8 Financial Resolutions Canadians Should Make This Year

The top tips for Canadians to protect and grow their finances this year!

17 Minute read

Originally published: December 14, 2022

Financial Resolutions Canadians Should Make This Year

The top tips for Canadians to protect and grow their finances this year!

17 Minute read

Originally published: December 14, 2022

Financial Resolutions Canadians Should Make This Year

This new year, you should make a financial resolution to better your future and your finances. Welcome to our blog on the best Financial Resolutions to Make This Year, our blog will have some new year’s resolutions that you can actually stick to! This blog will be covering information about some of the best savings accounts in Canada such as the TFSA, RRSP, RESP and we will also cover the brand new tax-free First Home Savings Account (FHSA). We have some important details about tackling debts, and even some information on getting a life insurance policy. There are so many great financial resolutions that you can make now which will benefit you in the long run.

Financial Resolutions Canadians Should Make This Year

The last couple of years have been full of difficulties and a lot of financial stress for everyone. This being said, a new year is here and with the rising cost of living and inflation, now is the time to take control of your financial situation and try to create a strong financial foundation in order to be prepared for any future financial issues, and make up for previous financial losses. There are a handful of things that you can do to better prepare for your short term finances and your long term financial future such as retirement, your children getting older, or maybe even buying your first home. Our list of financial resolutions will help you consider some amazing ways to boost your financial situation, even if only some of these apply to you, we challenge you to focus on your financial wellness and goals. 

Get Rid of Your Debts

To begin our list of Financial Resolutions Canadians Should Make This Year, the main thing we should focus on is paying off your debts. People have debts at many different points in their lives. You might be a recent graduate and have student loan debts, you might be a middle aged adult and have just purchased a brand new car or house and have years of debt ahead of you, or you might be a senior who has that last bit of your mortgage to pay off. Each of these situations have a common denominator: debt. Now let’s take a look at different points in your life that you could have debt in, and  see what can be done for young adults, adults and seniors to deal with their debts. 

Dealing with debt as a young adult

Student debt in Canada

Young adults are in a tough situation, chances are that they have just graduated and are left with thousands of dollars of debt and this might not even be the end of their academic career. Luckily, there are plenty of ways that young adults can deal with their debts. We recommend saving and creating a strong financial plan that can help you save while also paying your debts. The best savings account for young adults is the Tax-Free Savings Account (TFSA). This account allows you to save and generate profit completely tax-free, and best of all, your savings are accessible whenever you want. Now before you think about lucrative investments, think about a budget that is manageable and realistic. Once you find out how much you have aside to invest in a GIC, mutual fund, stocks and other investments you can contact us to find out the right investments for you and we can help you set up a strong investment portfolio. 

To find out more about the TFSA, read our article: 7 Reasons to Have a Tax-Free Savings Account (TFSA)

Dealing with debt as an adult

If you’re a middle aged adult, you might have a family, you might have just recently purchased a car or might be planning or have already purchased a home. This is likely the time in your life when you will have the most debt just based on the fact that you have probably made some large purchases so far. Therefore, we highly recommend that you consider investing into your retirement at this point because with the help of a Registered Retirement Savings Plan (RRSP) you can start deducting your tax, investing, and saving for your retirement. Just remember there is never a bad time to start saving for your retirement. 

We also recommend that you open a Tax-Free First Home Savings Account (FHSA) if you haven’t purchased your first home just yet. Starting in 2023, the FHSA is a brand new account that is here to help Canadians save up to $40,000 completely tax free to purchase their first home while also being a tax-deductible account. This is an amazing savings account that combines the best traits of the TFSA and the RRSP. We highly recommend that you consider opening one of these accounts, especially if you want to reduce your taxes and purchase a home in the competitive Canadian housing market. 

Advantages of a First Home Savings Account (FHSA)

Life is full of uncertainties, that is why it is best to protect your family and your assets. If you have any of the following: debts, children, spouse, a business, or a house, then generally, you need life insurance. Life insurance is essential to safeguard your loved ones and assets from any financial stress in the event of your death. There are life insurance policies out there for anyone coming from any walk of life, and as an adult there are amazing rates, even as low as $25 per month with large amounts of coverage. We will look closer into life insurance later on in this blog, for now let’s look into how seniors can deal with debt. 

