New Year, New Money
The term “dumpster fire” gets thrown around a lot these days, but 2016 really earned it. We lost Prince and Bowie (and Leonard and Carrie and Sharon and The Champ), got stuck with Trump, and had to sit through Dirty Grandpa. It was a seriously rough 12 months.
We all found our coping mechanisms. I took up bouldering, home-brewing, and collecting $30 brown lipsticks that made me look like Elaine Benes. I also spent a small fortune making sure our family Christmas was the best ever because we deserved it, and next year’s wasn’t exactly guaranteed.
Or maybe you’re like Caitlin Burns, 26 year-old ex-bakery employee in Toronto, who in 2016, “tried to bandage emotional issues with geographical changes and material acquisitions.”
“I took out a credit card with a limit greater than my emotional bandwidth and bought flights, skin treatments, and clothing,” admits Burns. “I tried to ground myself by crashing around capitalism and it didn’t work and now I don’t have anywhere to put all of these things, literally or figuratively. In 2017 I hope to curb my mania and find some kind of rhythm, peace and a payment plan.”
It’s OK if this all seems very relatable. You’re among friends here, and 2017 is another opportunity to #liveyourbestlife. Here are some tips on how to recover from your 2016 money mistakes and set up a 2017 strategy that will keep you flush, no matter what the new year throws at you.
Read your credit card statement like it’s a chest x-ray
“I’m sure my credit is terrible, but I don’t check it because I don’t want to know,” says Darcy Streitenfeld, a 30 year-old freelance writer and PR professional. “In 2016, I just lived my life and tried not to worry so much about it. No one can afford a house or a car anyways. So I thought, why should it matter?”
It may not be pretty, but eventually you’re going to need to take a long, hard look at yourself (and your credit score). Read over your credit card statement so you know exactly how much you’ve spent over the last month, and check the balances on any student loans or lines of credit. Sure, you’re probably feeling guilty and just want to avoid responsibility entirely, but this isn’t the type of hangover you can wait out. Really, it’ll only get worse. Rip off the bandage and get to work.
Keep your financial resolution simple
A survey from Fidelity Investments found that 51 percent of people who said they’d make saving a priority in January reported feeling better about their financial situation by the end of 2016.
“In 2017, I hope to make more, and reign in impulse purchases,” says Streitenfeld, “because sometimes I can spend a lot more money than I need to. Just being aware in general of how I spend my money is definitely the resolution.”
It’s easier to stick to goals that are simple, so I suggest memorizing the “rule of thirds” for serious saving power. Here’s how it works: Start by setting up a budget that includes all your sources of income and your absolute necessities like rent, internet, groceries, etc. Subtract these fixed costs from your paycheque, and then divide the money that’s left over into equal groups of three.
Your first third is going to cover the past — i.e any debts you’ve been working on. You’ll crush them in no time if you stick to this rate of payment.
Your second third goes to the fun part (the present). Spend this money on clothes, your Netflix subscription, and maybe even a trip away from the frozen Canadian tundra to sunny Cabo.
Finally, the last third goes to the future. Put this money into your TFSA, RRSP, and other savings accounts, then invest it in a strong, diversified portfolio. Clueless about how to do this? Check out our beginner’s guide to investing and definitions of the most common investment lingo.