While everyone else is making resolutions to eat less and exercise more, why don’t you focus some energy on getting your finances into shape? Here are some financial resolutions 2014 worth sticking to, and tips to how to end the year with more money in the bank than you started with.
Resulotion 1: I’ll Track Spending, Then Set A Budget
The best way to ensure you have more money in the bank at the end of the month is to spend less of it. You should set a budget for yourself and stick to it.
The first step in setting a budget is to track your current spending. Pull out a few months’ worth of recent bank statements, credit card bills, and your utility bills to start with.
Using a program such as Excel, set up columns for the various things you spend money on. The more specific you are, the easier it will be to spot areas to cut back on later:
•Household utilities (itemize each one separately)
•Auto repairs and maintenance
•Books and magazines
•Concerts and movies
In short, if you spend money on something, create a column for it. Once that’s done, you’ll be able to figure out your average monthly expenditures. How does that compare to your monthly income? If you’re spending more than you’re making, resolution No.1 is to stop that. Start by focusing in on any expenses that tally up to more than you expected. (What’s your takeout coffee budget?)
Resolution 2: I’ll Bank Smarter
Only a Luddite would store their savings in a mattress. But you should use your online skills to find the best interest rate for where you plan to park it. Why not start here?
Some other tips to keep more of your money in your account:
•No-fee bank accounts such as those offered by PC Financial and ING Direct really can save you lots of money with unlimited monthly withdrawals, free cheques, free Interac transactions and more. But note that fees for some transactions – such as withdrawing money overseas – can be exorbitantly high.
•Avoid using competitor’s ATMs at all costs, or else you’ll face penalties from both banks. In a pinch, use Interac to make a purchase and ask for cash back.
•Manage your balance so you don’t get dinged for an NSF penalty. Fees for having a cheque bounce have jumped to $45.
Resolution 3: I’ll Use Credit Correctly
Credit cards are a great tool for smart financial planning. They help establish and build your credit rating (provided you pay your bill on time), provide you with an interest-free loan (from the time of purchase until the day the bill is due), and many cards include extended warranty coverage on purchases and/or insurance on travel and car rentals.
Plus you can earn some great perks. For example, with the Scotiabank American Experess Card, you earn rewards points with every purchase.
The big caveat is that you should never carry credit card debt. If you’re regularly find yourself falling short at the end of the month, go back to your budgeting spreadsheet.
Resolution 4: I’ll Plan for the future
Once you do get your savings on track, it’s time to start planning for your future. There are two retirement savings options available to Canadians that also provide tax-savings: Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA). With RRSPs you get an immediate tax deduction on your current earnings, but will have to claim the money as taxable income when you withdraw it to fund your retirement. With TFSAs, you don’t get an discount on your current tax bill, but your investments grow tax-free.
If you have children, you really should look into Registered Education Savings Plans (RESPs). Through the federal Canada Education Savings Grant, contributions you make in this investment program are topped-up by 20 percent (up to $500 a year on a $2,500 contribution). Low-income families are eligible for additional top ups, and residents of Alberta get an additional $800 under the provincial Centennial Education Savings Grant