Dealing with Debt as a Senior

Seniors tend to be in a situation where their income is lower than when they were working and they might have a bit more debt that needs to be paid off. This being said, it is easy for seniors to lose control of their debts because they are usually not getting a large income. Luckily, most seniors are nearing the end of paying their mortgage, and a lot of them have children who have already graduated from school and are no longer dependent on them. What we recommend that seniors do is make sure that they have access to any of their pension funds from previous jobs, whether this means through a retirement allowance or LIRA. We also highly recommend that you start an RRSP prior to your retirement and honestly well before your senior years. Seniors should have a good grasp on their CPP benefits, these are provided to every Canadian resident so long as they have contributed to CPP. 

Finally, a strong life insurance plan is necessary for seniors who will tend to leave their family behind with funeral costs, remaining debts, and the remainder of the mortgage. A life insurance plan is crucial for seniors because we have seen plenty of people struggle financially due to the fact that their loved ones did not have life insurance. Life insurance is especially attractive for seniors because they can designate their beneficiary accordingly, donate the money to a charity of their choice, and they can ease financial burdens for their loved ones. If you need help figuring out a strong retirement plan for yourself, please contact our team of retirement planners and life insurance brokers to find out what is right for you. 

Max Out Tax-Free Savings Account (TFSA)

The Tax-Free Savings Account has been available for Canadians for over 10 years now. This account is great to be used for investing and saving. We think that opening a TFSA is one of the top Financial Resolutions Canadians Should Make This Year. This account can be used for saving, and investing and the best thing about it is the fact that all income or interest made on the account is completely tax free. The TFSA doesn’t have any complicated rules; rather, there are just a couple of contribution limits that you need to keep in mind. The TFSA total contribution limit for someone who was 18 years old in 2009 is going to be $88,000 in 2023, with the yearly limit being $6,500 in 2023. The yearly limit is only something to worry about if you have been contributing to the account often and maxing it out. Otherwise, a TFSA allows you to invest or save up to $88,000 completely tax-free which is amazing. This is the essential savings account out there for Canadians. There are a few reasons why you might want to maximize your contribution to a Tax-Free Savings Account (TFSA):

TFSAs allow you to earn tax-free investment income, which means that any interest, dividends, or capital gains earned on investments held in a TFSA will not be subject to income tax. This can help you save money and potentially increase your overall investment returns.

TFSAs offer a high level of flexibility, as you can withdraw funds at any time without incurring any tax penalties. This makes TFSAs a good option for saving for short-term goals, such as a down payment on a home or a major purchase, as well as for long-term goals, such as retirement.

The contribution limit for TFSAs is generally higher than that for other types of savings accounts, such as Registered Retirement Savings Plans (RRSPs). This means that you have the potential to save more money in a TFSA, which can help you reach your financial goals more quickly.

Learn everything you need to know about the TFSA by visiting our TFSA page here!

Contribute to Your Registered Retirement Savings Plan (RRSP)

As we mentioned earlier, there is never a bad time to start saving for your retirement. The Registered Retirement Savings Plan (RRSP) is the traditional savings account that is essential for those who want to save for their retirement while also deducting their taxes. The RRSP is an account which can be used to invest and save just like the TFSA, but the income earned on this account can be taxed (though income isn’t usually taxed as long as the income remains in the account). Here is where this account becomes special, all of your yearly contributions made to your RRSP are tax deductible, this means that you can pay less income tax so long as you contribute to your RRSP. The RRSP limit for 2022 was $29,210, or 18% of your yearly income. The RRSP maximum contribution for 2023 is $30,780 or 18% of your yearly income. 

Another great thing about this account is that you can open a spousal RRSP, which allows you to contribute to your spouse’s RRSP which can even further decrease your income taxes. Keep in mind that the money contributed to the spousal RRSP is strictly your spouse’s. This is especially helpful for your spouse if they make less income then your, this can lead to a more fair retirement and a stronger individual financial future for when you both retire. 

Keep in mind that the RRSP savings are not available to you whenever you want, you have to retire first in order for you to withdraw the money. There are ways that you can utilize your funds prior to retirement with the Lifelong Learners Plan or the Home Buyers Plan too. To find out everything you need to know about the RRSP read our What is a RRSP? Complete Canadian RRSP Guide. 

We strongly recommend that those who are looking to save for their retirement should open a RRSP this year. Retirement savings is extremely important to focus on as being financially stable during your retirement can be extremely difficult if you did not save before your retirement. No matter what your age is, or what stage in your life you are in, you should think about saving up for your retirement. 

