Tax season is officially upon us. But before you start freaking out because you don’t have a clue what a T4 or T4RSP is, take a deep breath. It’s going to be okay.
We get it, filing your taxes can be a stressful and daunting process, and we often don’t have the slightest idea where to begin. And let’s call a spade a spade, you probably feel like you have more important things to do like binge watching Riverdale or getting inspiration for your next girls trip — really, the list of excuses goes on and on.
But before you can get your taxes submitted, you need to ensure that your finances are in order just in case you owe money this year. Luckily for you, we’re here to guide you through the process and help you get your finances organized for tax time.
Get familiar with your taxes
First thing’s first, you need to understand how taxes work so you’re in the loop of what’s going on. When you start a new job, you need to know how to calculate whether the offered salary will leave you with enough money after taxes so you can meet your financial goals. Many young adults aren’t fully aware of how much will be deducted from their pay — especially if they are just breaking into the working world. Always know exactly what you’re getting paid and how much is being deducted. This way you’ll never have any surprises at tax time. The Canada Revenue Agency has a handy online calculator that walks you through what information you need to find out your year-end total deductions. Of course, this won’t tell you how much you’ll either get back or have to pay out (that depends on your spending for work-related items and whether certain things are expensed), but it’s a good place to start.
As you start making actual money in your career, you’ll most likely sign up for not one but maybe two credit cards, which makes it easy to get carried away with frivolous spending. Admit it, payday rolls around and you’ve gone to the mall to treat yourself to the pair of jeans you’ve been eyeing, only to go home with practically a new wardrobe. We’ve all been there. This is not only bad in the long run, but it will prevent you from getting your finances in order. By learning self-control when it comes to spending, you’ll eliminate impulse purchases and you won’t be stuck paying interest on a pair of new jeans. When it comes to spending, wait until you’ve actually saved up the money and can afford to make the purchase because you never want to get into the habit of putting all your purchases onto your credit cards, even if you can pay off your bill at the end of the month. Always pay your full balance and never have more cards than you can keep track of.
Know where your money is going
Regardless of your salary, you need to remember how important it is to never let your expenses exceed your income. The best way to stay on top of this is to budget! Once you realize that getting Starbucks every morning before work or going for apré¨s-work cocktails multiple times a week is seriously hurting your funds, you’ll understand that making minor changes to your ever day spending habits can have a huge impact on your finances. A budget will not only help you keep your expenses low, it will add up and help you save more money in the long run. Free apps like Mint are great and super easy to use. Mint helps you manage your money, pay your bills, track your credit score, and users can even set budgets that issue alerts when they start to top out.
When it doubt, save (and file) your receipts
This is especially important for those killing their side-hustle game. If you are not being reimbursed by a company for office supplies, working lunch meetings, phone and internet bills or even your taxis, keep your receipts. Almost everything work-related can be included and will help determine how much you’ll owe (if anything) at the end of year. If you work from home, even a portion of your rent or mortgage can be claimed — your best bet is to speak with an accountant (or someone who has done this before) to figure out exactly what to include.
Have an emergency fund
When you start to organize your finances and set your budget, you should set up a monthly deposit to an emergency fund — regardless of how much you make. Having money set aside in savings to use strictly for emergencies (like owing more money on your taxes than you expected) can really keep you out of trouble financially. You don’t need to deposit a huge amount, even something as low as $25 to $50 a month will significantly add up over time.
Own your debts
Whether you’re paying off your university tuition or you owe money on your credit cards, you MUST own your debts. If you sweep your bills and debts under the rug and act like they don’t exist it will not only keep you up at night but it’ll have a negative consequences on your finances. By acknowledging and accepting how much you owe, you can stay on top of payments and you’ll get everything paid off much faster.
Think long term
While tax season only occurs once a year, it’s important to always be smart with your money so you can minimize what you owe and get the most from your return when tax time rolls around. Always keep the receipts for your transit pass, tuition, child care, professional and union dues, charitable donations, and prescription and medical fees. This way, you’ll be prepared for tax time and able to get more money back in your wallet.
Don’t be afraid to ask for help
Whether you plan on having an accountant file your taxes or you want to do it yourself with a tax software, there’s always help available if you have questions. Don’t be afraid to reach out and ask for help or advice so you can get your finances in order and file your taxes pain-free.