alison griffiths articles
Alison's Money Rule
Posted November 28, 2011
Originally Published May 18, 2010
When you’re financially paralyzed start small to build confidence.
Last week family indebtedness in Canada hit a historic high. No wonder I’m getting so many letters from those paralyzed about their financial situation. Whether the problem is being house poor, a layoff, overspending or too little money chasing too many expenses the result is often paralysis, the inability to do anything to improve your situation.
If this is you, stage a break out by starting small. Look for minor spending items you can either reduce or eliminate. Success at a micro level will breed confidence to really shatter financial paralysis.
Some easy targets are the daily java jolt, snacks and lunch. Just the other day I listened to two women in a downtown elevator moaning about their credit card debt while they were each carrying giant specialty drinks and a pastry. Small stuff perhaps but over time they pack a financial punch. Chopping just $3.50 a day adds up to nearly $1300 a year in savings. It won’t pay off the federal debt but it’s still a sizable sum.
Depending on your marginal tax rate, you need to earn anywhere from $1800 to over $2500 to put that $1300 in your pocket.
Reinforce your success by stashing the daily savings in a piggy, jar or sock and plunk it on an outstanding debt every week. Remember, start small, build confidence and bigger things will follow. Once a saving behavior has been cemented you are well on your way to combating financial paralysis.
The next step is to aim for something bigger. Summer is coming, why not axe the gym membership? Do your own nails. Chop extra services on your cell or land line. Reduce your television package. Check your insurance policies -- you may be paying too much.
I just did all of this and the savings amounted to nearly $300 a month. Very little pain and lots of gain -- $3420 annually (I have to earn $5000 to pocket that.) If I put it in my RRSP the savings impact grows.
Take heart. Baby steps are all you need to eliminate financial paralysis.
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- How to avoid the RRSP deadline
- Should you contribute to an RRSP?
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