maiji: My experience with personal finance - approach + some resources (Canadian perspective)

As I've been working on the "my experience with" zines, I thought about doing one about personal finance. Turns out it was hard to squeeze what I wanted to cover into a mini zine to my satisfaction, so I decided to just make a post.I find personal finance to be very neglected, both in our formal education system and in most people's informal learning experiences. I read and hear a lot about people feeling lost and doing their best to muddle through systems that are often arbitrarily-designed and confusing. I'm not an expert by far, but I'm lucky that between my mom and my reading lots of Reader's Digest articles as a kid, I had a fairly decent understanding of the basics instilled in me. And I feel strongly about people being able to build financial literacy and confidence to achieve financial security! This is not financial advice. It's just an overview of what I do, followed by links I've found helpful. I am not a finance professional. There may very well be more effective ways to do anything I cover in here. I'm sharing this mainly as an overview of what I currently know and do, in case it might be helpful for others as a starting point to learn more. My approach (which was built up over years of trial and error...) may or may not work for you, depending on your situation and your priorities.The Canadian perspective is mainly references to Canadian accounts and tools.📝 1) Keep track of what I make, and what I spend/need. [READ-MORE]I have a spreadsheet where I list my monthly expenses for general reference. There are lots of templates out there, but I made my own because I found it easier to create one to cover just the specific info I want to see. It's pretty basic, but I use it and that's what matters.[Screenshot of chart labelled "Monthly expenses" with columns for Description, Cost, Payment Method, When, Notes, followed by placeholder examples of expenses. There is a total per month and a total per year at the bottom.]Mine includes: Description of every known fixed expense. Phone, internet, housing, insurance, subscriptions (like Pillowfort!), donations, etc. How much the expense is. If it's not paid monthly, I do a little formula in the spreadsheet cell to turn it into monthly number. E.g., if it costs $100/year, I put =100/12 in the cell. If it's in a different currency and this number might change (e.g., Pillowfort charges in USD, so the cost on my credit card every month is different due to exchange rate), I do an approximate conversion into CAD and round it up to be safe. All numbers are including tax. A note on how it's paid. Automated deduction from my bank account, pulled from a credit card, as needed, etc. Date column reminds me when I can expect the charge to come, like what day of the month, or a specific date when subscriptions renew. Notes, like explaining my calculations (in case I forget), comparisons of what I paid last year for things like insurance costs, whether something is discretionary - some recurring subscriptions and donations could be stopped or paused if I needed extra money.  I also include some items that are basically budgets for categories where the spend each month is not fixed. Right now they are "Public transit", "Food" (basically groceries and other staples), "Misc" (catch-all for shopping fun/treating myself, unplanned donations, etc.). For these I do my best guess of what the amount usually is, and buffer it a little. Stuff like medication kind of falls in between Food and Misc and I'm not in a situation where it's a big expense, so I don't track it that closely.  How I use it: The spreadsheet totals up all the numbers so I can see how much I need every month.  If my paycheque covers everything, hooray!! If it doesn't, better start working on ways to adjust things - drop or reduce discretionary items, look for more affordable options and change providers, etc. I update the list when things change - e.g., my home insurance renewed at a new rate. I also do periodic checks to see if it still makes sense or I want to tweak anything. Right now the check is monthly-ish, because I also use the same spreadsheet file to help me monitor my cash flow. Since all the info is in one place, it's easy review everything and tweak it. I've seen budgeting templates that just have categories like "entertainment", "gym", "clothing", "cosmetics", which makes sense if you make relatively regular purchases in those areas. But I don't, so I've never felt the need, and this structure works for me.   Some people also have a line for savings in their budget, to make sure they account for that. I don't do that because I put nearly all the money I don't use for expenses every month into savings. My hobbies are pretty low cost (like borrowing books from the library, thrifting, writing/art/crafts, cooking and baking, etc.), and the pandemic has since reduced or eliminated some "more expensive" hobbies like eating out at restaurants, going to the movies, and (the big one) travel. So this list is just to help me have an up-to-date picture of what my realistic monthly expenses are.  