8 essential money tips to try this year

The new year is a great time to review your finances and see if you’re on track to achieving your goals. Maybe you’re well on your way to hitting that financial target, or you want to start off 2025 by making some new moves.

Whether you want to save more, pay down debt, grow your wealth, stay on top of your investments, or do more with your money­­­ ­— the strategies on our financial checklist will help set you up for success.

Think of a financial plan as your personal roadmap — providing a complete picture of your finances, clearly outlining your financial goals and the steps you need to take to achieve them.

It considers your current financial situation — assessing your net worth (assets vs. liabilities), cash flow (income and spending), taxes, retirement planning, estate analysis, and in certain cases, insurance planning — to help you achieve your short, medium and long-term financial goals.

A financial plan gives you better control of your finances and peace of mind, knowing that strategies are in place to help keep you on track during both good and challenging times. 

While everyone’s will be unique, a financial plan is designed to answer three fundamental questions: 

1. Where are you now financially? 
2. Where would you like to be – both short and long-term? 
3. How will you get there? 

Once you have it in place, revisit your plan regularly to confirm whether you are still on track to meet your goals, or if adjustments should be made. A Scotia advisor will take the time to understand your goals and adjust your plan to ensure it works for you.

Investing in a registered account is a great way to build wealth or save for your financial goals, as it provides tax-free or tax-sheltered growth of your investments and income earnings. 

A registered account is an investment account that’s given tax-deferred or tax-sheltered status by the federal government. Income earned on the account is not taxed until withdrawal of funds, or in the case of a TFSA or FHSA (for qualifying withdrawals), it is typically not subject to tax.

Examples include:

• RRSP (Registered Retirement Savings Plan)
• TFSA (Tax-Free Savings Account)
• FHSA (First Home Savings Account)
• RESP (Registered Education Savings Plan)
• RRIF (Registered Retirement Income Fund)

You also can take advantage of government grants and incentives provided through most registered accounts. 

A non-registered account does not enjoy the same tax-sheltered status as its registered counterpart. They are a general investment account where you can invest in a wide range of assets and are required to pay taxes annually on income generated by the account.

Non-registered accounts are not registered with the federal government. It can benefit your overall investment strategy, especially if you’ve maxed out a registered account like an RRSP.  

Many of us are looking for ways to ensure our money goes as far as possible.

By creating a budget to help track your income and expenses, you’ll have greater control of your finances by gaining a solid understanding of where your money is going, how to tweak your spending and how you can maximize your savings to achieve your goals and lifestyle you want.

Your budget can be as basic or detailed as you like. The important thing is to set it up and ensure it’s working to meet both your short- and long-term financial goals. Reassess it at least semi-annually or whenever you have a significant change in your income or expenses.

Two steps to help you get started: 

Calculate the total income you’ll receive from all sources like employment income, rental or investment income, support payments, pension etc.

List all your expenses and divide them into two categories:

• Non-discretionary, or mandatory costs, such as mortgage payments, rent, hydro, etc.
• Discretionary, or non-essential costs, such as eating out at restaurants, shopping, vacation travel etc. If funds are remaining after you’ve accounted for all your non-discretionary costs, prioritize your discretionary costs based on what is most important to you.

Need some help setting up your budget? Here are two tools to consider:

Scotia Smart Money by Advice+ can help you with managing your budget.¹ This free tool gives you access to money management features in the Scotia app that will make it easy to track your bills, monitor spending and manage your cash flow. Plus, you'll get personally tailored advice to help you better manage your money.

The Scotiabank Money Finder calculator can also help you determine if you have additional funds available to put towards your financial goals by comparing your income to your expenses.

Some Canadians may be feeling the stress of paying down debt, whether it be existing or new debt.

Even if you’re successfully paying down your debt, you may want to learn ways to get rid of it faster. If debt is on your mind, we have three strategies for you to consider.

Before starting, here are some things you should do to set yourself up for success: 

• Make a master list of all your debts. A spreadsheet is a great place to store this information. Use exact figures and include minimum monthly payments and interest rates.
  
  
• Create a budget. If you don't already have a budget, now's the time to make one. Be sure to include all your expenses. If you occasionally enjoy going to the movies or a concert, make space in your budget for these.
  
  
• See what changes you can make. Look at your spending habits and identify expenses you can reduce. Adjust your budget numbers as needed.
  
  
• Determine a monthly debt repayment amount. It's an easy equation: Net Income - Expenses = Money available to pay down your debt. You may or may not want to use it all, but commit to a monthly amount.

Let’s look at these three debt repayment strategies to see if one or more suits you and your financial circumstances best.  The key is to select a plan you can stick to. The right debt repayment strategy paired with solid financial habits can go a long way toward reducing your debt load.  

With the snowball method, you start by paying off your smallest debt first while making the minimum monthly payments on all your other debts. If frequent small wins motivate you more than a longer-haul big win, the debt snowball method could be a good choice. On the downside, you won't always tackle your highest-interest debt with this method, so you'll likely take longer to pay off all your debt.  

The debt avalanche method has you paying off your highest interest debt first while making the minimum payments on all your other outstanding balances. With the debt avalanche method, you pay less interest overall than you would using the snowball method since you're paying off your highest-interest debts first. It’s a great option if you commit to it since it takes longer to see your first “win” of retiring a debt. 

With the debt consolidation method, you use a consolidation loan to pay off your other debts, combining all your debt payments into a single monthly payment. You might want to consider this option if you have a lot of high-interest debt. The optimal consolidation loan offers you a lower rate of interest overall when compared to the debts you'll be paying off with the loan. 

