Saving money Archives

March 1, 2021 investing, Kids, Saving money

What is an RDSP?

In my previous posts, I’ve talked about three different types of government savings plans:

Today I’m going to talk about a savings plan not a lot of people are familiar with – a Registered Disability Savings Plan.

What is an RSDP?

A registered disability savings plan or RDSP is a savings plan for parents and others (e.g. grandparents, aunts and uncles, etc.) that is intended to provide anyone who is eligible for the disability tax credit with long-term financial security. A beneficiary can only have ONE RDSP at any given time.

Who is eligible to be the beneficiary of an RDSP?

The following criteria must be met in order for someone to be the beneficiary of an RDSP. They must:

Have a valid social insurance number
Be eligible for the disability tax credit (DTC)
Be a resident of Canada when the plan is opened
Be under the age of 60

To be eligible for the disability tax credit, a qualified medical practitioner must have filed in Form 2201 Disability Tax Credit Certificate and the government must have approved it.

How do contributions and government matching work?

There is no yearly maximum for RDSP contributions, but there is a lifetime maximum contribution of $200,000. And the government will match your contributions up to a certain amount, depending on your household income. If your income is low enough, they will give you a contribution via a bond even if you have made no contribution.

Canada Disability Savings Grant

If your family income is $97,069 or less:

on the first $500 contribution—$3 grant for every 1 dollar contributed, up to $1,500 a year
on the next $1,000 contribution—$2 grant for every 1 dollar contributed, up to $2,000 a year

If your family income is more than $97,069:

on the first $1,000 contribution—$1 grant for every 1 dollar contributed, up to $1,000 a year

Canada Disability Savings Bond

The Government will pay a bond of up to $1,000 into an RDSP – even if you haven’t made any contributions! No contributions have to be made to get the bond. The amount the government contributes will be based on the beneficiary’s adjusted family net income as follows:

$31,711 or less — Bond $1,000
between $31,711 and $48,535— Part of the $1,000 is based on the formula in the Canada Disability Savings Act
more than $48,535—No bond is paid

RDSPs are a great savings vehicle

With the government providing a match to your contributions – or even a bond if you make no contribution, but have a low income, RDSPs are a great savings vehicle! Do you know anyone who has an RDSP or is contributing to one?

February 15, 2021 Saving money, Uncategorized

What are the benefits to an RESP?

Image by free stock photos from www.picjumbo.com from Pixabay

In my last two posts, I talked about how to use RRSPs and TFSAs to save for your future. Today I’m going to talk about RESPs or Registered Education Savings Plans.

What is an RESP?

A Registered Education Savings Plan is a great way to help a special child in your life save for their education. Whether it’s your child, grandchild, nephew, niece or another child you want to help – you can save them a lot of stress and expense down the line by contributing to an RESP for them. RESPs came along too late for my parents to take advantage of them – but they did help me pay for school, which was fantastic and enabled me to graduate without debt.

What are the benefits of an RESP?

There are several benefits to using an RESP to save for a child’s education:

There’s no yearly maximum or minimum – so you can make contributions when and how it works for you.
Any growth in them is tax-sheltered.
The beneficiary of the RESP can use them for a variety of post-secondary costs including housing and tuition.
Government matching – They’ll match 20% of your RESP contributions up to $2,500 each year – with a lifetime maximum of $7,200.

What happens if the child the RESP is for doesn’t want to attend any post-secondary schooling?

Depending on the type of plan and who opened the RESP, you can:

Transfer the funds to another child.
Transfer the funds to your RRSP.
Close the RESP.
Transfer the funds to an RDSP, if the child qualifies for one. I’ll talk more about RSDPs (Registered Disability Savings Plans) in my next post.

How can I get started?

Before you open an RESP, you’ll need a Social Insurance Number (SIN) for the child. It may be tempting to open an RESP individually for a child if you want to make contributions – but it’s likely better just to have one RESP open, instead of several. So if you aren’t the child’s parent or grandparent, talk to them about making RESP contributions through them if they’ve already opened one.

You’re Ready To Get Started

Now you know all about the benefits of helping a child pay for their education via an RESP. Even if you can only contribute a little bit each year, it will add up – especially with the matching government grant. Have you contributed to an RESP for someone? Tell me in the comments!

