December is here. We are just a month away from 2023. New year and holiday season sounds exciting and full of happiness, but don’t forget to also review your finances and plan for the year ahead.
Here are some financial checklists you can use to put your financial house in order before the 2023. For detailed explanation on each heading please click here.
Conduct a General Financial Check
Take a quick look at your finances for the year.
- Budget: Are you within your budget this year? Are you overspending or underspending? Now is a good time to review your income and expenses and adjust your budget accordingly for next year. If you have leftovers in any category, consider moving to Emergency fund or investments.
- Debts: If you have any debts, are you on track with paying off your debts?
- Emergency funds: 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? Take a moment to review and update as needed.
- Estate planning: An estate plan is the process of forming a detailed plan for how your assets will be distributed upon your death. Part of the process is planning to minimize tax liabilities. If you already have an estate plan, year-end is a good time to review and adjust where needed.
For example, your net worth might’ve gone up or down, meaning distribution and related taxes need to be reconsidered. Update your estate plan or will. If you don’t have an estate plan, now is a good time to make one.
Optimize your registered accounts and contributions
- TFSA
For 2022, the annual TFSA limit is $6,000 and this does not include the contribution room you may have carried forward from previous years. If you still have TFSA room available, consider contributing 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.
- RRSP
For 2022, you could contribute 18% of your earned income (up to a maximum of $29,210) 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 2023 in order to claim the tax deduction on your 2023 tax return. If your employer offers an RRSP contribution match, make sure to contribute the maximum to avoid leaving free money on the table.
For 2023, the maximum RRSP dollar limit is $30,780.
- Make RESP Contributions
A Registered Education Savings Plan (RESP) helps you save for your kid’s post-secondary education.
It’s always a good idea to maximize your RESP grants, if there’s still some room consider contributing extra.
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.
Prepare for Tax Season
Unless you are self-employed, you must file your 2022 income tax return by the end of April 2023. Start gathering the documentation you need at tax time to ensure you don’t miss out on important tax deductions and credits.
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.
Confused where to start? reach out
If you’re struggling with your finances or aren’t sure how to achieve your goals, I can help.
