Like 10% of Canadians in a study Gail quotes, I give myself an A in financial literacy. However, Gail correctly observes that “many Canadians may have a false sense of confidence.” Here are a few facts about my finances before I leap into taking Gail’s tests:
– I save more than half of my take-home pay.
– This savings level is not really part of any plan. I just look back at my credit card, bank account, and trading account records and see that I’ve saved more than I’ve spent.
– I check my account statements closely for errors, but I maintain high enough balances that I don’t have to check often to see if I have enough money for a particular purchase.
Here’s the first test (edited for length):
1. If you track your spending daily, take an A. If you do a weekly check, you score a B. If you’re over-confident enough to believe that you only have to check in once a month, you’re passing, but just. Never look at your account because you’ve got overdraft protection so nothing too bad can happen? You FAIL.Given how often I check my accounts, I deserve roughly a C on Gail’s scale.
2. Do you live on a budget and stick pretty close to the plan? Take an A. If you have a budget but sometimes are surprised by expenses, you score a B. If you have a budget in your head, and never go over on your spending, you’re passing, for now. If you don’t have a budget at all because you think they’re stupid or you can’t be bothered to manage your money with this level of detail, epic FAIL.I’m partly a D and partly an “epic FAIL” on this one. I don’t have a budget, but I never go over on my spending. I just look into the past to see how much I spend and use this to predict my future.
3. Do you have a specific amount that you set aside every month automatically for both retirement and emergencies? Take an A. If you save “pretty regularly” but not automatically, you score a B. If you’re using a round-up program for savings, all you get is a pass. Less than that, you FAIL. You also FAIL if you claim you can’t find even a dollar a day to save.I probably deserve a C on this one. Whenever cash has built up to a certain threshold in one of my accounts, I invest it. I usually just make one RRSP contribution in a year. I fill up my TFSA whenever there’s enough cash around. Any other cash gets invested in my taxable trading account.
Overall, my performance doesn’t look good on Gail’s scale, but my personal financial results are likely in the top few percent. I have friends who handle money similarly to the way I do. Gail’s methods are very successful for helping most people, but there seems to be a subset of us who don’t need Gail’s approach. However, I’d bet that most of the people who think they don’t need Gail’s approach are wrong.