The Year End Approacheth
Hello All,
It is hard to believe that we are approaching the end of this year(I was just getting used to writing 2022). It is the time of year (between holiday preparations, Christmas shopping and trying not to overeat) that we tend to take stock of where we are, what we have done over the past year and what we want to do in the new year.
For many it’s been a challenging year. Covid seems to be in the past as routines and processes are mostly back to normal. The effects however continue to be felt and will likely have an impact for years to come. This includes inflation and rising interest rates, working from home and mental health fallout.
Many of you have seen permanent change in your own (or your employer’s) businesses. A client, who runs a coworking space, was never able to reclaim their membership and is being forced to shut down. Another client landed a huge account from a customer who was able to seize a post Covid business opportunity. Several clients have been reexamining their business models and have made some shifts that are more aligned with their values, desires and the change they want to make in the world.
From a personal finance standpoint, Canadians savings rates in 2020 and 2021 were notably higher than in previous years as can be seen in this chart (this also holds true for many of the countries that the OECD tracks). This was a combination of Covid subsidies received and reduced spending (given that most of us were pretty much stuck at home). To counterbalance our extra savings, inflation has been at levels not seen since the 1980s. Stock markets have suffered significant losses and the US dollar has strengthened against virtually every currency. Interest rate increases have led to a reduction in housing prices and higher mortgage payments while also resulting in increase in rates for savings accounts and GICs (fixed investments).
Many of my newsletters focus on what we should do to keep our financial health, as it relates to both our businesses and personal finances, in order. As we approach the end of the year and I recap (i.e. repeat) the past year, I believe it is essential that you have systems in place so that you know your approximate financial health. Note that the system has to make sense to you and customized to way that you process information. Each of us does this differently - for some it is enough to do some rough calculations of the balances in their accounts and how much they owe. For others, having a spreadsheet or a budgeting app can be very useful to ensure that we don’t overlook anything. At a big picture level you should be tracking your revenues (or salary), business expenses, taxes payable, credit card debt, mortgage and loan payments and investment performance. You should also know your RRSPs and TFSAs contribution room and have a plan as to when and how you want to contribute.
Understanding your finances and making small changes (such as minor monthly contributions to a savings account or paying bills on time to avoid late payment penalties) can make a massive difference in your financial situation in the long run. This will get you closer to a more financial secure (and pleasant) future that allows you the freedom and flexibility to do what you would like to be doing.
Blog Post
A couple of (older) blog posts dealing with year end tax and personal finance tips:
9 Year End Tax Planning Tips for Small Business Owners
For numerous people around the world, the end of this year cannot come soon enough. It has been an unprecedented few months, the effects of which will be felt for many years to come. And while it has
Adopt These 9 Money Habits to Increase Your Net Worth
The approach of a new year tends to inspire the best intentions. We indulge over the holidays while resolving to be better, healthier, more financially disciplined etc as soon as the year is over.
