Now’s the time to revisit the most basic rule of personal finance

You can’t grow financially until you get into the habit of spending less than you earn.

Never in the history of this planet has it been more difficult to follow this most basic rule of personal finance. Between social networks and the internet, we are immersed in messages to spend. And then there’s the pandemic, which has resulted in pent-up demand to buy things, inflation, and job losses for some.

I’m starting the newsletter in 2022 with an eight-part back to basics series and you’ll find more personal finance basics and explanations and stories in The Globe as a whole in the coming weeks. To get started, let’s take a look at how to get your spending under control so that you can save and invest for the future.

If you regularly have nothing to spare from paycheque to paycheque, then track where your money is going. Banks are increasingly offering customers free tools to monitor their spending – log into your checking account to see what’s available. There are also free budgeting apps like Mint and PocketGuard, as well as a top-level app called YNAB – for You Need A Budget – which offers a free trial and then costs $ 14.99 per month or $ 98.99. per year.

Use the information you get from it and examine your spending to find areas to reduce. Small expenses are the easiest to manage, but it will take a lot to make a significant difference in your spending. One idea for big spending savings: Focus your energy on paying off a credit card balance, car loan, student loan, or line of credit. Then redirect the amount of your old loan payments to savings or investments.

Drastic spending cuts are hard to live with, so consider cutting back rather than eliminating things. Restaurants once or twice a month, rather than once or twice a week. Family vacations every summer, rather than twice a year. Buy a less exclusive brand of vehicle.

Some other ideas:

• Debit cards vs. credit cards: It’s easier to control spending when money comes straight out of your account
• Try the 24-hour rule: For splurges, wait 24 hours before you buy to see if your excitement wears off.
• Check your subscriptions: Many of us racked up a bunch of subscriptions during the pandemic, maybe more than what we actually use.

There is an emotional side to budgeting that is not discussed enough. It can be a bit of a shame to cut back while your Instagram feed continues to show you scenes of your friends and family living the lush life. You need a common phrase to tell people when they ask you why you’re not joining them or choosing a cheaper option. How about this: “I’m trying to get my finances back on track in 2022 and I’m cutting here and there to get there. Thank you for your understanding.”

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Rob’s Personal Finance Reading List

Main upcoming financial trends

Jason Kirby of The Globe has put together a comprehensive set of charts examining trends in the economy in 2022, including inflation and housing. Maclean’s annual set of economic charts to watch includes plenty of information about inflation. In addition, Investopedia highlights economic trends, sectors and political developments for investors to watch for in 2022.

Best credit cards, savings accounts for 2022

A personal finance blogger selects the best reward credit cards from a variety of categories, like daily expenses, cash backs, and frequent travelers. Here are the best savings accounts.

Best cars and trucks for 2022

Top 10 car and driver.

Main risks of financial markets

A long-time financial journalist examines the risks that could weigh on investors. The first is a COVID-19 mutation, which is already playing out.

Ask Rob

Question: I am considering opening a registered retirement income fund account with Questrade. What happens if the business declares bankruptcy? I know that they are part of the Canadian Investor Protection Fund, that they have additional insurance and that I will be able to get my money back. My question is how long will it take? I need the RRIF proceeds for everyday life.

A: Broker bankruptcies are rare and each is different. So there is no way to tell exactly how fast your money would be available. The CIPF says that it is usually necessary to transfer customer accounts to another company in the event of insolvency. It should be noted that regulators closely monitor the financial stability of brokerage firms. The most recent insolvency of a CIPF member dates back to 2015.

Do you have a question for me? Send me. Sorry, I cannot respond to each one personally. Questions and answers are edited for length and clarity.

Today’s financial tool

A financial goal calculator to help you get out of debt and set a savings goal.

The cashless zone

Jethro Tull, anyone? A list of albums to come in 2002 including retro names like Jethro Tull, Soft Cell and Tears for Fears.

Tweet of the week

frank thoughts on what it means to own a growing home.

What i wrote about

More Rob Carrick cover and money

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