Your grandparents knew a thing or two about managing money

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The more things change, the more they stay the same.

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Personal finance tools, technologies, and policies have changed significantly over the past five, 20, and 35 years. However, from what I’ve observed working in the personal finance industry for close to three decades, despite continual changes, the basics of managing your money successfully are as relevant today as they were when our grandparents came of age decades ago.

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The foundation of sound money management

Budgeting has always been about creating a plan so that you can make informed decisions about where your money goes. Whether you’re using a pencil and paper or a sleek new fintech app, the essence of budgeting hasn’t changed: Spend less than you earn and allocate your money wisely.

Imagine your grandparents jotting down expenses in a notebook. It’s not so different from using an interactive budgeting spreadsheet today. The tools have changed, but the goal of having a clear picture of your financial situation remains the same. Setting financial goals, whether for a rainy-day fund or a down payment on a home, and tracking expenses such as groceries, bills, and recreational activities, help you prioritize your spending and make intentional financial choices to keep your spending aligned with your income.

What’s more, budgeting isn’t just about cutting back and depriving yourself. It’s about making your money work for you. By understanding your cash flow and adjusting your spending plan as life happens, you can make informed decisions about where to invest, how to save more effectively, and even how to treat yourself without guilt.

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The key to achieving financial stability

Saving money is a concept that has remained unchanged for generations. Whether during times of economic stability or uncertainty, the act of putting money aside has always been a key to financial security. Regardless of the current interest rates or investment options available, building a financial safety net is as important as living according to a budget. Saving is a habit that ensures you are prepared for life’s inevitable ups and downs and future opportunities, such as spending a year abroad. More on that later.…

In our grandparents’ time, putting coins into a piggy bank or a simple savings account was the norm. Today, the landscape has evolved with high-interest savings accounts, tax-free savings accounts and automated savings plans making it easier to grow your savings. Yet, the process is the same: Set aside a portion of your income regularly, which is easier to do when you think of savings as your most important expense. This disciplined approach to saving money, which takes advantage of the magic of compound interest, helps you prepare for future needs, whether it’s an unexpected car repair, a medical emergency, or a dream vacation.

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The importance of saving and paying yourself first cannot be overstated. It provides peace of mind and financial security, allowing you to navigate life’s uncertainties — or even a pandemic — with confidence. By having a comprehensive savings strategy you gain the freedom to make choices without being constrained by financial worries. Whether you’re saving for short-term goals, such as a new gadget, or long-term for retirement, the practice of saving money is a timeless and essential aspect of financial wellbeing.

Regaining control when spending has gotten ahead of you

Managing debt is another area where, despite changes in the types of debt and financial products available, the core strategies remain the same: understand what you owe, consider options and solutions to deal with your debts, and then develop a debt reduction strategy that you can follow through with. However, because debt is now seen as normal, many believe that applying for credit is the only way to buy what they want. Unfortunately, it’s exactly this mindset — prioritizing borrowing over budgeting and saving — that has become a huge obstacle for creating lasting financial stability.

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Decades ago, dealing with your debt might have involved paying off a mortgage, car loan, or credit card bills. Today, we have many different types of credit products, such as student loans, personal loans, payday loans, and re-advanceable mortgages in the form of home equity lines of credit. Despite these changes, the fundamental strategies for managing debt remain the same: Prioritize high-interest debt, create a realistic repayment plan and avoid excessive borrowing.

Paying off high-interest debts first helps you reduce the overall interest burden, while consolidating debts can simplify your finances and potentially lower your interest rates and payments. But when you’re overwhelmed, identifying a strategy or even just a starting point can seem like an insurmountable task. That’s when seeking professional advice from a non-profit credit counsellor will help. They can provide valuable insights and guidance from an objective look at your overall situation and then suggest tailored strategies to help you deal with your debt effectively once and for all.

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Embracing change and future possibilities

Change is the only constant we can rely on, and, depending on your outlook, there are times when it can be an exciting adventure. After careful consideration and a lot of planning, I am thrilled to share that I will be spending the next year living in Europe, accompanying my husband for professional reasons. This means that this will be my last column for the Financial Post as I take a leave from my career in personal finance. But you will be in good hands: My colleague, Mary Castillo, will continue sharing valuable personal finance tips and insights from her work as a credit counsellor.

What’s old is new: essential financial wisdom

The basics of budgeting, saving and debt management are as relevant today as they were decades ago. Despite the rise of digital banking, cryptocurrencies and fintech innovations, the advice to spend less than you earn, use credit carefully, and invest your savings wisely still holds true. If I can leave you with one final piece of advice, pay close attention to where you spend your money. It’s not how much you make; it’s what you do with what you save. I wish you successful travels on your money management journey.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 28 years.

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