Investing

Should I Contribute to an RRSP or a TFSA?

 

 

 

 

 

With the introduction of the Tax Free Savings Account (TFSA) in January 2009, Canadians now have another investment vehicle option to save for retirement.  Whereas before, most people took advantage of the immediate tax deduction for contributing into a Registered Retirement Savings Plan (RRSP), now they have to consider what will be most beneficial to them in the long run.   With the RRSP contribution deadline for 2009 fast approaching, it’s important for Canadians to make this decision ASAP.

What are the advantages of contributing to a TFSA?

Although you don’t receive an income tax deduction for contributing into a TFSA, there are some important advantages to consider.  All earnings within a TFSA are not taxable, whereas with an RRSP, earnings are tax deferred, but when funds are withdrawn, they are fully taxable.

A second advantage is that there are no expensive tax implications when you withdraw from a TFSA.  Since you’ve already paid tax on the money you contribute to a TFSA, when you withdraw the funds it is not a taxable event.  By contrast, if you withdraw from an RRSP, not only are you subject to an immediate withholding tax, you also have to add the amount withdrawn to your income for the year and you may end up paying more tax when it is time to fill out your tax forms or prepare your online taxes this year.

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February 9, 2010
Money Saving Tips

How to Find Cheap College Textbooks

College students dread the start of every semester. This is because of the rising tuition fees, school supplies and textbooks. Every year, the cost of college is getting higher. It is only wise that students should learn how to cut costs and find alternatives in saving money.

Are you a college student who wants to save money? Worry no more! Did you know that you can save hundreds of dollars with college textbooks? Here are some tips that would help you save a lot of money with textbooks.

1. Save money on used books. Instead of buying a new one, why not consider a used textbook? You can ask other students who are done with the subject if they have the book you are looking for. There are also web sites on the Internet that sell cheap college textbooks.

2. Look for other alternatives. You may consult with your professor if you can buy the older edition of the book. An older edition of a college textbook almost has the same content as the newest edition most of the time. Buying an older edition can save you almost half the price of the latest one.

3. Required or recommended? Ask your professor whether the book is required or just recommended. If the book is just recommended, you may just read the book from your college library.

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February 7, 2010
Investing

RRSP Retirement Savings Tips for 2010

1.  Start contributing today into your RRSP for the 2010 tax year rather than waiting until the last minute to contribute.   If you can’t afford a lump sum contribution, start up a preauthorized contribution that comes directly out of your bank account on the same day that you get your paycheck.  By investing regularly throughout the year instead of contributing a lump sum at the RRSP deadline, your money will have more of a chance to grow for you, and will significantly impact your returns over the long term.

2.  If you think you will earn more money in future years, consider deferring your tax deductions until a later tax year.  Just because you contribute in 2010, it doesn’t mean that you have to benefit from the tax deduction in 2010.  Save it for a year that you expect your marginal tax rate to be much higher. For instance, full time students with part time jobs who want to start saving for retirement, will likely benefit from deferring their tax deductions.

3.  Take advantage of a spousal RRSP if you expect your spouse’s income to be lower than yours when you reach retirement age.  By splitting your income it will result in a lower tax bill in the future.

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February 5, 2010
Investing

Save Money On Your Taxes– Use A Spousal RRSP

 

 

 

 

If you anticipate that your spouse’s income will be considerably lower than your own during retirement, a great way to save money on your tax bill is to take advantage of a Spousal RRSP.  It’s a simple and strategic way to split your income.

How does a Spousal RRSP work?

The higher income-earning spouse contributes to the Spousal RRSP and gets to claim the tax deduction.  The money in the plan then accumulates free of tax until it is withdrawn by the other spouse (the lower income earner), which will result in tax savings.

What you should know about Spousal RRSPs:

If you are the plan owner and your spouse is contributing into your Spousal RRSP, if you withdraw money from the plan, any money contributed in the last 2 calendar years as well as the current year will impact your spouse’s taxes.  In other words, your spouse’s taxes will end up being impacted.  So, it would not be advisable to start up an RRSP unless you are certain you won’t have to withdraw the funds in the short term.  (Before investing in an RRSP, it’s important to have an emergency savings account set up so that in the event of an unexpected expense, you wouldn’t be depending on RRSP money.)

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February 3, 2010
Wealth

Ways To Increase Your Net Worth

What is your net worth?

To put it simply, if you were to sell everything you owned and pay off all your debts, the amount that you would be left with is your net worth.  Purchasing assets and paying off debts are both ways you can increase your net worth.

Purchasing Assets

Not everything you purchase will help you build your net worth.  For example, purchasing a new car doesn’t increase your net worth as it quickly depreciates in value.  You may have paid $20,000 for it but within a year or two it could be worth four to five thousand dollars less.

If you want to build your net worth, you will need to purchase assets that will ultimately increase in value over time such as works of art, rare coins, handmade Persian rugs, etc.  Investing in real estate is another way to build up your net worth, even if you do need to take on more debt in order to do so.

Paying Off Debts

Another way to build your net worth is to pay off your debts including car loans, student loans, credit cards, and your mortgage.  It’s always best to pay off high interest debt first, as well as debt where the interest is not tax deductible.

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February 1, 2010