Four financial tips to start your year off right

With a new year and the end of an often overindulgent holiday season, the “let’s get organized” side of me kicks into high gear. As with most people, it’s a time to reflect on what’s going well and what new opportunities lie ahead.

Top of mind for many is, unsurprisingly, household’s finances. According to a recent Forbes article, more than half surveyed wanted to save more in the coming year.

How to plan, be smart and make the most of every dollar while juggling multiple household financial priorities can be daunting. A financial planner by day and a wife and mom by night, I’ve put together four tips to help start you and your family down the path to money mindfulness in 2019.

  1. Build your budget
    You need to know where you’re starting from to know where to go next. For this reason, I’m going to come right out and say it: you need to prepare a budget.

    Begin with a simple income vs. expenses (fixed and variable) = surplus or deficit, as well as a basic idea of your family’s net worth (net worth = assets – liabilities).

    This is the hardest, most time-consuming part – and sometimes what stops us from even getting started. Let me assure you it’s well worth your time. Make use of great apps like mint.com or an Excel spreadsheet. If all else fails, break out your trusty pen and paper – whatever it takes.
     

  2. Positive cash flow is key
    Next, track your spending and understand where your money is going – in the financial world, this is called your cash flow. Is your cash flow positive or negative every month? Which direction is it trending?

    An app like mint.com links all of your bank accounts and credit cards into one spot and makes this process relatively painless.
     

  3. Remember the bigger picture
    The third step is to think about what your bigger, long-term goals are – like retirement, child’s education, buying a recreation property or starting a business.

    My husband and I had our kids in our mid-late 30s – a reality for many Canadian families. This means raising children, helping them pay for an education plus saving for retirement will become competing priorities over the next 20 years.

    A big mistake is putting off retirement planning simply because it’s the furthest away. Don’t wait for a time when you can “afford it” – by that point it’ll be harder to make up for lost time. That’s because the power of tax free compounding, dollar cost averaging and good savings habits have a bigger payoff the sooner you start. 

    Small steps you take now will have a big impact later.
     

  4. Insurance: What no one enjoys talking about it
    A last consideration that can’t be overlooked: Insurance and Wills.

    Having put some hard work and thought into your family’s financial plan, it’s worth going the extra step to ensure it’s all protected.

    Specifically, when you have dependents, insurance and Wills are non-negotiable, as you don’t have the saving level to “self-fund” in the event of a worst-case scenario. Some questions for you and your partner to consider include:

  • Have we agreed on who will look after our children should something happen to both of us? How would this person cover the additional expenses?

  • If we were suddenly without one person’s income, would we be able to maintain our family’s standard of living? Most employees have life insurance that includes one or two times their salary but this is rarely enough.

  • Do we have a plan in place to carry on in the event of a disability or a critical illness?

    The ability to earn an income is your biggest asset – especially when your children are small, debts are high and savings are low. Without this, even for a short time, the financial impact to your family could be severe. 

    Although it’s not a simple task, once you’ve thoughtfully taken the steps above, you can begin putting together a real life plan, one that gives you more confidence and peace of mind to move forward with clear goals and purpose.

    And remember to review your plan periodically. It’s meant to evolve over time and to adapt to your family’s changing needs, wants and priorities.
     

Erin Gendron is an Associate Investment Advisor with HollisWealth®, a division of Industrial Alliance Securities Inc., which is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. The opinions expressed herein are those of Ms. Gendron alone and may not be aligned with the opinions and values of Industrial Alliance Securities Inc. or any of its affiliated companies.