11 February 2021

Introduction

The road to purchasing your first home can be a bumpy one, especially for the younger generations entering into such an appreciated market that poses much more expensive homes than that of previous generations. Additionally, many of us live with some form of debt from education, credit cards, bank loans, subsidy checks, and more. 

The generational differences are why it’s imperative for us to develop a method of efficiency; we need to learn to walk through our financial life with as little drag as possible, otherwise we will never attain the goals we set for ourselves. If you want to purchase yourself a home, you need to ensure you’re saving money as effectively as possible and not bleeding cash each month. That is where the two main areas that drain your account each month come into play: debt and expenses. 

Paying off Debt

When you have your sights set on purchasing a home, your finances play a significant role. That, in turn, leads you directly to debt management, assessing how much debt you currently have, your ability to pay it off, how long that will take and the gap between your current efforts versus your potential impact on debt.

An important step in paying off your debts is prioritizing which order you will pay them off in. If you have multiple sources of debt and you put all your time and energy into paying off the wrong one first, it is only going to prolong your time saving for a house or condo.

In this article, Dave Ramsey briefly explains his recommended strategy to paying off debt. You can also find books on paying off debt from these two sources: Canadian Finance Books...MORE BOOKS!

Look through the strategies to find the one that best suits your current situation. Everyone has different personal situations in their life combined with unique debt, so your solution needs to fit your circumstances. The last thing you want to do is try paying off your debt only to realize you’re not plugging the biggest holes first.

Learn Financial Discipline

Discipline:

Self-discipline is one of the most important and determining factors when it comes to success, at anything. Life, happiness, fulfillment, career, character development, accomplishing life goals, and, yes, finances. If you don’t develop and strengthen your financial discipline, you can actually be spending more than you’re bringing in. Regardless of whether you make millions or an average income, it’s impossible to out-earn the absence of financial discipline.

Building financial discipline takes time and a LOT of effort. I always keep things straight with you and refuse to sugar coat the requirements to achieve something, this is no exception; this will not be a quick and easy road. With that said, however, it is definitely achievable. Here are some great steps and strategies to developing strong financial discipline. Be persistent and determined when approaching this. Discipline is built over time and, just like working out, the first few weeks are going to be the most challenging.

In addition to those resources, I have a few recommendations to avoid impulse purchases which will improve your results as you build your financial discipline.

Never go grocery shopping when you are hungry, you will spend 3 times as much as you intend. Avoid shopping every time you receive a paycheck, and just spend less time in the mall to begin with (COVID will help you with that). If you find yourself about to buy a product or piece of clothing, stop, put it back on the shelf and wait 24 hours. You will probably still have a desire to have that item after this wait, but you will also find you usually have a lower urge to buy it because you were caught up in an impulse buy 24 hours earlier in the store.

These are all examples of how you can reduce impulse spending by making small changes prior to going to the store. They are simple, yet extremely effective. 

Needs Vs. Wants:

A large part of self-discipline with your money is drawing a fine line between products and services you need and ones that you want. And this is a simple concept, but like most it is often overlooked.

Take some time to sit down and make a list of all the products and services you’ve spent money on in the past month. Then really look at their role in your life and categorize them as either a need or a want.

Were those two extra streaming services really needed? Did you need to order delivery for dinner last night, or could you have cooked something at home? Did you really need to spend so much on drinks at the bar last weekend?

You’ll find most of these items to be quite obvious to categorize, and the ones that require more thought will be settled at the end and you’ll be more conscious of the wants that don’t need to continue receiving money from you in the future.

Do an exercise in different rooms in your house. Scan the room and look at all the things that you bought. Would the room be a lot emptier if it was just things you needed, or would it look similar to what it does now? Would your bank account look healthier if you hadn’t spent money on a single want in the past month? Three months? A year?

This type of exercise is designed to change the way we think about our purchases. Albert Einstein once said, “No problem can be solved from the same level of consciousness that created it.” Similarly, no financial situation can be improved if we remain at the same level of discipline and thinking.

You can absolutely improve your financial situation through planning and taking actionable steps. Just like working out, the beginning is going to be the most challenging. Stay true to your financial goals and remain consistent in your actions. The way to achieving any financial endeavor is never easy, but it is absolutely attainable and certainly worth the reward in the end.

Conclusion

Debt and expenses can be the largest holes in our ship as we sail through financial waters, and drowning in debt is not a desirable outcome. If we change our mindset towards these issues and address them more proactively, we can avoid sinking. Even when we feel like we are already disciplined and addressing debt, there is always room for improvement, incremental advantages can make a big difference in the long run.

Place your priorities under a microscope; take the time to really draw the line between your “needs” and “wants” at this stage of your life. Devote some energy into learning about the debt you have, and which ones are causing you to take on the most water. This will decrease the overall amount of money you lose from your bank account each month, ensure that the money you put towards paying down debt is used the most effectively, and will lead to more money being saved to buy your first home!