Resolve to save more

There are only four days left until the new year and I’m sure most of us are excited to put 2020 behind us.

But as different as this past year has been, there is a time-honoured tradition that is sure to be followed as we always do starting out a new year — creating a bunch of resolutions that will only last a few weeks…

Many of these resolutions fail because they’re too lofty or unachievable. Goals need to be simple, within reach and achievement should be clearly definable.

While health-related goals are important, financial health and well-being is often overlooked. So this year, set some more realistic financial goals that you can achieve. I could easily list 10 or more ideas here but with the goal of keeping things simple, I suggest we start with just three.  

The following three goals are not only achievable, I’ll break them down with specific targets to track:

Create a budget

Budgeting is something often talked about and tried but rarely done well or followed through on. Yes, it takes some work but if you persevere, the rewards are better control of your spending and more freed up cash flow to put against debt or into savings. Your goals:

• Download an easy to use app to get started – I’d suggest Mint or YNAB (you need a budget) as both get great reviews and are easy to use
• Put aside some time in your calendar each week to track and update the app and stick to it! 
• Pick one category each month to reduce your spending.

Get out of (or reduce) your debt

By focusing on your debt instead of ignoring it, you can make a difference in how quickly you pay it off. While it may take some sacrifices to get under control, the sooner you get started the easier it will be. Your goals:

• Set up a debt-management plan. This should list each debt you owe, the interest rate it carries, and the payment terms.
• Using your budget from above, determine how much money you have to put against debt each month. Pay the minimum only on all debts except the one carrying the highest interest rate and put everything left against that until it is paid off.
• Identify one way each month to free up more cash flow to put against your debt. This could be done by reducing an expense, selling something you no longer need or finding a way to earn extra income.

Start saving money

While the standard goal of saving at least 10 per cent of your income each month is not attainable for many, the key is to just get started. By establishing a savings habit now, you are setting a trend for the rest of your working career.

If a retirement illustration suggest that you need to put away $500 per month to reach your goals but you can only afford $100 per month right now, that amount is still a lot better than saving nothing. Your goals:

• If you don’t already invest savings each month, you need to start. Even if you begin with $25 per month, you need to get started now. You can setup an automatic monthly contribution to an RRSP or TFSA account easily online and the money will be drawn automatically from your bank account. Set this up before the end of January.
• If you already contribute to savings regularly, it is time to increase those amounts. Any increase, no matter how small, will improve your odds of success. Once you’ve setup the increase, put a note in your calendar every six months to do another small increase.
• Free up some cash flow if need be to make this happen. Dine out less, cut down your utility bills or cancel a subscription you never use. There are many options here!

While these goals may seem intimidating, getting started is within your power and the sooner you do the farther ahead you will be. Let’s not only put the year that was 2020 behind us this week but take action to make 2021 the year that you take control of your financial future! 

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.