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The new year is a great time to review your finances and see if you’re heading in the right direction to achieving your goals. Whether you want to save more, pay off debt, grow your wealth, stay on top of your investments, or do more with your money, here is our financial checklist of strategies to help set you up for success in 2024.
Maybe you’re well on your way to achieving your financial goals or just want to start off 2024 by taking advantage of some of these financial strategies. Regardless, this checklist will help you get, or stay, on track.
If you want to attain financial well-being, it’s important that you have a financial plan. Think of a financial plan as your personal roadmap (providing you with a complete picture of your finances), clearly outlining your financial goals and the steps you need to take to achieve them. Your plan will include longer-term goals, such as saving for your children’s education and retirement planning, as well as shorter-term goals, such as saving for a car or a home.
A financial plan gives you better control of your finances and peace of mind, knowing there are strategies in place to help keep you on track during both good and challenging times.
While everyone’s plan will be unique to their specific goals, a financial plan is designed to help answer three fundamental questions:
- Where are you now financially?
- What would you like to achieve – both short and long term?
- How will you get there?
Once you have a plan in place, it’s important to revisit your plan regularly to confirm that you are still on track to meet your goals, or if adjustments should be made.
How long does it take to create a financial plan?
Here’s some good news: Your initial meeting with a Scotiabank advisor should only take about an hour. This will provide them the opportunity to ask questions about your financial situation, go over your goals and identify any specific needs. While it may take a few meetings to put your plan into action, it’s time well spent. With a financial plan in place, you’ll be more confident knowing that you’re in a better position to achieve your financial goals.
Learn more about financial planning and view some examples of the information you'll receive in your plan.
Reach out to a Scotiabank advisor to schedule an appointment.
A registered account is an investment account that is given tax-deferred or tax-sheltered status by the federal government. In other words, investing in a registered account is a great way to build wealth or save for your financial goals by deferring taxes or avoiding them on withdrawal.
Examples include:
Don’t forget these key dates:
- RRSP contribution deadline: February 29, 2024
- Annual increase in the TFSA contribution limit takes effect: January 1, 2024
- RESP contribution deadline: December 31 is the annual deadline to receive government grants
- FHSA contribution deadline: December 31 of each calendar year. Annual increase in the FHSA contribution limit takes effect January 1, 2024
- You have until April 30 to file your income tax return for 2024. If you are self-employed, the deadline to file your taxes is June 15, 2024.
- Check your RRSP, TFSA and RESP contribution limits by logging into your My CRA account , or check last year's Notice of Assessment
Did you know?
A non-registered account does not enjoy the same tax-sheltered status as its registered counterpart. You will need to pay taxes annually on income generated by the account. Although non-registered accounts offer no tax benefits, they usually have no contribution limits and are more flexible in terms of investments. Non-registered accounts are not registered with the federal government
As inflation continues to impact us all – from the grocery store and gas station to our utility bills – many of us are looking for ways to make sure our money goes as far as possible. By creating a budget to help track your spending and savings habits, you’ll gain control of, and become more efficient with your cash flow.
Your budget can be as basic or detailed as you like – whichever works best for you. The important thing is to set up a budget and reassess it at least semi-annually to ensure it’s working to meet both your short- and long-term financial goals, or whenever you have a significant change in your income or expenses.
Here are two steps to help you establish a budget:
STEP 1
Calculate the total income you’ll receive from all sources – for example, employment income, rental or investment income, support payments, pension etc.
STEP 2
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.
There are many benefits to creating and maintaining a budget:
- Allows you to objectively look at your needs versus your wants
- Helps you better meet short-term priorities, such as paying your monthly bills (like your mortgage, rent and utilities), while balancing expenses for the things you may want
- Helps you achieve longer-term goals (like buying a car or home, saving for a child’s education or retirement)
- Helps identify areas where you may be overspending and helps you reallocate these funds toward more important savings goals
- Helps to create a more effective plan to pay off debts
Are you looking for a tool to help you establish your budget?
Check out Scotia Smart Money by Advice+, which you can find in the Advice+ tab of the latest version of the Scotia app.*
Scotia Smart Money gives you access to a variety of money-management tools, such as a budget feature that tracks your spending and tells you how you’re doing on a monthly basis against the budget targets you’ve set up.
*To access Scotia Smart Money by Advice+, you must have an active personal banking retail product, have transacted at least once on your account within the preceding 6 months and have logged into the Scotia Mobile Banking App.
Some Canadians may find themselves feeling the stress of new debt they’ve taken on as a result the current economic environment or paying off existing debt. Creating a plan that lists each of your debts and how you will manage repayment is an important first step. Knowing what options are available to help you pay down your debt more quickly is also key to establishing a sense of control over your finances during this difficult time.
Here are some strategies to help you speed up your debt repayment:
Restructure your debt
There are a few different ways to do this.
- Switching to a lower interest-rate credit card: Many credit cards have high interest rates. If you have credit card debt, you might want to see if there are options available with a lower interest rate, as this could save you money.
- Consolidating your debt: If you have multiple loans or credit cards, you may be able to combine them all under a new credit application to take advantage of a potentially lower annual interest rate and payment. This might be under a secured or unsecured line of credit – or even a new loan. This way you’ll have one easy payment, which should alleviate a lot of stress.
Pick a debt-paying method
Consider one of these two methods to help pay down debt (but pick the one you feel will be faster or best suited to you).
- The debt avalanche method: This method focuses on paying off the debt with the highest interest rate first. After that’s paid, you shift to the debt with the next highest interest rate and so on.
