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This Year, Try Making and Sticking to a Financial New Year’s Resolution


 New Year’s resolutions are easy to declare but often much harder to actually keep.

This year, for a resolution with real significance, why don’t you try committing to improving your personal finances? It might help you stay on target toward key goals, such as a comfortable retirement. Here are four ideas you might want to consider:

1. Understand your full financial picture – It’s important to know where you stand today in terms of your assets and debts, as well as your goals for the future – particularly as they relate to your retirement – so you can come up with an appropriate plan to help you get you where you want to go.
 
2. Take full advantage of your RRSP, TFSA and RESP – As part of your retirement and children's education planning, don’t miss out on the chance to utilize these valuable savings vehicles the government has put in place for you. As early as possible this year – and every year after that – make sure you contribute the maximum amounts you can. All three programs have the enticement of key tax advantages.

With the Registered Retirement Savings Plan (RRSP), you have an attractive structure for housing a portfolio of investments such as stocks, bonds, mutual funds and more. Your contributions can be deducted from your income, which will help reduce the amount of income tax you pay. In addition, any growth earned in your RRSP is not taxed as income until funds are withdrawn, meaning your RRSP investments grow tax-deferred so the total value may grow more quickly.

You can also save and invest up to $5,500 per year in a Tax-Free Savings Account (TFSA). You can take the money out whenever you desire, no tax is paid on that withdrawal, and whatever growth occurs within the account does so tax-free. That means the TFSA can be a great supplement to your RRSP.

The Registered Education Savings Plan (RESP) allows you to save and benefit from tax-deferred growth until the accumulated amount is used for financing your children’s education. Although you are not able to deduct your contributions from your income, the money you contribute can generate additional funds through the Canada Education Savings Grant (CESG), a program that adds government-sponsored contributions to your RESP.
 
3. Build an emergency fund – You should have some easily accessible cash kept aside specifically for emergencies. If something unforeseen happens, you want enough in your emergency fund to avoid relying on your credit cards for the necessities of life. And it’s just as important that you not tap into your retirement savings, or you could put your retirement plans in jeopardy. So you might find it’s a prudent goal in 2018 to get the equivalent of three to six months’ worth of living expenses into an emergency fund.
 
4. Cut your debts – It sounds simple, but it’s difficult to achieve. Remember that every dollar that doesn’t go toward a debt payment can be applied toward your retirement savings. So this year, you might want to commit to borrowing only when necessary, shopping around for competitive rates, paying off credit card balances every month, consolidating your investing or banking in one place, and generally looking for ways to cut whatever costs you can while living within your means.
Here’s one other commitment that might be the most valuable of all: If you don’t already have a financial advisor, make this year the year you get one. A qualified financial advisor can objectively evaluate your situation, suggest appropriate financial strategies for helping you achieve your long-term objectives, and maybe even help you stick to your financial New Year’s resolution.

 Edward Jones, Member – Canadian Investor Protection Fund.

This Year, Try Making and Sticking to a Financial New Year’s Resolution

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Member – Canadian Investor Protection Fund. Member – Investment Industry Regulatory Organization of Canada.

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