Make confident credit decisions that are right for you today, tomorrow - or as your needs change. Here is a simple step-by-step approach that can help you manage your finances.
Step 1 - Establishing your goals
Take a moment to set some financial goals. Buying a home, a new car, a future vacation, paying off a loan or saving for retirement may be some of the goals on your list. Try to establish both short- and long-term goals.
Step 2 - Compile your information
Gather all of your income and expense records. Start by finding:
- Your past paycheque stubs
- Credit card statements
- Rent cheques
- Past utility bills such as phone, heating or cable
- Grocery receipts
- Financial statements for your mortgage, line of credit and bank accounts
- Other financial records such as loan payments, insurance payments and any other sources of income or expenses
Step 3 - Organize your finances
Now that you have all of your financial information, figure out how much income you are receiving and how many expenses you are paying out each month.
Make sure you include your "after tax" net income on your pay stub, rather than your pre-tax income. At this point you may have to estimate some expenses but, as you continue to budget, your estimates should become more accurate. When estimating future expenses, it's better to take a high estimate rather than a low one.
To determine your financial position, subtract your total monthly expenses from your total monthly income.
Now that you have a summary of your credit card spending, the CIBC CreditSmart enhanced monthly statement enables you to see at a glance where you're spending your money, both on a monthly and year-to-date basis. Track your spending in 10 common spend categories like "Transportation", "Retail & Grocery" and "Restaurants."
Step 4 - Create a plan of action
If you have calculated a positive amount, you may want to take this extra income and use it to pay off debt or save it to help achieve some of your goals.
If you have calculated a negative amount, then you may be spending more than you're earning and you may be using credit to pay the difference. You need to examine each of your expenses and make some budget decisions to get your spending on the right track. Start by reducing your least important expenses. You can create your own categories and track your spending using the CIBC CreditSmart personal spend manager. It's important to act quickly to avoid potential credit problems.
Step 5 - Set your budget
One of the best ways to establish a strong financial position is by setting a budget. A budget not only organizes your spending, it also helps you plan for and prioritize your expenses - so you can achieve your future financial goals. One helpful tool to keep your budget on track is the CIBC CreditSmart spend report.
Step 6 - Track your budget
Now that you have a budget, try keeping a monthly record of your spending habits. Keeping track of all your monthly expenditures will help you discover what expenses you can reduce. Even if you have a positive cash flow, you may be surprised how much you spend on things you don't really need. Tracking your expenses will also help you make budget adjustments and achieve your future financial goals more easily. You can also set up CIBC CreditSmart spend alerts to keep track of your budget and expenses.