Canadian Personal Finance Blog

Archive for the ‘TFSA’ Category

A very busy weekend for all of us and for me in particular:

1. The Winter Olympics started on Friday night, interesting to see the “Winter” Olympics in a city with no snow and it is 10 Celsius, oh well.
2. Valentine’s Day, but we have talked about it’s significance to Personal Finance
3. The Chinese Year of the Tiger began, and my question is, is it a tradition with the Chinese New Year to make resolutions? Happy New Year!
4. My parents celebrated their 58th wedding anniversary, which is the most significant part of the weekend.

In the coming week there will be lots more interesting things happening:

• It is “Family Day” in Ontario and lots of folks have today off, I don’t being a Federal Employee.
• Lent begins on Wednesday, an excellent time to start a new Personal Finance adventure.
• Stats Canada announces their Inflation numbers for January on Thursday.
• Shrove Tuesday means you should also get out and have some pancakes too!
• RRSP and Tax Season continues on

Tax Season

I await the delivery of most of the documentation I need to complete my taxes. I know that this year I will actually be getting tax back (at least that is my guess, I might be wrong), so I am eager to get my taxes submitted (electronically). For those who have RRSP room, or extra cash, they should be weighing the decision about whether to put their money in a TFSA or into an RRSP (or a spousal RRSP), which makes this season stressful as well.

There are some excellent articles out there comparing and contrasting whether you should be using an RRSP for your long term savings goals or a TFSA, and I encourage you to read other financial blogs and articles to figure out what decision is best for you (my guess is this is a personal decision, and there is no real “cut and dry” decision point that everyone can use).

Your T-4’s should arrive some time soon, but make sure you know what forms you will need for your taxes as well.

The Go Go 90’s

Frontline on PBS has an excellent video about someone who tried to cry Wolf, before the great melt-down. The lady who said Greenspan was wrong.

As my regular readers see, sometimes my mind wanders to weird places and I must admit I am not sure where most of this came from. On Sunday night at 5:00 PM I had nothing to write for Monday, but looked at the GPS I had just received from Christmas, started writing about a Financial GPS and from their we got to Financial Shock Collars and here we are Friday with a whole week of very odd postings by me.

I empathize with those in dire financial quandaries, but in some cases the Financial Shock Collar may be the only answer. As Mrs. C8j pointed out in a comment she made, a lot of issues with money in couples comes from lack of communication, so maybe it’s time to start talking to your spouse about money? Just an idea.

Random Shocking Thoughts

This week other Personal Finance Bloggers found more solid issues to write about, and some are well worth checking out in this weeks Random Thoughts:

• Given the C.D. Howe institute put out a very good e-brief Saver’s Choice: Comparing the Marginal Effetive Tax Burdens which has caused many bloggers to discuss this interesting point.
• Michael James spoke of this in his post RRSP versus TFSA where he discusses various scenarios about putting your money in either savings vehicle.
• The Canadian Capitalist also posted talking about the C.D. Howe’s take on TFSA versus RRSP where he talks about the Howe findings specifically.
• Canadian Financial DIY also comments on the Howe findings in New Data on TFSA vs RRSP and Canada’s Rube Goldberg Tax System.
• On a related topic, Larry MacDonald talks about RRSPs and business owners and how business owners might want to think about setting up RRSPs for their retirement, or perhaps even TFSAs?
• Preet wraps up his expose with Severing the Link Between Price and Weight Part IV.
• Million Dollar Journey talks about where they might get the money to put into their RRSP or TFSA with a the post How I saved 70% on my grocery bill, remember 50% off meat should be eaten the day you buy it too!
• Gail Vaz-Oxlade writes an important spiritual posting about Keeping Focus, which is important in this day and age, don’t get distracted from your goals.
• Let’s stop the madness is a very good rant by Ellen Roseman about the dirty tricks being played on some consumers, read this and be warned!
• I hadn’t noticed but Dave over a Investing Intelligently Got Laid Off, now it looks like he has found something, but does bring home that the alleged “recovery” may not be fully entrenched yet!

Enjoy your weekend, and remember, if you think you need a Financial Shock Collar, please get some help!

On Monday, Labor numbers which are out today!

This week a new pair of interesting topics arose in the world Financial Blogs, the changes that the government has passed to fix some loopholes in the TFSA program and a few bloggers pointing out that Bond Mutual Funds may seem “safe” right now, but if interest rates rise these funds are not as “safe” as you might think they are.

The proposed TFSA changes specific can be found on the Department of Finance web page and it outlines what and why will be changed in the system itself.

