Marc André Castonguay, CFP, CIM
January, 2025
A resolution to improve your financial health pays dividends for years to come. It’s a gift to your future self, paving the way for financial stability, less stress, and more freedom to enjoy life.
Ah, New Year’s resolutions—those delightful promises we make to ourselves while polishing off the last of the holiday cookies. Whether it’s committing to eat more kale, hitting the gym daily, or finally organizing that infamous junk drawer, January is prime time for self-improvement. But let’s face it: by February, the kale has wilted, the gym card is gathering dust, and the junk drawer… well, it’s still a disaster. This year, why not resolve to tackle something that truly sets you up for long-term success? Enter financial planning.
Financial planning is like the spinach smoothie of resolutions. It might not be glamorous, but it’s packed with benefits and could change your life. Here are some essential elements you should review as you kick off the new year with a fresh slate.
1. Set Clear Financial Goals
Before you can plan, you need to know what you’re aiming for. Are you saving for a dream vacation, paying off student loans, or building a down payment for your first home? Perhaps you’re envisioning a retirement where you travel the world or open that bakery you’ve always dreamed of.
Use the SMART framework for goal-setting: make your goals Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of saying, “I want to save more money,” aim for “I want to save $10,000 for a new car by December.”
2. Review Your Budget
If you don’t already have a budget, 2025 is the year to create one. And if you do have one, it’s time for a review. A budget is your cash flow roadmap, helping you direct your income toward your priorities instead of letting it mysteriously disappear by spending without restraints. Tracking your income and expenses will provide valuable information to help you identify areas where you can cut back and redirect those savings to your goals.
3. Build or Bolster Your Emergency Fund
Life is full of surprises, and not all of them are delightful. Whether it’s a leaky roof, unexpected medical expenses, or being out of work, having an emergency fund can save you from financial stress. Aim to set aside three to six months’ worth of living expenses in a high-interest savings account. If that sounds daunting, start small—even $1,000 can make a big difference in an emergency.
4. Tackle Debt Strategically
Debt isn’t just a financial burden; it’s a mental one too. Start the year by reviewing your debts and plan to pay them down. The snowball method (paying off the smallest balances first) and the avalanche method (tackling high-interest debts first) are both effective approaches. Choose the one that keeps you motivated. If credit card interest rates are eating into your budget, consider consolidating your debt or transferring balances to a lower-interest option.
5. Review Your Investments
If you have investments, the new year is an excellent time to review their performance. Are they aligned with your risk tolerance and long-term goals? If you’re not sure, a chat with a financial advisor could be invaluable.
For those who haven’t started investing yet, consider dipping your toes in this year. Time in the market often beats timing the market, so the sooner you start, the better.
6. Update Your Insurance Coverage
Insurance isn’t exactly the life of the financial planning party, but it’s a crucial safety net. Review your personal insurance (life, disability, critical illness, health) and general insurance (home, auto) to ensure they still meet your needs. Have you had major life changes, like getting married, having a child, or buying a home? These milestones may require policy updates.
7. Plan for Retirement
Retirement might feel like a distant dream, but the earlier you plan, the smoother the journey will be. Take stock of your retirement accounts and contributions. Are you taking full advantage of RRSP contribution room? Have you maxed out your TFSA?
If retirement planning feels overwhelming, talk to a financial planner to help break it into smaller steps.
8. Review Your Estate Plan
Nobody likes to think about their own mortality but having an estate plan ensures your assets will be efficiently distributed as per your wishes. Make sure your will is up to date and consider setting up a power of attorney. It’s a small effort now for significant peace of mind later. And the cost of having these estate documents drafted by a lawyer is much less than the cost of estate litigation that can arise when there is no plan.
Make Financial Planning Your Resolution
A resolution to improve your financial health pays dividends for years to come. It’s a gift to your future self, paving the way for financial stability, less stress, and more freedom to enjoy life. If you’re not sure where to start, reach out to a professional financial planner and start planning. Who knows? This could be the year you finally conquer both your finances and that junk drawer.
Author:
Marc André Castonguay, CFP®, CIM® is Senior Manager, Financial Planning with Louisbourg Investments.
Comments or questions may be submitted to him at marcandre.castonguay@louisbourg.net.
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This writing is for general information purposes only and is not intended to provide legal, accounting, tax or personalized financial advice. If you are not sure how to proceed with a request for further information, seek help from a professional. Any opinions expressed are my own and may not necessarily reflect those of Louisbourg Investments.
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