Reboot your finances in 2023
Written by Pira Kumarasamy

Thursday, January 5th, 2023

The beginning of a new year is the perfect time for a financial "cleanse." Hit the reset button on your habits, re-examine what you want to achieve in the year – or years – to come and give your financial plan a reboot. Here are a few ways to get started.

Step 1: Reassess your goals

Take the time to review your short-term and long-term goals, and reroute your savings if needed. For instance, you could be doing a great job of saving for retirement, but leaving little room for short-term expenses like a vacation or new car — so a little rebalancing may be in order.

A new year “is the best time to set up any certain expenses you know you'll have," says Alyssa Davies, personal finance expert and founder of MixedUpMoney.com.

One of Davies' preferred strategies is to create "sinking funds" – that is, money set aside each week or month in high-interest savings accounts (separate from your usual day-to-day account) to put toward a specific short-term goal. The key is to make adding to that fund a part of your regular budgeting routine, and to do your best not to withdraw from it until your goal is achieved.

“I know you may be a bit burnt out on the holiday season, but I love to restart my sinking fund for next Christmas and a sinking fund for any planned vacations or holidays we plan to take," Davies says.

Step 2: Consider charitable giving

Adding charitable giving to your regular outflows is one way to feel good by doing good. As an added bonus, donations to Canadian registered charities may qualify for charitable tax credits — which can boost any refund you get back from your 2022 tax return if you contribute by the March 1 deadline.

One of the easiest ways to incorporate charitable giving into your budget is to set up a recurring donation to your charity of choice. Many companies are now making it easier to give by automatically deducting a set amount from each paycheque, even matching some or all of the amount.

Step 3: Find savings opportunities (and celebrate your wins)

Davies makes a habit of reviewing her budget at the end of each year to reflect on expenditures and find ways to increase savings in the future.

“This is also an excellent time to celebrate any significant purchases or savings goals that you achieve," she says. “We often focus on what we need to improve, but this can also be a positive reflection of what we're doing well."

Cutting out subscriptions you don't need is one quick way to save. For instance, you may be subscribed to four streaming services and only watch your favourite shows on two of them. Review regular bills like your phone, internet and insurance, and shop around to see if you can find better rates. These simple steps can take just minutes and help you save significantly each month.

Step 4: Get organized for tax season

Is it that time already? A new year means tax season is around the corner. There are a few early steps you can take, including:

  • shopping around for accounting software if you don't already have one for filing taxes
  • checking on your RSP contribution room to see if you can make any last-minute lump-sum contributions to reduce your taxable income
  • looking into tax credits you might be eligible for (like charitable giving or work from home) so you can start preparing those receipts

Doing this legwork at the start of the year will mean smoother sailing — and smoother saving — through the rest of the year. Why not take a few hours this month to review your goals and map out how to get there? Your future self will thank you.

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