2021 is going to be your year (well, financially at least.)
This is the financial feminist’s guide for everything financial goals in 2021 (which means you made it through 2020 – pat on the back!) If anything, 2020 taught us the value of having a plan, throwing that plan out the window, then making a new plan, adapting, and learning from those around us. The51 is here to help you set new goals and optimize your financial future. Unsurprisingly, step one is, well, setting those goals, and step two is putting a plan in place to achieve them (a.k.a., building a budget). If only you had a handy guide to get started? Oh wait…
This guide is composed of four sections:
Looking back: What decisions and habits do you want to keep? What would you like to change?
Goal Setting: What would you like to achieve financially in 2021?
Budget: How are you going to get there?
Milestones: How are things going? Give yourself the opportunity to celebrate & reflect.
Looking back
The first step to a financially better 2021 is to take a look back at 2020 (we know, we know, but just do it quick…) Reflect specifically on how you reacted to the massive change in lifestyle that came with a global pandemic, and how your finances changed. For example, take a look at your spending habits from January to February and compare them with those of March to August to really get an idea of the changes. Mark down your income, your expenses and what you had leftover in your savings.
A forced slowdown of your social life also offers a unique opportunity to get insight into the “why” behind your spending decisions. Did you continue to stock up on fabulous shoes even though not a single one of your coworkers got to admire them over Zoom? Did you completely forgo self-care and work 24/7? Did you shop local or did you rely on Amazon deliveries? Take time to consider how you felt about your spending decisions; how did or didn’t they reflect what’s important to you and your financial goals?
Goal Setting
Alright. At the risk of sounding like a self-help brochure, imagine the best version of yourself; what would you like to celebrate in 2022? Are you hoping, for example, to move out of your rental and buy a place of your own? Is this the year you ask for that raise you deserve? Maybe you want to replenish the emergency savings you had to dip into in 2020, or build on the investing portfolio that you’ve established. What’s important for you to accomplish over the next year? Is there a location to visit on your bucket list? Is this the year you become debt free? Are you saving for an education program you’ve always dreamed of? Once you know where you want to get to, you can plan how to get there.
If you’re budgeting with a partner, it’s important to discuss both your individual and joint financial goals. The exercise of budgeting provides a valuable opportunity not just to discuss money, but your values around money. This way, you can remove any friction about spending and saving decisions in advance.
Budget
Screw diamonds. A carefully planned budget is every woman’s best friend. A budget is simply a written plan for your monthly spending, but having one is vital to keeping track of where your money’s going. A budget is putting the power of your money into your hands to control – no one else’s.
Why should I bother with budget?
"Failing to plan is planning to fail.” OK, so we just borrowed a line from our high school gym-teacher’s playbook. But it rings true; without a plan, you’re flying blind. The purpose of a budget is to provide a way to play your spending, in accordance with your priorities and values, and to give you a tool to measure how things are going. It is a great indicator if you are living below, within, or above your means! A budget should:
Act as a roadmap toward your financial goals
Align your spending and saving to your priorities
Build and reinforce new habits
Reduce financial stress
Control mindless spending
Grow your savings
How does gender influence budgeting?
As financial feminists like you already know, the economic realities in Canada are uniquely challenging for women. As of 2016, women were still making less than $0.70 on the dollar compared with men. And for Black women, Indigenous women, women of colour, women with disabilities, and women who identify as LGBTQ2+, the statistics only get worse. Indigenous women working full time in Canada earn $0.65 on the dollar compared to non-Indigenous men, and women with a disability earn a shocking $0.54 per $1 earned by non-disabled men.
However, despite significant differences in earning, women and men spend similar amounts in key categories such as housing, utilities and healthcare. Additionally, due to the “grooming gap” women’s earnings are negatively impacted when they don’t invest in hair, makeup and clothing (more on this another time…) ironically, these are the very purchase types often considered frivolous and therefore encouraged to be minimized when building a budget. Not to mention, factors such as career disruption for family leave, differences in life expectancy, and investing risk tolerance influence women’s savings and needs in retirement differently than men’s needs. This makes it critical for women to manage a budget that allows them to save and invest as early and as often as possible.
Your budget equips you with a roadmap to make impactful spending decisions. And as a Canadian women, studies show you will likely be the one making the most economic decisions for your families—from deciding which consumer goods to bring into the home, to which services are needed to maintain the household. In fact, women hold crucial purchasing power: Women drive about 85% of all consumer purchases (Yankelovich Monitor & Greenfield Online) through a combination of their buying power and influence.
