We are officially in the new year and like most people, you've likely made some new year's resolutions. One of the more common ones I hear are people trying to improve their finances. Whether it is trying to save more or trying to manage debt more efficiently, most people can make positive steps to improving their financial health, sometimes with very little effort. Here are a few things that can help push you in the right direction.
1. Make/review your financial plan
-It doesn't matter if you're young, middle-aged, nearing retirement, in retirement, paying off debt, saving for retirement, or a mix of the above, everyone can benefit from implementing some sort of financial plan in their lives. By simply writing down your plan or even saying it out loud would help many actually follow through on it.
2. Make/review your budget
-If you don't have a budget and you find it difficult to save or pay your bills, then I would suggest reviewing in detail all of your spending to see where you might be able to cut back.
3. Save more money
-One of the easiest ways to start saving more money is to setup a pre-authorized debit plan that comes directly out of your bank account on pay day directly to another savings account. Starting off small at $50/pay cheque and increasing it from there would be a good way to start. Saving more for various things such as funding an emergency fund, saving for your child's future, saving for retirement, or just general savings should all be considered and prioritized appropriately.
4. Pay off debt
-It's time to review all of your debt and make a plan to pay it off. Start with paying off the highest interest loans (credit cards) and work your way down from there. If there is substantial debt, then consider consolidating if possible to make it easier to manage.
5. Calculate last year's income and taxes
-By calculating these figures sooner than later it will help you with tax planning for future years as well and limit any surprises. 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 (deadline to contribute is March 2).
6. Review your will and update beneficiaries
-If you don't have a will, then you should likely get one setup to clearly state how you would like your estate distributed or who will take care of your children. Updating beneficiaries on accounts should be done as well if needed, especially if undergoing big life changes like marriage, having children, or divorce.
7. Increase your income
-Easier said than done, right? Saving and paying down debt is directly related to how much income you make, or how little. Maybe consider getting a part time job to supplement your income, or seek a raise or promotion at work. You may also consider going back to school or taking a relevant course that may increase your chances of a higher paying occupation in the future.
Taking care of your overall mental health should be a priority here as well. Don't get bogged down by your finances this year and make sure to spend some quality time relaxing with family and friends too. Happy new year!
-Marty Metz, CFP, CLU
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