Canadian Finance Blog

How to be Financially Responsible in 2012

Posted: 13 Feb 2012 02:00 AM PST

With a new year well underway, you may have had good intentions to improve your finances in 2012. In order to get your finances in check, you need to have a plan. This plan should include living within your means, spending according to your priorities, and doing what you can to get cash back and other rewards.

That's right: You can be financially responsible and still use a credit card. I've been using the TrueEarnings Card from Costco and American Express for a few months now, and it is clear that you can incorporate a rewards credit card into your efforts to be financially responsible and get ahead.

Start the New Year off Right

The very first thing to do is to stop spending more than you earn. Take a look at your income and your expenses, and make sure that what you make exceeds what you spend. Consider your priorities, and what's important to you. Look at the spending you have that doesn't match your values and financial goals. Those are the purchases you can stop making to bring your spending in line with your income.

Make a plan to pay down any debt that you have, and stick with that plan throughout the year. You want to make sure that you are getting rid of debt so that your financial resources are your own. Consider a realistic plan for paying off debt, and work on that.

Next, look for ways to earn more money. If you are concerned that there is only so much cutting you can do in your budget, or if you are looking for ways to increase your income so that you have more available cash to help you invest for the future, consider your options. You take a second job, start a side hustle, or look for passive income sources. And, if you want to earn money without doing anything markedly different from what you do regularly, you can consider using a cash back credit card.

Use Cash Back as Part of Your Plan

Cash back cards can be a great way to improve your ability to live in a financially responsible manner. Make a list of all your regular expenses — the things you plan to buy anyway. Then, use a cash back card to make those purchases.

You will be surprised at how quickly you can earn money — earning up to 2% on eligible gas purchases, 3% on eligible restaurant purchases, and 1% everywhere else. Let your money sit in an interest-bearing account all month, and use your cash back card as much as you can, all the while adhering to your budget and living within your means.

When you pay off your card each month, that money becomes earnings that can be put to good use. The year-end rebate from Costco when you use TrueEarnings is a lot like a windfall. I received nearly $50 cash back after having the card for less than six months, a full year would technically pay for my Costco Executive membership on it’s own! I received a rebate in the mail which I could use at Costco or exchange for cash. I used the cash reward while I was shopping, so it helped cover the majority of my grocery bill. If you are not shopping that day and want to be financially responsible, some of the ways to use this money can include:

Put it in your emergency fund so that it is ready to be called into action when you really need it.
Pay down debt so that you get ahead that much more.
Buy something you need, that you have been saving up for.

When used wisely, there is no reason that your TrueEarnings credit card, or other rewards card, can't be part of your efforts to get on the right track with your finances in the coming year.

How to be Financially Responsible in 2012 originally appeared on Canadian Finance Blog on February 13, 2012.

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