Wisdom You Can Take to the Bank

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With the challenging state of our current economy, many people are paying more attention than ever to their finances. Financial literacy is the key to being able to make better money decisions and securing a more sound future for you and your family.

Here are some tips that can help you build your wealth:

Live below your means

By spending less than you earn, you can create a surplus that you can then invest in your future. It will also help you develop habits that will carry you into retirement.

Get out of debt

Pay off high-interest credit cards first, then switch to debit cards. Consolidate loans under a single, low-interest arrangement. Get serious about paying down your home mortgage (or other major loans) the interest you save could buy your home twice over.

Be willing to pay for good advice

Seek out the best advice and ensure they have your best interests at heart instead of their own.

Get smart about taxes

Tax software, books and websites are helpful, but if your affairs involved anything more complex than T4’s, charitable receipts and RRSP contributions, engaging a professional will likely pay for itself.

Maximize RRSP contributions

Your taxable income is immediately reduced by the amount of your RRSP contribution, and you have tax-deferred growth until the age of 71. This is the place to put fixed income investments and high-turnover equity mutual funds.

Understand how a company pension plan fits with the retirement income system

The RRSP is only one-third of the three-pronged Canadian retirement system. There are also government pensions like CPP and OAS and company Registered Pension Plans.

Start a non-registered investment portfolio

RRSP investments remain frozen at 18% of annual income to a maximum of $30,780 (for 2023). Capital gains inclusion rates are 50% or can be deferred by not taking profits. Dividends are also taxed better than interest.

Learn about Exchange-traded funds

Unlike mutual funds, hedge funds reward managers when they make an absolute return on your money.

Get an RESP for the kids

An annual $2500 registered education savings plan for each child will net an additional 20% ($500) grant money from the federal government, up to $7,200 over the lifetime. However, you can invest up the lifetime limit of $50,000 per child, not all of which generates grant money but does grow tax-free over the years.

Seek balance in life

Work to live, don’t live to work. Spend more time with your family and community.

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