Financial House-cleaning For Couples
Now that the tax season is over, how did you and your significant other do? Were you faced with tax bills or did you receive a refund?If you both had a less than spectacular financial year, don’t be discouraged. Mid-year is a great time to review your financial situation and resolve to make changes now to ensure you’re in a better position next year. Here are some ideas that can help you both max out on the good and reduce the bad:
1. Clean up your tax act: Really evaluate how well you did this season. As a couple, did you take advantage of every credit possible—Spousal RRSP, GST credit, child tax and child care credits, marriage/common law/equivalent-to-married credits, RESP, charitable giving, medical expenses, tuition and education credits, and home-office expenses. Consider seeking advice from a tax expert. It’s worth the cost especially if you’ve been through a major life event like: marriage, divorce, career changes, severance, retirement, illness and/or disability.
2. Develop the habits of Super Savers: Set up a pre-authorised payment plan to contribute to your registered accounts year-round and have fun watching your nest egg grow. To take advantage of automatic RSP contributions, consider filing a Tax Reduction at Source Form 1213. Essentially, once the government approves your application, they authorize your employer to deduct less tax from your salary. You’ll end up increasing your cash flow and reducing your end-of-year tax bill, perhaps even to zero. The extra money you bring home can be directed towards debt reduction or your savings plan. Another option is to take advantage of any retirement savings programs that are provided through work, which results in instant tax savings.
3. Create a household budget and stick to it: Do you know what’s coming in and what’s going out? If you can’t answer these questions immediately, you likely aren’t budgeting. This can be a daunting task for some, but it doesn’t have to be. To make a simple budget, make a list of your income sources and your monthly expenditures, including your investments and savings. You can track your budget on paper, a spreadsheet or by using personal finance software. One trick to remember is to add your month-end cash balances to the following month.
4. Seriously reduce your debt: Include a line in your budget for debt reduction and commit to paying it down. If a part of your debt comes from credit cards, aim to pay it off every month and avoid making new charges. It’s always helpful to know your credit rating. If the result is high, make all the necessary changes to bring it down to normal levels.
5. Protect your investments: Would you be able to support your family and meet your financial responsibilities if you were in an accident or fell ill? A term insurance policy is an ideal solution because it’s inexpensive and it will meet your short-term needs.