Family Finance

Nine ways to improve your personal finances in 2011

January is a good time for getting organized and making changes. But, when it comes to personal finances, it’s hard to know where to start. Here is a list of nine things you can do to improve your personal financial situation in 2011.

• It's difficult to arrive at a destination if you don't have a map. It's same with your personal finances. You need to sit down with a financial advisor and decide, based on a number of factors, including your age and income, just what your financial goals are and how to get there.
• Once you have established your financial goals, you need to create a budget, so that you can set aside money. Your advisor can review your monthly income and expenses to help you identify areas for saving. To help with your budgeting click here.
• If you haven’t already done so, open an RRSP or Tax-Free Savings Account. And just as you would with your bills, pay yourself first by putting money into your RRSP or TFSA every month.
• Start a pre-authorized chequing plan (PAC). This simple investment strategy lets you set aside money on a regular basis to purchase mutual funds. Amounts as small as $50 per month, can be deducted from your personal bank account and invested in your RRSP or TFSA.
• Once your plan is in place, review it at least once a year with your financial advisor. This helps ensure that your plan continues to reflect your current situation.
• Buying a house is probably the biggest single investment you’ll ever make, and the biggest expense. Did you know that over the life of a $200,000 mortgage at 6% interest (assume a 30-year amortization and a monthly payment of $1,200), you would pay $230,000 in interest? But, by making a few extra mortgage payments every year, you’ll be able to save thousands of dollars.
• Check your insurance. When was the last time you looked at your home, auto and life insurance? Are you covered adequately and have you shopped around to make sure you’re not overpaying?
• Do you have a will? Review and update your estate plan annually to make sure it reflects your age and family circumstances, and protects your family from unnecessary taxes.
• Pay off your credit cards. We hear about “record-low” interest rates all the time, but credit cards are not part of this trend. Did you know that the highest-interest store credit card as of January 2011was charging 29.90% in annual interest? Bank and trust company credit cards were charging from 9.99% to 19.99% interest. Consider all the better uses you have for that money.