Best Financial Tips to Start the New Year

The new year is now here and along with trying to wrap up taxes, many are setting goals for the new year. Typically people are focusing on their weight, especially after two holidays of eating good food. I know I could lose a few pounds after this holiday break. More importantly, some are focusing their goals on their finances and I applaud those people. A new year is a great time to look over your finances and see where you can improve.

If you’re in debt, this could be the year you get out of it. You might not be able to pay it all off, but set a goal to pay off 10%, 20%, or more. Do what is reasonable for you and your situation, but create a goal to kill your debt in the new year.

If you’re on a savings kick (like me), then see what you can do in order to save more this upcoming year. I’ve always had a goal to get to 50% saving rate, but I’m not sure how I’m going to get there. No matter what, saving money is extremely important. It’s hard to survive if you’re not saving any money.1 I’m now a saver who loves it. Join the club this year!

My Financial Tip

Before we get to the other tips, I wanted to share my own, which is actually from my father. in this blog, this is what he told me to get me to take the leap.

"If your going to do it at all, Do it right the first time"

Dad

That little phrase was powerful and got right to the point. It helped me understand that I could do anything, and save time by doing it right the first time.

1. Investing for those just getting started

Let’s put first things first. Before you begin investing you need to complete your first 3 Steps: start an emergency fund, get out of debt, and save up three to six months of expenses. If you’ve done that, it’s time to get really serious about building wealth. What you’ll learn in the next few pages is our own personal philosophy on investing.

2. Investing for Retirement If you want to reach your golden years with financial dignity, you need a plan. Here’s ours.

Begin by taking part in a pre-tax savings plan RRSP and a tax-free savings plan TFSA.

Note: If you receive a company match in your RRSP, invest in those plans, up to the match, fIrst. Once your contribution equals the company match, fully fund a TFSA for you and your spouse. If you’ve maxed out your contribution to your TFSA and still have money to invest, invest the rest in a RRSP either registered or non-registered as per your tax situation, ask your advisor.

Fool Proof your money plan

THIS WORKS EVERY TIME

Don’t start investing until you complete Step 3 1. $1,000 in an emergency fund 2. Pay off all debt using the debt snowball 3. Three to six months of expenses in savings 4. Invest 15% of household income into TFSAs and then RRSPs depending on your tax situation, ask you advisor. 5. College funding plans 6. Pay off home early 7. Build wealth and give! Continue investing in Guaranteed Investment . Funds and paid for real estate

Why wait? Avoiding a crisis with a fully funded emergency fund and paying off high interest debts is a fantastic investment! Once you pay off your debts, don’t give yourself a raise! Get on an investment plan and invest the extra money. You can find out who we recommend to help you build a plan by clicking here.

You must know your options, it's your money tell it what to do.

Single Stocks I do not own single stocks and we do not suggest single stocks as part of your investment plan. Over the long term, single stock investors don’t consistently generate returns as high as guaranteed investment funds. If you really want to own a single stock, limit it to no more than 10% of your investment portfolio.

Certificates of Deposit (CDs) or G.I.C's CDs are not good for long term investing. They offer a low return rate, carry penalties for early withdrawals, and have a significant lack of access. We recommend CDs only for short term savings if it allows access without penalties.

Bonds I do not own any bonds. Despite their stereotype, single bonds can be very volatile, can go down in value, and have lower returns than the average investment fund over long periods of time continually.

Fixed Annuities Simply put, stay away from fixed annuities! Way too many penalties, and low rates of return.

Variable Annuities (VAs)- Whole Life Insurance- VAs are savings contracts with a life insurance company. The primary benefit of VAs is the tax deferred growth. However, TFSAs and Traditional RRSPs offer tax deferred growth without the additional costs that VAs charge. VAs charge penalties and taxes for early withdrawals before age 60. I do not own any VAs

Exchange Traded Funds (ETFs) I don’t own ETFs and we do not suggest them as part of your investment plan. ETFs are baskets of single stocks that intend to operate like mutual funds. Sounds good in theory but they are not mutual funds. Zero managers.

Real Estate Investment Trusts (REITs) As a category, REITs just don’t stack up to good growth stock mutual funds. I do not own any REITs and don’t suggest them for you. If you really want to invest in REITs, limit them to no more than 10% of your local investment portfolio.

Equity Indexed Annuities Equity Indexed Annuities contractually agree to limit your loss while you agree to limit your gains. I do not own these and we don’t recommend them for you.

Insurance: Life, Disability and Long Term Care (LTC) I recommend purchasing 15 year (or longer) term life insurance that’s equal to 8 - 10 times your annual income. I strongly suggest purchasing long term disability insurance in the event you become disabled if it is affordable. Make LTC a part of your plan when you turn 60.

Guaranteed Investment Funds Here’s my approach. I select 100% guaranteed investment funds that have a winning track record of more than 5 years and preferably more than 10 years. I don’t look at their 1 year or 3 year track records because I think long term. I spread my investing evenly across four types of funds. That means I put 25% of my investment amount into each of the following:

• Growth and Income Funds • Growth Funds • International Funds • Aggressive Growth Funds

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Pay a pro or do it yourself? Without a doubt, pay a pro. You can not get 100% guaranteed products without using a professional. Statistics show that “do-it-yourselfers” are quick to jump out of funds when they begin to under perform. A good professional advisor will remind you why you chose the fund in the first place (IE: "your fund is guaranteed against loses")and prevent you from losing money by buying high and selling low.