You Don’t Need An RRSP To Retire

You Don’t Need An RRSP To Retire

When it comes to retirement there is a lot of focus put on the RRSP. The Registered Retirement Savings Plan seems like an obvious choice for retirement (it even has retirement in the name after all!). But for many of us an RRSP isn’t necessary, and it might even be counterproductive!

There’s a new retirement account on the block and it’s called the TFSA. Not even 10 years old, the TFSA is relatively new to the retirement savings game. Starting in 2009, it changed the way we look at retirement savings.

If you’re new to RRSP vs TFSA debate it’s important to know that there are pros and cons for each account. RRSP’s do have the advantage in a few different areas, especially if you have high income or have a family and receive child benefits (either the Canada Child Benefit or a provincial child benefit). TFSA’s also have their share of benefits too. For low and middle income households, the TFSA has a few big advantages.

When deciding which is the right one for you need to look at multiple factors. Factors like income taxes, government benefits, creditor protection, and even human behaviour.

When deciding between the TFSA or the RRSP the key thing to remember is that you don’t actually NEED an RRSP to retire. Someone can easily retire with only a TFSA.

There are four things you need to know if you’re going to avoid the RRSP and only use the TFSA for retirement…

Debt Snowball Or Debt Avalanche Or Both?

Debt Snowball Or Debt Avalanche Or Both?

When it comes to debt payoff there are two popular strategies. These strategies are known as the “debt snowball” and the “debt avalanche”. These two popular strategies to pay off debt take advantage of human psychology or mathematics to help you pay off your debt faster.

Which debt payoff strategy you choose depends on your situation. Choosing one method vs the other may mean you pay your debt off faster OR it could mean you take longer to pay off your debt and end up making more interest payments.

The problem is that everyone in different and there isn’t a one-size-fits-all strategy. We have different amounts of debt. Our debt is spread over different accounts. And those accounts carry different interest rates (And to make it even more complicated, some kinds of debt let you reduce payments in difficult times, like some student loans, which can be a very valuable benefit!).

On top of this we all value things differently. Some of us prefer that immediate feedback (even if it means paying a bit more in the long run). Whereas some of us prefer to delay gratification a little bit, as long as it’s worthwhile in the end.

Choosing the right debt pay down strategy will depend on your personal situation and who you are as a person. In this post, we’ll summarize the two different methods and propose a third method that combines the best of both worlds.

We’ll also show you a cool little debt calculator that will help you decide which debt to pay off first.

Three Important Financial Factors To Consider When Buying Your First Home

Three Important Financial Factors To Consider When Buying Your First Home

It’s September and, along with the cool weather, that means the real estate market is back in full swing. Often buyers and sellers take a break during the summer, these months are filled with outdoor activities, BBQs and vacations, so this leaves little time to go house hunting.

But now that everyone is back into their regular routine the number of people actively looking for a new home starts to go back up.

When buying your first home there are a few important financial factors to consider. Not only will this be one of the biggest purchases of your life, but your home also drives a lot of on-going costs as well. These on-going costs can impact your budget for years to come.

Buying the wrong house might mean extra costs you didn’t anticipate or don’t have room for in your budget. This can mean years of financial pain and tight budgets.

Buying the right house means you’ll have lots of room in your budget to do all the things you love to do, travel, hobbies, restaurants etc.

When buying a house there are three very important financial factors to consider.

Reaching Financial Independence Tax Free

Reaching Financial Independence Tax Free

Financial independence is a goal for many people. Financial independence is when work becomes optional. It’s when your investments are large enough to support your annual spending indefinitely, without the need for employment income. Reaching financial independence frees you from the typical work/money/time equation. When you reach financial independence you no longer have to trade your time for money.

How much you need to reach financial independence is different for everyone, but the quick and most common metric is 25 times your annual spending. Once you reach this level of savings and investments (not including your home) you can withdraw 4% of your portfolio indefinitely. With the right portfolio your investments will grow enough each year to pay you 4% of the original principal and still keep up with inflation.

Taxes are obviously a big consideration when growing your investments. Tax free growth allows your investments to grow faster and lets you hit your goals earlier.

In Canada we have two main accounts that provide tax free growth, the TFSA and RRSP. With the TFSA you pay tax now but don’t pay tax later. With the RRSP you don’t pay tax now, but you do pay tax later. Regardless of when you pay the tax, the investment growth within an RRSP or a TFSA is tax free. Using your TFSA and your RRSP to its full potential means you can hit financial independence much faster.

How To Immunize Yourself From Rising Interest Rates

How To Immunize Yourself From Rising Interest Rates

Interest rates are going up and that’s putting a squeeze on anyone with debt. Whether it’s a mortgage, student loans, or a line of credit, you’re about to feel the sting of higher rates. We’ve had unprecedentedly low rates for almost 10 years now and forecasters have repeatedly called for higher rates, and it seems that they’re finally right.

The Bank of Canada just increased their rate again making this the 4th increase in the last 12 months. That increase means we’re being charged an extra 1% interest on variable rate debt versus last year. It also means any we’ll be charged an extra 1% on any new fixed rate debt. On a $350,000 mortgage that’s an extra $3,500 per year in interest charges or about $300 per month!

Rising interest rates impact all kinds of financial products. Variable rate mortgages, new fixed rate mortgages, lines of credit, home equity lines of credit and of course, student loans too.

Not only are we paying more for our current debt but rising interest rates also make it more difficult to qualify for a new debt too. Higher rates will decrease the amount of money you’re qualified to borrow. A household earning 80,000 per year will see their home buying budget decrease by $28,000.

There are a few strategies you can use to immunize yourself from the impact of higher rates, at least for a short period of time. From a few months, to a few years, to a decade, these strategies can help you avoid the sting of rising rates.

Three Ways To Visualize Your Financial Goals

Three Ways To Visualize Your Financial Goals

Goals are a fantastic way to motivate yourself. Having a big, ambitious goal will help you prioritize other things in your life. It gives you something to work toward. Something that you care deeply about. It helps you balance what you need today with what you want to achieve in the future.

Financial goals have made a huge difference in my life. Setting powerful financial goals has helped me focus on the things that matter to me and ignore the things that don’t. They’ve helped me prioritize my spending to better align with my short and long-term goals.

Because of these financial goals, I’ve cut $1,000’s per year in wasteful spending. Spending that really didn’t provide much value to me. Spending that was mostly driven out of habit. Spending that I’d gladly cut in favor of my long-term goals.

Once you have a financial goal then you have to track it. And this can be a challenge on its own.

One thing that helps me reach my financial goals (or any goal for that matter) is to track my progress visually.

Maybe I’m a visual person but I find it helps me to “see” where I’ve come from and where I’m going. It’s super motivating to see that I’m hitting my monthly goals and that I’m on track to hit my long-term goal.

There are a few different ways to visualize your goals. I’m going to share my three favorite visualization techniques with you.

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