New Year Financial Checklist Items

Out with the old, in with the new some say.

Welcome to 2023!

That said, whatever is old can also be new again with our valuable new year financial checklist items – to start your 2023 personal finance journey off right!

Budgets are good but monitoring your cashflow is better in any year!

While budgets are good we’re not really fans of them here on this site – we prefer to you monitor your cashflow often and there is no better way to find out where all your money goes than to use our free cashflow budgeting spreadsheet.

In fact, if you sign up for our free email newsletter, you’ll get your own free cashflow spreadsheet to work with and be notified when new content is posted.

Our content on this site includes:

• Free, detailed retirement case studies and portfolio drawdown ideas (we’ll link to a few later on in this post!)
• Our current lists for some of the best low-cost ETFs to invest in, and why
• Information about some of the best discount brokerages to invest with, and why
• Opportunities to participate in giveaways
• and more!

You’ll also get exclusive content only made available for our subscribers.

Back to the “B” word, it’s easy to understand why so many personal finance experts recommend budgeting: it can be an easy solution to a set of complex issues. For many people, budgeting can be similar to dieting. You might be told by some finance guru to “create a budget” but that’s not really helpful – just like “starting to diet” probably won’t last.

We believe the language around budgeting and dieting are similar, they are judgy words.

We don’t believe in budgeting or dieting because of this judgement and because ultimately we feel cashflow management (just like eating a more balanced diet) is likely going to yield much more positive results.

Budgeting doesn’t work for most people because it can leave many people feeling worse about themselves – that’s hardly the right mindset for positive change.

Instead, use tools like ours to find out where your money is going and see if those types of spending patterns align with your values.

Obviously, spending less than you make is a must for any wealth-building but if you don’t know where you are starting from, and if your spending needs are aligned with what you really value in your day-to-day life, then you’ll have little clue how to change anything.

So, this year, toss the budgeting concept out the window. Monitor your cashflow and make better decisions with it. Identify and grow the gap between income earned and expenses, so you can divert any money into savings for investment purposes whenever possible.

Consider investing this new year

While true, if you’re not investing, you could be missing out on valuable stock market gains, the reality is maybe you shouldn’t be investing at all – yet.

We outlined a few great reasons why you may wish to consider putting investing on hold until you get part of your financial house in order.

Further Reading: When should I start investing?

If you feel comfortable with your finances and cashflow management, then by all means try to start putting some money aside towards your investment accounts as soon as possible. The sooner your money can get working for you, with the proper conditions, with time on your side, the more wealth you can potentially build.

Alternatively, maybe you’re focused initially on creating an emergency fund. We’re fans of that too. To help you out, consider reading through the following link for some of the best savings rates in Canada.

Further Reading: These are the best high-interest savings accounts to own. 

We believe the money that you save in an emergency fund should be liquid – you can easily dip into it when you need it. That includes when your favourite stocks or ETFs go on sale! That brings us back to investing in this new year.

To summarize, here are our thoughts on saving vs. investing. They are different!

• Saving – to us this means setting money aside you don’t need to spend now, to cover any unknown future like an emergency or to cover a known future like a future short-term purchase. It’s money you can access quickly if you really need to with little to no risk and minimal taxation. This is money typically used in the next few months or the next few years. Given that, you don’t want to see any savings drop in value because it is money you’re depending on to be there.
• Investing – to us that means buying assets such as stocks or bonds, or real estate, with the expectation that your investment will make money for you, over a long period of time. Investments usually are selected to achieve long-term goals, as in multiple years or decades. This is money not needed in the short-term, such as one, two or even five years. It’s money that does not have to be liquid nor readily accessible, probably better that it is not to avoid any market-timing speculation. Generally speaking, investments can be categorized as income investments or growth investments. We believe depending upon where you are at in your investing lifecycle you might want a bit of both.

Contribute to your Tax-Free Savings Account (TFSA) this new year

You might already know by now that a Tax-Free Savings Account is not just a savings account. Thankfully, the account can hold stocks, low-cost Exchange Traded Funds (ETFs) and more. The beauty of this account: all the gains you make insight the account are tax-free.

The TFSA limit for 2023 is now up to $6,500, per adult, and contribution limits are now up to $88,000 since account inception if you have never invested inside the TFSA yet. That’s a lot of tax-free money!

Assuming you have the contribution funds available, we believe it makes great sense to strive and max out your TFSA contributions in January to get your money compounding away early and throughout the year.

We continue to believe the TFSA is a gift to every adult Canadian and as such, investors should strive to max out their TFSA contribution as much as possible.

Here are some fast facts about the TFSA:

1. You do not need to have earned income to contribute to a TFSA.

2. As the TFSA account holder, you can:

• make contributions
• make withdrawals
• determine how funds are invested

3. Unlike other accounts, you can give your spouse or common law partner money so that they can contribute to their own TFSA, and this amount or any earned income from that amount will not be allocated back to you. As referenced above, the total contributions you each make to your own TFSAs cannot be more than your TFSA contribution room.

