Personal Finance

That is my Saturday personal finance tip this week — pretty simple assignment to check yourself out with your local credit reporting agency.  Here in Canada we have two – one that has been in the news a lot lately – Equifax, and the other lesser known agency TransUnion.

Knowing your own credit score will allow you to monitor who is reporting  about you and can help prevent fraud and identity theft.  Your credit score affects many aspects of your life including when  you are applying for some jobs, purchasing insurance, and want to rent an apartment. If you decide to finance the purchase of a car or home, your credit score will also affect the rate of interest you pay; and a few percentage points can be a big deal on a $250,000 mortgage.

Credit rating agencies are a business selling you a product and they have plenty; however, in Canada the law allows you to check your credit report annually without a fee.  Finding that information on their website can be difficult – here is a link to TransUnions free reporting instructions and this is the one for Equifax.

You may be surprised about the information collected about you and your credit history.  Should you find errors or discrepancies on your report be sure to follow the agencies dispute resolution process to make the report right – it is about you after all.

This blog started out to be a personal finance tip; however, this advice is good for Small business owners as well as Household Managers.

Make an annual date to review your account plans for services like utilities, telecommunications, bank and credit cards.  Don’t overlook any long term bills especially those on auto-pay.

Companies change plans and update pricing regularly and there may be a better option available that you won’t know about without asking. With your current bill in-hand and a little bit of knowledge about what you are paying for, it will go a long way when you contact customer service to have them review your account.

Credit cards and banks are a great opportunity to save money.  First take a look at what charges you are paying for your basic bank account, there are free options on the market especially if you don’t need the services at a branch.  If you are carrying a balance on your credit card, consider switching to a low interest no frills card and then make an effort to pay off the balance as interest only is money lost.

By setting the date to review your accounts you can feel good that you are only paying for the services you want and need and getting the best deal available in the current market.  I remember my cell phone bill from the 1990’s, it was about three times that of my current bill, as the market has changed in the past 25 years!

People often ask me  how to organize their personal finances and I have come up with a simple solution you can implement in 3 easy steps:

• Step 1 is to have two bank accounts – One will be where you deposit your pay cheque and pay your fixed expenses (eg. mortgage and utility bills); the other bank account is for the portion of your budget for stuff like groceries, clothing, meals & entertainment, or other discretionary spending.
• Step 2 is to track your spending so you can actually make a plan, or a budget.  Some people loose interest at this task; however, modern technology has actually made this easy, try using a program like Mint, Wave,  QuickBooks Online or another similar software to track where your money is going.  After a few months of tracking you should be in a good position to make a plan.
• Step 3 is to make and review your plan. I call it a plan as opposed to a budget as like all plans you should review it frequently and make changes as necessary. I suggest a quarterly review and then adjust the plan for the next quarter based on what is actually happening in your life and spending.

Organizing, tracking and monitoring your spending is an ongoing process. By mindfully monitoring your spending it will help you find and save cash.  Watch for unnecessary spending in places like bank charges, interest, and other service charges which you can begin to eliminate based on your plan.  Be sure to budget a small savings for a vacation, it will make you feel good about having a plan when you are chilling under a palm tree.