Subtitle – The proven method to manage your finances with excellence.

In this blog you are going to learn how to manage your finances so you can build a solid foundation for wealth. Financial management and financial stewardship is a topic often accompanied by a feeling of apprehension. There are many people who are high income earners but do not know how to properly steward their finances. We can earn a lot of money, have a beautiful car, dress well, have a beautiful life but truthfully, still have those credit cards, personal loans, student loans, car payments, etc. Everyone sees us on the outside and thinks we are supposedly doing well but underneath if we peel back the curtain on our finances, we are not in a good place. Here are 10 money management tips to get you started and provide a thorough review on elements affecting your finances.

Tip #1. Create an emergency fund.

If you don’t have an emergency fund yet (or realizing that yours isn’t big enough), this should be your starting point. It’s time to start saving and here’s how: start with a $1000 emergency fund. You may feel like, “oh, the money is always going to be coming in,” but life happens to everyone and you need to make sure that you have emergency funds and savings so that when things happen you are prepared. Once you reach this goal, you should aim for a total of at least 3 to 6 months of your living expenses fully funded with an emergency fund.

Tip #2. Pay off debt. Aggressively!!

Set a timeframe and work backwards. Use what Dave Ramsey from the Ramsey show calls the “Snowball method”. Start with the smallest amount and attack the remaining amount. When you make a plan, stick to the plan and work the plan. Be faithful and allow God to show you how. While doing this exercise, remember what the Bible says in Proverbs 22:7- 9; “the rich rules over the poor, and the borrower is the slave of the lender.”

Tip #3. Have a weekly instead of monthly budget.

Whatever stage you are in, doing a budget is so necessary. You have to get very clear on where you stand with your finances and if its not a habit, write it on your calendar until it becomes a habit. It will take about 15 min to just see where the money has been going all week. This is the stage where you are able to get very clear and identify what is happening with your money.

Tip #4. Cut your expenses.

Subscriptions you are not using such as amazon prime, netflix, audible, amazon video, phone storage. Vendors that keep billing you, subscriptions to bookstore, monthly music subscriptions etc. Go through your statement balance and see if you know where all your money is going. Make sure you are not being overcharged for specific things.

Tip #5. Be intentional about creating multiple streams of income.

If you have a secure job, excellent. If you are in a job you love, excellent. But you should consider the idea of having another source of income. You want to be always saying, “how can I create more income for my household so I can earn more” to expedite your debt payoff or if you are out of debt, to invest more.

Tip #6. Utilize the JARS Money Management System to split your income up into five different bucket (accounts) or actual jars

6.1. The first jar will be called Tithing. Nothing in my possession is mine, God owns it all. I’m God’s money manager. In this first jar or bucket we put 10% of our total income and it goes to your local church, you give to God first.

6.2. Then comes the second Jar called Investments. This Jar represents YOU in the future, all your future aspirations, your family’s future needs, you’re inheritance – this is your legacy jar! In this jar, we will put 10% to 20% of the total income.

6.3. The third bucket is called Emergency fund. As previously explained, in this jar you are saving for all emergency events that will (not could) occur. a car needs repair, a pipe in your house broke, a kid is sick, a bill you didn’t plan for etc. When that unfortunate event occurs, you will not take money from your investments, rather you will use this Emergency fund to cover those expenses. So, in this jar, we are going to put 10% of your total income. For example; $100 of the total $1000 goes here. Once your goal of 3 to 6 months of living expenses is reached. The rest should go towards the Investments jar equalling 20% of your total income.

6.4. The Fourth jar will be called Necessities (mortgage or rent payment, groceries, school fees, electricity bills, etc.). All the everyday things you need for living. Not what you want, but what you really need!! In this bucket or jar, we will put (60%) of the total income. Using the previous example; that’s $600 of the total $1000 income will go
towards the Necessities jar, to cover all the monthly expenses that I mentioned.

6.5. Then we will finish with the fifth bucket. This is a jar that a lot of people love. It is called Entertainment and fun jar. We will allocate 10% of the total income in this jar.

Tip #7. Watch and build your credit score

Your credit score is crucial to your financial health, but many people don’t understand it, and the scoring system can be confusing. Ignoring your credit score could result in a low score that causes denial of credit cards, a mortgage,
apartment rentals and higher interest rates for loans that you are approved for etc.

How is my Credit Score Calculated?

There are five or six major factors that go into the calculation when it comes to your credit score:

Factor 1: Monthly payments – Make on-time payments:

This step is the most important factor in your credit score, accounting for 35% of the score. With a monthly payment date pay the full payment balance before the due date to stay in good standing and also to avoid interest.

Factor 2: Keep a low credit utilization (credit balance):

The ‘amount owed’ factor accounts for about 30% of your credit score. Your credit utilization is calculated by taking your total credit card balances and dividing it by your total credit limits.

Factor 3: Build a long credit history:

The length of your credit history accounts for 15% of your credit score. It takes time to build a solid credit history, so start as soon as possible. Keep old credit accounts open and in good standing to show a long credit history. A longer credit history demonstrates to lenders that you are a responsible borrower who can manage credit over time.

Factor 4: Limit new credit inquiries:

The new credit factor accounts for about 10% of your credit score. Each time you apply for new credit, it results in a hard inquiry on your credit report, which can negatively impact your score. Limit new credit inquiries
as much as possible by only applying for credit when necessary and spacing out your applications.

Factor 5: Maintain a healthy credit mix:

The credit mix factor accounts for 10% of your credit score. A healthy credit mix includes a combination of different types of credit. For example: mortgage payment, car payment, credit card payment etc. Having a mix of credit shows that you can handle different types of credit and is a good sign for lenders. Instalment loans (student loans, mortgages and car loans) show that you can pay back borrowed money consistently over time. Meanwhile, credit cards (revolving debt) show that you can take out varying amounts of money every month and manage your personal cash flow to pay it back.

Factor 6: Your public records:

Broadly speaking, public records refer to all legal and government matters in relation to credit reports, such as Collections reports, Bankruptcies, Consumer Proposals & Debt Management Programs, etc.

Tip #8. Managing your finances in your peak seasons will determine how hard the valleys will be.

If you are going to deal with our finances in the right way, you have to be proactive. You have to be someone who thinks ahead, you are thinking of the future and you want to make sure that the decisions you are making
now are really with your future in mind. Focus on what will serve you long term. If you manage your peak seasons with excellence, your valleys will hit differently. When you are at a peak financially, that’s not the time to buy
everything.

Tip #9. Take Advantage of Free Money

You don’t want to overlook what assets are available to you. If your employer offers a Retirement Savings plan (RRSP matching plan), you should absolutely take advantage of the benefit. It’s free money. Another place to look is your health insurance plan. Are you paying for glasses or contacts out-of-pocket when some of those costs are covered through your plan? Maybe your job offers a discounted gym membership. Take advantage of all the benefits your job offers; you might save some serious cash.

Tip #10. Automate your savings.

You know the monthly amount you decided to put into savings? Go ahead and set it up to transfer into your savings account automatically from your pay check. That way, you won’t even think about sending it on a detour from your
checking account to buy concert tickets, store sales or whatever other temptation might come your way each month. That money has a job: going into savings. So help yourself by sending it straight there! In summary: income alone will never create wealth. In order to become a good money manager, you will need to live below your means, reduce your expenses, know what expense do you say ‘yes’ to and prioritize debt freedom. There are a lot of different philosophies but at the end of the day, if you live debt free and don’t owe anybody anything you will be able to invest in an abundance of things because your money is no longer going in paying off things you own.