7 Things To Consider For Your Year-End Financial Checklist

The end of the year is always a busy one for family gatherings, holiday shopping, travelling and more.

With all of the merriment in the air this holiday season, don’t forget to also consider review your finances and plan for the year ahead.

Here’s a 7-step financial checklist you can follow to put your financial house in order before the New Year.

1. Conduct a General Financial Audit

Take a quick look at your finances for the year. Were you able to meet your goals? Did your monthly budget work out? how about your debt repayment plans?

Use this opportunity to review your:

  • Emergency fund: Do you have enough cash on hand to cover your expenses for 3-6 months.
  • Insurance coverage: Are you adequately protected against unforeseen and potentially disastrous life events?
  • Estate planning: Do you have an updated will? Create a Will online for cheap.
  • Debt: Are you on track with paying off your debts? How much high-interest debt are you carrying?
  • Net worth: Calculate your net worth. Are you on track to meet your long-term goals?

2. Contribute to your TFSA

A Tax-Free Savings Account (TFSA) is a great tool for saving and investing for both short and long term goals. 

For 2021, the annual TFSA limit is $6,000 and this does not include the contribution room you may have carried forward from previous years.

It’s not too late to contribute to your TFSA and take advantage of the tax-free growth realized on your savings account or investment portfolios.

If you are looking to make a TFSA withdrawal soon, consider making it before the end of the year. This way you can re-contribute the amount from day 1 of the New Year.

Here’s a Wealthsimple TFSA case study that shows how a TFSA can help your retirement savings.

3. Maximize your RRSP Contributions

For 2020, you could contribute 18% of your earned income (up to a maximum of $27,230) to a Registered Retirement Savings Plan. If you have not used up your eligible RRSP limits in previous years, your contribution room would be higher.

Consider making a contribution to your RRSP account within the first 60 days of the year 2021 in order to claim the tax deduction on your 2020 tax return.

For 2021, the maximum RRSP dollar limit is $27,830.

In addition to helping you save for retirement in the future, an RRSP contribution also lowers your taxes for today. Your lower taxable income (as a result of RRSP deductions) can result in an increase in your Canada Child Benefit if you have kids.

If your employer offers an RRSP contribution match, make sure to contribute the maximum to avoid leaving free money on the table.

Take note of some of these popular RRSP mistakes so you do not get penalized.

financial year-end checklist canada

4. Make RESP Contributions

A Registered Education Savings Plan (RESP) helps you save for your kid’s post-secondary education.

Each year you contribute to the account, the government matches your contributions at a rate of 20 cents per $1 contributed up to a maximum of $500 per year.

This government contribution is referred to as the Canada Education Savings Grant.

RESP funds grow tax-free and are taxed in the hands of your kids when they start making a withdrawal. This usually occurs at a much lower tax rate or it can remain tax-free depending on their income.

5. Audit Your Investment Portfolio

It’s very easy to forget about your investments and simply hope that all will be well. 

If you are a self-directed investor, the year-end is a good time to think about rebalancing your portfolio, consider tax-loss harvesting, and ensure that your investments are in line with your risk tolerance and investment objectives. 

If you are using the services of a robo-advisor, your portfolio is automatically rebalanced when required.

When there are changes in your financial circumstances, chat with one of their financial advisors to ensure your asset allocation continues to correlate with the level of risk you are comfortable with assuming.

Set up preauthorized contributions to your investment accounts, so you don’t forget to pay yourself first.

6. Prepare for Tax Season

Prepare for the coming tax season. Unless you are self-employed, you must file your 2020 income tax return by the end of April 2021. Self-employed individuals generally get an extension until the middle of June.

Start gathering the documentation you need at tax-time to ensure you don’t miss out on important tax deductions and credits.

7. Plan for the Future

Maybe you had some shortcomings this year. You can avoid the same problems in the coming year by planning well ahead.

Take a look at your budget to determine if you need to tweak it to accommodate your new financial goals. Do the same for your insurance and estate plan.

Do you need to increase your income? Formulate a plan to make extra money at your current employment or find other means.

Boost your savings rate by participating in a no-spending challenge, de-cluttering and sticking to your budget. 

If you are nearing retirement, this is also a good time to review your retirement savings to determine whether you are saving enough. Start looking at various options for generating retirement income from your registered and non-registered investment accounts.

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Conclusion

As the year comes to a close, a financial review can help you quantify your progress and identify areas where improvements are required.

It also helps you to develop a financial plan for the future. As Benjamin Franklin once quipped:

By failing to prepare, you are preparing to fail.

May the next year be your best yet!

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Author

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Enoch Omololu

Enoch Omololu is a personal finance expert and a veterinarian. He has a master’s degree in Finance and Investment Management from the University of Aberdeen Business School (Scotland) and has completed several courses and certificates in finance, including the Canadian Securities Course. He also has an MSc. in Agricultural Economics from the University of Manitoba and a Doctor of Veterinary Medicine degree from the University of Ibadan. Enoch has a passion for helping others win with their personal finances and has been writing about money matters for over a decade. His writing has been featured or quoted in the Toronto Star, The Globe and Mail, MSN Money, Financial Post, Winnipeg Free Press, CPA Canada, Credit Canada, Wealthsimple, and many other personal finance publications.

His top investment tools include Wealthsimple and Questrade. He earns cash back on purchases using KOHO, monitors his credit score for free using Borrowell, and earns interest on savings through EQ Bank.

2 thoughts on “7 Things To Consider For Your Year-End Financial Checklist”

  1. Hello Enoch,

    Many thanks for this reminder and Happy new year to you too.

    Could you please refer me to your writings on estate planning.

    Best regards

    Reply
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