Finance – Suman Bhandari

2024 End of Year Financial checklist

Suman — Wed, 06 Nov 2024 05:03:24 +0000

December is here, and we’re just a month away from 2025. The new year and holiday season bring excitement and joy, but it’s also essential to review your finances and plan for the year ahead.

Here are some financial checklists you can use to get your financial house in order before 2025. For detailed explanations 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 them to your emergency fund or investments.

Debts: If you have any debts, are you on track with paying them off?

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 your policies 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, with a focus on minimizing 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 changed, 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 create one.

Optimize Your Registered Accounts and Contributions

TFSA

For 2024, the annual TFSA limit is $7000, not including 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 on your savings account or investment portfolios.

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

RRSP

For 2024, you can contribute 18% of your earned income (up to a maximum of $31,560) 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 2025 to claim the tax deduction on your 2024 tax return. If your employer offers an RRSP contribution match, make sure to contribute the maximum to avoid leaving free money on the table.

Make RESP Contributions

A Registered Education Savings Plan (RESP) helps you save for your child’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 2024 income tax return by the end of April 2025. Start gathering the documentation you need for 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 for More Information

If you’re struggling with your finances or aren’t sure how to achieve your goals, I can help.

Initiate Conversations with Your Children about Finances!

Suman — Wed, 06 Sep 2023 21:31:43 +0000

Discussing money with children is often a topic that parents avoid. However, it’s essential to teach kids the fundamentals of financial management from a young age to help them develop good money habits early on. Here’s a simple guide to help you get started:

1. Initiate Conversations About Money: While finances are often a taboo subject, it’s important to introduce children to the concept of money. The sooner you start discussing it, the better prepared they will be to make informed decisions. Talk about your income and expenses without divulging too much detail to avoid causing unnecessary stress.

2. Encourage Savings: Saving is a vital skill for a secure future. Here are five tips to instill the savings habit in your kids:

Three-Jar Method: Provide your children with three jars for their money—one for spending, one for saving, and one for special occasions or gifts.
Lead by Example: If you manage money wisely and have a savings habit, your kids are more likely to follow suit.
Teach Consequences: Explain how spending can have consequences, like wasting money on low-quality items.
Ask Questions: Encourage them to think before making a purchase by asking if they’ll use it often and if it’s necessary.
Limit Impulse Buying: Show them that sometimes it’s better to leave a store empty-handed to prioritize needs over wants.

3. Invest in an RESP: Consider setting up a Registered Education Savings Plan (RESP) to save for their post-secondary education. The government provides incentives for this.

4. Open a Savings Account: As soon as they start earning money, help them open a savings account and make deposits regularly. This will allow them to see their savings grow over time.

5. Explain Paychecks: When your child receives their first paycheck, help them understand the deductions for taxes, employment insurance, and other government contributions. This will illustrate the difference between gross and net salary.

6. Seek Financial Advice: Encourage your kids to consult a financial security advisor as they secure stable jobs. Advisors can provide valuable insights and recommend strategies to help grow their savings, such as investing in RRSPs, TFSAs (Tax-Free Savings Accounts), or FHSAs (First Home Savings Accounts).

7. Discuss Insurance: Even though insurance may not seem appealing to young workers, it serves as a crucial safety net. Inform your children about insurance options, especially if they don’t have coverage through their employer. Life insurance is particularly important when starting a career, as it can provide financial support for family and loved ones in the event of an unexpected death.

8. Emphasize Responsible Credit Use: Teach your kids about credit and its responsible use. Explain that timely payments and responsible borrowing can be helpful for financing significant life events, such as education or starting a business. However, they should also understand that credit is a form of debt, and late payments can negatively impact their financial history.

By openly discussing these financial topics with your children, you can demystify money matters and empower them to make informed decisions as they grow older. Financial autonomy is a valuable skill that will benefit them throughout their lives.

ABCs of Financial Planning for Retirement

Suman — Mon, 13 Mar 2023 21:12:21 +0000

You Need a Plan

Whatever your age or situation, you should have a plan for retirement!

Planning for retirement means answering one basic question: how much should I put aside each year to reach my retirement objectives? Planning for your retirement can be broken down into four main steps.

Step 1 – Setting Your Objectives

First you need to set your objectives:

The age at which you want to retire
Be aware that if you want to retire early, you will need to save more money because you will be living off your retirement income for a longer period of time.

The amount of money you will need when you retire
This will depend on what type of life you want to live after you retire. Experts often express the amount of money you will need as a percentage of pre-retirement income. In determining this percentage, you need to take into consideration that some types of expenses will likely decrease or disappear during retirement (such as transportation costs, clothing, saving for retirement, mortgage, and expenses for dependent children) while others will likely increase (such as travel and health care).

Step 2 – Evaluating Your Retirement Income Sources

Then you need to make an inventory of all your potential income sources during retirement. Your income sources will typically include government plans (Quebec or Canada Pension Plan, Old Age Security), employer plans (past and present) and your personal savings (RRSP, TFSA and others).

What you want to do is estimate your total retirement income from all sources, taking into account the savings you have already accumulated as well as future contributions and future investment income.

Using a calculation tool or consulting a personal financial advisor can be most helpful at this stage. As a first step, it’s a good idea to read over documents such as the annual pension statement you receive from your employer, your personal RRSP account statement from your financial institution and any statement available on your participation in government plans.

Step 3 – Establishing Your Saving Strategy

When you know where you stand, you will be able to determine if you are on the right track. If you are not on track and the figures show that you will likely not reach your objectives with what you already have, you can then decide to increase your savings and/or change your investment strategy… or modify your plan.

Step 4 – Monitoring Your Progress

For successful long-term planning, you also need to review your plan regularly to see if it needs to be modified. Your financial situation and economic conditions will change over time, and you will likely need to make adjustments as you go along.

In Conclusion

Planning is the only way to avoid unpleasant surprises, like not being able to retire when you expected or not having enough income during retirement.

The key to retirement planning is starting when you still have enough time to accumulate adequate savings, before the amounts you must save become too high.

Obviously, there is much more to retirement planning than this. For example, you will need to answer other questions such as:

How should I invest my savings and what is my risk tolerance?
How can I take full advantage of the income tax system?
What other assets or income should I consider in my retirement planning?
How should I use the money during retirement?

Hopefully this will point you in the right direction and persuade you of the importance of planning for retirement.

We strongly suggest that you meet with a personal financial advisor to help you draw up your plan.