I always find this time of year tough to talk about money. Many of us (me included) are caught up with seeking out deals and buying gifts, and the last thing we want to consider is how to better our finances. December can be a hard month on anyone’s wallet. It’s for sure one of our spendiest months of the year. This year is a travel year for us, so that’s an extra $1,000 in the holiday budget for flights. Add on presents, Christmas parties, and other events; we’re looking at almost $2,000 of expenses this month. Yikes. I love Christmas, but not that price tag!
And I know we’re all caught up in the Christmas spirit, but it’s important not to let the year end slip away without doing a quick check-in with your finances. Here are a few tasks to add to your to-do list that will set you up for next year.
Top Up Your RESP
The deadline for making contributions to an RESP each year is December 31st. If you’ve been procrastinating about contributing for your children (or grandchildren) then now is the time.
The big perk of the RESP is that the government will pay you for contributing. On contributions up to $2,500 per year per beneficiary, the federal government will give you 20% in grant money. That’s potentially an extra $500 per year for your kid’s education. There are very few ways you can consistently make a 20% return on your investment.
If you feel like you’ve missed the boat on an RESP, it’s not necessarily too late. You are allowed to play catch-up. Each year you can double your contributions to make up for one missed year for each beneficiary. Say you have two kids and you only started contributing when they were 5 and 3. You could contribute a total of $10,000 this year. That would be $5,000 for each for the current year and one missed year. It also means that if your budget doesn’t allow for the full contribution right now, you can always keep it in the back of your mind in future years.
Top Up Your TFSA
December 31st is also the deadline for making this years TFSA contribution. This one isn’t such a big deal because you are allowed to top-up your TFSA at any point, and you never lose your accumulated room. Still, if you have the money in your budget, it’s never a bad time to move money to your TFSA.
As of 2018, you can have a total of $57,500 of contribution room in your TFSA, as long as you were over 18 in 2009 when the program started and a resident of Canada. In 2019 you’ll get another $6,000 of contribution room as it was bumped up slightly because of inflation from the current $5,500 per year.
TFSA’s are valuable because they give you the flexibility of a non-registered account but with added tax benefits. You also don’t need to worry about making a withdrawal because you get back that contribution in the following calendar year. Another perk of contributing before year end if you have the room.
Tax Loss Selling
You’ve all heard it before, when it comes to investing the number one rule is BUY LOW, SELL HIGH. And 99% of the time that’s the right advice.
The sometimes exception for that mantra is if you’re in desperate need of reducing a mega tax bill. For the majority of us, this tip isn’t going to apply because it only applies to investments held in non-registered accounts. Unless your TFSA is completely maxed out then you should be using that and tax isn’t an issue either way. However, if you do have investments in a non-registered account, you can take advantage of tax loss selling to decrease what you owe CRA.
How does that work? When you sell an investment like a stock or fund, you will either have made money or lost money on it. If you made money, you have to pay capital gains tax on the growth, but if you lost money, you can claim the loss and decrease your taxable income for the year. This might make sense if you’ve done something that is going to cost you big on taxes. An example would be selling a rental property that has jumped in value since you bought it.
If you have a dud stock in your portfolio and need the tax help then now might be a good time to offload it. One important note, you can buy back into the holding if you still think it has potential but you have to wait at least 30 days otherwise it’s considered short-term trading. With the market doing what it’s doing lately, it’s probably not that hard to find a loser in your portfolio.
Make A Charitable Contribution
‘Tis the season of giving back and sharing the love. If you have the funds available then now is the time when many charities are doing an extra big push for the holiday season. Requests for food, presents, cold weather gear, etc. always go up this time of year so do your part and contribute to your community.
The feel-good factor is reason enough. But if you need more encouragement, think of the tax break! For every dollar you donate to a registered charity before December 31st you can use to lower your tax bill when you file next year.
You earn tax credits on charitable donations at both the federal and provincial level. Federally you earn back 15% on donations up to $200 and 29% for donations over $200. Provincial credits range from 4% to 24%; you can get specific details on your province here.
Take Advantage of Work Benefits
If you have benefits through your employer then now is the time to make sure you’ve made good use of them during the year. Many benefit plans run for the calendar and will, therefore, reset on January 1st. If you have, haven’t made it to the dentist this year, or need to stock up on a prescription, or go for an extra massage to get you through the holidays then do it ASAP.
Just last week I squeezed in a dentist appointment, eye exam and bought new glasses and I have a massage booked for the end of the month. The benefits are there, make sure you are using them!
Does anyone else stockpile expense receipts and submit them all at once? *heads nodding*
If you are someone who claims expenses through work, then you want to make sure you get everything submitted to your employer by the end of the month. It tends to make the accounting that much more straightforward (for you and your work) if it’s claimed in the same calendar year the expense was incurred. Plus, we could all use a little extra cash this time of year!
This also goes for outstanding benefits invoices. If you’re sitting on some of those, then take the time to submit them to your insurance provider. Now is the time to collect on any outstanding payments you are owed.
I know this time of year is busy for everyone, but checking off a few of these year-end money moves for Canadians will set you on the right track for next year.
Will you be making any of the above moves this year? Is there anything else you would be adding to the list? Share your ideas in the comments.
This post was proofread by Grammarly.