Welcome to 2017. You’ve probably already made some pretty hefty new year’s resolutions, amiright? And I’m betting that at least one of them had to do with money. Save more, spend less, crush that credit card debt—there are plenty of ways to improve your money habits in 2017. But sometimes it’s easier to make the resolution than follow through with it. Which is why we spoke to Shannon Lee Simmons, personal finance expert and founder of the New School of Finance to chat about how to get through that post-holiday debt, how to incorporate smart money habits into your life and how to get saving.
The biggest mistake young people make with their money is assuming that there’s no point in keeping track of it
This is especially true if your paycheque isn’t as big as you’d like it to be, or if you have more debt than you’d like. Keeping track of your finances can seem a little redundant when you aren’t feeling good about the financial space you’re in. But Simmons reminds us that a little goes a long way (really!) and that being mindful of what’s coming and going will make you aware of patterns and opportunities with your spending.
So what should you be doing that you aren’t? Automatic savings
“You want to save either to savings accounts or set up additional payments (above the minimum) on any debt you might have,” says Simmons. “If you automate it so that it happens every month or every paycheque, you get used to living on the money that’s left over.”
Speaking of debt…
You want to focus your saving efforts on debt first—and make sure to pay the highest interest debt first. “You’re young,” says Simmons, “there’s lots of time for retirement savings and you will be so relieved once your debt is paid off.” Once you’ve taken care of your debt you can re-route those payments to a savings account.
If you’ve racked up debt over the holidays. “If you’ve got a credit card that allows you to collect points at the stores you shopped at over the holidays, you may be able to payback a portion of your balance with points,” says Simmons. Then, you need to set up a plan of attack. This might mean a tighter-than-normal budget for January—try to get everything paid off by February 1 and you can go back to a regular budget.
So I should cut up my credit cards?
Definitely not. “Having a credit card is not a bad thing,” says Simmons. “A credit card can even help your finances—provided you pay it off and do not overspend.” A little trick Simmons suggests is paying attention to where you spend your money and leverage reward programs when you use your credit card. “For instance you can earn 1.5 miles for every $1 you charge on your TD Aeroplan Visa Infinite Card on eligible gas or drugstore purchases so you can earn points for travel,” says Simmons. “This way, you leverage the spending you’re already doing and get rewards for things you want to spend money on (vacation) without having to save extra cash.”
Also, prioritize your spending
After getting rid of your debt, start saving towards your emergency account second. (Simmons recommends saving up to three months of living expenses if you are an employee and up to six months if you are self-employed.) Then, start to think about long-term savings—this is where your RRSPs (Registered Retirement Savings Plan) and TFSAs (Tax Free Savings Account) come in.
Main image via @fischrjournals