We all do it. We accumulate financial papers all year long, put them aside in a pile in the corner of the kitchen or desk and tell ourselves we’ll deal with it all—one day soon. But I’ve decided to tackle the clean up job this year and you can too. Rona Birenbaum, a certified financial planner with Caring for Clients has an easy plan and she knows the perfect place to start.
“When it comes to day-to-day finances, a lot of people keep much more information than they need so now’s the time to do a shredding purge,” says Birenbaum. “With identify theft rampant, any financial paper documents that aren’t necessary have to go. Keep only your tax returns and one year of bank statements for your records in a folder that’s easy for you to access.”
The key to making shredding work, of course, is to take advantage of all the online services that financial institutions are offering. That means setting yourself up with online banking if you haven’t already, as well as ensuring you have access to online trading accounts. “You should also ensure you are receiving your financial statements remotely for easy access from any computer or cell phone,” says Birenbaum. “It will also cut down on bank statement fees.”
Keep accounts together
Once you’ve purged the paper and taken a few days to set up your accounts online, it’s on to step two—amalgamating your RRSPs and TFSAs as well as your unregistered accounts to one financial institution that you’re happy to deal with. I did this several years ago and the whole process took about three months so give yourself the entire season to get this done properly.
This is also a good time to have a chat with your financial advisor (or do a bit of research yourself) to ensure you are holding the right investments in the right accounts for maximum tax advantage. Generally, it’s better to hold GICs and fixed income securities inside registered accounts, such as TFSAs and RRSPs since interest is subject to higher taxes. Equities in the form of stocks, mutual funds and ETFs can be held in unregistered accounts, (if you don’t have room in TFSAs or your retirement account), since capital gains and Canadian dividends get more favourable tax treatment.
Budget like you mean it
Finally, sit down and set some financial goals for the next one to three years.
“It can be as simple as making a commitment to reduce debt, or simply open and contribute to a TFSA this year,” says Birenbaum. “Decide where you want to be financially, spend an afternoon doing some budgeting, and then take the necessary steps towards making it happen.”
Follow-through is key and keeping your money goals on track can be as simple as cutting back on expenses to free up some extra cash for saving and investing, or getting some extra income coming in to your household through a part-time job or by renting out a room or garage that’s not being used.
In all cases, Birenbaum suggests you write down your goals.
“If you write them down, you are more likely to achieve them,” says Birenbaum. “And if you tell someone what your goals are, then you have even more propensity to follow through, the psychology being that you don’t want to let the person down. It works.”
Finally, don’t forget the little things. Check beneficiaries on your bank accounts and in your will. Review your insurance. And just in case the unexpected happens, keep a record of all your accounts and other important documents in a binder where your close family members or a dear friend have access to everything. It ensures that your finances will run smoothly, even if you have a setback along the way.