Tag Archives: money management

Money Management Tips

So, if you’ve been following along the past few weeks, you’ll know my ‘bad debt story’ and how I’ve worked on fixing it. Being better with money is something that I’m proud of. I try to share my experience with people so that they don’t have to go through the same stuff I did – please learn from my mistakes!! I know these tips aren’t groundbreaking but they’ve helped me out a lot.

Track Your Spending

I started tracking my spending before I made my budget. It helped me understand how much I was actually spending so I could make a realistic budget. I used an app called ‘Expense 5’, which was really eye-opening – tracking it in real time and being able to look at it at any time was a quick reality check. I’d look and think “wooooah, I’ve spent how much on snacks and Starbucks this week?” – I was quickly able to adjust. Without tracking my spending, I’d have no idea what’s going on.

Use Cash as Much as Possible

I used to watch a money show on TV and the debt counselor always told these people to use cash because it was easier to track. I do try to use cash as often as possible. I find that I am more conscious of my spending if I have to count out the money or I can see it dwindling down in my wallet (when you tap your debit card, you don’t even see your balance go down – is ignorance really bliss?).

Not Using Credit

If you struggle with debt and always being in the red, commit to not using credit. I don’t have credit cards because of my debt repayment program, but I can confidently say I haven’t missed them at all the past two years. I used credit like “free money”, which we all know it’s not. By eliminating credit cards, I get rid of that temptation of spending money I don’t have. I’m much more careful with big purchases now that I don’t use credit – I’m not as impulsive when I know the money is gone instantly.

Make a Realistic Budget

Ugh, if only I knew this when I first started out. Yeah, it’s nice to think you’re not going to spend any money on taxis all month, but let’s be real. Or it’s nice to think you can only eat out once a week, but is that really going to happen? Be realistic! If there are areas where you know you struggle or will have difficulty reducing your spending, is there somewhere else in your budget to cut the slack. This also is true with rent and living expenses. Is your budget realistic to your expenses and income? For example, I was budgeting to move out and realistically, my rent was $1,400 once I factored in utilities. However, I only budgeted $1,200. What was I thinking? Idiot, Nicole. Don’t be like that guys. If you make commission at your job (or have other variable forms of income), don’t factor that into your budget! Think of it like a bonus every month but budget to live without it. Leave wiggle room in your budget, too. If there’s an unexpected expense, you want to be able to afford it without going too far into the hole.

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Budgeting: The ‘20/30/50’ Method

Let me first preface this post by saying I am by no means a money expert. If you were to ask my closest friends and family a few years ago how I am with finances and budgeting, they would have laughed. But after a few years, lots of debt, money issues and living pay cheque to pay cheque, I’ve learned a lot about budgeting, money management, and saving. I’ve tried a few different ways of budgeting but this method seemed to work the best for me. I will also say that I’m really open about my money issues and what I’ve learned and gone through so if you have any questions feel free to comment below.

I used The ‘20/30/50’ Method to make a new budget this year and found it the easiest to work with and the most straightforward. Making a budget + tracking your spending can be very eye-opening if you’re diligent with it. It can show you where you’re overspending, where you might need to increase savings or income or where you might have extra money that’s unallocated. The budget I make is just for myself – J handles his money separately, which works for us – so all my numbers are for ‘my half’. You can download an editable copy of my ‘20/30/50’ budget and try it out for yourself!

Okay, so The ‘20/30/50’ Method has three categories and each number stands for a percentage of your total monthly income. So for example, 20 is 20% allocated to savings. The categories are:

50% – Must Have

Rent, utilities, car payments, #AdultThings that you need every month that no one really enjoys paying for – am I right? You’ll see in the template that among my must-haves I also budget for taxis and Car2Gos. Luckily my company reimburses me for the metro pass, so most of that budget gets used on taxis, Uber, and car shares. We live in midtown Toronto and don’t have car payments or parking but occasionally use a car share program or take taxis + Uber.

20% – Savings + Debt

This is fairly self-explanatory. I am on a debt repayment program so I like to allocate as much money to that every month as I can. However, J and I decided to start saving at least $100 from every pay cheque. I’m more confident in my spending habits and was able to move some money around to do so. Sometimes if I’m having a good month I’ll even put more than $100 in after all my debt + must haves are taken care of. Debt repayment is always going to be a top priority for me but it’s good to save. I also put money into an RRSP at work, which comes out every pay cheque and I don’t even notice. I would recommend doing that with your company as well, especially if they do partial or full match contributions. I promise you won’t even notice it’s ‘gone’.

30% – Everything Else

Anything that doesn’t fall into the above two categories, don’t forget bank fees!

This is always the first area that I look at to cut down on spending. For example, I switched from TD to PC Financial because I was tired of spending on bank fees. PC is a great option for ‘free banking’. If switching isn’t an option, look into how much you get charged in bank fees every month – I never did and it was astonishing to see it add up! Try to find an account that has as little monthly or annual fees as possible (that still fits what you need it for). Eating out has been a big adjustment for J and me! Before we got our condo together we were eating out a lot because we never had groceries. Now that we budget groceries into it, have our own kitchen and enjoy cooking again, we can cut down on eating out. I like to keep the ‘everything else’ category as small as possible. I have an ‘everything else’ line item in there, which is just my miscellaneous category for monthly expenses that don’t fit elsewhere.

In addition to budgeting, I also track my expenses using the app “Expense 5”. It’s been my favorite expense tracking app so far and the easiest to use. I actually prefer not attaching my bank account to a spending app because I find manual entry easier and more accurate. If you want an app that attaches to your bank account, I recommend Mint.

