Pattie Lovett-Reid: Focus on saving instead of how much you spend
Let's focus on saving rather than spending.
If you have made the commitment to take control of your financial situation this year, let’s drill down on your savings plan rather than focus on your spending.
I like to compare this to my exercise regime where slow and steady wins the race. It is all about the small wins that start to add up. This isn't about doing one big thing right, but doing a lot of little things right. That is what makes the difference.
Consider breaking down your savings into three very broad categories: essentials, long-term goals, and extras.
1. Essentials. Start with 70 per cent of your take-home pay going toward your mortgage, heating, taxes, food and transportation. If a bonus is received or unexpected windfall comes your way, consider banking 50 per cent of that, topping up essentials with 25 per cent and align 25 per cent toward a luxury or personal purchase. If you want to save even more, try to negotiate all of your contracts. There is often more wiggle room than you may think. The answer is always “no” if you don’t ask.
2. Long-term goals: Ideally, 15 per cent of your income would be tucked away for longer-term goals like your children's education, retirement, or building an investment portfolio.
3. Extras. A little discretionary spending can go a long way. Fifteen per cent of your earnings can be spent any way you like. In our household, we co-mingled our income so we often debated and discussed and compromised on this category. It can be a heated discussion and that's okay. Some months you may decide to not spend this money and save it for something that really matters to you such as a renovation, a trip or even a maternity leave. You get the point – think big picture.
When you have a plan, you get to know the numbers. This isn't about deprivation, it’s about achieving financial goals that matter to you. Get excited about your money and give this framework a try. It just might be the discipline you need to get your money on track this year.
February is Your Money Month at BNN Bloomberg. For more content like this, visit BNNBloomberg.ca/personal-finance