It’s time to go back to the basics of financial management
by Caroline Nevin
Recent Ipsos Canada survey data shows an interesting dichotomy in how Canadians view the economy. In essence, we believe that the economic situation is “bad,” but it’s not that big a deal for “us.” The thinking goes something like this: “We’re not a Lehman’s, we‘re not big money stock market players and my family seems to be doing OK.”
Regardless of how much or little you believe the global situation will affect you, it is reasonable to assume that it will. We don’t know how bad it will get, but we do know that our old way of life is no longer viable. Unending access to credit, living beyond our means, hyper-inflated housing markets, guaranteed wage increases (and jobs) will all be viewed by history as signs of a consumer society on the road to an inevitable crash.
The Canadian dollar has already dropped almost 20 per cent, real estate values are sliding fast, and the cost of living is increasing as inflation continues to rise. US law firms – those that remain standing – are expected to take a hit of between 5-15 per cent (Hildebrandt International). Altman Weil is predicting a nine per cent decrease in profits.
Whether you are in private practice, the public sector or in-house counsel, this is a good time to look at ways to reduce your exposure to financial stress. There are many sources of advice on the topic, but it all boils down to the same four rules you’ve always known:
Get clear on what you really need and want, for now and for the future. Find out how much you owe, record what you spend, and figure out a reasonable budget. There are lots of resources to help with this, including self-help sites (e.g. www.playbook.theHartford.com) and professionals (Canadian Bar Financial [CBAF] www.barfinancial.com).
Once you’re clear on what’s important to you, make conscious choices about spending. Put away all but your lowest interest credit card. Pay down the rest of your debts, starting with highest interest ones first. Use cash as much as possible, and find fun ways to be frugal.
(One CBA tip: as a B.C. lawyer, you have to invest in at least 12 hours of professional development as of January 1, 2009. CBA membership gives great value with 12 months of approved PD options plus up-to-date news and friendly networking.)
3. BUILD FOR THE FUTURE
No matter how small, save part of every paycheque. Take charge of your own “next stage” of life by growing the savings you need to move on – or land softly – when it’s time. (Note: thanks to CBA advocacy, your RRSPs are protected from seizure, just like pensions. And the CBAF has a great CBA rate to grow savings faster).
4. SHARE WHAT YOU CAN
This is a tough time for lots of people. We, who are fortunate, have a chance to help others. There are lots of great organizations to support, including the CBABC Bar Benevolent Society and Lawyers Assistance Program.
What your parents taught you is still sound: don’t pay more than you have to, don’t buy what you don’t need, save something no matter how small, and give what you can to those who have less. We are older now; perhaps it’s time to be a little money-wiser too.
Caroline Nevin, Executive Director, B.C. Branch, Canadian Bar Association
This article was published in the December 2008 issue of BarTalk. © 2008 The Canadian Bar Association. All rights reserved.