Consider Opening a Tax-Free First Home Savings Account (FHSA)

Continuing on in your list of Financial Resolutions Canadians Should Make This Year, we are now going to talk about the Tax-Free First Home Savings Account (FHSA). This account is perfect for Canadians who are thinking about purchasing their first home in the near future. Prospective first-time home buyers can take advantage of this new FHSA plan and save up to $40,000 tax-free. Contributions are tax-deductible like those for a Registered Retirement Savings Plan (RRSP), and withdrawals made for a primary residence are tax-free, just like a Tax-Free Savings Account (TFSA). You must use the funds in the FHSA within 15 years of opening the account for a home purchase, otherwise the account will be transferred to your RRSP or a Registered Retirement Income Fund (RRIF) for retirement savings. The reason why you should open up this account in 2023 is because buying a house can be extremely expensive in Canada now. So if you are someone who plans to buy a house within 15 years, this account is an extremely beneficial investment for you. If you and your spouse both open one and max it out that means you can contribute up to $80,000 completely tax free towards a house.  To find out more about the First Home Savings Account, check out our Guide to the Tax-Free First Home Savings Account (FHSA).

Don’t Wait, Buy Life Insurance This Year

This year is the year where you should give your family and yourself some peace of mind. This means that you should purchase a life insurance policy which will help you protect your family and your assets. There are many reasons why you might want to have life insurance. For one, life insurance can provide financial protection for your loved ones in the event of your death. This can help ensure that they are able to maintain their standard of living, even if you are no longer around to provide for them. Additionally, life insurance can be used to help cover outstanding debts and expenses, such as mortgages, car loans, and medical bills. This can help your loved ones avoid the added stress of trying to pay these bills on their own. Finally, life insurance can be a useful tool for estate planning, as it can provide the funds necessary to pay for any taxes or other expenses that may be due upon your death. There are also life insurance policies out there for people with medical conditions, criminal records, bad credit and more. When looking for life insurance, there are three options to choose from: fully underwritten, simplified issue, and guaranteed issue policies. Each of these options has its own pros and cons, and is designed for different needs and situations, take a look at the differences: 

Overview of guaranteed, simplified, and fully underwritten policies

If you are on the fence about buying life insurance ask yourself these questions:

  • Will my loved ones need extra financial assistance to be able to care for themselves if I die?
  • Is there anyone else who relies on me, such as my kids, partner, parents, grandparents, or siblings?
  • Will my family struggle to pay the mortgage if I die?
  • Do I want to set aside money for my children’s education?
  • Will my unpaid debt reduce the value of my estate or burden my family?
  • Do I want to leave any money to family members or organizations?

If you answered yes to any of these, it is a good indicator that life insurance is right for you. As mentioned before, practically anyone in Canada can get a life insurance policy, and there are plans out there that are cheaper than $25 per month for decent coverage. Please consider protecting your family and your assets this year, and contact our team of life insurance brokers who will find the right life insurance policy for you. Let’s continue on with the list of Financial Resolutions to Make This Year

Plan for Your Retirement

Planning for your retirement is essential for people of all ages, and there are actually many different things that you can do to begin planning for your dream retirement. Our team of retirement planners typically recommend saving and investing. There are so many saving plans out there for Canadians, it might be daunting to find out which one is right for you but luckily that is what we specialize in. We can help find out what your needs and wants are for your retirement, and with that information we can definitely look into your retirement planning options. Saving for retirement is important because it allows you to have financial security in the future. Retirement savings can help you maintain your lifestyle, pay for medical expenses, and provide a cushion of financial security in case of unexpected events. It also allows you to enjoy a retirement with more leisure time and financial freedom. Additionally, retirement savings can provide a legacy for your family and ensure that they are provided for after you pass away. If you want to retire wealthy, you should take a look at the list of the Top 9 Tips to Retire Wealthy in Canada

Maximize Your Children’s Registered Education Saving Plan (RESP) 

In 2023, you should consider putting money away for your child’s education. A Registered Education Savings Plan (RESP) is a type of savings account in Canada that provides tax advantages while allowing you to save for your child’s post-secondary education. It is a highly sought after savings account for parents with children in Canada. Additionally, the government provides grants to add to your RESP, making the cost of college or university more affordable. In addition to the monetary benefit of saving for your child’s future education, having an RESP offers tax-free gains until the money is withdrawn for educational purposes. Even though it does not have the same tax-reduction benefits as an RRSP, an RESP is still a great way to save for your child’s academic future.

