There are many parallels one can make between our daily habits and our financial decisions. Here are five financial resolutions Tradex recommends you consider for 2023:
1. “January Sales”
Take advantage of opportunities in equity and fixed income markets The US equity market has fallen into a bear market with a decline of over 20% in 2022. Given the surge in inflation and interest rate increases, many investments have posted negative returns. This year, take advantage of these declines, and buy assets that are on sale to benefit you in the long run.
Optimize your portfolio When it comes to your portfolio and investing practices, more isn’t always better. Many investors think they are diversifying their portfolios because they have holdings with ten different financial institutions. However, there is often a lot of overlap in their investments.
Streamlining helps investors get a handle on what assets they have and what they’re paying to own them. It can help eliminate redundancies and find cost-saving opportunities. An important step in building an optimal low-cost, diversified portfolio. Investors cleaning up a cluttered portfolio should be careful not to take it too far. Putting too much money into one investment or asset class in the name of simplification is never a good idea.
3. “Unconscious Snacking”
Small spending changes can also make a big difference. According to a recent report¹, half (51%) of Canadians are concerned about their current financial situation, but the majority have not changed their unconscious spending habits compared to six months ago. This includes the following examples:
- Charging monthly subscriptions to credit cards (64%)
- Using credit card to make payments (59%)
- Purchasing additional items to get a “perk”, like free shipping (54%)
- Picking up additional items at in-store or online checkouts (53%)
The report revealed that many Canadians (69%) who work with a Certified Financial Planner professional or Qualified Associate Financial Planner™ professional felt much better about their overall financial picture compared to those who use no financial planning assistance at all (38%). Financial planning has long-term benefits.
4. “Stop Your Bad Habits”
Avoid getting involved in trendy activities like so-called meme stocks Meme stocks emerged in 2020 during the COVID-19 pandemic; they refer to the shares of a company that have garnered viral popularity due to heightened social sentiment. This social sentiment is usually intensified by online and social media platforms like Reddit, Twitter, and Facebook. A stock becomes the subject of discussion online among individuals with their own investment
views and preferences. As word on the stock spreads, more and more investors jump on the bandwagon, and the share price spikes. Often, meme stocks can become apparently overvalued before the stocks eventually collapse. The meme stock phenomenon has added confusion to a market that is already dealing with rising interest rates, drastic losses, and the pending stresses of a possible recession. Investors can lose a lot of money in this unhealthy style of trading.
5. “Schedule an Annual Physical”
Do not hesitate to schedule a financial and portfolio review It might be time for an annual checkup with your financial advisor to complete a thorough review of your investments and your budget. This may also include a review of related financial matters, e.g., retirement plans, insurance policies, and taxes.
Moreover, just as a doctor may give you a protective flu shot, an advisor can help ‘’immunize’’ your portfolio against excessive volatility or tax-inefficient investment allocation.
6. “Chart Your Course”
Spend as much time on your planning your financial journey as you would on your summer vacation. As the saying goes: “You can’t get what you want, until you know what you want.” Once you establish your short-, medium-, and long-term financial goals, you can map out a course of action to get there. Goals reflect your personal priorities, whether they include home ownership, providing post-secondary education for your children or grandchildren, enjoying a comfortable retirement, or aspiring to live debt-free. Maybe all the above!
The good financial habits you resolve to implement now will serve you well this year and beyond.
 Financial Planning Association of Canada