Parents: How to Win at Finances in 5 Easy Steps

Parenthood is a magical stage of life: expenses appear out of thin air, and money vanishes before your very eyes. But with a few simple tricks up your sleeve, you can really run the show. Some expenses are not necessary whether you are a high- or low-income earner, and there are always steps you can take to lessen your burden and stretch your dollars farther. Here are five easy ways to get started:

1. Create a budget. Don’t just estimate what you need; check your banking and credit card statements and draw up a realistic monthly plan. Debt, food, and children are three big expense areas, with families sometimes even borrowing money to fund children’s activities. The average Canadian family can easily reduce many of their expenses by 10 – 25% by doing things like consolidating debt, meal planning, and cutting back on extras. That’s a lot of money that could go somewhere proactive, such as paying off high-interest loans, or contributing to savings and investments.

2. Keep track of where the money goes. Write it down, or use a budgeting app to record and categorise your spending, so you know when you’re nearing your limit. If you’re a compulsive credit card user, try using cash so you can see exactly how much you’re spending.

3. Find a financial mentor/coach. A Certified Financial Planner (CFP) can make a difference because of their objectivity. Finances are a sore spot for many families/couples, and a mediator can help you learn to discuss money in a calm, rational way. Plus, they have the experience and knowledge to help you achieve success.

4. Set up strategic savings accounts—not just for retirement, but for short-term goals too, like emergencies and travel. A TFSA (tax free savings account) or two would be ideal, and an automatic monthly deposit from your chequing account is easiest to implement.

5. Be a “conscious” spender. Every dollar matters, and whether it’s coming in or going out, it all adds up. Determine what your most frequent small purchases are (your daily coffee at Tim Hortons, for example), and look for ways you can plan ahead to save money (yep, that might mean investing in a coffee thermos!).

Many Canadians focus on achieving a higher income but neglect to really consider their expenses. Whether you’re a high- or lower-income family, the way you manage your expenses can really make a difference. Financial stress can be damaging on a family and is one of the major reasons relationships break up. Money management takes some planning, but it pays dividends in more ways than one.

Personal Finance Quotient (PFQ)

This questionnaire can help you better understand your own financial strengths and weaknesses. Take a minute to complete it—be honest with yourself!

Budgeting

Yes (  ) No (  ) Have you completed a budget in the last 5 years?

Yes (  ) No (  ) Do you know approximately how much “free money” you can spend each week?

Yes (  ) No (  ) Do you usually have extra money at the end of the month?

Yes (  ) No (  ) If you were going on a trip, would you set aside money leading up to the trip?

Yes (  ) No (  ) Do you usually pay for gift shopping by credit card and not pay off the balance at the end of the month?

Savings

Yes (  ) No (  ) Do you set aside money regularly for either short or long term savings?

Yes (  ) No (  ) Have you considered investing or have you invested in the stock market fund or actual stocks or real estate?

Yes (  ) No (  ) Would you agree that you understand compound vs simple interest as it applies to long term savings?

Yes (  ) No (  ) Do you understand the difference between a savings account at your bank and an investment account?

Saver (  ) Spender (  ) Generally, do you consider yourself a saver or a spender?

Debt

Yes (  ) No (  ) Do you pay your credit card balance off each month?

Yes (  ) No (  ) Do you usually pay just the minimum monthly payment on the credit card(s)?

Yes (  ) No (  ) Do you know what interest rate your loan and/or credit card is?

Yes (  ) No (  ) Do you know the difference between bad debt and good debt and have some understanding of the impact that either can have on your long term plan?

Yes (  ) No (  ) Have you ever reached out to someone to better understand debt management?

Overall

Yes (  ) No (  ) Have you checked your credit rating in the last three years?

Yes (  ) No (  ) If you are in a relationship, have you discussed short and long term personal finance issues?

Yes (  ) No (  ) In a few moments, could you come up with two or more financial goals?

True (  ) False (  ) It is always smarter to buy a home rather than rent.

Yes (  ) No (  ) Could you quickly come up with some ideas how to reduce expenses and do you use any of them?

The more answers you chose on the left side, the higher your quotient!

Money stress is hard on parents, but remember, you’re not alone. Discuss the results of your quiz with a Certified Financial Planner. They can help you make sure you’re getting the most out of your money right now, and draw up a plan that will allow you to save for the future.

Doug Wright

Doug Wright

Doug Wright is a financial planner and educator. He runs his own financial planning company, Wiltshire Financial Management Inc. in Halifax, Nova Scotia. He has written two personal finance books, No More Yoyos, A Story of a Personal Financial Turnaround as well as The Financial Playbook for Parents. Contact Doug at doug@wiltshirefinancial.ca or 902-404-8410