iA Securities & HollisWealth* are now iA Private Wealth

We are excited to introduce our new company name, iA Private Wealth. The new name is designed to better reflect the essence of what our advisors do – provide holistic wealth management solutions tailored to the unique needs and goals of investors across Canada.

Please take a few moments to browse our newly redesigned and updated website to learn about the many benefits of working with an iA Private Wealth Investment Advisor.

*Refers solely to the Investment Industry Regulatory Organization of Canada licensed advisors within HollisWealth.

Insights

Our articles, videos and webcasts can help you expand your knowledge of wealth management and stay up to date on the markets and economy.
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Maximizing the Benefit of Philanthropic Giving

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By John Tabet, November 10, 2020

This is the second article in a two-part series on charitable giving. Read Part I here.

For high-net-worth and ultra-high-net-worth families, leaving a lasting legacy through philanthropy is very often a central priority that spans multiple generations.

Many of my own clients – and their millennial children – exhibit a very strong desire to use their wealth to support a wide range of worthy causes, from racial justice to anti-poverty to environmental sustainability.

They are often surprised to learn, however, that setting up a foundation and making cash donations is typically not the best approach to supporting their cherished causes. For most wealthy individuals and families, making in-kind donations of shares via a donor-advised fund is the most attractive option for philanthropic giving.

Why not a foundation?

Setting up and maintaining a charitable foundation is, from an administrative perspective, very much like creating and maintaining a business.

The legal and accounting work that goes into establishing a foundation will typically cost in the neighbourhood of $10,000. And while foundations do not pay tax, they are still required to file an annual return. That means yearly accounting expenses, which come on top of the ongoing administrative work of managing assets held within the foundation.

If foundations were the only option for carrying out a philanthropic plan, they would be well worth the effort and expense. But there’s a better way.

Donor-advised funds

A donor-advised fund is a third-party vehicle – offered by most community foundations and some asset management firms – that effectively outsources the functions that would normally be performed by a foundation, while achieving all of the same charitable goals.

Donor-advised funds offer tremendous flexibility and convenience, as they allow you to make a large donation in a given year, claim the donation tax credit for that year, but disburse the funds in later years to a variety of charities. With a donor-advised fund, you simply make the gift and provide instructions on how to disburse it, and the organization that runs the fund takes care of the rest.

The fee associated with this service is generally low – typically 1.0% to 1.5% for a $250,000 donor-advised fund. In some instances, the fee is based on the number of donation grants you request. In both cases, the fee is not tax deductible, but it does not reduce the amount your donation tax credit is based on.

In short, with a donor-advised fund, you’ll save time and money, and you’ll be able to focus your philanthropic efforts on the joy of giving, rather than on administration and accounting.

In-kind stock donations

One of the best ways to maximize the amount you give – and the tax benefit of giving – is to make in-kind donations of stock, rather than cash donations generated from realized gains. To illustrate, let’s look at a hypothetical example.

Geneviève is a 32 year old attorney living in Montreal. Five years ago, she used $500,000 in family funds gifted to her to purchase shares of Facebook.

The shares are now worth $1 million, but Geneviève just received a $5 million bequest on the passing of her grandmother. So she decides to use the full value of her Facebook shares to make a generous donation, via a donor-advised fund, to the children’s ward of her local hospital, and a local organization that supports women victimized by domestic abuse.

Here are her options:

Sell and donate the proceeds

The sale of the shares would generate $1 million in cash, and 50% of the $500,000 capital gain – $250,000 – would be subject to a tax rate equivalent to Geneviève’s highest marginal rate, which is about 50%.

This would result in a tax bill of about $125,000, leaving $875,000 to donate to her charities of choice. Her tax credit would then be calculated based on the donation amount of $875,000.

Donate the shares in-kind

Gifting the shares means Geneviève would not be subject to capital gains tax, as our tax code says that when you donate shares to charity in-kind, you don’t have to claim a capital gain.

This means the charity would receive a donation valued at $1 million rather than $875,000, and Geneviève would get a donation tax credit calculated on $1 million rather than $875,000.

Conclusion

With the right planning, you can maximize the benefit received by your charities of choice, and increase the tax benefits of your generosity. Working closely with an experienced and knowledgeable Investment Advisor ensures that each component of your philanthropic vision is planned and executed as efficiently as possible, aligning all aspects of your intergenerational wealth plan – investment management, philanthropy and estate planning – with the values that define who you are.

