January rings in the New Year, a sign of optimism, and the annual promise of something new: adopting resolutions, setting goals and looking ahead. It’s also a time to reflect on the previous year. Making resolutions is common for many, but less than 40% will actually achieve what they set out to do.
Nevertheless, for those looking for improvement in their financial health, here are some good habits to follow at the beginning of each year.
January is a good month to…
1. ) Calculate your net worth
You know how to do this. Total up all your wealth building assets – home, investments – subtract your debts – mortgage, credit cards, car loan, and voila – the resulting total is your net worth, or in other words, the current picture of your financial standing.
There are lots of online calculators that help you do this, but don’t stop there. Redo the calculation at least once a year. Create your own spreadsheet so you can compare several years. It will help you see if you’re moving in the right direction. Otherwise, how can you know if you’re getting ahead?
Also read: Your financial plan is a compass
Focus on what you can do to improve your finances, and if you find yourself getting off track, do some course corrections and carry on.
2.) Revisit your goals
January is also a good time to review your goals. If you have a spouse or partner, set aside some quiet time this month to have the money talk. Have an honest discussion about your short-term and long-term goals and check to see whether you are still on track to meet them.
Or, maybe your situation or priorities have changed, and you need to reassess. If something is not working, go back and modify. Since you can’t know what the future holds for you, a period of five years is a manageable target.
Map out a few steps for the current year that will see you heading towards a better financial situation. Continue Reading…
RRSPs are a valuable tool for many taxpayers, which is why they are the backbone of many retirement plans. Getting the most out of your RRSP often involves thinking several years ahead, rather than just when the contribution deadline is looming.
Here are five RRSP strategies to get you thinking beyond the basics:
Claiming RRSP deductions
Most of us claim our RRSP deductions in the tax year we make the contribution, but you don’t have to. In fact, you can choose to deduct only a portion or none at all and carry it forward.
If you expect to move into a higher tax bracket next year from say, a big promotion, or the sale of rental property, you should still make your contribution to take advantage of tax-free compounding. But, it may be worth waiting to claim the deduction the next year (or later) when your marginal rate will be higher and you will get a substantially bigger tax refund.
Level out income
Enhancements to the CPP are always being suggested, largely to address the fact that fewer Canadians now have workplace pensions. The latest deal made by provincial Finance Ministers in June 2016 will boost CPP income from one quarter of pensionable earnings to one-third. The change will phase in slowly from 2019 to 2025 (when the pensionable earnings target will be $82,700), so it will be a while for these changes to be felt by future retirees.
Of more pressing concern to current retirees, and not addressed – or even on the radar – is the issue of CPP survivor benefits.
As noted in this Globe and Mail article, if you find yourself widowed, you may not get the survivor benefit that you expected.
CPP Survivor Benefits calculation
It is not a pension plan. You don’t make contributions. OAS is a government benefit program that is financed out of general revenue.
Employment history is not a factor in determining eligibility. You can receive OAS benefits even if you have never worked, or are still working.
Residency requirements have to be met. The amount you receive is determined by how long you have lived in Canada after the age of 18.
Everyone who has been a resident of Canada for at least ten years (after age 18) is eligible to collect OAS starting at age sixty-five. Normally, you qualify for the full amount only if you have been a resident for at least forty years after turning 18.
You may still qualify for full or partial payments if you meet certain other requirements.
Up to September 2017, the maximum monthly benefit is $583.74. This rate is reviewed four times a year and may be adjusted based on the cost of living measured by the Consumer Price Index. OAS is taxable income.
Anyone who receives OAS and whose income falls below a certain level may be eligible to receive additional non-taxable monthly payments.
- The Guaranteed Income Supplement provides a monthly benefit to low income OAS recipients. It is an income tested benefit. This means your total income from the previous year (combined income for couples) is used to determine your eligibility.
- Allowance is available to 60-64-year-old spouses/common-law partners of OAS recipients who also receive GIS.
- If you are sixty to sixty-four years old and are widowed, you may be eligible to receive the Allowance for the Survivor.