stopping regularly at the pub on the way home. Then consider the total impact on your budget. For instance, if you spend $5 per day on coffee, it can add up to $150 every month. Ask yourself if those activities are generating tangible value. If not - reconsider!”
Eliminate or at least decrease unnecessary expenses to allocate your money where it will best serve your goals. And keep a record of your spending to find any areas you may still need to adjust or work on.
Take stock of debt
The rising amount of personal debt in Canada is becoming all too common. Don’t let debt interfere with your future financial priorities—your long-term goals will be that much more readily attainable if you’re debt-free.
The first step is to get a handle on your current debt status, including credit cards, lines of credit and loans. Then work with a qualified financial planner to create a plan to pay off your debts, taking into account cash flow and other areas of your financial life.
Set inspiring goals
Set life and financial goals that are specific and realistic—yet inspiring. Whether they include finally getting out of debt or saving for a much-wanted purchase, the key is to find objectives that will motivate you to change your current money habits. Remember, specific doesn’t mean being inflexible. But having precise, measurable goals can help you notice changes, track your progress and feel more confident about achieving the goals you’re working towards.
Set both long-term and short-term goals: this will enable you to keep the big picture in mind, while at the same time start seeing the progress you’re making sooner. Write your goals down for easy reference and inspiration.
As you make changes to your activities and priorities to pursue your goals, know that achieving your goals is a process. Even if you aren’t successful from day one, you’re taking small but important steps in the right direction. Make an effort to gradually refine your saving and spending habits, and you may be surprised by the progress you make and the changes in your finances.
Don’t go it alone
Remember, you don’t have to go it alone when it comes to your finances. A CFP professional can help you put all the pieces of your financial life together, balancing what you need and want today with a road map for reaching your goals for the future.
For more on taking control of your finances and how financial planning can help, read 6 ways to balance your financial priorities, Financial planning can help anyone at any life stage, and FAQ: financial planning.