Jan 9, 2014

7 ways to become financially savvy in 2014

1. Use an Online Tool to Track your Finances

Lots of sites like Mint (which works for Canadians) and LearnVest (Americans) automatically track your finances and you can see how you've been doing over time. This is MUCH easier than manually entering each transaction into excel sheets and tracking receipts. Each also comes with an app. 



2. Use the 50/30/20 rule to distribute your income

NEEDs (food, shelter, utilities) should be 50% of your income.
WANTS (retail therapy, going out with friends) should be 30% of your income.
SAVINGS should be 20%. 

Right now my needs (especially shelter) take up over 50% with barely anything going into savings and a small percentage going towards wants. I have to adjust the distribution of income so that my books are more balanced. At present my goal is:

NEEDS - 63% (inclusive of rent, food, internet and phone bills)
WANTS - 7% (coffee shops, fast food, shopping, restaurants, social outings)
SAVINGS - 25% (towards having a minimum balance, TFSA and building an emergency savings account).

3. Become Financially Literate

Don't rely on someone else (whether a spouse, partner, your parents, or financial advisor) to handle your finances while you turn a blind eye. Unfortunately personal finances are taught at school so its your own personal responsibility to take your financial future into your own hands.

Subscribing to Money Saving Blogs has changed the way I spend and save: Reading these regularly has helped me save a substantial amount of money as I was constantly re-reminding myself to save by reading one or two articles everyday. Some of my favourite places for advice include: Learnvest and Investopedia.

I usually look for topics under "Personal Finance" as this would be applicable to average earners who are interested in building their nest egg.

Some basic articles I found helpful:

4. Switch to a Bank with more value

Dump your account that has fees and opt for other options that provide no fees in exchange for a minimal balance or a minimum of an X number of accounts with that financial institution. Use sites like RateSupermarket.ca (Canada) to compare accounts and fees.

5. Get a Credit Card with Rewards

Pay off your credit card balance in full each month. Take advantage of the use of your credit card with rewards. For young professionals just starting out like myself, I would prefer cash back; others include travel points or "rewards points" for different rewards programs. Here is an old Toronto Star article on the best Canadian cash back credit cards to consider.

6. Make Saving Fun

I came across SaveUp, after linking your accounts you earn rewards for making deposits and paying off debt and win prizes along the way. Its part of a new way of changing habits through gamification (think of it like fitocracy but for money instead of fitness - and you actually win prizes!).

7. Clip Coupons

Browse through savings flyers and clip coupons that are relevant and save it for your next shopping trip. Mrs. January has curated a list of Canadian Coupons that will mail coupons to you. 

2013 Finance Milestones

2013 was the year I got out of the red and broke even.
  • Paid off my student loans in full - as a result of minimizing my spending (spent less than $50 bimonthly on clothing in comparison to $100+ every month I used to spend).
  • I moved out on my own into a condo without a substantial increase to my expenses
  • Cancelled my Just Fab Membership which was charging $39.95 per month.
  • Opened up a TFSA account (have not yet contributed to it)
  • Consolidated my five different savings accounts into one.
  • Tracked monthly budgets successfully for the past year using Mint.
  • Used my "Read Later Pocket App" to read 20+ articles on budgeting from Forbes, Learnvest and other sites. 

Overview of My Spending 2013 vs. 2012

I was surprised to see that I actually spent less this year than the previous year. 

Yellow - 2012; Green - 2013

* I am actually referring to renting of condo, and purchase of supplies for condo

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