Budget Sense

2013 is almost here and it is time to think about your finances for the new year and how to ensure they are in their best shape ever. With these simple steps and checklist, you can make it your best year ever. Most of these are things we have talked about extensively in the past, but we now put it in one clear unified list:

1-Start saving money: don’t delay! You have to start this from Day 1 and not miss a day. If you don’t already have a savings account, ensure you open one immediately to take advantage of the compound interested. If you live in Canada, ensure it is a TFSA account, which allows you to save up to $5,500 a year, with all interest earned being tax free.  And speaking of saving money, ensure you pay yourself first when getting paid at work.And last but not least, don’t forget to open up and contribute to an RRSP (or other retirement saving programs) which will help with your retirement as well as for tax sheltering purposes.

2-Have a Piggy Bank: yes, a piggy bank or any jar where you can save your coins and even bills. You may be asking yourself why you need a piggy bank if you already have a real saving account at the bank? Well, as per our previous advise , the more sources of savings you have, the more money you will accumulate. It is as simple as that. So having a piggy bank, in addition to your real saving account, will help you save more money. Throw in any spare change you don’t need in there. In fact, occasionally, you will have $5 or $10 bills that you don’t need to spend, why not throw these in there too? On Dec 31 or so of 2013, you get to open the jar and enjoy all this money for a vacation, a big purchase or just add it to your bank savings.

3-Review all your bills and subscriptions: go over all your monthly, bi-monthly, quarterly and other subscriptions you pay for on a regular basis.  This includes your home and auto insurance. See what can you downgrade (cable TV?) or even cancel (newspaper delivery?) Chances are, there will be things that you no longer need and can cancel. This will save you money monthly.  Since it is a new year, you want to start fresh with everything and this would be the ideal time to do this.

4-Review your budget: related to the previous step, go over your budget and review it in full. Is there anything that needs to change? Is there any item that can be downgraded, with the resulting money going towards your savings? If you can manage to find even $10 of saving a month from your budget, you have done a good job!

5-Think about your taxes for the new year: if your work situation was such that you had to pay back to the government when filing your income tax last year, you need to do something about it this year. Instead of paying the government more than you already have, why not take some steps to ensure you don’t or even get something back? While the scope of this article can’t cover what does or doesn’t qualify as an income-tax eligible expense, there are some basic ones that should be on everyone’s list. These include RRSPs, charitable donations, medical expenses etc. Ensure you have all of these in one envelope and label them with the appropriate year (2012, 2013 etc.) When income tax filing season is here, you will be ready.

Following the above steps will ensure you stay afloat financially in 2013 and have money to save, spend and enjoy.

Start planning now while you still have some hours left in 2012!

A lot of us prefer to buy-and receive-gift cards this Christmas season than real gifts. They are good for a variety of reasons. They save time, give the receiver the option to spend it on things they like and more.  But when buying a gift card for friends and family this Christmas season, or for any occasion, try to get one that allows them to get services rather than goods. This will help the local economy rather than sending your money abroad to China and other far places.

Allow me to explain this further. If you are buying a gift for the young ones in your family (children under 10 or so) you will most likely get them toys, or even electronics, right? While that may be fine, why not get them a gift card for an experience or a service  instead of goods? This will help your local economy directly. While buying toys, for example, will most likely benefit a country like China, where the toy was most likely manufactured there. Sure, other local industries may benefit as well, but it will still have to be split. With a service or experience, most of the money will likely stay and be spent here. For example, you can buy your nephew a gift card to a local soccer camp. Or how about a season pass to your local theme park?

This is not to suggest that you shouldn’t buy any toys for your little ones, but some form of balance has to be achieved, if at all possible.  In my family for example, I noticed almost everyone bought my 2.5 year old nephew toys. Lots of toys. I was probably the only one who gave his parents a cash gift. He already has literally hundreds and hundreds of toys and he gets bored with any toy in a matter of few hours, if not minutes. Imagine if this money spent on toys, was instead used as a financial certificate for a future college education or even to get him into special sports, swimming or other activity schools. In other words, giving him a gift card for an experience will benefit him as well as the local economy, and creating many jobs in the process. Not to mention what these experiences will do to help shape him and help in his maturity and mental conditioning etc.

Same with gifts for your adult friends and family members. Instead of buying them electronics which they probably already have, why not buy them a gift card to a spa, tickets to watch a local sports team, or even a restaurant? All these three examples would directly help your local economy, and by extension, the national economy.

Imagine if at least half of us did this, the spin-off jobs and money it would create for the local and national economy would be huge. And imagine if we did this everyday, when buying gift cards for birthdays and other occasions. This would add billions to the local economy, rather than sending a lot of this money overseas.

So for your 7 year old daughter’s next birthday, get her a gift certificate to a local swimming or camp. And for your father? Get him a GYM membership, it will help his health as well as help the local economy.