Top Tips for Managing Your Finances in 2021

According to a 2015 IPOS Reid poll, only around half of Canadians are putting money aside to save for their retirement. The number gets worse when you look at those who are under 35, with only around 37% saving for their twilight years.

Things don’t look any rosier now either. A CIBC poll in 2018 found that of those nearing retirement, 32% don’t have any savings to fall back on. It also revealed that 53% of the country don’t know if they putting enough away. In 2020, a Scotiabank survey found that this figure had increased to 70%.

In all likelihood, they’re probably not doing enough. A BDO report published in 2019 found that 27% of Canadians don’t have enough money to cover their daily needs and over half of them live paycheque to paycheque.

Nearly two-thirds of adults in Canada have credit card debt, with one-third reporting that the amount they owe is increasing.

Canadians aren’t alone in this problem. Studies in the United States and the United Kingdom have found that many people don’t have enough money saved up to cover even a couple of months of expenses, with many not having any money put away at all.

While this is pretty grim reading, the good news is that you don’t have to become another statistic. By following just a few simple steps you can begin to get your finances in order.

Set a Budget

This can sound like a really scary chore, but the reality is that setting yourself a budget is a really easy process and will put you on the right track to managing your money. A properly prepared budget will let you see how much money you bring in each month and how much of it you can allocate to all of your different expenses.

You don’t need to be a spreadsheet expert either, a budget that’s written on a sheet of paper or entered into a specialist budgeting app will work just as well. All that matters is that you do these things:

  • List all your sources of income (eg. salary, savings interest, benefits)
  • List your “fixed” expenses, these are ones that you have to pay regardless of what you do (eg. mortgage, rent, utilities, car payment, loan repayment)
  • List your “variable” expenses, these are typically things you may still need to buy but you have a degree of control over how much they cost (eg. groceries, mobile phone contracts)

You can then subtract the two sets of expenses from your income. This will give you the amount that you should have left at the end of each month. You can then allocate some of this to your savings and some for discretionary spending for things you enjoy like dining out, new clothes, or going to watch a game.

Look for Ways to Cut Your Expenses

If this is the first time you’ve ever set a budget, it’s likely that you’ll be surprised by how much you’re paying for many things. If this is the case, or you simply want to increase how much you can save or spend on discretionary expenses each month, you’ll need to find ways to cut your spending elsewhere.

Thankfully, there are plenty of ways you can do this. Firstly, you can begin by looking for promotions and discounts on your everyday spending. Clipping coupons for your grocery shopping can be a great way to slash your monthly outgoings.

Similarly, you can often find discounts and promotions for entertainment products and services. Many restaurants offer coupons that you can use to cut your bill, while many online casinos run promotions that offer free spins to customers that qualify for various bonuses.

You can also cut your energy bills by taking steps like draught-proofing your home and looking for energy-efficient appliances. You can also compare the different energy plans available to you to find the cheapest options available.

Insurance is another area where you can often make a saving. By following a few simple steps, you can usually find the most cost-effective options for you.

Pay Down Debts

Since there’s a good chance you probably have some sort of debt that you’re repaying, it makes sense to look for ways to save money in this area. Debt slowly erodes your wealth over the long term because the interest charges remove your ability to save.

Not all debt is bad, but it doesn’t make sense to be paying 20% interest on a credit card while you have $2,000 of savings earning 0.1% from the bank.

Of course, everyone has their own unique circumstances, so you may need to seek independent financial advice, but for the majority of people, it will be beneficial to pay down debt quicker.

If you can’t do this, you may want to look into refinancing a loan or credit card to get a lower interest rate. If you can do this, you can continue to repay the same amount each month but have more of that money go towards paying down the amount you owe rather than covering interest.

While managing our money may seem daunting, the statistics show us just how important it is. You don’t need to feel overwhelmed though. Budgeting, cutting back on expenses, and paying down debts are all fairly easy provided you go at your own pace.