Investing in a recovering economy

As most indicators show that we’re continuing on a path to global economic recovery, it's best to go steady but be cautious when it comes to personal finances and investing this year.

Sure, your portfolios have lost value and your personal finances likely took a few hits over the past couple of years. You need to remain vigilant because now is not the time to be either hitting the panic button or increasing your level of risk.

This year, as should be the case every year, the first and most important task at hand is budgeting. As they say, if you fail to plan you plan to fail. The more you can do to improve your budgeting, the better.

If you fail to budget enough — or properly — you won’t have money to tuck into your RRSP; you won’t have money to put into a tax-free savings account; you can forget about investing in savings bonds and the stock market. You’ll end up shorting yourself with nobody else to blame.

The second most important task is all about containing and reducing your debt, which should be part of your budgeting process.

Get rid of those high-interest department-store credit cards and opt, instead, for a low-interest basic credit card without the bells and whistles. Better yet, many financial institutions now have zero-interest, pay-as-you-go credit cards that you pre-load with cash and you can only use as much

money as you load on to it.

What’s the use? Well, it gets you the hotel reservations you need or the online purchases you want to make or the car rental you can’t get without a credit card, but there’s no risk of spending money you don’t have.

The less debt you carry — and here's hoping you have no credit-card debt — the better off you are and you'll continue to be moving forward in this recovering economy.

As you plan your investments this year you'll no doubt be doing a lot of research, which is a good thing. If you’ve got the time then spend as much as you can on gathering and understanding the plethora of information that is out there — much of it contradictory and much of it predicated on your specific situation: age, income, geographic location, employment stability, etc.

If you don’t have time, don’t wing it. Talk to the experts — your financial institution will have some great advice; financial planners and advisers will also help guide you to varying degrees.

Find someone you trust and consider their advice carefully before cautiously moving ahead.

Investing this year is a lot like carpentry — measure twice and cut once. You can’t afford to waste your money at this point in the game.