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Lower Your Tax Bill Through Charitable Giving

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By John Tabet, November 10, 2020

This is the first article in a two-part series on charitable giving. Read Part II here.

Over the last number of years, my interactions with clients have shown a clear and undeniable trend: today’s investor is moving away from the conventional separation of wealth creation and personal values, and more towards the complete integration of socially conscious priorities into the holistic wealth planning process.

On the investment side, this often takes the form of increased interest in socially responsible investment funds, which in recent years have gone from a market niche to a core offering for virtually all asset management firms.

But the most direct way of expressing a commitment to a cherished cause, apart from the gift of your time, is through monetary donations. In this article series, I’ll provide an overview of how you can incorporate charitable giving into an optimally structured wealth plan, and explain how to maximize the benefit of your monetary gifts – both for your charity of choice and yourself.

Different types of donations

There are three main ways to make monetary donations:

  1. Giving
    Simple, one-off acts of support, such as buying a raffle ticket at a charity golf tournament or supporting a church bake sale.
  2. Being charitable
    Personal engagement with a specific organization that aligns with your values, and making monthly or annual financial gifts to support it.
  3. Philanthropy
    The option of choice for high-net-worth and ultra-high-net-worth individuals and families. Typically, this involves looking out over a longer time horizon and entails a systematic approach to donating very large sums to one or more causes.

In this article we’ll focus on being charitable; in the next installment of the series we’ll take a closer look at philanthropy.

Being charitable

For most people in the wealth accumulation stage of their financial journey, charitable giving will involve annual donation amounts ranging from hundreds to thousands of dollars, spread out over multiple charities or focused on a single cause.

When you donate to a registered charity you become eligible for tax credits, making charitable giving a win-win for both you and your charity of choice. Let’s look at an example:


  • Andrea makes $100,000 a year as an app developer in Toronto.
  • She donates $1,000 in 2019 to a registered charity focused on environmental sustainability.
  • Current tax rules allow for a federal credit amounting to 15% on the first $200 of the donation and 29% on the remaining $800, for a total of $262.
  • On the provincial level, Andrea can claim 5.05% on the first $200 and 11.16% on the remaining $800, for a total of $99.38.
  • The combined federal and provincial tax credit on her $1,000 donation reduces her income tax bill by $361.38.

This example represents a fairly straightforward case, but our tax rules include a number of other provisions that can enhance your credit amount and add significant flexibility to how you claim your credits. These include:

  • An enhanced credit rate of 33% on eligible amounts over $200 for taxpayers who earn more than $200,000 annually.
  • The ability to carry forward donation credits to any of the five years subsequent to the year the donation was made.
  • The ability to transfer donation credits to your spouse or common-law partner and combine them on a single tax return.

Conclusion

Charitable giving is one of the best ways to meaningfully support causes that engage and inspire our natural impulse to help those less fortunate than we are and join with those dedicated to making our world a better place. Working with your Investment Advisor and accountant can make this immensely satisfying activity financially beneficial for you as well.

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Financial Literacy Month is Every Month

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By iA Private Wealth, November 9, 2020

November is Financial Literacy Month. You may hear about events and program launches designed to increase the financial capabilities of Canadians. But really, why focus just one month on enhancing financial literacy? Being able to manage your money is a skill everyone needs every day – whether you are young, old or in between.

Typically, people learn the most about money when a big life change happens. It’s usually those big events that turn into teachable moments as people are forced by the situation to learn about their options, choices and decisions to be made.

For those of us with young adult children – university students or those just starting out in their careers – the pandemic has been an incredible teachable moment when it comes to finances, with unexpected impacts to both sides of the balance sheet. Money in and money out. For example, students have had to move to online learning, which in most cases has resulted in modest savings. On the other hand, many have unexpectedly lost their jobs or had their income reduced. Others have moved home – or stayed home instead of going off to university or college. And, of course, many adults with young children have assumed the role of caretaker while working from home versus depending on daycare.

We believe financial literacy month should be every month, but why not take the opportunity this official “Financial Literacy Month” to discuss with your adult children some key financial lessons learned through this pandemic. There are surely many takeaways that will help them better prepare for future disruptions to their financial lives and potentially reduce financial anxiety going forward.

