Yesterday was a snowy day at my house. On top of that, it was daylight savings, so I had an extra hour. I spent most of the day reading in my warm, cozy house. (If anyone is interested, I chose Turn the Ship Around, by L. David Marquet, which I greatly enjoyed.) I don’t read as much as I used to, mostly because I’ve been busy with other projects. But when I do read, I often discover or formulate new (to me) ideas that I could apply to my finances.
My new motto is: Instead of reacting to things that happen to me, I will make things happen.
Instead of reacting to unforeseen costs or unplanned spending, I will plan ahead to have more than enough for the monthly basics, knowing that unexpected costs seem to come up regularly, even if they come from varying sources. In my budget, I only plan uses for about 90% of my income, leaving the other 10% as a cushion for use as needed. If the money isn’t used, I allow it to accumulate, since surprises are sometimes large (eg. repairing a car, replacing a refrigerator, etc.). After about six months, however, I’ll deposit the money into an account where it is easily accessible, such as a savings account at the bank or in a TFSA.
Instead of reacting to the market, I will plan ahead and stick to my investment plan. When the market is up, I buy. When the market is down, I buy. Each month, I invest my savings in the market, knowing that it will rarely work out to be the perfect time to invest, but it’s better than not investing at all, or guessing wrong with one big deposit. Sometimes, it’s possible to see that the market is uncharacteristically low (eg. spring 2009), but that doesn’t mean that a recovery is imminent. I invested a relatively large deposit in 2009, and it has helped, but not as much as having an automatic, monthly investment plan in place.
Instead of reacting to taxes, fees and other leakages, I will create a financial plan and follow it. I was fortunate to be trained as a financial advisor. Some of the things I planned (and did) to reduce taxes, fees and future costs were: make regular RRSP deposits, direct a large portion of my RRSP deposits to my wife’s spousal RRSP, set up and fund TFSAs for each of us, set up an RESP for the children, write of interest on investment loans and claim charitable donation and education tax credits on the higher tax bill (mine). Working with a financial planner may not help your investments perform better, but there can be great benefits from organizing your finances in the most efficient way.
A lot of time and energy can be expended reacting to issues as they arise. Mistakes can also happen. Instead of reacting, taking control, looking ahead with a plan and putting the plan into action helped me to be relaxed about my money, knowing that I was well prepared and getting the greatest benefit possible. What aspect of your finances do you need to take more control over? What purpose or goal are you trying to achieve with your money?