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November is Financial Literacy Month, a month dedicated to informing Canadians about various events, programs and services that can enrich their financial knowledge.
Knowing how to make sound financial decisions is a great skill – especially as the amount of personal debt in Canada continues to grow. As part of Financial Literacy Month, Ashton College wants to introduce some key tips on money literacy that can help improve your control of your personal finances.
Most (if not all) of us have experienced thought traps at certain moments of our life. However, if we give in to these thoughts, we may find ourselves wasting more than a few dollars on things that we really don’t need.
By recognizing the dangers of thought traps and by taking small steps towards saving, you’ll be able to create a stable financial future for you and your family.
How often do you tell yourself that you deserve to spend money on an item or an activity because you have accomplished something during the day? You may want to reward yourself for your hard work with the things you really want and need; but this doesn’t mean you need to spend money every time you feel you have succeeded. Small rewards, such as buying treats after work or going out every weekend for dinner and drinks may seem insignificant, but they add up in the long run. A smarter decision is to save on small things to get a bigger reward later on.
You may think that you don’t earn enough to save; or that you already have too many expenses to try to save money. As valid as those thoughts may be, the truth is that everyone can save money – no matter how much or how little they earn. Here are some things to consider:
Use automatic deductions. If you use debit a lot, you may want to set up automatic deductions to your savings for every transaction you do. Small deductions, like 50 cents or $1, won’t hurt your budget, but will go a long way in forming a saving habit.
Keep track of your spending. Are there places where you can cut down what you spend? Whether it’s getting a cheaper phone plan or switching to homemade lunches there are always a few tricks you can use. And remember, small savings become big savings over time!
This is the biggest trap of them all. Tracking finances is not difficult – especially if using debit or credit cards where every card transaction is already recorded on your account. Budgeting takes less time than you think and it can help you get your finances on track.
Here’s a simple exercise designed to help you budget – you can do it in a notebook or in an online spreadsheet, whichever method you prefer. On one side of the paper, write your salary and other income sources (grants, scholarships, rent money, etc.). On the other, write your expenses. You can also put your debt amount on your budget sheet, and allocate a certain amount to be paid towards that debt monthly – treat it as a bill!
Just by doing that, you can approximate the amount of “leftover” money you will save. You’ll also be able to plan your expenses in advance, i.e. saving for the holiday season or an upcoming trip.
This is true – you most likely will spend that money. You may even think that you don’t need to save up and that you currently live a comfortable life. And this is where the danger lies – you don’t know what will happen in the future. What if you suddenly need money for something you didn’t budget for? Planning ahead for your finances gives you more security in your future, as opposed to impulsive buying that only gives temporary gratification.
Wouldn’t it be better to spend money on the things that you really want from life? Take a moment to go over your life goals and dreams – maybe it’s time to start saving up for bigger things.
Putting things on sale is a common marketing technique to attract customers – and we all know it! However, thinking that you save money when you buy with a discount is not uncommon. But if you already have the item, or you are not going to use it often, is it really worth buying another one, even if when it’s on sale?
When you feel the compulsion to buy a discounted item ask yourself these three questions:
These simple question can stop you from impulsive buying of certain items.
Yes, debt is becoming very common; a little too common, actually. And it is not surprising, considering how easy it is to get a credit card, student loan or mortgage nowadays. Of course, doing those things can be useful if you can’t immediately afford a house or an education, but it can hurt you in the long run.
Using debt as an excuse for more spending is counterproductive. It not only prevents you from reducing the debt you already have, but also results in justifying bad spending habits. Yes, everyone around you may be already in debt; but don’t use it as an excuse to create more debt (and more stress) for yourself. Take advantage of budgeting and saving and focus on becoming debt-free.
These are just a few of the many financial thought traps that people get themselves into. Being aware of these thoughts and learning to control your impulses can help you save money, likely more money than you think. So what are you waiting for? Be smart with your spending!
Canada’s Borrowing Binge – The Globe and Mail
Written with the help of resources from Get Smarter About Money