Archived — You and Your Money (3)

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1. Where am I now?

Completing the Money Planner

Before you can plan, you need to know how much money you have to spend and how you are spending it now. The following information will help you to be as accurate as possible when filling in your Money Planner.

(i) How much money do you have to spend?

Take-home income means what is left after deductions such as income tax and unemployment insurance. List only regular income, not money you receive for occasional overtime or bonuses.

If you are paid on commission, or receive your income on an irregular basis, enter an average monthly amount.

(ii) Where does it all go?

Complete the rest of the Money Planner chart. Keep these points in mind:

  • Write down the amount that you actually spend not what you think you should spend. Your chequebooks, credit card records and old receipts will help you determine some of the expenses.
  • Do not worry about making your income and expenses balance on the first try; that comes later. For the time being, just list your expenses as accurately as possible.

If you don't know how much you spend in a category, now is the time to keep records for that category until you have accurate figures.

Income and expenses will change throughout your life, and so will your spending plan.

2. Where do I want to be?

Setting goals

Setting financial goals is a key first step to becoming a better money manager. They will help you prioritize where you want to spend your money. What do you need and want in the next few months, in the next year and in the more distant future?

For goals to really work they have to be measurable. How will you know you have reached them? Ask yourself: What do I want? How much will it cost? When do I want it to happen?

What do you want to do in the next 3–12 months that will cost money? Perhaps you want to pay off the $1000 you owe on a credit card account, buy a new sound system for $2000, put $1000 in a Registered Retirement Savings Plan (RRSP), or spend $20 000 on a new car. These qualify as your short-term goals.

List your short-term goals here.
Goal When? How Much?
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It's more difficult to be specific with long-term goals such as taking an extended vacation, going back to school or buying a home. However, it's important to be as precise as possible. Here are some ideas that will help you think about your future:

  • How is your income likely to change in the next 5, 10 and 15 years?
  • Do you plan to stop working to return to school?
  • Will you finish schooling and start earning more money?
  • Will your family status change?
  • Will you need to buy or replace furniture, major appliances or vehicles? When? How much will this cost?
  • What type of housing will you need in the years to come? Will you buy or rent? How much will this cost?
  • What are other probable expenses in your future?
  • Are you preparing for retirement? If not, when will you begin doing so?
  • How much money do you owe? In view of your income and expenses for the next few years, is your debt load too large or is it reasonable?
List your long-term goals here.
Goal When? How Much?
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