Confidence From Preparation

Many calculations, victory, few calculations, no victory, then how much less so when no calculations? – Sun-tzu, The Art of War

People take time to plan days or weeks ahead for a party, and even months for a wedding. Yet, it only takes 15 minutes to plan a budget for the upcoming 2 weeks. Who has 15 minutes every other week to plan their finances? Who has time to review their personal financial situation 5 minutes per day? Taking the time to prepare in such a fashion is easy and extremely helpful, yet how many of us have the foresight to turn budgeting into a daily habit?

I am Andrew McNab, a Personal Finance Coach. I help high-income people with poor spending habits make better financial decisions. Over my 4 years in the Financial Industry, I have helped literally hundreds of people make budgeting plans and build their financial confidence levels, everyone from high school students to those in the prime of their career. People succeed more when they prepare, so the reason I am writing this article today is to help people understand just how critical budgeting is to being financially confident, and in turn financially free. On my birthday in the middle of this past month, I spoke with grade 12 students at Sir Wilfrid Laurier Collegiate. They each built an image of how they saw themselves living their lives one year in the future. First they visualized the kinds of situation they saw themselves in, like going to school, living on their own, working etc. and the quality of life they would have. Then, using sample figures for expense categories such as rent, groceries and transportation, the students put a dollar amount to their projected lifestyles in today’s dollars. Many students were shocked at how much living expenses actually cost. All the students agreed the exercise was valuable because even though they had often thought about life in the future, they had never translated their dreams into quantified expenses.

Many young people feel pressured when asked what they want to do with their lives. In fact, according to the Canadian National Survey on Economic and Financial Capability by the Canadian Foundation for Economic Education (November 2008), Canadians aged 18-34 are the most likely to report low levels of financial confidence (15%). If you don’t know exactly how much money you want to make, someone else will eventually decide for you. How many Canadians aged 18-34 are planning their finances every 1-2 weeks?

When we have no idea what we want we settle for anything. Many people live their lives like driving by looking in the rearview mirror. When you know how much your desired expenses are every 2 weeks, including setting aside for savings and investments, you have a clear, quantified image of yourself in the future that you can work towards. How do you how do you achieve greater certainty in your financial future? Make a plan!

Financial Tips

5 Quick Budgeting Tips

1. Review your personal finances every day. Ask yourself, is this plan still right for me?
2. Pay yourself first. Put 10% of your paycheck into an account you don’t touch before you pay anything else.
3. Separate your money into different categories using jars or envelopes for the different expenses you plan for. It is much harder emotionally to spend money out of a jar marked “rent” than it is to swipe a debit card.
4. Plan the upcoming week’s expenses at least 72 hours in advance
5. Leave your debit card at home and carry the money you need with you. If you need extra cash, pay with your credit card and pay off the debt from your emergency fund the same day.

Formula for success!

1) Know what you want.
2) Find a Coach
3) Meticulous Planning, Massive Action
4) Change your action plan depending on what works and what doesn’t