The Money Management Toolkit

Money can become a problem that almost all of us face at some point in our lives.

Whether it’s not having enough money to pay the bills or feeling like we can never treat ourselves, everyone has a different approach to money.

But no matter how much you make, it’s important to understand how to manage your money and get the most out of your salary.

Why poor money management is a concern

A lot of Canadians simply fail to manage their money correctly.

Not because they’re not frugal, but because they have incorrect misconceptions about some financial concepts.

For example, debt is often considered to be a bad thing, but there are certain types of debt that are simply unavoidable and are necessary for certain life goals.

This could be anything from taking a mortgage for a home to a car loan.

Planning around debt is actually a crucial thing to keep in mind, but it’s just one of the few things that we tend to forget and that leads to poor money management.

There are other situations where poor money management can lead to a poorer quality of life.

For instance, failing to save money can lead to family struggles when you face an emergency situation.

Perhaps you don’t have enough money to cope with a medical emergency, or maybe you can’t afford to repair your car after an accident.

Savings can also ensure that you have money for things such as your child’s college tuition, or even providing financial assistance to an elderly parent.

To make things worse, we’re also easily deceived when it comes to money.

Most of us are lured into a false sense of security when we receive a raise.

We might think that we’re making a lot more money, but the reality is that you might already be living on the edge of your income bracket.

A lot of people fall into debt because they try to sustain a lifestyle that they simply can’t afford.

It’s often supplemented with credit cards and loans, meaning you’re spending and relying on money that isn’t actually yours.

When combined with the joy we get from a raise, it repeats the same cycle and we’ll continue to struggle with poor money management.

So what’s the solution?

How can we take back control of our money?

Essential money management concepts

The solution is training ourselves to embrace a couple of simple money management concepts.

Tracking all of your expenses

First, make sure you’re keeping track of all your expenses.

This can be difficult if you’re not accustomed to keeping receipts, but with many of our purchases coming from online sources, this is actually easier than ever.

The question then becomes; how do you track your expenses?

Some people opt to create a simple spreadsheet or even write it down on a piece of paper then manually calculate it.

However, there are also cloud-based accounting applications that can help you organize your budget by tracking your expenses.

In addition, there are also mobile-based applications that can help you record all of your expenses.

Find a method that is both convenient and works for you.

You’ll need to make sure that you’re both honest and meticulous about tracking your expenses to get a true sense of how much you spend from paycheck to paycheck.

This first step can be a little distressing because many people will realize that they spend way too much money and save too little.

However, understanding your financial situation is the key to financial independence, hence why this is an extremely important step.

Make sure you separate repeated expenses (such as utility bills or loan repayments) from single purchases, such as a new video game or non-essential clothing item.

Reviewing and adjusting your expenses

Next, you’ll need to review your expenses at the end of a period that works for you.

We suggest doing this on a weekly basis or whenever you get your paycheck.

Add up all of your expenses then compare it to your incoming.

If you’re spending more than you make, then there’s clearly an issue and you need to immediately focus on cutting expenses.

If you’re in the green and making more than you’re spending then you’ll still want to look for ways to save more money and drop luxuries that you don’t need.

When reviewing your expenses, look for purchases that you can save on or completely omit.

A great place to start would be your food purchases.

It’s common for many of us to spend a lot of money on food, but there are much cheaper alternatives that can save us a lot of money.

Even if you can save $5 per day on food expenses, that can amount to around $150 over the course of a month.

That’s a considerable amount of money that can go towards your savings or even repaying your debts quickly.

Adjusting expenses is the key to creating more space in your budget.

If your current expenses are extremely tight, then you need to focus on getting rid of luxuries and identifying spending patterns and habits that should be avoided.

Consultations and specialist advice

Lastly, we can’t forget about the value of consultations and financial experts.

If your regular monthly expenses are higher than your income then there’s a serious issue that needs to be fixed before you end up in debt.

A great example of this is speaking to a Licensed Insolvency Trustee.

These specialists can offer life-changing debt solutions that will help you deal with different forms of credit.

If budget management can’t help with your financial situation, then there are effective debt relief options such as consumer proposals and bankruptcy claims that can help.

Regardless of your financial situation, consultations and specialists can be a great help in restoring your financial freedom.

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