Understanding how your behaviour is holding you back is the fastest way to turning your financial life around. Here are 10 financial truths and tips to get you headed in the right direction.


Don’t mistake checking your bank balance for budgeting.
People check their bank balances frequently in order to feel aware. Yet that quest for awareness often creates a counterproductive crutch. Personal finance habits were better in the 1980s, when they were based on debt levels and savings levels. This changed with online banking. One of the main culprits is false awareness. Checking their chequing account balance sets people up to spend, not refrain.

"If you’ve ever wondered why your effort isn’t translating into savings growth, it’s probably because you’re just “not spending” money."

Understand that not spending isn’t the same as saving.
If you’ve ever wondered why your effort isn’t translating into savings growth, it’s probably because you’re just “not spending” money. For instance, if you took your lunch to work this week and refrained from spending $35, you didn’t actually save anything. That is, unless you transferred $35 to your savings account. Did gas prices decrease? Calculate the difference in cost, and transfer the money to savings. Not spending doesn’t equal savings, unless you take the next step to actually save the money.

Your credit score is a measure of how good you are at borrowing. Your net worth is a measure of how good you are with money.
Will a good credit score allow you to retire? No. But a healthy net worth will. Measuring your net worth every 12 months will illustrate how effectively you use your income. Measuring changes in your credit score will simply show you how much better you are at being a member of the lending world.

A loan approval is not a reinforcement that you can objectively afford the thing you are borrowing money for.
A lending institution has a goal that is tied to revenue. You can’t blame them if they are willing to let you borrow “too much” money. Your job as a consumer is to know what you can afford before you apply for funding. You also must not confuse “affording the payment” with “affording the loan.” Stretching out a loan in order to afford the payment can result in death by a 1,000 paper cuts.

You must increase the amount of money you save and/or invest by at least 1% of your total income, every year.
Several years ago people started calling retirement “financial independence.” A more appropriate term is “income independence.” Your ability to retire is dependent on your ability to break your dependency on your work income. Asset accumulation can certainly help create income in retirement, but attacking the problem from the other side is smarter. Reducing your need for money is more efficient and easier. What’s better than having a bunch of money for retirement? Not needing a bunch of money for retirement. You can begin by reducing the amount of money you live on every year, via increasing the percentage of your income you save each year.

"Convenience is an exchange of money for time. You may not have the luxury to make this exchange."

Understand what convenience is.
Convenience is an exchange of money for time. You may not have the luxury to make this exchange. If you’re in debt and/or have paltry savings, you should consider using time instead of spending money. A good example of this is picking up carry-out on the way home from your kid’s soccer practice.

Find your problem area.
Look at your bank statement. What category of consumer spending occurs the most frequently? Is it the grocery store? Dining out? Is it shopping? You can reduce the amount of money you spend by focusing on reducing the frequency of expenditures. Start with your biggest problem area, and then see what other categories of spending you can reduce by focusing on frequency.

Your chance at financial success is more defined by your understanding of behaviour than it is by your understanding of math. Understanding how your behaviour is holding you back is the fastest way to turning your financial life around. Here are 10 financial truths and tips to get you headed in the right direction.

Talk about money once a month.
If you share finances with someone, you should talk about money regularly. But if you do it more than once a month, it can become tedious and counterproductive. If you discuss money less than once a month, you risk deviating from your plan. Once a month, discuss the previous month’s spending, and then talk about what events will require extra money in the coming 30 days.

Know your surplus or shortage.
It’s not good enough to know you had a good or bad month. You need to know by how much. If you don’t, you won’t know how much money you can tuck away due to a surplus, or how much spending needs to be cut the next month because of a shortage.

Don’t be overconfident in your income’s growth.
It’s not uncommon to make decisions on major purchases, like a house or a car, based on the belief that your income is going to go up. You can turn a pleasant financial situation into a stressful situation by projecting your confidence in your career, into your finances.

If you share finances with someone, you should talk about money regularly. But if you do it more than once a month, it can become tedious and counterproductive. If you discuss money less than once a month, you risk deviating from your plan. Once a month, discuss the previous month’s spending, and then talk about what events will require extra money in the coming 30 days.