Managing Finances & Smart Investments
Take Charge of your Finances
Isn’t it funny how students are taught to play the recorder in school but are never taught about money management, a skill we use daily from the moment you make your first dollar from chores? A positive relationship with money is an essential part of living a happy life in the 21st-century. With national credit awareness day next month there’s no better time to start discussing how managing finances can help you live a full life and get you into the home of your dreams.
Budgeting & Goal Setting
A budget is not just for the Type A personality. A budget is like planning a road to your dream destination and organizing the means to build it. So how do you make a budget?
Step one: calculate your income. Calculate yearly income and you’re necessary living expenses. This includes rent or mortgage, car insurance, groceries, home insurance, health insurance, or any other necessity to live a healthy life.
Step two: track your spending. Figure out how much you’re spending on necessities and wants. Wants are items or services that are not mandatory to living a healthy life. For example dining out, a daily coffee habit, aesthetic services, and recreational activities.
Step Three: set goals. What are your long term and short term financial goals? Short-term goals are less than a year and long term goals a year or more. A short term goal could be paying off credit card debt, paying off remaining student loans, or paying off the remaining mortgage. Long term goals can be saving for a home, saving for education, or saving for retirement. When setting your goals consider your priorities and set your goals around them.
Step four: make a plan. Now that you know how much of your spending is necessary and have mapped out goals you can figure out what unnecessary spending can be eliminated to reach your goals. Subtract your monthly necessary expenses from your monthly net income to figure out how much you have left each month. Depending on how much you want to save, or how quickly you want to pay off debt, figure out how much per month you need to set aside to reach your goal by your allotted time period.
The plan and budget you create may require you to adjust your lifestyle and potentially may require you to break some habits, like that morning coffee run. Before purchasing anything ask yourself if this item or service will still be providing the same amount of happiness and fulfillment in a few months. Ask yourself if the purchase is worth taking away from your long-term goal. Ultimately, It’s okay to treat yourself every now and then but it’s important to have a balance to enjoy the present and still be set for the future.
Smart consumerism also means letting your money work for you through investments. Buying a home puts your money to work. As property value increases your investment often grows into more than you spent initially. Real Estate is an inclusive and relatively safe investment opportunity. If you work with a Realtor you don’t need extensive knowledge of the market. Your Realtor will help guide your purchase and will be able to provide you with the market knowledge to make the best investment.
Real Estate is also a great opportunity for parents to financially assist their children’s future with this small initial investment. We’ve had clients that bought land for their young kids knowing that it was extremely likely the value would increase. The profit of a sale when their kids became adults gave their children’s funds to continue Real Estate investments. We’d be more than happy to share our market knowledge with you to direct you to the smartest investments. Give us a call – 587 229 7108.
Tune in next month when we dive deeper into smart consumerism and credit.