Most of us take the opportunity to give our homes and garages a good clean up come springtime – so why not do the same with your finances and give them an annual health check to make sure that they are still fit for purpose? The tax season provides you with the perfect chance to evaluate and possibly rethink your financial goals and actions and get you on the right track for the year ahead. Here are our top tips for an effective financial spring clean:
Before you can work out where your finances are at and subsequently where you want them to be, you need to have all of your financial information, such as receipts, bills, tax returns etc, in one, easily accessible place. These days, paperless bank and credit card statements are often the norm, therefore it is often worth printing out a years’ worth of them for your own records.
Conversely, however, don’t hang onto old financial information for too long or when it is no longer useful for you. As a general rule of thumb, it is advised that you keep documents relating to historical tax returns for seven years, but other financial information can generally be disposed of once you have confidently verified their accuracy.
Draw up a realistic budget
A clear and realistic budget is the cornerstone of your financial success and, for it to work for you in the best possible way, it has to be updated regularly to reflect your changing circumstances. Big life changes such as a new job, marriage or the purchase of a property can inevitably have knock on effects on your personal finances and it is crucial to anticipate such changes as far as possible and plan for them in advance in your budget.
There are plenty of online calculators to help you to track your spending and your outgoings and give you great tips on how to maximise your savings and plan your finances effectively.
Find creative ways to save and earn
Saving for both the future and for any financial emergencies that may arise is key to good financial planning. From your budget, work out a realistic amount to save per month and stick to it – remember that your savings fund will grow with time and provide you with flexibility and stability if things go wrong. As part of this, you need to carefully consider your retirement plan and make sure that your RRSP allocations are appropriate.
There are plenty of other ways to save money if you have the time to go through your financial records. Your life, disability, critical illness, home or car insurance policies should be regularly reviewed to make sure that you are getting the best coverage at the best price.
Deal with your debts
Tackling your debts, be they mortgages, credit cards or others, is one of the best ways of improving your finances for the better. The first step is to face the music – work out how much you owe and how much you are paying in interest charges. Once you are clear on your debt position, shop around to make sure that you are getting the best possible deals from lenders and paying the least amount of interest possible. Consolidating your debts could be an option here.
Once you have readjusted your debts to the lowest possible costs to you, it’s time to make a realistic plan to chip away at them. Paying off the highest interest debts first will obviously save you the most in interest charges in the long term, though you may want to consider the fact that paying off whole, smaller debts in full can sometimes offer you greater satisfaction and more motivation to continue.
If you need help with your finances, please don’t hesitate to contact us.