We all know how important it is to keep track of our finances, but the task can often be overwhelming, boring, or sometimes both. It can be tempting to avoid the anxiety of knowing how little money you have or the monotony of drawing out a budget. After all, you’re an adult, you know exactly where your money goes every month! But is that really true? If we’re being honest here, how many times have you checked your bank account to make sure that you still had enough to cover all your expenses? There is no shame in struggling financially. In fact, 1 in 6 Canadians say their monthly spending exceeds what they make and 1 in 4 admit to borrowing for food and other necessities. If you are among the many Canadians under the age of 65 in this position, there is hope!
If you relate to obsessively checking your bank account near financial deadlines or borrowing money for basic necessities, you may need to face an uncomfortable truth. Your finances are filthy! But don’t worry, you’re in the same boat as roughly 27 per cent of Canadians under 65 years of age. Cleaning up your finances won’t be the end of your financial struggles, but it will pave the way to an easier, less anxiety-filled life.
How do I “clean up” my finances?
“Filthy” finances are the result of poorly tracked or assigned money. So, naturally, to “clean up” your finances, you have to keep track of your income and spending. Yes, taking an honest look at your finances can be scary. It’s possible once you look at your income, debt, and expenses that you realize you don’t have enough to live the way you want. This can be hard for anyone to accept, especially if your desires are reasonable. It’s hard but keeping track of finances is the only way out.
There are two ways to spring clean your filthy finances. One is to create a detailed budget that outlines your income and how you allocate it each month. If that sounds tedious and painful, we have a list of trusty, easy-to-use budget apps here. If the prospect of detailing a budget is still overwhelming, you can always consult with a trusted financial professional such as a mortgage broker to help you iron out the finer points. This is especially true if you are working toward a financial goal such as refinancing, selling, or buying a home.
The second way to clean up your finances is to track your spending. This may sound redundant when step one involved setting up a strict budget, but this is where you have to be brutally honest with yourself. Where are you spending your money? Are you spending it on necessities or frivolously? The line isn’t as cut and dried as some financial gurus profess it to be. We discuss how to determine your needs best here. Once you understand your goals, ideals, and needs, it will be easier to tamp down your unnecessary spending. Keep an honest log of every dime you spend in a month and it will be easy to tell what needs to be cut. If you feel guilty accounting for it, you can probably lose it.
Why should I care?
There are a number of reasons to clean up your finances. The irony of avoiding your finances like the plague is that it actually causes more anxiety than it reduces. Sure, seeing a smaller number on your bank statement is not a pleasant feeling. However, it isn’t even a fraction of the anxiety you may feel when you don’t know whether your card will go through at the grocery store. Once again, there is no shame in financial struggles, and sometimes even your best efforts won’t eliminate them, but they can mitigate them.
You can improve your relationships!
Cleaning up your finances won’t only mitigate your struggles but can also improve other areas of your life. 86 per cent of Canadian couples admit to fighting over money. This sadly is no surprise when you consider just how much money permits in your life. It’s the roof over your head, the food in your belly and the clothes on your back. No couple is doomed to forever fight over money. The key is to have an open and frank discussion. If you can both agree on a budget and stick to it, you will have eliminated a major stressor from your relationship.
A financial spring cleaning will benefit other relationships as well! Borrowing money from friends and family can be a strain on a relationship. Many of us want to help our loved ones whenever we can. But if a relationship becomes a repeated financial drain, many of us may have to end it. Once you have control of your finances, you can avoid these relationship pitfalls.
The road to financial freedom!
Figuring out a budget won’t solve all your financial woes. What it will do is set you on the right path. Understanding where your money is going every month will help you pay down debts, control your spending, and even build an emergency fund. An emergency fund protects you from things such as job loss and unexpected expenses. That security alone is worth taking the time to detail a budget, let alone protection from fraudulent transactions!
So, who’s up for a bit of spring cleaning?
If you are like many Canadians, your finances are probably filthy. Not to worry! By developing a budget and tracking your spending, you can clean up your finances. While you are spring cleaning your home, spring clean your finances! If you need some help with your financial planning to prepare for a mortgage, you can give me a call at (705) 333-4338 or get in touch with me here!