The beginning of a New Year is a great time to reflect on your current situation and set your financial goals for the year ahead especially since there is a direct connection between overall financial wellness or financial peace of mind and happiness. For the record, financial peace of mind does not have to include great wealth. Here are some financial resolutions you may want to add to your list in order to enhance your financial wellbeing in 2019.
Set a budget
Only 40% of Canadians will set and live within a budget despite the fact that it’s the most effective money management tool available. Indeed, 99% of all individuals who have a budget report that a budget helps them manage their money according to a recent Financial Consumer Agency of Canada survey. Of those surveyed, 31% reported that a budget helps them be aware of where their money goes. Over half of those who budget used one to help pay down debt (55%), to increase their savings for the future (50%), or to save for emergencies (57%). People who follow a budget are more likely to reduce their spending and are less likely to rely on credit when struggling to make ends meet than are non-budgeters. And finally, budgets help individuals avoid spending regret
Living within your means is made a lot easier when you know what your “means are”. Instead of saving what's left over after you have done your spending, a better option is to save first or "Pay yourself first"
Read more here 10 Key Reasons to Budgeting
Calculate your net worth
Net worth is an excellent measure of your financial well-being and is calculated by the amount by which assets exceed liabilities or debt. Tracking net worth is an important aspect of personal financial planning and the best way to determine if financial progress towards financial goals is happening. Tracking your net worth can be a powerful motivator to save more, spend less and to pay off debt.
Read more here https://www.silvercompass.ca/net-worth-worth-tracking
Check your credit report
There are so many excellent reasons that checking your credit file is important to your financial health but sadly only 1 in 10 Canadians check their credit each year. If you have a good handle on your money and your finances, a credit report should show information you already have. Hopefully, there will be no surprises. But surprises and mistakes can and do happen and so does identity theft. This, I know personally. Checking a credit report is the very best way to verify information and to ensure that you have not been a victim of identity theft. Information is power. Only by checking your credit report can you ensure that inaccurate information gets corrected. Read more here https://www.silvercompass.ca/give-yourself-good-credit
Build an emergency fund
Unforeseen emergencies will invariably come our way at some point. An emergency is a major and sudden need that's not part of your current budget and is unplanned like a job loss, illness, an unexpected medical or dental bill or an auto or home repair. Having an emergency fund available will help reduce stress and additional expense when an emergency arises by helping you avoid funding it by accessing longer-term savings or with a high interest rate credit card. While it may seem like a daunting task to save some 3-6 months of living expenses, building an emergency fund into your budget will help in the long run. See more at https://www.silvercompass.ca/rainy-day-fund-good-your-health
Paydown bad debt
Reducing “bad debt” like credit card debt can not only save you money but also improve your credit score. Review your current balance of unhealthy debt and identify the debt with the highest interest rates and pay that off first. You might be able to transfer balances on cards with higher rates of interest to a lower interest card or consolidate your loans for a much lower rate depending on your credit history and current financial situation. Having that all important budget (#1 above) in place, will help you prioritize paying down credit card debt by reducing expenses elsewhere
Get your estate plan up to date
Estate planning is NOT JUST FOR THE WEALTHY! An estimated 56% of Canadians do NOT have a will in place which is a basic estate planning document. A will details the process for distributing assets in an orderly and tax efficient manner upon death. A will also documents the way in which an individual intended to have their estate administered. Dying without a will is no way to die given the additional grief in terms of delay and costs it can create for loved ones. Also, make sure your beneficiary information on all accounts is up to date. Read more https://www.silvercompass.ca/dying-without-will-no-way-die
Review life and disability insurance needs
A 2017 study reported that most Canadians lacked an understanding of their insurance needs and only 26% of those surveyed had reviewed their insurance needs within the past year. As life changes, so may the need for life and disability coverage in order to ensure loved ones are protected as well as future earnings potential. Career changes, relationship changes, dependent changes or financial changes are some of the changes that can warrant a change in life and or disability insurance. Most helpful would be creating a one page policy summary that notes relevant and important information like policy numbers, insurance carrier, date issued, benefit amount, premium amount, and beneficiary. This summary will also provide useful in reducing the risk that a policy would remain unclaimed by beneficiaries; which happens. In determining the amount of coverage required, it's important to consider how much capital loved ones would require to meet immediate and ongoing obligations at the time of your death. In determining the amount of disability insurance required, the need is based on how much future income is needed to sustain family and household expenses. A needs analysis template is available on the Government of Canada website or speak with a certfied financial planner who can help calculate more precise amounts.
