Financial Planning Checklist for the New Year
Are you financially prepared for the new year? Ensure your financial affairs are in good order with our handy checklist!
6 Minute read
Originally published: January 21, 2020
Updated: December 13, 2023
Financial Planning Checklist for the New Year
Are you financially prepared for the new year? Ensure your financial affairs are in good order with our handy checklist!
6 Minute read
Originally published: January 21, 2020
Updated: August 23, 2022
As we approach the New Year, now is an excellent opportunity to review your financial situation. Working through a financial planning checklist can be a helpful method to ensure that all of your bases are covered as you build a strong financial foundation for yourself. It’s possible that having a better understanding of the specifics of your financial life will help you feel more at ease and provide you with a stronger sense of security. This financial checklist will help you focus on some of the most important tasks you need to do regarding your finances as you work toward putting your New Year’s plans into action.
Financial Checklist
The following is a checklist of things to do, from making changes to RRSP contributions to evaluating beneficiaries on life insurance plans. With each point, ask yourself the following:
- Prepare Your Will or Make Sure it is Up to Date – If you have been procrastinating having your Will prepared, now is a great time to find a local Wills and Estate lawyer. If you already have a Will in place, ensure it is up to date.
- Take Advantage of Your Company Benefits – If you are lucky enough to work for an employer with benefits, are you optimizing what is being offered? Many employees who have extended health insurance coverage, fail to take advantage of what is being offered. From vision care or routine dental care to registered specialists and therapists, make sure you know what you qualify for and utilize your benefits as required.
- Take Advantage of Your Company Match Programs – Does your company offer a match program on your RRSP contributions? Are you optimizing the contributions? Take advantage by ensuring you are maximizing your contributions. Furthermore, if you work for a company that has an Employee Stock Ownership Plan (ESOP) make sure you take advantage of it.
- Increase your RRSP, TFSA and Non-registered contributions – outside of company contributions, if you are systematically contributing to your investment accounts, make sure to keep up with inflation by increasing your contribution. Note that the cumulative limit on Tax Free Savings Accounts is $69,500 since 2009 and will be $7000 in 2024. Furthermore, the RRSP deduction limit for 2024 is $32,490 (for 2023 it is $30,780) or 18% of income (whatever is less). In the case where you have typically done lump sum contributions, consider a systematic contribution plan that can lower market volatility through dollar cost averaging.
- Contribute Lump Sum to RRSP Before the Deadline – If you have opted to make yearly lump sum contributions to your RRSP, ensure you make a contribution before this year’s deadline on March 1, 2024. Have you considered a RRSP catch-up loan which will allow you to borrow to make a lump sum contribution to reduce your 2023 tax liability?
- Review Your Portfolio Allocation – with the 2023 year continuing what has been a record bull run, it is a good time to review your current portfolio to ensure it meets your financial objectives. Whether that be reducing exposure to certain asset classes or leaving current holdings status quo, the new year presents a good time to ensure your asset mix meets your current financial goals.
- Review Your Life, Critical Illness and Disability Insurance Policies – Evaluate your insurance needs by ensuring you have the correct amount of insurance for your current needs. In case of premature death, will all your debts be covered and will there be adequate income replacement? Do you have a term policy coming up for renewal which should either be extended or converted to a permanent insurance policy? Have you bought a term policy in the last 10 years? Due to insurance rates dropping on term insurance policies, have you compared to a current dated policy to compare? In case of accident or sickness, do you have enough coverage or assets to cover an extended period of time without income? Are you prepared in case of sickness to cover expenses related to out of pocket expenses such as medicine not covered by the provincial government or your group benefits?
- Compare Your Mortgage Rates to Current Market Conditions – Did you do a variable rate mortgage in the last 5 years? Have you compared to current rates where variable rates have dropped significantly? Do you have an upcoming mortgage renewal on fixed rates? Have you compared the current solutions? Do you have a debt to consolidate, renovations to complete, or would you like to ease your cash flow? Have you considered refinancing?
- Elect to take your Canada Pension Plan (CPP) or Old Age Security Benefit (OAS) – are you 60 or older or approaching 60 and want to know how much you will qualify for or the ramifications of taking your CPP or OAS early or delaying for future years? Even for those much younger, sign up on the Service Canada website for projections on future benefits.
- Is Your Net Worth Growing? – Are your debts increasing, but your assets not? Subtract your debts from the value of your assets. If your net worth decreased due to a variation in asset values (ie. due to markets falling) this is not necessarily an area of concern. However, if your debts continue to increase and your net worth has actually fallen or stayed stagnant it would be a good time to do a cash flow analysis and re-evaluate.
Aside from the points above, consider any other major life events recently. Are there any other major life changes which warrant a change – have you gotten married, changed jobs, bought a house, had kids or any other major life change? Perhaps you need to open a Registered Education Savings Plan (RESP) for a newborn child or get a new job which allows you to pay down more of your mortgage. Whatever the life change, take this opportunity to evaluate what changes may be necessary.
Frequently Asked Questions (FAQs) about Financial Planning
The financial status of each person is one of a kind and is determined by a combination of their specific goals and their current financial circumstances. A financial planner will be able to provide a strategy for you to maximize the benefits of these significant tax advantaged plans once they have a thorough understanding of your current financial situation as well as your short-term and long-term goals. This understanding is gained through discussion of these topics with you.
Critical illness insurance is an excellent way to protect yourself against the financial burden that could result from a future injury or illness. If you are the main earner for your family and are in good health, critical illness insurance is a good strategy to avoid future tragedies.
The Canada Education Savings Grant (CESG) is a government-funded grant. This is the 20% contribution made by the government to the RESP beneficiary. Having said that, the government’s maximum CESG contribution will be $2,500 each year. This means that the account’s sponsor will have to contribute $12,500 to the RESP in order to obtain the maximum CESG contribution amount for the year.
An RRSP is a retirement savings plan that you create, and you or your spouse or common-law partner contribute to. Contributions to deductible RRSPs can be utilized to lower your tax liability. Any income earned in an RRSP is usually tax-free as long as the funds remain in the plan; however, you must usually pay tax when you receive payments from the plan.
Since the Canada Pension Plan is considered income, it is taxable. Although taxes are not automatically deducted, you can request that they be deducted from your monthly payment.
Life insurance is particularly beneficial for those who have to provide for their spouse, children, and other family members in the event of their death. Depending on the value of the policy, life insurance death payments might assist beneficiaries to pay down a mortgage, support education expenses, or fund retirement. Permanent life insurance has a cash value component that accumulates over time.
Do you have other financial planning questions?
We would be happy to provide further analysis for your specific circumstances. Contact Protect Your Wealth today to learn more!
At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need.
Contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, Alberta, and British Columbia, including areas such as Waterdown, Calgary, and Kelowna.
