The New Year is the perfect time to get your finances organized and create a brighter financial future. There’s always room for improvement, regardless of your age or stage of life. Some Canadians need to start with the basics and make a plan to get out of debt. Others need help with budgeting and mastering their cash flow, or to start investing. Here are eight financial resolutions for the New Year – useful tips no matter where you are in your financial journey.
8 New Year’s Resolution Financial Goals Everyone Should Make
1. Master Your Cash Flow
The key to financial freedom is to spend less than you earn. But what if you don’t know where all your money goes? Start by tracking your spending. Sometimes a simple spreadsheet will do the trick – just save your receipts and plug in the numbers every day or two. But even better, you can automate this by using a budgeting app like You Need a Budget. This ingenious app is a pro at tracking your cash, with new YNAB users saving on average $600 by the second month and more than $6,000 in their first year (!). So whether you’re looking to get out of debt or monitor your spending, a budgeting app can help you get organized.
2. Make a Financial Plan
Once you know where your money goes – 3-6 months of expense tracking should do the trick – it’s time to make a financial plan for the future. Why? Because expense tracking is a backwards-looking activity. It’s useful to know where your money goes, but now you need a proactive spending plan to make the most of every dollar.
A financial plan can help you get there. It’s a written report that outlines your financial objectives and priorities, as well as charts out a path to achieve them. The process involves examining how much money you have right now, how much you’ll need in the future, and what you need to do to reach your short- and long-term objectives.
It’s easier to do than you think, and you certainly don’t need to pay a pro to do it. Find out how to create your own financial plan in seven steps. You can even download a personal finance app to help! Just download PocketSmith — a personal finance app that not only tracks your spending but also helps plan for the financial future.
3. Banish Banking Fees
Canadians can be loyal to a fault when it comes to their banking. Big banks charge $10-$20 per month in chequing account fees, which amounts to hundreds of dollars per year. All for the privilege of accessing your own money! Some savings accounts pay next to nothing in interest, and their credit card line-up often leaves something to be desired.
If you haven’t heard by now, there’s a better and cheaper way to bank: sign up for a Savings Plus Account with EQ Bank and say goodbye to everyday banking fees. The Savings Plus Account also offers free Interac e-Transfers®, free day-to-day transactions, and a superb 1.50%* everyday interest rate. Or if you want to shop around, check out our Complete Guide to the Best Banks in Canada.
*Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
4. Negotiate A Better Deal
Financial inertia can have a negative effect on your bottom line. What’s inertia? Sitting back and accepting rate increases on your recurring bills – from cable and internet to car and home insurance.
Take some time to review your recurring monthly or annual bills. I’m not asking you to give up your Netflix subscription. But a timely call to your telecom provider can yield big savings for your loyalty – all you have to do is ask for better pricing. Make sure to call once a year to negotiate a better deal.
When it comes to home and car insurance, shopping around for the best rate is the key to savings. Don’t know where to start? Try using reputable comparison websites like InsuranceHotline.com – an excellent “one-stop-shops” for getting competitive insurance quotes from multiple providers, which can help you score the best deal. Some insurance providers offer deep discounts for “bundled” policies.
5. Get a Credit Card Check-Up
Is your credit card working for you? It pays to check! At the beginning of the New Year, take a look at the best credit card offers and promotions on the market and see if there’s a credit card worth adding to your wallet. Also, with the new Aeroplan program, there’s a new line-up of a new system of earning rewards but also a new suite of Aeroplan credit cards.
The bottom line: a once-a-year review of the plastic in your wallet can have a big payoff.
6. Chart A New Investing Path
Canadians pay some of the highest mutual fund fees in the world – a sorry state of affairs when you consider we have more than $1 trillion is invested in mutual funds. With the dawn of the New Year, make a financial resolution to take control of your investments and cut those investment fees to the bone.
The easiest way to do that is to switch to one of the best robo advisors in Canada. Robo advisors use a computer algorithm to design and manage your investment portfolio, which helps keep fees lower. It’s simple: a robo advisor like Wealthsimple (our #1 rated robo advisor) will use a questionnaire to match your financial goals and risk tolerance to a portfolio to best suit your needs. Afterwards, it builds a diversified portfolio of low-cost index funds or ETFs that will be automatically monitored and rebalanced.