There are also some awesome grants for the RESP, the Canada Education Savings Grant and the Canada Learning Bond. These grants are specially allocated to the beneficiary and, when withdrawn, must be transferred directly to them. You could get $500 in your first year if you contribute $2,500, and up to $7,200 over your lifetime. Depending on your family’s income, you may be eligible for an extra 20% contribution from the Canada Education Savings Grant. The maximum contribution to an RESP per beneficiary born in or after 2004 is $2,000. On the first year of opening an RESP, $500 will be contributed and then $100 per year will be provided depending on the family’s eligibility, with lower income families receiving more. This plan is a great option and can be extremely beneficial in the future as your child will have less debt from education costs and will also have the opportunity to have more financial freedom at a younger age. Let’s continue on our list on Financial Resolutions to Make This Year!

Get a Critical Illness or Disability Insurance Policy

Life is full of uncertainties and you never know when you might be in a situation which is life altering and you will no longer be able to work, these situations can be difficult as you will have to use your savings or your loved ones will be burdened by the finances. Luckily, in Canada we have critical illness insurance and disability insurance which can help you recover, and take off the financial burden from your savings and your loved ones.

Critical illness insurance can provide financial protection in the event that you are diagnosed with a critical illness such as cancer, heart attack, or stroke. This type of insurance can help to cover the cost of medical treatment, as well as other expenses such as lost income and the cost of hiring home care services. By providing a financial safety net, critical illness insurance can help to alleviate some of the financial stress and uncertainty that comes with a serious illness.

Disability insurance is a type of insurance that provides financial protection in the event that you are unable to work due to a disability. If you become disabled and are unable to work, disability insurance can provide you with a regular source of income to help cover your living expenses and other bills. This can help to ensure that you are able to maintain your standard of living and focus on your recovery, rather than worrying about how you will pay your bills. Additionally, disability insurance can help to protect your savings and assets from being depleted by the cost of a prolonged disability.aa

Recap: Financial Resolutions Canadians Should Make This Year

That concludes our list of 8 Financial Resolutions Canadians Should Make This Year. We covered a lot of things and it might seem tough to follow through with some of them, but we can actually help you find out what resolutions are right for you. You might need a TFSA, RRSP, RESP or even a FHSA, but the best way to find out which one is right for you is to contact our team of financial advisors who can help you find the right savings account for you. No matter what point in life you are in, it is a great time to look into saving up for retirement and investing. Additionally, with the unpredictability of the world in the last couple of years, now is the best time to purchase a life insurance policy to protect your loved ones from financial burdens. Make 2023 the year that you have peace of mind and contact our life insurance brokers to find out more about why life insurance is right for you.

8 Financial Resolutions Canadians Should Make This Year

The Best Financial Resolutions to Make This Year

If you need help to figure out what financial resolutions you need to make this year you  can enlist the help of an agent for free to find the best life insurance or financial plan for you! 

At Protect Your Wealth, we’ve been providing expert advice for all types of life insurance, and retirement and investing planning, since 2007. As your Life Insurance broker and financial planner, we work with you to create a personalized plan for your family or business that covers and meets your needs.

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, B.C. and Alberta including areas such as Kitchener, Calgary, Red Deer, and Kelowna

Frequently Asked Questions (FAQs) about Savings Accounts and Life Insurance

Yes, you can get a life insurance policy if you have a mental illness. Mental illnesses will limit some of your options but there are great simplified and guaranteed issue life insurance policies for those with mental illness. 

Understanding the reason for your life insurance denial is crucial before you can decide what to do next. For example, should you hunt for a different kind of insurance plan or have your broker help you submit an application to a different company?

Check out our blog post on 6 Reasons Why You Were Denied Life Insurance if you want to learn more on why and what to do if you’ve been denied life insurance.

Based on a variety of considerations, you should choose the best sort of life insurance for you. The main distinction between term and whole life insurance is the short duration of protection provided by term insurance. If you can keep up with the premium payments required by life insurance providers for this insurance, whole life insurance offers lifetime protection. The price differential for the same amount of death benefit can be as much as nearly 15 times. Thus term life insurance is the cheaper and more popular option

  • Term life insurance is better if you:
    • Only want life insurance to cover a short-term need
    • Want the most affordable coverage
    • Think you might want permanent life insurance but you can’t afford it right now
    • Don’t want to use life insurance as a possible investment vehicle
  • Whole life is better if you:
    • Can comfortably afford the higher premiums
    • Want to leave money for your heirs
    • Have a lifelong dependent life a child with disabilities
    • Want life insurance that builds guaranteed cash value

Outside of the conventional medical exam, simplified issue life insurance will conduct an underwriting process and ask about your health. This means that in order to be eligible for low rates, you must be in good health. On the other hand, guaranteed issue life insurance does not need an underwriting process and does not ask any health-related inquiries. Compared to simplified and traditional life insurance coverage, no-medical life insurance is expensive.

