Getting Your Financial House In Order -
A Holistic To-Do List
Whether you’ve been cleaning out closets or searching for hidden treasures on Netflix these past few months, you might have some extra time on your hands to focus on projects you’ve been putting off for a while.
Is getting your personal finances in order on your list? If so, we’ve come up with a holistic to-do list to help you get organized and create a realistic and sustainable plan to help you manage your money that makes you feel good.
Begin with a positive mindset
When you think about money, how do you feel? Stressed? Dumb? Ambivalent? Tired? Managing your personal finances often comes with emotional add-ons.
If you aren’t managing your money in the way you would like to be, your emotions can be a place to start. Acknowledge them, then ask how they’re helping you. Don’t get hung up on money mistakes made in the past or comparing yourself to others. Focus on the positive, moving forward, and doing what’s best for you and your long-term happiness. You’ve got this.
?Did You Know
Every member has access to a free values-based financial plan. It's a road map to your dreams. It aligns your personal values with your goals, then explores options to help you achieve them.
Start with the basics
If you don’t have a budget or lost track of what you thought it was, this is a good place to start.
To get an accurate picture of your spending, review your bank account and credit card statements for the past three to six months to get an idea of where your money is going. There will likely be a few surprises.
Create a basic budget by dividing your expenses into three buckets – needs, wants, and savings. A popular rule is 50/30/20:
- 50% of your income towards necessities
- 30% for wants
- 20% for savings.
That specific ratio might not work for you (you may be more of a 70/20/10), but it’s a good exercise to categorize needs vs. wants, see what your ratios are now and determine what you might want to shift going forward.
Take some time to investigate apps or tools that can help you track and analyze your budget. It doesn’t have to be fancy, but it needs to work for you. Keep it simple, and make sure it’s sustainable. The power of having a budget is tracking your expenses and sticking to the budget you set.
- Tip: If you’re thinking about using an app - look at the reviews, confirm it works well for Canadians, and ensure you’re comfortable with how your personal information is used and stored.
Another critical piece of your personal financial profile is your credit score and credit report, which can be a good indicator of your financial health. Your credit score is a three-digit number reflecting your creditworthiness and how reliable you are managing your debts. Late payments and making only minimum monthly payments, for example, will bring down your score. Your credit report provides a detailed history of how you’ve met your financial obligations, including details of your credit accounts, your payment history, and any collections, bankruptcies or judgements against you. Know and monitor your credit score and review your credit history at least once a year to ensure it is accurate. Find out how to do that
You’ll come back to your budget in a bit.
Get organized (to get empowered)
Being organized when it comes to your financial information will save you time and prevent headaches in the future. Set aside some dedicated time, pick a playlist (remember, positive mindset), and cross this off the to-do list. If you’re married or in a common-law relationship, this might be a team activity.
Locate and gather all the paper documents you have. If you don’t already have a filing system, create one. Just like your budgeting system, it has to work for you. Shred what you don’t need to keep (Google can help you find the answer if you have questions about what you should file and what you should destroy). There may also be documents you want to have a digital copy of, such as insurance policies or lease agreements.
Look through what you have and ensure you have everything. Some big ones include your will, your insurance policies, all lease agreements, your mortgage agreement and land title documents and, if you have one, your safety deposit box contract. You should also have your income tax records (the Canadian Revenue Agency recommends you keep your tax record for six years) and the documents you’ll need to file your taxes next year.
Next up is reviewing your financial statements. This may not be on paper; you may need to go online. But get a full picture of all the accounts you have for day-to-day banking, investments (including retirement savings, tax-free savings accounts and pensions), loans, credit cards, and retail finance agreements (e.g. “no interest financing” for furniture or electronics). Create a simple ledger of all accounts, making a note of what investments are for retirement savings and what the interest rates are on any amounts you owe. You’ll come back to this.
Dream and plan
This is where your work so far pays off. Take some time to think about your future and what your short-term and long-term goals are. If you’re part of a couple, this will be a joint discussion. Some things to think about:
Do you have an emergency fund? What kind of financial cushion do you need to feel more prepared for the unexpected?
Think about your goals and plans for the future. Does your current budget support what you want to do in terms of paying off debt, saving for retirement, or making larger purchase like a home or vehicle?
Go back to your list of debts. Is there a way you can pay them down faster or more strategically? For example, using available funds from a lower-interest line of credit to pay off a higher-interest credit card.
Do you have a retirement plan? Not just an annual savings goal, but a real plan on when you want to quit working and what your lifestyle looks like post-retirement. The First Calgary retirement calculator is a good place to start crunching numbers.
Think about your lifestyle. Are you living beyond your means? Review your budget and see where you can trim your spending. Or look at making more significant changes to free up more of your budget to do the things that are important to you, e.g. moving to a cheaper apartment so you can focus more funds on travel.
Do you want to focus more time and energy on managing your investments? Would you like to build and manage your own online investing portfolio, or invest in real estate? Could you use some help with your investment strategy?
Knowing your overall financial picture and getting your financial house in order gives you the knowledge and ability to move forward confidently. And the financial experts at First Calgary are here to help. They can help provide advice and guidance on how you can get where you want to go faster - like making a larger RRSP contribution to get a bigger a tax return to put money toward that emergency (or vacation) fund. After completing this to-do list, you'll be ready to make the best financial decisions for you.
Still want to speak to one of our financial experts? We're here for you!