Ever feel like your paycheck disappears too quickly? Your pay or balance in your chequing account gets eaten up by bills and expenses, leaving no room for enjoyment. Maybe you decide to borrow money to purchase an item, or go on vacation, to only add to the debt you have. Sometimes we do this, and don’t even pay attention to the consequences.
The goal of this blog is to share some money tips which will help you, as an educator, to stay on track financially.
Personal Budgeting
Personal budgets will help you in many ways. They have tremendous benefits that could help you build wealth in the long run, but they also come with some pain and sacrifices (hang in there, they are worth it).
The basis of a budget is straightforward. You put together all your expenses and you jot down all the moneys that you expect to receive. If the number is negative, you need to cut back. If it’s positive, you need to save.
I want to go beyond the traditional idea of budgeting by discussing four strategies that will help you really understand what gets the ball rolling when it comes to budgeting:
- Remember balance is key
- Detect money leaks
- Know when to say no, and
- Build an Emergency Fund
*The last three are particularly important if you do not have a steady income.*
Balance is Key
It’s no fun having to decide between going out with friends or saving money. I’m not saying that you have to avoid going out at all costs. However, you will need to allocate a certain amount of money towards entertainment and stick to it. By allocating a certain amount to the things you like, you can enjoy them within reason. It takes willpower.
Example: A night downtown could range between $75 to $125 once you factor in a meal, some drinks, and possibly a movie or some form of entertainment. A budget that gives you one or two less expensive outings allows you to still have fun and enjoy your hard-earned money while staying within a balanced budget.
Detecting Money Leaks
This one is one of my favorites because, as a financial advisor, I live and breathe the power of compound interest (investments). Now let’s talk about it on the negative side – the power of compounding expenses. These expenses are so little that you can miss them, and not realize that you are spending thousands on a yearly basis.
I am talking about your monthly subscriptions to services that eat away at your budget without noticing – new supplies, Netflix, Spotify, Amazon Prime, gym membership, etc. Economists call this the subscription business, and it can cost us a lot of money. Believe it or not, you could have a subscription to buying shirts, for example, and not even know it. Being alert and detecting leaks and stopping them will help you a lot.
When to say no!
We live in a capitalist society that values gifting. There’s a lot of pressure to spend money for every occasion: Halloween, Father’s Day, Mother’s Day, wedding anniversaries, birthdays, Christmas, Ramadan, Hanukkah, baby showers, engagement parties, housewarming parties, etc. Individuals need to be able to prioritize and decide which ones fit the budget.
Emergency Funding
Lastly, there’s emergency funding. Experts suggest that it is good practice to have 3-6 months’ worth of money to cover expenses put away in your bank. It needs to be accessible and liquid. This is very important because in case of an emergency (a cut in income or an additional expense), you won’t have to borrow money to cover it. This may be difficult for someone who is already carrying a lot of debt. We can talk about debt reductions on another occasion, but I will leave you with this: building an emergency fund is just as important as getting rid of debt.
Post written by: Dan Fernandez
Dan is a Wealth Advisor with DMF Private Wealth, who provides independent financial advice.
Dan is happy to answer any questions you may have about your financial picture. He can be reached at 905-512-5629 or by email at dan@dmfwealth.ca.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This article was written, designed and produced by Dan Fernandez for the benefit of Dan Fernandez who is a Financial Advisor for DMF Private Wealth, a trade name registered with FundEX Investments Inc., and does not necessarily reflect the opinion of FundEX. The information contained in this article comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds Provided through FundEX Investments Inc.
