2 comments on “Exclusive Guide – TFSA versus RRSP”

Exclusive Guide – TFSA versus RRSP

TFSA versus RRSP

Even without the long acronyms, these two money saving products have a lot on common. Both investment vehicles offer tax incentives for savers and encourage you to plan for the future.

Here’s how these 2 options measure up against each other.

TFSA RRSP
Tax deductible? TFSA contributions are not tax-deductible.  So your contribution will not affect your taxable income in the year that you make a deposit. The contribution and investment earnings are exempt from taxation upon withdrawal. Money that you put towards your RRSP is tax deductible. It therefore reduces your taxable income in the year that you contribute.When you withdraw from your RRSP this money is added to your income and taxed at current rates.
Contribution limit You can invest up to $10,000 per calendar year in a TFSA. However, this may change as the new Federal Liberal government implements its new budget strategy. It’s a bit more complicated trying to figure out the maximum contribution limit for an RRSP without tax implications – It is dependent upon your previous year’s income and pension adjustments.  For more information, visit the Canada Revenue Agency.
Access You can access your money at any time. There are different types of RRSPs.  Locked-in RRSPs will not allow you to access your money until you hit a certain retirement age.  If your RRSP is not locked-in you can withdraw the funds at any time.Money that you withdraw from an RRSP will then be taxed in that year.
Taxes on withdrawal All of the money that you earn from your investment (i.e. interest, capital gains, etc) is tax free.
This means that your money can grow in the fund tax free and when you want to withdraw it, that income will also be tax free.
RRSPs are tax deductible and your portfolio grows tax sheltered.This means that you get the tax benefit when you put your money in.  When it comes time to withdrawing the funds, you will be taxed then.
Investment vehicles accepted A number of different investment vehicles qualify, including high interest savings accounts, GICs, bonds, mutual funds and stocks It can contain a variety of investments such as: RRSP savings deposits, treasury bills, GICs, mutual funds, bonds, and equities.
Beneficial for People who expect to be in a high tax bracket during retirement years. People who expect to be in a lower tax bracket during retirement years.
Minimum age limit You need to be 18 years of age and a Canadian resident to qualify No age restriction necessarily, but you do need to have generated RRSP contribution room by claiming earned income – which can be done by filing a tax return.
Maximum age limit There is no age limit. You are not eligible to contribute after the age of 71.
Benefits The money in your TFSA can be put towards whatever you’d like – there are no restrictions as to how or when you can use the money.
Also, unused contribution can be carried forward and accumulates in future years.
The tax benefits are immediate.  Also, come retirement age, you’ll be glad you put some extra money away

KEY TAKEAWAY

The main difference between an RRSP and TFSA is the timing of taxes:

  • An RRSP lets you defer taxes – an advantage if your marginal tax rate is lower in retirement.
  • With a TFSA, you’ve already paid tax on the money you contribute – an advantage if your marginal tax rate is higher when you withdraw the money.
2 comments on “Investment Guide – How to invest money for Beginners”

Investment Guide – How to invest money for Beginners

  1. Personal Investment: Introduction
  2. Personal Investment: Investing For Beginners – Know Your Savings Goals
  3. Personal Investment: RRSPs vs. TFSAs
  4. Personal Investment: Retirement Planning – CPP And Beyond
  5. Personal Investment: Bonds – The Safe Bet
  6. Personal Investment: Playing The Stock Market
  7. Personal Investment: Conclusion

1. Introduction

The article “Canada Beginners Guide to Personal Investment” covers simple “tips” for dummies or beginners on how to start your personal investments without hiring a financial consultant. This is the best article to learn how to Invest in Canada in 2018.

I assume you have a steady job and ready for investments. Big or small amount doesn’t matter. The important thing is that you need to start investing. Now, keep at it for the next four decades or so and you’ll be able to retire. Successful money management goes beyond just saving a portion of what you make. To really get the most out of your earnings, you’ll need to put it to work in a few choice investments.

2. Investing For Beginners – Know Your Savings Goals

Not sure where to start? Whether you’re already planning for retirement, or saving up for another life milestone such as your first home, here are the basics for beginning investors.

