The beginning of the year is a good time to get going with these financial planning tips. However, it works any time of the year.
The trick is to get going as soon as you can. Remember the power of compound interest?
This is a compilation of the same financial planning tips I use every year to ensure my savings and investments are in tip-top shape.
Financial Planning Tips for 2023
1. Set Financial Goals for the Year
Don’t stumble through financial planning. Have a plan. How much are you going to save for the year?
How are you going to save it? What are your short-term and long-term financial goals?
You can use the free setting your goals worksheet to determine the best way forward financially for the year.
I always go through this exercise at the beginning and middle of every year because I hate expenses I don’t have money for showing up.
Setting financial goals helps me be ready whenever this happens. Additionally, your financial goals should always be S.M.A.R.T.
S – specific, M – measurable, A – attainable, R- realistic, and T – timely.
2. Max Out Your TFSA
A Tax-Free Savings Account (TFSA) is one of the best ways to stack up your nest egg in Canada.
It’s a flexible vehicle that allows you to save and invest a certain amount of money every year without paying any tax on the interest.
It is also free to withdraw money from a TFSA. I opened my TFSA about 2 weeks after I landed in Canada.
For 2023, the TFSA contribution room is $6,500. If you haven’t contributed in recent years, that also adds up every year.
CRA will let you know how much contribution room you have when they send you an NOA every year.
I invest my TFSA in ETFs via Questrade and I’m satisfied with the growth rate so far.
If you’re not comfortable with DIY investing, you can also do it through the bank.
However, make sure you understand any investment vehicles before you sink your money into them.
Be sure to read up on the applicable rules for running a TFSA if you haven’t already.
3. Max Out Your RRSP
A Registered Retirement Savings Plan (RRSP) is another avenue to grow your money and save on taxes.
The contribution limit for your RRSP in 2021 is 18% of your annual income to a maximum amount of $27,830.
The RRSP season ends on March 1 of the following year so take your time to fund the RRSP.
You can also withdraw funds from your RRSP to buy a house or pay for school.
Like the TFSA, you can carry forward any unused amounts and maximize contributions later on.
There are penalties for over-contributing to a TFSA and RRSP account so pay attention.
If you have kids, you might also consider starting a Registered Education Savings Plan (RESP) for them.
Like my TFSA, my RRSP is invested through Questrade as well.
4. Start an Emergency Fund
A fully-funded emergency fund is vital and will prevent you from digging into your TFSA or other investments when you come against unexpected expenses.
And believe me, you will come up against unexpected expenses. That’s life and it’s inevitable.
A fully-funded emergency fund ensures you don’t have a meltdown every time you need money for unplanned expenses.
How much you should keep in an emergency fund account is up to you but a good rule is at least 3 months’ expenses.
I have 6 months’ expenses stacked in my emergency fund because that’s the number that makes me comfortable as a self-employed person.
5. Pay Off Any Debt
The best and fastest way to achieve financial freedom is by eliminating debt from your life.
You have got to pay off the credit cards, the loans, etc to have financial peace of mind.
The interest on this kind of debt is astronomical and you will never be free of them if you keep making only minimum payments.
Create a plan for paying off debt with the worksheet recommended above and attack the highest debts first.
Pay more than the minimum amount every month or make an extra payment when you can.
Prioritize paying off debt ASAP. This is the best way to meet your personal financial goals and become financially independent.
And whatever you do, do not borrow any more money.
6. Work on Your Credit Score
Is your credit score as good as it can be? Can you improve it in some way? You can monitor your credit score with Borrowell if you are in Canada.
If you’re in the US, try Credit Karma instead. Monitoring your credit also helps you notice quickly if there is identity theft or irregularities with your credit profile.
For tips on building a great credit score, read How to Build Credit Fast as a Newcomer to Canada.
7. Park Your Emergency Funds in a High Yield Savings Account
Your emergency funds shouldn’t be sitting in a regular savings account doing nothing. However, you shouldn’t tie it up in something where you can’t access it quickly when you need it.
This is where the high-yield savings account come in. A high-yield savings account can help the money grow at a decent rate.
Currently, I park my emergency funds in a high-yield savings account at Tangerine Bank where I get up to *5% interest on the balance (depending on which promotion is ongoing).
8. Don’t Forget to Budget
A budget can feel restrictive and annoying but it is a lifesaver and helps you better manage your money especially big purchases throughout the year like holidays or other assets.
