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Does Being a Penny Pincher or Money Miser Translate into Being Money Savvy?

Are you a penny pincher or money savvy?
Whenever there is a significant change that takes place throughout the year it causes some general reactions. For example, when a New Year is beginning tons of people make New Years resolutions. When a change in season is coming up people tend to start taking some positive actions. For example, for the spring/summer months a lot of people focus on getting slim and trim so they can look good in the clothing that is applicable to these seasons. When tax season arrives and the T4’s come out people are shocked at how much they made for the year and don’t understand where all the money went.  So they make a temporary vow to track their spending much closer.
For the first little while these individuals could be almost classed as penny pinchers or money misers, because they are not spending as freely as what they normally do.   In many cases this type of action only lasts for a month or two, then the sting of tax season lessens, and they go back to their own spending habits.
If they were to keep the money watching into play though would it actually translate into them being money savvy?
If one really wants to financially sound it has come to the point where one almost has to run their personal finances like a successful business would.   So what would that mean?
It would mean first of all keeping really good records as to what is actually coming in every month and what is going out.   Instead of waiting till the year end T4 slip arrives.   Although the income figures on this are only related to gross and net income, and doesn’t include all the living expenses. It still shows how much net money was left over that was used to live on during the year, and this still shocks many individuals.
The tracking of the personal finances just like a business would is going to give the true financial picture of what is going on.
A business would then take a look at all the money that was going out, and see where they could cut costs or do things differently that would generate some savings.
If you were going to apply this to your personal finances, it would mean looking at your household costs.   How can you shave these down?  A good example, of this is the post we did about hydro bills.   One thing you really need to understand is that shaving the living expenses is no easy task. First it takes time to analyze each and every expense right down to the last detail.   Then determining how much power you have to reduce the expenses. Then being committed to implementing ways to follow through with it.
This may seem like just too much work, but it is exactly what a successful business does.  If you want to whip your finances into shape then you may just have to learn to become a business person and rise up to the challenge.

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Sam Seidman, CPA, CA, LPA
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