By Anita Jean
This year "Blue Monday" will fall on January 26, 2015. Blue Monday has been assigned the title of the most depressing day of the year. Several factors contribute to this honour. The days are short, the weather is cold, you have likely failed your New Year's resolutions, and now you have to face the results of your holiday spending as the credit card bills roll in. Are you in this credit card bill situation? You are not alone. Our collective debt level is reaching new heights. According to a recent report by Statistics Canada, Canadians owed approximately $1.63 for every dollar of disposable income they had. We are talking the about the average family owing one and a half time what they earn after taxes are removed. Ouch!
When you feel financial hardships, it is difficult to maintain good health, both mentally and physically. If you live at or below the poverty line, the situation is more acute. Where is your money going? If you want to improve your financial health, no matter your level of income, track your spending. Keep a notebook where you write all your expenses, no matter how small. Note daily spending as you go or when you get home. Tracking sheets can be found downloaded via the internet and mobile tools. Track spending for a few months and tally by category on a monthly basis. For example, keep track for three months, add all of the months then divide by three. This gives you an average of your spending. By keeping track of your expenses, you are likely to spend less. This does require some discipline.
You can also figure out your personal "burn rate". For example, if you go to the coffee shop daily before work and you find that you spend $40 per month, if you go Monday to Friday, 5 days per week, or 20 days per month, your personal burn rate is $2 per work day. Make coffee at home and use a travel mug and you will save over $400 per year. Make coffee every 2nd day and you will save over $200 per year. You can apply this concept to anything.
When you know where your money is going, you can decide where it will go. This is called planned spending or a budget. A budget is not always necessary but will help you decide where your money goes. Two methods to manage your money:
- Top"Down Method: where you put savings aside and pay the bigger bills such as mortgage or rent, vehicle payments, utilities and bills. You can spend what is left over is spent without tracking expenses.
- Bottoms"Up Method: you figure all fixed expenses, such as mortgage or rent, utilities and other regular bills such as insurance. You then deduct that amount from your regular income. For the rest of the items which vary each month, such as food, going out, gas, etc., you allocate a budget and you monitor expenses as they are incurred using the tracking sheets.
Some people will keep money in separate envelopes or jars for each category and will not exceed the allocated amount. You likely will need to experiment with several techniques to find what will work for you.
The key is to not spend more than you make, and put some money aside in savings, even the smallest amount will help. An emergency fund should also be part of your financial health. No emergency fund? What about those points you accumulate through loyalty programs? If the finances are tight one month, use up your points for gas, groceries, etc. A quick search at your library or on the internet will generate tons of resources to help you improve you financial health.
Anita Jean is Manager of Health and Social Programs at the NorWest Community Health Centres.
Feel Better, Live Longer, Be Happier