No one is a perfect investor. Even the amazing Warren Buffet has made mistakes over time, surely. You will make your own too, but in an effort to help, allow us to share common mistakes to avoid.

Mistake #1: Not investing at all, or always putting off investing until later. There will always be something else to do with your money. You need to make investing a priority. Make your money work for you – even if all you can spare is $20 a week! Gail Vaz Oxlade makes this point well in her recent book Never Too Late: the earlier you start the better, so just start now!

Mistake #2: Having just told you not to put it off forever, investing before you are in the financial position to do so is another big mistake. Get your financial situation in order first: pay off high interest loans and credit cards, and create an emergency fund (most experts suggest at least three months of living expenses in savings). Once this is done, you are ready to start investing for larger goals.

Mistake #3: Don’t expect to get rich quick. Get rich quick schemes are among the riskiest styles of investing, and you will more than likely lose. Be sure to give yourself plenty of time to reach your financial goals, invest for the long term, and have the patience to allow your money to grow. If you want to gamble with high risk investments, make sure you are playing with money you can afford to lose.

Mistake #4: Don’t put all of your eggs into one basket. This really can’t be said enough. Diversify. Invest in various types of investments and industries for the best returns, and to protect your portfolio from volatility in one sector, or problems with one particular company.

Mistake #5: Don’t move your money around too much. The commission and transfer fees will eat away at any gains you make. Pick your investments carefully, invest your money, and allow it to grow – don’t panic if the stock drops a few dollars. Do your research and/or work with an adviser to determine the best time to sell to lock in your earnings or reduce possible losses.

Mistake #6: Hoping your investment in collectibles will really pay off. Honestly, if this were true, we’d all have a curio cabinet filled with china roses or Precious Moments. Collect because you want to. Don’t count on your Coke collection or your book collection to pay for your retirement years.

Have you made investing mistakes that taught you important lessons? Please share with our other readers.

Every investor has a risk tolerance that should not be ignored. A good financial adviser knows this, and will work with you to determine what your risk tolerance is and then to find investments that match your risk tolerance.

Figuring out your risk tolerance involves looking at several different factors. You need to know how much money you have to invest, what your investment and financial goals are, and how much time you have to reach them. Then you need to consider your personal characteristics: are you an adventurous and impulsive person who enjoys surprises; a methodical list maker, who plans and schedules all events months or weeks in advance; or somewhere between the two?

Conventional investing wisdom says that the more time you have to reach a goal, the more risk you can take. A young person planning for a retirement that is 50 years away can afford to take risks with their investments, because they have time to recover from potential losses. An older individual or someone planning for a short-term goal does not have the luxury of time, and so must be more careful.

This wisdom is based on a rational look at the markets and choices available, and does not take into account an investor’s personality, or feelings about money, which are also a huge part of their risk tolerance. How would that investor react if their portfolio was invested in stocks, and they had to watch the markets drop daily, for a week, month or much longer? Would they insist on selling, or sit back and let the money ride? This often has little to do with a person’s financial goals or investment choices – it comes down to how they feel about money.

For example, imagine two people planning to retire in ten years, who have no savings and no pension plan. An investor with a low to moderate risk tolerance will likely plan to put aside as much as possible every month, and invest it in a safe, low risk investment. There is no room in their plan for any investment losses. A person with a high risk tolerance might look at this situation differently, and put all their available money into a high risk investment, believing potential high returns are the only way to reach their retirement goals.

Neither approach is right. Neither is wrong. The low risk investor might not earn much income from their investments, but knows that whatever he is  able to save will be available for him in retirement. The high-risk investor wants to earn more and increase the amount of money available to her at retirement, but in doing so risks losing some or all of her savings. No one knows which investor will be better off, until the ten years are up.

Again, a good financial adviser will help you determine the level of risk that you are comfortable with, and help you choose your investments accordingly. Your risk tolerance should be based on a compromise between what your financial goals are and how you feel about the possibility of losing your money. The two cannot be separated.

For more guidance, our friends at InvestRight.org (the BC Securities Commission) have created a risk test. Try it! www.investright.org/risk_test

Naturally, if you have a low tolerance for risk, your investment style will most likely be conservative or moderate at best. If you have a high tolerance for risk, you will most likely be a moderate or aggressive investor. At the same time, your financial goals will also determine what style of investing you use. (More about finding your risk tolerance in an upcoming post).

