Take stock, reorganize, overhaul: how to refresh your finances for 2024

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With the turn of the calendar signaling a new beginning, it’s the perfect time of year to take stock of your finances, update your goals, and ditch bad financial habits.

When undertaking a financial refresh for the new year, the first thing to do, according to Saijal Patel, founder and CEO of financial wellness company Saij Elle, is to identify what has worked well for you over the past 12 years. last months.

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“You can’t change what you’re not really aware of. So go through this process to determine what worked, what you’re proud of, and where you think there’s an opportunity for improvement,” she said in an interview.

“It might sound cheesy, but you have to have the right conversation.”

She also advises clients to avoid feeling too guilty about spending habits they’re not so proud of, as this could prevent them from setting themselves up for success in 2024.

Kalee Boisvert, a financial advisor at Raymond James, takes a similar approach with clients in that the first step should be to identify where the problems lie.

“If you’ve ever said, ‘I have no idea where all my money is going,’ remember that your transaction history provides concrete evidence. Knowing your spending habits allows you to align your spending with your goals and values,” she said.

Boisvert says many clients make the mistake of simply estimating their expenses.

“They take the biggest expenses they have each month (mortgage, utilities, insurance, etc.), summarize them in their head and estimate their budget,” she said.

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“I encourage anyone who has used this approach to go through the full list of transactions from last month in detail to verify their accuracy. Unfortunately, the rough estimate method is often a poor indicator of your actual spending.

When it comes to the most common financial traps people fall into, Patel says unintentional spending is a major problem.

“It puts a lot of people in debt. We are emotional human beings and we tend to spend emotionally,” she said.

“Even these people who kind of know; it’s one thing to know in your mind, it’s another to go through your statement and actually see it.

A BMO survey released Dec. 11 finds 30% of respondents plan to cut spending in 2024, as concerns grow over high costs of living and economic uncertainty. The survey, carried out by Ipsos, was conducted between mid-September and mid-October among 2,502 Canadian adults.

However, the solution is not necessarily to implement an austerity budget.

“It’s not about punishing them or reducing them to the point where they don’t enjoy things anymore because this draconian approach doesn’t work – if they feel like they’re being stifled. But what I do is ask them about their values, you know, “What’s important? Are these expenses more in line with your values? » said Patel.

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“It’s amazing how I see the changes in my clients and they don’t feel like they’re missing out on anything, but they just haven’t been doing this intentional exercise.”

For clients looking to increase their savings in 2024, Frank Gasper, founder and wealth advisor at CSR Wealth Management, suggests automating contributions to their tax-free savings account and registered retirement savings plan.

“We are all busy and we forget. And even if the amount is less than what you would normally do, do less, automate it and complete it at the end of the year,” he said in an interview.

He also advises customers to take advantage of the new first home savings account.

The FHSA allows Canadians to contribute up to $8,000 per year, up to a lifetime limit of $40,000. The main advantage is that contributions are tax deductible and qualified withdrawals are tax free.

In a December 5 news release, the federal government announced that more than 300,000 Canadians had opened an FHSA.

Even if you don’t have a substantial amount of extra money, Gasper says it’s worth opening one to start accumulating contribution room. He recently had a client open an FHSA with just $25.

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“If you don’t open it, you won’t be able to access the room,” he said.

To go further, Gasper says he wants Canadians to “lose their love affair with the five or six big banks.”

“They’re not doing you any favors in general…people work at the same banks they opened when they were little, so they have this connection to the bank and they charge us fees based on the yin and yang.”

He says customers should shop around for better deals and consider alternative options such as Simplii, Tangerine or EQ Bank, particularly because they offer interest rates on high-interest savings accounts that are often higher than those of most major banks.

Overall, a financial update, including a reset of your mindset, can help you achieve your financial goals in 2024.

“Working on your mindset is crucial, and cultivating a positive attitude toward money can lead to real results,” Boisvert said.

“And the best part is, working on your money mindset requires no financial input! Try changing the way you think about money this year. Replace limiting beliefs with affirmations that open doors to possibilities, fostering creativity and inspiring new actions.

This report by The Canadian Press was first published Dec. 25, 2023.

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