Get financially organized !
As 1 of 2 Canadian experts and advocates for unclaimed financial property legislation in Canada, I obsess about the $6 Billion+ in unclaimed financial assets that Canadians have lost track of. This week I learned that unclaimed (matured) Canada Savings bonds now total $671 Million and are sitting at the Bank of Canada waiting to be claimed. That's an increase of $245 million or so in 3 years in a country that has a population of 36 million! So much hard earned money set aside for saving and then forgotten about. The balance of unclaimed Canada Savings bonds is in addition to another $600 million or so in unclaimed bank accounts also sitting with the Bank of Canada. Only 2 Canadian provinces have unclaimed property legislation (Alberta and Quebec) It’s vital that you organize and share information with your loved ones to reduce the risk that your hard earned assets go unclaimed because there is no obligation on the part of financial institutions to look for owners or named beneficiaries. Read more https://www.silvercompass.ca/6-billion-reasons-get-your-ducks-row
Review your risk tolerance and rebalance your investment portfolio if necessary
Risk and return go together but risk tolerance is personal because everyone’s different when it comes to how much market risk they can endure. One of the most important aspects of determining risk tolerance is based on when you expect to need the money and your other sources of income. Particularly given the recent market volatility we have seen over the past many months, it’s a good idea to ensure your asset allocation (The proportion of equities, fixed-income and cash in your portfolio) is still appropriate for your risk level. Portfolio growth and market shifts can alter the asset allocation of your portfolio over time.
Fees matter. Know what your investments cost
After 10 years of deliberation and discussion, in 2017, investment firms finally had to start reporting what clients were paying for their investments. Do you know what fees you are paying? Low cost isn't the only attribute to consider when reviewing your portfolio or choosing a financial advisor as it’s also important to consider the performance of your portfolio and the value of the service offerings you receive for those fees. Fees paid may or may not include regular meetings and financial/estate or tax planning and tax services etc. If you are paying more you should get more. Fees can have a significant impact on portfolios over time especially over the long term due to the magic of compounding. Lower fees mean more of your money stays invested and grows. Needless to say, when return expectations for both stocks and bonds are subdued, fees matter even more. Know what your investments are costing.
Read more here https://www.silvercompass.ca/why-fees-matter
Get a Financial Plan
Financial planning is more than budgeting, saving or having the perfect investment strategy. It's a process that sets you on a course toward achieving your personal goals, needs and priorities through the proper management of your financial affairs. Those who engage in comprehensive financial planning report significantly higher levels of financial and emotional well-being and feel more on track with their financial goals and retirement plans. Not all advisors are certified financial planners. Unfortunately, anyone at the moment outside of Quebec can call themselves a financial planner. Many calling themselves financial planners are not required to obtain any credentials at all. Those of us who have a CFP® designation are qualified through extensive education, a rigorous standardized national exam process, comprehensive continuing education requirements and accountability to the FPSC code of ethics and practice standards. We are held to higher ethical standards to ensure financial planning recommendations are in your best interest. A CFP® is best suited to help you analyze your financial situation and develop a financial plan in order to help you achieve both your short term and long term goals which will incorporate budgeting, investing, tax, retirement, estate planning, education planning and debt or risk management. Certified Financial Planners can increase your chance of success in making your 2019 financial resolutions become a reality.