Conservative investors want to hold on to their initial investment. If they invest $5000, they want to be sure to get at least that $5000 back. This type of investor usually invests in common stocks and bonds and short term money market accounts. High interest savings accounts are also common for conservative investors.

A moderate investor usually invests much like a conservative investor, but will place some of their savings into higher risk investments. Many moderate investors invest 50% of their money in conservative investments to ensure at least some money is safe, and then invest the rest in riskier investments to try to earn higher returns.

An aggressive investor is willing to take risks that other investors won’t take. They place higher amounts of money in riskier investment in the hopes of earning higher returns. Aggressive investors often have all or most of their investment funds tied up in the stock market, and may also be invested in various alternative investments.

Again, determining what style of investing you will use will depend upon your financial goals and your risk tolerance. No matter what your style of investing, you should always carefully research each investment choice. Never invest without having all available facts.

1. A person who lives within her means and saves, but still looks good, eats well and lives fabulous.

When I heard Harlequin was publishing a personal finance book a few months ago, I just had to buy it. I have been looking forward to this read for a while, and while it has just been too busy in the office for any fun reading, I was able to take advantage of some sick-leave last week and read on the comfort of my living room couch.

The Frugalista Files is Natalie’s story of digging her way out of debt and reinventing herself in the process. In 2008, at the age of 31, Natalie was in a go-nowhere job and more than $20,000 in debt. Rather than panic (well, she may have panicked a little at first) she came up with an ambitious and realistic plan to cut spending, increase her income, and pay off her debt.

Written in a diary format, the book follows Natalie through the year: from her “no-spend-month” in February, her frugal Memorial Day weekend plans, right through to limiting her Christmas spending to $140.

I loved that this book was so realistic. It’s not a crazy, “I could never do that” story about someone doubling their income, and paying off mounds of debt in less than a year. It’s a practical story of someone just like the rest of us, who makes a plan, sticks to it, and eventually gets where she wants to be. It was inspiring. She freelanced on the side for an extra $200 here, or $40 there – which all added up to thousands off her credit card debt. She cut shopping dramatically, and made smarter purchases when she needed to. She took a risk and took a buyout from her job at the Miami Herald to become a self-employed journalist and blogger. It worked. It wasn’t instant success – but it worked.

Written as a diary in a casual format, it is not a literary masterpiece, and there were a few too many smiley faces and LOLs for my taste. But that is my taste. On the other hand, it was an enjoyable read. My favourite scene was the trip to the emergency room, when her stress over layoffs at work made her ill:

“Have you been stressed?” Dr. Sexy asked.

“Yes,” I whimpered. “We had layoffs at work. But I wasn’t laid off.”

“I’m sure you’ve had to do more work, because productivity usually goes up when people are laid off,” Dr. Sexy said.

Oh my God! He’s kind and understanding, too. What will we name our children?

Yes, there is a bit of the Harlequin in there. Definitely a fun read, and inspiring. Keep in mind that this is not a “how-to” guide, nor does it hold the “secret” to paying off your bills forever – well, unless that secret is hard work and determination. She certainly had that.

Read more about the fugalista lifestyle at www.thefrugalista.com.

To celebrate romance this Valentine’s Day, we’d like to share tips on how to talk about money with your loved one, and to help you balance the romance with the reality.

1. 1. Have the money conversation early and have it often. (My husband and I started having monthly “finance” meetings a few years back. It works wonders, and doesn’t leave unanswered questions to fester into misunderstandings and arguments.) Communication is key to any relationship and especially so when it comes to money. Be up front about your good and bad financial habits and your current situation. Don’t wait for a crisis – when someone has maxed out a credit card it is too late for an objective, unemotional discussion.
2. 2. Married or living together? Stick to a household budget. As unromantic as it may seem, this can save endless arguments. Often it is one partner who is blamed for being the spender, but sometimes when you look closer you will see that you spend equally, only on different things. Set a basic household budget and discuss how much you’re going to spend on groceries and necessities together. Then discuss how and when to pay for larger, one-time purchases like a new television, or an upcoming vacation.

