2020 was a year many of us would like to forget, so starting off in 2021 let's give ourselves a financial kick in the pants and make this year a great one! Last year with the start of the global pandemic many Canadians were stressed out, especially when it came to the economy and their overall financial well being. Let's have a look at a few things you could tackle this year to help alleviate some stress no matter what life might throw at you in 2021.
1. Set Financial Goals - set goals for 1 year, 3 year, 5 year, 10 year, and even 20 years down the road. Perhaps having a budget and tracking your expenses is important for you to get a handle on. Maybe it is more so buying a car, paying for a wedding, or maybe something bigger like saving and investing for retirement? Sometimes by simply writing our goals down it will help us actually make a plan and stick to it in an effort to accomplish them.
2. Pay Down Your Debt - although some debt or financial obligations may have been delayed for some in 2020, it is likely that trend will not be able to continue for long. Always focus on paying down your highest interest debt first usually with credit cards, and then work your way down from there. If you have a lot of debt from various different sources it might be worth a look to see if you could consolidate it into one larger loan at a lower interest rate and to make it more manageable. Maybe you're pretty debt conscious and only have a mortgage to deal with? It might be a good idea to weigh the pro's and con's of paying down your mortgage or investing extra cashflow and make a plan from there. Check out my blog from last year for a little more detail on this topic at https://www.metzfinancial.ca/post/pay-down-your-mortgage-or-invest or check out this handy little Pay Down Debt or Invest Calculator here at https://www.freedom55financial.com/tools-and-calculators/pay-off-debt-or-invest-calculator.html?fbclid=IwAR3SFSKlvL-A1EVKFGpmeYUM7RxoE7RoVjTuLNFSS4gYjCP9lA-pJsbc7_8.
3. Cut Out Your Useless Expenses - if you're like me, then you are likely to have some expenses that add up every month that aren't necessarily worth it. Start by looking at your subscription services that may be adding up every month and you are not even actually using them, or using them very little. Our family decided to cut out our satellite TV last year as we usually use streaming services for that type of entertainment anyways. It turned out we didn't miss it at all and we saved over $1000 last year to boot! You could always call in to cancel and your TV provider will likely offer you a great deal to keep your services with them which could ultimately lower your monthly bill increasing your cash flow along the way. I'm currently debating whether or not to cancel my gym membership as it's been a couple months since I've attended, but let's just blame that on Covid-19 on that and call it a temporary hiatus!
4. Automate Your Finances - if you're like many Canadians when you receive your paycheque and struggle with your options with "new money" on whether to save it, invest it, pay down debt, or just go blow it on something useless, then consider automating your finances. Your paycheque comes on the same day every month or every two weeks, so consider automating bill payments for the same day, setup an automatic savings plan to have a portion of it moved to a savings account every month, and/or consider a pre-authorized debit plan into your investments. Paying your financial obligations and paying yourself on auto-pilot will help you take control of your finances.
5. Calculate your 2020 taxes - by calculating these figures sooner than later it will help you with tax planning for future years as well and limit any surprises. (Surprise! CERB is taxable!) Also, calculating these numbers before you file your tax returns would give you the opportunity to reduce your taxable income with a potential RRSP contribution.
6. Stay Healthy - this may not be financial advice directly, but I think it's more important than ever to stay healthy by exercising, eating well, checkups with your doctor, and taking your vitamins (or eating your Wheaties!) as I strongly believe a healthy body and mind will ultimately assist in maintaining healthy financial habits.
Tackle all of these or even a few things on this list and it will help you take control and improve your finances in 2021. Go get 'em!
-Marty Metz, CFP, CLU
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