On my personal finance journey, I have learnt a lot, failed myself a few times and have learnt a big lot too. I thought I would share some of my current favourite personal finance practices as I have seen positive results in my spending and saving patterns so far (again, I am not expert here, I am just really passionate about getting my finances right). Without talking too much, my favourite practices are:
- Automating my savings: This has probably been my best practice so far; it makes me think of my monthly contributions to my savings accounts as bills I need to pay- kind of like Netflix, apple music and other fees that automatically come out of my account on a given day in the month. I set mine up to be on the same day, so I have an idea of how much I need to have in my account on the withdrawal day.
- Having a savings goal and tracking my progress monthly: I have an excel sheet where I track how much I want saved up at the end of the year. Every month, I track how close I am to my goal. I also calculate how much more I need to save up to get to my goal and what my monthly contributions should be.
- Budgeting how I plan to spend each pay check: Before each pay day, I draw up a rough estimate of how I plan to spend the pay check. For example, I plan to use my next pay to cover my phone bill and transit pass. Part of it goes to savings and paying off anything I used on my credit card and the rest goes to living expenses for the rest of the month. I find that when I don’t plan how to spend any money I am given, I end up spending the money recklessly and even overspending.
- Leaving my credit card at home (Life saver here): I personally know I spend more with my credit card on hand than I do without it- and those summer sales are springing up faster than I can open my eyes. I get cash back for most purchases on my credit card so, I like having most of my expenses on there- this also discourages me from incurring big purchases on my debit card. I’d rather buy it on credit, get my points and do a transfer to pay off my credit card. However, that doesn’t always work out as planned. Last summer, I spent a large fraction of my pay check constantly paying off my credit card (mainly because I kept spending more and more on it); it really was such a vicious cycle. This year, my motto is simple- if I cannot afford it at the moment on my debit card at that given time- I simply cannot afford it. PERIODTTT. For example, the other day, I went shopping and picked 4 tops that came to $80. I only had about $120 on hand and knew I had to buy groceries and pick up few things. If I spent $80 on those tops (no matter how good the sale was), I only had $40 to live on till the next pay. I only bought 2 tops and spent $40 instead. If I had my credit card on me, I would have bought them all.
- Savings Accounts that are not easily accessible: I know I am not alone here. You walk into a store and that perfume or watch you have had your eyes on is currently marked down 50-75% and for some reason, you have to get it today. You do not have the money in your chequing account, but a quick transfer from your ‘savings’ to chequing account and this item is all yours. I can’t count how many times I have made transfers from my savings account to my chequing account at the teal while the cashier was ringing in the items. This is why I set up my savings in ways I can barely touch them, once the automated debit occurs, that’s it. I have a TFSA (Tax Free Savings Account) which requires me to either call or go in person to initiate a transfer. I also have a separate bank account for savings (have no idea where the card is, which is great).
- Low or Medium Risk Investments with high penalties for cashing out before maturity: This mainly helps me think long-term. It is so easy to think in terms of a trip I am saving for or for the numerous items on my unending wish- list. I like the balance of having both short- and long-term savings. I use the investments provided by my bank and WealthSimple to help with long term savings- talking mutual funds. WealthSimple is pretty straight forward but, you might want to speak to advisor first to understand this a little better.
- Storing up a foreign currency: I like to have a few US Dollars saved up because it is hard to spend foreign currency (thinking impulsive sprees) and historically, it has been a safer and more stable currency than the Canadian dollar. I find this super useful especially when I am going on trips as I don’t have to incur a huge loss on currency conversions (it might be cheaper to change from USD to GBP than to change from CAD to GBP). I’ve had a US Dollar account for times I received money from my parents, this protected me from whatever rate the bank may have been using to do the conversion (if you do not have a US Dollar Account, the bank gives you the Canadian equivalent and banks are known to have the worst rates in the market). This also gave me the flexibility to do the conversion on days the rates may have slightly been better. My US Dollar account is what some may term a travel fund and I look out for periods it might be favorable to buy US Dollars as one who earns in Canadian dollars.
- Having a comfortable spending allowance: I love being realistic and honest with myself; I love to eat out, grab drinks during happy hour and can be an impulsive spender. To top it all, the summer months are upon us with the numerous lists of things to do. Monthly, I allocate a fixed amount to what I have termed ‘play money’ to things that are not necessary for survival but, make me happy. Not making an allowance for this or giving these wants unrealistic budgets could lead to me spending recklessly. It would be nice if I didn’t finish the entire allowance in a month, as the rest can go to my savings but, if I decline brunch or drinks towards the end of the month, I may have finished my play money-ask me next month, lol.
- Saving ahead for big expenditures: This one is pretty straightforward. The big expenditure does not need to be a house or a car, it could be a trip or moving and furnishing costs if you are moving to a new place.
- Listening to podcasts, reading articles and following finance centered content:I believe the content I consume affects who I am. My favorite finance podcasts are; Listen Money Matters and Money Diaries (Refinery 29). I follow @stocksandstilletos, @thefinancebar, @moneyafrica, @clevergirlfinance and #personalfinance on Instagram; that’s all I can think of at the moment. I also plan to read Ramit Sethi’s book, ‘I will teach you to be rich’ before the summer runs out.
That’s it from me, I hope you have enjoyed this post and look forward to hearing some of your financial practices this year. Is there anything on the list that you might try or are curious to try? Please share your thoughts on this as well as podcasts and the finance resources you use. Look forward to hearing from you.Â
Loads of love,
PS: Incase you missed it, here is the template I use to monthly track my savings and how far away I am from my goal.