Also, beware of springing an expensive surprise purchase on your partner, romantic or not. If you are sharing finances – they have to pay for it too! Don’t be afraid to institute spending limits on birthday, Christmas or Valentine’s Day gifts.

3. 3. Make a plan. Work together to develop some shared financial goals. Working with a qualified and registered financial adviser can help you stay on track, but make sure you do your research and make decisions together.
4. 4. Work as a team. Investing your money can help you reach your future goals, but it takes research and practice. It’s a learning curve you’ll need to take together, so celebrate your successes and work together through the challenges.

For more tips on managing your money as a couple, check out The Smart Cookies’ Guide to Couples and Money, Smart Couples Finish Rich, Canadian Edition by David Bach, or Rich by Forty: A Young Couple’s Guide to Building Net Worth by Leslie Scorgie.

A CEDIF, or Community Economic Development Investment Fund, is an investment fund designed to encourage investment in Nova Scotia by Nova Scotians.

Investing in CEDIFs may qualify the investor for a 35 per cent provincial non-refundable income tax credit, making them an attractive investment for many Nova Scotians. Along with this possible tax benefit, there is also the satisfaction of investing in and supporting local communities. CEDIFs are also eligible investments for Self-directed RRSP accounts, which comes with an additional tax benefit.

On the other hand CEDIF’s are very speculative, high risk investments with very little liquidity and no available market value. Investors have no right to demand that the CEDIF or anyone else buy their shares back from them or to buy them at any particular price. So when investors want their money back they must rely primarily upon the willingness and ability of the CEDIF to buy their shares at a price which will be set by the CEDIF.

For those of you considering a CEDIF investment, we have attempted to briefly describe what they are, and how they work.

Sales of shares in CEDIF’s are exempt from the requirements to file a prospectus with the Nova Scotia Securities Commission, and for sellers of CEDIFs are not required to be registered with the NSSC.

CEDIFs must file an Offering Document with the Commission, and after staff signify in writing that they do not object to the CEDIF selling shares, they can and must give a copy of the Offering Document to each potential purchaser.  The Offering Document will disclose to readers useful and important information about the offering of shares. For example the Offering Document will disclose among other things:

1. 1. How much each share will cost and the minimum amount an individual must invest and any commissions being paid.
2. 2. Who can sell shares.
3. 3. What the CEDIF will do with the money raised, what the risks are or what happens if the CEDIF does not raise the required minimum amount.
4. 4. The history and track record for the CEDIF.
5. 5. The people working on the CEDIF as promoters, officers and directors and the potential conflicts of interest between promoters, officers and directors and the CEDIF.
6. 6. The restrictions on reselling the shares.
7. 7. The most recent financial statements for the CEDIF.

At the same time as Staff of the NSSC are checking the CEDIF for compliance with the Securities Legislation, the Nova Scotia Department of Finance is checking for compliance with the Equity Tax Credit Act.   If the Department of Finance is satisfied, they will issue an Equity Tax Credit Certificate to the CEDIF. After the sale of shares is completed the CEDIF will provide the Department of Finance with information on the purchasers and the Department will send Equity Tax Credit receipts to investors for 35 per cent of the amount they invested.

These amounts are non-refundable income tax credits against provincial income taxes payable and are entered on form NS 428 of the income tax return. If an investor sells their shares before a five year hold period expires they must repay the tax credit. The Canada Revenue Agency recovers this money on behalf of the Province.

CEDIF shares can be held in Self Directed Registered Retirement Savings Plans (RRSPs) , though the annual fees involved in self directed RRSPs makes small investments uneconomical.

This is not intended to be a full description of CEDIF’s or the implications and risks of investing in CEDIFs. Potential investors are advised to consult with their financial advisor prior to investing.

For further information on CEDIF’s please see:

http://www.gov.ns.ca/nssc/corporatefinance/cedif.htm

http://www.gov.ns.ca/econ/cedif/ http://www.gov.ns.ca/finance/en/home/taxation/personalincometax/equitytaxcredit/default.aspx

The TFSA complements existing registered savings plans like the Registered Retirement Savings Plans (RRSP) and the Registered Education Savings Plans (RESP).

