Archived — You and Your Money

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Good money managers spend within their income, plan for the future and solve financial problems. Poor money managers pay more, do without and fall behind.

If you find yourself in the second category, you can do something about it. You can learn to take charge of your finances.

Find information for different jurisdictions through the following links:

Financial Planning FAQs

What is a spending plan? spending plan comprises your answers to three questions:

  1. Where am I now?
  2. Where do I want to be?
  3. How will I get there?

The most important question is “Where am I now?” Consider how much it costs you to live each month, the amount of your income, whether you are spending more than you are making and, if there is money left over, what you are doing with it.

When you ask yourself, “Where do I want to be?” you are working toward goal setting. Perhaps you are aiming for a nice trip in six months, purchasing a car right now, going back to school in a year or buying a house in five years.

Answering, “How will I get there?” will define your plan — balancing spending and income and making sure you have money set aside for your goals.

What if I don't want to plan my spending? I'm young and I have lots of time to think about this later.

If you don't want to plan your spending, your only control is your paycheque. If you spend it all during the month, don't commit yourself to any credit payments. This isn't the best method but it should keep you out of debt.

I'm making it each month so I should be okay. Is a plan really necessary?

Consider the following questions: Do you have a balance on your credit card(s), and are you prepared for gift-giving occasions and car insurance premiums?

Making it each month includes preparing for expenses you know are going to arise, such as car insurance. The Money Planner on on this site identifies some of these expenses and shows you how to fit them in your plan.

Why did you ask about credit card balances?

If you aren't paying your credit card balances in full when they are due, you could be subsidizing your income using credit. For example, if you're carrying a balance of $250 on your credit card every month, you could be spending $250 a month more than you earn. If so, it could be a recipe for financial difficulties.

Figuring out where I am sounds like way too much work. Why bother?

It can be as much work as you want it to be. Decide which spending areas you need to keep track of and then do it for a month or two. In general, the "problem" expenses are food, personal spending and the irregular annual expenses. They are a good place to start recording. If you are just starting out, you may want to track all your spending for a couple of months.

Some articles suggest I spend X percent of my income on food and Y percent on housing. Why can't I just do that?

Percentages don't take into account your goals, preferences and, in some cases, where you live. How you spend is about you and what you want to do. You can choose to spend less in one category and more in another (e.g. take a bus instead of buying a car, so you can afford the vacation you want). Percentages just don't work.

What is the best advice you can give someone about planning?

  • You should know how much it costs to live each month including your irregular annual expenses.
  • You shouldn't spend more than you earn; avoid using credit to subsidize your income.
  • You should put money away for emergencies.
  • You should plan what you want your money to do for you by setting goals.

Money management starts with thinking about how and why you spend. Are you getting what you need and want? What would you like to do differently?