What are your financial New Year’s resolutions?

2023-01-03  5 minute read

Karen Johnson

Debt Solutions

With another New Year’s day come and gone, it’s time to commit yourself to the resolutions you made! And what better way to start the year than with a few financial resolutions? A financial resolution is a plan or goal to improve your own financial situation.

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Financial resolutions

Set a budget

Set a budget and track your spending to ensure you’re staying in the parameters you’ve set for yourself. Record your income and expenses, and always be honest. Remember to record the often forgettable expenses such as paying for online subscriptions and buying your morning coffee.

Setting a budget can help you prioritize your spending and ensure you’re spending your money on the things that matter most to you. By tracking your spending and identifying areas where you can make changes, you can free up more money to put into savings or pay down debt.

Here are links to tools to help you record your income and expenses:

Pay off debt

Paying off debt can help you improve your financial future and give you control over your finances. Carrying too much debt can make it difficult to save money for your future.

Tips to pay off debt:

  • Identify funds in your budget available to pay toward debt (see Set a budget)
  • Avalanche method: applying your available funds to your highest-interest debt in addition to your minimum payment. Once the first one is paid, increase your payments to the next highest interest rate, and so on.
  • Consolidate debt: you may be able to combine your various debts through a consolidation loan with a single monthly payment and a lower interest rate.
  • Stop using credit: Paying off debt is only possible if you stop creating new debt. Put the credit cards away where they’re not easily accessible, or cut them up. Contact your bank to lock your credit card and line of credit accounts. Stop automatic debits and payments coming from your credit cards, e.g. Netflix or other streaming services.
  • Contact a professional: If you’re finding your financial obligations start to cause stress or become unmanageable, you can consult with a Licensed Insolvency Trustee (LIT). An LIT will review your options and help you find the best-fit solution to reduce or eliminate your debt.

For more information, visit our blog 12 Resolutions to reduce debt.

Start saving for large purchases

Saving for large purchases such as a car, trip, or a down payment for a house requires planning. Try these tips for your future purchase.

  • Set a goal and have a clear idea of how much money you need to save.
  • Open a savings account specifically for your desired purchase. Choose a high-yield savings account to earn more interest on your savings.
  • Once you have determined how much to save, break it down into monthly payments or even payments broken down by pay dates. Move that money into your savings.
  • Make it easier by automating your savings. Set up automatic transfers from your chequing account to your savings account.

Create an emergency fund

An emergency fund is used to cover unexpected expenses, such as medical expenses, job loss, or urgent home repair.

  • Determine how much you need to save. Take a look at your monthly expenses. A rule of thumb is to save three to six months’ living expenses in case you don’t have income coming in for a period of time.
    • Open a high-yielding interest account specifically designated for your emergency fund. This account should not be locked in. It’s designed for an emergency situation, which means you’ll need access to the funds immediately. Avoid dipping into the account; this is your safety net and it’s essential to your financial future.
    • Set a monthly savings goal
    • Automate your savings
    • Cut expenses or reduce your spending such as entertainment expenses to identify available funds to put into an emergency fund

Invest in a retirement account, such as an RRSP to save for the golden years

Investing in your future will ensure a source of income when you retire. You’ll need an income from your retirement investments to cover your living expenses.

  • Determining how much to save for retirement will depend on several factors, including your age, income, and expected retirement living expenses.
  • Take advantage of any savings plan, pension plan, and RRSP products your employer offers now. Each has its contribution limits and tax benefits. It’s important to do your own research and choose the account that’s right for you.
  • When you receive a pay increase at work, bonus, or tax refund, consider putting that extra income toward your retirement savings.
  • Use automated savings to save into a dedicated retirement savings account.

Stick to your financial resolutions

There are several tips to help you stick to your resolutions.

  • Be specific and realistic.
  • Once you have set your resolutions, plan out how you will achieve them.
  • Start with resolutions that you can achieve the soonest. Quick wins will give you a feeling of success and motivate you to keep going.
  • Track your progress and be flexible. Resolutions can change as your year progresses.
  • Resolutions may not go exactly as planned but you can adapt as needed.

Setting financial resolutions is important because it can help you take control of your financial situation and work towards a stable and secure future. By setting specific, achievable resolutions, you can create a plan for managing your money and making positive changes that can help you reduce debt, save more, and improve your overall financial well-being.

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