The new year is a time to turn over a new leaf: Get fit or lose weight or somehow improve yourself. That's commendable, but these are mostly forgotten by, say, mid-February.
But there is one set of resolutions you can make - and keep - pretty easily: financial resolutions. And I don't mean the same old boring stuff like "spend less" or "cut back on credit cards."
That just doesn't work.
When you resolve something vague like, "I promise to spend less in 2013," that's a resolution that you're almost certainly bound to break, probably sooner rather than later.
So when I offer up some "financial resolutions," I mean realistic courses of action that you can start taking right now - and not have to break in three or four weeks.
Making a promise, say, "to not spend more" just won't work, because there's no goal. Do you mean no more than $1,000 per week? Or more than you're spending now?
Or what? You can see how easy it is to break this type of "resolution."
SET SOME GOALS
Instead, resolve to set some financial objectives.
For example, promise yourself to set aside some fixed amount from every paycheque, and put it into an investment account.
It's even easier if you arrange with your bank to make an automatic transfer from your chequing account. That way, it's like another regular deduction from your pay, except it's one that goes directly towards increasing your wealth.
Make the amount realistic. Some advisors think you should save 10 per cent of your income. I say set aside whatever you comfortably can, but do it consistently. Over time, it can really add up.
MAKE A PLAN
Next, resolve to make a plan. I don't mean a "budget" (although a budget should certainly be part of your plan). I mean assess your financial priorities. Write them down.
Are you saving for a down payment on a home? Are you setting funds aside for retirement? Do you need funds for a vacation? Or a new car? All of these require a plan - even if you start with a list on one of those kitchen "to-do" pads. That way, you can set priorities and assess what resources you have available.
ALLOCATE ASSETS PROPERLY
A third resolution is a must for those who already have some investments, whether in an RRSP or a Tax-Free Savings Account. And that is: Make sure your overall investment holdings reflect your tolerance for risk. Clients have come to me claiming to be ultra-conservative investors, but with portfolios chock-full of equity mutual funds. Hardly low-risk. Your financial advisor should have a questionnaire to help you draw up a realistic risk profile.
Using such a profile helps you rebalance your portfolio to just the right mix of safety, income and growth assets that will truly meet your needs - and let you sleep nights all year long.
. Robyn K. Thompson, CFP, is president of Castlemark Wealth Management. Provided courtesy of Fund Library, owned and operated by Fundata Canada.