A big reminder we’ve actually written a few comprehensive posts about TFSAs so you can take full advantage of its power over time!

Everything you need to know about TFSAs – including the TFSA contribution room is here.

Do you know if you invest wisely within your TFSA, you can retire on just that account?

Can you retire using just your TFSA?

Contribute to your Registered Retirement Savings Plan (RRSP) this new year

Regardless if you prioritize your RRSP over your TFSA, the facts remain that saving and investing inside your Registered Retirement Savings Plan (RRSP) remains one of the best ways to fund your retirement.

Essentially, anyone who files an income tax return and has earned income can open and contribute to an RRSP.

There are limits on how much you can contribute to an RRSP each year.

You can contribute the lower of:

• 18% of your earned income in the previous year (see above in our example), or
• to the maximum contribution amount for the tax year.

We’ve written hundreds of words about RRSPs in everything you need to know about RRSPs here.

We’ve also got some great case studies about how much wealth you can build via your RRSP(s), and how to retire wisely with those RRSP assets:

• How soon can you retire using your RRSP?
• Can you retire with $500,000 in your RRSP?

Rebalance your investments this new year

If you have an investment portfolio, and you’re not investing in some simple all-in-one index funds, you may want to consider the new year as a great time to re-balance your portfolio – if that has strayed from your target asset allocation.

You may also want to consider juicing any income needs as well, via dividend ETFs or other investments:

• These are the best Canadian dividend ETFs.
• The best U.S. dividend ETFs.
• These are the best international dividend ETFs.
• What are the best Bitcoin ETFs to own?

New Year Financial Checklist Items Summary

As you can appreciate, there is a lot of ground that any new year can cover. So, we believe you should keep your new year financial checklist items rather short to avoid paralysis by analysis.

To help keep you organized and focused, consider this 1-2 punch:

1. Consider revisiting your cashflow management in January, to identify where you can grow the gap between income earned and expenses where possible.
2. If you have a gap, consider investing, starting with contributions to your TFSA first and then funding the RRSP second if excess money is leftover.

Certainly, debt management/killing off debt is a key priority, and revisiting Wills, life insurance needs and other personal finance matters is very important in any new year too. But, we know from our own experiences you can’t do it all nor should you try. So, start with these new year financial checklist items, see if you have a surplus of cashflow to start with, and build from there into the spring.

That includes tackling any wealth preservation plans to get any future retirement income planning right.

We hope you enjoyed these new year financial checklist items and see you on the site in 2023!

Looking for help this year?

If you’ve already been investing for some time, and/or just want to know if you’re on track to meet any long-term goals including semi-retirement or retirement income needs – we can help!

Through our retirement projections services, we’ve helped well over 100 clients with answers to these questions and we remain on the ready in our low-cost service-model for all Canadians to take advantage of.

We answer complex, personal questions such as:

• Do I have enough to retire?
• When can I retire?
• Will I run out of money in retirement?
• How much can I spend in retirement?
• How much of a financial legacy can I leave behind?
• Should I take CPP at age 65 or 70?
• How do I minimize OAS clawback?
• Which account (and when) should I withdraw from for the highest tax efficiency and estate value?
• and more!

We are offering these services because we feel, essentially, we can help Canadians in a major way. We founded Cashflows & Portfolios to help offer up our time and expertise to Canadians when it comes to DIY early retirement, semi-retirement or full-on retirement preparation.

There is simply a HUGE gap between fee-only planners who advise folks vs. folks who simply want some personal confidence in their own retirement projections. We know! 

As passionate Do-It-Yourself (DIY) investors, we know the hard part really isn’t about investing or asset accumulation any longer with all the tools, services and resources available to Canadians. The challenging part is really about solving the asset decumulation puzzle. That asset decumulation puzzle is a process that is often very personal and must be tailored to your specific retirement or semi-retirement needs and goals. We know about that too – we’re working through that process ourselves right now!

Many financial advisors will typically charge between $1.5k – $11k for a financial plan or require that you invest through them and charge a percentage of your entire portfolio. By using our intake process and our services, we offer personalized retirement projections for a fraction of the cost. We also have no desire to manage any investors’ financial assets (and we do not provide specific investment advice), so we avoid that conflict of interest!

With Cashflows & Portfolios, we work with you, take your inputs, your assumptions, then work on providing you with an optimized Retirement Projections Report(s) that is customized to your needs and goals.

If you are interested in participating in a case study, money coaching session(s), and/or obtaining private projections for your financial scenario to answer questions like “how much will I have in retirement?”, please contact us here to get started.

We look forward to helping you out this year and beyond, with deep discounts offered to all returning clients.

Mark and Joe

Related Reading:

• Should you consider Dollar-Cost Averaging or Lump-Sum Investing this year? (My Own Advisor has your answer with the stats to back it up!)
• What is a Power of Attorney and do you need one? Read on to see what pitfalls can occur if you don’t have one.

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