The end of the year is fast-approaching (only 11 days left in 2019). Have you made and crushed all of your money goals for the past year? If not, I’ve made a handy check-list below of things you should be doing with your finances as we wrap up 2019 and head into a brand-new decade – the 2020’s!
1. Make sure you have contributed enough to your RRSP, Pension, or Group Retirement Plan through work.
RRSP contributions are tax-free meaning you do not pay income tax on the money you contribute. If you have made contributions, you may get a nice little refund come tax-time. Your RRSP contribution limit for 2019 is 18% of earned income you reported on your tax return in the previous year, up to a maximum of $26,500. It makes sense to contribute to RRSPs over TFSAs if your taxable income at the time you contribute will exceed your income in retirement, as you will pay taxes on the money you withdraw from RRSPs in the future. You have until 60 days after December 31st to make contributions to your RRSPs and count them towards your 2019 tax-year, in 2020 that day is March 2nd.
If you have a group plan at work with (hopefully) a company match, you should be making use of it! This is the simplest and easiest way to save for retirement, as deductions are taken directly from your paycheque. You don’t even have to think about it. Plus, it’s like getting a raise when you factor in the company match! If you are not signed up for your plan, make it a goal to do so in 2020.
2. Top-Up your TFSA
Contributions to TFSAs are not tax-deductible but the growth within them is tax-free! The new TFSA contribution limit for 2020 is $6,000, matching the amount set for 2019. The total contribution room available in 2020 for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009 is $69,500. If you are not using a TFSA to grow your money in savings or investments start in 2020.
3. Make your charitable contributions before year-end
Charitable giving is good for the soul (and your taxes!). You must make any donations prior to December 31st for it to count towards your 2019 tax year. “Canada has a generous tax credit system for donors to charities. The Charitable Donations Tax Credit can be up to 29 percent of the amount you donated at the federal level. You may also be entitled to an additional amount reaching up to 24 percent of your donation depending on your province of residence. There are several of rules that determine whether you qualify…. The CRA provides an online tool to calculate your credit, including the provincial component.” source: https://turbotax.intuit.ca/tips/tax-benefits-of-charitable-donations-5414
4. Contribute to RESPs
If you are using a Registered Education Savings Plan (RESP) for your children or grandchildren to save for their post-secondary education, consider topping up their account to make most of government grants for the year. The Government of Canada will match every contribution (20 cents on the dollar) up to a yearly maximum of $500 or total lifetime limit of $7,200. (Average and lower-income families can receive even more with the Canada Learning Bond (CLB)). You can carry forward some of the contribution room, but the sooner you contribute to a RESP the more time your funds have to grow, and there are limits on CESG once the beneficiary (child) turns 15. So, if you haven’t opened a RESP, add this to your financial goals for 2020.
5. Evaluate and assess your financial situation
If you have experienced any major life changes or are expecting some in the upcoming year it might be time to evaluate how this event has or could impact you financially. The purchase of a new home, a move, marriage or divorce, having a child, changing jobs or retiring are all important life changes and can affect your financial situation drastically. If you are having difficulty in navigating these changes it may be time to talk to a financial advisor or hire one.
Take stock of 2019. Go through your credit card, bank and investment statements. Review how you spent your money and evaluate whether you would have/could have done anything differently. Did you spend too much? Did you save enough? Think about all that you have accomplished…did you pay off that line of credit or reduce your balance on your credit cards significantly? Did you build up an emergency fund? Taking stock will help you outline your goals for 2020.
6. Make a plan
Look ahead to 2020. Do you have any major upcoming events or expenses that you may have to plan for? Are you getting married? Adopting a dog? Do your windows or any appliances need replaced? Are you planning a tropical vacation? Do you have enough savings in case of an emergency such as a vehicle break-down, job loss or major health issue? Create a budget and outline some goals for 2020. Think about how you will reach these goals and make a concrete plan for the new year. Some tangible suggestions may include:
Pay Yourself First. Determine how much, and when. $50 bi-weekly? $200/month? Make sure the amounts and timing are realistic. Paying yourself first means moving that money into a savings or an investment account that you cannot touch.
Pay down debt. Again, be realistic. Whether it is student loans, a line of credit, or credit card debt, make a plan and stick to it. Also, if you are still using credit cards and you have credit card debt that you cannot afford to pay off in full, STOP USING CREDIT CARDS.
Create short- and long-term goals. Think both a few years into the future and several down the road. Will you move houses in the next few years? What is your plan for retirement? How will you pay for your kid’s activities and later university or college?
7. Secure your future
Insurance is important. If something were to happen to you or a loved one how would you cope financially? Critical Illness, Disability and Life Insurance are all important to have in place BEFORE you face a crisis. If you don’t have any insurance in-force speak to an advisor to make sure your final expenses, any debts you may have, and your children’s care and education will be taken care of in the event of your illness, injury or passing.
Final Thoughts
Allocate a few hours in the upcoming weeks to get your finances in order. Getting prepped for the new year can be both satisfying and exciting. Being aware of your financial situation and having a plan can help reduce stress in a sometimes otherwise stressful time of year. If things are getting too complicated financially to handle on your own, it may be time to seek out professional advice. Here’s to a wonderful holiday season and happy, prosperous 2020!
Brooklyn Scott is a Financial Advisor/Mutual Funds Representative for Lewis & Jones Group/Desjardins Financial Group/Desjardins Financial Security Investments Inc. in Killarney, Manitoba.
Mutual funds are distributed through Desjardins Financial Security Investments Inc. For insurance products, Desjardins Financial Security Investments Inc. acts as a national insurance brokerage agency.