February 1, 2021 Saving money

Why you should have a TFSA

In my last post, I talked about RRSPs – formally known as registered retirement savings plans – and why should you use one while saving for retirement. Another great way to save for retirement – or just a general future expense like a house down payment is to use a TFSA. You can use a TFSA for any kind of savings goal you want!

What is a TFSA?

TFSAs are short for Tax-Free Savings Accounts. But you don’t just put money in them and hope for a little interest. You can use them for a variety of investments – from bonds to mutual funds to ETFs.

The most important thing you need to know about a TFSA is the magical phrase “tax-free”. This means that you aren’t taxed on any gains in your account – and you aren’t taxed on any withdrawals!

So what’s the catch?

You may be thinking that a TFSA sounds too good to be true. But the Canadian government wants to encourage Canadians to save – whether it’s to buy a house or provide additional income in retirement. After all, the more money you have in retirement income, the less you’ll be eligible for from the Canadian government in benefits like Old Age Security. So the government isn’t entirely selfless here.

How do contributions work?

The TFSA contribution limit for 2021 is $6000. TFSA limits have changed over the years – from being as low as $5,000 to as high as $10,000. Like RRSPs, contribution room rolls over – so if you don’t have enough money to make the maximum contribution one year, you can always catch up another time. Unlike RRSP contributions, all TFSA contributions must be made in the year they are intended for – so you can’t make a contribution to your TFSA in January 2021 and actually have it count towards your 2020 TFSA.

How do I know when I should choose a TFSA over an RRSP?

In an ideal world, we’d all have enough money to maximize out our TFSAs and our RRSPs every year. However, that’s just not realistic for most of us.

If you want to save for a specific goal that isn’t retirement – like a car, a vacation, or renovations for your house – then a TFSA is definitely the way to go. In addition, if you make a fairly low income and won’t really benefit from RRSP deductions or may need your money before retirement, then a TFSA is also the way to go.

If you make a high income and can benefit from RRSP deductions as well as the security of not needing your money until retirement, then an RRSP may be a better choice.

Now You Know!

You’re ready to get started contributing to a TFSA and saving for your future! Let me know in the comments – do you prefer a TFSA or an RRSP?

January 15, 2021 Saving money

It’s RRSP season – are you ready?

Image by 3D Animation Production Company from Pixabay

The first two months of any year are often referred to as “RRSP” season. This is because you can make contributions to your RRSP in the current year – but have them actually count towards the previous year’s contributions. If I’ve lost you, don’t worry – I’ll explain more below!

What is an RRSP?

An RRSP is short for a registered retirement savings plan. The government introduced them in the 1950s as a way to encourage Canadians to save for their retirements. As many places of employment don’t offer a pension anymore, RRSPs have become more and more important over the years.

Why would I want to contribute to one?

There are several reasons to contribute to an RRSP:

You are saving for your future. Presumably, you don’t want to work your entire life – so putting money in an RRSP ensures you have money waiting for you when you retire.
You can use your RRSP contributions to cut down on your tax bill. Any money you contribute to an RRSP is EXEMPT from taxes. For example, you made $40,000 and put $2000 into an RRSP. The government will then consider your income to only be $38,000 for the year.
You aren’t taxed on any growth in your RRSPs until you take money out. If the stock market is going crazy, don’t worry – you won’t be hit with a huge tax bill! Your RRSPs grow tax-free.

What are the rules about contributing?

For 2021, the maximum amount you can contribute to your RRSP is $27,830. However, unless you’ve made a very high salary, you likely won’t have this kind of contribution room. You “earn” contribution room every year you are working – and the maximum amount you can contribute is based on your salary. The good news is that your contribution amounts carry over – so if you have years with a lot of expenses, you can contribute less to your RRSPs and make up the difference later.

You can put a lump sum into your RRSP, but most people prefer to make monthly, automated contributions to spread out what they are putting in, and ride out any market volatility. For your 2020 RRSP, you can make a contribution any time during 2020 or in January or February 2021.

You’re ready to get started

Now you know the basics of what an RRSP is and how it works. It’s not too late to make contributions for 2020 – or start planning ahead for 2021!

January 1, 2021 Good money habits, Holidays, Saving money

Why our New Year’s resolutions will be less expensive this year

Normally, one of the biggest things people pledge to do for New Year’s is to start eating right and exercising. So they sign up for expensive gym memberships and fancy weight loss programs and then frequently stop committing to both within a month or two.

