savings plans http://www.wisebread.com/taxonomy/term/12174/all en-US Why Canada’s TFSA Is Totally Awesome http://www.wisebread.com/why-canada-s-tfsa-is-totally-awesome <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-canada-s-tfsa-is-totally-awesome" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old-couple-enjoying-retirement.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>In a recent article, I <a href="http://www.wisebread.com/canada-and-us-retirement-showdown-which-offers-more-for-retirees">compared the Canadian and American retirement systems</a>, and while I tried to include as much as I could, a lot of people jumped on my omission of the Tax Free Savings Account (TFSA). I left it out because, strictly speaking, a TFSA is not a retirement savings vehicle. But I should&rsquo;ve included it anyway for one simple reason&nbsp;&mdash; TFSAs are totally awesome, especially for investors. That&rsquo;s because if you put your investment in one of these, you don&rsquo;t have to pay capital gains tax. For regular people, that&rsquo;s as close as you can get to the benefits of an account in some tropical, offshore banking center (which, let&rsquo;s face it, probably wouldn&rsquo;t be interested in a $3,000 deposit anyway).</p> <p>According to a poll released by the Bank of Montreal in November, about 38% of Canadians have a TFSA account. If you aren&rsquo;t in that group, you&rsquo;re missing out. Here I&rsquo;ll go over this relative newcomer to Canadian financial (and yes, retirement) planning.</p> <h2>TFSA 101</h2> <p>First things first &mdash; the <a href="http://www.standardlife.ca/en/individual/solutions/tfsa/">TFSA</a> is poorly named and, as a result, many people assume that it&rsquo;s a savings account. In fact, the TFSA isn&rsquo;t an account at all; it&rsquo;s more like a label that can be applied to all kinds of financial accounts, including regular savings accounts, stock trading accounts, mutual funds, bonds, and even certain types of small business shares. In other words, it isn&rsquo;t just for saving. In fact, the TFSA&rsquo;s tax-free capital gains mean you get the greatest advantage by using it to invest. Unlike virtually every other kind of account you could put your money into, if you use a TFSA, you won&rsquo;t have to pay tax on any interest, dividends or capital gains you earn. Ever. </p> <p>Of course, there are some limits. When the TFSA was introduced in 2009, every Canadian over the age of 18 got $5,000 of contribution room. Like a Registered Retirement Savings Plan (RRSP), this contribution room continues to accumulate each year, and remains open whether you use it or not. So, if you&rsquo;ve never contributed to a TFSA, you could deposit as much as $25,500 in 2013 (the contribution was increased to $5,500 this year). Plus, that contribution room <i>never</i> goes away, even when you spend the money, which you can do without penalty whenever you choose. You could sock some money away for your retirement or pull it out and spend it on a nice vacation. Your choice. And hey, if you do manage a solid capital gain during the year, it might just be a very affordable trip!</p> <h2>Tax-Deferred Versus Tax-Free</h2> <p>What many people don&rsquo;t understand about TFSAs is the tax implications, which explains why, according to the BMO poll, many people don&rsquo;t use them effectively. So here&rsquo;s a rundown.</p> <p>TFSAs are tax free. That means that if you contribute $5,500 this year, make a great stock pick, and end up with $10,000 in your account by the end of the year, you can avoid paying what would normally amount to $675 in capital gains tax (assuming a 30% income tax rate). Pretty sweet, right?</p> <p>Now take the RRSP. If you contribute $5,500 to this type of account instead, you can deduct that $5,500 from your taxable income, which could mean a tax refund. So, essentially, the money you contribute to an RRSP has not been taxed. However, if your contribution grows to $10,000, you will pay income tax on that amount when you withdraw it (which hopefully happens when you&rsquo;re retired). The logic behind deferring your taxes until retirement is that many people have less income during retirement, and therefore a lower tax rate.</p> <h2>Why the TFSA Is Totally Awesome</h2> <p>What really sets the TFSA apart is that it&rsquo;s flexible. You can use it to save money for short-term goals, or to save for longer term dreams like a new home or even retirement, and you withdraw that money whenever you want. Plus, if you&rsquo;re already maxing out your RRSP, a TFSA gives a little extra incentive to save more. For those with lower incomes who might not benefit from an RRSP&rsquo;s tax deduction, it also provides another option.</p> <p>Whether you&rsquo;re making big bucks trading stocks and other investments or just racking up a little interest, a TFSA means you won&rsquo;t have to pay taxes on those gains. In other words, a Tax Free Savings Account is about as close as you can get to a free lunch in the investing world. And what budget-savvy person ever turns down one of those?