New Year's resolutions — love them or hate them, it is the time of year many of us make goals to change for the better.
For those who are curious, a quick Google search yielded the following top 10 resolutions (in no particular order):
1. Improve fitness
2. Eat better
3. Quit smoking/drinking
4. Self-care sleep more, get organized)
5. Travel more
7. Learn something new
8. Spend more time with family/friends
9. Read more
10. Save more/spend less/reduce debts
According to a 2002 study published in the Journal of Clinical Psychology, only 46 per cent of people who made New Year’s resolutions were successful. Does that prove the old adage that “resolutions were meant to be broken?"
So how does one overcome the odds? As Benjamin Franklin said, "Failing to plan was planning to fail." Given our background in financial planning, below are a few tips to help hit those financial resolutions:
Set a goal: Many may have heard of setting SMART goals. They should be Specific, Measurable, Achievable, Realistic and Timely. Sharing your goals with friends, family or co-workers can help keep you accountable.
Do your homework: Regardless whether your goal is to save more or pay down debt, they both require the same thing — more cash. A monthly budget is critical to highlight the ins and outs of cash flow. You might be surprised how quickly that daily coffee stop or frequent dining out add up. Are you paying top dollar for cable TV, but in reality only watching Netflix? A few common places you may free up some cash: dining out, bringing lunch to work and reviewing cellphone plans (particularly data overage).In addition, review recreational expenses, as well as smoking, alcohol and shopping.
Break it into smaller pieces: If you are saving for a trip that costs $5,000, you know you will need to come up with roughly $100 per week in savings. Cutting back in small places, such as one fewer meal or two fewer coffee runs per week, can quickly add up.
Automate where possible: One can easily set up automated savings plans that coincide with paydays. The age-old advice of “pay yourself first" works. When money is allocated to a key priority, there is less for discretionary expenses or what is called slippage.
There's an app for that: Several budgeting and finance apps are available to help with spending, tracking and goal setting. For example, TD has the MySpend app. When it first launched, customers who used it at least twice a month reduced their spending by between four and eight per cent.
Start now: Too many people fall to the mindset of "Once this is paid off, then I will …" The reality is there always seems to be another conflicting priority that will emerge. Commit to your goal now, even if only a small amount, and review in three to six months.
Seek help: If debt reduction is your primary goal, tackle the highest interest first ,which typically are credit cards. It may be worth seeing if a debt consolidation loan can help roll multiple payments into one. If your goal is saving, it can be tough choosing which avenue is best between RSPs, TFSAs and RESPs. We suggest consulting a trusted advisor for help.
For those who already max out your TFSA each year, 2020 brings a new limit of $6,000. We encourage you to make the most of it. All the best to investing well and living well in 2020!
(written by Keith Davis)
This document was prepared by Eric Davis, vice-president, portfolio manager and investment advisor, and Keith Davis, investment advisor, for informational purposes only and is subject to change. The contents of this document are not endorsed by TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc.-Member of the Canadian Investor Protection Fund. All insurance products and services are offered by life licensed advisors of TD Waterhouse Insurance Services Inc., a member of TD Bank Group. For more information, call 250-314-5124 or email Keith.firstname.lastname@example.org.