The year 2020 was a strange one for all of us. Our usual patterns of life were overturned, businesses floundered and shutdown, other businesses had to adapt to a new way of working, and social activities were largely non-existent. Many people lost their jobs and found themselves having to cut back in order to make ends meet. The year 2020 taught us a lot about the uncertainty of life and the need for planning and saving.
We have entered 2021 and we want to share with you five financial tips to help you start this year off right:
1. Revisit your Budget
We aren’t past the virus yet, even though there is a vaccine. Now is the time to revisit your monthly budget to see what things can be cut back. If you have two cars but hardly go out, consider putting one in storage or changing the usage to pleasure use to save on insurance costs. Are you paying for a gym membership that you aren’t using?
For any money you free up, either pay down debt or set up a monthly automatic savings into either a TFSA or savings account that you can draw from without a tax penalty. The uncertainty of 2020 has demonstrated the need for an emergency fund that can be used to help bridge the gap when there is a drop in monthly income. If that emergency fund is a line of credit, then during better times, that line of credit should be repaid or the debt can easily spiral out of control.
2. Avoid Credit Card Debt
Credit card debt is among the worst kind of debt out there. The interest rates on unpaid balances are typically between 15% and 20%, even though prime interest rates are at a historic low. If you find yourself in credit card debt, try to consolidate it under your mortgage payments or under a line of credit secured against your assets in order to get the lowest interest rates available. Do not fall for those easy loans or payday loans since the interest rates on those are just as bad as credit cards. Instead, talk to your bank or credit union directly and shop around for the best offer.
3. Beware the “Add to Cart” button
Global online sales grew astronomically in 2020 as people stayed at home to isolate from Covid-19. Buying online is very simple and the selection is huge. It is quite easy to instantly satisfy a want and have the package arrive within hours or days without getting off the couch. Unfortunately, this easy access has encouraged a spending spree on everything from takeout food to pet toys. Instead of scanning Facebook or Amazon when bored at home, consider going for a walk or calling a friend. Trade “retail therapy” for a better kind of therapy that is less damaging to personal finances. See tip 5 for some ideas.
4. Track your Spending
Your monthly spending won’t always be consistent, but there should be a typical average for basic needs like food, housing, telephone/internet, and transportation. It is the extras that need watching. There are apps available that will link to your credit card and bank transactions and automatically categorize them for you so you can see how much you have spent in each category. Apps like this make monthly tracking and budgeting far less manual and time consuming.
5. Invest in Yourself
If, like many other people, you found yourself with extra time in 2020, consider developing new skills, learning something new, or meeting your exercise targets. Not only will it help with your mental health, but it can create future possibilities that you hadn’t considered. For example, Toastmasters is meeting virtually all over the world and is a great way to practice public speaking and have social interaction. There are also courses offered virtually for free all over the place. Seize the opportunities available to you and take this time to consider what you want your life to look like.
We at ZLC wish you all the best for 2021 and hope that this article has given you some food for thought.
Disclaimer: This document has been prepared for use by ZLC Financial. The strategies, advice and technical content in this publication are provided for the general guidance and benefit of our clients, based on information believed to be accurate and complete, but we cannot guarantee its accuracy or completeness. This publication is not intended as nor does it constitute tax or legal advice. Readers should consult a qualified legal, tax or other professional advisor when planning to implement a strategy. This will ensure that their individual circumstances have been considered properly and that action is taken on the latest available information. Interest rates, market conditions, tax rules, and other investment factors are subject to change. This information is not investment advice and should only be used in conjunction with a discussion with a ZLC Financial Associate. Neither the firm nor the author of this publication accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or the information contained herein.