Year-End Checklist: 9 Things to Do for a Financially Successful 2020

Welcome to 2020 – a clean slate to turn over a new leaf with your finances. As yet another year draws to a close and a new decade begins, it’s time to reflect on the past 12 months, how you’ve fared with paying off debt, managing your budget, and what you’d like to do with the year ahead.

Unsurprisingly, paying off debt, building up savings, and understanding personal finance is at the forefront of Canadians’ minds when it comes to New Year’s resolutions. Next to losing weight, 28 percent of Canadians said that improving their financial health is of utmost importance to them on January 1, according to a 2018 Tangerine poll. So how did you fare in 2019?

Getting your house in order at the start of 2020 is a great way to begin the decade right. Here’s our checklist of what to do to set the stage for a prosperous year ahead.

1. Calculate Your Net Worth

You’re conducting a year-end postmortem on your finances and your first step is to calculate your net worth to tally up your gains and losses for 2019. Your net worth is a snapshot of your personal wealth at any given point in time – it shows whether you’re going further into the red, or if you’ve added to your wealth. It’s best to do it at the same time year-over-year to get a proper look at your progress, so doing it at the close of the year is sensible.

Start by taking stock of your assets from bank account savings to TFSAs and retirement funds, then address your debts, from credit cards, consolidation loans, and lines of credit. Subtract your debts from your assets and you’ve figured out your net worth.

If you noted last year’s net worth, how does this year stack up to last year’s? You need to identify if you’ve increased your net worth compared to the year before and if you’ve made any inroads on debt repayments, savings goals, and other financial priorities. If this is your first time calculating your net worth, save your snapshot for a comparison next year. In the meantime, take a look to see if your balances owing are less than last year, and if your savings account balances have gone up.

Ask yourself where you want to head to by the end of 2020. This can be a great exercise to celebrate your hard work, or it could be a wake-up call to help you see where you’re heading if you stay the course with your current spending habits.

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2. Gather Intel for Your Year Ahead

If you’re going to build a budget that’s realistic, addresses your year-round needs, and future-proofs your finances for what lies ahead, you’ll need to figure out some numbers:

• What you’ll be earning: an estimate of your income
• Who and how much you owe: a list of all your creditors, the debts, and their interest rates
• Your fixed expenses, from your mortgage to your car payments, to discretionary expenses, earmarking realistic amounts for groceries, entertainment, and other categories
• Your savings goals: if you plan on going on a family vacation this summer, or if you’re aiming to buy a new laptop before the next school year, get these expenses into writing
• And an often-forgotten-about, but important, category: your one-time costs, which include seasonal expenses like Christmas and holiday spending, birthday presents, summertime weddings, to property taxes, car servicing, professional dues, or buying winter tires

Think carefully about this last category. If you know what to expect for the upcoming year, you can better prepare for these expenses. It’s these one-off expenses that quickly derail us and force us to rely on credit to make ends meet. Looking back at your credit card and bank statements can shed light on what to plan for this year.

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3. Build a Budget (and Seek Professional Help If You Need It)

Now that you have accurate numbers in tow, build a budget that works. It needs to include your fixed expenses, your discretionary expenses, and debt repayment. Making sure you allocate part of your income towards debt repayment is crucial – identify a feasible amount of money to dedicate to paying off your credit card or making a single lump sum payment on your consolidation loan.

Don’t go too lean on your budget, skimping on certain categories. It won’t be sustainable. Like crash diets that start in the New Year, a bare-bones budget that doesn’t leave room for entertainment or eating out is simply setting you up for failure.

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Most importantly, make sure your budget balances out and your income covers all of your expenses. Remember, no budget is set in stone – if you find you’re overspending in some categories and possibly under spending in others within a few months’ time, revise your budget so it better reflects your day-to-day needs.

If you’re not sure what a budget really is, what it could look like for you, or you need help with constructing your budget, our Credit Counsellors can assist you with this process through free, confidential, and judgment-free appointments.

4. Conduct an Audit of All Accounts, Subscriptions & Memberships

The start of the New Year is a great time to do a full-scale audit of all of your existing accounts, recurring expenses, subscriptions, and memberships.

Consider:

• All of your credit cards, how much you owe, and your existing interest rates, and if any cards charge annual fees
• Your expense accounts, from utility bills, Internet and cell phone plans, to car and house insurance rates, even antivirus program payments
• Memberships, such as to the gym, Amazon Prime, Netflix, or other monthly expenses

Evaluate how you’re handling each of these accounts, whether you’re staying on top of them, and if you’re getting value out of these expenses. You may realize you have a gym membership you rarely use but are spending $50 a month on that you ought to cancel.

