With the new year in full swing, it’s time to start getting serious about your finances. We know (and hope) that you’ve already got all the basics under control; budgeting, savings, paying down on debt and cutting back on unnecessary spending. Now it’s time to take your financial goals one step further, here are 10 more items that should be on everyone’s to-do list this year.
Get Your Tax and Financial Documents In Order
One thing that a lot of people out there don’t do is file their financial documents properly and in an organized fashion. Having a box with a jumbled pile of receipts, pay stubs, and tax forms is no way to go about saving yourself time, money, and stress in the upcoming year. A good idea, if you haven’t already done so, is to get yourself an accordion folder with dividers, to make sure that all your information and forms are separated into their proper sections. This means that when tax season rolls around, you won’t be scrambling to gather all the necessary papers together. Simple, but effective.
Manage Your Credit Card Usage
It’s an unfortunate fact that a large percentage of people with credit cards do not use them wisely. Especially when you’re earning a regular income, it’s tough not to get into unhealthy spending habits. This is a subject that’s been brought up countless times when it comes to the idea of personal finance, but trust us when we say that it is an absolute truth to take into consideration when trying to get your financial life in order. Paying off the full amount of your balance on time is not necessarily the only good thing you can do if you have one or more credit cards. Reviewing everything that you’re charging is also important. One way to start saving money is forcing yourself to use your credit card to only purchase what’s necessary, like groceries, gas, and your phone bill. Using it for unnecessary expenses like clothes, recreational activities, and other such treat-yourself gifts is not a good idea, as it will, of course, result in revolving debt. So, if you’re addicted to shopping and making lots of small unnecessary purchases, but you want to avoid having to pay the interest that comes from not paying your full credit card bill every month, using your debit card or cash is a better idea.
Find the Best Possible Cell-Phone Plan
Another financial choice that many people don’t take into consideration is what they’re spending on their cell phone bills. However, finding a company and negotiating the best possible cell plan can be a daunting task. The promise of the latest smartphone is too tempting, so when the salesperson offers up a contract, we sign it without reading the fine print. Free text messages and enough gigabytes of data? As long as I have those, who cares what the monthly bill is? This is where cell phone companies really make their money. Not only are you paying for the phone, but you’re also getting charged extra for all the odds and ends. So, when you’re researching what company to go with, think about exactly what you’ll need the phone for, and confirm that they won’t be tacking on extra charges for services that should be free, like voicemail, and cross-country calls.
Make Changes Around The House
Another good place to start saving money is right in your own home. Depending on what your living situation is, whether you live in a house or apartment where the rent doesn’t include hydro, there are a few things you can do to cut costs here and there. For instance, switching to LED light bulbs will save you some money on the back end. True, they cost a bit more than regular incandescents, but they also save energy and can last up to five times longer. Instead of buying name-brand cleaning products, which can be costly and contain toxic chemicals, use cheaper alternatives like baking soda, vinegar and warm water to disinfect surfaces. If you’ve got an extra room, consider renting it out to a friend to earn a bit of extra cash every month. Instead of cranking up the thermostat in the winter, compensate by wearing warmer clothes or wrapping up in a blanket. Also, make sure to turn the temperature down when you leave the house.
Use Less Water
Saving a buck and being environmentally friendly can go hand-in-hand when you reduce your water consumption. A lot of people take water for granted. When it’s been a long day, standing under a hot shower forever can be tempting, but wasteful. Also, when you’re trying to drink clean water, at home or at work, get a Brita filter and fill up your own water bottles. This way, you won’t have to buy or consume bottled water, which is not only bad for your budget but the environment as well.
Make a Food Budget
Another common recommendation, but also an effective one, is to plan your meals better. This doesn’t just mean not eating at restaurants or take out. One good thing to stretch your grocery budget is to buy things that will last and that you can separate into multiple meals. Start by buying things in bulk, including non-perishables like rice, pasta, and other dry foods. This way, you can save money by making large pots of chilli, pasta sauce, and soup, freezing them in portions and reheating them time and time again. If you have a yard or access to a community garden, consider growing your own vegetables in the summer season, cutting costs and giving you fresh produce. If you ever decide to make whole turkeys or chickens, save the bones, boil them up with spices and vegetable ends to make your own broth for soups and sauces. Brew your own coffee and use travel mugs rather than going to Tim Hortons or Starbucks.
Start Selling Your Unused Stuff
One good thing about getting rid of your old spending habits is that you can use the opportunity to get rid of the old things you spent money on in the first place. While it might pain you at first, second-hand goods websites like VarageSale and Kijiji can help you get rid of the excess things like clothing, entertainment equipment (cameras, televisions, etc.), and other items that you don’t necessarily need.
Look Into Free or Reduced Banking
When opening a bank account, a lot of people don’t consider all the facts. One thing to think about when you’re trying to save for the future, and don’t want to risk keeping all your money in a safe or tucked under your mattress, is to find a bank with free banking. However, you will have to pay a transfer fee if you’re switching to or from another bank. If your current bank doesn’t offer free banking, but you don’t want to switch, ask them if they have cheaper alternative accounts. Just remember, most accounts have a monthly minimum limit, that if your balance goes under, will charge you a fee. While the more expensive accounts will come with added benefits like safety deposit boxes and points credit cards (for free instead of an annual charge), the cheaper ones will save you money with their monthly rate and will charge you less if your account balance should dip below the monthly limit.
Not sure if free banking is right for you? Check out our article on Canadian Banking Fees.
Start Getting Ready For Retirement
No matter what age you are, once you’ve started to earn a decent income, and have enough money in your chequing account to start setting some aside, it’s always a good idea to start planning for the future. Your bank should have a number of advisors for all aspects of personal finance, so getting a second opinion is a good first step. The first thing that they’ll probably help you do if you haven’t got one already, is to open up a Tax-Free Savings Account. This is one of the best things you can do to start really saving money and is an available option for anyone over the age of 18. You can even set up an automatic monthly contribution from your regular chequing account, with a maximum amount of $5,500 per year (this can change so make sure you double-check before you over contribute). However, be careful not to go over the yearly contribution limit, as you will be taxed on the extra money.
Another good thing to discuss with your financial advisor is opening up an RRSP (Registered Retirement Savings Plan) and making monthly contributions to it. Same with the TFSA, the RRSP is a good way to invest for retirement.
Think About Setting Up Your Will
As you get older, it’s a good idea to start thinking about arranging a will. A lot of people don’t consider this idea until it’s too late. In the unfortunate event of death, it’s important to have all your affairs in order and see that your finances are taken care of. In most cases, you’ll need to arrange “Power of Attorney,” which means setting up an appointment with a legal advisor and giving them the instructions necessary to see that the conditions of your will are honoured. This can include designated funeral arrangements, naming an estate representative, and making sure that your loved ones inherit what you want them to, instead of any debt that you have at the time of your passing.
Visit the Government of Canada website, for more information on Wills and Planning Your Estate.
While it can be difficult and take a lot of time to reach all these goals in just one year, getting them done as soon as possible will at least take a bit of stress off your shoulders. This way, not only will you be able to save for the future, but also for things that will make you happier for longer.