Real tips from financial planning pros to shape up your finances in 2017

If you've vowed to get your finances in order this year, follow these steps to ensure success. Karen Hatch

In the post-holiday haze of January, we tend to make a lot of promises to ourselves about being healthier both physically and mentally. But what about the health of our wallets?

According to a 2016 third quarter report from credit reporting agency TransUnion, average Canadian debt balances rose 2.3 per cent to $21,686, and it’s projected that balances will continue to rise over the next two years.

“The recent government outlook of weak economic conditions may have led some consumers to believe low interest rates will be here for a long time, which could result in pushing balances even higher due to low expected borrowing costs,” Jason Wang, TransUnion’s director of research and analysis in Canada said in a statement.

READ MORE: Canadians uncertain about retirement, but benefit from planning

Add to that a two per cent rise in credit card debt and a 6.8 per cent rise in installment loans at the time of the report, and it would seem that many Canadians could be on a crash course with their finances.

Story continues below advertisement

That doesn’t mean financial ruin is imminent, however. With a few tips and tricks, and some careful planning, you can get your money matters back on track this year.

Global News mined the expertise of financial planning professionals for some real and unexpected tips on fixing your finances.

#1 Be honest with yourself

It’s time to lay all your debts out on the table, no matter how daunting that sounds. It’s only in knowing how much money you owe that you can realistically start to plan to pay it off. Gather documentation that gives you the latest figures on your credit card debt, car and student loans, and anything else. Then track your expenses using an app like Mint or Expense Manager.

“Until you know what you’re spending and what you owe, you won’t be able to establish a budget,” says Michelle Barrett, a financial educator with Investors Group.

Breaking news from Canada and around the world sent to your email, as it happens.

#2 Think ahead

Life is unpredictable and more often than not, money issues pop up unexpectedly. For this reason, financial pros advise people live one month out. “Spend money from two paycheques ago instead of spending money as you get it,” Barrett says. This provides you with an instant buffer that can cover any unforeseen costs.

Then build on it with an emergency fund. “Save up three to six months’ worth of expenses in case you get fired or injured on the job and your short term disability hasn’t kicked in yet,” she says. In addition, homeowners should aim for a $2,000 to $3,000 cushion that can be used for immediate issues like fixing a broken washing machine or furnace.

Story continues below advertisement

#3 Do your homework

Research has shown that the average investor gets less bang for their long-term buck due to overzealous shifting of funds, which leads to under performing investments, says David McGruer, a financial advisor with HollisWealth Advisory Services Inc. and Advocis volunteer.

“Once your goals are clarified, quantified and a plan to achieve them is in place, be prepared to do very little with those investments.”

READ MORE: What the housing market could look like in 2017

#4 Be consistent

Don’t start by putting aside large sums of money if you won’t be able to keep it up. The general consensus for anyone looking to build a nest egg is to start with 10 per cent of your net income and work up to 20 per cent of your gross income, Barrett says. When it comes to retirement savings, she says to start as soon as possible, start small and “give yourself a raise every year.” Even if it’s minimal, it’ll add up and could be a significant boon to your post-career life.

#5 Have a plan

Set goals in place for yourself so you know how to allocate your savings. Create a pool of money for each goal: taxes, retirement and a vacation fund, for example.

Story continues below advertisement
“It’s important to identify these goals and put money into them accordingly because when people get into debt it’s [about] reacting,” Barrett says. “And when you’re constantly reacting to things you can’t get out of the hole.”

Prioritize your savings goals and be rational about them: you may be itching for a sun holiday, but paying off your taxes is a more immediate concern.

#6 Know the difference between a financial planner and an investment advisor

While the two can sound similar, their services are not. A financial planner will look at your life, your goals, your habits and your retirement needs and help you forge a plan to save, while an investment advisor will take your money and help you grow it.

“Neophytes usually think they should look for an advisor with a ‘performance track record,’ a list of qualifications or access to the most products,” McGruer says. “The chatter these days about conflicts of interest, fiduciary duties, best interest and banning commissions are all totally misguided since none of them is at the core of the value of financial advice. A financial advisor who truly knows his value identifies fundamental truths about the creation and protection of your long-term wealth.”

#7 Take a vacation

No, not that beach vacation (although, you might be able to do so soon), but a break from all the day-to-day responsibilities that stand in the way of planning your financial future.

Story continues below advertisement

“Many people spend more time planning their vacation than planning how to afford the biggest vacation of all: retirement,” McGruer says. “It doesn’t have to be a whole lot of time — it’ll likely take several hours at the beginning of a comprehensive financial plan and a few focused hours per year to be sure things are running smoothly.”

WATCH BELOW: Travel essentials for a vacation in the south

Click to play video: 'Travel essentials for a vacation in the south'
Travel essentials for a vacation in the south

Sponsored content