Save Money faster in 2021

 It is 2021 already! Any New Year resolutions for you?

We should make learning about money as a priority this year. I mean, make saving as a priority.

Every one want to save money. No one really want to accumulate debt. But, life happens and we buy things, that we don't really needed. 

So the first step to saving faster is to make saving the priority. We all heard about "paying yourself first". It actually means is to save the money you want from your pay check, before you start spending. So, think of an amount you can live without. Budget that as your "savings"

Most people get paid biweekly. To start, make an automatic deduction to savings account when you deposit the check. It need not be big. Just start the habit. When it is not in the checking account, you might keep it there and let it accumulate. I will actually say to automate it. If you are not seeing it, you won't feel like spending it either.

Next is to try reduce the spending. Each time, you are tempted to buy something, think it through:is it really needed? Can I do without it?

Do I really want to work 5 hours to make the money for this item? If the answer is no, then we don't usually buy it.

I have a reminder in my purse on a card asking "Do you really really want it?"  That gives me a moment to think before swiping my credit card.

IF you get a raise, try to save that money. The natural tendency will be to increase the expenses too, right? Try to at least increase your savings little bit whenever you get a raise. 

Many people won't get a raise easily. So, learn to negotiate for better pay whenever you get a chance. 

Make a targeted amount for savings. Then treat yourself with something nice with 10% of what you saved. That treat will be sweeter to enjoy!

Bindu

TFSA: Important things to remember

TFSA is a boon for most Canadians. The money in TFSA can be withdrawn at any time without a penalty. Investments in RRSP are subject to withdrawal tax.

Then there are some things we need to consider making investments in TFSA. 

TFSA is not just a savings account

Don't be limited to having only a savings account in TFSA. You can actually hold a trading account to invest money in TFSA. It can be growth oriented or dividend income  oriented: your choice. You can hold mutual funds, bonds and securities in this account. The money grow inside is not taxed. 

You can invest in interest generating accounts as well. The interest is not taxed. 

Transferring TFSA from one bank to another

If you need to transfer your TFSA to another financial institution, make sure you use the transfer form, T2033. 

If you are withdrawing money from one TFSA and investing it in another TFSA, make sure, it won't considered as an over contribution. 

Choosing the investments

If you are doing DIY dividend investing  within TFSA, make sure you are holding only Canadian stocks. Dividends from foreign stocks are subjected to withholding tax. 

You can also hold REITs like Reocan REIT in your TFSA. The distributions are not taxed. But make sure your investments are Canadian, to avoid paying taxes.

Paying Fees.

I used to invest as the money comes in. Then, I realized, each transaction costs me the trading fees. So, now a days, I will wait to make it at least $1000 to make a trade. 

You should also check the MER or the management expense ratio, if you are investing in mutual funds.  

DRIPing

DRIP is short for Dividend Re-Investment Program. I like to invest in dividend paying stocks. Some trading platforms allow to reinvest your dividend to buy the shares of the same company.

For example, you bought 100 shares of ABC company. When the quarterly dividend received, it is $12. the share is now trading at $10.25/share. If you are registered for  DRIP , you will get one new share, without having to pay trading fees. If the trading cost is $7, you are saving $7 to acquire that one share.  On top of it, you will get dividend for 101 shares in the next quarter. 

Maximizing the contribution

Every year the government will determine how much will be the TFSA contribution room. I will suggest all of us should contribute to maximize TFSA. That is the best way to grow the money. 

It may not be possible for every one to maximize the TFSA and RRSP contributions. We should at least think of maximizing our TFSA. 

Estate planning

As a final point, everyone should remember to name the successor or beneficiary for TFSA.  You can name spouse or common law partner as successor holder

Then  they can contribute the amount to their own TFSA. No need to check the contribution room.

If the beneficiary is not a spouse/common law partner, they can contribute the proceeds to their on TFSA only if they have room available. Capital gains or income  from the proceeds will be taxed as regular income from the beneficiary.

Disclaimer: I am not a financial expert. Please do your own research before making any decisions. 

Bindu