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Be proactive too: if you owe thousands on a credit card, but you’ve dutifully made your monthly payments on time, call the credit card company and ask for a lower interest rate. If you’ve been a loyal customer paying for a family bundle to cover your household’s cell phone usage, call your provider to ask for any promotions or scale your package down to what you’re actually using.

Do your homework and check on current rates for car insurance, life insurance, and costs for your utilities. If you belong to a Facebook group for your neighbourhood, pose a question to find out what others are paying so that you can compare.

Putting in the ask for a lower cost, or to match a competitor’s price, could shave a significant chunk of money off your bills. Ultimately, that’s more savings back into your pocket to pay off your debts.

5. Check Your Own Credit Reports

At least once a year, you need to request your own credit reports to make sure everything is accurate and that you aren’t putting yourself in harm’s way when it comes to fraud. It isn’t the most exciting of tasks, but it’s a great habit to get into as you do your New Year’s financial checkup.

Aside from fraud, you could be alerted to a drop in your credit score or an account that’s fallen into arrears. It’s important to check on your credit reports for exactly these reasons – any issues with your credit history could affect your ability to buy a house, borrow money, change jobs, and even lease a car.

If there are any inaccuracies, or your score isn’t up to par, you can make sure you start addressing concerns.

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6. Set Your Savings and Debt Repayment Goals

Now that you have your ducks in a row, set your goals, making sure that they’re SMART– specific, measurable, achievable, realistic, and timely. Don’t say “I want to get out of debt” or “I want to save money” – your goals need to include specific amounts, have set deadlines, and include an action plan to success. For example, “I want to pay off $1,000 from my credit card debt by repaying $84 each month.”

Shape your goals around:

• One or two short-term goals, which can be met within the next year. Examples include saving $1,000 for an annual summer vacation or paying off $5,000 of debt by year-end.
• One or two longer-term goals, which look further ahead within the next few years. That could mean chipping away at all of your debts or saving for a down payment.

Putting your goals into writing is a pivotal step – it gives you direction and context for why you’re putting hard work into budgeting and saving.

7. Future-Proof Your Finances

The road to being debt-free isn’t a straight line, especially with the curve balls life throws at us. From a leaky roof to family emergencies, you’ll need to be prepared for anything and everything that may derail you from sticking to your budget and staying out of debt.

Future-proof your finances by setting up an emergency fund this year. Setting aside even $20 a month would leave you with a $240 buffer for when your monthly spending gets tight. Factor in setting up and saving towards your slush fund – the future you is thanking you already!

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8. Track Your Progress and Celebrate Milestones

Between creating a budget to setting goals, you’ve put a lot of plans into action that need to be revisited. Establish checkpoints throughout the year to review and measure your progress, how you feel about your budget, and if you’re on track to reach your goals.

Schedule monthly, bi-monthly, or quarterly dates into your calendar to re-evaluate. You could learn your plan is working, and you’re on pace to reach your targets, which is worth celebrating. On the other hand, you may realize you’ve lost focus with budgeting and tracking your spending, you haven’t siphoned off money towards your savings goals, or you’ve resorted to spending money you don’t have again. That’s worth knowing too.

Sprinkling checkpoints throughout the year helps you get a pulse on how you’re doing so there aren’t any surprises by year-end. It also gives you time to make adjustments and get back on track to achieve your goals.

9. Get Your Whole Family Involved

While you may have the best intentions for the year ahead, you need buy-in from your partner, your kids, and anyone else you’re tied to financially. This is especially the case if you’re sharing bank accounts, expenses, or credit cards.

Hold a family meeting to discuss financial plans for 2020 – if you’re swapping from dinner dates out to cooking at home, you’ll need to warn your loved one and make sure they’re on the same page. Getting support from your family, for instance around gift giving, will help you all stay accountable and work as a team.

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Bonus Tip: Seek Professional Help If You Need It

Approaching the year ahead with a positive attitude and carrying out the steps above isn’t light work. If ever you feel inundated with budgeting, choosing a debt repayment plan, or staying out of debt, one of our Credit Counsellors would be happy to help you. Appointments are free, confidential, and you can talk to a Credit Counsellor in person or over the phone. You aren’t obligated to take any further action by speaking with the Counsellor and your meeting is a judgment-free zone. There are no hidden fees, fine print, or strings attached. Our Counsellors have had lots of experience and will help you review your budget and options so that you can reach your goals. Contact us now – you’ve got nothing to lose and everything to gain.