For instance, when I estimate I’m going to make a big purchase, I include this under big purchases for the year and start auto-saving for it. When the time comes, I won’t be knocked off my feet by the expense.
I also have separate accounts for pretty much everything – travel, education, treats, healthcare, etc. I can do this easily with no-fee banking through Tangerine. These accounts are separate from my emergency funds.
You can find a free income and expense budget template in my resource library.
9. Automate Your Personal Finance
Automation helps you organize your finances and prevents impulse and unnecessary spending.
Once you’ve decided what your financial goals are for the year, automate each section of it. Your money will start stacking up without any manual input from you.
10. Get Your Estate in Order
Estate planning is important in case you become incapacitated or in case of your passing. It’s not pleasant to think about but it’s necessary.
A last will and testament ensure your wishes are respected accordingly. Get your estate in order by creating a will
Putting together a will doesn’t have to be that expensive either.
Legal Wills is an online will-making platform you can use to create a last will and testament on the cheap.
You can also use Legal Wills for Power of Attorney, funeral wishes, a living will, and more.
Get 20% off Legal Wills when you create your last will and testament HERE.
11. Maximize Your Earning Potential
One of the best financial decisions I ever made for myself was taking the step to start diversifying my income.
I learned a very valuable lesson during the 2008 – 2010 recession – never ever rely on one source of income.
A 9 – 5 might be awesome but the truth is no one is indispensable and you can get booted anytime.
It’s imperative you have other sources of income besides the 9 – 5.
You can do this by utilizing your skills for other purposes or learning a new skill and monetizing it.
For ideas on creating multiple streams of income, read 9 Best Ways to Make Money from Home.
The ideas recommended will get you started ASAP with minimal investment.
12. Review Home and Car Insurance
Have a talk with your home and car insurance providers regarding the possibility of a discount.
Shop around to see if you can get better rates then switch or negotiate a better rate with your current providers.
Yes, this does work. Make a list and start calling for some quotes. I’ve found Square One Insurance to be quite competitive.
13. No Shame in Being Thrifty
There’s nothing wrong with looking for a good bargain and being thrifty. Head over to your local thrift store for a few treasures.
Don’t get hung up on wearing what’s in style or in season. It’ll be nonsense next season. Focus on building wardrobe classics that stand the test of time.
Don’t try to keep up with the Joneses. You have no idea what’s going on in their lives. Mind your own wallet and finances.
14. Book Your Screenings
What does this have to do with financial planning, you’re wondering? Well, medical expenses are one of the fastest money suckers in this world.
Even with “free” healthcare in Canada, there are still loads of medical expenses that can stack up, especially if you’re diagnosed with a serious medical condition.
Do not ignore your screenings – mammogram, pap smear, colonoscopy, prostate, etc. Do them when they’re due and don’t put them off.
Regular screenings can save your life and a ton of money down the road.
15. Treat Yourself
Yes, saving money, paying off debt, and planning for the future are all very nice, but you must also live life in the present.
That doesn’t mean going crazy every month or getting into more debt. Just treat yourself to a little something-something every month.
What sort of treat yourself items won’t blow your budget and goals?
Every time you hit a financial milestone, reward yourself with a little something-something.
However, don’t use this as an excuse to make a huge purchase that will land you right back or deeper into debt.
When I was working on paying off my debt, I set aside $35 to treat myself every month. As I paid down more debt, I increased my “treat yourself” money.
Now that I’m debt-free and financially independent, I still budget this money although it’s a lot higher now.
Here’s one of the things I bought with my treat yourself money last month. It was on sale too – 40% off!
Hunting for bargains is a great way to remain financially independent.
The lesson here is I developed money habits that I don’t feel the need to depart from just because I don’t have money issues anymore.
Discipline builds habits that will serve you well throughout the course of your life.
Got any financial planning tips that you think would fit right in here? Share with us in the comments section below.
Abi has lived and worked abroad for over 13 years. She loves traveling, reading, and writing. She is a big believer in following your dreams and has been marching to the beat of her unconventional drums for a long time. She funds her adventures by making smart financial decisions and investing wisely. Her top personal finance tools include trading with Questrade, investing change on MOKA, and no-fee banking with Tangerine and Neo Financial. Learn more about Abi HERE.
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