The Secret to Make 2022 a Financial Success

Despite the many challenges from 2021, most Canadians are feeling good heading into the new year. Many are also taking this important step to set themselves up for financial success in 2022. Are you doing the same?

According to a recent poll from Ipsos, two thirds of Canadians (67%) are generally optimistic about 2022. Many Canadians are also taking action to improve their financial health. Four in ten (41%) plan to make a New Year’s resolution about their finances.

Where’s this optimism coming from?

After all, we’re still dealing with the coronavirus pandemic, the rise of Omicron, the threat of war in Ukraine, soaring inflation and the prospect of rising interest rates.

I think part of the optimism comes from the extended bull market we’re currently in. The Canadian stock market is up 9 of the past 10 calendar years. That Includes a 21.7% gain for the TSX Composite in 2021. Returns like that certainly add to the positive vibe.

I think another part of the optimism comes from the fact that many people are taking action. As mentioned above, 41% of Canadians plan to make a financial resolution this year. Having a plan boosts confidence and reduces stress.

“Making a New Year’s resolution can help Canadians manage their financial expectations, and any surprises, in 2022.” said Carissa Lucreziano, Vice-President, CIBC Financial and Investment Advice.

“Having a plan to reach your long term ambitions and a clear understanding of your monthly cash flow can significantly reduce stress.” Ms. Lucreziano added.

And that’s the secret to making this year a financial success: Make a financial resolution for 2022.

Now I know what you’re thinking. New Year’s resolutions are easy to make, and they’re even easier to break. But financial resolutions are powerful motivators. They help keep you focused and on track.

And now there’s evidence to show that financial resolutions made during COVID have really paid off.

The 2022 Financial Resolutions Study from Fidelity Investments looks at people’s attitudes about making New Year financial resolutions. The study is based on Americans, but it has many useful insights for Canadians.

The Fidelity study found that people who made resolutions at the start of 2021 are more optimistic today. The study also found that people who made resolutions were able to stick to them: 71% said they were able to stick to their financial resolution from 2021, versus 58% in 2020.

Why were so many people able to stick to their plan last year? The study offers a clue: After living through the pandemic, 84% of respondents said they learned to let go of what they can’t control. That attitude forced people to focus on things they can control, like their financial goals.

So the point is clear: People who made financial resolutions last year were able to make progress on their goals, and that success makes them feel optimistic about 2022.

Planning for 2022: Time to Act

Finding focus and having a plan for 2022 will help you achieve financial success. What should you focus on this year?

According to CIBC, the top 2022 financial priorities for Canadians are paying down debt (20%), growing investments (16%) and keeping up with bills (15%). Secondary goals include growing an emergency fund (28%), avoiding more debt (26%) and saving for a vacation (17%).

If you’re still unsure what to focus on this year, here are four suggestions that may help.

Make an Inventory

The first step toward achieving any goal is knowing where you stand. That’s why an inventory of your financial accounts is a powerful tool.

The beginning of the year is usually when you receive your annual bank statements, investment statements, pension statements etc. So it’s the perfect time to update your financial account list.

Don’t have a financial account list? Here’s how to create a simple one. On a single sheet of paper, write down these headings: Banking, Investing, Debts, Life Insurance, Pensions. Then fit each of your accounts under the appropriate heading, along with some details.

For example, “RBC chequing account: $2000. Day to day expenses.” would go under banking. “RBC Mortgage: $250,000. 2.75% five year fixed.” would go under debts. “Canada Life work pension. $125,000. Retirement.” would be under pensions.

At the very least, an inventory of your financial accounts will get you organized and focused this year. That’s a big step in the right direction.

Work on your debt

Yes it is possible to get your debt under control in 2022. The key is to create some momentum. Commit a little extra cash, every week, to your debt. Interest rates are still low, so even a small payment increase will make a difference.

Have multiple debts? Here’s a trick: List all the debts you owe, starting with the smallest balance. In addition to your regular payments, take the extra cash you committed to and apply it to the smallest debt first. Completely pay off the smallest debt first, then move on to the next smallest debt on the list, and so on.

Now pure math says you should tackle your highest interest debt first. But remember, momentum is key. And making progress on debt reduction is truly empowering. Reducing your list of debts quickly will motivate you, and help you stick to your overall debt reduction goal.

Save a bit more for retirement

Inflation is making everything a bit more expensive. And that includes retirement. So saving a bit more for retirement is a good idea.

Here’s where automation can help. The beginning of the year is a good time to look at the percentage you’re saving towards retirement. At the very least, set your contribution amount to a level that maximizes any employer matching contributions.

You should target saving 10% of your salary over your career. That includes your contributions along with any company matching. If you’re starting to save for retirement later in your career, you’ll likely need to bump up your annual savings target.

Work with a financial advisor

If you’re still struggling with what to focus on this year, consider hiring a financial advisor. A professional financial advisor can help you create a strong plan for 2022, and help you stick to it.

Depending on your goals and personal financial situation, a financial advisor can help you set goals around cash flow, spending, tax planning, life insurance, retirement planning and more.

Bottom Line

We’ve seen that having a financial resolution last year during COVID has really paid off. Many Canadians are planning their financial resolutions for this year. Having a goal and creating a plan is the secret to financial success in 2022.

Wishing you all the very best this year!

This information has been prepared by Paul Carvalho who is an Investment Fund Advisor for Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Investment Fund Advisor can open accounts only in the provinces in which they are registered.