Here are three questions to discuss:

  1. Do you have a budget? Those that do have a budget have likely seen lots of changes. Income may have decreased. Or, working from home may have actually saved them money in a number of ways: daycare costs, transportation, eating out, clothing. Living through this experience of spending less should be a lesson to all Canadians about needs as opposed to wants and how to better control spending.
  2. Do you have an emergency fund or emergency savings? This pandemic has certainly hit home how important it is to have some money put away for a rainy day. Any savings your children have should be channeled into an emergency fund if they haven’t got one.
  3. Do you have the appropriate investments to help you meet your goals? Many people second guessed their risk tolerance levels when the markets crashed in March. Young people who are just starting to experience investing may shy away from the markets due to the volatility. But, as what typically happens in market crashes, there was a rebound. Young investors are in a great position now to take advantage of market growth over the long term.

Bottom line, now is a great time to talk to your children about money. Introduce them to your investment advisor who can walk them through the ins and outs of money management and investing. While money can’t buy happiness, being in control of your finances can certainly lead to less stress and less anxiety about money.

Learn more about how you and your family can get the most out of Financial Literacy Month by contacting one of our Investment Advisors today.

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How to Select an iA Private Wealth Investment Advisor

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By iA Private Wealth, May 10, 2020

Choosing an Investment Advisor is one of most important long-term financial decisions you will make – perhaps even the most important. We recommend that you take a systematic, deliberate approach using this four-step process:

Step 1: Self-assessment

The first step is to identify your needs and goals and assess your financial position. It’s important to be as thorough as possible and to document this process in as much detail as possible.

Step 2: Choose your level of involvement

iA Private Wealth offers two ways of receiving investment advice:

Option 1: Advisory account

An advisory account allows you to maintain control over investment decisions while receiving guidance from an Investment Advisor.

Learn more about advisory accounts

Your advisor will share investment recommendations that take into account your current financial situation, goals, investment knowledge, risk tolerance, and time horizon. You will have the opportunity to assess and approve – or revise – your advisor’s recommendations before taking action.

Responsibilities

This type of account allows for close collaboration with your advisor for investment selection. To make the most of this relationship, a clear understanding of mutual obligations is vital.

Your responsibilities

  • Clearly communicate your investment objectives, risk tolerance and time horizon
  • Validate investment decisions
  • Stay informed on the progress of your investments
  • Inform your Investment Advisor of any change in your personal or financial circumstances

Your Investment Advisor’s responsibilities

  • Know your investor profile
  • Maintain regular contact
  • Demonstrate a proper degree of prudence
  • Present investment recommendations that are suitable for your profile

Option 2: Managed account

Also known as a discretionary account, a managed account is right for you if you prefer to delegate all investment decisions. With a managed account, your investments are overseen by a Portfolio Manager, which is a special type of advisor with regulatory approval to exercise complete discretion when building and maintaining your investment portfolio.

Learn more about managed accounts

After providing your Portfolio Manager with a clear picture of your current financial situation, goals, investment knowledge, risk tolerance, and time horizon, you’ll agree to an investment policy statement (IPS) that’s built around your profile. Based on the guidelines in the IPS, your Portfolio Manager will make all investment decisions on an ongoing basis. If your financial situation changes, the IPS will be updated and your Portfolio Manager will make future investment decisions in line with the revised IPS.

Please note that there is a $250,000 minimum initial investment to qualify for our managed account offering.

Step 3: Interviews

After settling on a manageable list of candidates, contact them by phone or Zoom to get a sense of their background and experience. Some key questions to ask at this stage include:

  • How many years have you worked as an advisor?
  • What is your training?
  • What is your approach to planning and portfolio construction?
  • Which regulatory and professional organizations are you registered with?
  • How are you paid?

Step 4: Follow-up meeting

Following your initial interviews, you should be able to reduce your list to a few names. Request a 30-minute follow-up meeting with each advisor to learn additional details about what they have to offer and if they’re the right fit for your goals and needs.

After these meetings, it will be clear which advisor is best suited to becoming your long-term partner for financial success.

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When Can Pension Income Splitting Make Sense?

