The Loans Canada team sits down with Gary Schwartz of the Canadian Lenders Association to talk about open banking.
12 Rules for Personal Finance
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Looking to make a change with how you manage your personal finances? Need some help figuring out what you should be doing with your savings? Keep reading for the top 12 personal finance rules you need to know to help you get your finances in order.
Rule #1: Spend less than your income
If there is one thing that you absolutely need to take away from this whole list, it’s that you need to spend less than you earn. If you spend more than you earn you will perpetually be in debt and have no savings for the future. If your current lifestyle costs too much you need to make changes now before you put your financial and personal futures at risk.
Rule #2: Keep it simple
It’s as easy as it sounds. Keeping your personal finances and all the tools and investments that go along with it as simple as possible will allow you keep better track of everything. The more accounts, credit cards and investments you have the less time you’ll have to focus on the ones that really matter.
Rule #3: Don’t bet on your future income
While we all should believe in ourselves and our ability to earn the money we need and get the promotion we deserve, making bad financial decisions now because you think you’ll make more money in the future is a huge mistake. You can’t predict the future and while it is completely possible that you’ll get the raise and make more money, it is also possible that you could lose your job. Spend the money you have now and live the life you can afford, worry about spending your future money in the future.
Rule #4: Build an emergency fund
Liquid cash that you have easy access to is extremely important; this is why having an emergency fund bank account should be one of your top financial priorities. Cash can and will fix most emergencies. Even if you’re currently not making that much money you can start an emergency fund. Set up an automatic transfer for a small amount then don’t touch that money until you absolutely need it.
Rule #5: Eliminate high interest debt as soon as possible
High interest debt needs to be taken care of right away. If you have excessive amounts of high interest debt you’ll more than likely have serious issues achieving any financial goals you might have. Cut back whatever expenses you can and use that extra money to put towards debt repayment. Seek the help of a professional credit counsellor or enter a debt management program. Do whatever it takes and keep doing it until all your high interest debts are gone.
Rule #6: Build a budget
Anyone who wants to turn their finances around, get back on track or make some serious changes needs to make a budget. Writing out a budget will allow you to see, right in front of you, how much you’re actually making and spending. Break your bills and spending habits down into categories and figure out what can stay and what needs to go.
Click here to learn how to create a budget.
Rule #7: Cut the fat from your bills
Yes most bills are necessary and we can’t really change that much about them but there are a few that you might be able to cut the fat from. For example, you might have a phone plan with all the kinds of expensive perks and add-ons that you never use, call up your phone company and see if there is a less expensive plan that you can take advantage of. Furthermore, if you find a bill for something that you never use, cancel it right away.
Rule #8: Set big goals
If you have any idea what you want for your future and even if you don’t, set a few large goals. They can be whatever you want. Early retirement, starting a business or even traveling the world. Having a goal will allow you to better focus your finances and give you something to look forward to when you’re trying to stick to your strict budget.
Rule #9: Look into interest rate reduction
If you have any kind of debt but especially high interest credit card debt you should look into the possibility of getting a rate reduction. It’s not always possible but sometimes it is, it never hurts to ask. Lower interest rates will reduce both your monthly payments and the total amount of interest that you’ll end up paying over the lifetime of your loan, any reduction you can get will make an obvious difference.
Rule #10: Find hobbies that don’t cost extra
Hobbies are great and we always encourage people to have them as they can be a great way to release stress, but if your hobby is costing you an arm and leg every weekend it might be time to reconsider. The money you spend to purchase supplies or equipment every weekend could be going towards your high interest debt repayment. Try to make your financial life a priority at least until you’ve got it back on track.
Rule #11: Review it all, every week or once a month
Taking an hour once a week to sit down and review your finances and goals is a great way to keep yourself accountable and on track. Ask yourself what you did right and what you can work on next week. Are all your personal and financial decisions from the previous week in line with your long term goals? If you’re looking to make positive transformations in your life you need to intentionally work on them on a regular basis.
Rule #12: Cancel any membership or subscription you’re not using
If you’re not actively using it, get rid of it. Unused subscriptions and memberships are the worst kinds of money wasters. So if you have a gym membership that you haven’t used in months, cancel it. If you have an expensive cable or satellite packages but you only watch one or two channels, cancel it.
While trying to implement all of these rules into your life at the same time would be extremely overwhelming, picking one or two rules to focus on will allow you to better manage your finances and learn how to make small changes with big results.
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