There are a tonne of things you’d like to do, right? Go on vacation, upgrade your vehicle, go to that fancy hotel restaurant, learn something new, etc. Our bucket lists are long, and they should be! There is so much in this world to experience, and it would be a shame to not do all we want to. But most of your goals come at a price.
How do you finance your goals?
For many people, they would like to do a great deal of things. They talk all about those plans, without actually putting together an action plan to follow through. Often this ends up with most of that vacation, or the new TV purchase, or any other item on the bucket list, being charged to a credit card.
Financing anything through a credit card is a risky proposition, and while credit cards have definite advantages, they shouldn’t be used in lieu of a plan. Instead, they should be a key part of your plans.
We all know for big ticket items, like a house or wedding, that we must save for quite a while before we are able to purchase them. But are we regularly setting aside money for the rest of the things in our lives? With consumer debt on the rise, and an estimated $ 500 Billion of non-mortgage related debt held by Canadians (as of September 2019), many people are financing their lives through borrowed money. Delinquency rates, or people not paying their debts on time, is also on the rise. Too much lifestyle funding without a plan is getting people into trouble!
Many Business Minded readers are in a better than average financial positions, and are certainly more likely to be paying off their credit cards every month. But that doesn’t mean having a structured plan isn’t valuable!
As with most aspects of your financial lives, you probably don’t want to spend much time thinking about budgets for your goals. So to make sure you stay on track, without spending much time or energy, we need to turn to automation to help us out. For the major events and purchases that we’d like to experience in our lives, we need to automatically allocate a small amount of funds to separate accounts. Over time, these accounts will grow, and when it comes time to take that vacation, or buy the new phone or computer, we have the funds ready to spend.
I try to take at least one vacation every year. To ensure I am able to do that, I allocate a small amount of funding each month to a separate high-interest e-savings account. Over the year, those funds build up until I take my planned vacation. And the process repeats itself from there. Automatically save, achieve my goal, rinse and repeat.
Having systems that look out for us protects us from ourselves. Knowing that my money is already spent on a vacation that will occur in 8 months helps curb my impulse purchases today. And when it comes time to take my vacation, I am not left stressing about where all that money will come from.
Financing through a Simple System
Automate your goals. This system seems simple, yet for the vast majority of us, it is a system we never put the time in to implement. So today, take 15 minutes and create your simple system.
1) Decide which goals you are pursuing, and when. How much will those items cost? Divide the cost by the time until you need to pay, and you have your amount to save each period.
2) Open a separate account to hold the monies. This shouldn’t take you more than 5 minutes through online banking.
3) Set up automatic contributions to your new account, contributing the amount you calculated in step 1 each period, automatically.
4) Enjoy life!
The systems you put in place to control your impulses and make sure you live life to the fullest are dull. Systems don’t inspire anyone. But spending 15 minutes today can provide you the resources you need, when you need them. Achieving your goals doesn’t need to be any more intimidating than it already is. Make sure you have the financial systems in place to help reach your goals.
This system will help you avoid the pitfalls of consumer debt, and prevent you from needing to borrow from your future to pay for your today.