2024 brings new opportunities and challenges, and being financially savvy is more important than ever. I dive into essential financial tips that I practice regularly to empower my real estate investment journey and personal finances. Join me, as I break down these top 10 tips with practical advice and examples.
Whether you’re a real estate investor, a business owner, or simply looking to improve your personal finances, these top 10 financial tips will guide you toward a prosperous year.
1. Budgeting and Cash Flow Forecasting
Personal and Family Budgets
Start small by reviewing the last three months of your bank statements. Sum up your fixed and variable expenses – from mortgage payments and utilities to entertainment and travel budgets. Subtract these expenses from your income to see if you’re overspending.
Analyze your business finances through budgeting. Multi-year forecasts can be particularly revealing, highlighting potential future financial shortfalls and guiding cost-cutting strategies.
Rental Portfolio Budget
Evaluate each property individually. Assess cash flow and consider how changes in interest rates might affect your finances in the coming year. If you’re expecting negative cash flow, a budget will quantify this, aiding in decision-making.
2. Re-evaluate and Reset
Once you’ve established your budget, reassess your situation. For real estate investors, consider selling or refinancing properties in light of interest rate hikes. Business owners might need to cut costs or initiate new marketing strategies. On a personal level, reducing non-essential expenses or starting a side hustle could be beneficial.
3. Finding a Side Hustle
Adding a side hustle can significantly boost your income. Options range from renting out your basement to working as an Uber driver, bookkeeper, or social media manager. Remember to set aside a portion of this income for taxes, especially if you exceed $30,000 in earnings.
If you’re not facing negative cash flow, allocate a portion of your income to savings. Automatic transfers to a savings account are an effortless way to start. Even if it’s just 5% of your salary, the compound effect over time will be substantial.
5. Investing in Cash Flowing Assets
You don’t need a large sum to start investing. Begin with high-interest savings accounts and consider high-dividend stocks. Reinvest your earnings to grow your portfolio.
6. Understanding the Tax System
Knowledge of the tax system can save you thousands. Personal taxes in Canada are progressive, while corporate tax is a flat rate. Familiarize yourself with government programs like the First Time Home Saving Account and TFSA accounts.
7. Tracking Deductions
If you have investments, a side hustle, or rental properties, educate yourself about potential deductions. Keep receipts and documentations to maximize these deductions.
8. Setting Up Corporations
For small business owners or side hustlers, setting up a corporation can lead to significant tax savings. If you have accumulated retained earnings, consider multiple corporations for tax and legal liability protection.
9. Paying Your Spouse and Kids
Income splitting with your spouse and kids can reduce your tax burden. However, it’s important to understand the rules and document everything correctly to avoid issues with the CRA.
10. Maximizing Your Benefits
Stay informed about available government benefits, such as grocery rebates, childcare deductions, and homebuyer tax credits. These can provide substantial financial relief.
As we embark on 2024, let’s embrace these financial tips to achieve success. Regularly compare your actual expenses to your budget. This practice helps you stay on track and make necessary adjustments. Whether it’s through better budgeting, savvy investing, or understanding the nuances of tax systems, every step you take is a stride toward financial freedom.
Happy 2024 and hope you will achieve a year of financial success!
Until next time,
Cherry Chan, CPA, CA
Your Real Estate Tax Accountant