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By iA Private Wealth, March 06, 2020

Meet early retirees Clara and Charlie, both 63 years old. Charlie has a $3,200 monthly defined benefit pension through his employer and still does occasional consultation work. In total, he earns about $60,000 annually. Meanwhile, Clara’s work pension amounts to about $2,300 monthly, or $27,600 annually, putting her in a lower tax bracket than Charlie. Now that the couple is generating less income than they did when they were both working full time, they’re looking for ways to lower their tax burden to keep as much of their money as possible.

Thanks to Canada’s pension income-splitting rules, Clara and Charlie have the potential to reduce their overall income taxes by dividing up the money they receive from their respective pension plans. Based on their age and the eligibility requirements, Charlie can give up to half of his pension income to Clara for tax purposes. In short, because Charlie is in a higher tax bracket, he can split his income with Clara and drop into a lower tax bracket without bumping her into a higher one.

Once you understand the age and eligible income rules, taking advantage of pension splitting is as simple as completing a tax form each year. No money has to change hands.

What is pension splitting?

Pension splitting allows you to allocate up to 50% of your eligible pension income with your spouse or common-law partner for income tax purposes. To qualify, you and your spouse or partner must both be Canadian residents, be living together at the end of the tax year, and remain together for a period of 90 days or more at the beginning of the next tax year.

What qualifies as eligible pension income?

For those under age 65, the most common form of eligible income is from a registered company pension plan, whether defined benefit or defined contribution. Individuals who are age 55 or older are eligible to split pension income with their spouses.

Individuals without a registered pension plan can also take advantage of this tax strategy by converting their Registered Retirement Savings Plans (RRSPs) or deferred profit-sharing plans into income through a life annuity or a Registered Retirement Income Fund (RRIF). It’s important to note, however, that this income doesn’t qualify for splitting until after age 65.

In terms of government pension sources, the Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) isn’t considered eligible income, although CPP/QPP benefits can be split based on a separate set of “sharing” rules. Old Age Security (OAS) payments also aren’t eligible income.

The complete list of eligible pension income sources can be found on the Government of Canada website.

Who should take advantage of pension splitting?

In general, if one of the pension earners is in a higher marginal tax bracket than their spouse, then pension splitting is worth considering.

Take advantage of our retirement planning support

Other potential tax-management strategies related to pension income splitting include the pension tax credit for qualifying individuals. When it comes to planning for retirement, there’s a lot to think about, but we can help.

Learn more about how you can get the most out of your retirement income by contacting one of our Investment Advisors today.

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Cybersecurity Essentials to Better Protect Your Money and Your Identity

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By iA Private Wealth, March 03, 2020

The internet is an efficient way for you to stay connected with family and friends. On the flipside, like any public environment, you need to be aware and cautious. Just as locks on your doors can help you secure your home and belongings, there are steps you can take to safeguard your computer and personal information. Even the most tech-savvy among us can become the target of con artists. Recognizing the signs of online fraud is an important first line of defence – and, fortunately, there are a few simple tactics you can use to protect yourself.

Common internet scams

Phishing/spoofing is when someone tries to trick you, typically by email or text message, into revealing valuable personal information, like your Social Insurance Number (SIN). A typical scenario involves a scammer impersonating your bank in an email to get you to enter your personal or banking details into a fraudulent website to gain access to your money.

Forex and investment scams use false or fraudulent claims to solicit investments or loans. You might notice claims on social media (Facebook, Twitter), on websites or in your email promising outsized returns for trading in foreign currency and offshore investment “opportunities.” These scams typically ask for help moving money out of a country, with the offer to share the proceeds.

Malware/scareware/ransomware is malicious software designed to damage or disable computer systems. In the case of ransomware, the cybercriminal will block your access to your computer until you pay a ransom, typically in virtual currency such as bitcoin (which will make their crime less traceable).