3. RRSPs vs. TFSAs

Most Canadians are more familiar with Registered Retirement Savings Plans (RRSPs) than they are with Tax-Free Savings Accounts (TFSAs). This is in part because RRSPs have been around as a retirement savings’ vehicle for Canadians since 1957, and TFSAs only came into effect at the beginning of 2009.

Participating in both programs is similar in that you invest in a suite of options through your financial institution. But RRSPs get a boost from the fact that you get immediate tax savings (in the form of a deduction from your taxable income for the year in which they’re purchased). The tax-savings with TFSAs is that any money you earn on investments is non-taxable. (Down the road, when you do withdraw money from RRSPs, you’ll have to claim that as income at the time.)

While the upfront income tax savings from RRSPs may seem enticing, the fact is that if you’re just early in your career, and therefore making a relatively low income, you’re better off investing in TFSAs. Here’s why:

Let’s say you’re making a fairly low salary – the current national median income is $27,800 – and, you still manage to set aside $1,000 to invest. At the current minimum tax rate of 15 per cent, your tax-savings may only amount to a few dollars. But if you invest that $1,000 in a TFSA, it could grow significantly larger over time. A $1,000 investment that grew at five per cent a year would be worth $4,322 after 30 years.

If your career blossoms and you find yourself earning six-figures one day, you’ll be taxed at a rate of 26–29 per cent, making RRSP deductions a more-valuable consideration.

TFSAs also have another advantage over RRSPs in that you’re able to withdraw the funds whenever you want, without penalty. This makes them a useful savings vehicle for other big expenditures, such as the down payment on a house.

Keep in mind that both RRSPs and TFSAs offer the option of keeping your savings in cash, or investing them further in a GIC or stocks for further interest earning.

Check out this handy graph to learn more about RRSPs vs. TFSAs

4. Retirement Planning – CPP And Beyond

Current Canadian retirees benefit from two government-run pension programs: the Canada Pension Plan (CPP) and Old Age Security (OAS). The maximum monthly CPP payment in 2013 is $1,012.50. The current maximum monthly payment for the OAS is $550.99. Add that up, and you’re looking at $1,563.49. That works out to $18,761.88 a year.

It’s save to say that most of us wouldn’t be able to survive on that alone.
And even that may not be available when you’re ready to retire; in the 2012 budget, the age of eligibility for receiving the OAS was moved from 65 to 67 years of age. This is the first of many anticipated changes to the federal pension programs to deal with the fact that Canadians are living longer, and there may not be enough younger ones in the workforce to support all the baby boomers through a lengthy retirement period. In short, the onus is on young people to plan on financing their own retirement funds.

5. Bonds – The Safe Bet

The downside with investments held within both RRSPs and TFSAs is that they’re tied to stock markets and the overall health of the economy. The general trend has been for these types of investments to grow over time, but major market crashes – such as occurred in 2008 – can have devastating effects on people’s investments. In fact, many Canadians had to modify their retirement plans when the economy tanked and took a good chunk of their nest egg with it.

The principal invested in a savings bond is guaranteed by the government, making them as close to you can get to a sure thing. But that safety comes at a price: the current series of federal savings bonds pay a mere one per cent interest on the first year of the investment. And you don’t get any interest if you cash them in before the year is up.

6. Playing The Stock Market

Investing directly in individual stocks is the area where you can make the biggest gains, or take the biggest losses. But for every seemingly never-ending stock rise (Google’s $85 initial IPO price in 2004 has soared to approximately $1,010 in November 2013) there’s a reminder such as one-time stock market darling Research in Motion of how quickly things can change for the worse. RIM reached a high of more than $140 a share in 2008, but had dipped to less than $14 a share in 2013. You’ll also have to factor in brokerage fees for every transaction you make.

7. Conclusion

Different strategies work for different investors and different situations. An investor might employ more than one strategy, or choose a variety of investment vehicles depending upon their goals.

So, have a plan and a strategy.

Just like going on trip in your car, it is important that investors have a plan and a destination in mind before investing their money. Your goals—whether planning for retirement or buying a home—dictate your time horizon, which dictates your tolerance for risk. Additionally, you want to make sure that you diversify your investments so that some do well when the rest of your portfolio might not. This approach allows an investor to construct a portfolio that is in line with their risk tolerance and that balances potential return with some downside risk protection.

