A new year always feelings like a fresh start. You can reevaluate your goals, get back to your healthy living and make new resolutions. It’s also a really good time to do a financial check up to make sure everything is in order and that you’re doing the best you can for your family’s finances. Whether you handle all the finances, your partner does, or it’s a shared responsibility, it’s important to make sure you’re doing everything you can.
I had a chance to check in with Sybil Verch, a financial adviser and the host of Wealthy Life. She shared these six tips tips for a financial check up to start off the New Year.
Tips for a Financial Check Up
1. Top up your TFSA, (Tax Free Savings Account) to take advantage of the compounding tax free growth. If you’re not sure what compounding tax free growth means (it’s a bit confusing,) explained more simply, it is basically making money on money you’ve already made.
So for example, if you invest $1000 and earn 5% each year on your money (tax free in a TFSA), you’ll earn $50 the first year (5% on $1000 = $50. Total value of $1050 at the end of the year). The next year you’ll earn $52.50 as you are now earning 5% on your original investment PLUS 5% on the growth on your investment (5% on $1050 = $52.50), and end up with $1102.50. . . .and so on. Keep in mind that in a regular, non-registered investment account, the money you earn is subject to taxes.
2. Top up your RRSP (Registered Retirement Savings Plan) if you have room for it and it makes sense. You can get more in depth information from this episode of Wealthy Life about tax saving tips for families.
3. Start a monthly automatic savings plan (or increase the amount that you contribute to your existing plan) to ensure you pay yourself first and can still enjoy the future benefits this will bring you.
4. Schedule a financial check-up with your Financial Advisor to review your financial plan and ensure you are on track. They are there to help you.
5. Set financial goals for the year to keep you focused and motivated to stay in control of your finances. Check out this “5 Steps to Taking Control of Your Finances” article for details.
Some example goals would be:
- A family vacation to Disneyland which could cost about $6000. It would require savings of $500 per month for a year.
- Increase cash flow by consolidating your debt. Meet with your banker to consolidate credit card debt into a loan or line of credit at a lower interest rate and set monthly payments to pay off over a specific time period.
- If you want to save for a down payment on a house or condo, check with your financial advisor to see how much you need to save and how much you could afford. Then set up an automatic savings plan to achieve your goal. Meet with a realtor to start looking at properties in your price range to keep you motivated and excited about saving.
Bonus #6 – Sit down and review your family budget. Revise for any upcoming expenses and update amounts based on what you actually spent the previous year. Knowing where your money is going and what it needs to be spent on helps you to make decisions on whether you need something that is not in the budget.
This financial check up was given by Sybil Verch, a financial advisor and host of The Wealthy Life, a show that offers practical, real-life financial advice and solutions to guests. You can watch her Sunday’s at 6:30pm on Chek and on YouTube.