Putting your financial house in order
By Diana Cawfield • Bankrate.com

It's not too late in the new year to resolve to hone your financial smarts, especially with Registered Retirement Savings Plan, or RRSP, season upon us. To help you do that, we asked three experienced professionals for their advice on how to make 2010 the year when you put your financial house in order.

Know yourself
"Usually, the greatest impediment to wealth all comes down to knowledge, or lack of knowledge," says Dan Collison, a regional director with Investors Group in Markham, Ont., who also teaches personal finance at York University.

One of the biggest decisions you need to make when it comes to money management is whether you should go it alone or hire an expert. "And there's nothing wrong with hiring an expert first, then developing your own knowledge along the way," says Collison. "Basically, then, you've got a financial coach."

For investors who have the knack, the desire and the time to do their own homework, Bankrate.ca offers lots of tools to help you assess your financial health, from calculating how much money you'll need to reach an investment goal and how much you'll need to retire to figuring out how long it will take you to become a millionaire.

Know your investment vehicles
When it comes to planning for your future, Collison says "your first question should be: Should you contribute to RRSPs?" He says many Canadians think about investing in an RRSP as a way to lower their tax bill when they should be thinking about their long-term goals.

If you're investing for a short-term goal, such as a down payment on a house or another big-ticket purchase, you're better off saving that money outside of an RRSP, so you don't pay a high amount of tax when you go to withdraw it. Your best bet may be a Tax-Free Savings Account, or TFSA.

Collison says that for some individuals, especially people with low incomes, it may be more profitable to put their savings into a TFSA rather than in an RRSP.

Plan for emergencies
When it comes to investment goals, the best laid plans often go awry with unexpected emergencies and expenses. So, you need to have a stash of savings on hand that is separate from your retirement savings.

"Always put something very liquid on the side that you can draw on without hurting your portfolio," says Serge Pepin, director of retail investments, BMO Financial Group, in Toronto. "It is such an important part of your total financial planning."

Generally, putting away four to six months' worth of living expenses in an emergency fund is a good rule of thumb.

Be tax smart
With 40 years of experience, John Jelliman, president of KGF Financial Services, considers the TFSA a real trailblazer. "The TFSA has now become a real player in the world of allocating people's assets," he says. "Granted, you're not getting an initial tax break or a tax refund on the money, but from here on and forever, it will be totally tax-free, and that's huge."

Along with the tax advantage of TFSAs at any stage in life, remember the merits of spousal savings plans, says Jelliman, if you're approaching retirement. "There's a ton of severance going on out there, and the ability to share pension income when both spouses are over 65 years of age gets a big mark from me."

Save automatically
Lastly, Jelliman stresses an easy way of building a nest egg that many people still overlook: pre-authorized payments. "I was horrified to read a Royal Bank report over the weekend about how few people amongst the bank's RRSP holders use pre-authorized chequing," he says. "So they're doing it by crazy lump sums, which probably means they're deadline Dicks, they're contributing late."

By arranging for regular biweekly or monthly withdrawals from your savings or chequing account to your investment account, your money will have more time to grow and you won't be caught trying to come up with a lump sum RRSP payment at the last minute ever again.

Diana Cawfield is an award-winning freelance writer, specializing in finance and health sciences.