• Michael James points out why some of these changes are put in place with TFSA Changes Likely to Help Investors but he also comments on Bond Mutual funds in The Future of Bonds that you should read as well.
• Rob Carrick comments specifically on the Mutual Fund Bond issue in Latest Horror Flick: Attack of the Bond Market worth reading as well if you think your bond money is safe.
• The Canadian Capitalist also comments on the TFSA changes and also wants to know Why Ban Swap Transactions in TFSA Accounts ?
• Million Dollar Journey commented on the Proposed TFSA Changes as well, pointing out it most likely won’t affect (effect?) John Q. Public.
• Larry MacDonald replies to MacKenzie Financial’s “commentary” on ETF’s with I Thought I wanted a Mutual Fund , interesting how the Mutual Fund industry is not getting quite worried by ETF’s cutting into their profit margins.
• Gail Vaz-Oxlade did a Retirement Rant that is both entertaining and informative. I dare you to tell her why you aren’t saving, I dare you!
• Preet, who is looking for Folks to Be on the W Network With Him puts to rest some misconceptions about ETFs in ETF Does Not Mean Index well worth a read.

Read over these posts, very useful stuff for investors!

Looking at your mid-year personal finance review, you can ask the all important question, “Now what?”, and as usual my mealy mouthed answer is, “That depends!”.

If you have met all of your financial goals for the year and it is mid-year, you set your goals too low (or you sand bagged to make yourself feel good), or you got really lucky. No matter what reason, you can celebrate a little bit for achieving your goals, but now is the time to make some “stretch” goals for the end of the year, and prove that your success at the start of the year was not just a fluke and that you can work hard the whole year. Simply sitting on your financial laurels is just not the thing to do, build from your success and show that you can finish strong for the year.

If none of your goals are met, and you think you will be unable to hit any of your goals this year, maybe it is time to re-vamp, or re-think your plan (or scrap it completely). Not to worry, look at where you had problems with your plan and figure out whether you were:

1. Too aggressive in your planning, and set unattainable goals
2. Very unlucky and the world conspired against your plan
3. You never really planned to follow this plan

If the answer is (3) don’t kid yourself, you need to plan, this is going to hurt you some time soon. If the answer is you were too aggressive then maybe go back to your original goals or plan, and maybe scale them back so that they might be attainable by the end of the year (but still make them challenging).

If things are going OK, and you think you can succeed with your plan, good for you, you have made a good plan, and you are following it. You can celebrate a little in your success, but get back to your plan, enjoy your success and keep up the good work.

I got called by Insight Magazine to give some advice to new grads on what they should be doing about their finances, and I gave some answers to the interviewer, but as usual, I am not sure I was very clear or eloquent, so now I will attempt to be more clear to those that might read the article coming up.

Get The Heck Out of Debt

You have just graduated from University, and you might be carrying upwards of $40K in debt (hopefully in student loans only), you most likely won’t be paying that debt off in your first year of working (should you find a job right away) (if you can pay it off, good for you!), however, you should put together a plan on how you are going to pay off that debt and WHEN it will be retired. 

Carrying debt is a drag on your finances, and the sooner the debt is retired, the easier your financial life will be. You should not aspire to “get used to living in debt”, this is the one thing my generation does NOT want to hand down to you.

Don’t Fall In Love With Having Money

Just because you have graduated from University and you no longer have to eat Kraft Dinner with Hot Dogs for dinner, does not mean you must go out every night to eat. You have lived a frugal lifestyle as a student (I am assuming), but if you continued that frugal lifestyle for a while longer, you may be able to pay down your debt faster and then be on a much stronger footing financially.

Yes, you deserve to enjoy life, but it is very easy to get used to the “Let’s go out to dinner tonight we deserve it” lifestyle, and once you are in that lifestyle the habit is very hard to break (speaking as a 49 year old, I can attest to that issue).

You cannot live your parents’ lifestyle (yet) so don’t try. It took them 30 years to get where they are, don’t rush your spending habits to mimic their spending habits.

If your parents paid for you to have a Blackberry or an iPhone or paid for your Cell phone bill, maybe it’s time to get rid of this expensive toy? You don’t need $120 a month cell phone bills. Discretionary spending (i.e. money haemorhage) is a bad thing which you must watch diligently. Middle age men’s wastes spread, but their spending spreads like that as well, don’t let it happen to you.

Have a Savings Plan

The sooner you start saving, the better it will be for you when you reach my age, however, saving while still carrying discretionary debt (i.e. non-mortgage debt) is paying Peter to feed Paul. Lowering your debt is first and foremost, if you have left over moneys from your year, yes, starting an RRSP early is a good thing to do, but pay your debts first.

Savings is good, getting out of debt is better.

Get the Heck out of Debt

Did I mention this yet?

Banks Can be Negotiated With

As I have pointed out before Free Banking is possible, but it is more likely for old farts like me, who have a good track record with the bank already.  Paying $12-$25 a month in bank service charges you should try to avoid, since you most likely don’t use enough services with the bank to justify this charge. Go with as cheap banking as you can.

The Three Worst Ideas After Graduation

1. I deserve a new car! -or- I deserve a vacation in Las Vegas!
2. I’m a little short until my next pay cheque, I’ll get a pay day loan
3. I am only carrying a few hundred dollars on my credit card balance this month

Keep this in mind, did I mention Get the Heck Out of Debt?