The quality of our life apparently depends on the quality of the questions we ask ourselves. As with so many other dimensions, this philosophy also applies to the management of our personal finances. Without falling into the trap of resolutions, let’s say that January and the aura of renewal that emanates from it offer a precious opportunity to plan the next twelve-month cycle.
The tranquility of January weekends lends itself to this completely; a constructive way to fight against the melancholy that inhabits many of us in this post-festivities period. To your papers, your pencils and, above all, your calculators!
Budget
Do I know where my money is going? The higher the disposable income, the easier it is to lose rigor in tracking expenses. A rigorous analysis of your 2022 account statements and their grouping by category will allow you to paint a more accurate picture over a representative surplus period. This observation will facilitate the preparation of a more realistic 2023 budget. It is always easier to change your habits based on facts rather than impressions.
Let’s be honest: we live in a society that pushes us to consume. Have all my expenses in the past few months been planned and necessary? A budget exercise is a matter of priorities.
Ask yourself about the expenditure items that are priorities for you and revise your consumption habits so as to increase your available cash in 2023. The objective here may be to save for property maintenance expenses in the medium term, for a project that is close to your heart, or to set up an emergency fund or to improve it, for example.
Interest rate
Now, are there consumer debts that I could eliminate? In the context of current interest rates, there is no doubt that your objective for 2023 should be to repay all loans whose interest is not deductible on an accelerated basis and to avoid borrowing at all in order to maintain your level of consumption. What additional efforts are you willing to make in 2023 to demonstrate such financial wisdom?
Another question to ask yourself: should I repay the mortgage sooner? If you are still benefiting from a contract signed a few years ago and the interest rate is very low, your normal payments can be maintained as they are. However, you should estimate what the new payment would be at current rates by adjusting your savings upward from that amount.
You will thus have temporarily accelerated your RRSP, RESP or TFSA contributions and the downward adjustment of your other expenditure items will be less drastic once confronted with your new reality. For variable rate contracts, the increase in your payments should be considered even if it is not required by your creditor, in order to reduce the capital borrowed.
Business
Is the repayment of the Canada Emergency Business Account (CEBA) integrated into my 2023 cash management plan? If there is no principal repayment obligation until December 31, 2023, part of this loan will be transformed into a grant if the company meets certain eligibility criteria.
Is my remuneration as an executive shareholder optimized? In recent years, with the increase in the tax rate on non-eligible dividends, this review of the mode of remuneration is absolutely necessary. Dividends are still popular, although in many cases they generate a surcharge on salary. Other more qualitative variables may apply. Be open to change in 2023.
Do I have a succession plan? Between pious hope and concrete action, there is often a huge gap. As an entrepreneur, however, you should not underestimate the time required to prepare the transfer of your business and the absolutely necessary support of a network of experts (financial planners, accountants, tax specialists, lawyers, specialized consultants, etc.). .). Are you ready, in 2023, to change your habit of piloting your ship alone?
Investments
Another tough question: have I maintained my investment discipline in 2022? Despite periods of tumult in the financial markets, regular investments are, in the long term, more profitable than trying to time the market. Your long-term financial planning should be based on regular contributions to your various investment accounts. Remember that if you are overly emotional, working with professionals will help keep your cool.
Is my portfolio in a position to take advantage of the market recovery? In 2022, guaranteed products have aroused heightened curiosity among investors dazed by uncertainty. To finance short-term projects, you are currently winners. But if the investment horizon is long term, “freezing” your savings in this way will prevent you from taking advantage of the stock market recovery.
Real estate
This question is for first-time buyers (or older ones): do I need to open a TFSA (tax-free savings account for the purchase of a first property)? This new account, aimed at facilitating first-time homeownership, will be in effect as of April 1, 2023. If you are over 18 and do not own a residence (or haven’t for five years), you should open this account sooner rather than later, since you will no longer be eligible if you subsequently have a spouse who is already an owner.
Once opened, however, you will need to determine the optimal time to deduct your contributions from your taxable income, knowing that income is sometimes lower at the start of your career. It’s a safe bet, moreover, that some other chronicles in 2023 will focus on this theme.