A New Year checklist for investors

With the busy – and expensive – holiday season behind us, it’s the perfect time to check in with your financial health and get your investing on track for the coming year. It’s a time to think ahead, set goals and establish some good habits and strategies to help you achieve them. We’ve got a few tips that could help.

1.      Maximize your registered plan contributions

Registered plans (e.g., RRSP, TFSA, RESP) can make a significant difference on your taxable income, so it’s a good idea to maximize those contributions each year. In addition to annual contribution limits, some types of registered accounts also allow you to catch up on missed contribution room. To find your contribution room, you can check out your most recent Notice of Assessment from the Government of Canada or sign in to My Account for individuals.

With registered retirement savings plans (RRSPs), you have the first 60 days of each year to contribute toward the previous tax year. So, as long as you make your RRSP contribution by around March 1 each year, you can use that amount to lower your tax bill for the previous year. For more information, here are some RRSP Basics.

Tax-free savings accounts (TFSAs) let you earn tax-free investment income. The maximum contribution amount can change each year, depending on the cost of living in Canada. You can keep track of your TFSA contributions with a tool like our goal setter (log in to your account and click on “TFSA & RRSP Contributions" on your dashboard to set a goal). For more information, check out our TFSA Guide.

A registered education savings plan (RESP) is a tax-advantaged way to save for your child’s education, and the government adds up to $500 per year of Canada Education Savings Grant. Read more in our RESP Guide.

2.      Boost your investing with automatic contributions

Review your income, expenses and savings each year to make sure you’re on track to meet your goals. If you want to boost your savings, consider setting up automatic contributions, so part of your income is always directed to your investing account(s). Even if you already have them set up, your income may have changed in the past year, allowing you to add more to your investments. Automated contributions are also a good way to build your emergency fund .

3.      Rebalance your portfolio 

The new year is a good time to take a closer look at your portfolio to ensure your investments are aligned with your goals, your risk tolerance and investment time horizon. A few things could have happened since the last time you checked in with your investment accounts:

• Based on the performance of different investment assets over the course of the year, your portfolio may have shifted from your target asset allocation.
• Your personal situation may have changed (e.g., health, job, marital status, the birth of a child) , which could necessitate a fresh look at your financial goals.
• You may be close to a savings goal – such as retirement or your child starting their post-secondary education. As you get closer to the time when you’ll need the money, it might be time to reduce the level of risk in your investments or shift your asset allocation to ensure you’ll be able to access what you need.

Check in with your portfolio each year (or better yet, a few times each year) to ensure your investments are well diversified and on track to meet your goals.

4.      Review your emergency fund

Money experts agree that an emergency fund is a vital component to a sound financial plan. Unexpected events, like a job loss, a death in the family, or even a furnace breakdown, can quickly derail your financial plan. The new year is a good time to ensure you have enough tucked away in an asset that you’re able to liquidate quickly without penalty – a high interest savings account, a money market fund or a cashable GIC.

And while it’s important for everyone to have three to six months’ worth of living expenses saved in case of emergency, it’s even more important for active investors. Whether you invest in stocks, bonds, mutual funds or exchange-traded funds (ETFs), the last thing you want to have to do is be forced to liquidate your investment at the wrong time to cover an unexpected expense. You don’t want to sell a stock or ETF when the share/unit price is down. Similarly, you don’t want to have to cash a GIC early, because it will likely mean penalties and lost interest. An emergency fund is critical because it allows you to deal with financial hiccups without having to interrupt/liquidate your investments.