Managing money can be intimidating. From the list of financial to-dos to the endless array of acronyms for different accounts, it can easily feel like there’s too much to know, let alone if you’ll ever get it right. If you’re feeling overwhelmed and confused when it comes to managing your finances, you’re not alone.
39% of Canadians feel like they do not have their financial future under control. – The Financial Blind Spots Survey, FPSC
Ready to take charge of your finances but unsure where to get started? Below is a list of common financial blind spots that might be plaguing your money mindset, and how to fix them!
Sweating the small stuff
Clipping coupons might save you $0.30 on groceries, but you’d be better off axing a few lunches or a dinner out each week and saving $30.00 instead. When it comes to supercharging your finances, focus on dollars before pennies. It may not seem necessary to start slashing your spending if you’re like 39% of Canadians who are unclear of their long-term financial goals, but it’s better to start practicing these behaviors now so you have more to play with when you nail down what your big ticket items are.
Reducing your spending and increasing your income by any amount is always good for your net worth, but if you’re looking to get the most bang for your buck, your efforts should be directed towards major wins ahead of small victories. A good exercise is to identify the three largest expenses in your budget and try to reduce them by 15% each or more.
Only focusing on one side of the equation
Cutting expenses can make a huge difference in your monthly budget, but eventually, you hit a limit where you can’t cut anymore. If you’re still falling short of your bills or financial goals, the only solution is to earn more money.
Increasing your income is easier than you might think, and there are a few different ways to do it. One of the easiest is to negotiate your salary because that’s the only way you’ll bring in more money without having to do any more work! However, if your employer can’t pay you more right now, the next best thing is to start a side hustle. A side hustle is a small part-time job or hobby that increases your cash flow for only a few hours of your time each week. This can be anything from picking up a couple of weekend shifts at a local café, to making something to sell on Etsy. Even earning as little as an extra $50 per week – that’s $2,600 per year! — can have a transformative effect on your finances.
Procrastinating the most important tasks
If you’re in your 20’s or 30’s, retirement might seem too far away to worry about. Many young people say they’ll start saving for their big financial goals once their student loans are paid off, or they’re earning a higher income. In fact, more than 1/3 of Canadians under the age of 44 say they will worry about saving and investing in the future when they have more financial resources. 49% of Canadians don’t know how much they need to save for retirement. A financial planner can help you crunch the numbers.
Saving now, even if it’s a small amount, is better than trying to save later. This is because when it comes to getting started saving and investing, the habit is more important than the amount. Getting into the habit of setting money aside now will help you save later because you’ll be used to allocating a portion of your paycheque to the future. Even if you can only set aside $25 or $50 per month now, do it, and then increase this amount on a quarterly or annual basis.
The second reason it’s so important to save sooner rather than later is your money is worth more now than it ever will be again. If you’re in your 20’s or 30’s, your savings and investments will have decades to compound. Every $1 invested in your 20’s can be worth as much as $7 by retirement. If you’re in your 30’s, this drops to $4. Wait until your 40’s or 50’s to start saving, and you’ll have to save much, much more thank you would have had to set aside if you’d started earlier.
Trying to tackle everything at once
Getting your finances in order can seem to be an overwhelmingly long list of tasks: make a budget, pay off debt, start investing, and so on.
29% of Canadians say they feel overwhelmed with financial options. But contrary to how you might feel, you don’t need to learn how to do it all at the same time. Instead, focus on tackling just one thing and mastering it before you move on to the next. Depending on where you are in your financial journey, this can be anything from getting your credit report, so you know exactly how much debt you have, to calculating how much you need to set aside each payday to reach your dreams of home ownership or early retirement.
Whatever your goals, sitting down with a qualified financial planner can help. The FPSC Find a Planner tool can help you find a professional financial planner who will help you create an individualized financial plan to help you manage your money now, and meet your financial goals later.
Seeing past your financial blind spots might be easier than you think, especially when you have another pair of eyes!
This post was sponsored by the Financial Planning Standards Council. The views and opinions expressed in this blog, however, are purely my own.
