I think we can all agree that 2020 was NOT the best year to execute our New Year’s resolutions, especially if they were personal finance related. Whether you were furloughed or laid off when COVID-19 hit, you’re a business owner whose bottom line took a hit, or you had to spend money to improve your home office, it was a tough year to stick to financial goals. In fact, my company Willful did a survey with AngusReid in January 2020 that found that 76 percent of Canadians had at least one personal finance goal on their New Year’s Resolution list in 2020—when we did a similar survey in January 2021 with Arbor Memorial Inc., we found that only 6 percent of Canadians had achieved their resolutions last year, and a whopping 68 percent of Canadians aren’t even bothering to set resolutions this year.
Knowing we’re cautious about setting goals this year, it begs the question: how can you take small steps to improve your finances in 2021? This guide brings together advice from financial experts and outlines some small steps that can lead to big wins in 2021.
Small step #1: Look to podcasts to soak up knowledge
Many of us have more downtime right now thanks to no social gatherings, trips, or commuting. Why not take some of that extra time and put it into learning about personal finance (in a fun way)? I’ve long followed some top Canadian experts who are engaging, funny, and who make it fun (yes, fun) to learn about personal finance. Here are a few of my favourite podcasts:
- Mostly Money with Preet Banerjee – Preet is one of those people who can make talking about money seem like the most exciting thing in the world. He has a great sense of humour, and he’s able to keep conversations with financial experts light but informative.
- Mo’ Money podcast – Jessica Moorhouse is a millennial money expert. I’ve been listening to her podcast for years, and I love her conversational approach, and the wide range of topics, from side hustles, to freelancing, to good old fashioned saving, investing, and budgeting.
- Fintech Impact – Jason Pereira is a financial planner who interviews a fintech founder on each episode of his show. If you’re interested in how technology is changing the personal finance space, this show’s for you.
Small step #2: Evaluate—or reevaluate—your mortgage options
As a homeowner with a variable mortgage, it was a nice surprise to see interest rates drop to historically low rates (and my monthly mortgage payment drop along with them). I spoke with mortgage broker Jake Abramowicz, who said it’s the perfect time to be buying a new property—maybe you’re moving out of the city now that remote work is a thing? A small step you can take is using a calculator like RateHub’s mortgage affordability calculator or mortgage payment calculator to understand whether it’s feasible. And if you have an existing mortgage, you may want to look at your options for renewals.
“Perhaps one of the only good things that the pandemic has brought us all is super-low interest rates,” said Abramowicz. “We may never see these kinds of borrowing opportunities in our time again.” He also offered the following advice:
- If you own a property and have a renewal coming up: shop it around to at least 2-3 brokers and banks.
- If you have some high-interest debt, strongly consider refinancing the debt into your mortgage.
- If you have a mortgage rate over 2%, definitely ask your banker and broker to find out if breaking it makes sense.
- If you’re a first-time buyer sitting on the fence, opportunity knocks! At these rates, almost 70% of your payment can hit principal – that’s a tremendous “forced savings” opportunity, and a way to build up equity incredibly fast.”
Small step #3: Can’t do anything fun? Start to pay down debt strategically
We’re almost a year into COVID, and while there are still many who have seen their income streams disrupted, for others, it has presented an opportunity to reallocate funds away from travel, entertainment, dining out, gyms, and social events to pay down debt instead (after you’ve purchased Disney+, Netflix, Crave, and Amazon Prime Video of course). While it won’t be possible for everyone, if you are able to redirect some of those funds, remember to keep it realistic. I spoke to Shannon Lee Simmons, the founder of the New School of Finance and the author of one of my favourite personal finance books Worry-Free Money, and she said it’s equally as important to make a debt plan realistic as it is to make it aggressive. At a time when our mental health is suffering due to cold weather and lockdowns, ensure you leave yourself room for small indulgences while staying on track to pay off debt.
“If you’re aiming to pay off debt in 2021, ensure you make a realistic plan,” said Lee Simmons. “Often with debt repayment plans, we try to do extreme budgets and very short timelines, which can set us up for failure. Make a sustainable plan that allows you to pay back debt without giving up your life.”
Small step #4: Get those emergency plans in place
I’m the founder of an online will platform. Did you really think I would get through this article without talking about the importance of end-of-life planning? Regardless of your age, I can bet that you avoid thinking about your own mortality whenever possible. But COVID-19 highlighted that the unexpected can happen anytime. Our research found that 25% of Canadians had “make a will” on their resolutions list in 2020, and I’d bet that number is higher this year now that emergency planning is more top of mind.
Getting a will might not feel like a small step, but in reality, there are tools like Willful that take a Turbo Tax-style approach to creating your will. You answer a few questions about who you want to leave things to and a few other key choices, and the platform pulls your answers into customized documents, in less than 20 minutes. Not sure where to start? Check out this guide to discussing end-of-life wishes with family, which can help you address 20+ key questions you should be thinking about when it comes to organizing things for your family.
Another key aspect of end-of-life planning is life insurance and thanks to technology, it’s as easy as planning a will. Companies like PolicyMe help you to compare options and get quotes online, and Emma is a digital life insurance platform out of Montreal that brings a Wealthsimple-style approach to getting life insurance. Vincent Girard from Emma shared more about why digital options are COVID-friendly:
“Life insurance and pyjamas usually don’t belong in the same sentence, let alone in the same discussion…however with Emma, they now go hand in hand,” said Girard. “You can now buy life insurance in 30 minutes, without any medical exam or in-person appointment, and still benefit from the help of experts while you’re doing it. The best part is everything is done online, in the comfort of your home (or your favorite PJs!). It’s a nice way to turn a lazy Sunday morning into a productive one while keeping the coziness.”
Small step #5: Think about purpose, not just profit
I met financial planner David O’Leary a couple of years ago, and I loved the philosophy behind his firm Kind Wealth—it aims to help Canadians build a financial plan that includes purpose, whether that’s donating to charities in your will or building philanthropy into your financial plan. Here are few small steps you can take to do good while doing well financially in 2021:
- Set up a monthly donation on Give, an app that groups together charities by theme and makes it easy to support various causes
- Consider investing in a social impact fund, like this one from Wealthsimple
- Invest in a female founder by becoming an activator with SHEeo
- Update or create your will to leave a portion of your estate to charity (as someone who sits on the board of a charity, this can have a huge impact!)
O’Leary was Kind enough (pun intended) to share some thoughts on how to take small steps towards learning about responsible investing. “While you’re getting your finances organized, remember the destination isn’t all that matters. How you get there is just as important,” he said. “Go ahead, hustle, get paid, and get those venture capital returns if you want, but do it in a way that doesn’t hurt people or destroy the planet in the process. Invest, but do it responsibly.”
There you have it—a collection of advice and small steps that will hopefully help you have a big impact on your finances this year. One big step I didn’t mention? Start a company! So much innovation comes out of challenging times—so if you want to take a big leap in 2021, get that big idea off the ground this year.