5 Things to Do For a Financial Reset

By Carmen Chan

We’re a little ways into the new year now – the holiday season has come to a close and we’ve all returned back to work, school, and our daily routines. Have you carved out time to better understand your finances? Make this the year you conquer your debts, build up savings, and attain your financial goals.

Forty-two percent of Canadians tweaked their financial New Year’s resolutions in response to rising cost-of-living concerns, according to a December 2023 Ipsos poll conducted on behalf of BMO. It revealed that 30 percent of Canadians are now planning to minimize spending, 17 percent want to create a concrete budget aligned with financial goals, and another 68 percent want to chase specific goals in 2024.

But how do we chart the path to achieve our goals by December? Here’s how to get your financial house in order for 2024.

Calculate Your Debts or Your Net Worth

How much money do you need to repay across all your accounts or how much do you have across all of your assets? Conduct a full scale audit of your accounts to create a snapshot of where you stand. This is a great first step because you can compare six months into 2024 and again at the start of 2025 to see where you stand. You’ll know how much debt you’ve paid off and how much wealth you’ve added to your name.

Start by taking stock of your assets across all your accounts, including your savings account, chequing account, TFSA, retirement funds, and the value of your home if you’re a homeowner. Then calculate your debts, across credit cards, consolidation loans, lines of credit, and mortgage if you have one. Subtract your debts from your assets and you’ll have your net worth.

Hang onto these calculations because you can compare year-over-year to track your progress.

If you need some inspiration, 59 percent of Canadians polled at the end of 2023 said they’d focus on retirement planning, 46 percent needed to save for a summer vacation, 39 percent wanted to pay down debt, and another 36 percent were saving for a large purchase, such as a car.

Try to narrow down one or two short-term goals, which can be met within the calendar year and one long-term goal, which can take upwards of three to five years.

Setting SMART goals is an important task because it gives you direction and purpose. It’s the why behind why you’re budgeting, building wealth, and paying off debts.

Plan For the Year Ahead

Before you build a budget that includes a plan to achieve your goals, you’ll need to address your year-round needs. This is crucial because we’re often sidetracked from our financial goals because of a lack of planning and consideration of unforeseen expenses or events.

Think about what lies ahead for 2024 and include:

• How much you’ll be earning, including your income, a tax refund, a bonus at work, and any extra money coming your way.
• How much you owe, including a thorough list of all your creditors, your debts and their interest rates, and the applicable due dates.
• Your fixed expenses, including your mortgage, rent, car payments and bills, to your discretionary spending, including entertainment and eating out.
• How much you’d like to save for your short- and long-term goals. Are you saving for an August family vacation before your kids go back to school or the downpayment on a new vehicle?

A key step in this information-gathering stage is to think about one-time costs. These may include:

• Seasonal expenses, including Christmas gifts and New Year’s hosting, family birthdays, and summertime weddings. If your cousin is getting married out of town this summer, factor that expense into your budget now. Siphoning off as little as $20 a month will get you $120 by July.
• Home maintenance expenses, including property taxes, appliance repairs, summertime landscaping, as well as vehicle expenses like regular servicing, winter tires, or repairing the HVAC system before summer rolls around.

Pay attention to the second half of this step. The leading cause of financial anxiety for Canadians, according to the Ipsos poll, is the fear of unknown expenses, with 82 percent of consumers worried about these one-time costs. By looking back at your statements over the past few years, you’ll notice that most of these expenses are actually “known,” not “unknown.”

Build a Budget

Even though Canadians have financial goals in mind, 69 percent said they didn’t have a financial plan and another 60 percent said they didn’t have a budget. With this in mind, apply the steps above to help you design a budget that addresses all of your family’s monthly needs and accounts for your goals.

Your budget must include your income on one side, and your expenses on the other. Your expenses should include your debt repayments and savings.

Do You Think of Savings as an Important Expense?

Don’t go too lean on your budget to try to make it balance. That isn’t a sustainable move – you’ll set yourself up for failure if you commit to never eating out or never buying coffee in the morning. Instead, give yourself wiggle room for some treats without going overboard.

If your budget still doesn’t balance, rethink some of your discretionary spending. Do you need a Disney+ subscription as well as Netflix? Could you cut out your cable TV package for the next few months? Could you keep your car in the garage and carpool with your spouse to work in the mornings?

If you need help with constructing your budget, our credit counsellors are experts at helping clients outline budgets that work. They can assist you with this process through free, confidential, and judgment-free appointments.

Check In with Present You and Future You

With your budget and goals in tow, you’re putting a lot of plans into action. To make sure you’re on track, you’ll need to schedule regular checkups on your finances throughout 2024. Some people do this on a weekly, monthly or quarterly basis. They’ll review their spending habits, adjust their budget, and measure their progress against their goals.

Make this a standing meeting on your calendar. Pore over how much you’re spending on your discretionary spending and if this aligns with your budget, set auto debits on your accounts to pay off debt before their due dates, and make sure you’re carrying cash over into your savings accounts.

It’s also a good idea to visualize yourself in the future. Where are you living, what are you doing, and what is important to you? This is an exercise experts recommend because it’ll help you centre yourself in the present moment and encourage you to take care of yourself – and your family – for the future.

Setting aside time for these checkpoints throughout the year ensures you won’t have any surprises by year-end. It gives you time to adjust and pivot to help you achieve your goals.

Advice From Last Year’s Self – How to Deal with Credit Card Debt

Check Your Credit Report

Canadians ought to be checking their credit report at least once a year – and January and February are great times to do so. You’ll need to pull your report from the likes of Equifax Canada and TransUnion Canada to make sure everything is accurate and there isn’t any fraudulent activity.

You may notice a drop in your credit score because of late or missed payments or even an account that’s fallen into arrears. While it isn’t the most interesting of tasks, you’ll see how creditors view you as a borrower – and this, in turn, will affect your ability to buy a house, renegotiate a mortgage, borrow money, or even lease a car down the road.

If you notice any inaccuracies, get them corrected, and if you could be managing obligations better, address these concerns in 2024.

How to Get Your Own Credit Reports in Canada

Get Professional Help If You Need It

Meeting credit card due dates, setting a budget, defining SMART goals, and getting organized financially – these tasks aren’t light work. If you’re feeling inundated with your debts and don’t know how to chart a path forward, it’s worth seeking professional help before it gets worse.

Not-for-profit organizations like ours are here to help you get out of debt. You can call or chat to us online to set up an appointment over the phone or in-person.

Appointments are free, confidential, and take place in a judgment-free zone. There are no hidden fees, fine print, or strings attached. In a nutshell, our counsellors are here to help, whether that’s looking over your income and debts to advise you on your next steps to contacting your creditors to create a debt repayment program. Contact us now – you’ve got nothing to lose and everything to gain.