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  2. Steps for Effective Personal Finance Management and Planning

Steps for Effective Personal Finance Planning and Management

For some people, personal finance management is a passionate hobby, while for others it’s a daunting chore. Either way, personal financial planning – including budgeting, tracking your spending, and saving – is crucial if you want to get out of debt and reach your financial goals.

So what’s required in good personal finance management? These 8 steps are the building blocks to healthy money management.

1. Set Your Top Financial Goals

Identifying a strategized financial plan is key – this step helps you understand the purpose of the subsequent steps and provides you with direction when it comes to your money. Do you want to save up for a family holiday next summer? Are you hoping to get out of debt so you can focus wholeheartedly on a down payment for a house? Do you want to set aside 10% of your income starting now to work on your retirement nest egg?

These are examples of short-term, medium-term, and long-term financial goals. Aim to set one from each category, but if longer term goals seem like an intimidating commitment, that’s okay too. Instead, think of the near future: My goal is to save $1,000 this year for my retirement. Breaking enormous goals into smaller chunks (and smaller amounts of money) makes them much more palatable.

Financial management lightbulb.

With these goals in hand, you’ll be motivated to budget, automate your savings, and stay away from debt. After that, you can more easily take on bigger plans for your financial future like retirement savings, an emergency fund, and investment accounts.

2. Make Sure Your Goals are SMART

Be your own financial planner and Set SMART financial goals – specific, measurable, attainable, realistic, and timely – to set yourself up for success. An important part of goal setting is also coming up with a list of potential obstacles and ways to overcome them. By creating your contingency plan right from the get-go, you won’t stumble and falter when life gets in the way of your plans.

3. Get Into the Habit of Budgeting

Ask any personal finance aficionado what they do to take care of their personal finances, and budgeting will be a prime example of what they do steadfastly. Your budget – designed by you – dictates how much you can spend each month based on your income. When you’re sticking to a carefully constructed budget plan, you will have what you need and won’t be tempted to use credit to spend beyond your means.

What is a Budget?

If you’re building a budget from scratch, start with all of the income you generate each month – this is how much you have to work with. On the other end of the equation are all of your expenses. Your expenses can be categorized into fixed (rent, bills, transportation) and variable expenses (groceries, eating out, shopping, entertainment). If you’re dealing with debt, you need to ensure that debt repayment is factored into your expenses. Savings, maybe your most important expense, is also considered an expense when building a budget and working toward financial stability.

4. Track Your Spending

This step of tracking your spending goes hand in hand with budgeting – if you aren’t watching where your money goes each month, you’ll have no idea if you’re adhering to your budget or blowing through it.

Most people aren’t genuinely aware of how much they spend on groceries, shopping, or other miscellaneous expenses each month. Tracking your spending could be an incredibly eye-opening experience that could shift the way you spend your money. For example, you could learn that you spend over $300 each month on meals during the work week. The sticker shock of this may lead you to pack your lunch twice a week.

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Thankfully, there are hundreds of smartphone apps and tools tied to Canadian financial institutions that remove the grunt work (just be wary of giving an app access to your bank account; it may violate your banking agreement). These apps will track, categorize, and show you precisely where your money is going each month. Some can even spit out warnings, or tell you where you need to cut back on spending. If you prefer it too, you can stick to the traditional pen and paper method or an Excel spreadsheet.

Budgeting, Tracking, and Expense Management Tools for Free Download

5. Get Out of Debt, and Stay Out of Debt

Don’t feel like you can’t adopt great personal finance habits simply because you’re in debt. Look at the world of personal finance bloggers and you’ll stumble upon many who have either pulled themselves out of massive amounts of debt or are currently doing so.

But a key tactic is focusing on avoiding debt. This means paying off your debts. Many people start with the account with the highest interest rate, others start with the smallest debt, however all agree that you must stash away the credit card to avoid accumulating more.

Getting out of debt and managing debt will give you peace of mind and as you’re chipping away with debt repayment, the stress will alleviate too.

How to Get Out of Debt and Stay Out of Debt

6. Automate Your Savings and Your Payments

Model students of personal finance with a well rounded financial plan always do two things: they never miss a payment, and they always pay themselves first. They do this without even thinking each month by automating these money management activities. When possible, schedule your future bill payments so that you’re at least making the minimum payment on your accounts. This will help to protect your credit score. Also set reminders before bills are due to ensure you’ve got the money for automatic withdrawals.

Pay yourself first by moving some cash into your savings accounts on payday. Automating this step means you won’t even notice that the money is missing, but you’ve done yourself a favour by adding to your savings pot.

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7. Look for Hidden Opportunities to Lower Your Spending and Increase Monthly Cash Flow

Masters of personal finance tend to be gurus at redeeming credit card reward points for free travel, getting cash back on their gas and groceries, and other hacks that save them money in the long run and increase their cash flow.

When possible, maximize what’s available to you to keep your costs down in your financial plan. This could include flipping through flyers to take note of sales at the grocery store, or taking stock of all of your outstanding rewards points, gift cards, and other vouchers to pay for anything from hotel stays to coffees and nights out at the movie theatre.

Another creative habit of personal finance fans is setting themselves challenges, such as packing their lunches for a week, forgoing delivery and take out for a month, to extreme challenges, like outright shopping bans for no-spend challenges. While this is drastic, you could take inventory again of what you own and decide that a wise decision would be to stop yourself from buying certain items you already have an abundance of.

8. Work With an Advisor and Don’t Be Afraid to Ask for Help With Debt

Whether you’re rich or poor, money isn’t easy to manage and you might need help with debt. Depending on your personal financial goals, there are a number of personal finance professionals who can help you in any number of ways, including better financial education – licensed debt counsellors, certified financial planners (CFPs), accountants, insurance agents, and even some bankers. You might be looking to invest and have questions around how to maximize growth in your savings. Or you might be in debt and unsure of where to start. Then give us a call, chat with us online, or send us an email. We have professional Credit Counsellors who can provide you with help via free, confidential appointments that have no hidden fees, fine print, or strings attached. Isn’t it time you made a plan to manage your personal finances better?

Need expert help?

Looking to get back on track?

Get started today by making an appointment to speak with one of our credit counsellors. We’re happy to answer your questions and help you. All of our appointments are free, confidential, and non-judgmental.

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  1. Peter Grant Welch

    It was helpful

  2. Charles Kabanda

    Very educative, very insightful


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