Investing

Pay down debt or top up your RRSP?

04. February 2013 · 7 comments · Categories: Debt, Investing, Retirement

Yup – it’s that time of year again – last minute RRSP contribution time! So – do pay down debt or try to put a bit more into your RRSP? Here’s some tips to help you decide:

1. What kind of debt are you carrying?

If you’ve got high interest credit card debt, that should be your priority – 10, 15, or 20 percent in interest payments can do you in financially. Mortgage debt on the other hand – not so bad.

2. How much do you owe?

Carrying a big debt load is a heavy burden both financially and emotionally. If you’re struggling to make mortgage payments or have a ton of high interest debt (read: credit cards) then you might want to make debt repayment a bigger focus.

3. How old are you?

If you’re fairly close to retirement – you should really be focused on paying off debt. Making interest payments on a fixed income is no fun – especially if rates go up and you find yourself strapped for cash.

4. How much do you make?

The more you make – the more bang for your buck you get from your RRSP. If you’re earning in the top tax bracket, every 1,000 you contribute nets you a 400 tax break!

5. What kind of RRSP do you have?

If you have a group RRSP and your employer matches your contribution, then you should be taking advantage of it! That would be money lost, otherwise. Where I work, if I buy stock in my company in an RRSP, my employer will match it up to a certain amount.

6. What does the math say?

In the end, it’s a fine balance between what you’re paying on your debt and what you could be earning in your RRSP – do the math to see where you stand. One option is to use down your refund to pay down debt – but you have to have the self discipline to actually do it!

What’s your top priority – RRSP or debt payment?

4 Life Investments That You Can Be Saving On

08. January 2013 · 9 comments · Categories: Budgeting, Extra costs, Home, Insurance, Investing

The following is a guest post.
Without proper financial and budgeting skills, it can be tough to put enough money aside in order to make smart life investments in an effort to improve your life. However, with some due diligence and focus on saving your dimes and nickels, you can save enough money to make investments that will benefit your life, and allow you to work on your financial and budgeting skills, while saving for important investments. Four of the different life investments that you can work toward saving for by making minimal life changes include;

Purchasing a Home
Although purchasing a home can be quite expensive, many people are able to secure a home loan mortgage without offering too high of a down payment. The cost of purchasing a home can range greatly depending on the location, as well as other factors. If you have a steady job and a consistent income, putting away small amounts of money over time can allow you to save for a down payment, and subsequent mortgage payments. Try setting aside a small amount of every paycheck, or cutting back on your monthly expenses and instead using that money to invest in a home, which will likely be one of the largest purchases that you ever make in your life.

Life Insurance
Another excellent investment that you can make by making a few small life changes is the purchase of a life insurance policy. By making changes such as cutting back on your energy consumption, purchasing generic brands instead of brand names when at the grocery store, or cutting back on your entertainment spending, you can purchase life insurance relatively easy. Life insurance ensures that your family will be able to maintain the same quality of life should you pass unexpectedly, as the breadwinner in the family. If your family has no income, other than what you are able to bring in through your 9-to-5 job, it is important that you purchase life insurance in order for your family to have some sort of stability in the event that you passed away unexpectedly. Life insurance is relatively cheap on a monthly basis, and depending on your policy can cover you when a wide range of different accidents.

Investing In Stocks
One of your goals for financial stability should be to create multiple streams of income, which allow you to have some stability should you lose your job or require additional funds for one reason or another. Investing in stocks can be an excellent way to create additional streams of income, and ensure that at least a portion of your funds are earning money for you over time. Because stocks can be purchased individually, one at a time, making small adjustments to your life can allow you to set aside enough money to make small stock purchases over time, without having to save a large amount of money to start. In the beginning, you could go a small as purchasing individual stocks, and as your revenue increases, move on to purchasing handfuls at a time. Investing in stocks can be a great way to diversify your investments, and provide you with multiple streams of income.

Retirement Funds
One of the most important investments that you can make in your lifetime is investing properly into your retirement fund. Many companies even agree to match the contributions that their employees make into their retirement funds, which adds extra incentive to set aside money out of each paycheck, and make small changes in your life in order to put as much money into your retirement fund as possible. Saving $100 per month equates to $1,200 per year. When matched by an employer, that figure becomes $2,400 per year, which is $24,000 over the course of 10 years. It goes to show how large of an impact small changes in your life today could have on your future.

Author Bio: Stevie Clapton works for RentersInsurance.net, where you can find articles and assistance on finding home insurance.

Smart financial moves to take before New Year’s!

