Five financial goals for 2020

BY FAZEED BACCHUS

An experiment once conducted showed that people who wrote their goals on paper using the formula SMART, tend to achieve their goals more than those who kept them in their head. Writing crystallizes thought and thought motivates action. In this article, I would like to recommend five goals for 2020 and if you agree, put it on paper and follow the Specific, Measurable, Attainable, Realistic and Time bound formula.

Goal #1. Make use of the Tax-Free Savings Account TFSA, it is the only financial instrument available in Canada to grow your money tax free. The Government introduced it in 2009 starting with as little as $5,000 maximum contributions. Over the years the contribution limit increased and if you were over the age of 18 in 2009, then you have as much as $63,500 contribution room available to you. This money can be invested properly and can grow into quite a large lump sum.

Goal #2. Take advantage of the RRSP deduction to reduce income taxes. There is a myth that if you save taxes today by buying a RRSP, you will have to repay those taxes when you start receiving your RRSP/RRIF benefits. It’s a misunderstanding because, contributions are made during your higher earning years and withdrawals are made in your lower earning years. This means you save a higher portion of taxes during your contributing years and pay less in your withdrawal years.

Goal #3.  Restructure your debts. If you have a credit card and you are paying 20% interest, it will take you a long time before you are able to pay off the principal with minimum payments. Did you know that you can apply for a line of credit of between 3% to 8 % and by making the same monthly payments you can pay off the loan much faster? Consider consolidating your debts so that you make one affordable payment towards principal and interest and thus relieving your stress.

Goal # 4. Consider the position you will leave your family in, should you pass away suddenly. In my line of work, every day I am required to complete a risk assessment to see whether my client has enough coverage, so that if something were to happen to them, their family is not left with a whole heap of debts such as a mortgage to pay off, food on the table, funeral costs, children’s education, just to name a few.

Goal #5. Complete a financial security plan. Such a plan will take into account your situation if you were to die too soon, live too long or get sick along the way. A comprehensive plan will list your assets and liabilities to determine whether your liabilities will be a burden on your family and how you can protect your family. It will also help to make sure that you don’t run out of money during your retirement years. If you would like a copy of the blank security financial plan, please send me an email.

All the best for 2020.