As 2022 winds down, it’s time to assess your finances and prepare for another year. Reviewing your finances and planning for the months ahead will set you up for a brighter new year!
Here is our year-end financial checklist:
Review your overall financial situation
Carefully review your overall finances. Take a deep dive into items like debt, automatic payments, credit score, an emergency fund, and your current budget. Now is a great time to review your expenses and ensure you’re on the right track.
Optimize your registered account contributions
Do you have registered accounts like a Registered Retirement Savings Plan (RRSP), Registered Education Savings Plan (RESP), and Tax-Free Savings Account (TFSA)? Then, it’s time to review them and optimize your contributions so you can take full advantage of their benefits.
RRSP
The investment income you earn on your RRSP is tax-free. However, once you start withdrawing from it, you must pay tax on your withdrawals. For now, your contributions to the RRSP are tax-deductible. That means you can reduce your taxable income by the amount you contribute. The deadline for 2022 contributions is March 1, 2023 deadline. Maximizing your RRSP contributions can help you save money on your taxes.
RESP
Contributing to your child’s RESP helps set them up for a good education and a brighter future. If you’re eligible, you should take advantage of the Canada Education Savings Grant (CESG). The government will contribute funds to your RESP, matching 20 percent of your contributions. The benefit will match up to $500 per beneficiary per year and up to a maximum of $7,200. The contribution deadline for RESPs is December 31, 2022.
TFSA
Like RRSPs, the investment income earned in a TFSA is tax-free. Therefore, a strategy combining RRSP contributions and TFSA contributions can be beneficial. However, there is a contribution limit on your TFSA, but if you don’t contribute to the limit, you can carry over that TFSA room to the next year. You can find out how much room you have through the Canadian Revenue Agency. The deadline to contribute to your TFSA this year is December 31, 2022.
Review your estate plan and life insurance policy
It might feel morbid, but you should review your estate plan annually, including your life insurance coverage. If you don’t have a plan or an insurance policy, now is an excellent time to make one. It’s essential to have a detailed plan on how to divide your assets upon your passing or if you require care in the future.
If you already have an estate plan, now is an excellent time to review it and adjust where necessary. Often, your assets or wishes can change over time. Making sure it’s up-to-date will make a challenging process easier for your loved ones if there is a sudden life change.
Prepare for tax time
Tax season might seem far away in 2023, but it will be here before you know it. Preparing for tax season will ensure you’re on the right track when it comes time to file. Check and file receipts, bank statements, T-slips, and other essential documents.
Reviewing your financials now will also help you prepare for a change in tax liabilities. For instance, if you have earned significantly more than anticipated, you will have a larger tax bill. Understanding that now will help you create a plan for paying for it. In addition, optimizing RRSP contributions and properly filing receipts for tax write-offs can help you save come tax time.
Need help? We’re here for you
If you need help reviewing your investments, optimizing your contributions, and with tax planning, Fincor Financial is here to help. We can review your financial situation and provide thoughtful guidance so you can have a happy new year in 2023.
Contact us to book an appointment!