Take feelings out of finance
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It’s a tough job telling people to take the emotion out of finances, but that is exactly what Ladysmith financial planner, Michael Furlot CSA, recommends people do.
“Any decision made from a position of emotion usually doesn’t have the desired outcome,” he said.
He also told me people are better off financially than they realize.
I guess a lot of people, not just me, give themselves too much grief over their finances too.
The first step with creating a budget is remembering that, like healthy eating plans, it’s often more effective and easier to stay on track if things aren’t so rigid.
“Budgeting to me is not mapping out a prescribed set of numbers. It’s more of a continuous awareness,” Furlot said.
Creating an exact plan can leave people feeling frustrated and unhappy, which isn’t the purpose of a budget.
Instead, Furlot suggests making gradual cutbacks, and zapping hidden costs of living.
A visit to a financial planner begins with a general discussion about a customer’s fears and goals, which they should show up wanting to discuss openly.
Then, a planner looks at a person’s portfolio and creates a balance sheet, as well as a cash flow chart. For visual learners, these are helpful ways to demonstrate money’s path, but aren’t necessarily considered a concrete spending plan.
Common reasons to visit a financial planner are fears of paying off a mortgage, saving for retirement, paying off personal loans, and making up lost income due to illness or unexpected deaths in the family.
The average person may not know how to make the proper investments, which is also where a financial planner can help out.
Furlot said he acts like a coach, informing customers and providing them with a plan to address their greatest financial fear overall, and their three primary financial goals at the same time.
Once Furlot began talking about ways to create savings, I panicked because I don’t feel I’m in a position to save. I have student loans. I have an unreliable car. But Furlot’s advice came as a relief.
He said one thing for people with credit card debt to keep in mind is to pay it off before thinking about saving. Sure, I could be investing into an RRSP at the same time as paying off a high interest rate Visa, but in the end, the high interest rate negates my savings by continuing to climb.
People in a position to save, who are just starting a plan, should do so gradually.
Furlot said savings should come from making small changes rather than drastic percentages every payday.
For example, a savings of 10 per cent can feel like a huge chunk taken from the first pay cheque. Instead, Furlot said sometimes we need to put ourselves in front of the line. If we can take two hours once a week and hypothetically pocket those earnings, savings add up gradually and are easier to adjust to instead of taking a lump sum from each paycheque.
It’s partly about outlooks. Small changes in lifestyles will by necessary to achieve these savings, like renting less movies or dining out less, but Furlot recommends splurging every now and then too.
Spending $100 on dinner and drinks may seem decadent and lean more towards the ‘want’ category rather than the ‘need’ when one is trying to save, he said, but every once in a while, treating oneself can be considered a need, whereas daily frivolous spending on wining and dining drains accounts fast.
I used to think I should cut back on my spending so I’d save more, but now I’m going to cut back so I can pay down my debt, then save even faster.
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