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Year End Financial Planning Tips for Investors Under 40 Thumbnail

Year End Financial Planning Tips for Investors Under 40

As the calendar gets closer to turning over and ending a year none of us will forget, it is a good idea to take some of the spare time we all have not attending Christmas parties and conduct a year-end planning review. Most put these reviews off, but this is a great time to reflect and clean up some oft forgotten items.

#1 – Pay yourself first!

Do you use a pre-authorized contribution to automate your savings?  December is a great time to review and make adjustments to the investments that you’re using to rebalance and also to see if you can eek out a way to increase this automated savings a bit further.  Ideally, you’d have all your savings automated so that early January you can max out your TFSA, RESP and then in March your RRSP for the next year to get maximum tax deferred savings!

#2 -  Debt

Do you know the balance on your credit card, line of credit and mortgage?  If so, what are the interest rates you are paying?  Can you shift debt to accounts with lower rates?  Deductible debt is best if possible, credit cards and +20% rates are the worst and should be avoided at all costs.  Can you change your payment frequency on your mortgage to increase your principal payments?

#3 – Review your Emergency Fund

2020 has been a great year to have an emergency fund to backstop your life given what the world has brought forth.  Do you have an emergency fund?  Is it large enough?  What would happen if you needed a new furnace or were laid off work for 9 months like many faced this year?

#4 – Retirement Planning

Does your employer have a retirement savings program and/or a stock plan?  Are you maxing them out to maximize “free dollars”?  If not, why not?  

#5 – Benefits Plan

Depending on your plan you may not be able to change your plan or components now, but it’s a great time to review what you used.  Are you paying for services you and your family aren’t utilizing?  If so, be prepared for when you can adjust your options.  Are there dollars on the table you could realize before the calendar year crosses over and they are permanently lost?

#6 – Insurance (Wealth/Family Protection)

Have there been any changes in your life?  New job, children or move?  Has your net worth significantly changed?  If they answer to any of these are yes, you should have an insurance needs analysis completed to make sure your insurance is keeping up with your current lifestyle.  Nobody likes to talk about death or disability, but its better to be prepared than to realize your coverage is inadequate in your time of need.

7 – Estate Plan

Do you have wills and powers of attorneys?  If not, you need them!  This is especially true if you own a home, are married and/or have children.  Wills and powers of attorney’s are ways for your wishes to be enacted quickly and smoothly should something happen to you.  If you do have completed documents, how old are they?  When did you last review them?  Are the people you’ve appointed still the correct people for those roles?  Review, think about this and let the people who you’ve assigned the roles to what their responsibilities may be.

8 – Investment Review

How did your investments perform last year?  Are there any that didn’t work that should be changed?  Are there some that did extremely well and have changed your investment mix or are now overweight in your portfolio that you should reduce?  

9 – Set your goals for the next year

What do you want to accomplish?  Which of the above should be prioritized?  Do you have any milestones to prepare for or target?  

Talk to our team, we can help you with all of this!  We’ve helped similar clients through all of these situations.  The faster that you get it streamlined, the easier it becomes every year.