Spring is on the horizon, the trees are starting to come alive, and flowers are going to bloom. Forget the lingering winter temperatures (and snow), all is well with the world again!
You may not know this, but sometimes I feel like I’m supposed to be a poet! 😉
As you come out of hibernation and start planning to clean up your house and yard, consider spring cleaning your finances as well.
Here are a few suggestions for your financial spring clean-up this 2018:
If you have waited till spring to file your taxes, it’s time to get off your butt and send in your tax return.
For most Canadians, the deadline for income tax and benefit returns for the 2017 tax year is on April 30, 2018. For our neighbours down south (U.S.), the filing deadline is April 17, 2018. Self-employed individuals in Canada have until June 15, 2018.
If you file your taxes late and have a balance owing to the government, you will be hit with a penalty fee that’s equal to 5% of taxes you owe plus an additional 1% for every month your return is late, up to a year.
If you are consistently filing your taxes late, your penalty fee almost doubles.
If you are a freelancer, here are some expenses you can deduct when filing your taxes.
Open a CRA My Account to easily track your refund, benefits, and update your personal information.
Tax time is also a good time to look closely at your withholding. If you are getting a large tax refund, you should consider adjusting your taxes withheld at source to limit the interest-free loan you are providing to the government.
To maximize your tax refunds, consider using TurboTax.
2. Review Your Debt
Take a closer look at your debts and review your plan for debt freedom.
Categorize your debt into high and low-interest and consider paying off high-interest debt (e.g. credit cards) first. If you have lots of credit card debt, spring is a good time to consider consolidating them and obtaining a much cheaper balance transfer credit card, line of credit, or personal loan.
Not all debt is bad. For example, you may have taken out a loan for a mortgage, to beef up your retirement accounts, or to fund a business venture.
Eliminate your high-interest debt and manage your other debts responsibly!
3. Review Your Budget
Budgets are great at helping you reach your financial goals. They are also a ‘living’ thing, and need updating regularly.
Changes in your life situation such as a new kid, home, job, may require changes to your spending. Compare your income vs. expenses and what’s left-over.
- Will this get you to your financial goals?
- Do you need to increase income?
- Do you need to reduce expenses?
- How much per month needs to go to savings or emergency funds? Investing?
These are some of the questions you can answer through your budgeting process.
4. Audit Your Spending
In addition to making a budget, you should audit where and how your money is being spent. I generally prefer to earn more money and not have to squeeze a cent here and there, but sometimes, cutting expenses is the easier/only option.
Take a look at your expenses over the last year and identify areas where savings could be made.
For instance, are there subscriptions you could cancel – magazines you never read, gym membership you do not use, expensive cable service you can downgrade?
Tracking your spending on an ongoing basis makes auditing and keeping to your budget a breeze.
Some useful personal finance apps/tools for budgeting and tracking your expenses include:
Paytm: Track your bills and get rewarded at the same time. You can access all your bills in one place, get due dates, reminders, use multiple payment methods, and send money to friends and family across Canada for free.
With the Paytm app, you get rewarded for paying your bills and when you introduce friends to the app and they use your referral code, you both get rewarded. For example, if you use my referral code (PTM2477287) when you sign-up, you and I each get $10 in rewards. WIN-WIN! Even better, the app is FREE.
Mint: This budget app helps you create budgets, track and pay bills, connect all your bank accounts, get alerts for unusual spending, and essentially manage all your finances in one place.
YNAB: a budget management app that connects to your bank accounts, sets savings goals, and helps you get out of debt. They offer a 1 month free trial and thereafter, you pay $6.99/month.
Another program where you get rewarded for making purchases you would make anyway, is Ebates. Conduct your online purchases via the Ebates platform, and get cash back from over 750 stores.
5. Automate Savings, Investing, and Bill payments
Good intentions (of saving, investing and paying your bills) are not enough and your memory may not always serve you well.
To meet your savings and investing goals, automate the withdrawals from your bank accounts and you won’t need to remember. 🙂
Consider scheduling withdrawals to align with your paydays, so your automated payments do not bounce and leave you stuck with another bill!
6. Monitor Your Credit Score
Cyber thieves are always on the prowl looking to steal your identity and money. To stop them, you need to continually ensure you are protecting your personal and financial information.
Monitor your credit score and report free of charge and watch out for any red flags on your credit profile. If someone obtains a credit facility (e.g. credit card, loan, line of credit) in your name, it should show up on your credit report and your credit score normally takes a hit.
Checking your credit score literally takes five minutes or less of your time.
7. Organize Your Finances
There is no better time to organize your finances than springtime.
Do you have all those bank statements, bills, receipts, you received over the last year all jumbled together? It’s time to put them in order so you can easily access specific documents when needed, and not miss important deadlines. You may also need them for your tax return filing.
If you don’t have a filing cabinet, consider purchasing one.
Have paperwork that’s no longer useful? Shred them and reduce the clutter. Consider switching to paperless statement and bills.
8. Review Your Investments
What’s going on with your investments? “Buy and Hold” is great advice, but you should still take a look at your investment portfolio at least once every year to ensure all is well.
- What’s your portfolio performance?
- Do you need to consolidate investment accounts for efficiency, less paperwork, and less fees?
- What investment fees are you paying?
- When last did you review your asset allocation?
- Do you need to rebalance your portfolio?
- Is your risk tolerance unchanged?
- What’s your investing time horizon?
- Have you opened an RESP account?
- Are you maximizing free government contributions to your kid’s college-education savings plan?
9. Revisit Your Retirement Plans
Take a closer look at your retirement accounts including: RRSP, TFSA, Workplace pensions – for Canadians; IRA, Roth IRA, 401(k) – for Americans.
- Are you maxing out your contributions to employer-sponsored pension plans?
- What’s your contribution room?
- How much contribution room do you have left?
Do you have retirement goals?
- What dates are important to your retirement planning journey?
- Where’s your current position in the context of your retirement income/savings goals?
- What’s your net worth as of today?
10. Review Your Insurance
People obtain insurance and then totally forget about it.
Your home or life insurance needs updating every once in a while. Have you had recent home renovations or significant life events that impact your current policies?
For home insurance, remember to document your possessions so you have proof if needed for a claim. The encircleapp is useful for inventorizing your home and valuables assets.
Have had no home insurance claims for some years? Ask your insurer for a discount when renewing, or shop around for better rates.
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