Managing Your Money

Inevitably, the New Year arrives and we make resolutions or commitments to do something differently, to change for the better, to take control of something. “I will lose weight/get healthy/exercise more/stop smoking/save more/spend less/get organized/etc…”  It’s all well and good to make resolutions and commitments, but don’t count on one heartfelt promise to solve all your concerns.

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The beginning of the year is often the time where I have clients who excitedly want to update their financial plans, with ambitious savings or retirement goals. Last year, I had clients come in and decide to knock off three years from their retirement plan. They were committed to tighten their belts and aggressively increase their savings in order to get on the early-retirement bandwagon of travel & leisure. Though I pushed for details of how they were going to manage this in their day-to-day lives, and expressed my concern that it didn’t seem entirely realistic without adjustments to their lifestyle, they insisted we push forward with their dreams of “retirement freedom”, as they were “absolutely committed to spend less, and save more”. Sure enough, by June, after their over-spent summer vacation, they asked me to reduce their savings and withdraw funds to cover the balance that had accumulated on their line of credit.  They made a big ambitious commitment, but didn’t follow through by changing any of their small daily spending habits.

It’s easy to make big resolutions as we start the New Year. But it’s more likely the small, everyday choices we make that will determine the success or failure of those resolutions, the ones that we don’t think really matter much. Think about your everyday choices and habits. Are you conscious and aware of the small decisions that you are making on a daily basis? Are they leading you towards or away from your bigger goals or commitments?  When you do make a “bad” choice, is it an isolated decision or a trend? I believe it all comes down to being more conscious and mindful of the little decisions we make.

While this idea can apply to anything from being kinder, to being more mindful, or losing weight, let’s take a look at it from a financial point of view. Take for example the small daily choices we are often not even conscious of, and if we are, seem somewhat irrelevant in the moment. Paying a $1 bank fee to withdraw money from an ATM or e-transfer money. Paying $3 extra in parking fees to park a block closer to your destination. Incurring a $5-10 shipping fee that you could avoid by waiting until you need more items, that would then qualify for free shipping. Buying an item at regular price because you want it NOW, when you know it regularly goes on sale. Picking up a $10 lunch out, because you didn’t pack a lunch from home. Stopping for a $5 latte every day or two, when you can get a $2 regular coffee, or even better, a free coffee at work or at home. I could go on and on. Independently, if these decisions are isolated decision, they will have little or no impact on your financial life.  But put together, on a daily basis they will add up quickly, build on each other and create your bigger financial picture.

Many people don’t even recognize their small daily decisions, because they have become unconscious habits.  Becoming present to your choices and building an awareness of your decisions is one of the most important steps to achieving success. And this applies to everything in our day-to-day lives. The most financially successful people I know have a tremendous awareness of their spending.  I’m not saying that they won’t spend the extra $3 for a closer parking, but they are consciously aware that they are doing it, and it may likely be an isolated choice. I know a family who are multi-millionaires who won’t let their children order soft drinks in a restaurant because there is so little financial value in them. Agreed there’s little nutritional value either, but wasteful pennies is what’s on the forefront of their thinking.

The healthiest, fittest people I know think along the same lines. They have a tremendous awareness of what they put in their bodies. They may eat junk food on occasion, but that becomes an isolated choice rather than an everyday decision that adds up. When the everyday food habits are healthy and nutritious, there is little impact or guilt surrounding the occasional treat. And the same applies to spending.

I often compare financial management to weight management. Both can be broken down to very simple formulas:

  • Income less spending = either savings or debt
  • Calories consumed less calories burned = weight loss or gain

Simple, yes. Easy, no. It takes a great deal of commitment, awareness, and planning to be successful at achieving goals. The clearer you can see your goals and the big picture, the more impact your regular, small, seemingly insignificant decisions will have. Working on awareness and being conscious of these decisions is the first step to changing habits. A journal is a great way to develop awareness, and make you more aware of habits and seeing your pitfalls. New Year…new approach!  All the best to you in the New Year!

Important Note:
Alison Lush, Professional Organizer, and I will be presenting some workshops together, with tips and tricks for living an organized life, both financially and otherwise. These events will be in early 2017 (dates TBD).  Please contact us at 514-981-5796 to receive a complimentary invitation to these workshops.

Lynn MacNeil, F.PL. Vice President, Investment Advisor, is a Financial Planner with Richardson GMP Limited in Montreal, with over 20 years of experience working with retirees and pre-retirees. For a private financial consultation, or more information on this topic or on any other investment or financial matter, please contact Lynn MacNeil at 514.981.5795 or [email protected].

The opinions expressed in this article are the opinions of Lynn MacNeil and readers should not assume they reflect the opinions or recommendations of Richardson GMP Ltd. or its affiliates. The comments contained herein are general in nature and are not intended to be, nor should be construed to be, legal or tax advice to any particular individual. Accordingly, individuals should consult their own legal or tax advisors for advice with respect to the tax consequences to them, having regard to their own particular circumstances. Richardson GMP Limited, Member Canadian Investor Protection Fund.

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