Money: taking stock of 2023

With the turn of the calendar signalling a fresh start, it’s the perfect time of year to take stock of your finances, update your goals and leave bad money habits behind.

In doing a financial refresh for the new year, the first order of business, according to Saijal Patel, founder and CEO of financial wellness firm Saij Elle, is to identify what worked well for you over the past 12 months.

“You can’t change what you’re not really aware of. So go through that process of what worked, what you’re proud of and the areas where you believe there is an opportunity to improve,” she said in an interview.

“Maybe this sounds cheesy, but you have to have the right conversation.”

She also advises clients to avoid feeling too guilty about spending habits they’re not so proud of, because it could get in the way of setting themselves up for success in 2024.

Kalee Boisvert, a financial advisor with Raymond James, takes a similar approach with clients in that the first step needs to be identifying where the issues are.

“If you've ever said, ‘I have no idea where all my money goes,’ remember that your transaction history provides concrete evidence. Knowing your spending patterns empowers you to align expenses with your goals and values,” she said.

Boisvert says many clients make the mistake of merely estimating their expenses.

“They take the largest expenses they have each month (mortgage, utilities, insurance, etc) sum them up in their head and guesstimate their budget,” she said.

“I encourage anyone who has been using this approach to go through the complete list of transactions from a past month in detail to double-check their accuracy. Unfortunately, the guesstimating method is often a poor indicator of your actual spending picture.”

When it comes to the most common financial pitfalls people fall into, Patel says unintentional spending is a top issue.

“It puts a lot of people into debt. We are emotional human beings and we tend to spend emotionally,” she said.

“Even those people who kind of know; it’s one thing to know in your mind, it’s another thing to go through your statement and actually see it.”

A BMO survey released on Dec. 11 found 30 per cent of respondents were looking to cut back on their spending in 2024 as worries grow over the high cost of living and economic uncertainty. The survey, done by Ipsos, was conducted between mid-September and mid-October and polled 2,502 Canadian adults.

However, the solution is not necessarily to implement an austerity budget.

“This isn't about punishment or having them cut back to the point where they're not enjoying things because that draconian approach doesn't work — if they feel like they're being stifled. But what I do is ask them about their values, you know, 'What's important? Does this spending align more to your values?' Patel said.

“It's amazing how I see the shifts with my clients and they don't feel like they're missing out on anything, but they just haven't gone through that intentional exercise.”

For clients wanting to boost their savings in 2024, Frank Gasper, founder and wealth advisor at CSR Wealth Management, suggests automating contributions to their tax-free savings account and registered retirement savings plan.

“We're all busy and we forget. And even if the amount is less than what you would normally do — do less, automate it and then top it up at the end of the year,” he said in an interview.

He also advises clients to take advantage of the new first-home savings account.

The FHSA allows Canadians to contribute up to $8,000 per year, up to a lifetime limit of $40,000. The major benefit is that contributions are tax deductible and qualifying withdrawals are tax-free.

In a Dec. 5 release, the federal government announced that more than 300,000 Canadians had opened an FHSA.

Even if you don’t have a substantial amount of extra cash on hand, Gasper says it’s worth opening one to begin accumulating the contribution room. He recently told a client to open an FHSA with just $25 in it.

“If you don't open it, you can't get the room,” he said.

To go the extra mile, Gasper says he wants Canadians to “lose the love affair with the five or six big banks.”

“They are not doing you any favours in general ... people are at the same banks that they opened when they were little so they have this connection to the bank and they are charging us fees out of the yin-yang.”

He says clients should shop around for better deals and consider alternative options such as Simplii, Tangerine or EQ Bank, particularly because they offer interest rates on high-interest savings accounts that are often higher than most of the big banks.

Overall, going through a financial refresh, including re-setting your mindset, can help you achieve your financial goals in 2024.

“Working on your mindset is crucial, and cultivating a positive attitude toward money can lead to real results," said Boisvert.

“And the best part is, working on your money mindset doesn’t require any financial input! Try to change the way you think about money this year. Replace limiting beliefs with affirmations that open doors to possibilities, fostering creativity and inspiring new actions.”