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Happy Thanksgiving. Enjoy an extra day off with with your loved ones!
The impact of saving a loonie per week! Saving money comes easily to some people; they shop within budget, pay their bills on time, and make sure a portion of their paycheque always goes straight into their savings account. If you’re not one of those people, however, and haven’t been staying on top of your finances, not to worry — you’re about to embark on a challenge that will change your entire relationship with money. Sound like it’s going to be a lot of effort? Well, it’s not. The concept that’s been spreading like wildfire is so simple: start with a dollar a week and increase your savings by one dollar every week for 52 weeks. It goes something like this: Week 1: $1, Account balance: $1 Week 2: $2, Account balance: $3 Week 3: $3, Account balance: $6 By 52 weeks, you’ll have saved $1,378! Why it works: You’re starting off small and working on building the habit of saving, rather than thinking about the amount itself. As time progresses, the act of saving will become effortless and your monetary achievement will be the reward to look forward to. Tip: if you keep your funds in a high-interest savings account, you’ll collect even more than $1, 378 by week 52. The most you’ll ever need to put away is $52 in one week. You may feel like your purse strings are already pulled too tight — but there’s bound to be some wiggle room for more saving. Exercise those creative juices and come up with new ways to cut back, like reducing your grocery bill or buying second-hand items. Do you have extra cash now? If so, do the 52-week money challenge in reverse. Start by putting $52 into your savings account and work backwards: week 2 would be $51, week 3 would be $50 and so on. By December, you’ll be saving dollars per week and will have over $1,370 added to your savings account — just in time for the holidays. What would you do with an extra $1,378? Share your comments and money-saving ideas below!
Take time for yourself! Plan for and enjoy vacations with your family. This is just one of those small but important things you'll look back on with great memories in the future!
You should always pay yourself first, then pay off your highest interest rate debt next.
The greatest compliment anyone can give is a referral.
I love helping people! One more person is well on their way to purchasing a home soon!
I read a great article the other day about the benefits and comparisons of the Tax Free Savings Account and the Registered Retirement Savings Plan. I've updated it here for you! Enjoy... Greg TFSA vs RRSP: Head to Head Comparison by Young in RRSPs and TFSAs There has been a lot of talk about which one is better, the TFSA vs RRSP in the media. Both are great tools for saving for us Canadians. Given that it’s a fresh year (and almost time the RRSP contribution deadline for 2014-March 3rd, in case you forgot), more people are thinking about the TFSA and the RRSP. In an ideal world, one could max out both the RRSP and the TFSA. That would be ideal. Though in the real world, life happens, and it is oftentimes very difficult to be able to scrounge up the money (without having to sell a kidney on the black market-kidding!) to be able to max out both the RRSP and the TFSA. In my opinion, the RRSP and the TFSA are like siblings. Very different siblings. Almost mirror opposites and the inverse of each other. They both compete for your money and attention. They are both good, but as we all know, one can be better for you than the other, just like parents really do have a preference of one sibling over the other, but they just don’t say it aloud (uh oh, is my middle child syndrome coming out in my post?! Sorry about that). So let’s talk about the RRSP first (the older sibling): The Basic Lowdown on the RRSP: The RRSP was introduced in 1957 (yeah, it’s the really old sibling) The RRSP can hold a number of things (including GIC’s, stocks, mutual funds, bonds); it’s like a basket of investments sheltered from tax. Contributing to the RRSP is with PRE-TAX income (the tax refund you get is your pre-tax money, but given to back to you at a later date) You will have to pay tax eventually when you take money out of it- it’s a tax deferral program (the hope is that when you take money OUT of the RRSP, you’ll be low income aka retired, so there won’t be as much income) You are supposed to contribute to it to reap the tax deductions when you’re at a higher tax bracket, and take it out when you are at a lower tax bracket. There are two options where you are allowed to borrow money from your own RRSP: 1) Home Buyers Plan and 2) Lifelong Learning Plan (with both you are expected to pay back 1/15 and 1/10 respectively, of the amount you borrowed per year until its fully paid) The Lowdown on the TFSA: People could first contribute to a TFSA in 2009 (this is the new baby sibling, becoming ever popular) As long as you were over the age of 18, you can contribute up to $5000 per year to a TFSA for the first 4 years. (ie. 2009-2012 = $5000 each or $20,000). In 2013 and 2014 the amount was increased for inflation and is at $5500 each year. Currently in 2014, if you haven’t opened a TFSA before, you can contribute up to $31,000 Like an RRSP, you can hold a number of things. The TFSA is like a basket of investments (GIC’s, High Interest Savings Accounts, stocks, bonds etc.) Money contributed to it is AFTER TAX income, but you can take out money that has been compounding in the TFSA TAX FREE. You can take out the money any time- tax free You have to wait until the next year to contribute back to it, otherwise you will be dinged A LOT. Many people have been using the TFSA as an emergency fund, but with the increasing amount allowed ($31,000) I think people should be looking at other options for their TFSA- like my personal favourite, the Tax Free Trading Account Do you see what I mean about them being the inverse of each other? RRSP= pre-tax dollars invested, taxed when you withdraw; and TFSA= after tax dollars invested; no tax when you withdraw. Now that we’ve introduced the siblings, lets look at their good and bad traits. PROS of the RRSP: It feels awesome to get that tax return. Especially when you use that tax