Here are five simple steps that you can apply right away to help improve your finances next year:
Switch to a variable interest rate mortgage. According to a popular study in 2001 by Moshe Milevsky, home owners have been better off with a variable interest rate nearly 90 per cent of the time over the last 50 years. Yet consumers choose the five-year fixed rate option 65 per cent of the time, often citing the “sleep at night” factor in their decision. You might sleep better knowing that you’ll potentially be saving thousands of dollars with a variable rate mortgage.
Dump your expensive mutual funds. Mutual fund fees in Canada are the highest in the world, and because of these fees, the vast majority of actively-managed funds lag behind the market. Switching to low cost index mutual funds or ETFs will cut your investment fees to the bone while increasing your overall returns.
Take advantage of employer matching plans. Many companies will match your RRSP contributions up to a certain amount each year. An employer match effectively doubles your rate of return, yet employees aren’t taking full advantage of this incentive. If your employer matches RRSP contributions up to two per cent of your salary, and you earn $50,000 per year, make a $1,000 RRSP contribution to maximize your employer matching plan.
Ask for a raise. Nothing will help improve your finances like a salary increase, and sometimes all you need to do is ask. Most employers are afraid of losing their top performers, but unfortunately they aren’t just going to hand out large raises to everyone. If you’ve proven yourself to be a valuable part of the team, don't hesitate to ask for more money.
Earn money on the side. Some people can turn their hobbies into a lucrative side business, but it doesn’t have to earn you thousands of dollars a month to be worthwhile. Some examples include: picking up bargains at flea markets or garage sales and selling the items online, using your photography skills to pick up a few weekend gigs doing weddings or outdoor family pictures, or starting your own blog or freelancing for a magazine or small newspaper. Making money on the side by doing something you love can be extremely rewarding.
Put these simple steps into practice over the next few months to help improve your finances next year.