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What’s a TFSA and how can you get one?

In my last post, I discussed RRSPs. This time, I want to introduce you to the Tax-Free Savings Account (TFSA) since many people I speak to aren’t taking advantage of this product.

Why aren’t people using a TFSA, you ask? Well, from feedback I’ve gotten, it’s simply because many of us don’t know how it works.

Let’s fix that! Read on…

 

WHAT IS A TFSA?

A TFSA (Tax Free Savings Account), like the name suggests, is a program we can use to save and invest money, all tax-free. We can use a TFSA for any type of savings goal.

It was introduced in 2009 as a registered plan so all contributions and growth are monitored by the federal government based on our Social Insurance Number.

Note that the TFSA itself is not an investment, it’s simply a “container” that holds investments and these investments must adhere to the rules of the program.

HOW DOES IT WORK?

The idea behind the TFSA is that we invest our money in a tax-free environment, so our money can compound faster while it’s in the plan.

If you’re wondering why tax-free growth is such a big deal, take a look at the example on the right.

  • How can I open a TFSA?

To be eligible for an TFSA, you must be a Canadian resident for tax purposes, be over 18 and must have contribution room.

  • How much can I put into my TFSA?

Here are the contribution limits for each year since 2009:

Year(s) Annual limit Cumulative total
2009, 2010, 2011, 2012 $5,000 $20,000
2013, 2014 $5,500 $31,000
2015 $10,000 $41,000
2016, 2017, 2018 $5,500 $57,500

Unused contribution room from previous years are carried forward, so as an example, someone who was eligible for a TFSA in 2009 but never had one, can contribute up to $57,500 in 2018.

Withdrawals also affect your contribution room for that calendar year – you may have to wait until the following year for your contribution room to increase.

  • What can I invest in?

Similar to investing in an RRSP, GICs (Guaranteed Investment Certificates) and Mutual Funds are used by many Canadians. Stocks and real estate can also be used.

It’s important to note that your investments should be based on your personal risk tolerance and investment objectives and speaking to an advisor is a great way to make sure you are using a strategy that works for you.

  • How long can I contribute for?

There are no age limits for contributing to a TFSA, so you can continue as long as the program is available, and you are eligible.

WHO IS IT RIGHT FOR?

A TFSA is a great way to save money for short term goals (vacations, cars, emergency fund etc.), but it’s becoming a more popular way to save for retirement because of the tax-free benefits.

As business owners, one advantage of using a TFSA is that the contribution room isn’t based on earned income like an RRSP. We usually declare less income when filing taxes, so our calculated RRSP room can be restrictive. A TFSA would be a good option for increasing retirement savings.

Also, since many business owners are in a higher tax bracket during retirement, using a TFSA as the first option for retirement savings may be more tax-effective than an RRSP when it comes to withdrawing the money.

Another thing to keep in mind (especially if you are thinking of running your business abroad) is that the growth on your money in a TFSA is tax free while you are a resident of Canada, so if you move outside of the country, you may have to pay applicable taxes.

Depending on your goals, a TFSA may make more sense for you, or using both a TFSA and RRSP may be best. It’s about knowing the pros and cons of each and making sure your money works for you!

To learn more about TFSAs: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/tax-free-savings-account.html

 

—————

Kim Lowrie is an insurance agent and mutual fund representative with World Financial Group.

She and her husband have made it their lifelong mission to help families, individuals and business owners succeed financially.

To find a solution that best fits your needs and goals, connect with Kim:

647.231.9052

klowrie02unjc@wfgmail.ca

Website | LinkedIn | Facebook | Twitter

Preparing for homeownership in 4 steps

It’s the end of the month and your rent has gone through like it has for many years. You’ve never had an issue paying your rent on time and perhaps you’ve thought about owning a home, but don’t know if you could afford it or don’t know where to start. Purchasing real estate can be a great long term investment putting you on a path to financial success and is attainable if the right steps are put in place.

When considering becoming a homeowner preparation is key and more so when it comes to getting approved for a mortgage. It is a process with several key factors to consider.

 

Here are 4 things you should be doing:

  • First, monitor your credit score. Banks and lenders use your credit score to determine the level of risk lending money to you will be. Having a higher credit score and clean credit history, ideally above 680, demonstrates you to be a good candidate.
  • Second, evaluate your income and employment situation. Your income level and debts will determine how much will be approved for. You also want to consider affordability. After paying your mortgage, monthly bills and other necessities is there any savings?
  • Third, saving a downpayment. At minimum you will need 5% of your purchase price to use as a down payment on an owner occupied property. Steadily saving for this in your bank account and having it ready a few months before making an offer will put you in a good position.
  • Fourth, seek expert advice. Speaking to a mortgage professional will put you on the right path to getting approved the first time. They will evaluate your individual situation and develop a plan with you towards becoming a home owner. Brokers work with several lenders including banks, credit unions, monoline and private lenders to make sure you are getting a good mortgage product at the best available rate.

