With Christmas just around the corner it's hard to think about setting budgets and saving money, especially when we are bombarded during the holiday season with advertisements trying to get us to spend it all on the latest gadgets and super sales. But, we may need to seriously think about our financial future right now if we're going to change where, some say, we are headed as a nation.
Can't Keep Spending
Jacques Nantel, a professor at the Universite de Montreal's business school, warns in an article by the Montreal Gazette that Canadians can not afford to keep spending at their current rate. The article goes on to explain that the level of consumer debt is currently at a historic high, equaling 163 percent of the average income. That means for every dollar a Canadian family owes, they only have 63 cents to pay back that dollar.
Think that statistic doesn't apply to you? Think again. Nantel states that 40% of Canadian families are just two paycheques away from bankruptcy if they lose their main source of income.
So, what can you do now to save your financial future? According to Nantel, the best thing to do is to start budgeting your spending and begin saving at least seven percent of your income.
What's A Budget?
Setting a budget is the first step towards saving, but you can't set a budget until you know exactly where you spend money. Start by reviewing credit card & bank statements to track your expenses. Look over a few months of your spending habits to calculate how much you spend on food, entertainment, utilities, etc.
Then you must decide for each expense: Is it a WANT or a NEED? Figuring out the difference between your wants and needs will help you then set priorities for your spending.
Pay Yourself First
Saving is not only important to ensure you can pay your debts, but it will help you meet your financial goals and provide security against the unexpected.
The first step towards saving is setting a plan, which will be easy to do since you've already set your budget and know your priorities!
Next, you'll want to pay off debts with high interest rates or fees. You may even want to consider transferring outstanding balances on credit cards with high interest rates to a low rate credit card.
Then, set aside a portion of your income before you pay bills, go to the market or fill up the car with gas. It's imperative that you pay yourself first, before you spend money on anything! The Finance Consumer Agency of Canada suggests saving 15% of your income, if you can, while other experts say to save at least seven to ten percent.
(If you need more help budgeting your finances or saving for the future, check out Your Financial Toolkit from the Financial Consumer Agency of Canada. This important resource contains a number of learning modules that will walk you through the process step by step.)
When you're out shopping this holiday, remember how important, yet easy, it is to stick to a budget and pay yourself first. Stay away from impulse buys and "once in a lifetime" sales and ask yourself, "Is this really a want or a need?" Take a few moments to sit down and calculate your personal and/or family budget, along with a detailed savings plan. Setting aside a little now will have a massive effect on your financial future, as well as our nations'.