Canadian residents age 18 or older can contribute up to $5,000 annually to a TFSA. Any income earned within a TFSA is tax-free. Money withdrawn from a TFSA is also tax-free. Unused TFSA contribution room is carried forward and accumulates in future years. So if you only contributed $1000 in 2010, the other $4000 allowance carries forward, and in 2011 you can contribute up to $9000.

How does a TFSA compare to an RRSP?

Unlike an RRSP, if you withdraw money from your TFSA, you can contribute that amount again in future years. Re-contributing in the same year may result in an over-contribution amount which would be subject to a penalty tax. For example – you withdraw $3000 in May to cover a small renovation project. Re-contributing $3000 in November could trigger a penalty tax* but if you wait until January, you are fine.

Like RRSPs, TFSAs are a type of account, in which you can buy a range of investment products such as mutual funds, Guaranteed Investment Certificates (GICs) and bonds.

Unlike RRSPs, contributions to your TFSA are not tax-deductible.

Withdrawals from your TFSA are not considered income. Thus, unlike RRSPs, neither income earned within a TFSA nor withdrawals from it affect eligibility for federal income-tested benefits and credits, such as Old Age Security, the Guaranteed Income Supplement, and the Canada Child Tax Benefit.

You can’t specifically open a spousal-TFSA as you can with an RRSP, but funds can be given to a spouse or common-law partner for them to invest in their TFSA. TFSA assets can generally be transferred to a spouse or common-law partner upon death.

*Whether or not you actually pay a penalty tax will depend on your available contribution room. If you find yourself in this situation, speak to a financial adviser before making your contribution.

RRSP stands for Registered Retirement Savings Plan. An RRSP is a type of account for holding savings and investment assets.

This is an important point. An RRSP is an account, not an investment. Every year, many times a year, I hear people talk about “buying RRSPs” or “investing in RRSPs.” Think of bank accounts. You may open a savings account, a chequing account, a high-interest account, or etc. These are all types of accounts you put money into, for different purposes. An RRSP is a type of investment account. The account is registered with the Canada Revenue Agency, and is primarily designed for retirement savings.

Within your RRSP account, you may hold any of the following types of investments: cash, guaranteed investment certificates (GICs), bonds, mortgage loans, mutual funds, income trusts, corporate shares (stocks), foreign currency and labour-sponsored funds. This may vary depending on where you have opened your RRSP and the kind of investments the institution sells. You may open your registered retirement savings plan through a financial institution such as a bank, credit union, trust or insurance company. Your financial institution will advise you on the types of RRSPs available, and the investments they can contain.

There are a variety of RRSP rules which determine the amount you are able to  contribute each year, the timing of contributions, how to claim your contribution tax credit, the types of investments allowed in the account, and the eventual conversion of the RRSP into an RRIF (Registered Retirement Income Fund) in retirement. More information can be found on the Canada Revenue Agency’s website.

There are three main benefits to using an RRSP for retirement savings:

• Taxes on any income contributed to an RRSP are deferred until the funds are withdrawn, in the form of a tax credit.
• Because you defer paying tax until you withdraw the money at a later date, presumably at a lower retirement level income, most people will pay less tax over all. (This is not true if your retirement income or tax rate is equal to or greater than it is when making contributions).
• Income earned on the money invested inside the RRSP is not taxed either while within the plan or on withdrawal.

You also have the option of setting up a spousal or common-law partner RRSP. This type of plan can help ensure that retirement income is more evenly split between two partners. In this case, the higher-income partner contributes to an RRSP for the lower-income partner. The contributor receives the tax deduction, which is worth more to a higher income earner. The lower income spouse receives the income during retirement, likely to be taxed at a lower rate – again leading to decreased overall tax costs.

There are limits on how much can be contributed to an RRSP and claimed on a tax return each year (though few people actually contribute the maximum allowed*). Your exact limit is calculated by Canada Revenue Agency (CRA) based on your income, pension contributions and deductions, and past unused contributions room, which is carried forward year to year. Put simply, each year you are allowed to contribute up to 18% of your previous year’s salaries, plus any unused room, less an adjustment for pensions activity. Regardless of your income, there is a cutoff amount you cannot exceed, which in 2010 is set at $21,000 and will increase each year with the annual increase in the average wage.

