A new year brings fresh opportunities to change things up when it comes to managing your finances. The 2015 Sun Life Financial Annual Check-Up found that 66% of Canadians say their debt level is the same or worse than it was at this time last year. Though 67% say they're optimistic about 2016, only 13% note that paying down debt is among their top three New Year's resolutions. Just four per cent rank savings as a top resolution.
Now is the time to make that change! It's also RRSP season, which is great motivation for people looking to up their savings game. Canadians are eligible to contribute 18% of earned income reported on their tax return last year up to a maximum of $24,930 - less any pension adjustments. The easiest way to determine your contribution limit for 2015 is to look at your 2014 Notice of Assessment, where the Canada Revenue Agency does the calculation for you. Here are a few tips to keep in mind as you prepare for a new year.
FIVE WAYS TO GAIN BETTER FINANCIAL FOOTING IN 2016
• Reduce your debt. Make a plan to chip away at your debt. Prioritize and pay off consumer debt with the highest interest rate first or consolidate this debt into a lower interest paying vehicle such as a line of credit and vow to pay off your credit cards monthly. Then, tackle any other high-rate loans and consider accelerating your mortgage payments.
• Increase your savings. Take advantage of any workplace savings such as pension plans, RRSPs, TFSAs, non-registered savings or share purchase plans with employer contribution matching that you may be eligible for. Automate your savings by setting up pre-authorized payments from your account. If you pay yourself first, you'll be building savings and after a while you will not even notice the reduction in cash flow; but you will notice the savings!
• Don't make decisions in isolation. It's important that your financial decisions are based on your goals as an individual or family. For example, if you are considering the purchase of a new vehicle, how will this impact your goals?
• Note your net worth. Set your goals with an eye toward increasing your net worth. Updating your net worth calculation once or twice a year is a good way to track your financial health. If you're able to increase your net worth by 8% each year, your net worth will double every nine years, according to a 2015 tax planning guide from KPMG. Some ways to increase your net worth include investing more of your income by cutting spending on discretionary items, like a daily coffee or buying your lunch, minimizing overall family taxes and paying down debt.
• Tune out market movements and stay invested. The Investor Sentiment Report by Sun Life Global Investments found 38% of Canadians admitted to checking their portfolios more frequently due to market volatility. The investment forecast for 2016 is looking increasingly bumpy - so remember to focus on your long-term goals and stay invested.
The New Year is a great opportunity to reset your goals and plan a brighter way forward. The formula for building your net worth starts with disciplined and regular saving and a sound financial plan. The magic of compounding will help your assets grow over time. Imagine reflecting on 2016 with pride that you have navigated yourself to a more sound financial future. An advisor can help you put together a financial plan that reflects your family's lifestyle and goals.
This article is provided for general informational purposes only and should not be considered specific financial advice. For advice specific to your circumstances, please speak to the appropriate tax, investment or insurance adviser.
Follow HuffPost Canada Blogs on Facebook