The start of a new year is a great time to reflect on the financial resolutions we set out for ourselves. How will we know if we met our financial goals? Following the SMART strategy for goal setting (Specific, Manageable, Achievable, Realistic, Time-bound) is an effective tool to ensure we have clarity in setting measurable goals and working to achieve objectives within specific timelines. It encourages setting precise goals which enables us to calculate if the financial goal has been reached.
If you met your objectives for 2024, celebrate and give yourself congratulations. This is an impressive accomplishment. If you find that you did not meet your goals, do not be discouraged. Reflect on what you would like to achieve the upcoming year and make a plan to meet these goals. Here are a few financial resolutions that you may wish to consider.
Create a budget
Building a budget is the first step to financial security. It creates a fuller picture of your finances and can help you understand if you have a surplus or shortfall of income at the end of the month after all fixed expenses have been paid. Review your past spending habits to understand where your money is going. Have your savings and spending priorities changed over the past year? Budgeting can help set a plan for cutting expenses and spending less, paying off any outstanding debt, building savings and finding ways to afford more of the things that you care the most about.
Build your emergency fund
Setting up an emergency fund helps you to handle unexpected expenses without going into debt. This could avoid using credit that may charge high interest. It will provide peace of mind and will allow you to have financial control.
Pay down debt
There are many reasons people borrow money. Typically, some debt is required to purchase larger items like a house, a car, or to pay for schooling and there is a long-term strategy for paying down these outstanding balances. For debt accumulated on revolving credit such as credit cards or lines of credit, applying extra payments to the balances with the highest interest rates can reduce interest cost. Prioritizing debt repayment and reducing outstanding balances will decrease the overall interest charges. This may save money in the long run and result in extra funds within your monthly budget that can allocated to other financial goals.
Create savings goals
Consider your life goals. These may include buying a home, paying for school, purchasing a car or going on a special vacation. Prioritize the goals as it may not be financially manageable to save for all the goals at the same time. Put a price tag and time horizon on each of your goals and calculate how much would need to be set aside monthly to reach the goal. Assess if this is achievable within your budget. You may have to adjust your plan by either extending the time horizon for savings or reducing the expectation of the goal. Set aside the funds for each savings strategy in a separate account to avoid these funds being intermingled with money used for everyday expenses or the possibility it may be used for impulse purchases.
Savings for retirement
Most people dream of a fulfilling and financially sound retirement. It may seem as if retirement is a long way off but savings early, even small amounts, can make a substantial impact over the long term. Many people have retirement accounts but may not feel they are on track with savings to meet all their retirement needs and expectations. It is a good idea to review your retirement savings goals and assess your investments regularly. This includes understanding the specific investments held and evaluating your investment platform overall to ensure it is well positioned to help achieve your retirement savings goals within your risk tolerance and time horizon. Rebalance your investments if required to ensure they are inline to help meet your objectives
Build financial knowledge
One of the most valuable investments you can make is working to expand your financial literacy. The Financial Consumer Agency of Canada describes financial literacy as having the knowledge to understand personal financial matters, the skills to apply the financial knowledge to everyday situations and the confidence to make responsible financial decisions. Working with a qualified financial advisor can help you create a detailed financial plan to meet your individual goals and strengthen your financial knowledge, skills and confidence.
Possibilities to increase your income
Consideration may be given to increasing your take home pay to support financial well-being and confidence in managing resources. Some ideas on how this might be achieved include:
- Researching the market salary for your job/role and experience level. Know your worth to be able to advocate for job advancement and pay increases.
- Develop your skills through additional educational courses and/or taking on more responsibility within your current job role.
- Networking with a focus on professional relationships.
- Turn a hobby into a side business to generate additional income.
Give back
Consider giving back to your community. This may boost your happiness, increase your mental well-being and overall life satisfaction but also provides much need resources and services within your neighborhood. Charitable donations, volunteering your time and sharing your expertise/skills are all ways to support local organizations in your community.
Be good to yourself
After all the financial obligations have been assessed and built into the budget, it is also important to think about spending on experiences that bring you happiness. Invest in yourself and your own mental well-being, while making sure it fits within your budget. Making room for fun and finding affordable ways to treat yourself will help you stick to your resolutions.
The role of a trusted financial advisor
The process of creating a list of financial resolutions can be relatively easy to complete for some people. What generally proves to be more challenging is having the required knowledge, skills and understanding to successfully reach the goals set. Seeking the assistance of a trusted financial advisor can be a good course of action. A financial advisor will partner with you to answer questions, assist in developing a plan to help achieve financial goals and meet with you regularly to assess the plan and review progress. Their professional advice can play an important role in expanding your knowledge, strengthening your confidence and supporting the achievement of your financial goals.
FirstOntario Credit Union in partnership with Aviso Wealth has an experienced team of advisors specializing in various areas of wealth management, including retirement planning, investment management, estate and succession planning, individual financial risk management and more. These professionals are here to help you plan for the future and reach your financial goals. Visit www.firstontario.com/Investments or call 1-800-616-8878 ext. 1700 to connect with a FirstOntario advisor and start growing your wealth today – your way.