As 2017 winds down, assess your finances and get them new-year ready.
Your overall quality of life is directly related to the overall quality of your finances. So as one year ends and the next is about to begin, take some time to be sure you’re making the right choices financially. That will make for a truly happy new year.
Set a budget
And stick to it. With the holidays fast approaching, you need to create a realistic budget that will allow you to buy your presents and celebrate with friends and family without having to stress over unexpected surprises in the new-year.
Tackle that debt
If you have lingering debts, make a plan for paying them down. Prioritize the highest interest debts first. Consider setting up preauthorized payments from your bank account. Avoid generating more debt by paying off your credit card every month — or start shopping with cash.
Max out your RRSPs
Registered Retirement Savings Plans (RRSPs) offer the best tax-sheltered savings builder for most Canadians. If you are turning 71 in 2017 you must make any RRSP contributions by December 31, 2017 and if you have created any RRSP contribution room in 2017 you may want to over-contribute in order to use the deduction in 2017. Contributions to a spousal RRSP before the end of the year would result in a one year reduction in the attribution period compared to a contribution made in the first 60 days of 2018.
Think RESP
A tax-sheltered, compound-growth Registered Education Savings Plan (RESP) is an excellent way to cover escalating education costs and give your kids a head start on life. If you have a child turning 15 in 2017 and wish to receive Canada Education Savings Grants when they are 16 and 17 you need to ensure that they have either made $2,000 of total RESP contributions or contributed a minimum of $100 in any 4 years by the end of this year.
Check your insurance
As your life changes, your need for income protection changes. Be sure your insurance coverage is keeping pace and you have enough coverage, the right kind, and you’ve updated your beneficiaries.
Consider taxes when you invest
Certain investments are more tax efficient than others. For example, interest income is taxed significantly higher than dividends and capital gains – so it’s often better to hold investments that earn dividends and capital gains outside your RRSP and interest-earning investments inside it.
Whatever plan you make to control your spending, be smart with your taxes and improve your investments, resolve now to revisit your plan throughout the year.
Tax-loss selling
If you have investments that are in a loss position you may want to consider selling them before the end of the year to trigger a capital loss. The capital loss would offset other capital gains from the current year, and any remaining net capital loss can be carried back three years or forward indefinitely. Alternatively, if you’re going to dispose of an investment in a capital gains position consider deferring the sale until 2018, which will then defer the tax on the capital gain a full year.
Minimize your taxes
Talk with a tax professional now to be sure you’re keeping the right receipts and making the right investments to take advantage of all possible tax deductions and credits. Consider the tax implications of moving expenses, child-care costs, tuition fees, medical expenses, charitable donations and safe deposit box charges.
Stick to the plan
Whatever plan you make to control your spending, be smart with your taxes and improve your investments, resolve now to revisit your plan throughout the year. Your small efforts, over time, will add up to a financially sensible 2018.
2017 year-end planning checklist
The Canada Education Savings Grant and Canada Learning Bond (CLB) are provided by the Government of Canada. CLB eligibility depends on family income levels. Some provinces make education savings grants available to their residents.