How to get your finances in order before the end of the year
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Any time is a good time to look over your finances and make sure they’re set up to support your lifestyle and long-term goals. A lot of folks wait until a brand new year rolls around to make their traditional resolutions and work on building better habits. And that’s good — but a great time to look at your finances is before the end of a calendar year. There are two solid reasons why:

●      Practically, with a quick check-in on your financial state, you can avoid falling into the pitfall of overspending during the holiday season.

●      Emotionally, you can be ready to hit the ground running in the new year with an existing plan rather than feel the potential burden of “having” to start a new goal.

The holiday season tends to be both expensive and tiring, and many of us overestimate the time and energy we’ll have at the beginning of the year to work on essential habit changes. Instead, you can set yourself up for success by making a plan later in the year and proactively ease some of the psychological overload of January. You’ll be ready to roll (and feel great) with a fresh financial plan to kick off the new year.

Go over your annual savings and set new goals

You need to know where you’ve been to get the best sense of where you want to go. Looking at what we have (or haven’t) saved over a year can feel challenging, and even scary. You might feel more stressed if you haven’t saved anything yet.

Money is emotional, and it can feel more manageable at the moment to avoid it. All of these feelings are normal and totally OK. Start by doing one positive thing for your finances. It’s not about the amount but the fact that you’re taking action.

●      Download statements for all of your accounts and investments and total up your savings for the year. (It might be $0. If so, that’s fine. You’re taking a step to save more, and that’s very important to keep top of mind.)

●      Calculate the percentage of how much you saved to your total take-home income. A popular strategy is that 20% of your pay should go towards saving and debt repayments. This is just a benchmark to start your thinking.

●      Do you want to save more or less in the next calendar year? If it’s more, do you have automatic withdrawals set up to make saving as easy as possible?

●      If you’ve got an emergency fund set up with about 3-6 months of total expenses, then congratulations! You’re in a good position and can look at depositing that cash into other types of investments. If you don’t have an emergency fund yet, focus on building it up before moving on to different kinds of savings. 

Time any TFSA withdrawals

A Tax-Free Savings Account (TFSA) is a prime savings tool for Canadians. One of the best aspects of a TFSA is its flexibility — you can withdraw funds from it whenever you need them and recontribute them back, up to your overall limit, at almost anytime. When withdrawing from your TFSA, you must wait until the following calendar year to re-contribute it without tax penalty.

If you’re planning for a major purchase or know you’ll be taking cash out of your TFSA, do it before the end of the year. Say you withdraw in December 2022. You can begin re-contributing right away, as of January 2023. (If you were to withdraw on December 31, you could technically put it right back the next day, on January 1, without penalty.)

If you waited until January 1, 2023, to withdraw, you’d have to wait a whole year — until January 1, 2024 — before you can start adding that cash back. Late-year TFSA withdrawals give you maximum control over when you’ll deposit funds again.

Review all your financial products

Your financial needs change over time. Change is good! But it can be easy to keep using services that might not be the right fit for how much you’re spending or how you’re living now. It’s also common to sign up for a new service because of the fancy bells and whistles you think you’ll use, but end up ignoring in the long run. You want to ensure that you’re always getting the most from the services you’re paying for (and also not paying any more than you need to be).

●      Look over each credit card you have and its benefits. Are you paying more than you need for perks and programs you don’t use? In that case, become aware of the benefits you could be using and plan to take advantage of them or switch to a lower-fee card that’s more aligned with how you spend.

●      Many credit cards offer bonuses for spending a certain amount in various categories, like restaurants or travel. If you’ve got multiple cards, you might be spreading your spending so that you don’t hit the required levels and take full advantage of the perks on offer.

●      Go through all of your insurance policies — home, auto, life and any others — to refresh on how they’re set up and if the coverage included will still have you totally covered.

Look after your loved ones with your will and beneficiaries

A truly comprehensive financial plan includes planning for every circumstance, including how the people you love most will be taken care of if you pass away. Sure, nobody wants to think about this scenario, but it’s imperative.

●      Do you have a will? Good. Review it annually to make sure it’s still set up how you want.

●      Don’t have a will? Bad. A will is a cornerstone of financial planning. It not only protects your loved ones financially but will most likely ease a lot of emotional stress in a terrible situation.

Also, look at your designated beneficiaries across life insurance policies or investment assets. Each should have single or multiple beneficiaries, with according allotments set up however you wish.

Check in on your credit report and score for free

Some folks regularly check in on their credit score or subscribe to monthly update services with the two main Canadian consumer credit bureaus: TransUnion and Equifax. But a lot of us don’t, and staying on top of your score is simpler than you might think. Consistently checking your credit report is vital to ensure incorrect info hasn’t been added, that balances are reporting as they should, and that your report accurately reflects your financial situation.

In recent years, newer digital options to access your credit info have demystified how to access your credit report. Financial platforms like Borrowell have made it easier to see more of your credit information online for free. An increasing number of credit cards and banks have integrated credit monitoring or other tools into their existing services.

Though those are a great way to stay on top of the main details of your credit month-to-month, it’s a strong idea once a year to download your complete report directly from the credit bureaus. Even better, you can do this for no charge.

Downloading or getting a paper copy of your full Consumer Disclosure — the industry term for your credit report — will show you every detail, above and beyond the snapshot insights you might have been seeing, so you can deep dive and make sure your complete report is correct. And, if something is wrong, you can take action to fix it.

Schedule an end-of-year review with a financial advisor

Everyone’s financial situation is unique. While some advice is golden and applies to (mostly) everyone — like paying off high-interest consumer debt as quickly as possible  — other strategies depend on you.

To get the most customized sense of your finances and if you’re on track to hit your goals, an annual meeting with a financial advisor is a great way to know your options and choose the right ones for you.

Jeremy Elder is a Toronto-based content marketer and copywriter with over a decade’s experience telling stories for some of the world’s biggest brands. He’s an expert at finding WiFi wherever you least expect it.

Jeremy Elder is a paid Sonnet spokesperson.
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