Me and My Money

Dad wants daughter to play the market...

Posted November 25, 2011
Originally Published June 10, 2010

Q: I have been working at the same job for four years. During that time I have not saved a cent and am living pay cheque to pay cheque.

My monthly take home is $1600. I have no idea where the money goes, I know I spend a lot on groceries, but other than that, couldn’t tell you. I tried opening a savings account, but I always kept transferring into my chequing. I’m always dipping into my overdraft.

I want to get real about saving and my future. My father’s suggestion is to at least have $1,000.00 in my chequing then maybe look into playing the stock market. SB

A: With all due respect to your dear Dad I think the suggestion about playing the stock market would be about as useful to your un-thrifty self as advising you to use gasoline to put out a fire. And of course it would be great to have $1000 in your bank account, but first things first.

Job One and Two are to answer your own question, “Where does the money go?” and to set up a savings plan you can stick to.

Right now you are financially adrift with no control over your money which is clearly eating away at you and giving you a sense of failure. Not only that but when one lacks financial direction it becomes very difficult to set life goals, let alone chart a path to achieve them.

So, let’s begin at the beginning. Credit Canada has an excellent tracker booklet which you can download at http://www.creditcanada.com/documents/BudgetTracker.pdf. Print it out or use it as a basis to create your own. I want you to track everything you spend for a full month. And I mean everything -- from a loonie in the parking meter to a snack on the way to work or a drink with friends afterward.

Imagine me hovering at your shoulder as you dip into a garage sale and score a paperback for a quarter. Write it down!

Add your purchases and bill payments up every week and then total them for the month. (Take a look at your credit and debit card statements to see if you missed anything.) If the sum is more than your net pay then you have to start cutting back but at least you have something to work with.

Next step is to create a blueprint for your future spending -- aka a budget. Go to my website, alisongriffiths.ca, and download the budget template in the Tools tab. Start filling it in by referencing your month of tracking but start with your fixed costs -- rent, utilities, transit pass etc.

Don’t fill in variable expenses such as groceries, clothes and entertainment just yet. But do add in a savings amount as a fixed cost. Start with something manageable, say $100. Whatever is left over is what you have to spend for the month -- and no more.

Next, kindle your savings by opening a Tax Free Savings Account and an RRSP at your bank. Do not attach the TFSA to your on-line banking to prevent your sticky fingers from transferring funds when you are short.

Take your savings amount and set up two automatic debits -- half going into your TFSA and half into your RRSP. Don’t worry about investing (forget playing the market!) just yet, the goal is to get the money out of your chequing and into savings thus setting a savings pattern that is self re-enforcing.

Oh yes, remove your overdraft from your account. It is no safety net for you, rather it is enabling you to overspend. The first bounced cheque or declined debit purchase will wake you up to the fact that you must live within your means.

You’ve got lots to do. Report back to me in two months to update your progress. Good luck!

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