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Number 1----Be Organized
Being organized is also the Key to Budgeting.
Know what:
- your debts are,
- the interest rates are on your debts,
- types of credit you have
- your monthly net income is
- your monthly expenses are
Number 2----Max Out Your RRSP'S
Max out your RRSP contributions every year, especially if you have carryforward contribution room. Maxing out your RRSP contributions could net you a significant income tax return and therefore a significant return on your investment in a short period of time.
The refund realized from the RRSP contributions could be used for any number of things:
- make a lump sum payment on your mortgage.
- use the funds to start an emergency fund, or
- pay off some of your credit cards, overdraft, payday loan or lines of credit.
Number 3----Start a Savings Plan
Begin an automatic type of savings plan as soon as possible. Consider having a certain amount of money deducted from your pay cheque on a regular basis. There are a number of ways this could be accomplished.
If your employer offers:
- Canada Savings Bonds, you could purchase a set dollar amount to be deducted from your pay on a regular basis. The Canada Savings Bonds could be used for Christmas shopping, emergencies, unexpected expenses, etc.
- RRSP contributions, especially if the employer offers to match your contributions by a certain percentage. Contributing 4% of your earnings matched by 4% from your employer means you could have saved 8% of your income right off the top every month without ever realizing or missing those extra dollars.
Pay yourself first:
- the first 10% of your pay should be put in a savings vehicle where the money is not easily accesible to you unless you really need it.
- put this money away yourself on a regular basis or
- set it up with your savings institution to do it for you every time your pay is deposited to your bank account.
Number 4----Educate Your Children About Money
- Teach your children the value of money.
- Begin at a very early age.
- Children learn their parents financial habits by watching what their parents do.
Even though as parents we may not realize that our kids are picking up our habits, they are!
As parents we should teach them the very best money habits that we can. If children learn to manage money at a young age they become naturals at handling money and will continue this trait throughout their lives and handling money successfully will be a lifestyle choice well into adulthood.
Young people should be taught the value of saving from the age of six or so, and really concentrate on young teens when they start to make their own money from chores, babysitting or part time jobs.
When our kids were younger we made them put half of everything they earned into their savings account. We felt that because we supported our kids and paid for everything they needed, that when they were spending money it was for things they wanted and therefore wasn't required spending.
We didn't want our kids to get the idea that they could just blow whatever amount of money they wanted to. By the time our kids were twenty one years of age, they had at least five thousand dollars in their bank accounts. Our son used his money to buy a car and our daughter is using her money to help pay for school.
Number 5----Make More than Minimum Payments on Your Debts!
If you want to be debt free sooner you must make more than the minimum required payments on your debts. The best investment in your financial future is a repaid debt. If your paying interest on your debts every dollar you pay off now is a dollar saved in future finance charges.
Some of the following methods can be used to make more than the minimum or required payments:
- By making mortgage payments bi-weekly instead of monthly you could shave several years off the life of your mortgage. If you make lump sum payments on your mortgage at least once a year of at least $1000, you will save thousands of dollars in interest and be debt free several years earlier. The $1000 is called a principal payment which means this amount comes directly off the principal of your debt rather than going to interest. In the early years of a mortgage this $1000 can actually save you six to eight mortgage payments. Because it takes several payments in the early stages of a mortgage to reduce the principal by $1000, because most of the mortgage payment goes to interest in those early years.
- use vacation pay or income tax refunds to pay off debts, or to make lump sum payments on debt.
- If you are earning less than 3% on savings vehicles and you owe money on credit cards, overdraft, lines of credit or payday loans you should use your savings to pay off your debts. Once debts are paid then start saving again.
Be Prepared Financially by being balanced in everything you do!
If you require assistance to implement the Top 5 Money Tips for 2007 contact A Step Beyond.ca. An experienced credit and debt counsellor is available to help you achieve your financial goals.