You can use a type of life insurance called burial insurance or funeral insurance to assist your loved ones in covering your final expenses. Because its sole purpose is to cover funeral and burial costs, it offers a lower benefit amount than traditional term life insurance. To know more about funeral insurance check out our blog! 

You should purchase life insurance for a variety of reasons, but the major one is to shield your loved ones from financial hardships in the case of your passing, serious illness, or disability. Fortunately, life insurance in Canada has excellent rates, special plans that can fit your lifestyle, and inexpensive options. The fact that life insurance can have excellent riders, such as critical illness riders and disability riders, is another justification for purchasing it. These riders are crucial to have because unexpected events happen in life and it is always wise to be protected. Find out more about why you should have life insurance here!

Before making a decision on joint life insurance, a married couple should evaluate their financial objectives and preferences. Consulting with a life insurance broker and financial advisor can assist both partners in determining whether joint life insurance is an appropriate choice.

The total lifetime grant amount that is eligible for an RESP is $7,200, this remains the same regardless of family income and includes the CESG and CLB benefits.

A RESP works by the sponsor of the plan (parent, family member, guardian) making contributions to the plan. The government then contributes 20% of the amount contributed by the sponsor, the maximum contribution the government will make per year is $2,500.

  • Income that is made in the RRSP through investments such as ETFs, mutual funds, stocks, bonds, and GICs are tax-deferred as long as the income remains in the RRSP account.
  • The tax-advantaged portion of the RRSP is where the savings occur, year to year prior to your retirement. Any contribution made to your RRSP is tax-deductible, meaning that the contributions you make can reduce the amount of taxes you pay on the current year tax return.
  • Your RRSP contribution room can be moved over to future years, or if it is unused. This is especially helpful to reduce taxes during your tax return.
  • The RRSP account can be used by couples to reduce their individual taxes as well. For example, if you make more income than your spouse, you can contribute to their RRSP which will reduce the amount of taxes that you pay.
  • You can withdraw money from your RRSP account without getting taxed immediately if the amount withdrawn is used towards purchasing your first home under the Home Buyers Plan.
  • You can withdraw money from your RRSP account without getting taxed if the amount withdrawn is used towards your education under the Lifelong Learning Plan.

An RRSP is a retirement savings account, this account has tax-deferred benefits which can be used to hold investments and you will not be taxed on the income earned as long as the income earned remains in the account. The contributions that you make to your RRSP are tax-deductible. There is a yearly RRSP contribution limit, for 2022 the maximum contribution limit is $29,210, and for 2021 the maximum contribution limit was $27,830. The maximum contribution limit can also be capped at 18% of your income, or the yearly contribution limit, whichever is lower. Additionally, there is also the carried over contribution room if you haven’t contributed the full yearly amounts throughout the years.

The Tax-Free Savings Account (TFSA) can hold various investment benefits, such as cash, stocks, bonds, GICs and mutual funds, the growth of which will not be tax-deductible. Any contribution or any income earned in the account is generally tax-free, even when it is withdrawn.

Locked-In Retirement Account (LIRA) is an account meant for those who have an employee pension plan and leave their job. You have the option of transferring your pension plan savings into a LIRA, but you will not have access to the funds until you retire, hence it is locked-in.

Registered Retirement Savings Plan (RRSP) is a tax-advantaged retirement savings plan. You contribute to the RRSP throughout your life and once you retire you convert it to a Registered Retirement Income Fund to withdraw your income. The RRSP has plenty of tax-deductible benefits and tax-advantages.

Yes, a Tax-Free Savings Account (TFSA) is a great account for all Canadians to have. There are no fees for most TFSAs, there aren’t mandatory monthly deposits needed. A TFSA is an excellent account for all Canadians, even if they don’t have a clear savings goal in mind yet. The contribution room in your TFSA will grow if it is unused and not maxed out, therefore it will be ready for you when you want to start saving and using your TFSA. Starting a TFSA is a smart decision and is readily available. Contact a financial advisor now to learn how a TFSA will be right for you.

Talk to an advisor today.

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