8 financial housekeeping tasks to tackle before the end of the year
Very timely advice from the pros
The truth is, many of us won't start thinking about things like taxes and deductions until March or April rolls around. But there are several important financial and tax-related deadlines that are fast approaching.
We talked to two professionals — personal finance expert Rubina Ahmed-Haq and Michael Allen, a senior portfolio manager at Wealthsimple — to get their take on the money tasks Canadians may want to act on by Dec. 31.
Here are their top tips and reminders. Though the list may seem a bit daunting, note that not every task will apply to you, and that checking off even one of these suggestions can help you start the new year on a better financial note. Talk to a financial advisor at your bank or your accountant about any questions you might have and what might be the best custom strategy for your particular lifestyle.
Withdraw needed funds from your TFSA
If you're going to need funds from your Tax-Free Savings Account (TFSA) soon, perhaps to top up your RRSP, pay down debt or make a big purchase in the new year, it might make sense to make the withdrawal in 2018 rather than wait any longer. "Think about doing the withdrawal in December because, come January, you'll be able to recontribute the amount that you just took out," says Allen, who also notes that the TFSA contribution limit will be going up to $6,000 in January.
Make your RESP contributions
If you're making Registered Education Savings Plan (RESP) contributions for your kids, or a child in your life, you'll have to do it before year-end to receive the Canada Education Savings Grant (CESG) for 2018. "Make sure you get your RESP contributions in before December 31 to receive the maximum grant you're eligible for. The contribution room does roll forward, but you can only catch up on one year of grants at a time," says Allen. "So if you don't keep up, it can be hard to get the full government grant amount."
Ahmed-Haq notes that if you contribute $2,500 per child, you'll receive the maximum grant amount, which is $500. "If you can afford to do so, get all that money in now and take advantage of the grant this year, and then you can work on next year's grant, as well," says Ahmed-Haq. "You're just getting that money that much sooner in your child's education savings plan."
Spend money on your business
If you're self-employed and haven't incurred many expenses so far this year, you might want to consider making some of your planned early-2019 expenditures — for example, purchasing new equipment or investing in an office renovation — before the end of 2018 instead, notes Ahmed-Haq. "This way, you can minimize your overall tax burden in the new year. That does mean that you can't use the writeoff for 2019, but there could be other things that come up."
Make charitable donations
Now is a great time to make donations to your favourite causes and charities. "Get your charitable donations in by Dec. 31, and you'll receive those tax credits for 2018," says Allen.
Convert your RRSP into a RRIF, if you're 71 this year
The calendar year that you turn 71, you have to do something with your RRSP holdings, says Allen. Most people convert them into a Registered Retirement Income Fund (RRIF), although you can also opt for a lump-sum cash payment or purchase an annuity.
See if you can claim the Canada caregiver credit
"There's a new Canada caregiver credit (CCC) — they've combined three old credits into one to make it more efficient — and basically it's for those people that are taking care of an older relative that needs assistance, a disabled child or another disabled person that they have in their home," explains Ahmed-Haq.
"It allows you to get some money back for adjustments that you made in your life, or even equipment that you needed to buy in order to help this person who is now relying on you and your income." If you qualify, you might want to look into ways to take advantage of the credit for this year.
Review your financial plan
"The end of the year is a great time to review your financial plan, some of the expenditures and some of the things that may have changed in your life," says Allen. "Then you can update that financial plan, looking at the overall risk of the portfolio — because if your circumstances change, then the portfolio should also change with that."
He recommends reviewing your portfolio on a semi-annual or annual basis, if possible; it's the ideal time to see the fees you've paid, consider rebalancing the portfolio and make sure you are well diversified. "Throughout any given year, there's a lot of investment activity that happens within a portfolio, so it's just making sure that you still have the right diversification and the right balance at the end of the year," says Allen.
Get a head start on your taxes
Ahmed-Haq suggests taking time over the holidays, especially if you have a few days off, to start calculating your 2018 expenses and putting your tax documents together. "You're of course waiting for some tax documents to come through, but you have most of the rough numbers in hand," she says. "Get ahead on your taxes and you're going to save yourself so much time and hassle come March. Then, you can file your taxes early, and that means if you're getting a refund, you'll get that early — money you can use right away to either invest, put back into your RRSP or pay off debt."