By: Bharathi Sandhu

With Christmas having come and gone, many Canadians are looking for a fresh start in 2016 and make many resolutions about money. Resolutions, like diets, feel great in the moment you make them but it often proves difficult to implement the steps necessary to achieve success. Here are three basic tips to help get you on track for any financial resolutions you may have from paying down debt to creating a savings plan.

Prepare a cash flow summary.

I used to exasperatedly roll my eyes when my father would ask me to prepare a budget, in order to receive a higher allowance. I would either ask my mother for the shortfall, or make do without, in order to avoid making one. To me, the word budget has an ugly connotation, much like the word “diet”. I tend to avoid both. While I have not yet come up with a less offensive word for “diet”, a better phrase for budget is cash flow summary. In general, a cash flow summary is a comprehensive list of money in versus money out of your household. The idea here is to list your “must have” expenses per month. This would be your mortgage payment, car payments, gas, groceries, utility bills, children’s expenses, life insurance premiums, RRSP and TFSA contributions, etc. List these underneath all your combined household sources of income (his salary, her salary, rent from the basement suite, child tax credit, etc.). The total income minus total expenses is your net (hopefully positive) cash flow for the month.   Consider this s a blueprint of what your discretionary spending (ie. vacations, shopping and meals out) should look like over the year. There are many financial apps and websites that can help with this. A favorite of mine is mint.com.

Minimize outstanding debts.

My general rule of thumb is the higher the interest rate on the debt, the higher on my list of pay downs. For example, a credit card balance is generally at a higher interest rate than a mortgage (typically 18% on credit cards versus a current 3.5% on mortgages). The lower your debt load is, the more money can go into savings which leads to more financial flexibility down the road. You would have an easier time adapting to any anticipated or unanticipated life changes if you are not under the burden of large monthly debt payments.

Create a rainy day fund.

New set of tires for your car. Water heater damage that needs immediate attention. Child desperately needs uninsured orthodontic treatment. Many such concerns can cause the average family to go into a spiral of debt. A rainy day fund would help cushion the blow and prevent you from going into possibly high interest debt for unanticipated expenses. Many financial planning experts advise keeping on hand, in cash, three month’s worth of living expenses. Referring to the first point, this would be your total “must have” expenses per month times 3. This would help in the event of unanticipated expenses, or life changes such as loss of job or illness. This contributes to the financial flexibility and adaptability of the household.

Tracking your money, minimizing outstanding debts and saving for a rainy day are three very basic financial planning principles that are easy to apply no matter what your financial situation is. These three tips in general will help you kick start your New Year’s Resolutions in regards to your money for 2016.   To a good financial future!

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