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Good Housekeeping


The shopping is done, the gifts have been opened and our stomachs have been filled.  Now it’s time to clean up before the New Year comes around.  The end of the year is a great time to reflect on the things that have happened over the past year.  Your personal finances should be no exception.  All of us want to spend the holiday time with our friends and families, but we owe it to ourselves to be a little selfish and take some time for ourselves.  Doing your personal financial plan for the next year is a great start.

An easy task to do is to determine whether you’ve met your goals of paying yourself first.  Did you stick to the plan to save first and then spend?  For Canadians, at this point in the year, you should be gearing up for the New Year when TFSA contribution room opens up.  I must admit, January 1st is my favourite day of the year, not because I get to go into a drunken stupor but because it’s the day when I can put my savings for the year into my TFSA.  To be exact, when the calendar year rolls over, each Canadian who has opened up a TFSA is qualified to contribute an additional $5500. That first week of January is my boxing week sale.  I now get to go shopping for new investments.  Yay!!!

After a full year, it is also a good chance to reflect on changes in your own life that might affect your financial plan.  Did you have a new addition to your family? Did you purchase a new home?  Perhaps you are thinking about going back to school?  Maybe you are moving to a new city?  These are all things that might change the original plan that you might have set for yourself when you started doing your financial plan.  If things haven’t changed, then it is prudent to stick with the original plan that you set out for yourself.  Stay patient and let your plan work for you.  If things have changed, perhaps it’s time to review your finances and maybe talk to a financial advisor to devise a new strategy.

I already mentioned in a previous post that you should be preparing for your tax returns by taking advantage of tax loss selling, if that applies to you.  That is something that you should already have done if you wanted to take advantage of it.  The end of the year is also a chance to review how well your investments have done over the course of the calendar year.  For 2013, it was probably a banner year for Canadian investors because not only did real estate go up, but equities went up as well.  If you only invested in GICs and money market funds, I’m sorry you might have missed out on the best year to ever come around, but perhaps it’s a wake up call to learn and invest for the future.

Reviewing your investments shouldn’t be about picking out the losers and disposing of them.  If you are buying individual stocks, it’s time to review these companies and see if the original thesis of why you invested in the company still holds true.  Companies like BlackBerry might have been something you put money into, but now that the direction of the business is changing, is that something you want to be a part of?  The reason for investing is to be a part of the company.  It’s not to gamble and hope that you get returns the next week.  Remember that there is a difference between investing and gambling, if you still don’t understand the difference please get professional help.  Think of investing like marriage, you certainly don’t change wives or husbands every day.  Remember, “till death do you part”.

If you’ve been doing the Couch Potato portfolio or you have devised your own personal index portfolio, it’s a chance to review your holdings and rebalance your funds to ensure that your original allocations are being met.  To be successful using an index portfolio doesn’t mean you just buy and hold forever.  Rebalancing your portfolio is extremely important because it prevents you from being too reliant on any one specific index to drive your portfolio.  The idea behind indexing is to diversify and eliminate risk.  Rebalancing on a regular basis will help you achieve that goal.

For New Years, we all like to make resolutions.  Most of us will pick something like getting in shape, or finding ourselves a significant other, or maybe getting a new job.  I tend to set goals around personal growth and learning.  I like to pick a subject that I’m weak at and plan on finding resources so that I can teach myself.  This blog is an avenue where I can express my findings and teach to other people.  Hopefully, you too can set a goal for self improvement, like continually reading my blog.

Don’t forget, the one year anniversary of my blog is coming up.  I’ll be doing a quick recap of 2013 and what to look for in the coming year.

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