return to contribute to your RRSP again for the following year. Like Jim Yih (a fee only advisor and best selling author and financial speaker on wealth), I agree that RRSPs are great in that you are forced not to want to withdraw from it (other than for school or for a first time home purchase)… because we all know that we all have sticky fingers and it’s hard not to take from the cookie jar! Hence, it’s a great way to develop disciplined investing into your RRSP It’s a good tool for those with high incomes who are taxed to the nines. It can feel good to get some of your tax dollars back. You can hold USD stocks in it- great for big dividend payers stocks like Coca Cola, Johnson and Johnson etc. Because if these stocks are held OUTSIDE of an RRSP, you would have to pay hefty taxes on it because foreign income is treated like interest income- taxed at your marginal rate (e.g. if you paid 40% income tax, you would pay 40% tax on your dividend income from Coca Cola) CONS of the RRSP: It’s a tax deferral… if you have a great pension, you will be taxed to the nines when you are in retirement, especially when you are forced to take your RRSP out, little by little each year. You can’t take money out except for buying a home (first time or very long time since you’ve bought a home) or for education for you or your spouse (up to the age of 71) If you aren’t making much money that year (e.g. if you are a student) there isn’t too much point in taking a deduction for the RRSP. You already aren’t taxed that much, so you wont’ get much of your taxes paid back. The Home Buyer’s Plan and Lifelong Learning Plan are great, but the money you pay back to your RRSP isn’t tax deductible. Now let’s look at the hotter younger sibling, the TFSA PROS of the TFSA: Everyone gets the same amount- so it could be more equitable that way. Everyone can contribute $5000 starting from the age of 18. So, theoretically if I contributed $5000 to a TFSA until I was 65 and had zero returns (which is highly unlikely) on my investments, I would still have a little over $200,000 in the bank. Tax Free. It is easy to get your money out You are rewarded for investing smart. If you invested really well and made $4000 on top of your $5000 contribution, and you withdraw $9000, you can contribute $9000 back the following year instead of $5000 (Balance Junkie proves this is true by calling up CRA to double check) CONS of the TFSA: The problem is that it is being heavily marketed as a Tax Free High Interest Savings Account by many "investment professionals". You get 2% interest if you’re lucky, and as we all know this barely keeps up with inflation. It’s very easy to take money out (it’s both a pro and a con) so being able to save for something long term (like retirement) will be difficult, what with our natural tendency towards instant gratification. Youngandthrifty’s Take: Personally, I am trying to contribute to both. I don’t have very much money that I am allowed to contribute towards an RRSP anyway because of the Pension Adjustment, so a little tax refund is always nice to offset some things like capital gains, interest income etc., otherwise I might be paying more taxes when I’ve already paid so much in taxes from my primary source of income. I do like that the RRSP allows you to contribute USD. I do like that with the TFSA, it can be used as a short term mode of investing and saving. I like them both, for different reasons. I would recommend that for those who are not taxed to the nines yet (like students, new grads, young adults etc.), it is better to contribute to a TFSA. The TFSA would be better for short term goals (within 1-10 years), like saving for a down payment, saving for a car, saving for that future baby, or saving for that big trip. The TFSA (younger sibling) is great for those short term goals. If you are able to invest well with the TFSA, those goals can become reality that much sooner. However, just as we can’t ignore the wiser, older sibling, we must not forget about the RRSP. We need to make sure we have enough to retire on too. Because compound interest and TIME is on your side (because we’re young!), once you start making some money, I would sock some money away at an RRSP for now. It’s hard to play catch up when you’re saving for retirement. However, for the 32% of us that have a big pension to retire on, I would mainly recommend the TFSA. With $200,000 (plus growth) available to be withdrawn tax free and a pension, there should be enough money available for a comfortable retirement. That is unless can’t resist dipping into the cookie jar before then! Of course, everyone is different and would have a different reason for having one or the other as a better option for their situation. It’s best to sit down and really think about the merits of each option to figure out which one you want to allocate the majority of your hard earned money to. Readers, what do you think? What are your thoughts between TFSA vs RRSP? Are you planning to contribute to both? If you had to pick one, which would you choose?
Smart investors diversify! They own investments, real estate and businesses. Oh, and they never stop learning. - Greg Gingerich
"Too many people spend money they haven’t earned, to buy things they don’t want, to impress people they don’t like.” – Will Smith
What age would you like to retire?
I have 3 questions for you as we head into a new year... 1) Do you believe we are still in a recession? 2) Did you know that stock markets in Canada, the U.S. and Japan made 10%, 30% and 50% respectively in 2013? 3) What will you do differently in 2014 to improve your results?
It's been a busy week but now time for a break to spent some quality time with family. Merry Christmas to you all!
I started this page to help you! If you have questions about how to reach a savings goal, what types of investments to use or how to save a million dollars by the time you retire, just ask. I've got an answer :)
TFSAs and RRSPs both offer tax advantages to help you reach your savings goals. If you can afford it, a good strategy is to contribute as much as you can to both. But if you have to choose one over the other, make sure you understand how they differ. And then make your choice based on your own individual financial and tax situation.