Spring Cleaning Your Personal Finances
May 03, 2022
It’s that time of year when spring cleaning is top of mind for many. Your personal finances are like your home – they can benefit from a good spring cleaning now and then. Take advantage of spring by reviewing your financial habits and creating a solid plan that will prepare you for financial success. Your ‘why’ changes over time, and so do the financial means to get you there. An annual review of your finances can help you assess your short-term and long-term goals around your ‘why’.
Update Your Budget
Or, if you don’t have a budget, there is no time like the springtime present to create one. Doing an annual review of your income and expenses is well worth the effort. You may be earning more, or less, than you were a year ago and need to adjust your spending, and/or saving, accordingly. Give the sheer explosion of the subscription-based economy, setting aside time on an annual basis to review your various subscriptions can be insightful and can result in significant cost-savings. Perhaps Netflix has dropped your favourite shows and you rarely watch it anymore, so it’s a good time to cancel. Perhaps your go-to spin instructor has moved away and so you are no longer using your gym membership. Perhaps your coffee spending has gotten out of hand and it’s time to invest in an espresso machine for home.
Assess Your Debt
Just last month Statistics Canada reported a new record level of household debt to disposable income – to the tune of $1.86 in credit market debt for every dollar of household income. If you have credit card debt, student loans, or other debts, now is the time to develop a plan for getting out of debt. This may involve making some sacrifices in your budget, but it will be worth it in the long run. That feeling of satisfaction when your house is in order doesn’t even begin to hold a candle to the feeling of being on the path to being debt-free.
A Penny Saved is a Penny Earned
This classic adage is an oldie but a goodie. As part of your budgeting, make sure you are setting aside money each month for saving purposes. A good rule of thumb is to have at least three months worth of expenses in savings. Furthermore, you’ll want to also ensure you are contributing to a Registered Retirement Savings Plan and/or a Tax-Free Savings Account. For further direction on how to determine the best way to proceed investment-wise, check out our article on RRSPs or TFSAs: Which is the Right Investment Option for You?
Review Your Insurance Coverage
It is important to review your insurance coverage regularly for a few reasons. For starters, life circumstances can change over night and it is important to make sure that your coverage still meets your changing needs. For example, if you get married or have a child, you will need to make sure that your coverage includes them. Second, insurance companies can change their rates and coverage options on an annual basis, so an annual review will help determine if you are still getting a good deal. Finally, if you have any claims or problems with your current coverage or if you’ve experienced any issues with claims in the past, a good review can help to assess whether you’re best set up for the coverage you and your family need.
Update Your Estate Planning Documents
Spring is the perfect season to put your affairs in order, so take the opportunity to review your will and estate planning documentation. This will help you to identify any existing provisions or beneficiaries that may need to be updated or changed. In addition, you will also need to think about the various types of assets and property that need to be included in your estate plan. Whether it's investments, real estate, family heirlooms, or other valuables, all of your assets should be accounted for and addressed in your estate plan. Estate planning is not a one-time activity; it requires ongoing maintenance and periodic reviews as your estate evolves and grows over time, so an annual spring review just makes good sense.
With the craziness of tax season behind us, spring also provides an ideal opportunity to meet with your Integrated Advisory financial planner and make sure that your financial plan is on track. Start the season off right and enjoy the peace of mind that comes with sound financial planning.
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