Tools and habits to stay on track with your money goals

In recent years, financial planning has been reduced from a process to a product. The broader financial industry has offered financial plans, often on a one-time basis, and frequently as a prospecting tool. It is not enough to simply have a financial plan that gathers dust. Forward-looking financial planning can help you stay on track and achieve your long-term goals.

What kinds of goals should you be setting?

Many people have the goal of investing their money. But in order to invest, you have to spend less than you earn. Some people start investing too early. It probably makes sense to pay down non-mortgage consumer debt like credit cards first. It also generally makes sense to contribute to your savings (for example, to an emergency fund) before growing your wealth through investing.

If you are saving for retirement, you should try to figure out how much you should be saving. This is based on your expenses, now and in retirement, and trying to work backwards to figure out how much to put aside each month. If you do not work with a financial planner, online tools are better than nothing.

What type of account should you use to invest?

When you are starting out, the most important part of investing is figuring out which account to use. If your income is low or you are young, it should probably be a tax-free savings account (TFSA).

If your income is moderate to high, or if you have an employer matching contribution program at work, it should probably be a registered retirement savings plan (RRSP) or defined contribution (DC) pension plan. The tax-free first home savings account (FHSA) being introduced in 2023 presents another option for renters saving for a home.

Years like 2022 are unfortunate. Most investments have lost value. But 2021 was a great year. North American stocks were up about 25% and many real estate markets saw similar returns. Some years, you will make outsized gains. In other years, you will feel like you are going backwards. Try to focus on a medium-term time horizon, such as three years, to see how much progress you have made as opposed to worrying about month-to-month changes.

Post a Comment