The good news is that we can’t waste our money on stuff we won’t use this time. Most of Canada is in lockdown in one form or another, so you can’t sign up for the gym, and you can’t go buy expensive shakes and other weight-loss concoctions you really don’t need.

The good news is that if you do really want to lose weight and exercise you can still do it – just without spending a lot of extra money.

Exercise

The easiest exercise to do is right outside your front door – just put on your boots and go! If you don’t feel safe going out because it’s icy, you can walk in place in your house, or go up and down the stairs.

And there are tons of Youtube videos and programs that show you how to use your body weight to do strength training.

Always remember, the right exercise program is one you stick to! Being able to exercise from the comfort of your own home with objects you have around the house (like soup cans!) makes it easier to stick to being active. Even if you start with a few minutes a day, it’s a step in the right direction!

Eating Right

Like exercise – it’s not that we don’t know how to eat right – we’re just not too great about sticking to it. Eating properly doesn’t have to be expensive – it just takes a bit of planning. Unless you’re really good at it, sticking to a type of eating that cuts out one or more types of food entirely (e.g. carbs) may not be a great route. It’s better to plan a balanced diet with some room for treats.

There are also lots of free calorie counting apps you can use to quickly and easily see what your calorie intake should be if you want to lose weight. You can also use the app to log your calories each day to keep on track.

The Takeaway

You can still achieve your New Year’s goals in regards to exercise and eating right – without spending a fortune. Dust off some fitness equipment you already own or put on some boots and go outside! You can choose in seasons vegetables and cheap protein (like beans) to make filling and healthy meals – batch cooking is a great way to save time and money.

How do you plan to eat well or exercise without spending a lot?

August 15, 2020 Mortgage, Saving money

How to get started saving for home ownership

Image by Nattanan Kanchanaprat from Pixabay

So you’re finally ready and you want to take the plunge into homeownership! You realize that in order to do this, you need to start saving up money. But how? It may seem like every dollar you make is already accounted for – and you think there’s no way you can find the extra money you need to put towards a down payment.

I’m here to tell you that’s not true – here are the first three steps you need to take to get started on saving for homeownership.

Figure out your net monthly income
Figure out your fixed expense
Figure out your variable expenses – and where you can cut back to start saving

1. Figure out your monthly net income

Figuring out your net monthly income can be easy or hard depending on how many sources of income you have. If your income varies from month to month, then figure out the average of what you make each month. Take into account:

Your regular salary
Tips
Other regular income – such as child support, dividends etc. you can count on

2. Figure out your fixed expenses

Fixed expenses are expenses where you really don’t have any wiggle room. For example:

Rent
Student loan payments
Child care

It’s possible you could negotiate a lower rent or child care, but you can’t count on that lasting. You could also choose to move or switch child care providers, but the amount you’d save is not likely worth the hassle unless the savings are quite large.

3. Figure out your variable expenses and where you can cut back

After you’ve figured out your monthly net income and your fixed expenses, you should sit down figure out what your variable expenses are. They tend to be irregular and can happen from as little as once a year to as often as every other week. The good news is that they are expenses that you have more control over.

Here are some sample variable expenses:

Vacations
Gifts
Cell phone
Internet and cable
Subscription boxes
Groceries, takeout food, Meals and drinks out
Entertainment, such as movies, concerts, etc. (Not that any of us are spending much money on big-ticket events these days!)

Now take a look at these expenses and figure out where you can cut back. Perhaps you can eat out less. Or maybe you’re good with just Netflix and don’t need cable. Or you’ve enjoyed that subscription box – but really don’t need to keep getting it. You don’t have to cut out everything all at once – just see where it works for you to make changes.

The Takeaway

It can seem overwhelming to get started saving for a house. But by breaking it down into concrete steps (that you can break down into more little steps) you’ve found a way to get started!

If you have a house – how did you get started saving for it? If you don’t, but want to – how do you plan to start saving up?

August 1, 2020 Mortgage, Saving money

How I paid off my mortgage in less than 5 years

A mortgage is one of the biggest debts you’ll ever take on. Unless you inherit money or win the lottery, chances are, you’ll need to take out a mortgage if you want to buy a house. For our first house, my husband and I did take on a mortgage – but we paid it off in less than 5 years! It was a huge relief for us to have it paid off. It meant we saved a lot of money we could use elsewhere that we didn’t have to spend on interest.

