Financial Checklist for After the Holidays

It’s the end of the year. Time to look back at how did we do this year, and to see how the next year is shaping up to be. Remember, the key here is to focus on moving forward, not berating yourself for past decisions you can’t change. It’s important to get your finances back on track moving forward.

REVIEW

  1. Family Report Card: Sit down for a “Family Report Card” which is essentially a brief financial assessment period with your loved ones. Discuss if you met your financial goals, paid off the debts that you hoped to, and kept within your budget.
  2. Conduct a General Financial Audit: Review your finances for the past year. Check if you were able to meet your goals, if your monthly budgets worked out, and how your debt repayment plans went.

BUDGETING

  1. Create a Budget for 2024: Creating a budget is a crucial step in managing your finances. It helps you understand where your money is going and how you can control your spending. Here are some steps to create a budget:
    • List your income and expenses.
    • Begin tracking your expenses.
    • Set realistic financial goals.
    • Set budget priorities.

EMERGENCIES AND SAVINGS:

  1. Plan for Emergencies: Set up an emergency fund. An emergency fund is money set aside to cover unexpected expenses. Here are some tips to set up an emergency fund:
    • Open a savings account that is easy to access in case of an emergency.
    • Start by saving a realistic amount: It can take months or years to reach the desired amount for your emergency fund. Even if the amount is nominal, something like $50 per paycheque, it can grow over time.
    • Forced Savings Strategy: Forced savings, also known as paying yourself first, is when you transfer money to a savings or investment account as soon as you are paid.
    • Make it a habit. Automate your savings.

SPENDING

  1. Pause on Spending: Acknowledge if you overspent and then stop spending, even for a few days, except for essentials. Take a break from utilizing those credit cards.
  2. Consider using cash over credit cards: The physical act of handing over cash can make us more aware of our spending. This noticeable exchange of payment for goods is often not felt when using credit or debit cards.

LARGER EXPENDITURES

  1. Plan for Larger Expenditures and How to Pay for Them: Planning for larger expenditures involves setting aside money specifically for these expenses. Here are some steps to plan for larger expenditures:
    • Identify the larger expenditures you anticipate, such as home repairs, replacing an older vehicle, or upcoming educational expenses.
    • Estimate the cost of these expenditures.
    • Start saving for these expenditures in advance.
    • If savings are not sufficient to cover these expenditures, consider borrowing, but avoid using credit cards for that. Even if you had to borrow at 5-9% interest, it could still be better than the credit card rates of 19% or higher over a long period of time.
      a) Home Repairs: You can finance home renovations through various options, including savings, a line of credit, a home equity line of credit or a second mortgage.
      b) Replacing an Older Vehicle: When replacing an older vehicle, consider factors such as the cost of the new vehicle and insurance. Most dealers offer dealer financing through traditional financial institutions at reasonable interest rates. If that is not an option, or if you are buying the vehicle from a private seller consider a line of credit, a home equity line of credit or a smaller second mortgage.
      c) Upcoming Educational Expenses: Planning for educational expenses involves saving money specifically for these costs. Consider options such as Registered Education Savings Plans (RESPs), which are long-term savings plans to help save for a child’s education after high school. If these savings are insufficient, consider a student loan, a line of credit, a home equity line of credit or a second mortgage.

DEBT

  1. Debt Diet: If your household has credit cards, a mortgage, student loans or other debts, it’s time to get serious about paying them off, or at least reducing the balances owing. Review your budget to determine how much money you can apply to debt each month above the minimum payments.
  2. Pay Off Debt: Early in the new year is an excellent time to start planning and taking charge of your finances.

INCOME

  1. Review Your Income: Take a look at your income sources and see if there are opportunities for improvement. This could include working overtime if that is an option, asking for a raise at work, changing careers, looking for a higher-paying job, or starting a side hustle to bring in extra income. Also, employers are projecting an average annual base salary increase of 3.64% for 2024.
  2. Contribute to your TFSA: You could earn tax-free income by making investments inside a self-directed Tax-Free Savings Account (TFSA),which is a great tool for saving and investing for both short and long-term goals. For 2024, the annual TFSA limit is $7,000.

