With soaring inflation and interest rates on the rise, many Canadians are concerned about their day-to-day cash flow. When looking at your personal finances remember it is not just about the math; your emotions, psychology and behavior play a significant role in how you manage your money. 

Controlling your cash flow will help reduce stress and allow you

to enjoy life; regardless of what economic policy they throw at us next.

Here are six steps to help you stay on track

First; calculate your net monthly income. Avoid using your gross monthly income because some of this money will automatically be deducted for taxes, EI, CPP and investment contributions. Furthermore, don’t include bonuses, tax refunds and investment gains, these will vary; best to plan to use this extra cash to pay off debt or plan for a special event.

Calculate fixed expenses. Car payments, rent or mortgage payments, utilities, insurance, and other fixed costs should be separated from your discretionary spending. Make your financial goals (e.g. monthly RRSP contributions) part of your fixed expenses and continue to pay yourself first.

Strike a balance between Needs and Wants. Dining out, travel, gifts, clothing etc. are all discretionary spending and where you can look to start cutting back. The key is balance. A little fun occasionally is important and will help you stay on track, just be aware of what you are spending and try not to use credit to fund your social life.

Be Aware of your Spending. Credit and Debt cards have made it easy to forget how much we spend on unnecessary items. Keeping track of how much you are spending will give you a new appreciation for your hard-earned money. Review your spending habits regularly and try to cut down where you can without being too restrictive.

Have an Emergency Fund. Planning for a rainy day will help you stay out of debt. Unforeseen expenses like car repairs or a new roof can set you back. By saving a little each month in a separate account you will have the cash available to cover these unexpected expenses.

Set financial goals. Knowing how much money you are bringing in and where it is all going is just the first step in financial planning. Where do you want to be in 5-10-20 years from now? Having a clear picture of what you want your future to look like, will help you stay on track and curb your unnecessary spending.

If you are looking for something more tailored to your individual spending habits give me a call, we can review your situation and develop a personalized Cash Flow Plan.

Have a great week,

Tracey

Source: Original article by Centum One Financial, The Money Finder, MT08-06-2015, 09-13-17BNN Bloomberg.ca MT 2019-01-23,2022-06-17

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