For years, I’ve been noodling over the financial phenomenon that happens during this time of year. Markets suffer. Debts creep higher.
The period of time between the third Monday in January (Blue Monday) and Feb. 14 (Valentine’s Day) is the saddest financial time of the year for Canadians, according to the Financial Planning Standards Council and Credit Canada. Contributing to this sadness is large credit card bills from the holidays, of which one in five Canadians can’t afford to cover with their savings. Younger adults under the age of 45 suffer the most from the financial blues, which we also know is attributed to lack of financial security due to precarious and unpredictable work arrangements.
And, I am not immune to the financial blues. But over the course of working with my business coach (yes, even this coach needs a coach), I’ve learned that trying to make massive sweeping changes in January generally leads to failure, and that I’d be better off focusing on smaller improvements.
The theory is simple. Those small steps gradually build momentum. And that’s the momentum you’ll need in time to make big changes to your finances. Try these small steps to improve your finances.
Consolidate and pay extra toward pesky high-interest debts: There are few things more depressing than lighting your precious hard-earned money on fire and watching it burn. That’s essentially what you’re doing by carrying any kind of high-interest balance. In today’s market, anything over 12 per cent interest is considered high interest.
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There are two ways to tackle these debts. The first option is to consolidate them into one lower-interest loan that combines your debts into one payment. Yes, these are called consolidation loans, and you can get them from your bank or from an online marketplace lender.
The second option, usually the path to take if you’re unable to qualify for a consolidation loan, is the avalanche system. You pay extra on the highest balance, while still making minimum payments on your other balances, until the first debt is cleared. Then you move onto the next highest interest debt and your barrel down on that one … and so on.
Wondering where to get that extra money from? Take small steps to reduce budget categories like groceries, lunches or coffees out. Even $ 20 per week can make a massive difference to your debts.
Get your side-hustle on: Whether you’re in stable or unstable financial condition, just about everyone can use a little more money in their pocket. Consider getting a part-time gig at the library, taking on freelance work, consulting or teaching classes at the gym. I’ve been side hustling since I can remember; teaching HIIT (high-intensity interval training) classes over my lunch hour, writing books, and curbing stuff I don’t need on Kijiji. Yes, it takes time to do this. But start with something very small. In the majority of cases, the payoff is well worth the effort.
Save more: Let’s say that you saved $ 5 per day for the next 25 years and earned 5 per cent net return on your savings, you would have just over $ 90,000 in savings. Now imagine you doubled that daily savings, you would have $ 180,000 — WOW! Take a moment to think about where you could find a few extra dollars each day to put toward your financial security.
Reduce your consumption: Purging, decluttering and reducing your consumption of material things is linked to anxiety and stress reduction. Not surprisingly, it also saves money, which further quells our financial blues. Take a moment to evaluate what you could do without, then reduce slowly, one room and one budget category at a time.
By taking small, healthy financial steps, you’ll start to see your debt reduce and savings grow. And go easy on yourself. It takes time to build momentum to make big changes.
Lesley-Anne Scorgie is a Toronto-based personal finance columnist and a freelance contributing columnist for the Star. Follow her on Twitter: @lesleyscorgie