At the end of each year, you should review your financial situation to ensure that you are on the right track for a secured financial future.
CREDIT
Make sure that you are using your credit wisely so you keep your options available if or when you need them. It is advisable that you check your credit report regularly – or at least once a year – so you know where you stand and whether your credit has been compromised in any way, especially through fraud. Most banking institutions offer a free soft check on you credit report. Soft checks are when the regular credit reviews don’t affect your credit score.
There are some people who have the mistaken notion that it is more responsible not to use credit lines at all. But this actually works to your disadvantage. Not having any activities submitted to the credit bureau would mean that financial institutions have no way of determining what your credit habits are and you will most likely get turned down if you need to avail of a loan or credit card in the future.
SAVINGS
Although majority of us find this a difficult exercise, we should consciously make a disciplined effort to set aside a certain portion of the money we earn every month. Incorporate it in your budget to set aside a percentage – maybe 10% of earned money – at the end of each month. Just think of it as another utility payment that you have to make. The savings will start to build and you may find yourself with a comfortable amount that you can draw on in case of emergency or when you retire.
RETIREMENT
Retirement planning is part of the overall savings picture. If you can, work an RRSP contribution into your budget as soon as possible so you will be much further ahead when you want to put your feet up and enjoy. Contributing to an RRSP also gives you a tax break at the end of the year and you can use your tax return money to put towards paying down your mortgage or put it towards a vacation. Both of those are win-win scenarios.
MORTGAGE
Home ownership is generally the largest investment that most Canadians will ever have in their lifetime. And it therefore follows that mortgage will comprise the biggest debt that will be carried by homeowners. You should regularly review your mortgage to ensure that you have the best mortgage structure tailor fitted to your current requirement.
Take a few minutes to review your debt-structure. If you are making high monthly payments on high-interest loans and/or credit cards, maybe you can restructure the debts by refinancing your credit accounts into your home. This generally reduces the amount of interest you are paying overall and lowers your monthly payments. At the same time, if you take advantage of an accelerated payment structure (bi-weekly or weekly) and bump up your minimum required payment by the 15-25% that your institution allows, you can pay down your principal and be mortgage free much sooner!
If you currently have a mortgage rate anywhere over 3%, you should do yourself a favour and consult with a mortgage professional to determine if you can get a better mortgage with lower rates.
INSURANCE
Make sure you are adequately covered with insurance so that you can protect yourself and your family in the event of a crisis or emergency. Whether it be home, health, life or disability insurance, it is always a good idea to review all of your insurance coverage at least once a year to make sure you are fully covered.
Most clients may benefit more from having independent mortgage insurance coverage as opposed to taking the insurance coverage offered by the institution that has your mortgage. If your mortgage insurance is through a company that is independent of the bank, you would have the ability to keep the coverage and premium you initially had even if moving your mortgage to another institution at a better rate works better for you.
Critical Illness Insurance offers protection should you become affected by one of the approved conditions and is often paid in a lump sum amount once you have survived the specified waiting period. It gives you the assurance that the costs of a serious medical condition, as well as living expenses, will be covered.