We all know that a good budget and a smart use of credit can help us to get ahead, especially in these tricky economic times.
Sometimes, it can feel a little daunting though. Village Media sat down with Scott Nairn, Branch Manager, PFP, FCSI, at Sudbury Credit Union, to learn more about how we can make ends meet more comfortably each month.
Q: How can a good budget help individuals and families meet their financial goals?
Scott: Much like a compass or a GPS, developing a thoughtful budget will act as your guide. You can’t meet with success unless you know where you are going. However, simply setting goals isn’t enough — you need a structured approach to creating, tracking, and completing them. This is why goal-setting frameworks such as objectives and SMART goals are essential. Your goals should be specific, measurable, achievable, realistic, and timely.
Q: What is a good place to start with budgeting?
Scott: Step one of creating a budget is to determine your primary budget goal. Are you wanting to stay on track, save more money, cut expenses, reduce debt, or are you creating your first budget? The Government of Canada has a useful online budget planning tool that can help.
Step two is knowing where you are currently spending your money. Today, with almost all of us operating in a near cashless society, this process has become far easier. Obtain your financial institution account statements for three months and breakdown your spending habits. Everything will be detailed if you use your debit card or credit card for all of your purchases. Pay attention to and group items such as fuel, groceries, restaurant meals, bill payments and especially the little items that can add up to considerable amounts over the course of a month.
Q: What about credit? How can/should credit fit into a household’s overall financial plan?
Scott: The use of credit is a reality for almost everyone these days.
The trick is to know how to use it properly. The question should be ‘is this a need or a want’ and then decide on how this impacts your budget goals. It requires a great deal of discipline.
Q: What are the pros and cons about using credit?
Scott: Some benefits of credit include:
- Items can be purchased and used while being paid for.
- If there is a large, unplanned, or unexpected expense, credit can help pay for the expense. This is not ideal but can help in an emergency if you are unprepared.
- Some credit cards offer a points program, these points can add up to cash-back or free groceries and merchandise.
On the other hand, there are also some drawbacks to credit:
- When purchased on credit, items can end up costing more.
- Items that are wants (not really needed) may end up being purchased more often if you have credit. This can lead to overspending and living beyond your means.
- People who use credit frequently tend not to save as much.
Keep in mind that you should keep credit payments to 10-15% of your take-home pay, not including your mortgage payment. It is a good idea to set limits for your credit card debt, have no more than two credit cards, and never charge more than you can pay off in one month.
Q: What can someone do if they find themselves unable to pay off their debts?
Scott: First, stop spending on anything that is not essential. Then phone or write to your creditors. Let them know the issue and ask for assistance. Ask if it is possible to make smaller payments towards the amount owing and then keep your creditors informed.
You can also ask your credit union or bank about a consolidation loan. This type of loan can be used to pay off high interest debt and then payment is made to the credit union or bank for the new loan. Do not continue to use your credit cards while the consolidation loan is being paid. Instead, put any extra money towards paying down your debt.
Q: Inflation has thrown a lot of people’s budgets off. What is your advice for readjusting for the higher cost of living?
Scott: Inflation has been tough on almost every household. The good news is that you don’t have to accept defeat. It all comes down to the budget. That budget needs to be zero-based, which means your net income minus your expenses equals zero at the end of the month. Every dollar you earn has a job that you assign to it. Some steps to help reduce the impact of inflation include:
- Finding ways to save like cutting back on higher priced grocery purchases, taking your own coffee, being conscious about your electricity usage.
- Earn extra money with a side hustle, selling items you no longer need, or even renting out an unused room in your home.
- Cut expenses like streaming services and auto-renewing subscriptions. Each one may seem insignificant, but the total can be shocking.
Take a hard look at your discretionary spending. You might have to cut back on dining in order to stay on track. Don’t forget to reward yourself but stay within your budget!
Q: How can Sudbury Credit Union help?
Scott: At Sudbury Credit Union, we are absolutely focused on working directly with our members and acting in their best interest. All decisions are made locally with the ultimate goal of making our community a better place.
We live here, we work here, we give here. That doesn’t mean we can do everything, but it does mean that we will work directly with our members to the very best of our ability.
Q: What else should we do to stay on track with our finances?
Scott: Along with budgeting, you should also work on developing a financial plan. Financial planning takes a holistic, big picture view of you, your lifestyle, and your financial needs and priorities. Without this broad approach, it’s like trying to see out a window with the curtains half-closed. You need the full view to understand and make the right decisions about every aspect of your finances.
With solid budget planning and a disciplined approach to building a meaningful, realistic financial plan, the stresses of today’s challenging economic times can be eased.
For more information about budgets, credit, and financial planning, visit the helpful team at Sudbury Credit Union.
This article was sponsored by Sudbury Credit Union, a 2023 Sudbury·com Reader Favourite.