Finances

I’m not sure if there are a lot of people out there who are aware that they’re able to get free money. There are things that you can take advantage of to get you a little bit ahead so I’m not sure why they’re not doing it. But then again, I think that people aren’t away of it because no one is telling them about it. So I try to make it known whenever I can.

My company has a program that will match a certain percentage of my RRSP contribution. I took advantage of that the day that I started working. My company will match up to 4% of my contribution which means that my investment makes a return as soon as I make a contribution. There’s really nothing to lose when you’re offered something like this so I wonder why some people don’t take advantage of it.

The most ridiculous reason as to why someone wouldn’t take advantage of this program is because they’re “not planning on working there for two years.” From what I’ve heard, some company will only let you keep their contribution if you stay at the company for a minimum of two years but I still don’t see that as a valid reason not to contribute to your RRSP. Even if the company doesn’t let you keep their contribution, you will still have your contribution and every little bit helps.

When you make an RRSP contribution, you’re saving up for your retirement. The fact that your company isn’t going to let you keep their contribution is beside the fact. And who knows, if you do manage to stay at that company for two years, you’ll have that extra contribution. But if you’ve worked there for two years and haven’t started contributing, you’ve just wasted two years’ worth of free money. I have a few more months before I reach my two year mark at my present job but if I didn’t make it, I’d be happy knowing that I’ve managed to save close to $8,000 for my retirement.

RRSP aren’t the only thing that you can take advantage of. I tell my friends who have children to sign up for an RESP for their kids. I have one friend who is trying to save up for her kids but things come up and they have to dip into it. I tell her that it’s not money that she supposed to be using for emergency. The money that she deposit into that account should stay there until her kids reaches the age where they continue their education. I’m not sure where she stands on the RESP but I don’t think she’s doing it right.

I’ve been contributing to my younger brothers’ RESP and as to date, the account is sitting at $3,224.40 which is slightly down from what it should be. But if you take a closer look, I’m not down at all. I deposited $1500 for each of them so the account should be at $3,000 but it’s higher. The reason why it’s up $224.40 because the rest was deposited by the government.

If your income is really low, you can qualify for a lot of extra money. The Canadian Learning Bond (CLB) can give you an addition $600 up to a maximum of $2000, I believe. On top of that, there’s the Canadian Education Savings Grant (CESG) which will match 20% of your contribution. There’s a limit as to how much they’ll match every year but I forgot what that amount was. I didn’t qualify for the CLB because I made too much but I did get the CESG. The addition $300 might not sound like much but it’s better than nothing.

My brother Tonee turned 17 years old a couple of weeks ago which means that the CESG will continue to match my contribution for another year. Kevin still has about six more years to go before they stop contributing to his account but by the time that happens, I’ll have almost enough in the RESP to cover all of his post secondary cost.

It looks like there’s free money available to people but they just have to know where to look for it. I try to be on the lookout for anything like this and relay the information to my friends. Whatever they choose to do with that information is up to them. I just hope that they’re smart enough to take advantage of an opportunity when one comes along.

There has been a lot of talk lately about the new Tax Free Savings Account (TFSA) going around. A lot of people have heard about it from the government but not too many people are familiar with it. I’m not too sure about it as well but I have an idea. I tried playing around with some numbers to see how it benefits and at first I didn’t see the point but in the long run, it’ll come in hand.

The TFSA was introduced in the 2008 budget and it hopes to help encourage Canadians to save up. It’s like a retirement savings plan (RSP) but you’re not penalized when you withdraw your money. With an RSP, you’re taxed at least 10% of your withdraw. Unlike an RSP, TFSA are not tax deductible which is a bit of a downer but on the other hand, any interest that you gain on that account is not taxed so you keep all of it.

Any Canadian residents who are 18 or older can contribute up to $5,000 per year to a TFSA. I believe, and correct me if I’m wrong, if you don’t deposit the full $5,000 it’ll leave you room to do that next year. So you can start an account now and deposit nothing but in ten years you can contribute $50,000 because that’s what you’re eligible for. The contribution room is carried forward and accumulates. But if you deposit money into the account and withdraw it, that will create moor room for contribution.

