It’s that time of the year, spring cleaning! While many people use this time of the year to clean up their house, yard, and diet, most overlook the need to do a financial clean up as well.
Crowe MacKay’s Licensed Insolvency Trustees in Vancouver and Surrey are here to help, providing 6 simple steps for financial spring cleaning. If you require assistance, contact our team in Vancouver and Surrey to start your debt relief journey.
1. Get to Know how You are Spending Your Money
Before you can organize and clean up your finances, you need to determine where your money is going and why. The majority of Canadians are not aware of how they are actually spending their money each month. The easiest way to do this is to pull your financial statements for the last two months. This includes bank statements, credit card statements, investment statements, and any other statement relevant to your finances. Review and categorize each expense on your statements and then total each category for each month. This will provide you with a picture of how you have been using your money.
2. Declutter Your Expenses
Now that you know how you have been spending your money each month, look for warning signs of unnecessary expenses such as multiple subscriptions to similar products. For example, do you pay for cable TV plus multiple streaming services such as Netflix, Amazon Prime, Apple TV, Disney+, Crave, or Paramount? There is an ever growing list of these services, but you do not need every single one. Could you cancel your cable and choose one or two streaming services or stick to just cable? Doing this one thing alone can save you hundreds of dollars each month.
Having a storage unit in Vancouver or Surrey may be another expense you should be reviewing. When was the last time you went to your storage unit for something? If it has been six months or more since you needed anything from your unit, now is the time to seriously evaluate if you even need those items. Remember, there is a difference between needing something and wanting it ‘just in case.’ Some people have found it more cost effective to rent the same item when they need it instead of paying a monthly storage fee for things they rarely or never use. Getting rid of your storage locker will not only reduce your monthly expenses, but you could also make some money from selling items you no longer use or need.
Take this time to review any insurances you are paying for, such as car, house, renters content, and life insurances. Is the coverage still what you need? It is possible to have duplicate coverages, so make sure you are not covered more than once. Many companies offer discounts if you bundle your insurance with them. If you have multiple insurance providers, ask for a quote to see how much just one provider would cost. Shop around to ensure you have the proper coverage while still getting the best deal.
3. Make a Budget
We’ve said it before, and we’ll will say it again, make a budget.
Now that you are aware of how you are spending your money and you have cut out what’s unnecessary, you can take the next step to make a realistic budget. A budget is necessary to ensure that you are not wasting money while at the same time preparing for irregular expenses, emergencies, and retirement, while still enjoying life. We recommend downloading a free interactive budgeting template, such as the one developed by the Office of the Superintendent of Bankruptcy.
Once you have balanced your budgeting plan, stick to it. At first, you may need to keep track of your expenses on a daily basis to get into the habit of staying within your budget. Do not get discouraged if you fall off the wagon, dust yourself off and do better the next week. Berating yourself and giving up will only harm you. Keep your chin up, and keep going! Once your new plan has become habit, it’s wise to keep a weekly tracking plan to give yourself the necessary reality check each week to remain on track.
4. Create an Emergency Fund
Having an emergency savings fund should be a high priority for all Canadians. The rule of thumb for an emergency fund is to have three months’ worth of your living expenses, or six months for a self-employed individual, in savings. If you didn’t include this in your budgeting plan, return to step 3 and make the necessary adjustment.
5. Start Saving for Retirement
After you’ve completed the above, there’s retirement to think about. According to a recent survey done by BMO, Canadians need $1.7M to retire. This may sound like an unreachable figure, but if you start right away and make saving a priority, you can have a comfortable retirement. Even if you cannot afford to contribute very much right now, getting into the habit of making regular contributions to a retirement fund will add up over time. As your situation improves, you can increase your contributions. If you haven’t done so yet, start now!
6. Review Your Credit Report
All Canadians should review their credit report at least once a year. You can review your credit report for free directly online with Equifax and Transunion or you can request a report for free by mailing in a request form. If you find any errors on your credit report, immediately notify the credit bureau and request that the error be fixed.
This is a good time to review how much open credit you have. If you have any accounts that have been paid off but are not actually closed yet, have them closed immediately. Having multiple credit cards is not advisable, lenders may think of you as a risk if you have several credit cards or lines of credit. Choose one or two that work best for you and cancel the rest.
At Crowe MacKay & Company, we have over 60 years of experience and offer free initial consultations. If you have any questions regarding the information above, contact our office today and start your debt relief journey.
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This article has been published for general information. You should always contact your trusted advisor for specific guidance pertaining to your individual needs. This publication is not a substitute for obtaining personalized advice. If you require corporate or personal Insolvency services, Crowe MacKay & Company provides custom solutions for clients, allowing them to live debt-free.