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 that are curious, a quick Google search yielded the following top 10 resolutions, in no particular order, per the GoSkills website:
• Improve fitness
• Eat better
• Quit smoking/drinking
• Self-care (ex: sleep more, reduce screen time)
• Travel more
• Volunteer
• Learn something new
• Spend more time with family/friends
• Read more
• Save more/spend less/reduce debts
A 2021 Forbes story found a staggering 80 per cent of resolutions fail by mid-February. Research conducted by fitness company Strava in 2019 found most people had given up on their goals by Jan. 19. I guess that begs the old adage that “resolutions were meant to be broken”?
So how does one overcome the odds? As Benjamin Franklin said, "Failing to plan is 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 aim to be specific, measurable, achievable, realistic and timely. Sharing your goals with friends, family or co-workers can help keep you accountable. One main reason resolutions tend to fail is the goal set is either too strict or not realistic.
• Do your homework: Regardless if 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. Are you paying top dollar for cable TV, but in reality only watching Netflix? You might also be surprised how quickly frequently dining out adds up. A few common places you may be able to free up some cash include dining out, bringing lunch to work, reviewing monthly subscriptions, checking cellphone plans (particularly data overages) and reviewing recreational expenses, as well as smoking, alcohol and shopping.
• Break it into smaller pieces: If you are saving for a trip in a year that costs $5,000, then you know you will need to come up with roughly $100 per week in savings for 12 months. Cutting back in small places such as one less meal out a week or two fewer coffee runs can quickly add up.
• Automate where possible: One can easily set up automated savings plans that coincide with paydays. The old adage of "pay yourself first" works here. 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, when TD launched its MySpend app in 2016, TD reported that users saw an average drop of between four and eight per cent in their spending after using the app to track their budgets.
• Start now: Too many people fall to the mindset of "Once this is paid off, then I will …" The reality is there often is another conflicting priority that will emerge. Commit to your goal now, even if only a small amount, and review it in three to six months.
• Seek help: If debt reduction is your primary goal, tackle the highest interest bills first, which typically are credit cards. It may be worth seeing if a debt consolidation loan could 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 of you who already max out your TFSA each year, 2023 brings a new limit of $6,500. We encourage you to make the most of it. All the best to investing well and living well in 2023.
"The best time to plant a tree was 20 years ago, the next best time is now."
— Chinese proverb.
Until next time, Invest Well. Live Well.
Written by Keith
The views expressed are those of Eric Davis, Senior Portfolio Manager and Senior Investment Advisor, and Keith Davis, Associate Investment Advisor, TD Wealth Private Investment Advice, as of November 16, 2022 and are subject to change based on market and other conditions. Davis Wealth Management Team is part of TD Wealth Private Investment Advice, a division of TD Waterhouse Canada Inc. which is a subsidiary of The Toronto-Dominion Bank. For more information: 250-314-5124 or keith.davis@td.com.