When the TFSA was first introduced I didn’t think that I would sign up for it because I didn’t see any advantage over the RSPs. RSPs allows you to save up for your retirement and it’s tax deductible where as a TFSA allows you to save up for retirement but it’s not tax deductible. Any interest made on the TFSA isn’t subject to tax but the same goes with RSP. Any interest that was earned in an RSP will be deposited back into the account so there’s no tax on it.

I guess the major difference between the two is that with a TFSA you’re allowed to withdraw the money without having to worry about being taxed but that’s not that point of the TFSA. If you keep taking money out then you might as well open up a chequing account.

The TFSA doesn’t become beneficial unless you have a lot of money in there. If you deposit the annual maximum of $5,000 you can earn just under $100 if it’s high interest account. It’s unlikely for me to deposit that much into a TFSA. It’s better if I used that and deposit it into an RSP where it’ll be more advantageous for me.

For the last month or so, I’ve been seeing and hearing a lot of advertisement for the TFSA but they didn’t give out much information about it. The advertisement just tells people to sign up for it but they don’t inform anyone about the account. People aren’t going to sign up for it if they don’t know anything about it.

I decided to open up one to see how well it can do. I’m planning on deposition $50 a month into that account and letting it grow on its own. I don’t think there will be much growth on it but it’s a start to saving up money. But from what I can tell from my research, I don’t see it doing me any good. It’ll just be an account here I stash my money.

Due to the economic problems that are occurring in the US, the Canadian economy is being affected as well. I thought that the bailout was supposed to smooth things out but it looks like the problems are still there. Even with the bailout, there are issues of executives wasting money and taking advantage of the money. The financial industry is in deep waters and really needs a life line right now. Stocks are plummeting and a lot of people rushing to the banks to withdraw money so they won’t lose it.

In the last week or so, my RRSP account has dropped at least 10% and it has not gone back up yet. Both of my accounts have been affected but one more than other. The RRSP account with RBC suffered the most lost but I’m not sure exactly why since it’s the conservative account. The RRSP account with Sun Life Financial dropped a few hundred dollars and it’s the aggressive account. I would have thought that it would have been more impacted.

With every investment that you make, there are risks involved and if you’re lucky, there will be returns as well. At the moment, I’m not getting too much on the return side but none of this is considered risky either. I thought I understood the risk involved in investing but right now I’m not too sure anymore.

My RBC account, being conservative should be investing mostly in fixed income and the remainder in equity which leads me to assume that I shouldn’t be losing so much. If I understand this correctly, having most of the investments in fixed income would resist major changes in the market meaning that I wouldn’t lose too much. That’s the whole purpose of selecting conservative over aggressive.

I opened my RBC when I was a young man and I didn’t have much to invest but the money that I invested, I didn’t want to lose so I told them to make my portfolio a conservative one. It was a safe invest profile for me because I was willing to risk a lot. Once I learned more and more about investing, I was willing to take a higher risk which is what I’m doing with my Sun Life account.

The higher the risk that I am willing to take means the higher the potential loss. I’m willing to take a higher loss with the Sun Life account because my work place has an RRSP Matching plan where they’ll match my contribution by a certain amount. The amount is a high percentage but it’s enough for me to play around with.

With the market going down, it looks like it’s better to invest in fixed income. I changed the numbers around for the Sun Life account so that I would be investing mainly in equity with 0% in fixed income. So within the last three months I’ve lost 8.8% of my investment. As for my RBC account, I’ve lost 12.8% in the last three months.

Right now, I have a couple of options. I can either take advantage of the low market values or I can continue and invest the same amount. My RBC investments went as high as $8,507.80 in May before declining to its current value. My Sun Life investment was as high as $8,255.26 at the end of September and dropped to $7,842.33 as of today. I think that once the funds becomes available, I might max out my RRSP and contribute more while things are low and hopefully I’ll be rewarded when the market starts to stabilize.

No, that’s not a typo and I wasn’t trying to sing the “R-E-S-P-E-C-T” song. Back in January, before I left for Hong Kong, I opened up a Registered Education Savings Plan (RESP) for my two youngest brothers. I don’t want them to take a student loan from the government because it’s too expensive and I didn’t want my parents to have to worry about extra savings. I have a bit of extra money at the end of the month so I decided to do the savings for them.