But I do keep track of my savings withdrawals through monitoring my cash flow (keeping an eye on the activity of money coming in/going out of my bank account so that I know what I have available at any time)!For this, I made a simple calculator to quickly check my main chequing/bank account balance. This account has a minimum balance that needs to be maintained to avoid fees. The calculator helps me make sure I stay above but as close to that minimum balance as possible. I want to be able to move as much money out of the account as possible into better return saving/investing accounts.The bank account cash flow calculator looks like this:[Screenshot of spreadsheet. The top is a monthly starting balance, followed by expenses in chronological order as they are subtracted from the starting balance. A row in the middle calculates the mid-month balance before the first paycheque, and another row at the end calculated the end of month balance after the final paycheque. There is also a column of notes flagging how much the account balance needs to be to avoid fees.] Row 1/Cell B1: Opening/starting balance. Rows 2-8, 11-13: Expenses that are auto-deducted from my account, organized by when they happen during the month (e.g., bill payments; automated investments etc.) Rows 10 and 14: When my paycheque comes in twice a month. Rows 9 and 15: Show my balance total right before first paycheque, and at the end of the month. Very basic formula, just totalling all the cells above it. B9 has the formula =SUM(B1:B8) and B15 has the formula =SUM(B9:B14). Note: The reason I do the balance check calculations before the first paycheque but after the last paycheque is because in my case, most of my automated expenses take place in the first half of the month. So after my first paycheque, usually there are no concerns about falling below my minimum balance unless there's a very large unexpected expense. How I use it: When I need to do a cash flow check, I simply put my current account balance as the starting balance.  I update the numbers to remove the deductions/paycheques that already happened. In the real version of the spreadsheet, the notes column repeats the amount of the expense/pay, so that I can just copy and paste as needed from there as I play around with numbers during my check. I add any other expenses I'm expecting to deduct, for example if I'm thinking about making a bigger purchase than normal. Then from the highlighted balance totals, I can see what that does to my account balance, if I'm going to fall below my minimum balance, how much I can safely move out for saving, etc.[/READ-MORE] 🏦 2) Save/invest as much as I can of the rest. [READ-MORE]Any money that's not needed in my chequing account to cover monthly expenses goes to my savings/investments. They are: An emergency fund. My first line of defense. This is a high interest savings account (HISA) with enough money to cover a few month's worth of expenses, and make a bit of money while it's just sitting there. I can withdraw money from it immediately if needed for things like "welp the washing machine that's been here since we moved has in suddenly died", unexpected medical bills, and whatnot. A short term non-registered investment. This is in case of really big emergencies or bigger purchases that are too much for my monthly pay or the previous emergency fund to cover. This covers even more months of expenses, and since I'm less likely to touch it, it's a higher risk investment that has the potential to earn more money than a savings account (but lower risk/reward than my long-term investments). It's also a bit less liquid (slower to be converted to cash if I need it - might take a few days compared to the immediately accessible HISA). Long term investments for retirement. If I don't need to top up the previous two things, all extra money goes here. This includes my registered accounts (e.g., Tax Free Savings Account/TFSA, Registered Retirement Savings Account/RRSP, etc.). I do not withdraw money from these accounts. I pretend they don't exist aside from when I add money to them, deal with reporting for taxes, or discuss them with my financial advisor. This way they can continue to compound interest/grow as much as possible over time and allow me to take advantage of tax benefits. If I have a specific goal I want to save for, I might get a separate short term non-registered investment for it. Pre-pandemic that's how I'd plan for things like when I took trips to Japan and Taiwan. I'd figure out my budget for the trip and then save that money so that the principal (original amount invested) would be protected till I need to use it, and it can also make some extra money too. Usually I would use a GIC (Guaranteed Investment Income) for this. I've worked at places of different sizes, from small family-run businesses to large corporations. If my employer offers some kind of retirement savings (e.g., RRSP, pension) matching, which is noted in the paperwork I get when I start, I get that set up ASAP.  It takes a small amount of my paycheque (you can decide how much up to a max amount) and automatically deposits it into a retirement savings plan The employer matches it up to a certain amount.  I always make sure I max it out to get the full amount the employer will match. It's literally free bonus money!  [/READ-MORE]🧾 3) Keep track of info for taxes as I go. [READ-MORE]I'm a big believer in doing little things over time, instead of ignoring them until they turn into one massive mountain that overwhelms me as I'm trying to meet a deadline. Obviously it takes discipline, and I wasn't very good about it when I was little. But one day, when I was a kid, I read an article in Reader's Digest about how it takes X days to build a habit and if you can keep it up for that period of time it'll stick. At the time I was getting tired of the dentist always telling me I need to floss regularly at my checkups, so without telling anyone I started trying it with flossing. At my next check up, my dentist was impressed and gave me a glowing review. Little Me was like, wow!! It works!! Life hack!! And from that point on my life changed forever!! Or at least I became a little more disciplined, haha. I don't actually remember the number of days the article said (a quick search is giving me ranges from ~18-200+ days), but I remember it was something that seemed reasonable/doable to Little Me. And it doesn't matter because my main takeaway was - and remains - that if I keep forcing myself to do something regularly, it might feel like a chore at the beginning but will eventually transform into a reliable unforced habit. It's worked enough times for me, in any case. I file receipts and paperwork as soon as I receive them, so that I know where they are when tax season comes. If it's digital, it goes into a folder on my computer for the tax year with subfolders for the category (e.g., medical receipts, T-slips, donations etc. The folders are already pre-named based on last year's folders, and I update them if I think of a folder I need to add or a better way of doing it). If it's physical, it goes into a physical file folder labelled with the tax year and into my little filing cabinet. I am a bit lazy here because I don't bother organizing the physical folder, just roughly stash the things that are the same together-ish in the folder. Most receipts are digital these days so there's not too much to go through/organize in the physical folder when the time comes. Important thing is that they're all in one place and I don't have to hunt/tear my room apart. I have spreadsheets (usually copied from last year's work, cleared out and optimized with updates/learnings from last year) to track things I need for taxes, as they happen.  For example, I have one for managing sales, expenses and inventory for my art stuff. As soon as I get a sale or incur an expense and have the info to do it, I update the spreadsheet and add the item under the appropriate category and get info/totals that I can easily reference come data-entry-for-tax-time. I have an annual tax prep list (again, these days it's just copied from last year's and updated) that reminds me what accounts I need to check and what files/paperwork I got from each one last year, and any notable things I encountered when doing taxes previously that I want to remember. This way I can see what I should expect to have, what I'm still waiting for, answers to my common questions that I forget every year, etc. At the end of every tax season I update the notes in this prep list. It is my annual gift to myself that has saved me so many headaches and "What the heck does this mean?? How do I XYZ???" hair-ripping-outage. Thanks, Past Me!! When I do my taxes, as I enter the info from my files, I add a letter "v" prefix in the front of the filename so I know I've entered it. When I finish my taxes, I do a check of the info again, and then I change the prefix to "c" so that I know it's been checked. I do the same with physical documents, just make a mark on the top right.[/READ-MORE] 💸 4) Treat credit as cash. [READ-MORE] Credit cards to me are functionally the same as using a debit card. If I don't have the money in my bank account to cover something, I don't use my credit card. I pay off the balance in full every month. (I don't use my debit card to pay for anything. I am paranoid and don't trust giving that kind of direct access to my account.) I have two credit cards from two different providers, both with $0 annual fees. This is because having two helps with building a credit score/makes me look more reliable to official people (e.g., banks) doing formal checks for various kinds of applications, and also gives me a backup in case one of them becomes unusable for some reason (e.g., not accepted at the store, or locked due to fraud concerns from the card provider. Which has happened before when whatever algorithm the provider uses thought my purchase didn't seem to match my usual behaviour). I always treat one card as my main, and the other as a backup only if needed or if it had some kind of better deal/reward/perk for using it in that situation. I never let the credit card company raise my limit. The existing limit has always been more than enough for me and I think it's safer to have a lower limit in case the card is lost/stolen. [/READ-MORE] 🖊️ 5) Understand enough to make informed decisions. Find professionals I trust for the rest. [READ-MORE]I probably have enough skills/knowledge to deal with personal finance stuff on my own, but it would take a lot of time and energy and emotional discipline and stress me out to no end. I'd rather save more time and energy for things I love (like making art!), and leave nitty gritty details and administration to the pros if I can. So I've found it really great to have a financial advisor. This article from the Ontario Securities Commission has a summary about working with one.  My advisor has helped me way beyond just investments. A few examples: strategies that helped me pay off my mortgage earlier; researching, recommending and taking care of paperwork to protect my family and my future (insurance for health, disability, long-term care; wills etc.); how best to optimize my finances to be able to support charities and causes I care about; keeping an eye out on tax considerations with my investments; answering my questions about various financial info/new developments I come across and figuring out whether it's relevant or appropriate for me.  