New year, new budget: A step-by-step guide on how to refresh your finances

Posted by Admin December 31, 2024 Bussiness

A simple copy and paste of your 2024 budget isn’t enough to help you achieve your goals and maximize your finances for the new year, experts say.

“Things don’t stay the same. Prices keep going up,” said Jessica Morgan, founder of financial literacy site Canadianbudget.ca.

“You want to go into (the) new year with a new plan,” she said. That means auditing and budgeting.

“First, you have to look back on the year that we’ve just concluded,” she said. “Take a look at your spending for insights.”

Tracking spending patterns in your current budget can provide insight into the coming year. But if you haven’t started tracking everyday spending yet, Morgan suggests going back to review your bank and credit card statements.

An audit on all subscription costs is next on the list.

“Services that you subscribe to are probably raising their fees,” Morgan said. “It’s a good idea to take a look at what you already are paying for and what you’re subscribed to.”

Janine Rogan, a chartered professional accountant and CEO of the Wealth Building Academy, agrees. “We somehow end up subscribing to probably more things than we actually need.”

Negotiating any bills such as cellphone plans, bank fees, or insurance costs can also help lower your expenses, Rogan said. But if you can’t negotiate, she suggested “looking at ways to add value,” such as adding more data to an existing phone plan.

The review stage sets you up for the next step: setting new goals.

“What do you want to enjoy and accomplish this year and how much money do you need to pay for that?” Rogan said.

For example, if the goal is to have a maxed-out tax-free savings account — which has a renewed contribution limit of $7,000 for 2025 — dividing that amount across 12 months will make it achievable.

“That’s $583 a month,” Rogan said.

That savings method can apply to any other financial goal — a vacation, buying a new vehicle or even starting to plan for the next holiday season.

“Automating it and making it happen in small chunks early on can be really valuable,” Rogan said.

There’s one more “unfun” piece of preparing for a smoother financial year, she said: Figuring out if you will owe money for income taxes.

To get a rough estimate, she suggested taking the final paystub of the year, which should include a breakdown of your yearly salary, and putting the amount into a tax calculator.

“It will give you a good estimate of whether or not you’re going to owe,” Rogan said.

“I tell people to do this early in January so that come April 30, you’re not scrambling to pay thousands of dollars (and) you’ve had four months to save up,” she said.

Saving for tax time is especially important for freelance workers and others who don’t have tax automatically withdrawn by their employer.

For budgeting, Rogan said it’s important to be holistic and look at money overall on either a quarter-to-quarter basis or an annual basis — allowing more room for flexibility, and ebbs and flows in cash flow, rather than setting a strict weekly budget.

“You might have extra income one month, you might have extra expenses the next month and sometimes, those things are unexpected,” she said.

“We can’t plan for them but sometimes, we can take that yearlong look at a spending plan.”

That still requires a routine check on the budget weekly, biweekly or monthly — whichever works for you.

A budget or finance buddy can also help you stay on track with your goals, experts say.

Kelley Keehn said she often schedules financial check-ins with her spouse on bigger goals.

“What I do with my husband at the year is, we go, ‘What are all the things we need to do financially?’ said Keehn, a financial educator and founder of Money Wise Workplaces.

“Maybe we need to set goals. And we just drink some wine and write everything down,” she said.

Once the goals are set, Keehn sets reminders every few months to revisit them.

Even if there’s no time on the day it’s scheduled for, Keehn said at least the task would not get lost in the noise or feel so overwhelming — and can be rescheduled for a future date.

While it’s never too late to start tracking money, Morgan said it’s becoming more important to do so as the cost of living keeps going up.

Most people feel motivated at the beginning of the year, she said. So, she suggested picking a method that works for tracking money — an app, spreadsheet, computer software or simply pen and paper — anything that “fits into your everyday life.”

She added: “It’s a pre-emptive step to make things easier throughout the year with your finances. I would say it’s a great time to get started.”

This report by The Canadian Press was first published Dec. 31, 2024.

Ritika Dubey, The Canadian Press