In this post, I’m going to talk to you about the three main things we did to help ensure we could pay off our mortgage quickly:

Buy less house than we were approved for.
Opt for bi-weekly payments.
Put down a lump sum payment every year.

1. Buy less house than we were approved for

My husband and I were both working and making decent salaries. But we were house shopping in Toronto which wasn’t cheap! I think we were approved for a mortgage of over 500,000 dollars, but the idea that much debt just made me nervous. We certainly could have bought a much nicer, bigger house if we’d used that amount. But we would have been “house poor” and it would have taken us years to pay off. In the end, we took a mortgage of 100,000 dollars and paid for the rest of the house using savings.

2. Opting for bi-weekly payments

When you have a bi-weekly mortgage payment, you are giving the bank a payment every two weeks instead of monthly. I tied it to when my paycheck came in, so we’d always have enough in the bank to cover our costs – never had to worry about overdraft charges!

With bi-weekly payments, you actually ended up making one extra payment a year, which means you are paying your mortgage off that much faster. But you aren’t making any changes to your budget or payment schedule, so it doesn’t come as a surprise to you when that “extra” payment comes out of your bank account!

3. Put down a lump-sum payment every year

Another option we took advantage of was putting down a lump-sum payment. A lump-sum payment means that you put down a certain amount towards the principal once a year. Most banks have a limit on how much of a lump-sum you can put down (it’s usually a certain percentage, such as 10%, of the total amount you borrowed in the first place). This is a great way to quickly cut down how much of the principal you still owe – and you have total control over it. Even if you can only put 500 dollars down – it’s still helping cut down your principal.

Now it’s your turn!

You’ve now learned three great ways you can pay your mortgage off quickly:

Borrow a lower amount than you are approved for
Select bi-weekly instead of monthly payments
Make a lump-sum payment each year

Some banks may charge a few for selecting a bi-weekly payment schedule or lump-sum payments, so check with your bank before you proceed with either of these options.

Happy mortgage-free living!

May 15, 2020 Saving money

5 ways we’ve learned to keep ourselves busy cheaply during lockdown

Another good thing that’s come out of the past few months is that we’ve all learned how to entertain ourselves fairly cheaply. Previously, we might have spent a lot of money on an evening out to keep ourselves busy – but that hasn’t been an option for the past few months.

So we’ve all learned how to keep ourselves entertained with what we can find at home! Here are some of the ways people have been keeping busy for free or cheap:

Going for walks
Baking
Playing games online with friends
Taking free online classes
Downloading ebooks from the library

1. Going for walks

For a while, when only the bare essential stores were open and even playgrounds were closed, a lot of people were going for walks. I’m lucky enough to live in an area with great nature paths and quiet streets, so our main entertainment for a few months was socially distanced walks once a week with family members.

2. Baking

Baking has definitely been very popular over the past few months. I’m not much of a baker – and even I baked my first loaf of bread. Flour and yeast have been flying off the shelves! When I found some yeast, I picked up some extra to share. I think baking has been popular because it’s very soothing and because you get to eat the end product.

3. Playing games online with friends

If I had managed to get a Nintendo Switch and a copy of Animal Crossing I’d definitely have spent time online playing games with friends. This didn’t happen for me, so I played stuff I already had solo. I know that online gaming has been popular with a lot of older kids as a great way to have fun and keep in touch with their friends.

4. Taking free online classes

As soon as it looked like schools were going to shut down, lots of places stepped up to offer classes that anyone could take for free. Disney was offering animation lessons, Scholastic had stuff for younger kids – you could find a free class on just about anything you wanted! I started one that talked about the history of the pyramids.

5. Downloading ebooks from the library

My local library really ramped up their online offerings since the actual library branches were closed. You could even apply for a library card online if you didn’t have one. We also got access to two other city library ebook offerings which was great – I found some books I wanted to read that I couldn’t find anywhere else.

The Takeaway

The great news is that all of these options will continue to be available even as things open up. We may not have as much selection in some things in the future, but stuff will still be out!

What’s one free or cheap way you entertained yourself over the past few months?

March 15, 2020 Saving money

Saving during a pandemic

I have to admit I never thought I’d be writing those words!