It gives me a lot of peace of mind knowing my family and I can contact my advisor for help if something terrible were to happen - a bad accident, losing a job - and we have a trusted professional who can support from managing the financial and paperwork side.  As for how I found my advisor: A former teacher of mine, whom I like and respect a lot, went into it. Despite him being my former teacher, I asked him for references and checked all of them before I agreed to work with him. He was super amused and told me, "You're the only person who did that." I don't take anything for granted!! He trained another person who supported him so I got to know her too, and then she took over his accounts when he retired. They've been wonderful. Both of my advisors have CFP certifications, and have never acted like salespeople pushing generic solutions or pressuring me - that would've turned me off immediately. They understand what I care about and make appropriate recommendations; are patient with all my questions (I ask a lot of questions... and sometimes the same ones over and over again because I forgot the answer from when I asked last year...); clearly explain things and give pragmatic feedback if they feel I'm making a decision that doesn't align with my values (probably because I didn't fully understand it); and are honest about what they know and don't know. Some day I might consider getting a professional to do my taxes too. Maybe. For now, I persevere lol [/READ-MORE]🧰 Resources [READ-MORE]None of these are referral links!📚 InvestingIntroduction.caThis is a site about financial/investment basics by the Ontario Securities Commission, but pretty much all the info is relevant for all Canadians. It's available in 23 languages which makes it great to share with people who might be new to Canada; don't have English as their first language; older relatives who may not be as comfortable in English; etc. It's pretty easy/fast to go through to get an initial overview on core topics like identifying fraud and protecting yourself against it; budgeting and saving; investing for the future; retirement planning. There are handouts and videos, and it also links to even more resources on their main GetSmarterAboutMoney.ca site for digging deeper on any topic.There are securities commissions throughout the country - I know I've seen some resources from the British Columbia Securities Commission and Alberta Securities Commission too.🪙 YourTrove.orgA resource site from Prosper Canada, a charity focused on financial literacy and empowerment. Similar to the OSC links above, there are lots of handouts, worksheets and templates, even tools for finding and navigating disability benefits. 🌳 Bank.GreenBeing mindful of environmental impact is important to me, and sustainable finance is part of it. This site helps you find more environmentally-responsible banking options, and is not just Canada. (This is like a geographically-broader version of Climate Pledge Collective's Bank Switch, which I've talked about before.)🖥️ Wealthsimple TaxFormerly SimpleTax until Wealthsimple bought them. My whole family uses this for our taxes, and I have a lot of friends who use it too. They offer a 100% free plan (donation optional), and it's quite user-friendly. (BTW the CRA (Canada Revenue Agency) is expanding their automatic tax filing this year!! Very exciting for people who qualify.)🔥 Canadian CoastFIRE CalculatorThis site helps you figure out your CoastFIRE number and includes considerations for CPP (Canadian Pension Plan) and OAS (Old Age Security) for Canadians. I find it a helpful way to have some big picture perspective on my different financial accounts. FIRE (Financial Independence, Retire Early) is a movement/approach where you essentially minimize all expenses to the extreme and save/invest heavily to hit a certain number (calculated based on your lifestyle needs). Once you reach that number, passive income from your investments will theoretically cover all your expenses for the rest of your life, so you don't need a conventional full-time job anymore. It requires extreme discipline and depending on individual situations may not be feasible... but there are variations of FIRE which also work as simplified ways to help me think about, manage, and feel in control of my finances, financial health and journey.  CoastFIRE is an approach where you figure out a number (again, calculated based on your lifestyle needs) where from that point onwards your investments can grow on its own, without any further contributions, to the amount you need by the time you want to retirement.  The idea is that once you hit that number in your investments, you can't retire immediately, but now you have more freedom and you can "coast". You don't have to worry about saving anymore - you just need to cover your expenses. So you could, for example, change jobs - go from full time to part time, or switch to lower-paying work that is less stressful and that you enjoy more. You can, of course, continue to save/invest, which would help to buffer and grow your security even more. But the main idea is that you have more control and flexibility to do what you want.[/READ-MORE] I'm considering another writeup about my experience related to my current investing approach in more detail (which would be even more Canadian-specific in terms of accounts/tools/processes discussed than this one, though again some of the principles can be fairly universal). Let me know if you might be interested in that!UPDATE: And here's the followup: My experience with investing!