- The debt snowball method: The goal is to start by paying off your smallest debt first. This can create a sense of accomplishment, so you can use that momentum to move on to the next debt. Many people find this method easier to stick to. Keep in mind, however, that you may end up paying more in interest depending on the amount of time it takes to pay off your larger debts with potentially higher interest rates.
If you are feeling overwhelmed with your debt, or want to learn more about options to pay off debt more effectively, reach out to a Scotiabank advisor to review your situation and help you find a solution that works best for you. You can visit scotiabank.com/book to schedule an appointment.
Investing on a regular basis 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 instance, weekly, biweekly or monthly. Even small amounts saved regularly can add up over time. When your cash flow improves, you can then decide on how much you can increase your contribution.
To see how quickly your savings can grow, try out our interactive PAC video.
Two ways to maximize your PAC
• Don’t set it and forget it – increase your contribution when you can
Setting up automatic contributions helps puts you on the path to achieving your savings goals, but it’s easy to forget to adjust your plan as your financial circumstances change. It’s a great idea to revisit your PAC contributions on a regular basis – especially after major changes, like paying off student debt or landing a promotion. You’ll be amazed by how much more you can save by increasing your contributions – even a little.
In the graph below, we look at an investor who contributes $200 monthly for 15 years versus the same investor increasing their monthly contribution by just $25 each year.
For illustrative purposes only. The example uses a hypothetical rate of return of 5%, assumes reinvestment of all income, compounded annually and does not include transaction costs, fees, or taxes. The example does not reflect actual results or the returns or future value of an actual investment.
- Make it bi-weekly and save even more
The example below underscores the savings advantage provided by bi-weekly contributions over a 20-year period.
For illustrative purposes only. The example uses a hypothetical rate of return of 5%, assumes reinvestment of all income, compounded annually and does not include transaction costs, fees, or taxes. The example does not reflect actual results or the returns or future value of an actual investment.
Life is often filled with surprises, hopefully the good outweigh the bad. Unfortunately, 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 been saving and want to start, or your savings aren’t quite where you want them to be, review your discretionary (i.e., non-essential) expenses and, if possible, start cutting or reducing those costs to fund your emergency fund. Even small amounts saved regularly can add up over time – and you can get started with as little as $25 per month. If money is tight right now, try and start as soon as your family budget allows.
Make it easy on yourself by scheduling automatic deposits to your emergency fund through Pre-Authorized Contributions.
Time is your biggest ally when it comes to saving. Once you start working and can set aside even a small amount each month, you can be well on your way to building savings for your short- and long-term financial goals. 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.
Let's take a look at how Compound Growth works
$200 monthly contribution with an annual compound
rate of return of 6%
For illustrative purposes only and is not intended to forecast future returns of any investment. Assumes a $200 investment at the beginning of each month. Annual compound rate of return is 6%.
As you set out on the path to saving and investing, you’ll need to determine which products and/or investment strategies are right for you and your financial situation.
To determine the most appropriate savings and investing options, begin by asking yourself these three key questions:
- What are you saving or investing for?
- What is your time horizon to reach 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, recent spikes in market volatility may understandably prompt you to abandon your long-term plan and perhaps cash out and retreat to the sidelines. If this is the case, ask yourself if the market or economic events fuelling the downturn changes your long-term goals.
As you consider your options, keep the following in mind:
✔ Manage risk, don’t avoid it
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 will help to lower the overall risk of your portfolio. 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 that balance between growing your savings in line with your needs while maintaining a mix of investments that doesn’t exceed your tolerance for risk.
✔ Put diversification to work
Often compared to not putting all your eggs in one basket, diversification is the process of spreading your money across a variety of investments – for example, stocks, bonds, cash – that don’t all behave the same way during periods of market volatility. By including investments that react differently to certain market events – as one type of security falls, the other should rise – you can help lower the impact of market declines on your portfolio.
✔ Invest automatically and take advantage of market ups and downs
Instead of fearing a market correction, consider viewing it as a buying opportunity. By contributing a fixed-dollar amount on a regular basis through a Pre-Authorized Contribution (PAC) plan, you can take advantage of market dips by purchasing more fund units when your dollar goes farther and, in turn, lowering your average cost.
✔ Focus on the big picture
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.
Working through some of your concerns, either on your own or with an advisor, can allow you to make informed investment choices, view your portfolio with more calm, and ultimately help keep you on track to meet your financial goals.
Coping with inflation and staying on track financially
The negative impact that inflation has on your savings over time is an ever-present, but often overlooked risk when investing. While the impact of inflation on your investments isn’t usually felt in the short term, its impact can slowly erode the purchasing power of your long-term savings.
As the price of goods and services increases over time, a higher amount of savings is required to maintain the same level of purchasing power in the future (e.g., retirement).
No one can completely avoid the effects of inflation. However, a sound investment strategy as part of your financial plan can help you maintain your purchasing power and standard of living in retirement.
Scotiabank offers a wide range of portfolio solutions that are built to navigate a variety of market conditions, including periods of rising inflation, and align with your risk tolerance and long-term return expectations.
At Scotiabank, it’s our goal to provide tailored and personalized advice so that you can reach your financial goals.
This article is provided for information purposes only. It is not to be relied upon as financial, tax or investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. References to any third party product or service, opinion or statement, or the use of any trade, firm or corporation name does not constitute endorsement, recommendation, or approval by The Bank of Nova Scotia of any of the products, services or opinions of the third party. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific financial, investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments, including ETFs. Please read the prospectus before investing. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated.
