It’s time for your annual financial checkup

Was 2016 one of the worst all around years in recent history? From terrorist attacks, disease outbreaks and ridiculous election campaigns to multiple celebrity deaths and economic uncertainties, there is little doubt that at the very least, many people will be happy to leave 2016 behind.

While you may not be able to control major world events by yourself, you can take a few simple steps to help ensure that you start 2017 in the best possible position.

Those just starting out in their careers, as well as those already retired, can all benefit from a quick financial health checkup as we being a new year.

As one of your New Year’s resolutions, ask yourself these five questions to see if you’re on track for a prosperous 2017:

1 How does your credit report look? No matter your age or even if you never plan to borrow another penny again, it is important to keep any eye on your credit report. Requesting a copy of your credit report can allow you to make sure everything on the report looks right and if it doesn’t, take the appropriate steps to get it fixed. Many retirees are shocked to find out they have an open credit card or line of credit that they don’t even know about. You can request a free report from Equifax.ca or Transunion.ca

2. What is your current net worth? It’s a good idea to sit down and calculate your net worth at least once per year, preferably at the same time each year.

For retirees, you can then take a look at how much you’re withdrawing each year as a percentage and ensure that it’s a sustainable rate. For example, if you have a net worth of $750,000 and you’re pulling out $45,000 to live on each year, this would give you a six per cent withdrawal rate, which should be sustainable.

For those in the earlier stages of building your retirement nest egg, you can use this annual net worth calculation to make sure you’re still headed in the right direction and at the right pace.

3. How much are you paying in interest? At least once per year, you should sit down and compile a summary of the interest you’re paying from all sources including mortgages, unpaid credit cards, car loans, lines of credit and any other interest bearing accounts. Take a look at each loan, especially the ones charging higher rates and see if there’s anything you can do to reduce these interest costs.

It could be as simple as a phone call to request a lower interest rate or maybe you can transfer some high-interest credit card debt to a lower-interest line of credit.

Nobody likes debt and the human instinct makes us avoid reviewing these things, but a couple of small changes could mean big differences to your future.

4. Are there any new contribution amounts available to you? On Jan. 1 of each year, Canadians may receive additional contribution room for their Tax Free Savings Accounts, Registered Education Savings Plans, Registered Disability Savings Plans and Registered Retirement Savings Plans.

The start of each year is a good time to review your contribution limits for each of these account types and transfer funds into these accounts if it makes sense.

5. How much are you spending each month? At least once per year, you should track every penny you spend for an entire month.

This exercise is a great one that allows you to see where your money is going and identify ways that you may be able to save. You’ll be amazed to see how easily some of those little costs can add up.

The above five questions are just a sample of ones that you should ask yourself each year to perform a full financial health checkup.

While your financial situation can often feel overwhelming, approach each issue one at a time to break down the task and before you know it, you’ll be all done and well positioned for a prosperous 2017.

Brett Millard is owner of SPEIR Wealth Management in Kelowna. Reach him at brett@speirwealth.com.