Your RRSP deduction limit will be sent to you each year by CRA, and can be found either at line (A) of the RRSP Deduction Limit Statement, on your latest Notice of Assessment or Notice of Reassessment, or on a T1028, sent after the processing of your previous year’s tax return.

The deadline for contributing to your RRSP and claiming a deduction on your 2010 tax return is March 1, 2011. For this reason, January and February have been dubbed by those in the finance industry as the “RRSP season.”

* According to this year’s RBC RRSP Poll, 61 per cent of Canadian Adults have RRSPs, and a quarter of them (24 per cent) plan to maximize their contribution for 2010.

Retirement may be a long way off for you – or it might be right around the corner. No matter how near or far it is, you’ve absolutely got to start saving for it now. However, saving for retirement isn’t what it used to be. Fewer people have retirement plans provided by employers, and for those who do, they aren’t always going to be sufficient to cover all expected retirement costs.

Many Canadians do their retirement savings through Registered Retirement Savings Plan – RRSPs. RRSPs are quite popular because the money is not taxed until you withdraw the funds, and you can deduct your RRSP contribution from the taxes that you owe. RRSPs can be opened at most financial institutions, and can be used to invest in all sorts of products: stocks, bonds, mutual funds, GICs, and money market accounts. Not yet sure what to invest in? There is no harm in leaving it in cash for now, just don’t put off the decision too long.

Canadians also have the option of investing through Tax-Free Savings Accounts (TFSAs), to supplement their RRSP or pension savings. You cannot deduct your TFSA contribution, but you can contribute up to $5000 per year, which grows tax-free. The benefit: this money is not taxed when withdrawn.

In the next few blog posts we will look closer at RRSPs, TFSAs and other retirement savings options available to Canadians. But remember, whichever retirement investment you choose, just make sure you choose something. Be careful about depending on government pensions, company retirement plans, an inheritance that may or may not come through or lottery winnings. Take care of your financial future by investing in it today.

I understand the point he was making, and it is good to know yourself and how to control potential bad investing impulses. However, I do think his solution was flawed. If you only check in on your account once or twice a year, you are not only making yourself more vulnerable to fraud, but you might also miss administrative errors in your file which may be costing you money. I have worked in brokerage firms. Mistakes happen. Sometimes they are caught and fixed immediately by staff, sometimes they are not. It is the client’s responsibility to monitor their statements and report errors.

If you are not in the habit of reading and reviewing your monthly investment (or banking) statements already, we suggest you make it one of your 2011 resolutions. If you find the statement confusing, ask your adviser or their assistant to walk you through the document. Make notes. Then file each one and compare month to month. If you are confused by changes, call your adviser for clarification. Don’t panic, but take the time to discover what is happening and why.  Your goal for 2011 should be to gain a better understanding of your portfolio, and how it is helping you to reach your goals.

While my friends solution to his panicking may have made him feel better, it also put him at greater risk. In the end, if this process upsets you too much, it is probably a good sign that you are invested in products too risky for you, and you may want to make changes.

Personally, I find doing it all (or mostly all at once) helps me keep track of how much I am spending. When I buy in advance, I may take advantage of good deals in June, but spend more in the long-run as I get new ideas closer to Christmas.

I’ve worked hard over the years to find a good mix of frugality and generosity when it comes to holiday spending. I don’t mind spending more this time of year. I like to give presents, I like to entertain. I just don’t want to be paying for it for the rest of the year. I don’t know that I have found the perfect balance, but I am way ahead of where I was 10 years ago, and I am happy to share my methods.

Five tips for controlling and enjoying your holiday spending:

1. 1. Set a budget. It is remarkable how many people I talk to who just don’t know how much they will spend over the holidays. No wonder people spend themselves into a pile of debt. Your budget may be purely practical – “I only have $300 extra dollars, and so I cannot spend any more” – or if your financial situation is more flexible, make a list of your planned purchases, decide how much you’d reasonably like to spend on each person or event, and “ta-da!” You have your holiday budget.
   

   2. Stick to your budget. Seriously. Come home from the mall, total your receipts, and see how you did. Maybe you have room for more, maybe you have to reconsider buying Susie both the doll and the book. A budget gets you nowhere if you don’t follow it, check in periodically, and adjust.
   

