By Farhana Uddin
New year, new goals. Do you want to save for the short term or plan for a long time? Here’s how to lay the foundations for your financial success, even during a pandemic.
It is never pleasant to have financial difficulties, mainly due to the COVID-19 pandemic. But each lousy patch is also an opportunity to bounce back to better prepare for the future.
For many, the new year can be like a fresh start and a time to review your goals. According to a recent Sun Life survey1, 43% of Canadians have set goals for 2021. For more than half of them, these goals are financial.
If you’re one of those with financial goals for 2021, remember to go at your own pace. Think of it as a marathon, not a sprint, and remember that achieving great things takes time. That being said, here are some short and long term goals that might be within your reach.
Three short-term financial goals for 2021
- Save more (as much as your budget allows)
Have you resolved to spend less and save more in 2021? You can start by using a budget calculator to see where your money is going. This tool also lets you know if you can balance your accounts.
This will give you a good understanding of your monthly spending habits and where to cut them. You might find that your electricity bills are rising and look for ways to keep them down. You might even find that you saved more by going out less often because of the pandemic.
You can start small, saving $5, $10, or $15 per week or month. You don’t have to save a lot, and you can adjust the amount according to your budget.
How to become a super-saver?
When you get into the habit of saving regularly, you will want to make the best use of the money set aside each month. Depending on your current financial priorities, you might consider pursuing one of the following goals.
Six steps for a well-thought-out confinement budget
- Use the TFSA to save for a special event
Do you have something special planned this year, such as a wedding, a birth or the purchase of a new house? If so, use the Tax-Free Savings Account (TFSA). It is ideal for growing your money towards these types of short-term goals.
How does a TFSA work? A TFSA allows different types of investments: GICs, mutual funds, segregated funds, stocks, bonds, etc. You invest money that has already been taxed, and your earnings are not taxable.
Plus, you can withdraw your money from the TFSA whenever you want, for any reason. This money can then be used to achieve one of these financial goals:
Plan a major expense
Set aside money to fund parental leave
Pay your credit card
Pay off your mortgage
Have a source of additional retirement income
You can even use the funds from your TFSA to pay for any costs related to COVID-19.
How much can you put into a TFSA? Warning! The annual contribution limit for 2021 is set at $6,000.
What if you’ve never opened a TFSA before? If so, you can contribute up to $75,000 today. This applies if you were at least 18 years old in 2009 (the year the TFSA was introduced). In addition, you can also return, the following year, any amount that you have withdrawn previously.
Five things you might not know about the TFSA
TFSA: 4 common mistakes to avoid
Six beneficial ways to use your TFSA
- Build an emergency fund
Whether or not you save like a pro, life always throws you some unexpected financial difficulties. But, if you can’t foresee financial emergencies, you can prepare for them.
The ideal emergency plan is a plan:
that saves and grows money when things are going well;
which is easily accessible when the going gets tough.
In anticipation, consider putting the extra money you have in a high-interest savings account. It cannot hold investments, but the interest is higher than a regular savings account. And then, you can withdraw the funds immediately, whenever the need arises.
Your TFSA can also be used as an emergency fund, but certain restrictions may apply to the investments in it. This is why there may be a delay of a few days to withdraw the money.
