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Financial tips to start off the New Year

Posted by Select Real Estate Group on Wednesday, January 11, 2023 at 10:22:42 AM By Select Real Estate Group / January 11, 2023 Comment

Make financial success a part of your New Year resolutions

With the New Year now upon us, it's a great time to consider setting financial goals for yourself. Whether it's paying off debt, investing, or saving for a big purchase, many Canadians can make small changes with big impacts on their finances.

Top tips for organizing your finances in 2023

  1. Audit your finances

    Start an inventory of all your payments and any important banking documents, and set up a tracking system. This will allow you to see where your finances currently stand and provide you with information needed to accurately set up your 2023 budget.

  2. Review your credit cards

    Do a quick audit of your balances and identify where and how you spend your money. This will allow you to determine whether you’re getting the best value out of your credit card.

  3. Trim back on your back accounts

    Banking fees may seem insignificant, but they can add up quickly. Consider trimming your accounts to 2-3 to simplify your paperwork and more easily track your monthly income and expenses. Also, consider switching to no-fee digital bank accounts as more and more businesses are going cashless.

  4. Automate your payments

    This will help avoid any late fees and penalties. It is a good strategy to schedule payments at least three business days before the bill is due.

  5. Set a goal and budget for the year

    Goals could be either paying off debts quickly, building an emergency fund, or setting up regular investment contributions. Making these goals achievable and realistic will build confidence and momentum and put you on track for even greater financial success.

How to create a budget

Money is a very personal matter, and while there certainly is no 'right' way to budget, there are some best practices on how best to approach budgeting.

Income-based budgeting methods 

  • 50/30/20 method - divides your income according to three main categories: needs, wants and savings
    • 50% of your income should be earmarked for needs (home, utilities, groceries, transportation, insurance, debt repayment, etc.)
    • 30% of your income can be used for things you want but don’t necessarily need (clothing, entertainment, restaurants, streaming services, etc.)
    • 20% of your income should be put towards savings
  • Zero-sum budgeting -  requires you to allocate every single dollar you earn. Therefore if you take home $3,000 a month, you have to allocate the full amount in spending. While this method may not work for those who have unpredictable income, the main advantage is that it helps you stay on track as there is no room for impulse purchases without readjusting your budget.
  • The 60% solution - allocate 60% of your total income to cover regular expenses, with the remainder allocated towards savings and irregular expenses (shopping, entertainment, streaming services, etc).

Expense-based budgeting methods

  • The balance sheet - allows you to build your budget by simply adding up all of the incoming money and all of your expenses . This can be done by pen and paper, a spreadsheet or even using many of the available online budgeting tools.

 

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The bottom line

The key to setting and achieving financial goals is to make them measurable and easy. Don't be afraid to get creative and tailor your goals to your unique circumstances and priorities. Keep in mind that any kind of budget you make, even if it’s very simple, can help make sure you have money available for the things that are most important to you - whether it's paying off debt, saving for a big purchase or travelling.

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