   3. Plan for the surprises. Like when your neighbours come over with a surprise present, or Aunt Maud announces she’s coming home for Christmas with her two kids and her puppy. First of all, remember most people don’t give in the expectation of receiving something back, but if you are like me, you want to reciprocate, and hate being caught off guard. Most years I pick up a few extra bottles of wine or boxes of chocolates just for such occasions. Extra expenses can ruin a holiday budget quickly.
   

   4. Check your list. Twice. And then again. You don’t have to give to everyone. This may seem to conflict with number three, but I think they go together well. Are there people you buy for out of habit who don’t really belong on the list? Still sending a little something to your best friend from junior high – a little something that costs $30 plus another $20 in shipping? Perhaps buy your sister’s family one large family present instead of four small ones. Where can you realistically cut corners, without feeling like a Grinch?
   

   5. Buy what people want or need. Don’t buy something you would not want to receive yourself – unless you know that person has requested it. For me, the hardest part about holiday spending is all the waste. I love giving and receiving presents that will be worn, cherished or just used. Why buy an 8-year old a $120 collector’s doll for her shelf, when she will arguably get as much pleasure or more from two colouring books and a box of play-dough? Who is the collector’s doll really for, anyway? (Nothing against collector’s dolls I just remember not being particularly impressed with one as a child.)

I’m no expert, but following these simple rules keeps me sane, and happy with my spending. And keeps the credit card damage to a minimum.

What are your holiday spending tips? I intend to elaborate more on holiday budgeting in the coming weeks, and would gladly add reader feedback to upcoming blog posts.

Women are often perceived as less savvy investors.  Maybe it goes back to the old myth that girls can’t do math? This view has always frustrated me. But then I am a woman working in finance, who is rather quite good at math, a skill I inherited from my mother who used to earn 100% on her university calculus exams! (I am not THAT good at math, but she is.)

The whole women aren’t good with money myth is a holdover from the days when we weren’t even allowed to have our own money. Women are just as good at managing finances as men, and it is starting to show. Many of the most well-known financial writers, teachers and leaders in Canada are female: Sherry Cooper, Executive Vice President and Chief Economist, BMO Financial Group; Gail Vaz-Oxlade, of TVs Till Debt do Us Part; Lesley Scorgie , author of Rich by 30 and Rich by 40; and Patricia Lovett-Reid, Senior Vice-President, TD Waterhouse (just to name a few).

TD Waterhouse recently released the results of its 10th annual Female Investor Poll, which showed that 61% of women in Atlantic Canada have savings and investments in their own name. 24% of married (or common-law) women have completely separate bank accounts from their partner and 43% have a joint account as well as separate accounts, showing increased financial independence.

Now, it is not all good news. Only two-in-ten women in Atlantic Canada (18%) have a financial plan, the lowest figure in Canada (vs. 29% nationally).  Infact, according to the CSA Investor Index 2009, only 25% of Nova Scotians, male or female, have a financial plan, so that is something we can all work on.

What is your story? Women: how comfortable are you managing your finances? Men: do the women in your household play a role in managing the finances?

The terms saving and investing are often used interchangeably, but they mean different things. Saving is putting money aside for a future need. You may keep your savings in a bank account, a savings bond, a money market fund, or even (but not recommended) under your mattress or in a bedside drawer.

Savings are most commonly used for short-term needs such as upcoming expenses or emergencies. You  earn a low rate of interest on savings deposits and can withdraw your money easily.

Investing simply means putting your money to work so it can make more money. Investing involves taking some risk with your money, in hopes of making it grow.The amount of risk you are willing to take varies from person to person, based on your personal situation and beliefs. Generally, the more risk you are willing to take, the higher potential for growth.

For many Canadians, investing is not only prudent—it’s a necessity.The cost of education dramatically increasing. Fewer people are covered by employer sponsored retirement plans. Saving for retirement will likely be the biggest financial goal for most Canadians and investing is one of the few ways that can help them achieve it.

There are many different ways you can go about investing, including putting money into stocks, bonds, mutual funds and real estate (to name just a few). Each of these has pros and cons, which we discuss later month – or for more information check out our “Investments at a Glance” summer series.

