When CreditCards.ca asked how her new book, "Count on Yourself - Take Charge of Your Money", can help consumers in the New Year, award-winning financial journalist Alison Griffiths replied, "Knowledge really is empowering. After you start taking these steps, and although it may take a while if you've been in the backseat financially, once you're in the driver's seat, it feels good."
Pausing slightly, the host of TV shows ‘Maxed Out' and ‘Dollars and Sense' added, "And, it's kind of fun!"
Below are five powerful "take charge" resolutions based on Alison's latest money guide.
Money Resolution No. 1: Get organized financially.
Alison Griffiths: By that I mean that we can't spread our financial stuff all over the place. If I was to gather most people together and say "List all your debts, tell me what your credit limits and interest rates are," most people couldn't tell me.
They may know that their mortgage is at 4 per cent. But the average Canadian has at least four credit cards, and loses track of and gets confused by what they owe. And that tends to result in us making poor decisions.
A simple exercise is to write down all your debts or list them in a spreadsheet, including the interest rates and credit limits. This gives you a picture, and a lot of people will say, "Wow!" Your ‘aha moment' makes it easier to take the next step, which is having a strategy to pay down debt (i.e., highest interest rate debt is paid first, and then you move on down the line).
Money Resolution No. 2: Read your statements.
Griffiths: The second resolution falls into the 'pay attention' area. As our lives get so busy, we all carry debts with many bill payments, and there's lots of other financial stuff that demands our attention. As a result, we tend not to read what we're most familiar with. I find that the vast majority of people don't thoroughly read their credit card statements. They'll look at the bottom line, and if it looks more or less right, they'll either pay it off or pay what they can afford. But they don't actually go through and take a look at the transactions.
A careful review can catch a lot of fraudulent or irregular activity, as well as mistakes. I just caught one on my credit card statement, where I was double-charged for an airline ticket. It was easy to pick out, because the charges followed each other. Yet it was a very heavy month for me, because I had done quite a bit of travelling. Since I pay off my cards every month, it would have been really easy to say, "Yes, it's a big balance because I travelled a lot, so I'll read the statement later." I really urge people to start reading their statements in the New Year.
People often notice service charges on their bank statements that they're not really aware that they're paying. It doesn't take that long to review the average credit card statement. Just run your eye and finger down the list of transactions. The other thing that I find that it does is that people tend to wince when they see what they spend. Once you start reading your statements, this increased awareness will lead you to tighten your belt.
Money Resolution No. 3: Become more aware of your investments.
Griffiths: Most people don't know what they buy every month for their retirement in 10 to 50 years. This is a staggering thing when you think about it. A lot of people have set up automatic monthly pre-authorized contributions to their RRSPs. Imagine buying something every single month, but you have no idea of what it is. And yet, this is a very common thing.
Take a look at your investment statement. If you understand every single item that's there -- great, keep going. If you don't, it's time to visit your financial adviser.
At a recent workshop with a group of 15 women, I asked all of them what they were buying in their company pension plans. Not one could tell me. Many of the women in that group had Masters degrees, so it's not about being a financial whiz, or being Warren Buffett. It's more about taking a look [at your statements].
Money Resolution No. 4: Keep it simple smartie.
Griffiths: Study after study shows, that the simpler you make your investments, the more likely you are to have investment success. At that seminar attended by 15 women, we also brought in our personal investment statements. One woman was very apologetic and said, "All I do is just buy GICs." And I said, "Brilliant! You get the Warren Buffett award." Why? Number one, she knew exactly what she was buying. Number two, she hadn't lost money as have so many others.
Everybody was surprised, because they thought I was going to talk about other ways to make money. And yes, I can do that. But for her, she selected something she could understand, she felt confident with, plus it was safe. When she asked, "What should I do now?" I said, "Stick to the course, you're doing fine."
Money Resolution No. 5: Educate your kids about money.
Griffiths: Our kids are probably going to be a generation that will be more or less on their own [in retirement]. Educating your kids about money can be about really simple things like teaching them how to comparison shop, paying attention to ensure that their receipts are right and getting the correct change if you're paying with cash. These kinds of things develop awareness in kids.
I have no idea of what the financial world is going to look like in 10 years time. But I do know that if you teach them to pay attention, to ask questions when they're confused and to keep asking questions until they get an answer they can understand, then you're going to raise a child who is going to grow up to be much savvier than if you keep your fingers crossed hoping to get it right.
Talk with your children about money issues: paying the mortgage, credit cards or developing a budget for vacation spending. Get kids involved as if you were teaching them how to bake cookies.
Do the same with money, and it will definitely pay off.
See related: Expert Q&A: Smart money tips for 2012; 7 money lessons from "The Wealthy Barber Returns"
