With the New Year less than a week away, it’s everyone’s favourite time of year: New Year’s Resolution time! Many people set themselves ambitious goals, but goal-setting is only half the battle. To improve your chances of success, it’s important to come up with an action plans to achieve your goals. Last week we offered three financial goals to aim for in 2016. This week we offer three more goals to get your finances in order in the New Year.
- Pay Off Consumer Debt
I know interest rates are low now, but they aren’t likely to be this low forever. Make hay while the sun shines and aim to pay off your consumer debt next year. There are two popular methods for paying off debt: the debt-snowball method and debt stacking method. Using the debt-snowball method, you start by paying off the debt with the smallest balance first, while paying the minimum on your other debt. Using the second method, the debt stacking method, you start by paying off the consumer debt with the highest interest rate first. It’s up to you which method you’d like to go with, but if you’re carrying a lot of high interest credit card debt, it’s probably best to go with the debt stacking method.
- Build A Rainy Day Fund
Are you prepared for a financial emergency? Financial emergencies come in all shapes and sizes, including job loss, a leaky roof, major car repair and the list goes on. Financial experts recommend keeping at least three to six months living expenses squirreled away in a high-interest savings account. How do you start an emergency fund (if you don’t already have one)? The best way is to automate your savings. Set up automatic withdrawals from your chequing account to a separate savings account for your rainy day funds. Once you build up your rainy day funds, only touch it in a financial emergency. It’s important to determine what an emergency is. If your furnace breaks down during wintertime, that’s a financial emergency, but if there’s a two-for-one shoe sale at Foot Locker, that’s probably not.
- Pay Yourself First
Here’s a scary fact: less than a quarter of Canadians contribute anything to their RRSPs. With less than a third of the workforce with the benefit of a workplace pension plan, we’re setting ourselves up for a rude awakening in retirement if we don’t take the onus to save for retirement. The easiest way to save is to pay yourself first. This phrase has been made famous by the Wealthy Barber, David Chilton. Using this method, aim to save 10 percent of your pre-tax income. The easiest way to do this is to automate your savings (see above). If you can’t afford 10 percent right now, don’t worry. Saving 7 percent or even 5 percent is better than nothing.
There you have it, three more New Year’s resolutions to start the year off right. Here’s a productive and successful 2016! Happy holidays everyone!