11. December 2012 · 10 comments · Categories: Holidays, Investing

I know, I know – it’s begining to look a lot like Christmas, and who has time to worry about things like saving on your taxes or getting your finances in order? But there are some great things you can do to help save on your taxes and get your finances organized that don’t take up too much time!

Donate to your favourite charity

It’s that time of year anyways – to think about others. December 31st is the last day to make a donation and obtain a tax receipt for 2012. Plenty of places are set up to make it easy to donate online, and you can get electronic tax receipts that are generated and emailed to you instantly. My brother and I have taken to “exchanging” charitable donations as Christmas gifts. We each donate to a cause the other believes in, and get a nice tax receipt to show for it!

Contribute to an RESP for a child or grandchild

The federal government provides a Canada Education Savings Grant of 20% on the first $2,500 of annual RESP contributions per child, which can add up to $7,200 to an RESP during a child’s lifetime. If you haven’t maximized RESP contributions for your children or grandchildren, you can make an enhanced catch-up contribution in 2012. I give money to my brother each year at Christmas to go towards my niece’s RESP.

Pay expenses by year end to be eligible for tax deductions and credits

Claiming expenses, such as interest on money borrowed for investing or student loans, daycare fees and children’s fitness or arts fees can all provide benefits at tax time. You must be sure to pay these expenses by the end of the year to realize the tax savings for 2012.

Review your investments

The end of the year is a good time to review the types of investments you hold, and the accounts in which you hold them.

Prepare for retirement

There are a number of tax considerations for those just entering into their retirement years:

If you turned 65 in 2012 and have not yet applied for Old Age Security benefits, remember that retroactive benefits, which can be worth over $6,500, can only be claimed within a limited time. To receive those benefits, you should apply as soon as possible.

If you turned 71 in 2012, you have until December 31 to make any final contributions to your RRSP and convert it into a RRIF or registered annuity. And you can’t avoid this – the bank will force convert you if you don’t arrange it yourself – they are required to by law.

What financial moves, if any, do you have planned for the end of the year?

Is Canada a viable destination for offshore investors?

16. September 2012 · 7 comments · Categories: Investing

Hey all! This is another one of my “expand the focus of my blog” posts. Today I’m going to talk about offshore investment in Canada.

What is offshore investment?

Basically, something that is offshore is located or based outside of of a person’s national boundaries (that is, outside your country). The term offshore can be used to used to describe foreign banks, corporations, investments and deposits.

What kind of offshore investments are available?

There are a variety of offshore investments, but some of the most popular are:

Cash (such as bank accounts)
Bonds (both government and private company bonds)
Property (land, buildings, or both)
Equities (stocks or individual funds)

Why would I want an offshore investment?

Some reasons to have an offshore investment are:

Different government regulations – you may be able to invest offshore in items that you cannot invest in via your native country
Better or lower tax rates
Asset protection
Confidentiality
Access to a wider variety of investments

Why would offshore investors consider Canada as a good option?

One of the biggest things Canada has to offer the world is natural resources. Canada has many natural resources, such as lumber, oil, and gas. Right now, the Alberta oil sands are producing a significant amount of oil, and this can be a great opportunity for offshore investors.

Another option is real estate and land – Canada is a big country, and investors may have a lot more options to buy real estate and land then they would in their own home country.

In conclusion

I think that Canada can definitely be considered a viable destination for offshore investors. I hope you’ve enjoyed learning about offshore investment in Canada.

What is an ETF and why would I want to buy one?

27. August 2012 · 7 comments · Categories: Investing · Tags: ETFs, exchange traded funds

I was reading the Globe and Mail “Report on Business” section last week and it talked about ETFs. I have heard the term numerous times, but honestly don’t know a lot about them. So I decided to find out.

What does ETF stand for?

ETF is short for Exchange Traded Fund.
Okay, great. So, what exactly is an Exchange Traded Fund (ETF)?

The easiest way to understand ETFs is to think of them as mutual funds that trade like stocks. An ETF holds assets, such as stocks, commodities, or bonds. It usually tracks an index – such as a bond index or a stock index. They are actually traded like a stock on an exchange, and their value can go up and down during the course of a trading day.

Why would I want to buy one?

There are various reasons people may want to consider buying an ETF:
· You get the diversification of an index fund, but the added bonus of being able to sell short, buy on margin and purchase as little as one share.
· The expense ratios for most ETFs are lower than those of the average mutual fund.

So, which one should I buy?

Sorry – that’s beyond the scope of my knowledge! If I had a head for investing at all, I wouldn’t need a day job! There are lots of ETFs out there, dealing in anything from gold and silver, to crude oil. It all depends on what you’re looking for, and what is most important to you. A good place to start learning more would be the Global and Mail ETF page.