You can apply for a consolidation loan at your financial institution. Scotiabank, for example, offers the Scotia Plan® Loan to help consolidate your debts and reduce interest costs.

Check out this video on the three debt repayment strategies.

If you are feeling overwhelmed by your debt or want to learn about options to pay off debt more effectively, reach out to a Scotia advisor to review your situation and help you find a solution that works best for you. 

Investing regularly through Pre-Authorized Contributions (PACs) is a great way to easily and automatically build your savings for short- and long-term goals. 

With a PAC, you simply choose the amount you want to contribute and how often – for example, weekly, biweekly or monthly. Even small amounts saved regularly can add up over time. When your cash flow improves, you can decide on how much you can increase your contribution.

Here are two ways to maximize your PAC:

Setting up automatic contributions helps move you toward achieving your savings goals, but it’s easy to forget to adjust your plan as your financial circumstances change. Revisit your PAC contributions regularly, especially after major changes, like paying off student debt or landing a promotion. While it’s tempting to just set it and forget it, you’ll be amazed by how much more you can save by increasing your contributions – even a little.

In the graph below, we compare an investor who contributes $200 monthly for 15 years to the same investor who increases their monthly contribution by just $25 each year. 

Changing your contribution from monthly to bi-weekly can be beneficial. You may be making bi-weekly mortgage payments. Do the same with your savings. It’s a small change, but the benefits can add up.  

The example below highlights the savings advantage of switching to bi-weekly contributions over a 20-year period. 

To see how quickly your savings can grow, try out our interactive PAC video.

When it comes to unforeseen events like job loss, illness or major home repairs, it’s important to be financially prepared. Unexpected expenses are inevitable, so an emergency fund should be part of your budget. If you set aside small amounts every pay period, you may not need to access your savings or borrow from your credit card if something does arise, like a major car repair. Many financial advisors suggest you save the equivalent of three to six months of living expenses to get you through a financial setback or job loss. 

If you haven’t yet been saving and want to start, or your savings aren’t where you want them to be, review your discretionary (non-essential) expenses. Start trimming those costs where possible to help build your emergency fund. If money is tight right now, start when your family budget allows. 

Building an emergency fund is typically considered a short-term financial goal requiring less than three years to achieve and, as such, a savings account is typically recommended. Most importantly, a savings account allows you quick access to your money should you need it. Speak with your Scotia advisor to determine which savings account best meets your needs.

Make it easier on yourself by scheduling automatic deposits to your emergency fund through Pre-Authorized Contributions. 

Time is your biggest ally when it comes to saving. When it comes to saving for retirement in particular, the earlier you start, the better off you’ll be because your money will have more time to benefit from compound growth.

Compound growth refers to the exponential increase in your investment’s value over time because earnings grow not only on the principal but on the growth as well – and on the growth from that growth, and so on. The longer you save, the more your money benefits from the power of compounding. 

Let’s take a look at how compound growth works

As you set out on the path to saving and investing, you’ll need to determine which products and investment strategies are right for you.

To determine the most appropriate savings and investing options, work with your Scotia advisor to help you answer these three key questions:

• What are you saving or investing for?
• What is your time horizon for reaching your goal?
• What is your risk tolerance?

When it comes to saving, it’s easy to get sidetracked. A Pre-Authorized Contribution (PAC) allows you to make saving priority number one by ensuring you automatically make contributions.

No matter how experienced you are as an investor, during times of market volatility, you may understandably feel the urge to abandon your long-term plan, cash out, and retreat to the sidelines. But if your financial situation and goals haven’t changed, chances are neither should your investment strategy.

During periods of market volatility, try to keep the following in mind:

Consider finding a middle ground with an investment solution that offers a balanced approach to risk and return. Not surprisingly, reducing your exposure to riskier investments can help lower your portfolio's exposure to market risk. But taken too far, you could increase your exposure to other risks, such as longevity risk – the risk that you’ll outlive your retirement savings. The key to long-term investment success is finding the balance between growing your savings in line with your financial goals while maintaining a mix of investments that doesn’t exceed your risk tolerance. 

Often compared to not putting all your eggs in one basket, diversification is the process of spreading your money across a variety of investments, such as stocks, bonds, and cash, that don’t all behave the same way during periods of market volatility. By including investments that react differently or even inversely to various market events — you can help lower the impact of market declines on your portfolio.

Instead of fearing market volatility, consider viewing it as a buying opportunity. By contributing a fixed-dollar amount regularly through a Pre-Authorized Contribution (PAC) plan, you can take advantage of market dips by purchasing more mutual fund units when unit prices are down, which lowers your average cost.

When looking at historical rates of returns, don’t focus solely on the upside. Although it’s practically impossible to forecast when the next upward or downward spike in the market will take place, having a well-thought-out investment plan can help provide a sense of confidence that you can ride out the volatility.

Keeping an eye on your long-term strategy will ultimately help keep you invested during those occasional bumps in the road.

Scotiabank offers a wide range of portfolio solutions designed to navigate changing market conditions, and align with your risk tolerance to position you for long-term success.

At Scotiabank, we aim to provide tailored and personalized advice so that you can reach your financial goals.

According to a recent Scotiabank national poll, three in four Canadians who work with a financial advisor feel they offer comprehensive planning and advice with 85% confident in the advice they receive from their advisor, and 78% indicating that with the advice from their advisor, they are better off financially than if they managed their money on their own.²