Written by Annastasia Liu
Monday, January 6th, 2020
My husband and I have been playing catch up with our finances for just over a year. In 2018, we finally took possession of our home. We also took a few vacations and bought a new vehicle.
Although we achieved some big goals and ticked some things off our bucket lists in 2018 and 2019, we lost sight of what we should be saving for and overextended ourselves in too many areas. We're hoping to learn from our mistakes and take action to refocus our finances and get things back on track.
Where Things Went Wrong With Our Finances
Problem #1: We made use of the Home Buyers' Plan to purchase our home and withdrew the majority of the funds in our RSPs. We had also been saving diligently in a joint savings account to make sure we had enough for a substantial down payment so we could avoid paying for mortgage default insurance. After the money left our accounts, we didn't have a plan for how we'd replenish our savings afterwards. Big mistake.
Problem #2: We moved into a slightly bigger home, which gave us more space to hold on to old stuff and fill it with new stuff we didn't need. For example, if we saw something on sale, we'd buy it and store it away for later. Sometimes, I'd forget I had already bought something and stored it away and buy it again, which was a waste of money.
Problem #3: You know the phrase YOLO (You Only Live Once)? Well, it's not a very good mentality when it comes to your finances. We fell into the habit of indulging too often without really pausing to think about our decisions. Like booking vacations spontaneously and not budgeting for our trip expenses, saying yes to multiple destination weddings in a year and impulse shopping on a regular basis.
The Plan to Fix Our Finances
Solution #1: When we had a clear goal, saving was much easier for us. Goal-oriented saving tends to keep us motivated and focused to save so we'll establish new short-term and long-term goals to get back into a savings mindset.
Here are the goals we've settled on:
- Save for window treatments
- Decide on a vacation and save for all the expenses in advance
- Set up an emergency fund with 3 months' salary saved
- Replenish RSPs and pay back Home Buyers' Plan
Solution #2: To cut back on overspending and buying things we don't need, we'll adopt a "one in, one out" shopping method. For example, if I want to buy a new piece of clothing, I'll have to get rid of an item of clothing I already have. The idea is to be more mindful of what we have, what we need and to make better purchasing decisions overall. We also plan to sell some items we have but don't use to make some extra cash. We'll put the extra funds towards savings goals or our vacation fund.
Solution #3: After some time indulging in the YOLO lifestyle and seeing the effects on our bank account, we'll be more deliberate about our splurges. Vacationing is still important to us, but we'll set a budget based on how much we've saved and be more strategic and thoughtful about where we go. We'll also look into different points and rewards programs to cut our out of pocket costs.
After a busy 2018 and 2019, we might be a little off track, but now that we have a plan moving forward, we're already starting to feel more confident in our finances and in our future