First you want to teach basic budgeting skills, if you haven’t already. For great online lessons and worksheets, visit The City, a joint project between the British Columbia Securities Commission and the Financial Consumer Agency of Canada. The City teaches financial life skills to teenagers and young adults, either in class or through independent learning.

To teach similar skills to younger children, check out Make it Count: A Parent’s Guide to Youth Money Management, from the Canadian Securities Administrators.

Want more tips for helping students reduce or avoid debt? Read Finish College Without Student Loan Debt

at the Canadian Finance Blog.

Before making a rash decision, remember that most important thing is that you get your money into an RRSP account. There is no rule that says you have to invest it upon deposit. Don’t force yourself into a quick decision, and buy something you aren’t comfortable with or don’t understand.

Check your notice of assessment from last year’s tax records, to be sure you know how much room you have to contribute. The last thing you need is to over contribute and start dealing with penalties. If you have time, talk to an accountant or financial adviser about how much you should contribute. If your optimal contribution isn’t possible, contribute as much as you can afford, without straining your day to day budget.

If you already have an RRSP account open from a previous year, you might be able to quickly and easily deposit cash right into your RRSP account via online banking, saving you the time and hassle required to set up an appointment.

Once the cash has been deposited, contact your adviser and schedule a meeting in the coming weeks, to decide when and how to invest. Working at a relaxed pace allows you to consider all options and make a choice that suits your needs and your risk tolerance.

Also, another point to remember: if you are strapped for cash this year, but still want to contribute to an RRSP, you can transfer other investments into an RRSP account – provided they are eligible.

Or at the very least, let me tell what I think the most important message is. If you want to get rich, you have to save money. Plain and simple.

People get excited about the stock market. We want to pick investments that will out do our friends and family – have a little something to brag about at the next cocktail party. “I made a killing on XYZ stock last month, bought it for $2, sold it at $8 just before the bottom fell out. Looks like the wife & I will be cruising in the Caribbean this winter.”

A nice story. But honestly, for the vast majority of us, the money in our savings or retirement accounts is going to accumulate over time not from capital gains, dividends, or interest, but from our own contributions. It’s quite simple, really: how can we expect to earn income on money we haven’t contributed?

The lesson here: start saving. Yes, this is easier said than done, but put aside some time to take a good look at your finances. Create a budget. And make a plan to save. Once you have built up some savings, then you can sit down and ponder the investment possibilities.

But often, it does not turn out to be so easy. Maybe you can’t find another job, or your company cuts back on your hours permanently. Even if the situation is resolved and your income goes up again, debt is usually not as easy to pay off as you expected it to be.

Debt is a burden both financially and psychologically. No one wants that kind of cloud hovering over them. People concerned over their debts can be more prone to fall for the “get rich quick” style of investment scams. In their desperation to solve their debt problem, people may not be as cautious as they should be.

The best and simplest way to get out of debt is just to keep making your monthly payments on time. Yes, this will take you a long time, but sometimes it is the only option. Budget for it. Treat your debt payments like other fixed payments such as your mortgage or rent. That money is not available for spending.

The real trouble begins when you cannot make your monthly payments. Maybe your income has decreased, interest rates have risen, or you have new or larger expenses than before. What are your options?

• If you haven’t already, start with smaller steps like switching to lower interest credit cards, reducing spending on discretionary items, and reducing expenses. It may be that cable TV or your smartphone have to go until you get your finances under control.
• Talk to your bank or credit union about a consolidation loan. This allows you to pay out a lot of small loans or credit card debts with one large loan. This one monthly payment is often much lower, especially if your debts are mainly on high interest store accounts or credit cards. Simplifying this way is also good for those with issues managing money and keeping track of all their debts.
• Most loans (including credit card balances) can be renegotiated to give you longer to pay. This will mean smaller monthly payments, or possibly a ‘payment holiday’ if you simply cannot make your payment this month. This does not have to be as scary as it sounds. Create a suggested payment schedule before you call before you call, then explain your situation truthfully and tell them what you suggest.
• As a last resort, you may have to consider bankruptcy. With bankruptcy, you have a court declare that you cannot pay your debts and will not be able to do so in the foreseeable future. You give up all you have and your creditors have to accept whatever they are awarded. Don’t be fooled – this is not an “easy out.” You may lose your home (if you own it), your car, and any savings that you have.

