The Learning Centre:
Change these 5 habits to move your finances forward in the New Year
(Reading time: 4:30)
Next to health and fitness, improving personal finances tops Canadians’ list of New Year’s resolutions.
Yet according to an Ipsos survey, only 27% of Canadians that make resolutions actually stick to them.
But why is that?
Educators Certified Financial Planner Lisa Raponi chalks this lack of ‘resolution follow-through’ up to one simple thing: habits.
“It’s true when they say that people are creatures of habit” says Lisa. “It can be difficult to change or even break certain habits because they become second nature—to the point where we perform them without even thinking about it. That’s why, when I sit down with education members to discuss their financial plan, part of the discussion involves identifying which habits need to be improved upon so they can start making better spending and saving decisions.”
That’s where awareness is key when it comes to following through on any type of resolution, financial or otherwise.
“If someone doesn’t know which habits need to change,” states Lisa, “they will most likely keep doing the exact things that are holding them back.”
If 2020 is the year you want to finally move your finances forward; here are 5 habits to change now.
#1: Spending more than you earn.
If you are holding any type of balance on your credit card (25% of education members carry a balance on their credit cards), sorry to break it you, but you are spending more than you earn. This is a financial habit shared by 38% of Canadians, who admit to be carrying debt because they live beyond their means. While there is nothing wrong with using credit as a means to build up loyalty points and rewards, relying on credit cards to regularly cover a gap in cash flow should be a red flag that you need to make some serious changes in your spending habits.
#2: Not saving as much as you should.
Depending where you are on the pay grid, there may be a cash flow gap between how much you would like to save versus how much you can actually afford to save. Yet, as this rollercoaster year within education has shown, you can’t afford to not be financially prepared. Plus, there are sudden, everyday emergencies you should be saving for (such as an appliance/car breaking down) as well those important life goals (buying/renovating a home, sending the kids to college/university, ensuring your pension income will be sufficient in retirement, etc.). Regardless of how much income you’re bringing in, getting into the habit of putting at least some money aside more frequently will make you less dependent on credit when emergencies do arise (or when it comes time to pay for expensive goals).
Change this habit by: setting up pre-authorized/automatic contributions from your bank account into a special ‘emergency’ or ‘goal’ savings account.
#3: Saving without a (financial) plan.
If you’ve been stuck in the habit of spinning your wheels when it comes to your savings goals, chances are it’s because you don’t have a financial plan in place—and you wouldn’t be alone in that regard. Out of the 46% of Canadians that don’t have a financial plan, more than half admit to having no idea on how to take their savings goals to the next level. From identifying your personal and financial goals/priorities to building in a realistic timeline, having a plan in place is crucial if you’re serious about moving your financial situation forward (because it serves as a detailed roadmap for achieving your goals).
In addition to building a detailed financial plan, Educators Senior Financial Advisor Shannon Lamont believes it is also essential to choose the right investment vehicles to move that financial plan forward.
“I feel like one of the biggest gaps for people who save without a financial plan is that their investments don’t align with their goals,” states Shannon. “That’s where investors can benefit from working with a Certified Financial Planner Professional or advisor. In addition to providing you with strategic advice that factors in both your risk tolerance and investment timeline, a CFP has the capability to view your investment goals objectively. That will ensure investment decisions are made from a practical, versus an emotional point of view—which is something investors will really appreciate during times of extreme market fluctuation.”
#4: Paying unnecessary fees and for unused services / memberships.
A study from the Canadian Banker’s Association has discovered that 48% of Canadians pay an average of $15 a month in banking fees, while 65% of Canadians are paying for monthly gym memberships they are rarely using. That’s just the tip of the iceberg when it comes to the money being wasted on various fees and under-used (and unused) monthly services and memberships.
Change this habit by: finding cheaper alternatives for the services and memberships you regularly use; or look for ways to get more value for what you pay for (I.e. start using that gym membership more often); then consider canceling the services and memberships not being used.
Tip: 54% of Canadians waste money on late fees by forgetting to make their bill payments on time. If you’re not in the habit of paying your bills right away, automate the process to always ensure prompt payment (and avoid paying late fees).
#5: Not paying attention to your investment portfolio.
We’re often told to ‘stay the course’ when it comes to our investments, but that doesn’t mean you should adopt a ‘set it and forget it’ approach to investing. From getting married and having kids, to getting divorced and remarried—a lot can change in your life over time and those changes can potentially impact your investment goals. Plus, there is also your life stage to consider. While you may have been willing to take greater investment risks earlier in your career, you may want to get a little more conservative with your money as you approach retirement.
Need a little help making the switch to better financial habits? We’re here for you.
Whether you’re looking for a savings strategy to tighten your spending habits or advice on how to finally move your finances forward, call on Educators Financial Group. We’ve been exclusively serving the financial needs and goals of education members since 1975. Let us put all of that experience to work for you.
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