Five ways to organize your finances this January.

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4 Minutes Read

Start the new year right. 

Feeling the post-holiday blues? January may be dark and cold – but we know the perfect distraction. Here are five ways to financially prepare for an amazing year (and avoid future stress).

Set short-term and long-term goals. 

Any fab financial plan requires a clear understanding of the goals you’re working toward. Grab a pen and paper, and let’s get to it! You’re going to make two columns, one for your short-term goals and one for your long-term goals. Ultimately, you’ll list up to five items in each column. P.S. Not sure what to focus on? Maybe our money mantra quiz will help!

Start with your short-term goals — the items you can reasonably check off before the year is over. These goals might include paying off credit card debt or upgrading to a new apartment. Remember: try to set realistic goals. Although your heart is saying “buy a Tesla,” your bank account may be more of a Toyota gal (at least for now). 

Once you’ve listed your goals for this year, it’s time to go big. In the long-term column, write out the financial milestones you’d like to achieve in the next five years – buying a house, eliminating your student loan, or quitting your corporate job and moving to Greece. (Psst. Maybe this is where you could include that Tesla purchase…)

Finally, assign each item a deadline and a dollar amount. Planning a trip for spring break? Let’s say $1,500 by April 1st. These figures will be important for the next section…budgeting.

Build a budget.

It’s time to put your plan into action by creating a budget tracker (kinda like the one we created for your holiday finances). When you get down to basics, a budget helps you spend money on the things you need and care about without relying on loans or credit. It’s easy to set up a monthly budget tracker using a computer spreadsheet – in fact, most spreadsheet applications, like Excel, come with a built-in budget template. There are also plenty of budgeting apps out there if you’re really not in a DIY mood. 

Your budget should have three sections: income, expenses and savings. At the end of the day, you want to account for the money you know is coming in (your paycheque) and the money you know is going out (rent, groceries, amenities). 

Start by filling in your income and then making a list of your expenses. It’s a good idea to review your spending over the last year to note the average cost of purchases, like groceries, and decide if there’s any spending you can cut altogether. 

The third section, savings, is where your goals come in. Calculate the amount you should save each month to hit your desired milestones, and include those numbers in an itemized list. For example, in order to save $1,500 for your trip by April 1st, you’ll need to put away $500 a month starting in January. Include that number under savings as Spring Break Trip - $500. 

Finally, add together your expenses and savings and subtract that figure from your income. Have money left over? Great! If not, don’t panic – you just need to reassess some timelines. 

Remember: your budget is meant to help you. You can always make changes if you meet your savings target (hooray!) or if an unexpected expense comes up. The point of this exercise is to simply figure out what you’re working with. 


Set up auto-deposits and payments.

We’re not going to lie: this one is a little less exciting, but it’s so worth it. Using your budget as a trusty guide, set up autopayments for those recurring expenses, like your phone bill. Getting payments in on time is great for your credit score; once the initial setup is done, you won’t have to lift a finger. 

Same goes for your savings and investments! Take advantage of the tools available to you – like Flahmingo’s scheduled deposits feature – to automate your contributions to a savings account or TFSA. The less friction there is, the more likely you are to actually meet your budgeting (or investing) goals. 


Cut out spending for January.

Oof. Hard to hear, we know. According to experts, a ‘spending freeze’ is a great way to ‘reset’ your habits. Of course, it’s impossible to stop spending completely – but consider reducing your expenses to those core necessities. For example, maybe a spend-free January looks like meals at home this month rather than eating out. Bonus tip: this is a great time to cancel unused subscriptions. Still paying for a mindfulness app you haven’t opened in six months? Cut it loose (we won’t judge). 

It’s also okay to start small. Maybe there’s something you know you spend a ton of money on, like clothes. Try to go the full month without adding anything new to your wardrobe. When January is over, you might even realize that you don’t miss those purchases at all!


Start contributing to a TFSA or RRSP.

If you aren’t already using them, contributing to these financial products is another way to up your financial game in 2022! But first, what are they? A Tax-Free Savings Account (TFSA) is exactly what it sounds like – an account where you can hold savings and investments without being taxed on the interest you earn. Just make sure you pay attention to the contribution limit for 2021 and 2022: $6,000 per year, plus any unused contributions that have carried forward. When you fund your Flahmingo account, you’re actually funding a TFSA – meaning you won’t be taxed on your investment returns. 

On the other hand, a Registered Retirement Savings Plan (RRSP) – coming soon to Flahmingo! – helps you save for retirement by offering tax benefits. The funds contributed to your RRSP, and any gains on investments held in the account, will not be taxed until they are withdrawn – ideally at retirement. You can contribute 18% of last year's income to your RRSP – as long as that amount doesn't exceed the current tax year's contribution limit ($27,830 for 2021). Ugh, math. Not to worry: you'll find your contribution limit on your most recent CRA Notice of Assessment. 

These accounts are a great option for growing savings or investments long-term – when it comes to preparing for future financial freedom, there’s no time to start like the present!

 

Be flexible.

Whether you’re tackling one item on this list or all five, the most important part is making adjustments when you need to – and not being too hard on yourself. Remember: trying your best for five months (even with occasional mistakes) is still better than being perfect for only five days.

Ferron Guerreiro

Author