<b><br /> </b></p> <p>This post was made possible by support from&nbsp;<a href="http://www.standardlife.ca/" target="_blank">Standard Life</a>, a leading provider of&nbsp;<a href="http://www.standardlife.ca/prpp/index.html" target="_blank">Canadian pension plans</a></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/tara-struyk">Tara Struyk</a> of <a href="http://www.wisebread.com/why-canada-s-tfsa-is-totally-awesome">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-much-money-will-you-need-to-retire">How Much Money Will You Need to Retire?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-sure-you-dont-run-out-of-money-in-retirement">How to Make Sure You Don&#039;t Run Out of Money in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-you-treat-your-social-security-benefits-like-a-bond">Should You Treat Your Social Security Benefits Like a Bond?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-keep-student-loans-from-wrecking-your-retirement">How to Keep Student Loans From Wrecking Your Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-reasons-to-invest-in-stocks-past-age-50">7 Reasons to Invest in Stocks Past Age 50</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Investment Retirement Canada retirement savings savings plans Thu, 25 Apr 2013 10:24:33 +0000 Tara Struyk 973633 at http://www.wisebread.com Defining What Financial Success Means to You http://www.wisebread.com/defining-what-financial-success-means-to-you <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/defining-what-financial-success-means-to-you" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/1109031385_a572ef88da_z.jpg" alt="guy jumping" title="guy jumping" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>There is an old story about a young boy who is asked by an adult what he wants to be when he grows up.&nbsp;Not one to waste time as a fireman or an astronaut, the young boy gets right to the point and announces that when he grows up, he wants to be rich. (See also:&nbsp;<a href="http://www.wisebread.com/do-you-really-want-to-be-rich">Do You&nbsp;Really&nbsp;Want to&nbsp;Be Rich?</a>)</p> <p>The boy&rsquo;s ambition is one you likely share. After all, how many people do you know who aspire to become poorer as they get older? But what does it mean to be &ldquo;rich&rdquo;? While some people might define financial success as achievement of a particular net worth, that may be the wrong way to think about it. As Adrian J. Cartwood, author of the soon-to-be-available book &ldquo;Share Your Number&rdquo; and the financial blog <a href="http://7million7years.com/">7 Million in 7 Years</a>, explains, &quot;People, even rich people, are often dissatisfied with their level of financial success because they have failed to make the one true connection: that your life isn't about money, rather your money is there to support your life.&quot;</p> <p>Instead of thinking about financial success as a mere number, Cartwood suggests that the best way to achieve monetary fulfillment is to first understand how you want to spend your money &mdash; only then can you figure out how much you will need to finance your dreams. &quot;It's only when you find your life's true purpose and calculate how much money you need in order to support the life of your dreams &mdash; whether that be $100,000 or $100 million &mdash; will you really know what financial success means to you,&quot; he explains.</p> <p>So how does one do this?</p> <h3>1. Take a Closer Look at Your Life</h3> <p>Start by asking yourself questions about what you enjoy doing. This will help you create a clearer picture of your goals for your future and give you a starting point for figuring out what that future will cost. Ask:</p> <ul> <li>What are your favorite activities, interests, and hobbies right now?</li> <li>Do you think you will want to continue doing them in the future?</li> <li>Is it feasible to continue some of the things you enjoy now as you get older, or do you anticipate stopping some of them?</li> </ul> <h3>2. Dream Big</h3> <p>If money was not an object, what would you love to do? <a href="http://www.wisebread.com/how-to-get-free-accommodations-and-paid-jobs-on-boats">Sail around the world</a>? Build a <a href="http://www.wisebread.com/live-abroad-for-less-also-at-home">tropical vacation home</a>? Start your own business? Simply be able to fish every day in the pond near your home? Do not be afraid to name your dreams out loud, no matter how far-fetched they seem. The more specific you can be about your goals for your life, the easier it will be to develop a plan to reach them.</p> <h3>3. Figure Out the Costs</h3> <p>Once you know what you would love to do with your life, you can start to determine how much money you need to pay for your dream future. Depending on your plans, this might be as simple as looking up the cost of buying and maintaining a recreational vehicle or as complicated as estimating how much money it would take to open a restaurant in your neighborhood. Either way, you will need to have an idea of how much money you are going to need to finance your desires and still pay for your day-to-day living expenses.