It’s important to make sure you get as much ‘life from your money’ as is reasonable.
That was the basis of a presentation by Stephanie Holmes-Winton the CEO and founder of CacheFlo Inc., a software company that builds behaviour-based spending management applications for financial professionals & institutions to use with their clients when she spoke in Yorkton last week.
Holmes-Winton’s presentation was part of the FCC Young Farmer Summit, and looked at how people can manage their money in ways that work.
And people do need to manage their money. It’s important to make sure you get as much ‘life from your money’ as is reasonable.
Holmes-Winton noted a payroll survey from 2019 that 43 per cent of people would have trouble meeting their bills even after only one week without their paycheque.
Statistically 31 per cent don’t have enough to pay bills every month, added Holmes-Winton, and 47 per cent think they’d be in trouble if interest rates increased.
“Fifty-three per cent of Canadians live paycheque to paycheque,” said Holmes-Winton.
These realities create pressure on people.
“Eighty-eight per cent admit to spending as many as 130 hours every year thinking about their personal finances while at work,” said Holmes-Winton.
That impacts job performance.
“What can you get done on your farm in 130 hours?” asked Holmes-Winton.
If an operation has 10 workers that is 1300 hours “of productivity you’re losing every single year,” she said.
The first step is knowing just what sort of shape your finances are in. A good measure to begin with is to know how much per dollar earned we owe.
“It’s a really important number we should know,” said Holmes-Winton, adding on average it’s about $1.78. The number tends to be higher for young people who are taking on more debt.
The next step many take is to set budgets, but Holmes-Winton said they are often ineffective because people have a difficult time following something because budgets are often seen as controlling, that people must sacrifice, feel restricted and unhappy.
“The focus is on what I can’t have and have to give up,” said Holmes-Winton.
Those elements can lead to stress, and stress can impact how we deal with our money.
“The more stressed we are the more we tend to make bad decisions,” offered Holmes-Winton.
That is not to say a budget can’t be a tool. Holmes-Winton said, “Budgets with a beginning and end ... a time-boxed plan ... work well,” for example a renovation project, or vacation plan.
But you do need to track spending in a way that goes beyond keeping it in your head.
“Keeping track of money in our heads is very, very difficult,” said Holmes-Winton, adding it gets “harder with all the distractions” we have.
Some things, such as rent, mortgages and gas have a low risk of overspending on because they tend to be rather fixed costs, said Holmes-Winton.
Others, such as eating out, the grocery cart, daily expenses, have greater risk of overspending.
It helps too to manage the debt one takes on, said Holmes-Winton.
For example there is more to borrowing than interest rates. The term of the debt influences the end cost to a person in a greater way.
“When you borrow don’t ask about rates, ask about cost,” said Holmes-Winton.
Another is to “limit debt to as few accounts as possible,” she said, adding of course it’s a good idea “to pay the principle down as quickly as possible.”