BLINDING DEBT IS THE WORST WAY TO GET AHEAD FINANCIALLY
All it will take for most people is one week of tracking expenses to stop, drop and roll because alarm bells go off and someone has to call 911. The only problem is that no one is going to put out your financial fire but yourself. Skip the I’ll pay tomorrow, next week, next month or forgetting about bill payments all around. This has to stop and if you can’t get your sh** together then there’s no point whining about money.
Even someone who is on government assistance, working minimum wage jobs sometimes even two to get by can be better savers than the person who earns a higher income but doesn’t have a damn clue how to save it. I’m tired of people who have it all and can’t get it together and it’s the people who hit rock bottom that are climbing the financial ranks because they teach themselves about money and how it all works. You know, spend less, save more.
It’s a simple way of looking at money even if you only have $5 to spare every month BUT that $5 surplus is going to change your life if you manage it wisely. Not only that but the more your savings or nest egg starts to grow the more enthusiastic you will be about saving more and finding more ways to earn extra cash.
More.More.More… see the trend!
Technology for financial newbies
Forget new technology if you’re struggling with your finances and focus on keeping things simple and documented by tracking expenses on your own. By this I mean using a few simple tools that you can buy at the Dollar Store or easily find at a second-hand shop might just be the motivation YOU need to get started on a budgeting journey that will change your life forever.
- Book with paper or a binder with sheets of paper
- Pencil and Eraser
- Folder or envelope for receipts
Getting our feet wet in the financial world was how our path to debt freedom and the passion for control over our lives began. This also meant a new way of life something which many people need to understand begins with change. This new beginning meant that we didn’t go out with our friends every week for dinner, drinks and other costly ventures. We both quit smoking and have saved a tonne of money over the past 5 years and everything we bought we did so second-hand or found deals on Kijiji .
Our budget was what kept us accountable for our actions as did collecting receipts for everything we purchased even if it was coffee at Tim Horton’s. I can’t stress enough why you should stop being negative about money and with this new way of thinking you WILL see improvement in your financial affairs.
Can you afford it?
If your answer is, I don’t know or I think so you should keep reading this post.
Let’s talk about tracking your expenses for a week and what that will mean to you or if you have a family how that might change paths for your lives. When I was growing up my parents didn’t have money to put us in sports because it was impossible. Savings came first because sports activities would not pay the mortgage or put food on the table.
Related: I can buy it but can I afford it?
Always consider your current financial situation and what may lie ahead. If you are living pay to pay and you MUST stop and try to understand why. I’m not talking about bitching about it in your head or to other people either. I mean getting down to business and getting stuff done. Money doesn’t deposit itself in the bank so get your act together and own your money, don’t let it own you.
The problem for some people is that once they get into debt they can find every reason in the book about why it happened. If we become proactive about emergency savings, not spending money we don’t have then it won’t happen.
I know some of you may have turned to credit cards to pay for emergencies or pulled money from your RRSP’s to pay the debt collectors but you’ve now pulled money from one pot to pay another. This cycle will NEVER end unless you put a stop to it. In fact the higher the interest rates you have on your debts and the less you pay, the worse you will be.
Truth is, people don’t want to be told what to do with their money but when they are up the crapper they come running for help. Whether your debt was conceived from emergency or other means it must be paid. In the process if you don’t find a way out money stress will following you around like sticky peanut butter clings to a slice of bread.
Get started early even if your early might seem like it’s too late
Just recently we were speaking to a young family we know in their early twenties with 2 children. Not only have they been talking to us about finance but they have an advisor they look up to. The mere fact that they went out of their way at such a young age to learn about investing, retirement and savings is a HUGE win for this couple.
I can ask some people and they have no idea what an RRSP, TFSA or even an RESP for their child is all about. Why? Because once you’re in debt you feel that you don’t belong in the group of people who save. Wrong. Saving money is not a rich person thing. You can but it’s your attitude that stops you.
Although they rent and she is a stay-at-home mother they are still able to sock away $1000 a month into savings after they pay their bills which includes investing. They may not pay into their retirement savings the full amounts but SOMETHING is going in plus they take advantage of an employer pension matching program.
He works a full-time job earning $22/hr, goes to college and part-time during the week earning him minimum wage plus tips. She stays home and the only money she gets is from the government for the kids. They own a vehicle that they pay monthly payments on and these two young parents are killing it financially better than many in their age-group.
Situational differences will obviously change the way you save but my point of sharing the above is that they go above and beyond to make sure they are saving money, spending less and doing everything they can for their future. Starting young with debt in your pocket is one of the worst ways to get into the savings and investing way of life early on. Even when you move into your 30’s and 40’s if you haven’t figured out money yet you risk not knowing how you will fund your future especially with the way inflation has gone up and wages staying stagnant.
