Financial tips for 2012
By Peter Diekmeyer • Bankrate.com

As Canada continues its tepid economic recovery, content that it is doing better than many other western countries, an increasing number of voices are warning that times could be tough for a while. The latest to join the chorus is Avery Shenfeld, an economist with CIBC World Markets.

"Akin to Pharaoh's dream for Egypt, the global economy could well be in the midst of seven lean years, as the debt financed bounty of the prior expansion left a growth famine in the wake," wrote Shenfeld in a recent note to the bank's clients. "We are already more than halfway there, as the deep recession that began in 2008, was followed, at least in much of the developed world, by a lacklustre recovery."

Shenfeld's comments echo those of many prominent financial sector stakeholders, who warn that prudence may be in order. For example, the Bank of Canada has indicated that it will not raise interest rates for the foreseeable future, due to persistent economic weakness. Several other major central banks have similar policies. As a result, we have prepared a list of financial tips for 2012, for those who believe that the economy may not bounce back quickly.

1. Assess your performance last year
If you don't know where you are, it's hard to figure out where you are going. Each year business accountants put together financial reports, which managers use to assess their company's performance. However few individuals so do. Try it. List all of your revenues and expenses for last year, as well as your assets and liabilities, and use the information to assess your progress. 

2. Make a budget for 2012
It's spring break, and your family is bugging you to grab a last minute Caribbean vacation deal that they found online. Can you afford it? If you had done a budget at the start of the year you would know. So while you may be able to write a cheque for the trip, did you remember that your municipal tax bills come due the following month? Budgeting forces you to assess and deal with obstacles on the road ahead and thus helps you better meet your financial goals.

3. Pay down expensive debt
Many categories of interest rates are at record low levels, particularly for prime corporate and mortgage borrowers. However, credit card debt, government tax liabilities, car leases and many other obligations often come with extremely high carrying costs and late payment penalties. While borrowing to buy a house, a car or a school education can be a good investment (when done at reasonable levels), before taking on any new obligations make sure to pay down your high interest rate debt first.