With the economy continuing to struggle, markets fluctuating and job security in jeopardy, it is no wonder that many people are concerned about their financial futures. In such uncertain times, feeling out of control — especially when it comes to finances — can lead to unnecessary stress. To take back control and alleviate anxiety, here are five tips to help you manage your household finances.
1. Create a spending plan
The term “budget” can sound restrictive — but let’s face it, we all have living expenses and they’re not always easy to stay on top of. Instead of a budget, create a spending plan by using a spreadsheet to list all your monthly bills and find out where your money is going. There are also online tools that can help you build your plan. Add up your costs and deduct them from your income to be sure the amount you are spending plus your savings is less than the amount you’re earning.
2. Find places to save
Once you have your spending plan in place, take a look at your monthly bills to find places to save. For example, check out your home phone, Internet service, cellphone plans — and are you really watching all those TV channels you’re paying for? Can you save on insurance costs by bundling your home and car policies? Can you reduce transportation costs by leaving the car at home a couple of days a week or carpooling? You may be surprised by just how much you can reduce your monthly costs and free up funds for saving and investing.
3. Identify your financial goals
We all know we need to save money, but the proverbial “rainy day” may seem a bit vague. Having a specific goal you want to reach — whether it’s buying your first home, funding your child’s education or renovating to give you the spa bathroom of your dreams — is a good incentive to save. This tangible goal will give you a great reason to pack a lunch for work, forgo the $5 latte and walk past that sale sign at the mall.
4. Pay off debt
Carrying consumer debt can be draining on your mind as well as your wallet, and paying it off is a good way to feel more in control of your household finances. Some experts say to start with the highest interest rate credit card first since it is costing the most. Others recommend starting with the smallest amount because paying it off gives you a sense of accomplishment that encourages you to keep going. Whichever works for you, commit to paying off your debt today.
You can also go to your bank to talk about consolidating your debts into one monthly payment. A line of credit usually carries a lower interest rate so consider using yours to pay off higher interest rate credit cards and have one convenient payment.
5. Set up an emergency fund
It is important to have money set aside in case you have a job disruption or an unplanned expense. In the article “Prepare for the worst and make 2016 the year of the emergency fund“, Rob Carrick writes that an alarmingly large number of people don’t have an emergency fund.
It is usually recommended that this fund have enough money to cover three to six months of living expenses. Carrick writes, “Think of an emergency fund as insurance against a short-term setback that affects your long-term financial goals.” He also cautions that retirement savings and lines of credit should not be considered emergency funds.
Do you feel you have a solid financial plan in place or do you need help identifying your goals and determining which saving and investment strategy is right for you? Invisor offers Canadian investors personalized investment management solutions at a fraction of the cost of traditional advisor models, without requiring any minimum investment amounts.
Pramod Udiaver is the Co-founder and Chief Executive Officer of Invisor Investment Management Inc., one of Canada’s leading online financial advisors that provides personalized investment management services. Passionate about personal finance and a student of financial markets himself, Pramod & his team’s mission at Invisor is to simplify investing and help Canadians reach their financial dreams sooner.
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