Hopefully this article has provided some insights and good ideas as you invest for your future.

Your journey is just beginning, however, your challenge is to keep learning and stay informed.

0 comments on “Majority of Canadians haunted by Financial Stress”

Majority of Canadians haunted by Financial Stress

Are you stressed about your personal finances? I’m sure you are, and that’s the reason you are reading this article. According to the Financial Planning Standards Council – Financial Stress Survey, 41% Canadians cite “money” as the greatest reason of stress.

Financial.png

Here are top 3 Simple and Easy steps which will ensure that you regain some confidence about your personal finances.

  1. Weigh in financially

Weigh.png

Where are you now, how much do you earn, your spending habits, and how much you owe.

2. Create a Goal Plan

Goal.png

What are your goals (short term & long term)? Saving for a home, buying an SUV, saving for children’s education, paying off debt?

3. Action Plan

Actionable Plan.png

The next question is how are you going to get there? Are you going to earn more, spend less, automate your savings, or all 3?

Here is the solution:

Taking charge of your personal finances is the best way to reduce money related stress. 

  • Find & Cancel Unwanted Subscriptions

If you analyze your transactions to find all your recurring subscriptions, you will at-least find 1-2 subscriptions which you no longer use. So, why not cancel them?

  • Get out off credit card debt

A technique lot of people like to use to get out off debt is to pay off small credit card balances first. This can have a powerful psychological effect on many people because it can feel like they are making progress sooner. This can be very encouraging and provides a lot of people with motivation to keep paying down their debt.

  • Remove your payment information from Online shopping carts to cut down on Impulse purchases.

  • Consider a cooling period of 24 hours before buying a “want” as compared to a “need”.

  • Consider opening a TFSA or RSP

If you don’t have one, consider opening a TFSA or RSP. Start to save, even as little as $50 a month and it will increase your feeling of financial confidence.

0 comments on “Amazon MTurk Reviews”

Amazon MTurk Reviews

MT

Work from home and make money online with Amazon Mechanical Turk (MTurk)

When I first landed in Canada and started looking for a job, I was really frustrated! I think you guys already know the reason… why??? Earlier I was slogging for more than 8 hours during the weekdays in the corporate world and suddenly I had to leave my job, relocate to Canada and search for new opportunities. Honestly, I was not utilizing my time properly. So I thought why not start earning money from home. That was the time, I came across MTurk and thought about giving it a try.

I got to know that US and Indian citizens make the primary workforce and are making decent money online every day — working whenever and wherever they want — through this platform. As it was a platform provided by Amazon, I decided to put this flexible remote job opportunity to the test !

Rather than wasting valuable time, why not earn some extra bucks, or maybe learn something knew. I googled a bit and ensured that it is legitimate.

 


What is MTurk? 

Amazon Mechanical Turk is a crowdsourcing internet workplace. It’s based on the idea that there are still many jobs that humans do much effectively than computers, such as providing initial data to robots, identifying objects in a photo or video, performing data de-duplication, transcribing audio recordings, or performing surveys based on geolocations.


 

You know what, I earned 154.57 USD (~ 200 CAD) in a month (working only 1 – 1.5 hours per day) which is not great, however atleast I know I will be able to pay few of my current month’s bills.

MTurk
MTurk Dashboard

Pros:

  • I averaged around an hourly rate of $5 which is way less than the minimum pay rate here in Canada, however good when it gives a flexibility to work from home.
  • Be your own boss, pick up tasks (HITs) you are interested in and work whenever you feel like.

Cons:

  • Many of the high paying microtasks / HITs (Human Intelligence Tasks) are only available for US location.
  • You can only transfer your earnings to an Amazon.com Gift Card. PayPal payments are only applicable to US & Indian Citizens.

You can find an entire community of MTurk workers on Reddit who share valuable tips/tricks to increase your earnings and to identify valuable HITs.

Question: Did you manage to make money online with MTurk or another platform? Would appreciate your comments below!