Taking the time now to consider personal tax implications and laying down a financial foundation for the coming year can go a long way to setting yourself up for success down the road, says Dawn Marchand, vice-president of marketing, product and direct distribution for Lawyers Financial.
Marchand suggests a good way to begin is by taking stock of the past year.
“One of the most important things that everyone can do is to see if their debt situation has improved over the past year,” she tells AdvocateDaily.com.
“If it hasn’t, then now is the time to do something about that — set those automatic payments higher, for example, so that at the end of the year you will be able to say, ‘Yes, my debt situation has improved.’”
That might include taking a spending holiday by holding off on purchases, says Marchand. That could include not buying any clothes for an extended period or not dining out as often.
Setting monthly goals, she adds, can help to whittle down personal debt to achieve an improved financial picture by the end of the year.
Lawyers Financial was originally set up through the Canadian Bar Association and designed to address lawyers’ personal financial issues, explains Marchand. It now runs independently as a non-profit organization with 30 advisors available to lawyers — and their families and employees — across the country.
She points out that the RRSP contribution deadline is March 1 and the tax filing deadline is April 30. The trick, says Marchand, is not to wait until the last minute. Lawyers should start considering their options now and reach out to their advisers while they still have plenty of time.
“Quite often we’re doing our taxes, or March 1 is coming, and we’re making rushed decisions,” she says. “Take a weekend beforehand, look at your income statement and the RRSP assessment from last year, and use an online RRSP calculator. And then make an informed decision about your contribution.
“RRSPs are simply one of the best tax savings vehicles you can find,” says Marchand. “Depending upon your tax bracket, you can save up to 40 per cent on taxes. What that means is that a $1,000 contribution could provide up to a $400 return in tax savings or a tax refund. So sometimes it makes sense to take a loan to get an RRSP.”