Cybersecurity best practices

Critical steps to protecting your digital life include:

  • Using passwords and a password manager. A good password manager will generate and save strong passwords, then autofill them on the associated website or login screen as needed. No more memorizing or keeping unsafe paper records.
  • Using security software. Install anti-virus software and anti-spyware on your devices from a reliable source and keep it updated. Steer clear of apparent security updates from pop-up ads or emails – they may be malware that could infect your computer. Using a firewall is another step you can take to fend off hackers who might try to crash your computer or delete or steal sensitive information.
  • Having the latest operating system. Be sure your computer operating system reflects the most recent update, which can include patches to fix newly identified security holes.
  • Being watchful with downloads. Carelessly downloading attachments from your email can circumvent even the most vigilant anti-virus software. Never open email attachments from people you don’t know and be wary of any unexpected attachments forwarded to you from those who you do know, but who may be unwittingly spreading malicious code because their accounts were hacked.

Turning off your computer. Shutting down your computer severs an attacker’s connection, be it spyware or a botnet, which is a string of connected computers that may be using your computer’s resources to find other unwitting victims.

When online, embrace your inner skeptic

While there’s no foolproof method for staying safe online, you can take meaningful steps to avoid and deter criminal encounters. A healthy dose of skepticism is useful here. Take what you see online with a grain of salt, question claims that seem too good to be true and keep important details about yourself private. All these actions can go a long way in ensuring you’re as safe on your computer as you are in real life – or IRL, for the tech-savvy.

How we can help

Preserving your assets is key to any wealth management strategy. Securing your online presence and working with one of our skilled Investment Advisors can help you position your portfolio for success and achieve greater financial well-being.

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Is a TFSA for You?

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By iA Private Wealth, February 18, 2020

Do you know the difference between a Tax-Free Savings Account (TFSA) and a Registered Retirement Savings Plan (RRSP)? Don’t be embarrassed if you don’t know the answer. More than a quarter of Canadians (27%) are unable to explain the difference between the two accounts1.

While RRSPs and TFSAs share similarities, it’s important to understand how these accounts work and when to use one over another.

Turbocharge your savings

As the name implies, an RRSP is typically reserved for retirement savings (click here for more details). If you are looking for a way to grow your savings tax-free, but would like more flexibility to access your money, consider a TFSA.

Like an RRSP, a TFSA allows you to invest in a wide variety of products, including stocks, bonds, mutual funds, exchange-traded funds and GICs. The right mix of investments will depend on your goals. A TFSA can be a great way to save for shorter-term goals, such as a home reno, a new car or building your “rainy day” fund. Before deciding on which investments to hold in a TFSA, consider your time horizon and savings goal, among other factors.

Saving for retirement

If you’re in your peak earning years, an RRSP may be a better long-term retirement vehicle compared to a TFSA. You can deduct RRSP contributions from your income to lower your tax bill, something you can’t do with a TFSA. An RRSP also helps you save by deferring taxes into the future to when you’re retired, at which point you’ll likely be in a lower tax bracket.

Although RRSPs offer a good way to save for retirement, TFSAs can play a role, too. A TFSA can provide a tax-free way to supplement your income in retirement, which can be useful if you’ve reached your RRSP contribution limit or have a reliable defined benefit pension plan through your employer.

Key features of TFSAs

  • Can be used to fund any goal.
  • For the 2020 tax year, the contribution limit is $6,000; the total cumulative contribution room is $69,500 for those who have never contributed and have been eligible for the TFSA since its introduction in 2009.
  • Contributions are not tax-deductible.
  • Investments benefit from tax-free growth, with no tax on withdrawals.

This year, resolve to save

TFSAs and RRSPs are both attractive for savers and offer significant benefits in helping you reach your financial goals. If you’re still unsure about the best approach for your situation and want to learn more about how to optimize your savings strategy in 2020, contact one of our Investment Advisors today.

1https://www.bnnbloomberg.ca/1-in-4-canadians-don-t-know-the-difference-between-a-tfsa-and-an-rrsp-survey-1.1380298

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How RRSPs Turbocharge Your Retirement Savings

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By iA Private Wealth, February 12, 2020

To get the most out of your RRSP, it’s important to understand how it works. An RRSP on its own doesn’t constitute a retirement plan. Think of an RRSP as a special type of savings account that offers tax advantages to help you save for retirement.

Any money you put into an RRSP reduces your taxable income for that year. This is why many Canadians who contribute to their RRSP look forward to receiving a tax refund in the spring. The tax you would have paid on that income gets deferred until you retire. RRSPs are particularly useful when you’re in your peak earning years and anticipate being in a higher tax bracket today than when you’re retired and no longer working.

