You may not even realize you’re only a step away from financial destruction. This goes beyond having a budget and sticking to it, or living below your means. It’s about doing a lot of little things right to change your financial trajectory.
Here are 10 ways to take control of your financial situation before it’s too late.
1. Learn how to say “no” and mean it. No, I don't need the latest designer duds. No, I don't need to drive a fancy new car. No, I don't need to pick up breakfast everyday on the way to work. You get the picture. Say no to mindless spending.
2. Look closely at where you live. If you live in a "tony" area, you can be sure both the home and living costs will be expensive. Bigger homes are not always better, and it’s no fun being asset rich and cash poor. Recognize everything from dining out, entertainment, and even children's sporting activities, could cost you more simply based on the neighbourhood you live in.
3. It’s easy to get into debt quickly but very difficult to get out of debt quickly. When you owe money the power of time and compounding works against you. Debt is dangerous and we need to treat it with the respect it deserves because it can destroy your financial plan.
4. Stop with the emotional rewards. When did it become okay to splurge on an expensive vacation because you felt you deserved it, even though you couldn’t afford it?
5. Good financial intentions can lead to financial missteps. A classic example of this is accumulating debt while you have money sitting in a low-yielding interest bearing account simply because you are afraid to give up savings. It is important to look at your whole balance sheet for ways to get the biggest bang for your buck.
6. Build an emergency fund that could help you get through a difficult situation. Many financial planners will tell you to keep three months' worth of expenses in an account where you can access it quickly. Loss of employment or changes in the economy could drain your savings and place you in a cycle of debt paying for debt. A three-month buffer could be the difference between keeping or losing your house; however, in today’s environment, I would up the ante to six to nine months given that it could take longer to find a job than you anticipated.
7. Stop job hopping. Moving from job-to-job can compromise your earning potential and your retirement savings. Sure, the temptation may be to move onto the next opportunity – but short-term satisfaction can lead to long-term financial disappointment. There are things about all of our jobs we wish we could change, but remember, the grass is not always greener.
8. Try not to overlook fees. ATM fees can prove to be very costly. If you take out $25 and pay $3 in fees, and you should realize very quickly that was an expensive transaction.
9. Set financial goals that will get you excited to save. Review your goals regularly, monitor your progress, and stay the course. Don’t abandon long-term goals for short-term rewards. Set up a pre-authorized purchase plan so money comes right out of your account and into a savings or investment strategy automatically. You will learn to live on less.
10.Don’t abdicate financial responsibility to anyone. No one is going to care more about your financial life than you. Stay involved, understand the numbers and never hesitate to ask for explanations about terms or financial decisions you don’t understand. It is your money.
Higher debt levels, higher rates, and living paycheque to paycheque are financial wake-up calls for all of us.