Investing a little bit of effort and time in outlining your financial goals will help you to improve your financial situation in 2020. This will also help you to develop a sound long-term strategy for your financial future.
Do Your Taxes Early
Like it or not, the tax season is coming up quickly, and it pays to file your taxes before the deadline. Reporting your eligible expenses and income is far from fun but procrastinating will make it more stressful. The deadline for filing in Canada is April 30, 2020. Early filing also ensures that you receive credit and benefit payments such as the working income tax benefit, GST/HST credit, Canada child benefit, and guaranteed income supplement. Eligible taxpayers are also entitled to claim the Climate Action Incentive if living in New Brunswick, Ontario, Manitoba, and Saskatchewan.
Getting your taxes done early is easier if your income sources include:
- Grants
- Bursaries
- Fellowships
- Scholarships
- Support payments
- Social assistance
- Employment insurance
- Disability insurance
Completing your tax returns is not as easy if you have rental or business income, are self-employed, have declared bankruptcy during the previous or current year, or have capital losses or gains. In this case, it is important to get your taxes done early to ensure that you have plenty of time to gather all documents and pay taxes that you owe.
To file your taxes, you will need to provide information such as your home address, banking details, number of children, and marital status. You should also report income in the form of benefits, investments, and self-employment and employment income. Claim tax credits, expenses, and deductions to lower the amount you pay. You can complete your tax returns in different ways, including by phone, on paper, and by software.
Fix Your Credit
The first thing to do is plan to get your credit in check regardless of how much you owe. Start by listing all debts that you owe, including due dates, monthly payments, total amount, and creditors. Make sure you update your list to check on your progress and see where you stand. Making timely payments each month is obviously a must. Late and missed payments will affect your credit score and will make it more difficult to pay off your debts. If you have multiple debts, you may want to set alerts to help you avoid late payments. It is also important to decide which debts to pay off first. If you have multiple credit cards, start with the one that carries the highest interest rate. Make sure you make the minimum payment on your other accounts to avoid penalty interest and to stop your debt from growing.
Create a Financial Plan
Setting a budget will help you to stay focused on your financial goals and get control over your money. There are other benefits to setting a budget such as organizing your savings and spending and paying off debt faster. The first step to creating a budget is to look at your income or how much you can afford to spend on a monthly basis. Start by listing different sources of income such as your salary, wages, alimony, and benefit and credit payments. Other sources of income include rental and dividend income, royalty and interest income, and capital gains. Once you get an idea of how much money is coming in, you have to look at your expenses, including fixed and variable expenses. Examples of variable expenses include car maintenance, home repairs, and groceries. Fixed expenses, on the other hand, include things like credit card and loan payments, car insurance, utilities, rent, and service payments such as cell phone, Internet, and cable TV. Compare your income and expenses to see whether you need to adjust your spending to meet your expenses and save enough to achieve your goals. You can either try to increase your income or cut back on both fixed and variable expenses.
Settle Bad Debts
Paying off bad debts will help you to improve your credit score. Such debts are in collections because you are unable to pay them back. The best thing you can do is settle or pay the full outstanding balance. First contact your debt collector and try to negotiate a settled payment in exchange for deleting the account from your report. Offer an amount that is smaller than what you owe. If this doesn’t work, then offer a full payment to get the account removed.
Make a Long-term Savings Goal
The first step to making a savings goal for yourself is to actually name your goal. Examples of goals include creating an emergency fund, saving to pay off debt, and saving for down payment, your kid’s education, or retirement. Examine your goals to decide whether they are long-term, mid-term, or short-term. Long-term goals such as retirement and college education require a lot of money and careful planning and take several years to achieve. Mid-term goals such as paying off credit card debt or buying a new car do not take as long to achieve but certainly longer than short-term ones. Short-term goals, on the other hand, take one year or less and include things like buying a new washing machine or going on vacation.
Find a Financial Planner
If you lack basic knowledge of debt management, investment, and financial planning, you may want to use the services of a financial advisor. Advisors have expertise across a wealth of topics such as tax strategies, wealth management, insurance coverage, budgeting, and saving. They can help you to develop a financial plan and stick to it as to achieve your long-term and short-term goals. Your advisor will help you to choose from different types of insurance coverage such as disability, term life, and long term care. You may be asked to fill in a detailed questionnaire to help assess your financial situation. The questionnaire typically includes questions about your expenses, sources of income, assets and liabilities, and future income and retirement income sources. The answers will help your advisor to assess your financial strength and risk tolerance. The financial plan that you develop with your advisor will be based on your liquid capital, assets and liabilities, and net worth.
Ready to Invest?
Finding new companies to invest in can be tricky, especially if you have little or no experience. In this case, you may want to invest in companies across different sectors in S&P, including health care, consumer discretionary, industrial, consumer staple, energy, and material. Other sectors to look into are utility, real estate, telecom, technology, and financial. Choose companies that are good for growth or value investing. The approach that you choose to include companies in your portfolio depends on your financial goals and risk profile. If you have a low-risk profile, then consider dividend stocks. Growth stocks are a good option for those who wish to invest in long term growth while value investing is a preferable choice if you are looking for stocks that are trading below their book or intrinsic value.
