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SAVING & SPENDING

8 smart financial strategies for 2012

8 smart financial strategies for 2012

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"Getting ahead financially — and weathering any economy — must be a personal strategy. It doesn't happen by accident," says Carrie Russell, Senior Vice President of Saving and Investment for TD Canada Trust. "Being proactive about your saving and investing options will make the difference between getting ahead and just getting by."

If you're ready to make 2012 the year you get financially fit, consider these simply smart financial strategies from Ms. Russell:

Make use of online tools

"Today, we have the advantage of having so much of our financial transactions and history online," Ms. Russell says. "Use your online banking features to your full advantage. For example, download statements to the software of your choice to see where your money is going. And online calculators and other tools make it easier to come up with a basic financial plan." (See short article on the left, "Make it automated," for access to online tools.)

Perform a household cash-flow analysis

"It's easy to know how much money you have coming in; it's what goes out that can be surprising," says Ms. Russell. "And not knowing could mean you spend more than you earn." Calculate all your spending from monthly bills to going out for dinner — and everything in between.

Expert tip: You'll have an online record of your spending when you use your credit card or debit card, but don't forget about cash receipts too. That daily latte (or two) can really add up.

Be purposeful with your savings

You have to identify your goals before you can meet them. Think short-term (like a vacation), mid-term (your children's education) and long-term (your retirement nest egg). Once you know your objectives, you can start putting a plan of action in place.

Pay yourself first

If one or all your goals are daunting (tuition costs how much?), then know that the more you chip away at it, the more possible it becomes. "Make it a habit to put aside money early on in the month," Ms. Russell says. "Use automatic transfers that move money from one account to another so that you don't have to think about it, but your balance will climb."

Expert tip: Check with your bank about automatic saving options, including monthly transfer and by putting a small amount aside every time you use your debit or ATM card; for example through TD Canada Trust's Simply Save program.

Set aside emergency funds

If you don't already, have six months' salary saved for just-in-case scenarios. "You need to be prepared for unexpected bumps in the road such as illness, job loss, or unplanned home or car expenses," Ms. Russell says. "One report that came across my desk stated that during the 2008 recession, two-thirds of Canadians were only two paycheques away from financial ruin. This year, plan to be better prepared to ride out potential financial downturns."

Use basic savings and investment plans to
reach your goals

"For the average Canadian, many goals can be satisfied with high-interest savings accounts, Guaranteed Investment Certificates (GICs), and basic investment products," she says. "It doesn't have to be complicated, but your investments should fit your stage of life, comfort with risk, and how well you understand the investment vehicle." She recommends the following basic savings and investment vehicles:

Expert tip: "Since they each serve a different purpose, open and save within both a TFSA and RSP if you can," advises Ms. Russell. "RSPs are specifically for retirement savings, but you can redeem and use your TFSA for any goal."

Slash your bad debt

While you continue to pay down the good debt (your mortgage or a student loan, for example), do what you can to cut your bad debt. Bad debt is the kind that's usually found on high-interest credit cards, such as some department store credit cards. While you may be saving your credit rating by paying only the minimal monthly due, interest is piling up on the remaining amount every month.

Get help

"For some, online tools are enough to help them put a plan in place," Ms. Russell says. "Others may want to speak to an advisor at their local branch to get started. And if you're looking for a financial planner, then get referrals from family and friends. When you meet with potential planners, see if they understand what's important to you and make things clearer for you rather than create confusion. Also know how they will be compensated before signing up for their services."

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