Everyone makes mistakes. If you’ve been making any of the following mistakes with your money, you can decide today to make a change and make a difference.
1. Spending more than you make. If you’ve succumbed to the lure of credit as a solution to your cash flow shortfall, you’re creating a real mess for yourself. Learning to live within your means requires that you make choices about what you will spend your money on. Debt isn’t a solution; debt is an emergency waiting to happen. Which leads to…
2. You don’t live with a budget. Having a budget means you’re making a conscious decision about how you want to spend your money. Knowing how much you’re going to spend on the various areas of your life is the only way to stay in the black and achieve your goals. Work with facts. If you guestimate, you’ll underestimate. Some people underestimate their expenses because they forget the things that don’t occur every month: think car insurance, property taxes, sports fees. Some people under-estimate because they actually don’t know how much they’re spending on things like take-out, clothes, and coffee. Do a spending analysis so you’re working with real numbers.
3. Not saving enough. Start saving in your 20s and you can save as little as six percent of your income because you have so much time on your side. Wait ‘til your 30s and you’ll have to stash away ten percent to make up for the lost time. Hold off until your 40s, and it’ll cost you 18 percent of your cash flow just to hit the same target.
4. Not having an emergency fund. If you got sick, lost your job or had your hours reduced at work, or had to care for someone else who was ill, how long would you last without a paycheque? More than half of Canadians couldn’t last three months. An emergency fund is your first line of defense against the unexpected things life will throw at you. Without an emergency fund, you’d have to turn to credit to fill the gap in your cash flow. You need to have six months’ worth of essential expenses in the bank if you don’t want to find yourself on that slippery slope.
5. You haven’t bought enough or the right kind of insurance. Want affordable insurance? Buy it young. Wait too long and the premiums will go up, or worse, you won’t qualify for coverage. There is no one kind of insurance that’s best; there is only the insurance that’s best for you. Use an expert to guide you through the language because it can get pretty complicated. BTW, don’t bank on your company insurance since moving jobs would mean lost coverage, and you may then be too old (or too sick) to re-qualify at a decent price.
6. Putting off investing because you’re afraid. You may already be an investor and just don’t know it. Anything that puts your money to work to earn more money is an investment. If have a savings account, GIC or Canada Savings Bonds, you’re an investor. You’ve simply chosen a very low-risk, low-return investment.
Want to earn a higher return? Time to learn about the other investments from which you can choose. Don’t feel overwhelmed by the choices. Take your time and learn new ways of growing your money. Remember, before you buy anything, you must be able to explain it to a ninth-grader.
7. You don’t have a will or powers of attorney. More than half of Canadians don’t have a will. Without one you have no say on who gets your money, you can’t plan to minimize your taxes and you’re leaving your family in the lurch. Quit procrastinating. Without powers of attorney, not even your spouse can step in to direct your medical care or make financial adjustments.
There’s no rocket-science to good money management. It takes discipline to be in charge of your money. Or you can ignore the details and always wonder where your money has been going and why you can’t seem to get ahead. It’s your money so it’s your choice.