Home Trust offers a Visa card with travel benefits such as no foreign exchange conversion fees, auto rental collision insurance, and roadside assistance. Roadside assistance is offered free of charge and entitles customers to 4 service calls annually. Cardholders also earn 1 percent cash back on all items charged to the card, and there is no limit to the amount that can be earned.
This rewards credit card by MBNA is a good deal in that it allows customers to earn points on a daily basis. Every dollar spent on eligible purchases earns 2 points, including dining, grocery items, and gas. A welcome bonus of 2,500 points is offered with the first purchase to customers who opt for e-statements. Cardholders are free to redeem points for gift cards, travel, merchandise, charity donations, etc. They also enjoy everyday and security services such as lost luggage assistance, emergency services, and ticket replacement.
This card by American Express also features multiple benefits such as free additional cards, access to special offers and reserved tickets, and travel coverage. Customers are offered the chance to make restaurant reservations and buy presale tickets for special events, including theatre performances and concerts. An added advantage is the fact that there are no travel and seat restrictions. The first $500 purchase earns 10,000 rewards points, and referring a friend earns additional $5,000 points. Each dollar in purchases is equal to 1.25 points.
Offered by the Bank of Nova Scotia, this cashback card features a special offer so that customers earn 10 percent back on all purchases made during the first three months. Each dollar spent at grocery and drug stores earns 4 percent and at gas stations – 2 percent. Other benefits worth mentioning include concierge services, access to dining experiences and premier events, wine purchase discounts, complimentary wine tastings, and more.
Also a great credit card to earn money on purchases, Meridian Visa Infinite features 10 percent cash back on items charged during the first 3 months. Utility bills and pharmacy purchases earn 2 percent, grocery and gas earn 4 percent, and all other purchases – 1 percent. Rewards can be redeemed in the form of gift cards, account credit, events tickets, and merchandise. The card also comes with a comprehensive insurance package, including travel assistance, baggage insurance, and emergency health care coverage.
Also a good choice to earn rewards points, this card by American Express comes with a low interest rate and a welcome bonus of 30,000 points for purchases worth $500 made on a monthly basis. Each dollar spent in cafes, bars, and restaurants earns 5 rewards points. Supplementary cards are offered at no additional cost. Customers enjoy multiple benefits, including shopping deals, weekend gateway experiences, advance movie screenings, reserved tickets, and presale tickets for major events.
The Bank of Montreal also offers a rewards card with shopping and travel benefits, an annual fee waiver during the first year, and a welcome bonus of 35,000 points. One dollar spent on everyday purchases earns 2 points, and $1 on entertainment, restaurant, and travel purchases earns 3 points. Customers also benefit from access to vacation packages, cruises, car rentals, and other travel benefits.
Customers who need a card with comprehensive travel coverage may check this card by Scotiabank, which also features an attractive rewards scheme. Travel coverage includes travel accident, travel emergency medical, flight delay, lost and delayed baggage, and other types of insurance. Cardholders also earn 1 point per dollar on everyday purchases and 4 points per dollar on entertainment, gas, dining, and grocery purchases. The list of added benefits includes concierge services, access to special offers, experiential tours, culinary experiences, and Hertz #1 Club Gold membership.
This Visa card also comes with a comprehensive insurance package, including travel, common carrier accident, emergency health care, trip interruption or cancellation, and baggage insurance. The card also offers 2 percent cash back on purchases and features wine and food experiences, concierge services, and hotel and travel benefits. Customers enjoy exclusive travel benefits such as airport parking discounts, security fast track lanes, and Priority Pass membership. Hotel benefits include beverage and food credit, complimentary daily breakfast, and automatic room upgrades based on availability.
This credit card by the Bank of Montreal is especially designed for students and features discounts on food, dining, clothing, beauty, and other items. Cardholders are offered 5 percent cash back on purchases during the first three months and 1 percent after the promotional period. Students also benefit from access to sports events, premiers, and concerts, exclusive deals, and add-ons such as BMO Roadside Assistance and Credit Alert. A signature or reference letter from parents is not required.
Scotiabank also offers a student card that is suitable for young people with no credit history. The card features a rewards program that offers customers the chance to earn 5 points per dollar on Cineplex purchases and 1 point on everyday purchases. Scotiabank offers multiple benefits such as discounts on car rentals, supplementary cards, and optional protection in case of critical illness, lockout or strike, job loss, disability, etc.
This card is a good option for borrowers with tarnished credit and requires a security deposit as a guarantee of repayment. The minimum deposit is $500 and the maximum deposit – $10,000. Customers can use the card to book vacations and make online or in-store purchases. Cash can be accessed at ATMs with the Plus and Visa logo. The approval rate is quite high (over 95 percent), which makes this secured card a good choice for customers who seek to reestablish credit.
This secured card helps customers build credit and comes with beneficial features such as low security deposit, easy approval, and free financial resources and education. Cardholders are offered free courses on different topics, including finances, money, how to set financial goals, and how to improve credit.
