Building your Financial
Success
With Alain Aube
Financial Rewards
Yes, you can
take a debt-free holiday!
You're enjoying life on the world's most beautiful beach, sipping a
lip-smacking libation and thinking happy thoughts - when an ominous
black cloud gathers on your mental horizon. In just a few more idyllic
days, your dream vacation will be over and you'll be heading home to
face a storm of holiday debt.
Wouldn't it be great to take a worry-free and debt-free vacation? Well,
you can - and all it takes is a little self-discipline and a realistic
budget. Whether it's part of your vacation-savings strategy or your
overall financial plan, a budget is the essential element in your
debt-defeating success - so here are a few common-sense ideas for
establishing a budget that you can live with.
Get your priorities in order: Your objective is to create a budget that
will free up cash for short-term financial needs and generate sufficient
funds to invest for your longer-term wealth-health. A good starting
point: Make a list of your more immediate goals (that dream vacation,
for instance) and your 'life' goals (things like buying a home, having a
family, enjoying a comfortable retirement) and organize them in order of
their importance to you.
Get your finances in order: There are plenty of personal finance
computer software programs that can make budgeting as easy as clicking a
mouse, but you can always grab a pencil and a piece of paper - and away
you go:
• Calculate your monthly income. List all the components of your income
in one column and the appropriate dollar amounts in a second column.
Include salary, overtime, bonuses, commission, pension income,
investment income (from stocks, bonds, rental real estate, alimony and
child support) - then subtract income tax.
• Calculate your monthly expenses. Gather receipts, check bank
statements or your chequebook, as well as credit card statements and any
other expense records. In one column, list the sources of your expenses
(include everything you can think of: mortgage or rent payments,
property taxes, utilities, loan payments, private health insurance, car
lease payments, car insurance, parking fees, public transportation, dry
cleaning, gifts, clothing, groceries, child care, restaurant meals,
charitable donations, life insurance, entertainment, and any money you
put aside for savings or investments, such as RSP contributions). In a
second column, record the amounts of your spending - then average your
expenses over three or four months to account for expenses that don't
occur each month.
• Total the amounts of your income and expenses. Then subtract your
expenses from your income. What's left over is the amount you have extra
to save or invest.
• Fine-tune your budget. If you don't have much left over each month (or
maybe nothing at all) you'll need to adjust your spending. And, even if
you're happy with what you see, you can still use your budget to reduce
spending and increase your savings and investments. So, make one more
column and write down what you really want to spend in each category.
But, be realistic - some expenses are fixed and can't be reduced, and if
you cut too much in other areas, you'll never be able to stick to your
plan.
• Be flexible. Check your budget and financial performance every few
months. If you're doing well, look for ways to do better; if you're not
meeting your objectives, figure out why and take steps to correct the
situation.
When you develop a solid budget strategy - and stick to it - you'll more
likely have all the money you need to pay for your dream vacation in
advance and to fulfill all your life dreams. A financial advisor can
help you put together the right budget for you and give you an even
better chance of achieving all your financial goals.
