As you look forward, it’s a great time to get your finances set up right for the new year. A fresh new start sets the stage for new goals, new habits, and some new ways to get ahead. The new year has the potential to be a better year for Canadians. So, let’s look at some ways to make a difference this coming year in your personal finances.
Why The New Year Is A Perfect Time To Reset Your Personal Finances
Now is the time to refresh your personal finances with a new financial plan. Whether you need to make a short-term difference in your credit card habits or your personal finances need an overhaul, this is the time. Here are a few areas to focus on as you refresh your finances for the new year ahead.
New Year’s resolutions for paperwork tend to slide off-track during the year. You may feel motivated to create a complex paperwork system on January 1. Still, by July, chances are you’re back to your old habits. Know your own patterns and find a plan that works for you.
It’s critical you find an organizational system that works for you. Most Canadians are moving toward digital paperwork, finding ways to keep recordkeeping to a minimum. For example, you don’t need to keep an extra copy of your bank statements because the last 18 months are readily available online anytime.
On the other hand, you may have some paper copies you do need to keep. If so, look at scanning them and saving them digitally to get them out of the way. If you don’t have a scanner, you can head down to the local copy shop chain once a month and get your paperwork digitized for a few bucks.
Also, create a quick reference document in case someone else needs to see to your finances in an emergency.
Organize Files And Folders
Take a look at your current system to organize your documents. This year’s taxes will be a handful if you have overflowing shoe boxes of receipts. What can you do to make next year better?
Take some time to make an easy-to-use system you can stick to all year. Focus on only the paperwork you must keep. And digitize as much as possible. Ask for a digital copy of your bills. Most companies have a way to eliminate snail mail paper bills.
Be sure to label everything clearly. Very, very clearly.
Review/Create A Budget
If you used a budget last year, now is the time to review it. If you didn’t, now is the time to make one.
Budgets are not designed to be hard and fast rules. They are guidelines to help you make decisions about your personal finances in the short term. It’s easy to get off track with a credit card in hand. So, your budget is a critical piece of your personal finances.
If you stopped following your budget because it was too strict, try a more relaxed approach. The 50/30/20 financial system sets aside 50% of income for necessary expenses, 30% for wants and 20% for savings. This budget is much more sustainable for most Canadians in the longer term.
Compile Tax Info Together
Now is the time to get all your tax info together. Go through your paperwork and organize everything you will need. Make a list of what you still need, like T4s. Some may come in the mail, but others may be available on your CRA My Account in the next few weeks.
What Are Your Financial Goals For This Year?
You probably have some financial goals already tucked in your heart. A specific amount in your savings account. A vacation. Paying down debt. Household repairs. Firming those goals up, especially in writing, makes them more motivational throughout the year.
Could this be the perfect year for you to set a goal to learn more about personal finances? Learning more helps you stay motivated and keeps you on track toward your financial goals. Follow a few blogs. Read a couple of books. Or even take a class or two online. Some additional knowledge will go a long way to making your personal finances look better in the long term.
Do A Financial Health Check
A thorough financial health check once a year sets the stage for your less in-depth monthly and quarterly checks. At this time of year, there are a few things that are really important to do.
Assess Your Retirement Accounts And Contribute To RRSP/TFSA
Check your CRA My Account or call CRA to assess your RRSP and TFSA accounts. Review your contribution room and contribute as much as possible.
- Registered Retirement Savings Plan (RRSP) contributions save you taxes and build the base of your retirement.
- Your Tax-Free Savings Account (TFSA) contributions save you taxes and give you short-term savings.
Check Your Credit Report
As the new year dawns, it is time again to check your credit report.
If there are any issues, address them right away. Contact the credit bureau to request they fix any errors. Mistakes are more common than you might think.
Also, if your credit score is less than ideal, look at ways you could improve it. Paying off that credit card is good for more than just having less debt, it can increase your credit score, too.
Assess Your Income And Debt
Take a close look at your income and your debt. Honestly, are you in over your head? Would smaller payments make it easier to not go into further debt? Are you making progress paying off your debt? If not, what could you do?
For many Canadians, last year was a hard year for personal finances. Taking a close look at your personal finances for the new year gives you insight and motivation to get on track.
We can help you make the decisions necessary to make this year a better year for your personal finance. If you need help assessing your financial situation or expert advice on how to get ahead faster, reach out today.