The first few weeks of a new year offers a great opportunity to start anew, readjusting, adding and putting final touches on fiscal strategies.

Here are some financial pledges you should easily be able to keep this year. If you do, you can add wealthier to your resolutions to be slimmer, trimmer and healthier by 2014.

Get a personalized financial plan. Consult with your accountant and set goals. Figure out where you want to be financially at the end of 2013, 2015, 2017 and 2022. Whether you want to save for a down payment on a house, a long holiday trip, a cottage or a long, comfortable retirement, you need to diagram the steps required to reach those goals. Review the plan at least once a year so you can make adjustments if you need to keep you on track.

Tackle debt. Be strategic in paying down your debt by attacking the bills with the highest interest rate first and paying the minimum on the rest. Once the first debt is paid off, start paying down the debt with the next highest interest rate.

Maximize RRSP benefits. If you participate in a group Registered Retirement Savings Plan, take time to evaluate how much you contribute and whether you can jack up those amounts. If you don't participate in a group plan, or have your own, start now. RRSPs are a major source of retirement savings for many individuals.

Many companies match or top-up your contributions, which essentially means you get free money. On top of this, your company absorbs any administrative costs for setting up the plan. Check to be sure you take full advantage of this. If your company doesn't match, ask if it's possible to set up a matching plan.

Group RRSPs make saving for retirement easy — your contributions are deducted automatically from your pay cheques and put into the plan for you. Even if you can only contribute $25 per week, your money will double with the company contribution without you having to do anything.

Employer contribution formulas can vary significantly. Some plans kick in a certain percentage of contributions based on the length of employment. Some contribution limits change each year based on company performance.

Keep in mind that when you join your company's Group RRSP you benefit from:

  1. Tax reductions. Your contributions are made with pre-tax income reducing your taxes each pay period.
  2. Dollar cost averaging. By investing regularly you limit investment risk by smoothing out large swings in value.

 
Consult with your accountant for assistance in choosing the investments you want to include in your plan.

Bulk up your TFSA. Now that the maximum allowable annual contributions to Tax Free Savings Accounts has increased to $5,500 there is more reason than ever to take full advantage of the accounts. If you've never contributed to a TFSA before, you can contribute up to $20,000 and pay no tax on any gains incurred inside the account. As of Jan. 1, 2013, you can put another $5,500 into your TFSA.

Re-balance your portfolio. The weighting of your investment portfolio changes over the course of a year — or less in some instances — as the market value of each security earns a different return.

At the end of the day you typically need to re-balance your investments. That means buying and selling in ways that will reset the weight of each asset class back to its initial state. Securities that performed well in 2011 may not repeat that performance in 2013. Typically, an annual review is all that is required. But if your investments are under-performing, you may want to consider more frequent reviews and re-balancing. Your accountant can help you decide.

Tally insurance needs. You should have sufficient life and disability insurance appropriate to your stage of life. The life insurance you carry should be enough to ensure that your dependents and your business partners, if you have any, can carry on if something happens to you. Disability should do the same if you are injured and can no longer work. Homeowner's insurance should cover the cost of your home if it were destroyed.

Update documents. The beginning of the year is a good time to take a look at your financial documents and be sure they are up-to-date. These documents may include a will, living trust, power of attorney and beneficiary information for registered plans and trusts. You want to be sure the documents reflect who can make decisions for you and handle your estate if you cannot or have died. Remember, named beneficiaries take legal precedence over anyone you may have named in your will.

It is important to set goals for yourself in 2013, but be cautious about setting objectives that are unrealistic for your financial situation. Your resolutions should look beyond 2013 so that you are able to reassess each year to ensure you are still solidly on the right track in all areas of your finances to reach your ultimate goals.

 

Budget and Learn to Say No

 
Two keys to a sound financial strategy are to have a budget you can live with and learning to say no when something doesn't fit into that budget.

Recognize that to achieve goals you must spend in a practical way. If you really love that $5 coffee every morning, you may not be able to afford to buy lunch. Budgets are common sense ways to find financial balance and reach goals.

In addition, you should set up an emergency fund that could cover your expenses for between five months and nine months. The money can go toward car payments or repairs, medical expenses or be used to replace income if you lose your job.

A variation is to set up a savings account dedicated to a specific goal, such as buying a new refrigerator.
Every time you get paid, automatically put money aside before you spend anything. Before you know it you will have enough money for the purchase and your emergency fund will relieve some of the stress of worrying about how you will be able to deal with unexpected expenses.
While you are arranging and planning your finances, there are a few things to keep in mind when you make decisions regarding major purchases. For example, if you are thinking about buying a bigger house, ask yourself if you really need one. Donate some furniture you don't really use — toys, kitchen utensils and small appliances and you may find you have all the room you need. And for some of those donations you'll get a receipt to help lower your tax liability.

If you are thinking about buying a new refrigerator or stove, would it be more cost-effective to repair the one you have, keeping your cash flow healthier and getting a few more years out of it?