This card is a good choice for newcomers to Canada and persons with no credit history. Scotiabank offers the option to transfer balances, and customers benefit from a low 3.99 percent introductory rate during the first 6 months. Additional benefits for cardholders include car rental discounts and Visa Checkout.
This MasterCard by MNBA comes with a zero promotional rate on balance transfers during the first 10 months, allowing customers to transfer high-interest balances. There are many benefits for cardholders, among which legal assistance, pre-trip information, and lost ticket and lost card replacement. Up to nine authorized users can be added free of charge.
Another option by President’s Choice Financial, this card comes with a very low balance transfer rate of 0.97 percent during the first 6 months. Customers also earn 3 cents per litre at Mobil and Esso gas stations, 25 points per dollar at Shoppers Drug Mart, 20 points per dollar at PC Travel, and 10 points on all other purchases. Added benefits for cardholders are emergency cash advances, free extended warranty, and the option to request up to 4 additional cards at no added cost.
This card by Canadian Tire allows holders to earn 3 percent on grocery purchases, 5 – 7 cent per litre at Husky and Gas+ stations, and 4 percent in CT money. Customers also enjoy perks such as concierge services, personalized offers, roadside assistance, and access to exclusive events.
This card is offered to Costco members and features 1 percent cash back on regular purchases, 2 percent on gas, and 3 percent on dining. The array of everyday and travel benefits includes travel assistance, baggage delay and common carrier travel accident insurance, and price protection.
Canadian Tire also advertises instant decision for customers who fill in the application for approval. The Triangle MasterCard® allows customers to earn rewards that can be redeemed at Atmosphere, Mark’s/L’Équipeur, Sport Chek, and Canadian Tire. There is a host of benefits for holders, including access to exclusive events and offers, no-receipt returns, and 5 – 7 ¢ per litre in cash back in CT Money when making debit or cash purchases. Weekly flyer bonuses are also available. Like other instant approval credit cards, customers who are retired or employed, are of legal age, and are Canadian citizens are eligible to apply. Applicants are asked to provide details such as address and name of current employer, annual income, and previous address.
Low Rate Guaranteed MasterCard® requires a security deposit and goes with added incentives such as travel assistance, baggage delay insurance, and common carrier travel accident insurance. Other perks include emergency cash advances and card replacement and extended warranty. All applicants qualify provided that they do not have an account at the bank which was not in good standing and are of legal age.
The Guaranteed MasterCard® is another option for customers who are looking for a guaranteed credit card. This product comes with travel and everyday benefits such as car rental collision waiver, extended warranty, and others. Customers benefit from legal referrals, lost luggage assistance, lost ticket and documents replacements, medical referrals, and others.
The Preferred Rate MasterCard® by BMO® is one option to look into, which comes with a low intro rate of 3.99 percent. This rate applies to balance transfers during a 9-month promotional period. There are add-ons such as balance protection and roadside assistance. BMO also advertises security features such as MasterCard SecureCode, zero liability, and chip technology. Customers are eligible to apply provided that they did not file for bankruptcy during the past seven years and are of the age of majority in their territory or province of residence. They are asked to bring photo identification such as their territorial or provincial health insurance card, certificate of Canadian citizenship, Permanent Resident Card, driver’s license, Immigration Canada Documents, etc. When applying for a card, customers are asked about their housing status, address, monthly payment, years of employment and employment information, income details, and more.
The Vancity enviro Secured Visa is also a good choice for customers with fair and tarnished scores, those with past financial problems, and recent immigrants. Those who deposit $500 or more in their TFSA, Jumpstart High Interest Savings Account or Vancity Term Deposit are offered an enviro Visa. The amount deposited determines the limit. The card goes with multiple benefits such as Visa payWave and Checkout, stolen and lost card protection, recurring payments, lost and delayed baggage insurance, travel accident insurance, and more. Optional coverage includes trip interruption, trip cancellation, and travel medical insurance as well as critical illness, life, and accidental dismemberment insurance. An added benefit is the option to set up automatic payments to avoid late and missed payments. Customers also have access to their online account information, including statement data, transactions, and current balance. Customers can apply by visiting a local branch.
Toronto Dominion features the TD Cash Secured Credit Card which requires a deposit made into a TD Simple Savings Account. The deposit serves as collateral and can be as low as $500. On the good side, this card allows holders to earn money back on regular purchases, purchases at grocery stores, and dining. Holders earn 1 percent back on regular purchases, 2 percent on groceries, and 3 percent on fine and casual dining. Additional benefits include instant card replacement, chip technology protection, and digital wallet that allows customers to add their card to their phone. *Please note that this card is no longer available.
The Canadian Imperial Bank of Commerce also offers secured cards to newcomers, Canadians trying to rebuild or build credit, and international students. Applicants are asked to make a security deposit which is held in an interest-bearing investment instrument. Newcomers to Canada can choose a card that is tailored to their requirements provided that they have another borrowing or banking product in good standing, including a mortgage, line of credit, loan, or savings or chequing account. A security deposit is not required, and customers with no credit history qualify provided that they meet the criteria.