There’s a resolution revolution a-comin’! A few days from now, as the old year gives way to the new, Canadians everywhere will be making promises to themselves. Big promises (I resolve to quit smoking.) and not-so-big-promises (I resolve to call my aunt more often.). But here’s one promise you should make and never break: “I resolve to be financially secure.” And here are 10 simple ways to make that happen:
1. Budget better Look carefully at your income and expenses — then set a realistic budget that includes savings.
2. Defeat debt Keep that high-interest credit card in your pocket – or better yet, cut it into little pieces. Credit card debt is very expensive.
3. Set goals Make sure your lifestyle expectations match – and don’t exceed – your income. Be sure to set aside enough regularly to reach your goals.
4. Register yourself Investments held within a Tax-Free Savings Account (TFSA) allows for tax-free income and an RRSP is a terrific tax-deferred savings builder. Start early, make your maximum yearly contributions and you’ll save on tax and enjoy years of taxfree growth in a TFSA and tax-sheltered compound growth in a RRSP.
5. Trim taxes There are lots of tax deductions and tax credits – be sure you take full advantage of every one that applies to you.
6. Invest efficiently Interest income is taxed significantly higher than dividends or capital gains – so it’s usually better to hold investments earning interest income in a TFSA or a tax-deferred RRSP and those that earn dividends or attract capital gains in your nonregistered portfolio.
7. Invest in your child’s future A post-secondary education is expensive but necessary.
Help your kids pay for it by starting a tax-deferred, compound growth Registered Education Savings Plan (RESP) eligible investments now!
8. Insure change Your life is always changing in one way or another – that means your need for income protection and estate planning are changing, too.
9. Assist your assets Good asset allocation is vital to good long-term investment growth.
Get steadier returns over time with the right balance of assets from the three asset categories – cash, fixed-income investments and equities.
10. Wrap it all in a plan The tenth step to financial security is to wrap the other nine steps in a comprehensive financial plan that will get you where you want to go.
Achieving financial security – now, that is a resolution you can take to the bank. Your professional advisor can help you get there.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears Wednesdays.