While you may see the immediate refund on your tax bill, that’s not the only tax benefit an RRSP offers. Your RRSP also provides a tax-free way to grow your savings until you need to withdraw the money and convert it to a Registered Retirement Income Fund (RRIF) by age 71. As mentioned earlier, your RRSP is simply an account; it’s how you decide to invest within that account that matters. RRSPs can hold a variety of investment vehicles, including stocks, bonds, mutual funds, exchange-traded funds and GICs. How you invest will depend on your goals and risk tolerance. Any investments you hold in your RRSP can grow and take advantage of the potential for tax-free compounding.

Maintaining a well-diversified portfolio can help you mitigate risk and volatility, and ultimately help you achieve your retirement goals. The mix of investments that make the most sense for you will depend on a variety of factors, such as your ability to save, your risk tolerance and your goals. Depending on those factors, two people of similar ages and incomes could have very different portfolios. An Investment Advisor can help you decide on the right asset mix and develop strategies to help you save for retirement and your other goals.

Key features of RRSPs

  • Generally used for retirement savings.
  • Annual contribution limit of 18% of your previous year’s income to a maximum of $26,500 for the 2019 tax year, minus applicable pension adjustments, plus any unused contribution room from previous years.
  • Contributions are deductible from income.
  • Investments grow tax-deferred (tax is paid when the funds are withdrawn).

RRSPs work well when they’re used for their intended purpose – retirement. With a few notable exceptions, making early withdrawals from your RRSP can result in a hefty tax bill. If you need to save for shorter-term priorities like a kitchen renovation or a new car, consider alternative savings vehicles that don’t impact your retirement nest egg, such as a Tax-Free Savings Account (TFSA).

Typically, one in four Canadians contributes to their RRSP each year, making a median contribution of $3,030.1 Even small amounts can help. Setting up a regular contribution and investment plan will take the stress off the tax deadline and set you on the path to a comfortable retirement. To find out how you can optimize your retirement savings strategy, speak with one of our Investment Advisors today.

1https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1110004401

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The Holiday Debt Hangover Cure That Can Put You on Track to Meet Your Goals

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By iA Private Wealth, January 29, 2020

January is a great time to examine your finances and set new targets for the year, but making progress on your goals can be challenging if you have to deal with a holiday debt hangover. In 2019, the average Canadian was projected to spend approximately $1,600 on the holidays, up about 2% over 20181, and increasingly they’re charging it on plastic. Now that the holidays are over and the credit card bills are arriving, here are three steps to help you to take control of your debts and start the new year off on the right foot.

1. Own what you owe

Fixing any problem begins with understanding it. People can be so afraid of their debt that they refuse to open their bills. But late or ignored debt payments only make matters worse and can have a long-term impact on your credit rating if left unchecked. Take the first step and gain clarity by assessing the damage to know exactly how much you owe and to whom. Then set up a schedule for paying back the debt. Try to repay significantly more than the prescribed minimum so that you chip away at the principal.

2. Put your spending into hibernation

Now is the time to give your cards and yourself a rest – don’t add to the debt. Reduce your entertainment costs, avoid eating out and trim any extras on your internet, telephone and/or cable bill. Use a debit card or cash to pay for necessities like food. And take steps to avoid spending temptations. That may mean going for a walk outside instead of through the mall or keeping your credit card at home. A lot of our life is now online, so you may also want to take a digital hiatus to control any shopping from your couch.

3. Focus on goals, not resolutions

Resolutions tend to be all or nothing affairs. They usually fail because we often don’t map the necessary steps to achieve the goal we’re striving for. To successfully achieve your goals, you have to have a clear intent, a concrete plan and a willingness to take action. Start by building a budget and a timeline for each goal. For debt, set a reasonable deadline for paying it off. Remember that over time, putting aside even small amounts in regular increments can grow to substantial savings. Just think – if you can save $50 a month for a year, you’ll have $600 to spend during the next holiday season.

You owe it to yourself

Being prepared and having a plan to bring your aspirations to fruition is one of the best ways to make a positive and meaningful change in your life. For help fine-tuning your 2020 wealth plan to get results and move closer to realizing your goals, contact one of our Investment Advisors today.

1 https://www.pwc.com/ca/en/industries/retail-consumer/2019-holiday-outlook-canadian-insights.html