Money Resolutions You Can Keep
By, Carla Hindman, Director of Financial Education, Visa Canada
Health and fitness are among the top resolutions for Canadians. But what about getting your personal finances in shape and becoming financially fit? Every year Canadians vow to stick to a budget, curb spending and pay off debt. Coming up with these money resolutions is easy – it's sticking to them that's the hard part!
The new year is a great time to reevaluate where you stand financially – and it's not too late to make resolutions for the upcoming year. Here are five tips to help get your finances in shape:
Set SMART Goals. When it comes to setting financial goals, a simple rule can help your resolution stick. Make sure your goals are SMART: specific, measureable, attainable, realistic and time-sensitive. Instead of having a vague goal such as "save more money", a SMART goal might be to put an extra $60 per month away for emergencies. Establishing quantifiable measurements means you can track and be encouraged by your progress. Telling your friends or family about your financial resolutions will help make you accountable.
Track what you spend. For the next few months, write down every penny you spend on rent or mortgage, utilities, groceries, meals out, parking meters, allowances, gas – the works. Also, remember to include larger, infrequent expenses such as car or home insurance and car maintenance.
Start a budget. Knowing where your money goes is an eye opening experience. Only 47 per cent of Canadians use a budget to plan their spending. A budget can help you pay your bills on time, cover unexpected emergencies and reach your financial goals – now and in the future. To build a monthly budget you will need to add up your income, estimate expenses and then figure out the difference. Practical Money Skills has a series of tools and online calculators to help you get started.
Build savings. Saving is never easy, but it's worth it in the long run. Automatic transfers to a savings account offer a convenient way to build your savings. Investigate savings tools such as a Tax Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) to see if they fit your savings goals. Saving for your child's education? Consider opening a Registered Education Savings Plan (RESP) and watch your money grow tax-free until it's withdrawn for qualified educational expenses. As a bonus, the federal government will provide a grant of 20 per cent of the first $2,500 in annual contributions made to an RESP – up to $500 per year.
Manage Debt. If you're in debt, you're not alone. Start out by making a list of everything you owe, whether it's a credit card balance, student loans or other debts. Reducing debt is like losing weight. You're not going to lose 50 pounds in a month. You need to set realistic goals within reasonable timeframes.
Prepare for the Unexpected. There's nothing harder to plan for than the unexpected. The key to successfully surviving these life-changing events, financially at least, is to anticipate hard times. Build an emergency fund that is easy to access in the event of unemployment, illness or a major unplanned expense. Experts recommend saving three to six months of living expenses. Need help figuring out how much to put aside for your emergency fund? Check out this calculator from Practical Money Skills.
Keeping Your Finances and Information Secure. When your private financial information gets into the wrong hands, the consequences can be devastating. This year, take the right security precautions to minimize your chances of being victimized. Protect your passwords and PINs, review your banking statements for accuracy, shred old financial documents before getting rid of them, and report any suspicion of fraud. Also, don't give out personal information on the phone, by mail or over the Internet unless you initiated the contact and know who you're dealing with.
Bottom line: Start this year off with financial resolutions that will help you save, spend and live better in 2017.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.