This is a checklist that I update and follow at the beginning of every year.
Similar to the end of the year tax tips, there are certain financial to-do items to start off the year on a strong note. Here is the checklist that I use at the beginning of the year.
1. Contribute to your TFSA
For 2018, TFSA’s get $5,500 in contribution room ($57,500 total since 2009). If you made a withdrawal in 2017, then this year, you can contribute up to $5,500 plus the 2017 withdrawal amount. For more details about your TFSA contribution room, here are the details.
2. Maximize your RESP contribution
For those of you with kids, a new year means more government matching for your RESP! The federal government will match 20% of your RESP contribution which maxes out at $500 per child per year. To max out the government contribution, you’ll need to contribute $2,500 per child to the RESP account (how does an RESP work?).
Haven’t opened an account yet? We have ours with TD e-series, but if we had a child today, I would likely open it with a brokerage that offers commission-free ETFs. Also, don’t worry if you haven’t started contributing yet, you can still catch up on your RESP contributions!
3. Contribute to your RRSP
Another contribution?! I know, by the end of January, our savings stockpile definitely takes a hit – but it’s worth it! Even though it’s no longer 2017, you can still contribute to your RRSP (or not) to your tax advantage. The RRSP contribution will act as a deduction, so if you have tax owing (ie. from capital gains or side business etc), or in a high tax bracket, it may make sense to make a contribution. RRSP contributions made between now and the RRSP deadline (March 1. 2018) can be claimed for either 2017 or 2018 tax year (or carried forward).
4. Re-balance your Portfolio
If you have significant capital gains in a non-registered portfolio that requires re-balancing, then early in the year is the best time to do it. Why? Simply because capital gains tax is deferred for over a year – that is when you file 2018 taxes in late winter 2019. Also, now is a good a time as any to re-balance some of those holdings.
5. Calculate your Annual Returns
Calculating your annual investment returns is important to see how effective your portfolio is against the index benchmark. This is really geared towards more active investors or those that rely on their bankers to choose active mutual funds for them. Some discount brokerages do the calculations for you, but I’m the type that likes to confirm with my own calculations. So if your broker doesn’t do the investment return calculations for you, or if you want to do them yourself, I recommend that you get familiar with the XIRR function in Excel (or google spreadsheets).
Sounds complex, but it really isn’t too bad for those who have used a spreadsheet before. Here is a thorough explanation of how to use XIRR to calculate your investment returns.
6. Prepare for filing 2017 Taxes
With 2017 over, it’s a good time to start thinking about income tax. There is a bit of administrative work required for income tax filing, even before obtaining your T4 from your employer. Some things that I like to get out of the way are:
- Print off my non-registered brokerage statements for the year (and calculate capital gain/loss for the year – if you have multiple buys/sells with the same position here’s how to calculate your adjusted cost base);
- Gather receipts for RRSP contributions, childcare, children fitness programs , arts programs, charitable donations, prescription drugs, dentist visits; and,
- Print off interest statements from my investment loan.
For more information, here is a comprehensive article about the information required to file income taxes. If you are a small business owner or own rental properties, here is an article that may help.
Those are my checklist items to start the year. What tips do you have?-> If you would like to read more articles like this, you can sign up for my free newsletter service below (we will not spam you).