Have you ever invested in ETFs? If so, have you been happy with them? Or are you like me, and just learning what they are?

RESPs – an overview

23. July 2012 · 3 comments · Categories: Investing, Kids

I was inspired to write this post because apparently some idiot at the bank told my parents they cannot open one for their granddaughter (my niece). Seriously, that person has no business running a bank if she doesn’t know some basic information like who can open one!

What is an RESP?

An RESP stands for Registered Education Savings Plans.

Who can open one?

Anybody. Yup. Anybody. But it has to be opened for someone under the age of 17.

What is it?

It’s a great way to save for a child’s education. The best thing about it is that the government will actually give you some free money when you put money into it.

No way – the government wants to give me money?

Yup. It’s called a Canada Education Savings Grant. It can provide an additional $200 on the first $500 you save annually, and up to $400 on the next $2,000 saved.

The maximum lifetime grant that the Government of Canada will give to a child is $7,200.

Even if you can’t afford to put anything in at all – the child may be eligible for a $500 Canadian Learning Bond.

Okay, what about taxes?

You aren’t charged on the interest earned in the RESP, and because the beneficiary should be in a low tax bracket when they withdraw the money, they likely won’t have to either.

Can I deduct what I contribute from my income tax, like I do for an RRSP contribution?

Nope. Sorry. That’s a no-go.

And what if the kid doesn’t go to any kind of “higher education”?

Depending on the type of plan you choose, it can stay open and be used for the child’s sibling. If you wait long enough, the RESP can be closed and the money returned to you. Or, you can transfer the money to your RRSP. If you think this is a real possibility, make sure your clear on what your options are before you open the RESP.

What’s the lifetime maximum that can be contributed?

$50,000 dollars.

Have you opened an RESP? Would you?

Why it is a Wise Decision to Sell Investments & Pay Income Taxes before it’s Too Late

03. July 2012 · 2 comments · Categories: Investing

This is a guest post from Rosette Summer. Thanks very much Rosette!

The economy is not exactly what it used to be. Now, you have to think harder before you buy or sell an investment. Then you have income taxes to pay. It is a wise decision to sell investments & pay income taxes before it’s too late. This will help keep you out of debt.

Today’s Economy

After the recession, the world was literally in chaos. Many people lost their jobs while millions of others had their paychecks slashed to compensate. Years later, when the United States economy started improving, the European markets rapidly deteriorated. It is unfortunate, but that is the world we live in. The economy rapidly changes without warning.

Making an Investment

Investments are small purchases that make us part owner of a business or company. Investments are a source of income for everyone. Whether you invested in stocks or a private business, you will receive a percentage of the income every month, annually or when you sell the investment.

Selling an Investment

With time, the value of your investment will either increase or decrease. If you bought 10,000 of company ABC’s stock at $4 each, each stock may grow and be worth $10 after a year. When you sell the stocks, you will earn a $60,000 profit. However, not everything is rainbows and sunshine when it comes to selling your investment. If you sell the stocks for anything less than $4 each, you could go into debt.

Income Taxes

Income tax is a charge placed on your income. Income tax can be regressive, progressive or flat. These are taxes levied on the taxable amount. For example, if a 5% tax is applied on income of $50,000 a year, you will have to pay the government $2500 at the end of the year.

When you earn from your stocks, an income tax is placed on it. This is because you are earning from the tax. However, this needs to be done for a full year before any tax is placed on the income. Many people decide to avoid paying their taxes in hopes of saving some money .These are usually people in debt.

Selling your Investments before it’s Too Late

If you have made a few investments, one of the most important things you can do is to keep an eye on the investment and the company itself. If you hear a rumor that something bad may happen to the company or business you have invested in, it may be a good idea to sell your investment.

If something bad does happen, the value of your investment will drop. If it drops too low, and the company declares bankruptcy, you will lose your investment. You may even go into debt.

Paying your Income Tax before it’s Too Late

One of the worst things you could do is try to evade paying your income tax. Trust me, the IRS (or CRA) will find out and it will not end well if your income tax is found to be high. In fact, most people who face debt try to evade paying their income tax every year. When they are caught, not only are they punished, they still have to pay the income tax, even if they are in debt.

When it comes to your investments, always keep an eye on the company that you have invested in. If you think that something is going to go wrong or that the value of your investment is going to drop significantly, it may be a good idea to sell your investment before it’s too late. The same applies to your income tax. It is better you pay a small amount now than face a plethora of problems later.

About the Author:

This post was exclusively written by Rosette Summer for this site.