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A New Year Financial To-Do List

Improve Your Wealth Health

Many of us go through an annual ritual of setting resolutions. Improving health is usually high on many people’s lists — lose weight, exercise and eat healthier. However, in addition to improving your physical health, you can resolve to make this year your healthiest financial year ever by focusing on the fundamentals. The following is a list of some financial “to-do’s” that you should discuss with your advisor.

Make sure Your Will and Power of Attorney are up-to-date Did you know that a large majority of Canadians do not have a will? Furthermore, of those who do, many have one that is out of date and does not reflect their current wishes or family situation. Furthermore, if you do have a will, do you have a “simple” will? A simple will is one that states something to the effect of “If I die first, everything goes to my spouse directly. If my spouse dies first, everything comes to me directly. And after we both die, everything goes to our children equally.” This type of will may result in higher taxes for your survivors and potential disharmony among family members. Give your family and yourself peace of mind by booking an appointment with a legal advisor who specializes in will and estate planning.

Save Taxes by Putting Family Income-Splitting Structures in Place  Family income splitting is the bread and butter of tax planning in Canada, but many Canadians are not taking advantage of simple income-splitting opportunities acknowledged by the Canada Revenue Agency (CRA). If you have a low-income spouse or low-income children or grandchildren, opportunities might be found in prescribed rate loans, funding Tax-Free Savings Account (TFSA) , gifting, family trusts, or income splitting for business owners.

Ensure you have adequate Life and Living Benefits Insurance Ask yourself the following question: “Am I confident that if I died or became disabled, my family or I would have adequate assets and income to maintain our standard of living?” It’s a very important question. If the answer is “No” or “I don’t know,” then speak to your advisor to determine if you are under-insured, and if so, by how much. Give yourself and your family peace of mind by taking immediate action today to secure your family’s financial future in the event of an unforeseen occurrence.

Ensure your Asset Allocation is Up-To-Date and Tax Efficient Now is a good time to review the asset allocation of your investments (cash, fixed income and equities) as well as their currency and geographic split (Canada, U.S., international). Is your asset allocation appropriate based on your risk tolerance, and your financial and retirement goals? Studies have shown that asset allocation is a key factor in determining your investment performance and variability of returns. Speak to your advisor about getting an asset allocation analysis to see where you stand today and if any changes need to be made.

Review Account Structure and Beneficiaries First, make a list of all your accounts, including any employer accounts such as an employer pension plan, group RRSP or stock savings plan. Next, for each account in the list you created, ask yourself the following two questions: i) How is this account legally and beneficially owned? ii) Who is the Beneficiary? The appropriateness of your account structures and beneficiary designations will depend largely on how you intend to have your estate distributed and how your Will is structured.

Give Back – Donate your Money & Time Let’s face it, we are lucky to be living in Canada. Most of you reading this article are likely in the top 20% in terms of income or net worth of all Canadians and in the top 1% of all people in the world. Striving to reach your personal goals related to money, career, family and health is, of course, important. You may also want to give back to those less fortunate than you by donating your money and time through volunteer work. A great way to take your charitable giving to the next level and get your entire family involved in philanthropy is by creating a charitable foundation.

Ask you Advisor to prepare a Retirement Projection or Comprehensive Financial Plan

The question everyone asks is, “Will I have enough income and savings when I retire so I can live comfortably?” You may have savings through an RRSP and/or a company pension plan, but are you on track to meeting your retirement age and income goals? If you are a business owner, how will you use the equity in your business to create retirement income, and will it be enough? As life expectancies get longer, maintaining a comfortable standard of living throughout your retirement may become more challenging. Give yourself peace of mind and speak to your advisor about preparing a simple retirement projection so you can see on paper where you stand today and what changes, if any, need to be made to reach your retirement income goals.

Simplify your Financial Life Although the tips and strategies in this article may require additional time, it is important to not lose sight of the benefits of getting your financial life in order, chief among which is preserving and maximizing your wealth. Nevertheless, keeping things simple is always welcome by most.

Successful people tend to work off to-do lists with a strong determination to complete each item on the list. Do yourself a favour and sit down with your advisor to go through this list with a commitment to completing all of the items by the end of the year.