The wealth landscape in Canada is about to change significantly over the next couple years. Currently, Canadian women directly control a large chunk of Canadian financial assets—about $2.2 trillion. By 2030, women are expected to control 65% of the financial assets in Canada. We hope to provide our Financial Feminists with the right tools to create healthy financial habits and move mountains with that $3.8 trillion.
How can I budget?
There is no one-size-fits-all approach to budgeting. Everyone has unique needs—which is exactly why we have options.
What are the steps to creating a budget?
No matter what budgeting approach you follow, these are the key steps:
1. Go through your previous year’ bank statements. Consider which of your expenses are fixed, and where you have flexibility. Based on this, make a realistic budget for the next 12 months. Break down each category of expenses.
2. Start by addressing any outstanding debt for example, student loans or credit card debt, and devote energies to paying this off before you start saving or investing.
There’s differing opinion on whether or not you should wait to start saving while paying down debt. This is a personal decision, but we like to look at the ROI (Return on Investment) of where we’re putting our money. Are you getting further ahead by earning 0.1% interest in a savings account, or by avoiding the 19.99% interest on credit card debt?
3. Once debt is tackled, aim to put 20% of your paycheck aside until you at least have the equivalent of at least two months’ worth of expenses in your bank account. This is your rainy-day fund. Depending on what your fixed monthly expenses are and how much risk exists around your income you may want to set more aside. What do we mean by income risk? Consider how stable your employment is (Was your organization hit hard by the pandemic?), whether you’re a freelancer or a salaried employee, or whether your income is supplemented by programs such as CERB or EI. If your income is (or may become) variable, you may want to increase your rainy-day savings. Likewise, your rainy-day fund should increase as your life and financial commitments increase. Do you have a family to support, or own your own home? If so, set more aside—try to get that rainy-day fund closer to six months’ worth of expenses.
4. Build up some short-term savings. Are you dreaming of your next beach vacation? Start setting aside money for it now.
5. Once you’ve built up your savings account, it’s time to start investing. We recommend speaking with an advisor to determine the most favourable investing vehicle for your personal considerations. Investing early and often makes a world of difference (it’s possible we’re a bit biased… but truly, developing these skills early is an excellent strategy for success.)
“Budgeting your money is the key to having enough. “
- Elizabeth Warren
50/20/30 Budgeting Method
Senator Elizabeth Warren popularized the so-called "50/20/30 budget rule" (sometimes labeled "50-30-20") in her book, All Your Worth: The Ultimate Lifetime Money Plan. 50% of income is allocated toward needs, such as rent, food, and minimum payments on debt. 30% is for wants, such as trips or entertainment. Finally, 20% goes toward savings.
Excel Budgeting Tool
If you want help determining your expenses, check out our monthly budgeting tool. Using an excel template makes it easy to consider different scenarios that would impact your spending and savings. It also makes it really easy to categorize and compare your spending to your budget on a monthly basis.
Are you looking for a template to get started? Sign up for membership and receive our 2021 budgeting tool.
Use an App
Apps such as Mint (Free) and You Need A Budget (CAD $11.99/month) make it easy to track spending by linking your credit cards and bank accounts.
Milestones
Schedule monthly budget reviews to track your progress in pursuit of your financial goals. This is the time to reflect on the month and determine which areas need your focus.
Assess how you feel about how much you’ve spent in each category: Would you like to invest more of your income in any area, or is there an opportunity to cut back? (i.e. “I wish I had invested more in learning over the last year.”)
Sitting down to review your spending every month can feel really uncomfortable at first. Did I really spend $200 on Uber Eats this month? However, knowledge, even uncomfortable knowledge, is power — and it’s the key to change. If you don’t check your progress against your plan, you won’t know how close or far you are from achieving your goals. It’s also important that you don’t forget to celebrate your accomplishments! Reviewing your spending should provide you an opportunity to congratulate yourself for ways you’ve challenged yourself and succeeded.
Remember, it is never too late to start! Let’s tackle 2021 like the kickass financial feminist that you are. Tell us how it’s going to in the comments below! What budgeting approach works for you? What’s your hot tip to share with this community?
Are you eager to learn more about how to actually get started? Join us for our member’s only Budgeting session and get our 2021 budgeting template for free to get started. Sign-up membership here.