Financial awesomeness

We live in a day and age when the majority of people live paycheque to paycheque and are under constant pressure of money issues. According to a recent poll by The Canadian Payroll Association, more than half of polled Canadian employees would find it difficult to meet their financial obligations if their paycheques were delayed by a single week. For younger people it’s even higher – 63 per cent of people between ages 18 to 30 report living paycheque to paycheque.

What’s better? Personally, I think you can reach a point when money doesn’t worry you on everyday basis. It doesn’t mean you have all the money in the world and don’t have to work! It simply means that your financial side of life is under control and you are always prepared. I call it “financial awesomeness”.

Here are few steps I think will get us (and anybody else for that matter) to financial awesomeness:

1. Simplifying your finances

Simplifying finances means doing a complete overhaul of your finances by nuking them and rebuilding from scratch with the sole purpose of making them as simple as possible and as transparent as possible. An average couple today has two chequing accounts, seven credit cards, three saving accounts, and three loans. How can anyone effectively keep track of all those? It’s impossible!

 

2. Positive cash flow (aka Living on Less Than You Make)

Nobody likes budgeting. For most people budgets never work because it takes a very high level of discipline to stick to one, almost to the level of obsession. If you’re married, it’s even harder as you have to set the budget together, agree to it, and make sure both of you avoid overspending in any of the categories. It gets even harder if you didn’t follow step #1 and your financial system is still a mess with multiple checking and credit accounts.

Instead, I would recommend tracking your spending and making sure you simply spend less than you make. Forget about setting budgets for lunches and gas for the month, just make sure you are not spending more than you make. Your paycheques should always be greater than your expenses!

 

3. Pay off all your consumer debt and never borrow again

Once we’ve simplified our financial life and achieved positive cashflow, it was time to put that extra cashflow to work. This is when we’ve started paying off our debts.

Here’s a sad fact – your debt makes your bank richer and yourself poorer. All debt costs you money that you voluntarily hand over to your bank in a form of interest just for the privilege of being in debt. If you buy a car, you pay interest. If you have a balance on your credit card, you pay interest. If you have a line of credit, you also pay interest. Newsflash – achieving financial awesomeness is tough if you keep paying interest.

 

Do you want to become financially awesome but not sure where to start? Learn from my bumpy experience and simply follow the steps I’ve mapped out for myself. Hopefully they will help you as well.

Visit the full version of this story with all the steps explained at http://snip.ly/RS31

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.