While being at home for days on end has definitely been rough on pretty much everyone, the pandemic has given at least some of us the opportunity to save some money. Here are the main four areas people are saving money in during the pandemic:

Commuting
Eating out
Drinking
Travelling

1. Commuting

My husband takes the train to work every day. At two times a day, five times a week, that really adds up. With him now working full time at home, we’ve saved a lot of money on commuting costs. As well, we’ve been able to decrease the insurance on one of our cars as we really aren’t using it these days. So we’ve definitely saved money on commuting!

2. Eating out

Normally we’d go get takeout once a week. However, we decided to skip it for several weeks as we felt it just wasn’t worth the risk. As well, my husband would go buy a cup of coffee a few times a day while at work, so we’re also saving money on that (although we are spending more on coffee at home now!). I think a lot of people we know are following the same pattern – they just don’t want to deal with the risk of picking up food, so they’re avoiding it completely.

3. Drinking

We’re past the stage in life where we’d go to clubs or go out for drinks with co-workers. But for people who do this on a regular basis, they are definitely saving a lot of money. In a big city like Toronto, drinks can often cost up to $10 apiece, so if you go out for drinks a few times a week and now you’re not – you could be saving a lot of money.

4. Travelling

Again, we’re at a stage in life where we’re not doing much travelling. I did have one overnight trip booked – but I could cancel the hotel at no cost, so I saved some money by not going away. A lot of folks may have ended up putting down deposits they won’t get back, but if you were planning a trip in the near future, and didn’t have anything put down, you may have saved yourself some money due to this pandemic.

The Takeaway

I’m not going to try to put a rosy glow on this – we’re living in uncertain times and it’s a lot to process. It feels like life has gone from normal to scary almost overnight. No one knows what the future holds. But I’m trying to see the silver lining in all of this – and that lining is that we’ve saved ourselves some money at least!

In my next post, I’ll talk about areas where people are spending more money during this pandemic.

How has COVID-19 impacted your spending?

January 15, 2020 Saving money

The FIVE magic words that save you money

I bet you’re thinking – come on, how could FIVE words save me money? Someone is trying too hard to justify their English degree! 😛

In all seriousness though – here are the five magic words that can save you money. They are – USE UP WHAT YOU HAVE.

One more time – that’s USE UP WHAT YOU HAVE! If you use what you already have – then you aren’t spending money to buy new stuff! And you aren’t wasting money throwing out things that have expired, gotten freezer-burned etc.

I know, I know – it seems too easy. But obviously it isn’t – or we’d all be doing it. So I’m going to outline a three-step process to help you use up what you have:

Take stock of what you have
Make a list
Remember to use the lists!

1. Take stock of what you have

A lot of us end the holidays with more food than we need (particularly sweets and treats) and often extra bath and body products too (they’re a very popular secret Santa gift!). So, without further ado, you need to go through all of the following places and take stock of what you have:

Kitchen cupboards
Fridge
Freezer
Deep Freeze
All bathroom cupboards
Anywhere else you store surplus items!

While you’re there, throw out anything that’s expired or leaking (and can’t be saved – i.e. don’t save a leaking tin can, but you could save a leaking shampoo bottle).

All done? Tidied up and amazed at how much you have? Now you’re ready for step 2!

2. Make a list

That’s right – you’ve got to write down what you have and put the list somewhere you’ll see it. You can take one of two approaches:

1. A master list, which lists all extra items – everything from toilet paper to mustard.

2. Separate lists – for each storage space. So you’d have a list in the bathroom for items stored under the counter, a list on the freezer for items stored there, etc.

Or if you’re really ambitious – you could do a master list and separate lists! The main post of these lists is to make sure you know what you have, and that you can easily take stock of it before you go shopping. So the only “right” method is the one that works for you!

Now you’re ready for step 3.

3. Using the lists

No point in making the list (or lists!) if you’re not going to remember to refer to them. I keep a running list each week of items we need to get when we go grocery shopping. It’s right on the fridge – so it’s easy to keep up to date, and easy to refer to. You may find that keeping your list on the side of the fridge works best for you – or you may like to keep them on your phone. The main thing is to keep the list(s) in a spot that you’ll be sure to remember to check them before you go shopping!

You’re all set!

You’ve now learned the five magic words to saving yourself money – USE UP WHAT YOU HAVE! You start by taking stock, then make a list, then refer to that list before you go shopping! It’s so easy – and you can get started right now!