Kicking off the new year with resolutions to strengthen your financial fitness

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For many, the new year is a time for personal reflection and goal setting. These goals or resolutions could be to hit the gym more frequently or even read a new book every month. While these are admirable activities, the new year is also a great time for considering your wealth-building journey and setting mid and long-term financial goals. Learn four actions you can take to become more financially fit in 2023:

1) Pay down your debt

Consumer debt is a challenging burden that limits not only the money you can put towards investing for future goals but also limits your ability to afford the day-to-day cost of living. One of the best steps you can take is to develop a repayment plan for your credit card or other kinds of debt. Credit cards have an average interest rate of 19.99% (the annual percentage calculated daily and charged on any balances carried from month to month) meaning debt can quickly grow out of control if you let it. Paying down your debt every month allows more of your future earnings to be used elsewhere.

2) Create a rainy day fund

If the pandemic has reminded us of anything, it’s that the unexpected can happen and the better prepared we are, the better we can weather the storm. From your vehicle needing an unforeseen fix to an emergency home repair, creating a savings account or high-interest savings account to cover the curveballs life throws at you can be a game changer for your wealth-building journey. Slowly building up an emergency fund, equivalent to 3-6 months of income, can allow you to dedicate a larger portion of your money to investing while giving you the confidence that you won’t have to sell your investments early to cover an unexpected cost. Starting with just $25 a paycheck can net you $600 in emergency savings in a year.

3)Take advantage of your employer’s group RRSP plan

Thinking about something far off – like retirement – can feel daunting, but the earlier you start saving and investing for your golden years, the bigger the nest egg you will create for yourself. If your employer offers a voluntary group registered retirement savings plan, you can start investing for your retirement every month, and also take advantage of group plan benefits like investments with lower-cost fees. You may even be able to benefit from a match savings program in which your employer will also contribute to your plan. Once you enroll in your company’s program, you can sign up for automatic payroll deduction and take the guesswork out of routinely saving for your retirement years.

4) Invest in yourself before you invest your money

Much like physical exercise, the more you train yourself to be financially fit, the better success you will have in developing positive habits with your money and investing toward your long-term goals. Look for opportunities to strengthen your knowledge of money management and investing with credible and unbiased resources. The Financial Consumer Agency of Canada has excellent information on debt and borrowing, managing your money and even mortgage calculators. Want to learn more about investing? Visit CheckFirst.ca, brought to you by the Alberta Securities Commission to access unbiased information, tools and resources to help you learn to invest and avoid scams. You can even attend one of the many free programs on investing held throughout the province all year long, both online and in person.

The new year always brings excitement and the push to learn and advance. As you build out your areas for growth in 2023, consider including a few financial resolutions to help you spend consciously, invest wisely, and reach your financial goals today and for many years to come.

 

Sticking to your investing goals through the holidays

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As the holidays approach, many Albertans are overwhelmed by the costs associated with the season. According to PwC’s Canadian Holiday Outlook, Canadians expect to spend on average $1,402 on the holidays, an increase of 29 per cent over last year. From gifts to large dinners, saving and investing can take a backseat to stressful credit card bills.

To avoid this unwanted stress and falling off track with your investing goals, here are five steps you can take to enjoy the holidays and continue to grow your wealth into the new year.

Understand your budget: We all have costs associated with our day-to-day lives, with some falling under needs (housing, utilities, and food) and the rest under wants (gifts, trips, eating out etc.). Take the time to understand your monthly fixed costs and what you can realistically allocate towards gift shopping and entertainment. With this information, you can also see what steps you can take to stay within your regular monthly budget while showing those close to you that you care for them. This could be as easy as giving personalized handmade items instead of buying gifts, and coordinating a volunteering day or potluck instead of hosting a large dinner.

Automate your investments: One of the key components to every investing journey is contributing consistently to your investment portfolio to maximize the compounding effect (the interest on top of interest your invested money earns over time) on your returns. Before you start shopping, consider an achievable amount you can dedicate to your investments each paycheck and set up automatic withdrawals through your bank as soon as you get paid. By utilizing the “Pay yourself first” strategy, you can ensure consistent contributions to your investments, without even having to think about it or inadvertently spending that money.

Confront your debts: There is no better time to confront your debt than now. Review any consumer debt you may have, and focus on ways to minimize adding to it. If you cannot find a sensible approach that doesn’t add to your debt, set reasonable spending limits on gifts, entertainment, and food that you won’t struggle with paying off in the new year, and won’t limit your ability to continue contributing to your investments.

Save while you invest: While investing is an important tool to growing your wealth, dedicating some of your money towards a savings account can help you be prepared for significant expenses like the holidays. Ideally, it helps to have a savings account for near-term goals like gifts, trips, entertainment and an emergency fund that you can utilize for unexpected expenses that may come your way. By planning ahead and dedicating a small amount each month to both accounts, you will be well prepared.                                                                                                                                                                                                       
Avoid the temptation of get-rich-quick investment scams: You may be enticed to make extra money during the holidays with investment offers advertised as having high returns with little to no risk. Remember that fraudsters like to target those who are trying to make money quickly online and in person. Stick to your own financial goals and ignore those investment “opportunities” that could leave you in a worse position.

By staying mindful of your budget, maintaining your investment contributions, and minimizing the debt you take on, you can come out of the holidays without hitting speed bumps on your investing journey.