INVESTMENTS

  1. Audit Your Investment Portfolio: Review your investment portfolio and make necessary adjustments.
  2. Focus on registered accounts first: Before investing into any unregistered account make sure you contribute the maximum allowed amounts to your RRSPs an TFSAs.
  3. Risk tolerance: Understand your risk tolerance, and don’t get tempted by opportunities to make a quick buck. If something sounds too good to be true, it often is, so exercise caution and do your due diligence before making any financial decisions.
  4. Speak with investment professional: Make sure the advise you receive is from a qualified investment professional.

TAXES

  1. Tax Filing For 2023: Consider contributing to your RRSP account within the first 60 days of 2024 to claim the tax deduction on your 2023 tax return if you have unused room.
  2. Maximize your RRSP Contributions: For 2023, you could contribute 18% of your earned income (up to a maximum of $30,780) to a Registered Retirement Savings Plan.
  3. Sell Positions for a Tax Loss: Consider selling any money-losing positions and/or investments in your portfolio for a tax loss.

MORTGAGE

  1. Mortgage Planning: If you’re thinking of buying a home in the near future, speak with a mortgage broker or lender to find out where you stand financially. More specifically, you’ll want to know how much you can afford and what type of mortgage product might be best for you when it comes time to apply for a mortgage.
  2. First-Time Buyers: If you are buying a home for the first time, consider consulting with a mortgage professional who is knowledgeable about the programs specifically available for first-time buyers. This will allow you to fully take advantage of these opportunities.
  3. Consider Refinancing: Analyze your current mortgage. Is there enough equity in your property? Look at your current rate, and where the rates are right now. Do you carry other high interest rate debt, and would replacing that debt and rolling it in a new mortgage make a financial sense, and will that save you money in the long run? Talk to a professional to analyze the numbers for you, and to compare where would you be if you took that step.
  4. Paperwork: If buying or refinancing is in the plans for 2024, you would need to prepare and organize your paperwork. Your lender will want to know details about your income and job status to make sure your income is sufficient enough and your position is stable enough to continue making mortgage payments throughout the entire term period. Here are some documents that you may need to supply that fall under this category: Pay stubs, T1 tax forms, Notice of Assessment, Letter of employment from your employer, bank statements showing enough down payment in case of buying.

Looking Ahead for 2024

The Canadian economy is expected to rebound in 2024. The Bank of Canada is near the end of its rate hike cycle and the pressure on household balance sheets should subside over time. The recovery is anticipated to gain momentum in the second half of 2024 when the Bank of Canada is projected to lower its high interest rates.

As we look forward to these positive economic changes, it’s crucial to align our financial plans accordingly.

Review and Adjust Your Financial Plan

Remember, it’s important to review and adjust your financial plan regularly to ensure it aligns with your current financial situation and goals. Keep an eye on your larger goals to guide you through smaller challenges, as they can turn into big problems if not dealt with in time. It’s also a good idea to consult with a financial advisor for personalized advice. This way, you can be prepared to navigate the financial landscape of 2024 effectively.

Contact TheBroker.ca Ltd. today for a free consultation! We can offer you helpful advice on getting a mortgage, current mortgage rates, and anything mortgage related. For any questions or further assistance, feel free to reach out to us via our website or call us at (519) 252-9665.

Please note that this information is current as of the time of writing and is intended for general informational purposes only. It should not be relied upon as financial advice. Always consult with a mortgage professional for advice tailored to your specific circumstances.

This article was brought to you by TheBroker.ca Ltd., a licensed mortgage brokerage. Our licensing status with the Financial Services Regulatory Authority of Ontario (FSRA) can be confirmed through this link.

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