Stop living paycheque to paycheque

January 25th, 2018

It’s Tuesday. Your cupboards are bare, your bank account is looking light, and payday is still three days away. This paycheque-to-paycheque game is getting old and you’re ready for a change.

But where do you start? According to a recent study by the Canadian Payroll Association, nearly half of Canadians rely on their entire paycheques to cover expenses, with 40% of fellow Canucks spending all (or more) than their earnings each week. Clearly, this is a big deal across the country.

The good news is that you can break free from the cycle and take control of your money. The bad news is it won’t be easy. Planning to spend less and putting more money towards debt or savings is easy. Following through is the hardest part.

To help you create a solid plan of action, here are five tips to whip your finances into shape.

  1. Know where your money is going and make a budget

    To better manage your money, you’ll need to do two things. First, write down all of your monthly mandatory expenses. Think rent, utilities, phone bill, groceries, car payments, insurance, etc. Second, figure out where the rest of your money is being spent.

    Free online money management services and apps make it easy to help you track your spending so you can get a better understanding of where your money is going. How it works is you securely connect the transaction histories of your bank accounts and credit cards. Then, each transaction is organized into categories. Once you have your purchases classified into groups, you can move backwards from there to determine what you can cut.

  2. Cut back on spending

    Now that you’ve tracked where your money goes, look for opportunities to trim those expenses. Can you get a cheaper home insurance policy? Great. Cancel the gym membership you haven’t used since the spring? Awesome. These are great steps in the right direction, but keep in mind, this is just a start.

    The most challenging change will come from your daily habits. For example, bringing your own coffee and lunch to work can easily save you $75 a week.

    If you need an extra push to kick the convenience-spending habit goodbye, try the good old jar system for saving and spending. The way it works is simple: have a jar or two labeled for big-ticket savings objectives such as a vacation or paying off school loans. You can see your savings grow this way, which can be very motivating.

    After you’ve taken care of your basic needs, give yourself a spending allowance in cash each week. That allowance now becomes your budget for all the extras. Even wine.

    Like we said, it won’t be easy, but it’s worth it in the end.

  3. Increase your earnings

    In addition to cutting back on the money going out, look for opportunities to get more money coming in. Whether that means finding a side hustle, asking for a raise, or looking for a new 9-5 with higher pay, earning more money is a surefire way to make it easier to balance your budget.

  4. Increase debt payments or reduce interest paid

    So you’ve cut back on daily spending and trimmed your monthly expenses to give your budget a bit of breathing room. Now for the toughest part: reducing debt and paying your future-self.

    Carrying credit card or other consumer debt? Call your bank and ask about lowering your interest rates. If they can’t help, consolidating your loan or using a 0% balance transfer credit card can help bring down your payment amounts. You might also want to combine all of your loans under one roof, so you won’t have to track multiple accounts.

    This is also the time to automate payments to your emergency savings or investment accounts. These should be set up to take money directly out of your account on payday, so you never even have the chance to spend that cash.

  5. Put your money to work

    Rather than storing your savings in a shoebox under your bed, open a high-interest savings account or Guaranteed Investment Certificate (GIC) to start earning interest. Or, look into investing with a financial advisor, who can help with a plan to get you on a path to financial freedom.

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