Tonee and Kevin are 16 and 12, respectively and it won’t be long before they’re done with high school. Tonee has two more years before he’s done and Kevin will be done high school around 2015. I can make deposits into Tonee’s account for two years and Kevin’s for seven years. The amount in Tonee’s account isn’t going to be that high since it’s such a short period of time but it should be enough to get him started. Kevin is the youngest and always gets spoiled and it looks like he’ll get spoiled again.

I’ve decided to make monthly deposits of $100 per account. I’ve set up an automatic withdraw to deduct $50 from my account every other week and deposit it into each RESP account. At the moment I have an RBC Target 2010 Education Fund and an RBC Target 2015 Education Fund.

I’ve decided to go conservative with Tonee’s Target 2010 because I don’t want the money to fluctuate too much. When it comes to money, the less time you have, the less of a change you want. I don’t want to put this portfolio into a higher risk category and end up having nothing by the time Tonee graduates. Tonee’s account is at $655.22, a positive gain of $5.22 which isn’t bad. Maybe he can use that extra $5 to buy a pencil case or something.

Somewhere down the road, I decided to top up the account to $500. I was informed by the account manager that if I have more than $500 in the account, I could start making deposits myself but as it turns out, I can’t deposit anything into this account unless I call in. It had something to do with mutual funds and securities. Every now and then I would like to deposit an extra $25 into each account and I thought it was a waste of time having to call in and ask someone at RBC to do it. But if that’s what the rules are, I don’t have a choice but to follow it.

Kevin’s account is more aggressive than Tonee’s because I have more time to save. His account is up at $663.57 which is $8.35 more than Tonee. The cost of Kevin’s portfolio is a tad more than Tonee so he’s getting fewer units. By the time Kevin starts college, he should have about $8400 in this account whereas Tonee will only have about $2400. That’s probably enough to cover a semester or so.

On top of my monthly deposits, the government gives me a 20% grant. For every month that I deposit $100, they will deposit $20 into each account. At least, that’s what I thought it was but after looking at the history, it looks like I’m only getting 15%. I don’t know if it was changed somewhere during the years but it’s better than nothing.

If you have kids, I highly recommend that you start an RESP for them as soon as possible. I tell my friends who has kids to do the same but they’re not doing it. It doesn’t matter if you can’t put $100 a month away as long as you put something in there, it will help. A deposit as low as $20 a month from the day they were born until the day they graduate will save you about $4000. You can either use that $4000 to pay for part of the tuition or take a loan from the government and worry about paying the interest on the loan.

I’m taking a lot longer than I had planned to pay off some debts. These debts aren’t mind but I’m trying to be helpful to some friends and loaning them some money. It’s turning around and kicking me in the ass for it. It’s a bad idea to be lending money to people who have low income and can’t afford to make payments in the first place. I didn’t think the load would have been this heavy to take on but I was wrong. I was hoping that they would have given me partial payments to pay for their loans but nothing has gone through yet. The longer it takes for me to pay of these debts, the more it will cost me in the end.

I had to make an appointment with my account manger last week to see about getting a consolidation loan. I wanted to borrow enough money to cover every since credit card that I have. We added up all the credit card bills and estimated that I will need $12,500 to pay for everything.

I put in my application and waited for my account manager to give me a call to let me know if it has been approved or not. I emailed him the remaining documents that he asked for and waiting patiently for his response.

I get a call from him the next day informing me that it might be better if I applied for a line of credit. With a consolidation loan, I would have to cancel all my credit cards. Right now, with my girlfriend overseas, I need to have my credit cards in case of emergencies.
I’ll be borrowing at a rate of 10.75% which means that I’ll have to pay back $13,843.75, an extra $1,343.75. I’m getting charged $120 a month for interest charges. Over the course of a year that’s going to cost me $1,440. By taking the line of credit, I’ll be saving a bit of money. It’s not much but every little bit helps.

It is estimated that it will take me about two years to pay off everything. I’m planning on making $500 payments a month to the line of credit. If I have extra money to use, I will put it towards the payment as well. The higher the payments, the faster I will have this paid off. I’m hoping to use my income tax return to help with the payments. If I’m getting back when I think I’m getting back, I’ll be shaving off five months worth of payments.