60% of Quebecers say they have a budget, which they follow on a regular basis in 43% of cases. It’s already a lot, but not enough. To overcome the challenge of personal finances, nothing beats good planning and motivating goals.
1. Define your financial goals
Buying a first home, starting a family, retiring at age 60 or traveling several months a year: these are all goals that make you dream, but have a cost. If one wants to realize one’s dreams, one must start by setting financial goals. Also, good financial planning is the key to success.
When defining your goals, you have to think in the short and long term. What do we want to accomplish in the coming months? Can we save money enough to afford the much-deserved trip after a busy year? Should we instead start contributing to an RRSP? These are short-term goals.
Those who are beyond the six-month or one-year horizon are in the middle term, for example buying a first home in three years. In the long term, it is our life projects (e.g., deciding at age 35 that we will retire at age 60).
The benefit of setting financial goals is to realize what financial measures are needed to achieve them. If buying a first home seems unreachable when you’re 20, it becomes more realistic when you set a monthly save money tips.
2. Make a personal budget
The personal budget is the everyday tool to achieve its goals in the short, medium and long-term. It keeps track of our income and expenses and gives us a clear picture of our financial situation. Many people avoid making a budget because they believe that it is necessarily binding. “A budget is above all a matter of choice,” says Natalia Sandjian, a financial planner at the National Bank. We must first stop prioritizing spending, then have the discipline to make consistent decisions every day … several times a day. ”
In fact, a successful budget is a budget that we can meet. By setting financial goals and a strategy to achieve them, we are much more inclined to respect them. Because it is easier to give up this nice sweater sold if we know that the saved money will be used to pay a sabbatical year!
Personal finance advisers also agree on the importance of establishing a financial cushion that is equivalent to three to six month salary, for contingencies. If you lose your job or a loved one falls ill, you can continue to pay your rent and expenses until the situation is restored.
When you are a parent
The birth of a child causes a lot of upheavals, especially in financial terms. Not only does it cause a lot of expenses, but it often causes a drop in income for parents, who take parental leave. According to a study by the Fraser Institute, a toddler can incur up to $ 3,000 in extra expenses per year for a household, while it takes about $ 4,500 a year for a teenager. It is better to plan it in your budget to save money if you plan to start a family.