Mar. 9, 2017 "Smart saving for your future": I found this article by Gail Vaz- Oxlade in the Metro on Mar. 23, 2015:
Saving is a lost art. You'd think that with all the yada-yada about how important it is to save, what a big deal RRSPs and TFSAs are, and the scant resources we'll have if we count on the government, that we'd all be squirrelling away money for the future at a wicked clip. We're not.
People often misunderstand what "saving" is. Saving is "not spending money" and if you want to have "savings," you have to take the money you didn't spend and put it somewhere to accumulate for the future.
If you're sticking money away for a vacation, for present buying or to pay your car insurance, that's not savings; it's "planned spending."
Yes, you're smart to accumulate money for big spends along with your day-to-day needs, but it's not savings. Unless it's going into an emergency fund, a long-term savings -- think retirement or school - it's not "savings."
If money burns a hole in your pocket, then you're likely spending it faster than you make it. Saving isn't even part of the game plan.
But I have news for you: If you don't start to save, you're headed for disaster. Not saving is a sure way to have nothing later.
And learning to save is a habit that anyone can establish. You start by picking an amount -- even $20, $50 or $100 a month -- and sending it automatically to a high-interest savings account.
There are heaps of ways to have a life and save too. Just because you've decided to become financially responsible does not mean you're doomed to a life of boredom.
Small luxuries will still have their place. You're just going to trim back and really appreciate them when they come along.
Don't give up coffee completely. Decide instead that you're going to trim back your coffee habit by 25%, 30% or 50% a week, and send all the money you're not spending to your savings.
Forget about giving up all entertainment. It won't stick. Don't commit to spending nothing on clothes. Instead, learn to spend less, like hitting the second-hand store and becoming a bargain queen.
Money is an exhaustible resource. It runs out.
This is not about hoarding all your money and having no fun.
And it doesn't matter how small you start.
As long as you begin developing the saving habit, you're heading in the right direction and momentum will carry you along.
Feb. 2, 2015 "Stumped by the ways to save": Today I found this article by Gail Vaz- Oxlade in the Metro:
One of the financial goals that inevitably floats to the top of the list is saving more money. It’s a good goal. But there are so many different vehicles you can use to save that sometimes the choices become the barrier to saving.
At the height of RRSP season you’ll no doubt hear the seven, nine and 11 best reasons to use an RRSP. But is it a good choice for you? Ever since the Tax Free Savings Account (TFSA) came on the market, this is the big question.
The RRSP’s big benefit isn’t just as a savings vehicle, it’s also as a way to save on taxes now because of the tax deduction. You can contribute up to 18 per cent of your earned income in 2014, to a maximum of $24,930 for 2015.
Most people don’t come anywhere close. But if you made an income of $60,000 in 2014 and put $10,800 into an RRSP in 2015 (at a 30 per cent marginal tax rate), you’d reduce your taxes from $11,686 to $8,322, for a savings of $3,364 on your taxes. Wouldn’t you rather keep that $3,364 to use to meet your goals?
The contribution limit for a TFSA for 2015 is $5,500. Put $5,500 a year in a TFSA at an average return of four per cent over 30 years and you’ll have over $319,000, $154,000 of which you didn’t have to bust your butt to earn.
Put $5,500 a year into an RRSP and reinvest the tax refund you get (assuming you’re paying tax at 30 per cent) in a TFSA and, all things being equal, you’ll have an extra $93,000, which is the compounded return on the tax savings you put in the TFSA.
If you have a low income and it is taking almost all your money just to make ends meet, then if you decide to save a little somethin’ somethin’, a TFSA is a better bet.
If you’re going to be able to make do with the income CPP and OAS provide, then squirrelling away whatever you can manage in a TFSA makes way more sense.
And if you’re going to have an income that lets you qualify for the Guaranteed Income Supplement, then using a TFSA will also work better for you. Ditto if you’re well into your career and still have a low tax rate.
Claiming a deduction for an RRSP contribution when your taxes are low, piling up a stash of cash, and then paying more in tax when you cash out at retirement makes no sense.
If you think you’ll likely always be at the lowest tax rates then you should stick with a TFSA.
However, if you expect that over time your income and tax rates will increase, an RRSP will save on taxes bigtime.
You don’t have to claim the deduction in those early years.
Make your RRSP contribution but hold the deduction for when your taxes are higher and you’ll get a bigger refund.
You can then use the taxes you save to fund your TFSA contribution. Or perhaps, by then you’ll have other priorities like paying down your mortgage or funding an RESP for your kids.
If you’re close to hanging up your spurs, and you haven’t made any RRSP contributions so far, go with a TFSA. The same holds true if you’ve got a great pension plan at work since having a whack of taxable income in an RRSP will be less than optimum come retirement time.
If you’re concerned about losing your OAS to the claw back, go with a TFSA instead of an RRSP.
For virtually everyone else an RRSP is an awesome idea. Don’t be confused by all the blah blah blah into thinking you won’t benefit from an RRSP because the income you take out is taxable.
Remember, you didn’t pay any tax on the money that went into the RRSP (unlike the money that went into a TFSA).
So to put $5,500 into an RRSP you need gross only $5,500, but to make the same contribution to a TFSA you’d have to have earned $7,150 in pre-tax income (at a 30-per-cent tax rate).
I believe an RRSP is still the single best way to save for retirement. I’ve had my RRSP since I was 22 years old and I’m damn glad I had some foresight and started contributing early.
Sure, there were years when I barely made a contribution, but as my income and spending needs changed I shifted my contributions to make the RRSP work for me. And as soon as the TFSA became available, I started putting money into one.
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