So one of the credos of Personal Finance that most experts agree on is you should Pay Yourself First , however, what that means to each of the experts is always a little different.
My big thing about the concept of Pay Yourself First is, make sure you are paying all your bills as well. What I mean, is that if you are building up your savings, while continuing to build up your debt load, so whatever I say this week, remember that my version of Pay Yourself First is assuming you are paying your bills and your debt as well!
With this in mind here is a list of the major ways you can (and should) pay yourself first (or more precisely what savings vehicle you should put your savings money in):
- Pay off your debt! You want to pay yourself, decrease your debt and the money you save on Interest is going to pay you, so keep this in mind. Yes, I know I sound repetitive, but it’s important.
- Put Money in your RRSP (or 401k). This is a great place to pay yourself because, you are saving tax money while saving money. You can do this a lot of ways, and I’ll talk about this later in the week. The drawback is if you need the money before you retire, there are a bunch of drawbacks, but even if you save the tax money you save somewhere else you are ahead of the game (like say paying off your debt).
- Put Money in your TFSA, another good place to save your extra money or your savings, because the money grows tax free, and it comes out of it Tax Free (now remember there are limits and rules that you need to be up to date on, so please read up on this vehicle).
- Put Money in your kids’ RESP, if you don’t have kids, don’t worry about this one, but if you have kids, when they are young is when you should use this savings vehicle. The government wants to subsidize your savings for your kids post secondary education, you should take advantage of this.
- Put Money in your loved ones RDSP, if you don’t have a disabled love one, don’t worry about it, but if you do have someone you care for that is disabled, think about this program to help with their security. I have written about this before, and will continue talking about this program as it becomes more clear to me.
- Take all your Tax Deductions, it amazes how many people who do not take advantage of the tax breaks that are available to them, such as:
- Active child tax credit, if your kids are playing sports and is younger than 16, you need to take advantage of this program.
- Mass transit tax credit, if you take the bus, or your kids do, why wouldn’t you use this tax credit?
- Child Care credit, if your kids are in daycare, why wouldn’t you write this off?
- Medical expenses, are you claiming these? If you don’t have a health plan, or it doesn’t pay for all your medical, look into this.
- Don’t wait until April to get your tax credit, if you are taking advantage of these tax credits and breaks, make sure you get paid up front, don’t let the government hold your money all year and then give it back to you at the end of the year, Pay Yourself Now!
I’ll write some more about this topic, but remember you need to pay yourself first.