Last week, I shared three financial resolutions to think about. This week, I continue on with another three for consideration.
4. Boost retirement savings.
The savings rate in Canada has been under 5% for the past 15 year. I am always amazed at how few people buy RRSPs given the tax benefits and the pressures to self-fund your own retirement income. Most people who filed tax returns were far from maxing the total room available to them. In fact, 91% of the total RRSP room is unused. The median contribution across Canada is only $2,600.
Related article: The online Guide to RRSPs
If you are part of this group with unused RRSP contribution room, it might be the perfect time to develop a plan to start getting money into RRSPs. If you have not started contributing to RRSPs, start a monthly contribution plan, it will be the easiest way to start. If you’ve already got a monthly contribution set up, see if it’s feasible to increase your contributions. If you have a Group RRSP plan through work and are not taking advantage of employer matching and the ease of having contributions deducted from your paycheque, it’s a great time to enrol in that plan.
Related article: Employee benefits of a Group RRSP
5. Update your will
You should update your will at least every five years or whenever there is a major change in your circumstances. In the interim, mark your calendar as a reminder to reread your will once a year, perhaps on the anniversary of the date you signed it. This exercise may spark some personal reasons for updating your will.
Related article: How often should you review your will?
What follows is a partial list of technical matters which may have a bearing on your will review. This is a general guide only and if you have any questions you should consult your lawyer.
- Will was written before 1982 and contains a limited marital deduction clause.
- You want to add or remove a beneficiary.
- You no longer keep in touch with your executor
- Your marital status has changed, or a member of your family’s marital status has changed.
- There has been a birth or adoption of children or grandchildren since the last will review.
- There has been a change in your health or a family member’s since the last will review.
- There has been a change in the value of your estate.
- One or more assets has appreciated or depreciated greatly since the last review.
- There has been an acquisition or change in the ownership of life insurance, pension plans, or other retirement benefits since the last review.
- There has been a significant change in a business situation. -You want to change/add/or delete a guardian, executor, or a trustee since the last review.
- You’ve moved to another province since the last will review.
- There has been a change in the form of property ownership since the last review.
- You’ve acquired property in another country or province since the last will review.
- There have been significant tax law changes since the last will review.
6. Take stock and simplify.
In the health industry, weight is one of the universal benchmarks to understand your level of health and fitness. In the financial industry, your net worth is the benchmark to use to measure your financial fitness.
If you do not know what your net worth is, take a piece of paper and start figuring it out right now. On the left hand side of the page, list all of your assets. These would be primarily your financial assets as opposed to your personal assets. On the right hand side of the page, list all of your debts or liabilities. On the bottom of the page or the backside, take your assets and subtract your liabilities and you should have your net worth statement.
Related article: Calculating your net worth
Once you have this figure, you should try to make sure you are going in the right direction where your net worth is increasing year after year. Increasing your net worth can be accomplished by either accumulating more financial assets or paying off debt.
Whatever the case may be, it will be much easier knowing if you are making progress if you keep track of your net worth on an ongoing basis. I suggest annually as a minimum.
So there you have a few ideas for financial resolutions for the new year. Some may apply to you, others may not. The whole idea of resolutions is to simply set new goals for the future. Good luck!