It’s recommended that you re-adjust your budget every month but I haven’t gotten that intense about it yet. This is a good starting off point. I recently had my best friend do this budget to help her assess where she can save and used it to help her goal plan for the future. For example, if you want to move out but haven’t yet, you can use this budget to make a ‘mockup’ of what living solo or with a roommate would cost and whether you can afford it.

I hope this was helpful!

 

That Terrible Four Letter Word …

DEBT. Yuck, debt. Such a gross word. Debt feels terrible. Depending on how out of control it gets, it can weigh on you every day, stress you out, and affect many areas of your life. I would know, I’ve been there! Let me share my backstory.

It’s hard for me to remember where my bad debt began – probably around the time that I thought getting a line of credit to pay off my OSAP debt was a good idea. It could have been if I had managed it right, but I was young and dumb and didn’t. Yeah, I paid off my OSAP but I had ‘so much money left over’ – what on earth was I going to do with it? Well, I spent it. On what? I have no idea (that’s the worst part)! I spent it on stuff and things I can’t even remember now. From that point forward, it was really difficult for me to ‘get out of the hole’ when it came to money. I was in the negative for more than what I was earning every two weeks at work.

Fast forward a few years – I have a better paying job, a promotion coming soon (or so I thought) that would come with a pay raise, and after a few bumps in my personal life, I thought it was time to get a place of my own. I built a hasty budget that I clearly tailored to make it seem like I could afford to live in downtown Toronto because I wanted it so badly. Among moving expenses, filling my apartment with furniture and dishes and decorations, rent, utilities, cable, the internet, phone bill, groceries, going out, Toronto fun … the list goes on and on, I was racking up some serious debt. Credit cards were maxed out with high interest, line of credit was maxed out with the bank taking my money every week (that nasty term ‘garnishing your wages’ is as bad as debt itself), and I even stooped to payday loans … I basically had no money ever. Anytime I got paid, my money was gone. I could barely afford to pay my rent or eat, let alone do anything fun.

I knew I had to make a change – my first step was getting rid of my tiny condo. I loved living on my own and the freedom it came with but I was tired of barely making rent. So, I bucked up and found a roommate in a ‘cheaper’ area of the city in a less-fancy apartment where my monthly bills would get cut by more than 50%. That still wasn’t good enough. I was an ostrich burying my head in the sand every time I got a bill – I’d rip it up, throw it out, hide it, anything to avoid seeing how bad it was (which ultimately made it worse). Creditors started calling me at all times of the day and I stopped being able to answer my phone – I was scared of who was on the other end and what they were going to say to me.

Moving was a great step but the biggest step I took was finding a debt repayment program. It took a lot of nudging from my parents and friends to even explore this option. The program I chose is with ‘Credit Canada Debt Solutions’ and it was, hands down, one of the best decisions I made in a long time. My counselor’s name is Cathy and she helped me get started with the program. She was extremely non-judgemental (my biggest worry about talking with someone about my debt. “You spent HOW MUCH on clothes last year?”). She walked me through everything, answered all my questions about what would happen next, what this would mean for my credit rating, and the in’s and out’s of working with CCDS. I walked out of the room feeling amazing. They were going to handle all creditor calls. They were going to pay all my debt back – all I had to do was send them one payment every month. Another great thing about using a debt repayment program is that they work with the creditors to lower interest rate. CCDS has lowered almost all of my interest to 0% with the exception of one company, where I only pay $4 a month. I felt like a weight was lifted off my shoulders.

At this point, you’re likely thinking “great job, Nicole! You must be out of debt by now!” Ha – not a chance. After I enrolled in the program, I ‘fell off the wagon’ after a few months and stopped making my payments. Womp, womp. I figured I could ‘handle it myself’ and I wanted that extra $500 every month to spend on myself. I had moved in with a roommate, I was ‘saving money’, I deserved it! I was wrong. The creditor calls started soon after and after months of, again, ignoring calls and bills, I couldn’t take it anymore. I went back to CCDS to try and get on the program. I had a big wakeup call and learned that my actions had actually made my situation a lot worse. I won’t share the nitty gritty details, but let’s just say the stern talking to and intimidating word “bankruptcy” scared me enough to get my sh*t together.

Fast forward a year after that scary conversation and I’m happy to say I am in a much better place. Not only am I well on the way to paying off my debt, but I’m also saving money and no longer living pay cheque to pay cheque. It took a lot of mistakes, a lot of adjustments, and a lot of learning to get it right. I have to be disciplined with my spending, cut out extras, pinch pennies at times, but in the long run, it feels way better to be able to afford the important things when I need or want them.

Why do I tell this story? Because I was so scared to talk about my debt to my friends and family, I hid the problem until it got too much to handle. I’ve learned that by being open and honest about what’s going on, it holds me accountable to being smart with my money and I know that my debt isn’t anything to be ashamed of. It was bad but it could have been worse. One of my closest friends urged me to look into the program, stating he wished he had done it when he was younger. J asked me if I was ok when I kept getting calls at early hours on the weekend (creditors know when you’re around!). My parents were supportive but realistic with what was going on. If your story feels like mine, know that lots of other people are in similar situations and it’s nothing that can’t be handled. I thought it made me a lesser person to use services like CCDS, but I know now that I was only hurting myself. Reach out, talk to someone like CCDS or your trusted friend – you’ll feel so much better!