Posted by Robert on April 29, 2013
I dropped my son off to play at a friend’s house today, and their family was in the throes of spring cleaning. We’ve been outside starting to clean up the yard. I don’t know what it is about springtime, but it seems to be the time to clean up and start fresh. So, in line with my focus on money, I’m spring cleaning my finances.
Net Worth and Cash Flow. Every three months, I calculate my net worth and my cash flow. I have a look at money earned (income, revenue) and money spent (debt payment, bills, spending) and make sure that we’re spending less than we’re earning. I just did that at the end of March. I also like to see if there’s room for planned one-time spending, such as a vacation. As long as we have more money coming in than going out, our net worth should be increasing. Unfortunately, fluctuations in investment values make it hard to tell sometimes. It also makes sense to look at the investments and make sure they’re still the best choices.
Recurring Bills. When coming income to expenses, there’s not always much room for cutting back. But it’s helpful to check recurring bills such as the phone bill, the heat and electricity, the water and any other utilities or services and ensure they aren’t increasing over time and that they’re still providing value for money. Not long ago, we cut back on our phone bill and increased our internet speed. We still pay about the same each month, but we’re happier with this level of service.
Taxes. This is practically a dirty word, especially in the spring. To be truthful, even getting a refund isn’t a good thing. That means you overpaid the government throughout the year, extending them an interest-free loan. The government gets annoyed if you owe more than $2000 at tax time, and will set up tax instalments for you. But you should get annoyed if you get a refund larger than $2000, and complete a form T1213 to reduce tax deductions at source. Another potential cause is if you receive a bonus that is fully taxed, instead of having it paid into an RRSP.
Charitable Contributions. Our family donates a certain percentage of our income each year to charity. At tax time, I calculate all of our income from investments and reconcile the amount that we have already donated against our goal. We can then plan what charities we want to support in the upcoming year.
Summer Vacation. The end of a long, cold, dark winter is a great time to plan for a summer vacation. As long as we’re spending less than we earn, our net worth is increasing on track, our taxes are paid and our finances are in order, we like to plan what we’ll do during the summer holidays. It takes money and planning, but in varying proportions. Sometimes it’s just an overnight camping trip, others could by more elaborate and costly. But I find that if we plan ahead, we can have a good time and control the costs.
When do you take time to look at the big picture? What areas do you find have room for “cleaning up”?