The process does not need to be overwhelming and will be stress free if you work with a professional in the field who can answer all your questions and provide you with the information you need to make smart financial decisions.

 

Ericka Kodituwakku is a mortgage agent in Ottawa specializing in first time home buyers. Contact her today for a FREE Homebuyers Guide and with any questions on the mortgage process.

Ericka Kodituwakku, Mortgage Agent
Mortgage Alliance Licence # 10530

(613) 413-2781
www.mortgagealliance.com/ErickaKodituwakku
ekodituwakku@mortgagealliance.com
https://www.facebook.com/KodiMortgage/

PLANTING ONE SEED (INVESTMENT) AT A TIME!

Amina

This past weekend the weather was finally amazing to get out in the garden, dig through the earth with my fingers and pull out all the weeds before planting my vegetable garden. It got me thinking that it takes one seed at a time to harvest your garden.

What if we took the same view on our investments?

When we first start we are so keen to learn and invest in anything that comes our way – but that can be foolhardy – especially when it comes to investing!  WHY?

Ask any successful real estate investor and he or she she will tell you that the secret to their success was knowledge.  They learned everything they could before investing in their first property.  They planted one seed at a time!  Did they stop there? No they keep learning and applying that knowledge to build on their portfolio.

As an investor you must take your time to learn, which strategy suits you best. Is it student rentals, multi-family, rent to own, buy & hold, flipping, just to name a few?  Or is it lending your money for a great return or investing in syndicated mortgages or even 2nd mortgages?

Lending your money or investing in 2nd mortgages, may not provide as big returns as a bricks and mortar property, but you also don’t have the hassle of being a landlord and dealing with tenant issues.

I was recently approached by a financial advisor, who only believed that the road to wealth was paved on people investing in the stock market.  I have nothing against financial advisors, but being a person who lost a lot in the 2009 crash, I did not want to repeat past mistakes, which included investing in the stock market.  Does that mean I don’t invest in the stock market at all? NO – I do but I self-direct my investmetns and don’t leave it to somebody else to do it for me – thus I don’t incur huge MER (management expense ratio) fees, which can cut into the growth of my investments.  He could not understand why I would not recommend him to my clients.

Taking charge of your financial future should not be left up to somebody else – burrying your head in the sand and hoping your money will be taken care of is also foolhardy!  Does it take work to look after your finances? YES, but isn’t it more rewarding to see your garden grow when you have planted those initial seeds yourself?

Planting those seeds takes time but when that garden (investment portfolio) starts to grow, you will reap the rewards!

To your Wealth!

Amina

Please “like” my facebook page here Please follow me on twitter here

Is Engagement On Social Media A Return On Your Investment?

Malene Jorgensen

When people talk about social media marketing, there seems to be a focus on what you are getting in return. How is your timely investment measured? How is that investment related to sales? Some people tend to believe that just because you start sharing links on Facebook and Twitter, you will make money. Sure, there are success stories of people making lots of money online with their businesses, but this is far from the norm.

In other words, just because you are sharing links to your e-commerce store or your online products doesn’t mean you will see any returns on this investment. Instead, you may need to change your view of social media marketing all together to see just how useful it can be.

It really isn’t about how many products you sell every time you share a link. Instead, it is about the relationships you create on the network and about how you continue to nurture them. The investment really comes down to the engagement you have on these networks. If you start conversations, chances are that you will gain some loyal customers. So, when you do end up releasing a new product or service, people are more likely to invest in them if they are suited for their needs.

If you have thousands of followers who are excited about your business and you aren’t seeing any purchases, the problem may not be with your social media marketing. One common problem I stumble upon often is that people will disregard their Twitter or Facebook followers because they aren’t seeing any sales. But your social media marketing efforts may be paying off. The followers may be coming to your website – which is the goal of social media marketing – but they are turned off by your website. Then, they leave again without making a purchase.

You can find out whether this is a problem by implementing an analytics system to your business website, so you can see how many people are coming from Twitter or Facebook. You need to analyze all the steps in your social media strategies to determine what isn’t working. Only then can you find your social media success – and see the returns on your timely investments.

 

Malene Jorgensen is an entrepreneur, author and speaker. Jorgensen is passionate about online content, blogging, online business development and e-commerce. She owns an international media publishing company and a design studio. Jorgensen has written several books that are sold in over 50 countries. She is also obsessed with coffee and Twitter. You can reach Malene Jorgensen at Website | LinkedIn | Twitter | Instagram 

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