</p> <h3>4. Develop a Savings Plan</h3> <p>Finally, you need to figure out how you are going to earn and/or save the money you need to reach true financial success. The amount may not be enormous; after all, if your dreams are inexpensive, then your personal definition of financial success will be modest. Of course, if you have grand plans for your future, you will need to figure out a way to put enough money away to be able to live the life you desire. And more importantly, you will want to start living that life as soon as possible. Consider your current earnings, how much you are likely to earn in the future, and how much money you can put away on a regular basis. Talk to an <a href="http://www.wisebread.com/6-mistakes-to-avoid-with-a-financial-adviser">investment advisor</a> to help develop a plan to make your savings grow.</p> <p>It may take hard work and planning, but having the money available to give you the life you truly desire is a worthwhile and reachable goal &mdash; and it's the true measure of financial success.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/debbie-dragon">Debbie Dragon</a> of <a href="http://www.wisebread.com/defining-what-financial-success-means-to-you">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/21-ways-to-make-a-big-financial-change">21 Ways to Make a Big Financial Change</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-successful-millennials-do">7 Things Successful Millennials Do</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-americans-are-getting-better-at-managing-their-money">3 Ways Americans Are Getting Better at Managing Their Money</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-inspiring-quotes-about-money-from-successful-women">6 Inspiring Quotes About Money From Successful Women</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-to-remember-every-time-you-face-a-financial-failure">5 Things to Remember Every Time You Face a Financial Failure</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance acheiving goals identify your dream savings plans success Mon, 25 Jun 2012 10:24:08 +0000 Debbie Dragon 935253 at http://www.wisebread.com Financial Freedom and Using Passion to Budget http://www.wisebread.com/financial-freedom-and-using-passion-to-budget <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/financial-freedom-and-using-passion-to-budget" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/IMG_4637_1.JPG" alt="financial freedom" title="financial freedom" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Increasing numbers of people are in serious debt and seeking <a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-debt-management">debt management</a> and <a href="http://www.wisebread.com/credit-counseling-when-you-need-it-and-when-you-dont">debt settlement</a> services. Although at first blush you would suppose that it has to do with job loss and poor economic climate, the vast majority of these people are actually high income-earners, with good jobs. What gives? Where is the financial freedom we all are striving toward? I would like to suggest that it&rsquo;s more achievable than we realize.</p> <p>It&rsquo;s tough to live in our consumer-driven society these days. Societal undercurrents tell us to buy, buy, buy. Buy the latest technological gadget, because it will make you more productive (and happy). Buy the latest fashion, because it will make you look and feel good (and happy). And buy your <a href="http://www.wisebread.com/the-retirement-latte">daily latte</a> at the local coffee shop, because it&rsquo;s delicious, chic, and tasty (and it will make you happy).</p> <p>If you are vulnerable to these pressures (and we all are &mdash; I&rsquo;m certainly not impervious), then before you know it, you&rsquo;ll have overspent, even if you have good incoming cash flow. Next thing you know, you&rsquo;re unhappy and in debt.</p> <p>So how do we manage these pressures? I believe the trick is to have a passion. <strong>If we are undirected, we are susceptible to all the external forces of consumerism around us</strong>, and whamo, we&rsquo;re a full-on rat in the race, wondering when the wheel will stop spinning or how we can get off the ride.</p> <h2>Financial Freedom</h2> <p>What is your definition of financial freedom? Contrary to popular opinion, I don&rsquo;t believe it has to do with making more money (because the more you make, the more you spend), or having a certain balance in your bank account. Financial freedom is rarely about spending the rest of your days on a beach sipping tropical drinks with fancy umbrellas in them. (As nice as that would be, it gets old pretty quickly).