Financial Literacy Month (MNP 3 Minute Debt Break)

November is Financial Literacy Month in Canada. This is the month where Canadians strive to become more literate, more mindful and more in control of their finances. One of the main causes of financial difficulty is lack of control over the use of credit and the debts that result from the misuse or overextension of credit. In order to avoid using credit, you have to take active steps to manage your money, by developing a realistic working budget. Think of your budget as a spending plan, rather than as a mechanism that imposes limitations on your spending or deprives you of a certain lifestyle.

There are a few basic steps to follow to develop your spending plan.

First, set some realistic goals that are short, medium and long. Goal setting allows you to determine how to make your goals a reality and how to adjust your monthly living expenses in order to achieve these goals. 

Then, track your income and expenses. Start by writing down and adding up all sources of household income and the amounts that you receive each month. Tracking your expenses will be more difficult than tracking your income. There are different ways to track your monthly expenses like keeping receipts, recording expenses in a notebook and reviewing your bank statements. You can estimate these amounts by calculating how much you spend for each category each year, and then dividing this amount by twelve to determine the monthly amount spent on these types of expenses.

Then, develop your budget. Take a look at the monthly expenses you tracked and decide which expense are needs and which of your monthly expenses are wants. Once you have reviewed the amounts you spend each month, create an improved version that reflects your financial goals and monthly expenses. It is important to be realistic though. 

Now that you know what your monthly expenses are and when you need to pay for them, you will want to come up with a system for you to manage your budget. It’s helpful to get into some good habits like reviewing your bank statements every month. Arrange automatic withdrawals for bill payments, to avoid late charges and interest. Use equalized payment options for utility accounts to avoid seasonal fluctuations. And set up monthly payments for annual or irregular expenses like property taxes or insurance.  

Learning to stick to your budget gets easier the more you stick with it. If you track your expenses and make changes where you need to, you will form good habits. If paying off your debts is one of your financial goals this November, contact your local MNP advisor today to learn how to achieve this goal. A Licensed Insolvency Trustee will be able to give you advice on how to defeat debt and live debt free!

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