Real Recovery Requires New Financial Planning

With 2010 in full swing, Canada is beginning to feel a greater sense of confidence in the nation’s economic situation. Well on the path to recovery, the nation now inhabits citizens who are planning their financial futures with a bit more scrutiny than year or so ago. In today’s edition of The Toronto Sun, P.J. Harston advises people to be cautious with their personal finances this year.

Harston suggests that playing it safe is probably the best bet informing us that there is no need to get overly worried or overly confident just yet. Budgeting should be at the top of everyone’s to do list. Improving your budgeting is the key to ensuring that you don’t overspend or find yourself in more debt.

“If you fail to plan, you plan to fail,” he reminds us. Harston insists that each of your financial decisions should be realistic. Make sure to devote the appropriate amount of funds to each of your important priorities. Proper budgeting is perhaps the most important task to accomplish if you want to ensure your finances are in good shape.

He writes: “If you fail to budget enough — or properly — you won’t have money to tuck into your RRSP; you won’t have money to put into a tax-free savings account; you can forget about investing in savings bonds and the stock market. You’ll end up shorting yourself with nobody else to blame.”

The second most important task involves reducing your debt. To do so, Harston suggests that you learn to stop spending money that you don’t have. And while this seems like common sense, many Canadians find themselves in debt simply because they put purchases on their credit cards that they are unable to pay off in full.

As a result, they find themselves paying off high balances that accrue high interest charges that seemingly never disappear no matter how many payments are made towards them. One suggestion is to apply for a “zero-interest, pay-as-you-go credit cards that you pre-load with cash and you can only use as much money as you load on to it.”

Acknowledging that having a credit card can still be very beneficial, he notes that with this type of account, one can still make hotel reservations, book a car rental or buy items online without the risk of spending money that you don’t actually have.

The moral of the story: Make it a mission of yours to carry as little debt as possible. Says Harston: “The less debt you carry — and here’s hoping you have no credit-card debt — the better off you are and you’ll continue to be moving forward in this recovering economy.”