I want to start a new tradition!
In my last post, I discussed my net worth improvements in 2019. I plan on writing yearly financial updates discussing my overall spending, debt pay off, and savings rates. I realized something was missing though: context.
It’s simple to tell you what I did, but I also want to explain how.
Since I doubt many years will look financially similar for me, I thought it would be fun to add an additional yearly update explaining the best financial decisions I made that year. I’m talking actionable tips that you can apply to your own life if you’re in similar circumstances!
When you want to improve your net worth (ie pay off debt or save/invest), the money to do that comes from your gap.
What the heck is your gap?
It’s the amount of space between your income and your spending. Let’s say you earn $4000 net income every month. Your bills and spending amount to $3200. This means your gap is $800 ($4000-$3200). You have $800 each month to save or pay off debt with if the other variables stay the same.
Phrased that way, it’s easy to see that increasing your gap can come from either:
- Increasing your income
- Decreasing your spending.
While most financial blogs tend to focus on decreasing expenses, I believe it’s important to focus on both aspects. Your spending can only be cut to a certain level before it feels like deprivation, whereas your income is theoretically infinite.
That’s why my 5 best financial decisions in 2019 are a combination of both!
One decision improved both factors, one increased my income, and the last three reduced my expenses.
So without further delay, let’s get to them!
1) Starting this blog
I know I know, that sounds cliche. But it’s true.
There’s something about telling the world your goals and financial beliefs that holds you accountable to living them. After-all, nobody likes a hypocrite. I’m not going to say one thing on my blog then do the opposite in real life. I’ve made my plans of paying off my debt while living a financially balanced life quite clear, so now I just follow through.
Another interesting thing happened when I put my financial “ugly” out there for the world to see: it opened up discussions about money.
It’s funny that some of the most heated topics such as politics, sex, and religion are still considered more ok to discuss than money.
Ahh, money and how you handle it? Oh we don’t talk about that!
Whoops. Looks like I removed the taboo….
Since starting this blog I’ve had numerous friends, coworkers, and family members want to talk money with me. I think it’s one of my favourite outcomes of blogging. Hearing other peoples goals, struggles, and victories with their finances constantly motivates me to either improve my own or find a way to help with theirs.
I won’t deny that blogging has earned me a little side money which is helping with my debt pay off. However, I think it’s biggest value has been in motivating me to be conscious with my spending decisions because hey, I might just end up discussing those decisions publicly.
2) Accepting additional work shifts
I recognize that I’m lucky to be in a career where this is possible, so I take advantage of it.
I wouldn’t want to hold down two jobs. I know people with debt that work their career Mon-Fri, then have a second job on the weekend. While I’m impressed by their work ethic, I very much enjoy having the option of down time. So instead of committing to a second job every week, I take on call weekend shifts occasionally. I get paid double time when I do, so it really helps increase my financial gap.
I also volunteer to work every holiday that I can. Christmas the past two years? I was on call at the hospital (and got called in). Same as numerous other holidays throughout 2019. While most people are enjoying long weekends, I’m at work. I won’t lie: it can be difficult to work when it seems like everyone else is enjoying holidays or times with family. However, it allowed me to pay off thousands of dollars of debt this year so I’m grateful for the option.
3) Being conscious about food costs
By FAR, this was the hardest of the 5 for me.
It can be so easy to overspend on food. We make decisions about what to eat numerous times a day, everyday. Those decisions can add up. Food is one of the largest monthly expenses for most people, and it’s unavoidable. You have to eat!! That doesn’t justify avoiding conscious decisions though.
I understand the desire to spend money on food: I’m a dietitian and a foodie. I care about what it does to my body, and I also care about how it tastes. Adding in caring about price to that mix can make the equation daunting at times.
As with all options, I’m not suggesting there’s a “right” amount to spend on food. A common theme on my blog is that you get to decide what adds value to your life, and you should spend money on that. Be conscious about it though.
You NEED protein; you don’t NEED steak.
I wrote an entire blog post about saving money on groceries, so give that a read if you want specifics. However, there’s two main concepts I think you should keep in mind:
- Don’t waste food. If you buy it, eat it. Otherwise it’s bad for your wallet and the planet.
- It’s fine if you consciously spend extra on food (if you can afford it). Just make sure you’re getting adequate enjoyment to justify the cost. Don’t do something simply because it’s become habit.
4) Driving a paid off vehicle
From the way people talk, it’s like vehicles expire/explode on a certain date. New’s flash: they don’t. You don’t need to upgrade your vehicle the second you pay it off!
I drive a 2008 Rav 4 Sport that I bought used and paid off two years ago. I love it as much as the day I bought it.
Last winter I was driving with a friend and she looked around for the seat warmer button. The look on her face when I joked that it doesn’t have seat warmers and her butt would have to heat itself the old fashioned way was priceless. She commented that she could never live without seat warmers in her vehicle.
I absolutely 100% guarantee that you can. Proof? Through almost all of humans driving history, we lived without them. We survived somehow.
It’s absolutely ok to want nice things. Life should be about more than bare minimum needs.
My concern is when people use the word “need” interchangeably with “want”. It’s particularly concerning when wants are prioritized, and you stop affording needs.
In my case, needing to pay off debt > wanting a vehicle upgrade.
Having no car payments allows me to put hundreds more on debt every month. It’s amazing.
I will happily drive Rav until it’s an unusable rust bucket. My butt will be just fine.
5) Pausing interest on debt
I love financial tips where there is no downside to applying it. This is one of those.
If you’re like me, you likely can’t pay your debt off in a month. It’s going to take some time.
The biggest issue with time when it comes to debt is that you pay for it (in interest). I HATE paying interest. Giving someone else my hard earned money in return for carrying debt hurts my soul, so I try to minimize it as much as possible.
In 2019, I did this by stopping paying interest on my student loans (legally).
If you live in Canada, there’s an incredible thing called the Repayment Assistance Plan (RAP). It’s income based, so the assistance depends on how much you earn. If your income is low enough they will halt all payments required and the government will pay your interest for you. Who wouldn’t love that?
A common misconception is that it’s based on your yearly income; it’s not. I wouldn’t have qualified if it were. You simply have to apply when you had a low income month. Since I worked casually for most of 2019, there were months I earned tons and months I earned little. If the average mattered, I wouldn’t qualify. But I applied when I had a low month, and then the assistance lasts for 6 months from that date regardless of income in that time.
Since graduation ~2.5 years ago, I’ve qualified for RAP twice. That amounts to a full year of no interest payments, or thousands of dollars saved!
It’s an incredible program, yet many don’t take advantage of it. You should! If you’re curious whether you qualify, you can find out more information here.
There you have it: my 5 best financial decisions in 2019!
I’m actually excited to continue this tradition and see how my decisions change throughout the years.
What do you feel were some of your best decisions last year? Were they hard to stick to?