Going through a divorce can be an extremely overwhelming and challenging time. Taking steps to organize your finances can help mitigate much of the stress which comes with such a life transition. The New Year is a great time to start fresh with your finances. The below is a calendar of monthly milestones which can help you find independent financial success in 2016.
January
Create a personal balance sheet/net wealth statement.
2016 has already seen a lot of market volatility. Like anything, worrying about it is often worse than actually understanding the facts and what you have in place and taking action. Look at your most recent investment statements or go online and check account balances. Top up TFSAs or investigate opening a TFSA and taking advantage of your carry forward contribution room. Understand the value of your RRIF and your new RRIF payments. Identify potential problem areas:
• Does any one financial asset class/sector consume a significant share of your net wealth
• Do you have liquidity in your portfolio
• How does your net wealth compare to December 31, 2014
• How does your debt load compare – opportunity to refinance
February
RRSP contribution top up and collect your tax information. Look at your NOA to see what your contribution room is. If you have cash on hand make your contribution before February 29, 2016. The maximum is $24,930 for the 2015 tax year and $25,370 for 2016.
March
Update your financial goals for the year ahead. Given the market volatility it is an ideal time to look at the assumptions you have made regarding your goals. Revisit asset allocation, your savings rate, your rate of return assumptions, withdrawal rates. Better understand discretionary and non-discretionary expenses.
April
Tax time. Understand realized gains and losses in your portfolio. Are you taking advantage of all the tax planning incentives that are available to you? Introduce your accountant to your wealth advisor. Update your accountant on any life changes. Get organized – look at paperwork and get an understanding of what you really need to keep and what you can throw out. Generally you want to keep important documents such as tax returns for the past seven years.
May
Check up on insurance needs. Do you have adequate insurance on your house, cars? Review life insurance – too much or not enough. Look at disability insurance – your employer may offer some but understand how much and conditions. Investigate long term care insurance or if you have it remind yourself what the policy entails.
Summer
Estate planning. If you don’t have a will/POA in place it may be a good project for the summer. Also, you should be reviewing your estate plan every five years or with any major life event. After you have completed your estate plan don’t forget to update your beneficiaries on your RRSP and TFSA. Finally, take the time to create a drop dead sheet and talk about it with your executors.
September
Back to school. Encourage your loved ones to investigate RESPs or think about long term education savings for your children or grandchildren.
October
Thanksgiving. A good time to engage in family estate planning or encourage financial literacy. You might also decide that this is the time to give back and look at philanthropy and giving time, treasure or talent to causes close to your heart.
November
Make sure you are on track. Are you on track for the goals you set? Where are you at and how are you going to reach your goals?
December
Year end planning. Accelerate any TFSA account withdrawals. A taxpayer who withdraws funds from her TFSA before December 31st, 2016 will have that amount added to her TFSA contribution limit for 2017. If you wait until January 2017, you won’t be able to replace the funds until 2018. Make RRSP contribution if you are 71 by December 31st. And, combine tax loss selling with rebalancing – identify losers that you may want to sell to offset realized gains in the portfolio.
For further information on how you can achieve independent financial success in 2016, please check out Sarah’s profile at http://divorceangels.ca/vendor/sarah-bull/?r=4223
Sarah Bull
Partner and Portfolio Manager
KJ Harrison