</p> <p>My current income is a mere fraction of what I made when I was running my financial planning practice. And yet, I have more freedom &mdash; financially and otherwise &mdash; than I ever have. A friend of mine who runs a fledgling business considers himself to be financially free, despite a lack of surplus cash and long hours. And another friend who is a mature law school student by day and working at night says she, too, is more financially free than she ever has been.</p> <p>How can this be? Isn&rsquo;t financial freedom, well, <em>financial</em>?</p> <p>I think the pattern in all three cases is in our passions. We all work long hours, but we love what we do. We are excited to wake up each day (although admittedly my law student friend is a little bleary-eyed). We have direction, and most importantly, we have <a href="http://www.wisebread.com/goal-setting-getting-out-of-debt-once-and-for-all">a goal that makes us sing</a>.</p> <h2>Goal Setting</h2> <p>If you are in debt, setting a goal that is simply to get out of debt isn&rsquo;t exciting enough to achieve easily. With a goal like that, the end-game is nothing more than a bank account with a $0 balance. As much of an achievement getting out of debt may be, a $0 balance is hardly something to dance in the streets about.</p> <p>Instead, the goal needs to be something bigger. Something exciting. Something that gives us butterflies in our stomach.</p> <p>For myself, initially setting the goal of traveling full-time was exciting enough to get me through the obstacles that stood in my way to packing my bags and getting on that airplane. And in continuing on this path over the last three years, my goal of continuing to make my full-time travels financially sustainable keeps me in check.</p> <p>I work long hours sometimes (between volunteering and writing), but I do it from wherever in the world I so choose &mdash; a nomadic life which has been a lifelong dream. Even though my income is almost ten times lower than it once was, I never truly want for anything.</p> <h2>Achieving Financial Freedom</h2> <p>When I was a <a href="http://www.wisebread.com/9-signs-you-need-to-fire-your-financial-planner">financial planner</a>, before pulling out balance sheets and working on numbers, the first thing I did was to ask my clients what they want to do with their lives. I challenged them to dream big, and not worry so much about what&rsquo;s &ldquo;realistic&rdquo;. As a result, I helped people move across the world, open businesses, and own properties. Ask any of these people if they initially thought it would be possible, and they would probably laugh and say no.</p> <h2>Using Passion to Budget</h2> <p>Once you set a goal that makes you sing, all of a sudden <a href="http://www.wisebread.com/financial-iq-test-how-healthy-is-your-budget">budgeting</a> becomes a lot easier. As you contemplate that purchase that is supposed to make you happy, the other side of your brain reminds you that the happiness is only temporary (and often unhappy debt is a consequence), and that your real dream could come true if you exercised some restraint. <strong>It&rsquo;s not deprivation; it&rsquo;s prioritization.</strong></p> <p>You&rsquo;ll begin to see everything with new eyes. You&rsquo;ll realize you&rsquo;re unwittingly spending money on <a href="http://www.wisebread.com/seven-monthly-expenses-we-dont-realize-we-dont-need">things you don&rsquo;t need</a>, and all of a sudden you&rsquo;ll start to find money where you didn&rsquo;t think it existed. Depending on the goal and your starting point, the progress may be slow, but if you <a href="http://www.wisebread.com/vision-boards-dream-big-play-with-pictures-and-watch-your-life-change">keep the vision in mind</a>, it&rsquo;s amazing how things can fall into place.</p> <p><em><strong>A Passionate Goal + Conscious Spending + a dash of Faith = Financial Freedom.</strong></em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/nora-dunn">Nora Dunn</a> of <a href="http://www.wisebread.com/financial-freedom-and-using-passion-to-budget">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-6"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/when-should-you-say-no-to-those-who-want-to-borrow-money-from-you">When Should You Say No to Those Who Want to Borrow Money from You?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-traits-of-people-who-live-debt-free">8 Traits of People Who Live Debt-Free</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-six-figures-really-that-much">Is Six Figures Really That Much?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/if-you-won-the-lottery-you-would">If You Won The Lottery, You Would...</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/ten-tenets-for-arranging-your-rich-part-1-rich-is-relative">Ten Tenets for &quot;Arranging Your Rich&quot; - Part 1: Rich is Relative</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Career and Income Lifestyle financial freedom savings plans Sun, 30 May 2010 16:00:04 +0000 Nora Dunn 104690 at http://www.wisebread.com