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10 ways to improve your finances

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In 2023, it’s time to take a serious look at your finances. With inflation and potentially higher interest rates looming, it may seem like financial control is not entirely in your own hands.

In fact, a recent WealthRocket survey found nearly one-in-five Canadians feel their finances are out of control. But there are things you can do to improve your finances. And there is no better time to start than now.

How to improve your finances in 2023

The key to improving your finances in 2023 is to develop better personal financial habits. That means focusing on preserving the money you have and improving your cash flow. The following ten financial tips can help ensure your financial success.

10 financial tips for 2023:

1. Set goals

Financial planning starts with identifying your goals. What do you want to accomplish in the long term? Are you hoping to buy a house? Pay off your student debt. Send a child to college? Or are you thinking about retirement? Now put some numbers with these goals. How much of a down payment will you need to buy the house you want? What is a reasonable timeline for saving that amount?

Also, set your short-term goals. Will you need to replace appliances or buy a car in the next few years? How much will you need? Knowing these amounts and keeping them top of mind will help you save for them. Revisit these goals on an annual basis and whenever your financial situation changes.

Hint: Ensuring your goals are SMART (specific, measurable, attainable, realistic, and subject to timelines) will go a long way to helping you improve your finances.

2. Budget, review, repeat

Budgets are not just a way to plan for monthly expenses. In addition to plotting your future spending and putting it in writing, budgets also provide you with an opportunity to analyze your spending and identify issues with your spending habits. That’s why it’s critical to create a monthly expense budget and then take the time at the end of the month to compare it to actual expenditures. This is also a good opportunity for you to check your credit card and bank accounts for fraudulent debits or charges.

Add a separate section for your net worth, including debts and savings, and track big-ticket items such as vehicles and vacations that you will want or need in the future. Factoring these into your budget can help prevent surprises and allow you to save for them.

Hint: If you avoid budgeting because you find it boring or depressing or it takes too much time, leveraging a smartphone app can make the process more fun and save time.

3. Maximize your paycheck and more

Now is also an excellent time to ask for a raise. Unemployment is down, the job market is in a good place, and most experts say that the new year is the best time to approach your boss about your salary. Companies are making their annual plans in January, so take advantage of the new budget.

Even a slight pay raise can help improve your financial situation. So too can certain employee benefits. Make sure you are leveraging all the benefits you are entitled to. Many people pay out of pocket for things that can be reimbursed through a benefits package such as massages, gym memberships, and even vision care. Also, look for the additional perks and discounts offered by your company.

Hint: Before you ask for a raise, do some research to know what the industry norms are for your position. Go in armed with this information and a quick summary of what you have done for your company.

4. Comparison shop for financial products and services

The new year is a great time to shop for the best deals on everything from your internet and mobile phone plans to insurance, banking, and credit cards.

Comparison shopping puts you in the driver’s seat. It also helps you learn more about the products and services you use, which means you will make better spending decisions.

Be wary of the hype and take the time to compare the details of any deals a company offers. It doesn’t hurt to call your existing providers, insurers, or bankers and see if they can offer a match or a better deal.

Hint: Understand what you need from a credit card before you shop. A card might offer significant financial rewards in cash back or points, but you may pay upfront for these through card fees and higher interest rates. Bottom line: read the fine print.

5. Pay off high-interest debt

Take a hard look at your existing debt, particularly what it costs to service it each month, and consider paying off higher interest debt sooner. This is known as the debt avalanche method. You pay off the debt with the highest rates first and then use the money you save each month to pay down additional debt. Work this into your budget to ensure it happens.

Credit cards often have the highest interest rates. Student loans tend to have lower interest rates, although this is not always the case, so check the actual rates.

Hint: If your debt seems overwhelming, start by first paying off your smallest balance. This can help you build momentum and provide an incentive to start on your larger balances.