Create an expense report
Tracking expenses for just one week is simple and I want to hear from everyone reading this today who tries one week of tracking exactly what they learned about the way they spend money. It may not be a surprise to you but those numbers should be all you need to get over a hump. Whether you are spending too much or living on limited income it’s critical to find ways or more ways to save or even better, more ways to earn money.
You will always be further ahead if you can save something and your rich neighbour saves nothing. You may not get the same experiences as them in life but you won’t have to worry about how you’ll pay for them if the walls come tumbling down. Besides, there are so many ways to experience our world without blowing wads of cash but let’s just keep those secrets for another post.
Tracking expenses is simple
Now that you have your tools you’re ready to track expenses for 7 days beginning on Monday to Sunday or however you see fit. As long as it is a week of documented expenses. You may find that one week you don’t go out much but the next you are out every day shopping. If that’s the case then target 2 weeks of spending especially if it’s a week where you will be out and about often. Don’t complicate though because that’s where people give up.
In your budget workbook each page will become a day of the week. So Monday is the first page where on each line you will use receipts that you collect from everywhere you spend money outside of fixed expenses will go. Fixed expenses are your mortgage, rent, life-insurance, house insurance and so on that don’t change month to month unless rates rise.
What you want to find out is how much of your money you are spending each day outside of these fixed expenses. The expenses we are looking at may be variable expenses such as clothing, eating out, allowance, tools, miscellaneous etc. I know some people who will build a deck on their house for $5000 because they “need it” yet they have zero savings after paying for the reno, debt and little to no retirement money being invested. You must see what is wrong with this visual.
If at the end of the week you find that you don’t quite have an accurate picture of your expenses do it again. It doesn’t hurt to be tracking expenses from the start every week for a few months either. The idea is that from week one you don’t stop tracking expenses because you do want to make changes and you do want to see where your money is going.
In the evening take 10 minutes to input your daily expenses into your budget workbook then tally it up. What we would do is beside each receipt write a little note. I’m asking you to use a pencil and paper to do this because it’s easier to remember when you have to write it rather than type it at first. Until you have a grip on your money track it manually then move to technology if that is the route you’d like to take.
An example of this would be;
Thursday, October 26, 2017 Tracking Expenses
- Coffee Tim Horton’s $2 ….NO
- Pair of shoes $30….No
- New cologne $50… No
- Set of wrenches $45… Yes
- New bathroom towels $26…No
The idea around this is that you are asking yourself whether you really needed to spend the money. Once you get good at it you won’t have to ask yourself again after you spend the money because you will just know whether you should spend it or not. This is a progression stage in budgeting where you become AWARE of what you are spending.
If you find that you didn’t need that cologne or pair of shoes consider returning them with the receipt that you collected. Trust me the more you return the less you will spend. I’m pretty sure you won’t want to be back and forth to the shops every week but you must hold yourself accountable. If you can’t make the right decision before you buy and later realize you shouldn’t have, return it.
Once your week is up and you have all of your tracking expenses written down, reviewed and tallied have a clear look at what you’ve spent. Can you break those expenses down even further or find ways to save money.
An example of this would be;
- Coffee Tim Horton’s $2 ….YES <<<<< If you said yes you must have that coffee every morning consider making it at home instead of hitting up the drive-thru. Huge savings right there.
- Pair of shoes $30…YES <<<< Perhaps waiting for a sale the next time instead of paying full-price or finding shoes that are for sale second-hand or even brand new because other people spent money they didn’t have and are now selling to return a portion of what they spent. You might even have people who receive gifts they don’t want and sell them for less just to get rid of them. Their loss is your gain, right?
- New cologne $50… Perhaps you can opt into a rewards program like at Shoppers Drug Mart and each year collect points when you shop and when the time is right use the points to buy your cologne, perfume or other beauty products you need for your health and well-being.
Review your tracking expenses report
This is your opportunity to sit and go over your report from the week by yourself or with your partner. In come cases you may want to involve the kids so they can see how they impact money by asking for things that you can’t afford. It’s important to teach kids that money must be earned and distributed properly before we buy things we want.
If you find that you didn’t get an accurate report keep tracking expenses until your financial picture comes clear. If you want to go the extra mile download our budget for free and track all of your money coming in and going out. I recommend doing this after you get a grip on your expense report. I’m hoping you will soon commit to taking your money to the next level with a simple budget plan.
As 2017 comes to and end in the next couple of months now is a good time to think about how you would like to see your 2018 financial report to look like. Anything could happen along the way but having a plan in place gets you one step ahead of where you used to be.
Now that you’ve got your expense report you can move on to Budgeting by reading our 10 Step Budgeting Series. Don’t worry it’s not boring and long either. It’s simple.
Discussion Question: Will you commit to one week of tracking expenses? Yes or No. If you’ve surpassed this stage in your financial life how have you motivated yourself to continue. Share your tips for those just starting out.
Leave your comment below.
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