Getting Financially Fit in 2013

Since everyone is running around making resolutions about getting out of debt/saving more/buying a large item or trip I thought I would help out by doing a post on getting a grip on your financials. I am hardly an expert in money, but my only debt is my mortgage so I have to think I am not a complete idiot when it comes to money- right?

Let's start off 2013 with the proper footing!

1. Order your credit report
In Canada, you can order your credit report for free through Transamerica or Equifax. Getting this report might seem pointless if you don't have debt or know all of your debt, but it is actually important because sometimes companies make errors and something on your report might not be correct (and could haunt you when you are trying to get credit for something!)

I found this presentation on understanding your credit score and credit report by the government very helpful!

If you want your credit score instantly online, it will cost you. However you can order a copy for free by mail by calling either company. You just need to answer a few automatic questions over the phone (to verify your identity) and you are done!

2. Calculate your savings/debt repayment
You actually need to sit down and crunch out your numbers. Take your after-tax income and subtract any fixed expenses. What you are left with is the money for savings, debt repayment, and fun. This is money you can work with for achieving your dreams!  If you are saving for something big, break down the cost per month and see if it is manageable. Same goes for debt, but take into account interest because your debt will be growing! If you don't have enough money for what you want to do, you may have to cut back on fun, reevaluate why your fixed expenses are so high, or make more money. Don't cut back on savings or debt repayment!

3. Automate it
They always say you should pay yourself first and it really is true! 25% of my income automatically goes to different accounts (RRSP, TFSAs, savings etc) and then I don't touch it except for in rare instances like a big trip...or when I bought my condo. It wasn't always 25%. Work on a budget and see what you can manage. ANYTHING is better than nothing! If an emergency arises, you don't want to have to reach for a credit card.

4. Review your spending from the previous year
With my bank, I can download a spreadsheet of all transactions. You can use this information to sort where your money is going. It might open your eyes to where all your money is going (especially in cash!)

5. Change your mindset
A lot of people suffer from FMO- Fear of Missing Out. They don't turn down any plans because they afraid of missing something fun. I totally fall into that camp and have even been known to get out of bed to join a friend at a club (For which she still owes me!!). However I think you just need to be more flexible. If a friend calls asking you out to dinner, try changing the venue. Ask if you can go to a cheaper restaurant or perhaps if she would like to come over for dinner with you. If you like to go out dancing on weekends, try arranging a pre-drinking BYOB party at your place and then only bringing a small amount of cash to the bar afterwards to buy drinks.

6. Check your TFSA and RRSP limits for 2013
You have a maximum amount you can deposit into these accounts before incurring taxable consequences. Plus with the TFSA the limit doesn't reset until the following year (for example, if you put in the max $5000 in Jan and then take it out in June, you cannot put that $5000 again until the following year).

7. Ask for a raise
This one might seem like a pipe dream, but if you are working hard at your job and feel you deserve a raise, there really is no harm. The worst your boss can say is "no", and usually there will be a reason for that "no" that is outside of your control. The best tactic for this is to book some time with your boss and explain the projects you are working on, the extra time, how hard you work, etc and ask if there would be room in their budget to consider increasing your salary. Sometimes your boss might not even realize what you have been doing and you may be planting the seed in their brain for a raise or bonus.

Funny story- right after I bought my condo, I thought to myself "it would be a lot easier to pay my mortgage if I made more money" (crazy logic- I know). So I followed my own advice and approached my boss for a raise. Right after I asked she said that it was quite the coincidence because just that morning she had received approval for a raise she already wanted to give me!

8. Call companies you pay money to and try to lower your payments
This can include calling your internet/phone/cable company and negotiating a better deal. For credit cards, you can call and try to get your interest rates lowered. In both cases the companies might push back or say what they are offering is the "best they can do". Stick your ground until you get what you want. The cable company wants your business and the credit card company wants their money. They WILL work with you.

9. Purge
I don't know why people always go for Spring Cleaning. I think the new year is actually the best time to purge your old stuff. You can sell stuff online, have a garage sale (if your climate is nice- if not, box up until the spring and then sell), or donate to a good cause. Use the money from this purge (if available) and put it towards your financial goal. Even if you don't make money, purging helps you inventory your belongings, which will help you stop wasting money on things you don't need

10. Plan and Reward!
Any goal is just a dream until you have a plan! You need to work out where your money will be going this year and why. To keep yourself motivated, set rewards for various checkpoints in your journey. It does not need to cost money- even just pampering yourself at home or taking a couple of days off for a stay-cation can be rewards!

Good luck in your goals this year!!