6. Set up automatic payments

Even with the best intentions, it is easy to forget to make a payment. However, the interest charges for missed payments can be substantial. Worse, they can eventually affect your credit rating.

Set up automatic payments through your bank, credit card, or service providers. This also helps your budget. If it comes out every month, you know what to expect and plan for it.

Hint: Consider using your credit card for automatic payments, especially if you can earn points or cash back. This also gives you extra time to pay. However, you must also pay off your credit card each month, or you will pay even more interest.

7. Know your credit score

Your credit score influences everything from interest rates to insurance costs. It determines whether you can qualify for a mortgage and even rent an apartment. If you don’t know your credit score – you should.

Many banks offer free credit score information within their online banking systems, and the companies like Borrowell and Credit Karma also offer free credit scores. Once you know your score, look at what is affecting it. Did you miss payments? Do you have a high debt ratio? Your score will provide you with your credit history and identify any issues with your current rating, which you can then plan to fix. This is also your opportunity to address any errors on your credit report that adversely affect your score.

Hint: If you rent, you can now use your rental payments to help build credit. The Landlord Credit Bureau and Equifax recently teamed up to include paid rent in credit scores.

8. Protect your privacy and security

Almost 80% of Canadians believe they are at risk for identity theft, and habits picked up during the pandemic, such as online shopping and ordering in, have put them even more at risk. The good news is that 80% have found that staying home during the pandemic has also provided more time to be vigilant about their identity.

If you have not started taking online security more seriously, now is the time. Identity theft can be incredibly costly and affect your credit score for years. At a minimum, be sure you:

  • Regularly check your credit score for new cards or accounts you do not recognize
  • Change your online passwords every three months
  • Shred personal and financial documents
  • Share less on social media
  • Check bank and credit cards statements monthly for irregularities

Hint: If you think you might be a victim of identity theft, contact a credit bureau to request a fraud alert on your credit report, and then contact your banks and insurance companies. This may help prevent identity thieves from accessing additional credit in your name.

9. Pay yourself first but slow your spending

This is probably the biggest favor you can do for your finances. Set up an automated withdrawal that goes directly into a savings vehicle. What vehicle you choose depends on what you are saving for. Registered accounts work well for retirement and education, while TFSAs are excellent for long-term savings. Bank savings accounts can handle any short-term savings. Be sure to create an emergency fund with some of your savings that can cover your monthly expenses for three to six months.

Once you’ve started paying yourself through automated savings, preserve your gains by looking at proposed expenditures. Never buy on a whim. If you’re online shopping, consider leaving items in your shopping cart for a day or so. You may decide you do not really want it after all. Recognize the difference between needs and wants, and avoid spending on your wants until you have extra cash and no debts.

Hint: For many people, shopping is a panacea. They do it when they’re sad, bored, lonely, or even happy. Know your spending triggers so you can control them. Your finances will thank you.

10. Invest to grow your money

Investing is a great way to earn passive income. If you want to improve your finances, consider investing in either a registered account or an investment account. Which is right for you depends on your personal financial circumstances and your reason for investing. For example, are you hoping to grow your money to retire or to have more money to spend? Use the services of a broker who will also provide you with personalized investment advice or go it alone with a low-fee online account.

If you might need the funds or don’t want to risk your money, choose a relatively stable investment such as a GIC that offers you a moderate return but still protects your initial investment. If you want to grow your money at a higher rate and can tolerate substantial risk, consider stocks, mutual funds, or ETFs. However, research or professional advice is vital. Do your homework or solicit advice from an investment advisor.

Hint: Before you invest, know how you want to invest, how much money you should invest, and your risk tolerance. This is the knowledge you will need to guide your investment plans whether you invest independently or with an investment advisor.

Our final thoughts

Improving your finances is mostly about paying attention but it’s also about ensuring you get the most out of the money you earn. Taking the time to leverage these tips can ensure you improve your finances in 2023 and ensure your financial success for many years to come.

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