New financial beginnings
A new year signals a time for new starts, new resolutions, a fresh new perspective on the next 365 days to follow. Add all this newness to a looming post-holiday credit card bill, and you’ve got even more reasons to start fresh with your financial planning.
To get you started, WealthCo offers you 10 financial New Year’s resolutions to inspire some fresh thinking on your budget and planning.
Know what you want and be clear about it.
Have a clear, concise financial goal for the year. Resolutions, like all goals, are best when they are specific. It is not enough to say, “I want to pay down my credit card and more money in the bank.” Instead, write a clear financial resolution that is actionable like, “I will have the balance on my credit card paid down to $0, over $10,000 in my savings account.”
Cut down on debt.
On average, Canadian adults spend more than $1,500 on gifts, travel, and other expenses during the holidays. Add this to an existing credit card balance, and you may have a bit more of a shock by January. Make a list of all your liabilities and organize them by annual interest rate. Those with the highest rate (usually credit cards) should be paid off immediately. There is no sense in Investing money while you are paying 19% or more in interest each year.
Just like saving regularly, you should set up a regular process by which you invest your money. Money sitting in a bank account earns less than 1% and inflation can be double (or more) than this – your money is losing 1-2% of its value as a result. You don’t need a pile of cash to start investing – there are numerous cost-sensitive options that are more effective for long-term savings.
Begin using personal finance software.
Knowledge is power. Do you really know how much you spent last year on haircuts or movie tickets? Track your spending and investments more effectively by knowing where you can note and limit any spending beyond the basics. Being more mindful of daily spending forces you to be more conscious about how you spend it. Make technology work for you.
Schedule weekly financial exercising.
By January, the gyms will be packed with people trying to get back into shape after the holidays. While there are physical exercises for our bodies, there are also financial exercises for the balance sheet. Just as you would schedule time in your calendar to hit the gym, set aside some time to review your budget and balance sheet each week.
Read a financial book each month.
If you want to learn how to cook, you read cookbooks and spend many hours per week in the kitchen. If you want to learn to fix and engine, you ask someone to show you. The internet, your local bookshop, and/or your Advisor can give you easy and instant access to many of the most brilliant financial minds of our time. Harness this by picking up a copy of the work and words of those who’ve made major moolah in their lifetimes.
Go on a cash diet.
Just like the New Year may signal a time for less alcohol and more salads, the best diet for a heavy credit card debt is to use only cash. Try setting a limit (usually around $50-100/week) and see if you can live off that amount each week. Neurological studies have shown that we “shut down” when we swipe debit and credit cards – we don’t always register what is happening. When you use cash, you are forced to keep your brain engaged (to count the money, to use it for payment, or to note that you’re about to run out of it). A cash diet is a great way to keep spending under control and increase money mindfulness.
Collect your change.
Start paying for more things by cash. And any time you pay for things with bills, only spend whole dollar amounts and save the pocket change to deposit into a jar or piggy bank) at night. Many major banks also offer similar automated arrangements for change deposits to go into a savings or tax free savings account. You may be surprised at how fast the change from impromptu coffee purchases and dinners-out adds up.
Make money doing what you love.
There is at least one thing that you are truly passionate about. One way to enjoy your work is to do the things you enjoy. Find a way to turn passions and hobbies into profit. While this may not replace or transition into your full-time day job, woodworking a new patio chair or knitting mittens can turn into extra disposable income on Etsy or at flea markets.
Review your portfolio.
Is your investment portfolio still on track to helping you meet your long-term goals? If not, it may be time for some changes. You will want to study your personal mix to make sure it still accurately reflects your risk tolerance. Make sure the balance you have is a snapshot of where you are at in terms of short- and long-term goals each year.
Do you have additional ideas on how to start the New Year off right?
With a bit of planning, some determination, and more clarity on your personal financial goals, you can make this the best year yet.
Get in touch with us today for more helpful tips and suggestions to put your future into focus.
Happy New Year from all of us at WealthCo.