Are you planning on making financial planning resolutions for the New Year? The end of one year and the beginning of a new one is often a time of reflection. We evaluate relationships, finances and how we survived life’s challenges often to think that we would like to be in a better position this time next year. If financial planning resolutions are on the top of your list here are a few things you might want to consider whether you are single, married or going through a transition in your life:
1). Budget Planning: It’s always wise to chose a date in the future to have a look at those automatic payments and re-evaluate whether they are needed or if we can get the same service for less cost. Perhaps it’s time to lose the home phone in favour of an upgraded cell phone package at less cost? Maybe you haven’t looked at your insurance coverage in awhile? Are your cable and internet plans working for you? These automatic bills can often get overlooked but upgrading some plans and deleting others might provide for a more functional 2015.
Another issue to examine is your cash flow. This year I’ve decided to increase my discretional spending because I found that although I had put myself on a budget in 2014 it didn’t really work for me so I ended up putting more and more purchases on my credit card. This year, I am going to give myself a more realistic spending allowance and stick to it so that I don’t end up with credit card debt. (One tip here is to put all your purchases on your credit card if you have air miles or cash back features on your card and then pay them off as soon as you get home. I booked a trip to the Galapagos later this year using only air miles by doing this. Also, make sure all your bills get charged to this Visa or MasterCard like your Rogers bill as these points add up too.)
If you still have some monies left over after budgeting realistically then you might want to accelerate your debt repayments, if you have them.
2). Estate Planning: If you only have a pension at work and a RRSP you might be covered in the estate planning department if you have named your beneficiaries on these accounts but anything you own that is not in a registered plan (RRSP, RESP, RPP and TFSA) should be covered by your Will. If you don’t have one you should consider it seriously. Yes, it costs money but in the end you will have made the transition of your death easier for those you love and have left behind. Powers of Attorney that cover health and who will pick up the financial slack if you become incapacitated should also be put in place when you are doing your Will. If you have these, you might want to review them to ensure they still meet up to your present day wishes.
3). Financial Planning: Is your financial plan in place? Are you aware of how your pension plans work and how they will provide income in retirement? How do these plans work with your Canada Pension Plan, Old Age Security plans and your RRSP’s? Will all these financial plans provide enough cash flow, after-tax, in your retirement? If you can’t figure out how these all work together or how much you need to save to make sure you are financially whole during your retirement years then hire a professional to help you.
4). Retirement Planning: Often people contribute enough money in their RRSP’s to avoid paying the tax man but this isn’t the reason for retirement planning. Saving for retirement should have an end-game in sight, to retire with adequate funds to fund your retirement. What should you be saving annually to ensure your retirement goals are met? It might also be a good time to order a Canada Pension Plan (CPP) statement to see how your CPP benefits will work with your own personal financial plans.
With some of these things in place you will be able to reflect on how far you have come in 2015 this time next year.