How to Keep Your Financial Resolutions this Year
One of the all-time most common New Year’s resolutions is to save more and spend less. But about 80 percent of New Year’s resolutions fail by mid-February. You’ve been there, done that.
This year, you can make it happen. The key? Make a plan and then enlist technology to help keep it on track.
Here are five things you can do today to set yourself up for the best financial year of your life:
1. Set both short & long-term goals
Often, our long-terms savings goals may be decades out. And frankly, our brains have a hard time relating to these goals, because we tend to think about our future selves as strangers. It’s hard to get excited about saving money if you can’t visualize the reward.
Here’s a pro tip: mixing in some shorter-term goals can help you build better savings habits—and give you the incentive you need to keep going. To keep it manageable, include a target savings amount and a deadline. For example, you might decide to put away $1,000 for a long weekend out of town in three months. That might mean cutting back on day-to-day indulgences, but a weekend away is sure to be more memorable than your daily caramel macchiato.
Once you’re in the habit of spending less, put those lessons towards your long-terms savings to kick your investment contributions into high gear. After all, when you’re saving for a goal that’s decades out, the growth on that money can compound into a much greater value than it’s worth today.
2. Build a budget
They say money can’t buy you happiness, but the feeling of financial security can positively impact your life satisfaction in a big way. And budgeting is the best way to get to that point.
Think about your money in terms of three buckets: the functional, the fun, and the future. The functional includes all of the things that you’ll need to cover: bills, a roof over your head, food on the table. The fun is everything that goes above and beyond the practical: dinners out, new jeans, etc. The future includes all of those long-term savings goals you set up in step one. Remember: every $1 you put into that bucket, can turn into $5 dollars (or more) in a few decades when invested.
Apps like Mint or You Need a Budget (YNAB) will let you visualize which buckets your money is going into, and can even help make saving feel more like a game.
3. Give yourself a raise
Want to guarantee a raise this year? Pay yourself first. When you automatically invest a portion of your paycheque, that money can turn into a bigger payout down the road.
To start, make sure to max out any savings matching programs you’re eligible for through your employer. Typically, your employer will set up a group investment account and match your contributions dollar-for-dollar up to a certain percentage of your income. These contributions come right off your paycheque, so you’ll never be tempted to spend that money.
Next, go back to that budget and see if you can afford to make a bigger payout to the “future” bucket each month. Setting up automatic deposits into an investing account every time you get paid is an effortless way to guarantee more money in your pocket by the end of the year.
Remember, New Year’s resolutions are all about improvement, so if you’re already making steady contributions, now might be a good time to turn up the intensity!
4. Secure a spring bonus
New Year’s Resolutions can be especially hard to keep if it takes too long to reap the rewards. Here’s a carrot: contribute to an RRSP before the March 2 deadline, and you’ll be setting yourself up for a juicy spring bonus in the form of a bigger tax return.
A big spring payout can feel really gratifying. But we’d be remiss if we didn’t remind you that a tax return is not actually free money. In fact, that money is part of your income, and any refund you receive is actually the government repaying you for the interest-free loan that you lent it throughout the year.
If you really want to double down on your financial resolutions, consider investing that return. The average Canadian contributes $5,400 to their RRSP each year and gets a $1,620 tax refund. If you keep up with those average contributions and reinvest that refund every year, in 10 years it could add up to enough for a new car. Meanwhile, in 20 years, you would have enough for the downpayment on that lake house you’ve always dreamed of.
5. Change your mind
Wealth is a mindset. Focus on learning throughout the year, and you could change your relationship with money for life. There are so many ways to get a dose of inspiration:
Read a book: There’s a reason that people rave over the classics like Rich Dad, Poor Dad, The Total Money Makeover, Millionaire Teacher, and I Will Teach You to Be Rich. Even if you don’t agree with all of the points the authors make, these books are bound to influence your views on money. Meanwhile, books like The Simple Path to Wealth,The Year of Less, and Playing with FIRE can help you build dramatically better savings and spending habits.
Non-fiction reading feel like a snore? Try listening on audiobook while cooking dinner or on your daily commute.
Expand your podcast rotation: There are so many great financial podcasts to add into your listening rotation. NPR’s Planet Money pairs economics with entertainment, making sense of that mysterious force that makes the world go ‘round. There are also a number of Canadian personal finance experts whose podcasts will give helpful ideas for getting your money on track: check out Moolala and the Mo’ Money Podcast.
Follow a new blog: No matter what you’re looking for, there’s someone writing about it online. In detail. Not sure where to start? Check out Mr. Money Moustache, Young and Thrifty, and Savvy New Canadians.
Follow these five steps and you’re sure to finish off the year wealthier and more confident with your money.
And when it comes to investing, WealthBar is here to help you stay on track towards your financial goals effortlessly. Start investing or speak with a financial adviser today.