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Credit Coach: #FLM2017: How to Live Within Your Means

November is Financial Literacy Month (#FLM2017) in Canada, a month-long opportunity to focus on increasing your knowledge of personal finance.

November is Financial Literacy Month (#FLM2017) in Canada, a month-long opportunity to focus on increasing your knowledge of personal finance.

Focusing on financial literacy can mean many things — like learning how to budget, understanding how credit works or teaching your children about money.

This week we’ll tackle a hard subject: living within your means.

Living within your means is about more than just understanding how to create a budget — that can be straightforward. It often means making the hard choices to go without or to delay gratification.

As a practicing Licensed Insolvency Trustee (LIT) for over 17 years, I know that when an individual faces a financial crisis, it could be for many reasons. The need to file a consumer proposal or personal bankruptcy generally arises as a result of a life-changing event, like a job loss, a divorce, a mental health crisis or an addiction.

However, in those 17 years, I’ve found that a life-changing event is often made worse by not being prepared for it. Years, sometimes decades, of poor credit management combined with a lack of emergency savings has put many individuals and families in financial chains. So when an unexpected emergency happens, they’re unable to break free from those shackles.

Living within your means will not be the same for everyone. However the following tips or strategies hold true for most individuals and families.

Use your credit card for security and convenience only  

Your credit card is a tool that helps you secure a hotel booking or car rental reservation. It frees you from having to carry cash around.  

Many individuals see credit as an extension of their purchasing power. This is a fallacy. Don’t put your annual vacation in the sun on a credit card, or pay for it with your line-of-credit, unless you have cash in reserve to pay it off on your return.

Understand that you aren’t entitled

When you work hard, parent hard, volunteer in the community, coach your child’s hockey team, and you’re the best spouse you can be, it’s tempting to fall into the trap of feeling like you deserve something special — an extravagant purchase, a night out or a vacation.

The reality is that many people work hard — and that makes you valuable to your boss and special to your family. But it doesn’t mean that you should spring for an expensive dinner, vacation, new car or brand new man cave if you don’t have the cash to pay for it. This is a harsh life lesson, I know, but it’s key for living within your means.

Learn the basics of budgeting

Living within your means is a skill like anything else. If you want to be physically fit you have to exercise, if you want to build houses you need a contractor’s skillset, and if you want a roadmap to live within your means you have to sit and plan it out. A little hard work putting together a household budget will go a long way in making any financial plan a success.

If you want to learn more about how to create a budget, read my blog Taking Control of Your Finances with a Budget.

Differentiate between wants and needs

The truth is many of us need very little in life. Most of our purchases are “wants” or discretionary. Identifying what you want versus what you need is a basic principle of budgeting and an important part of living within your means.  

Take some time to look around your house and assess your own spending habits — flip open the fridge or take stock of your electronic devices. Be truthful with yourself and tally up the differences in the money spent on wants versus needs. You might just surprise yourself.

This list of tips is not exhaustive nor comprehensive. It’s meant to be a wakeup call to help you take control of your finances, and reach the point where you can weather the storm if a life crisis happens.

What do you find most challenging about living within your means? Please share your thoughts in the comments section below or go to @JSCreditCoach.

Jayson Stoppel is a Licensed Insolvency Trustee and Chartered Accountant with BDO First Call Debt Solutions. With over 17 years in practice, Jayson assists individuals, families and companies with financial difficulties in Thunder Bay and throughout Northwest Ontario. To reach Jayson by email: