Money Management Tactics for You and Your Family
Money management is important to be successful at paying your bills, saving for the future, being prepared for unexpected expenses, and planning a positive financial future for your children. To have a bright financial future, it is important to have a plan in place to achieve your financial goals.
Society, as it is today, seems to think that people are born knowing how to manage money, as it is not necessarily taught to us by our parents, not covered in the school curriculum and is a basic skill that we require to achieve our personal and familial financial goals.
The first step is to get organized. By being organized, we mean acquiring the tools of your trade. You will need a file box, file folders, labels and a felt pen. These are the tools that you will use to save all your receipts and file them under your appropriate item list in your budget. Name one file folder “Unrecorded Receipts”. Here is where you will put every receipt that you receive and once a week, you will go through it and sort the receipts into their appropriate folder. A basic list of folders would be “Income”, “Bank Information”, “Family Entertainment”, “Rainy Day Fund”, “Regular Bills” (includes utilities, internet, phone and cable), “Income Tax”, “Home” (includes rent or mortgage, house taxes, other property taxes, home maintenance) ”, “Household Expenses” (include groceries, other household expenses, clothing, and family allowances”, “Insurance” (includes life, disability, health, critical illness, home and car) “Vehicles” (includes gas, automobile maintenance, and leases), “Credit Products” (includes credit cards, lines of credit, and loans), “Retirement and Investment Accounts” (includes RRSP, RIF, a tax-free savings account, and your investment portfolio), “Warranties”, “Wills and Estates”, “Legal Documents”, “Two ‘bills’ folders – one labelled ‘Bills 1-15’ and the other labelled ‘Bills 16-31”. This folder system can also be set up virtually on your computer, and you can scan in your receipts for future reference. Just make sure that you make a backup of your information, so you don’t lose it if your computer goes down.
Once you have your folders labelled, sort through your receipts and bills and organize your paperwork into the files listed above. Then, once a week go through your bills, insert in folders, pay those that must be paid before the next week, and keep everything in one place so it is all at the tip of your fingers the next time you sit down to update your budget. Once a year, go through your files and shred old bills and receipts that are no longer needed for budgeting or income tax purposes. This time is also a good time to access your online banking and print off your bank statements from 6 years ago, and retain them, as Revenue Canada requires you to retain 7 years’ worth of records, in case they audit you.
Create a spreadsheet, excel has household budget spreadsheets that you can utilize to project your annual household budget. Once a month enter your receipts and payments in your spreadsheet, so you always have a handle on where you are at in your financial goals.
What do you want to save for? Write it down, how much it will cost to purchase, and how much will you put away every month to achieve that goal?
Next, set three realistic financial goals that you want to achieve. For example, one of your goals might be to take a family vacation. Figure out how much a vacation. Take the total and divide it by how many paychecks you have in a year. This is how much you will set aside each payday to pay for that goal of a family vacation.
If you keep all your receipts and review them once a week, you will have a better idea of where your money is going and what specifically you are spending it on. If you don’t want to keep the physical copy of the receipt, then make sure you take a picture of it with your phone or scan it into your computer. This will also, allow you to get a handle on where you are overspending and look for ways to reduce what you are spending on that item line in your budget.
If you are a visual person, you can even get play money and put it into envelopes labelled like your file folders. Then, every month, you divide the play money up amongst the envelopes and as you pay for things throughout the month, you remove the amount from its selected envelop and file or scan your receipt. At the end of the month, you count out the money and you know how much you have left to either put in savings or invest.
This same technique will work for your kids as well. If you don’t want them carrying real cash, you can give them their play money in an envelope, and every time they want to purchase something, you can either put it on your credit card or debit card and get them to give you the equivalent in play money. In this way, they will become more conscious of how they are spending their money and realize that it is not a bottomless supply. Plus, they will think about their purchases in a more realistic manner and weigh the pros and cons of making a purchase before they spend their money.
If you struggle with creating your own household budget, K Liu Accounting Services can help you to set up an annual household budget, so you can manage your money effectively and successfully. To book your appointment with one of our Financial Specialists, contact us at Contact Us | K Liu Accounting Services Inc.