In 2024, many St. Albertans will need to get a grip on their emotions in order to get a handle on their finances, say local financial planners.
With no guarantee that inflation will ease in the new year, or that interest rates will drop, many in the city will have to continue — or begin — spending less and keeping a watchful eye on their finances.
And while it may be tempting to stop contributing to your savings, it’s critical to have some money going into storage even in hard times, according to Craig Strain, a partner and certified financial planner at Red Willow Wealth Management.
“Something is better than nothing,” he said. “You’d be surprised at how quickly [money] accumulates.”
A large part of Strain’s job is simply helping people manage their behaviours around spending and saving. Saving money should be an “automatic” behaviour, he said, like brushing your teeth at night.
“If it’s becoming difficult to maintain a certain contribution rate, you can always decrease it so that you’re maintaining that behaviour,” he said.
For anyone just getting started on saving for retirement, it’s important to understand the differing benefits between an RRSP and a tax-free savings account and to be on the lookout for certain savings advantages, such as employer-matched RRSP contributions.
Someone who is doing well in their career and may have a family should be looking at insurance for injuries or illness to feel secure if they need to take extended time away from work, he said. And potential home buyers should be considering a first home savings account, which will allow them to save on taxes for their first home.
New retirees with a defined benefit pension on top of CPP and OAS probably have a clear idea what they can expect to receive every month, Strain said.
However, for those using retirement savings like RRSPs as their primary source of income through retirement, “we probably would want to have some sort of cash wedge or low risk investment available to them, so that if we do see major fluctuations in the market, they can draw from their cash rather than selling securities at a loss,” he said.
Brock Denault, a financial advisor at Return on Wealth Inc., said that the rising cost of living has given rise to some emotional conversations about saving money, especially for those living with debt.
“Where we come into the picture is to tamper down the emotional aspect,” Denault said. “Someone who has $5,000 in debt may carry the same emotional toll as someone who's $100,000 in debt. It's all perspective.”
Taking an unflinching look at your debt is the first step to overcoming the problem, according to Denault. “The emotional side of it is the most intimidating thing,” he said.
In 2023, many of his clients, with or without large amounts of debt, were “stretched thin.”
Staying secure financially “falls on the individual and how they are going to want to adjust their lifestyle — what sacrifices are they going to want to make, if any at all? And finding comfort in their decisions,” he said.
“The thing to avoid coming into this year would be just to avoid living outside of your means and avoid falling prey to what other people may be doing around you that you would want to do that you can't financially do.
His advice for anyone looking to improve their financial situation in the new year is to not give into despair. Instead, understand that with time and effort, even fairly tricky financial knots can be untangled, and “just keep moving forward.”
