Personal finance strategy: a checklist

It is January and many people are trying to implement good financial habits. If you are just getting started on your personal finance plan and are wondering what you should do, or if you are further along your journey and are looking for what else you could do to help out your finances, then look no further. Here is a list of all the tactics and habits we deploy on the daily to support our personal finance strategy. 

(It is a lot of information? I prepared a summarized checklist that you can download and use for your own purposes.)

Disclaimer: I am not a finance professional and none of that blog content should be considered as being financial advice. This is simply what my family and I do / aim to do.

Basics of our intentional personal finance strategy

1- Build a safety net

1. Have an emergency fund equivalent of 3-6 months of your expenses readily available in case you need it. It can help cover major and unforeseen breakdowns in your home or support you until you get back on your feet in the unfortunate event you loose your job.
2. Keep your emergency fund on a high interest savings account (HISA). Most brick-and-mortar banks would give a very low interest on their savings accounts but there are plenty of online options where you could earn 2% to 3.5% interest. If you need help in picking a HISA, I recommend you check this great post from Jessica Moorhouse, she has a lot of amazing resources that works for Canada.

2- Tackle any high-interest debts

Prior to saving and once you have a big enough emergency nest egg built up, you should tackle any high-interest debts (such as credit cards debts). Wondering if your car payments or your mortgage should be considered high-interest debts? If the interest applied to your debt is higher that the typical 7-10% return you could assume when investing in index funds, then it is a high-interest debt and you want to get rid of it before doing anything else.

3- Saving & Investing

If you don’t have high-interest debts (yay!), then you can continue your personal finance journey with the following:

How much to save

Target to save about 20% of your net income, or as much as you are comfortable with.

Place the money on registered savings accounts – not your regular savings or HISA account

1. Max out RRSPs and TFSAs. If there is some kind of limit contribution going on, you can be sure these accounts are worth it. There may be some interest in keeping some RRSP contribution room for later years based on your current earning power but to keep it simple, I think it is best to aim for maxing it out. Feel free to do otherwise if you are further along in your financial process. 
2. If your employer has a pension plan or RRSP benefits, they may be matching your own contribution up to a certain %. Make sure you are making the maximum contribution that will get you the maximum match from your employer: don’t leave any money on the table. Open a RRSP directly with your employer to contribute from your gross pay.
3. If relevant to your situation, open a RESP for your child and ensure you collect the yearly maximal government contribution by adding a sufficient amount to the account. Based on your personal situation, you may not want or need a RESP (Registered Education Savings Plan) and that is fine.

Got savings, got registered accounts, what is next?

1. Invest in Index funds, picking ETF following the S&P 500 and build yourself a balanced portfolio. There is no need to try to pick individual stocks to beat the market. Keep it simple.
2. Use a robot advisor broker platform. Once you learn enough about investing, you should be comfortable doing self-directed investment so you can avoid paying for non-value added advisor fees. I personally use Questrade. 

4- Create a budget and stick to it

You don’t have to be very intense about it. However, you should have a decent idea of:

• Your actual fixed and variables expenses
• Your minimal fixed and variable expenses. These are what you would have to pay for if you were to reduce your lifestyle to its bare minimum
• Your saving target

Most people (myself included) find it very hard to stick strictly to a budget. To make it easier and don’t stress out about it, we keep some wiggle room there. 

Lifestyle habits supporting our intentional personal finance strategy

We are not living frugally in any way but are making intentional choices on how we spend our money. The goal is to be able to save more because we have spent less or more wisely without depriving ourselves.

The following are what I consider good financial habits. They are probably not going to make you rich just by themselves but they can help keep your personal finance situation healthy and are easy to implement.

1) Automate your bills payments

Once you have a budget in place, you can look into automating your bill payments. Having a defined budget prior to setting this up will ensure you have timed the payment to go through appropriately (such as after pay-day). You wouldn’t want your automated payment to not be able to go through.

• You don’t have to worry about forgetting to pay a bill and face late fees charges.
• Some credit cards also give you a higher % of cash back for automated transactions.

2) Do your due diligence and shop around once a year for better deals from your providers

Suppliers and their plans change all the time. Once a year, take the time to review the offerings and make sure you have what works best for you. This could free up a few dollars to invest differently within your personal finance strategy.