It’s a cinch to make the switch to a robo advisor and you’ll save a bundle on fees. Wealthsimple charges a management fee between 0.40% and 0.50% – that’s a far cry from the 2%+ that most Canadian bank mutual funds charge. Plus, it takes mere minutes to open an account and transfer your existing investments online – no meetings, phone calls, or annoying paperwork required. If that’s not enticing enough, Wealthsimple is offering an exclusive welcome offer for Young and Thrifty readers. Open and fund your first Wealthsimple Invest account with $1,000, and you’ll get a $100 cash bonus deposited into your account. That alone is a reason to sign up!
Prefer to take the wheel yourself? Open a discount brokerage account at Questrade where you can buy ETFs for free. It’s our top choice for the best online brokerage in Canada, and you can build your own couch potato indexing strategy on the cheap. An all-in-one asset allocation ETF like VBAL or VGRO provides instant global diversification and costs just 0.25%. Open a Questrade account and get $50 in free trades.
Another great option is Wealthsimple Trade — the only discount brokerage in Canada to offer commission-free trades. Now is a great time to sign up because Wealthsimple Trade is offering Young and Thrifty readers an exclusive deal: get a $50 cash bonus and $0 commission trades when you open a new Wealthsimple Trade account. All you have to do is deposit and trade at least $150.
7. Disaster-Proof Your Finances
You’ve mastered your cash flow, banished your banking fees, found new savings by haggling your recurring bills, and switched to a better investing strategy. Now it’s time to take care of the ugly stuff nobody likes to think about: to disaster-proof your life, you need to review your insurance coverage and make sure your legal will is up to date (or that you have one in place!).
Part 1: Get Life Insurance
Most Canadian employees receive a modest life insurance benefit from their employer – typically 1 or 2 times their salary. While that’s a decent start, it’s not nearly enough coverage for young families with dependents – who may require as much as 10 or 15 times their salary to provide for their loved ones.
Again, when it comes to finding the best life insurance in Canada, comparison sites like PolicyAdvisor.com and PolicyMe can be lifesavers (no pun intended). With just a few clicks on your computer, tablet, or smartphone, the best life insurance quotes will appear on your screen in a matter of minutes. You can also use their life insurance calculators to estimate how much you’ll likely need.
Part 2: Get a Will
Do you have a will in place? If you don’t, get one pronto. It’s a legal document that states how you want your estate to be divided upon your death, and it’s one of the most important legal documents of your life. If you die without a will, the government decides what happens to your assets and dependents – and their choice may not be the one you would make. Don’t let this happen to you!
Making a legal will doesn’t have to be daunting or expensive. With Willful, you can make a legal will online for as little as $99. Their seamless platform will guide you through all of the required questions in under 20 minutes. No lawyer required. To save you money, we’ve got an exclusive promo code for our readers.
8. Get Out of Debt
Finally, if you’re bogged down in credit card debt, make it your financial resolution for the New Year to pay it down to almost $0. Start by switching to one of the best low-interest credit cards or sign up for one of the best balance transfer credit cards (some of which offer 0% interest for a limited time). It’ll save you a ton of interest and help you pay off your credit card debt faster.
You could also look at consolidating your debt. The interest rates for personal loans tend to be much lower than the typical 19% charged by credit cards. For instance, Loans Canada is the largest lender network in Canada and has interest rates starting as low as 5.15%. There are even no credit check lines of credit (but the interest rates tend to be higher) and credit lines designed for gig workers via Moves Financial. Explore the options, but just make sure to carefully compare the rates as well as the terms and conditions.
If you’re really stuck in a debt ditch, you could also consider getting credit counselling. A non-profit credit counselling service like Consolidated Credit can review your financial circumstances and help you make a plan for getting out of debt.
Do whatever it takes, and above all, avoid payday loans at all cost.
Final Thoughts: How Do You Set Financial Goals for the New Year?
Setting financial resolutions for the New Year doesn’t have to be painful or restrictive. In no time, you can take control of your finances and find big savings without cutting your spending to the bone or skipping out on that cherished latte. All it takes is a little planning, and if you follow these eight steps, you’ll be well on your way to a healthy, happy financial future. Start with making a budget and a financial plan, then move on to tackling other tasks, like setting up automated investments, getting insurance, and making a legal will. Finally, make debt repayment a top priority for the forthcoming year. Happy New Year and happy financial fitness to all!
Disclaimer: Young & Thrifty has entered into a referral and advertising arrangement with Wealthsimple US, LTD and receives compensation when you open an account or for certain qualifying activity which may include clicking links. You will not be charged a fee for this referral and Wealthsimple and Young and Thrifty are not related entities. It is a requirement to disclose that we earn these fees and also provide you with the latest Wealthsimple ADV brochure so you can learn more about them before opening an account.