If your financial new year’s resolution reads something like “Be smarter with money,” you can do better. Like all resolutions, financial goals carry the best odds of success if they are specific, and come with a plan.
In that spirit, I asked four financial experts what they foresee as being the most pressing personal finance issues of 2016, and what resolutions they recommend in response.
Let their answers be your guide to financial well-being in the new year.
Issue 1: Retirement Planning
The Expert: Tony Maiorino, vice-president and head of Wealth Planning Services at RBC Wealth Management
“For some individuals, a lack of understanding about retirement planning can be enough to deter them from broaching the subject. For others, it's the many details to take into account that becomes overwhelming and generates anxiety.
Putting off the planning for retirement won't prevent it from happening, and you can't get time back, so the sooner you get a plan in place, the better. Even if your situation changes along the way, components of your plan can be adjusted and fine-tuned to suit your needs.”
Resolution: give it the attention it deserves
“Birth certificates don’t come with an expiry date, so an effective estate plan that’s reviewed regularly is the only way to ensure the plans for your wealth will be achieved and executed.
As we head into 2016, I encourage everyone to take a family inventory as an important first step in planning their estate. Compile a list of information pertaining to your family's banking and investment accounts, advisors, assets, pension information and insurance policies … Share and discuss this information with your partner.”
Issue 2: Not Knowing Where Your Money Goes
The Expert: Paul Shelestowsky is a senior wealth advisor at Meridian Credit Union
“It is beyond evident that people who spend time on their finances should end up further ahead than people that do not spend time on their finances. It is easier to get out of debt if you can track where your dollars are going. It is easier to save for an emergency fund or a specific goal if you know where your dollars are going ... Knowing where your dollars are going, and using that information to form a budget will also reduce stress and create peace of mind.”
Resolution: start tracking “Working with a budget can be a very hard habit to form. Even when I started tracking my expenses, I found I would start and stop and have to restart again — but the time and effort will pay off.
Tracking your finances has never been easier. There are several online and app services that do most of the work for you. Mint.com is probably the most used service; it’s ross-platform, and extremely easy to use.”
Issue 3: Too Much Debt
The Expert: Cynthia Kett is a principal with Stewart & Kett Financial Advisors Inc.
“People are carrying too much non-deductible debt, whether it’s a mortgage, a car loan or a line of credit due to past overspending. I don’t think they realize how much debt can weigh them down. It’s like carrying an extra five to 10 kg on your body — it can be heavy and exhausting!
Some homeowners think it’s ok to have a big mortgage, but do you really want to work just to support your house? Also, today’s rates are low, but they may rise by the time the mortgage renews. Family finances will be squeezed even more.”
Resolution: Pay down non-deductible debt strateigically
“Look at one’s total non-deductible debt and try to aggressively pay it down over the next year, starting with the highest rate debt first (credit cards, for example). Design a financial ‘diet’ that’s ambitious, but not impossible, so that you stick to it. Set up regular, automatic deductions from your bank account to be applied to the debt until it’s discharged. Then, move onto the next highest rate debt and pay it down.”
Issue 4: Debt and Low Savings
The expert: Kelley Keehn is an award-winning author, personal finance expert
“The massive level of debt that most Canadians are facing, along with record low savings to cushion an emergency, [is the issue]. Even with record low interest rates, Canadians are facing debt levels of 164% of their disposable income. BMO recently reported that 25% of those surveyed didn’t have enough emergency savings to weather a financial storm and the same percentage are living paycheque to paycheque.”
“Change the dialogue from ‘How do I afford everything I want to do and have?’ to ‘How can I become financially free?’ Yes, the latter takes choice and awareness (I don’t like sacrifice either — like diets, it doesn’t work in the long term). But if we don’t change the narrative to becoming debt-free and saving for our future selves, our stress will continue to rise, our future will be more bleak and the message we’re teaching our children is less than positive.
Like with health, small habits add up quickly. Get on your bank’s website and figure out how earning just a few dollars more per day and using those funds to pay down your debt quicker can save you big bucks and start you on a new year’s path to financial prosperity.”