1. Shop around for the most appropriate credit card: basically the one you will get the most out of (do you travel often and would enjoy the miles? Going out to the movies a lot? Just plain cash back is what you love best?)
2. Internet and cellphone plans evolve all the time. You don’t have to actually change supplier but do the work of finding a cheaper equivalent plan and then ask for the price to be matched. It works almost all the time.
3. Renting your water tank? If it is old enough, it may be worth it to buy it to avoid rental fees (but then you will be responsible for any maintenance costs)

3) Leverage customer services

1. Don’t be afraid to take advantage of customer services when making a complaint is justified. Companies, and especially larger ones, have whole teams and resources in place for this exact purpose.
   • Recently, I was able to get $150 off a new piece of furniture because the delivery was delayed by the store. It actually makes me very uncomfortable to complain about anything but truth is, we don’t have to be rude or aggressive at all. In this example, my husband just pointed it out he was a bit disappointed with the situation and the sales person was already issuing a partial refund on our order before he could finish his sentence.
   • It is much more costly to bring in new customers versus retaining the ones you have. Retailers will likely do a commercial gesture to make sure you are satisfied and keep coming back. So be a kind “Karen” (but only when it is justified!).
2. Also don’t be scared of asking for a 10-15% off when buying some items on the most expensive side (like a Thule chariot for your kids, been there done that). Once again, the sales person is here to make a sale and you never know how much margin they have to wiggle with unless you ask. Also something that I am not personally comfortable doing but my husband has about zero shame. 

4) Purchase at the right time

I am not talking about stocks there (no point in timing the market, right?) but about household goods or services in general.

1. Black Friday generally kicks off the most frenetic shopping season of the year that you can take advantage of (as long as you avoid over consumption, check this post I wrote).
2. My husband also continues to mention every fortnight about the greatest deal he’s ever made: a Christmas tree. A few years back we bought a 8’ tree for $30 instead of $600 right after the Holidays season when stores were scrambling to get rid off excess inventory. Same idea: we purchased our backyard furniture in October.

5) Reduce your energy consumption

Maybe that is because energy in Europe is so expensive but we have always been careful about how much electricity or gas we consume. I was told recently that people in Canada would “open the window during winter if it is too hot” before getting their thermostat down. Obviously, it is a bit of an exaggeration but the point is: most people are not paying attention to their utility bill. If this is you, that means you could save some dollars there and also be a little gentler on the planet. 

Others personal finance habits 

• Use a cash back app. It is tiny money but I find this highly motivating. I am using Rakuten all the time (this Rakuten referral link will get you $30). If you are going to spend the money anyway, you might as well get a few dollars back.
• Use up any gift cards. Received a bunch of random gift cards after the Holidays? Don’t rush but make sure you use them entirely, it is money! People would forget about them after a while, especially if they are for a retail store they are not visiting frequently.
• Monitor your credit score once in a while: this is critical if you are looking to get a loan and can also help in reducing some other costs (some home insurance have a discounted price for good credit owners)
• Try to create multiple sources of income. You don’t need to get entirely absorbed into some kind of lucrative side hustle (unless that’s your thing) but maybe look into selling items you are not using anymore using platforms like Poshmark or Facebook Marketplace.
• You may have employee benefits such as a Health Spending Account allocated each year as part of your compensation package. Claim all relevant expenses and leverage benefits coordination. 

Life changing personal finance tactics

Alright, let’s be transparent here: these are the tactics that may not be possible to do. At the minimum, they are going to be difficult and take some time to implement or adjust to. They may also be having a high impact to support your personal finance strategy. So if relevant to your situation, you may want to consider it.

1. Multiple cars in your household? With more employer flexibility to work from home, you may be able to keep a single car and save on insurance, car payments and gas. Or just get started on bicycle ! (Just kidding but not really, Montreal is an amazing city with bicycle lanes literally everywhere so that is something we are going to try out. Just gonna have to avoid winter months, easy.)
2. Move out of a high cost of living area to a lower cost of living area. Interested in learning more and see if it is worth it for you? Check out my post.
3. Invest in real estate to generate rental income. 

Personal finance is a personal thing

These tools are what we picked to drive our personal finance strategy. You can decide that some of these are not going to be working for you, or not now. You can apply other tactics. For example, you may have noticed that none of these habits or tactics require to be frugal and deprive yourself. Of course, if frugality is your thing then please go ahead. You will probably reach your personal finance objectives even sooner.

A personal finance strategy is, well, personal. Each individual or family needs to figure out what balance of habits, methods and tactics they feel comfortable sticking to to make the best of their financial future while enjoying the present. 

In case you missed it: download the (free) checklist I put together with all these tactics!

And my referral link with Rakuten will get you $30 to get started.