Meridian Wealth advisor David Semerak weighs in on financial literacy, the limits of budgeting, and delayed gratification
Many calorie-conscious Canadians go through a post-holiday detox as part of their annual start-of-the-year routines. Some shift their diets toward the greener side of the food spectrum; others turn to specialized food supplements; and still others revive their love-hate relationship with the gym.
But from David Semerak’s point of view, there’s another type of detox that people should undertake.
“Whether it’s on gifts or special experiences with our loved ones, we’ve all become accustomed to spending more through the holidays,” said the senior wealth advisor from Meridian. “Now that we’re back to our regular routines, I believe it’s really important to step back and get our spending under control.”
It doesn’t take a wealth professional to realize that spending money feels very, very good, which is why Semerak says it’s too easy for people to carry their higher-than-normal December spending habits into the new year.
“If we don’t monitor and acknowledge it, it could get out of hand,” he said. “It could blindside us, particularly many people whose January paychecks are smaller than in December, thanks to taxes that come back into effect.”
Given that, the first month of the year represents an ideal time to step back, rein in spending, and re-evaluate one’s financial situation. According to Semerak, the habit should be an annual tradition not just for individuals, but for households.
“I think our education system does a pretty poor job of teaching our kids about money,” he said. “Making it a family affair really allows us as parents to close the gap and teach our children how to be responsible with their money.”
Ideally, parents should take every day as a chance to impart financial lessons, but daily life tends to get in the way. Dual-income families have arguably become the new normal; with two young boys to care for, Semerak and his wife are exhausted by the end of the day. But through their yearly financial detox, they create opportunities to discuss money in a more natural setting compared to school or sitting children down to discuss budgets.
“Typically, if we’re driving to a hockey game or a soccer game, we’d stop for a coffee, and the boys would ask for something to drink like a smoothie,” he said as an example. “But during Financial Detox Month, we don’t stop, and I talk to them about how much we managed to save with that decision.”
Creating teachable moments is particularly important as getting children’s undivided attention becomes more challenging. With personal devices and faster data connections, more free time is lost Netflix and other streaming sites. Social media and online games can also take away chances for families to connect with each other.
The risk of overspending increases further with the convenience of buying items online, as people who did their holiday shopping through e-commerce sites may be realizing. In the case of digital items — an in-game power up, an extra skin for a Fortnite character, an e-book — having no physical object in sight makes people more prone to keeping the associated expense out-of-mind.
The proliferation of cheap debt, which has made a lot of Canadians overly accustomed to tapping their lines of credit and credit cards, has added fuel to the fire. “I’m not saying that there aren’t very constructive uses of debt,” Semerak said. “But we can’t lose sight of the fact that eventually it’ll have to be paid back. Having a plan in place to pay off your debt — committing to go beyond minimum payments, for example, through an automatic savings plan — is really essential.”
For Financial Detox Month, he advises people to pursue one of two goals: reduce debt or increase savings. His own family observes the tradition by avoiding spending on discretionary items, taking a sack lunch or lunch box every day, eating home cooking or leftovers, and not purchasing new toys and games. The money they save, he said, is used to pay off debt from bills, settle holiday expenses, or add to the family’s emergency fund — all benefits that his boys don’t necessarily appreciate, but he believes they should be made aware of as early as now.
Budgeting may be useful for some to achieve their savings or debt goals. But it’s not so easy for others, as Semerak knows firsthand from being a father with two kids. Ramping up savings could be particularly useful for those who already have an automatic investment plan in place — something that he urges everyone with access to a group savings plan to do.
“Not having enough savings or having too much debt can have long-term consequences, which is too easy to forget in our instant-gratification culture,” he said. “That’s why I think no matter what people do, whether they’re budget people or not, they should devote part of each year to mindfully monitoring and tracking expenses as a family.”