One of our Twitter followers, and the winner of our recent holiday contest, has declared 2010 as the year she takes control of her debt. She is writing about her plan and her struggles at her new blog, Debt Blasting. I encourage you to follow her process.

For some reason I can’t fully understand, budgets scare people. I don’t know how many times I have heard people say “I can’t budget.” Nonsense. Budgeting doesn’t have to be complicated. Some people enjoy budgeting in minute detail, down to the last penny. For most this is not realistic. A budget is simply a plan. A guideline. A map to reach your financial goals.

A budget should never be a financial starvation diet. That won’t work for the long haul. Make reasonable estimates for food, clothing, shelter, utilities and insurance and set aside a reasonable amount for entertainment and the occasional luxury item. First, budget for fixed expenses, then for savings, and then your other spending.

Even a small amount saved will help you reach your long term and short term financial goals. You can find many budget forms on the internet. Two of my favourites are from Gail Vaz Oxlade (of TVs Till Debt Do Us Part) and the “Finance for a Freelance Life” blog. If these don’t work for you, just use any search engine you choose and type in “free budget forms”.

You’ll get lots of hits. Print one out and work on it with your spouse or partner. Both of you will need to be happy with the final result and feel like it’s something you can stick to.

Of course, the key to budgeting is that at the bottom of the page, income should exceed or be equal to your expenses. If not, you are spending more than you earn and could end up in trouble with debt. If this is the case, go back over your worksheet and find places to cut costs. Perhaps you can only afford to eat out every two weeks rather than every week. Or you have to cut down your grocery bill.

If you have a spouse or partner it is very important that you work on this budget together. Sit down and figure out what your joint financial goals are – long term and short term. How much do you need to save to reach these goals? Where are you willing to cut costs if needed? (This can be the trickiest part. I thought we spent way too much money on groceries, my husband felt we should cut back on entertainment. We did a little of both in the end.)

Every journey begins with one step and the first step to attaining your financial goals is to make a realistic budget that both of you can live with.

In my household, this year we are marginally increasing our RRSP contributions (every little bit helps) and as we both opened Tax-Free Savings Accounts late last year, we are resolving to contribute to those regularly too.

Also, as my husband’s job will have him away for most of the year, we are planning a mid-year reunion trip, somewhere overseas. So, beginning with my next paycheque, a portion will be set aside each pay period to fund that trip. All of this while continuing to keep our credit cards clear, pay off my student loans and pay the mortgage as fast as possible. No easy task, but I think we’re up for it.

If you haven’t made a financial resolution yet, consider:

• opening an RRSP
• opening a Tax-Free Savings Account (TSFA)
• increasing contributions to either an RRSP or TSFA
• paying down debt
• preparing a written financial plan
• reviewing your financial plan with an adviser
• researching each investment personally before making decisions
• enrolling in a personal finance course

Any other ideas? What are your financial resolutions for the new year?

To help you out, I have quizzed staff at the Nova Scotia Securities Commission, as well as our followers on Twitter, for their personal finance book recommendations. These make great stocking stuffers, and offer lessons that last a lifetime.

Our top picks are:

1. The Wealthy Barber, by David Chilton. It’s a Canadian classic. Covers the whole range of personal finance topics in a story format that anyone can understand. A great book for beginners.

2. The New Retirement, by Sherry Cooper. Retirement is changing in Canada, and Sherry Cooper has advice for boomers. The economist draws from studies in psychology and gerontology to offer tips on living the second half of your adult life productively and in good health.

3. The Smart Cookies Guide to Making More Dough, by Andrea Baxter, Angela Self, Katie Dunsworth, Robyn Gunn, and Sandra Hanna. The Smart Cookies are five young Canadian women who formed a “money club” to dig thenmselves out of debt and turn their financial lives around. In this book, the “Cookies” share their stories, offer easy-to-follow steps, and lay out simple plans for meeting any goal, whether it’s eliminating debt, making good investments, becoming a smart spender or saving up for a big-ticket purchase.

Do you have a favourite personal finance book or resource? What should I be putting in my family’s Christmas stockings? Leave a comment below, or retweet this post, and you could win your choice of the books listed. (Draw date Friday, December 18, 2009. Contest open to Canadian residents only.)