Financial Problems Start Here

financial budget kelowna
I don't know about you ... but tax time is a time for financial reflection. All I want to know is ... am I making progress or am I falling behind.

Since I run my own financial business, I track everything, the gas for my car, car insurance and the costs to run my office. I also track my personal costs, food budget, hydro costs, and debt costs from the year. Every year I am amazed at how much I spend.

After more than 15 years in the financial industry if I had to pick the most important thing you can do to make your financial life better is to focus on your cash flow. That's right I am referring to dreaded "b word" ... budget

Like weight gain, cash flow problems happen over time. Before we go over some simple ideas on how to improve your cash flow ... let me tell you story and you see if this reminds you someone you know ...

Years 20 - 25
When most of leave home we rarely have much income, so our lives are simple. Spending time with friends is big part of single life, so we end up spending almost all we make going out on the town.

If you are a student you start your life with a sizable student loan and a student line of credit. Thank goodness a good job is just around the corner.

Years 25-35
For many we know are married and have young children.  We don't go out as much as we used too, but we know have the added expense of kids and possibly a mortgage.

Unfortunately home ownership and children are very expensive. The bank know this when they sign you up for their latest credit card when you buy your home. They know you want new furniture, and they know you won't be able to pay the purchase off either.

Years 35-45
The kids are getting older, no more diapers and baby sitters. Just as you think you can save more money you can add sports or hobbies for your kids to the list of things to spend your income on.

For many the original home seems too small,  so now is good time to buy a larger home and up goes the mortgage.

Work is harder too, and we all deserve a vacation. Thank goodness for credit card with points. Yes I know it still ends up costing 3 - 4,000 dollars, but your deserved it.

Years 45-55
Hurray the kids are gone, now you can focus on you.  Now you should have more money to pay off the bloated line of credit, credit cards and mortgage.  That is until grand children are born.  Now you spend time with them and spoil them in the way you were not able to with your own children.

The financial reality is, regardless of you age if you don't control your spending you will never have anything to show for your hard work and debt will become a way of life. The good new is all your goals and dreams only require an investment of 12 hours a year, or 15 -20 minutes a week to keep your financial life on track.

So what can you do right now to improve your financial life ...

1. Do a budget.
Go over everything you spend. Everything you need, and want each month. Food, coffee, birthday gifts etc. Once you have done this you can use it guide line for step three.

Check out the Financial Consumer Agency of Canada website for their interactive budget calculator. Great place to start.

2. Get a handle on what you are actually spending.
What you think you spend and what you actually spend is usually much different.

I remember meeting with a family of 3 that estimated they were spending 400 dollars a month for food each month. After careful inspection of their bank statements, their actual monthly food bill was 983 dollars. The best budget in the world cannot help you if you are overspending 583 dollars a month!

3. Cut out those things that don't really matter.
Now you have a budget that makes sense and an idea of where you are spending now you can decide if change is in order.

Here are some ideas on where you might trim your budget and what you might do with that newly found 200 dollars a month ...

  • Eliminate lunch with your work buddies and it put toward your annual vacation account. Now you can come home and not fear the coming credit card bills.
  • Chop your food budget and you can live your life with out a balance on your credit card.
  • Cut out eating out twice a month and apply the savings toward your 200,000 mortgage and you would save you 75 payments and more than 50,000.*
  • Stop  driving your second car and invest the gasoline bill into a Tax Free Savings Account (TFSA) earning 8% over 10 years and accumulate 36,888.**
No matter what your income is ... managing your cash flow and controlling your spending is the only way to get what you want out of life and achieve financial goals that are important. (Don't forget the budget calculator link above)

As a friend of mine likes to say "Money only goes where it is wanted". The question is who wants it more ... you or your credit card company.

*Assuming a 200,000 balance at 5% with a monthly payment of 1163.21 adding a monthly additional payment of 200. Check out** Assuming a 200 dollar monthly contribution over 10 year period. Check out the TFSA Calculator
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