When is it time to change your financial goals?

Mohita Jaidka

KEY TAKEAWAYS

✔ A budget can help you reach your financial goals.

✔ Review your financial goals at least once a year.

✔ Make adjustments to your budget and financial goals as your situation changes.

Creating and sticking with a budget is one of your safest bets for finding your path to financial wellness. But between life’s milestones, growth moments, and unexpected setbacks—not to mention how our habits and income may have shifted during the Covid-19 pandemic—there are plenty of reasons to adjust your course from time to time. The key is to know when, how, and how much to tweak your goals, so that you stay on the right track on your financial journey.

Here are some simple questions you can ask yourself today to make sure your budget, spending, and goals are still aligned as you save for the future.

Do you have a budget?

No matter your age or financial situation, creating a monthly budget can be an important first step towards improving your financial health. A basic household budget, listing your actual or estimated income and expenses for a typical month, gives you a good overview of your monthly cash flow, and it gives you a clear picture of how much is available for non-essential spending (i.e., the “wants” in your budget).

Creating and sticking with a budget can also help you spend less and save more. Playing around with the numbers in your budget should give you a good sense of where you can maybe trim your spending and find potential savings.

Once you’ve created a budget, remember to keep it updated so that it continues to reflect your current income and spending habits. If you get a raise or promotion, for example, you can change the income amount on your budget, and make plans for that extra money that will serve your short- and long-term financial goals. And when new expenses such as daycare or a higher car payment arise, you’ll need to adjust your budget to cover these higher costs without going into debt.

How do your budget and spending reflect your financial goals?

Your financial and savings goals should guide your everyday spending and your budget goals. Whether you’re hoping to become debt-free this year or you’re saving up for a future wedding, having a clear budget and savings plan in place could help you reach those goals more quickly.

It’s important to review these goals—and your overall financial plan—at least once a year, to make sure that you remain on the right path and are making good progress towards them (tools like a savings calculator can help).

This review also lets you make necessary adjustments to things like how much you’re saving, where you might be investing, or how quickly you’re paying off your debts. For example, if you’re saving up for a condo down payment, you could put extra money into your RRSPs. Those contributions can be tax-deductible, and you can later use up to $35,000 penalty-free for a down payment with the Home Buyers’ Plan program.

Has Covid-19 impacted your financial picture?

Even before the Covid-19 pandemic, 50 percent of Canadians were living “paycheque to paycheque,” leaving little room for long-term savings or an emergency fund. If you’re one of the many Canadians who lost work or faced big life changes during Covid, consider making an emergency budget to temporarily help you prioritize expenses. You could also look into government supports, and you could explore creative ways to increase your income.

Longer term, you’ll want to rethink your financial goals, make a new budget (which may involve debt repayment and credit score repair), and replenish your rainy-day fund and savings as much as possible. Financial emergencies are never easy, but having a plan in place to deal with them can help prevent or minimize the impact of unexpected setbacks, and it will keep you on your path to financial wellness.