Last updated: Jan. 15, 2014
We’re 2 weeks into the new year. How are you doing on your New Year’s Resolutions?
Health is a common theme in many New Year’s resolutions, but have you made a resolution this year to improve your financial health?
Here are 4 tips that you can follow to improve your financial health in 2014.
1. Pay Off Debt
Credit cards are almost a necessity in today’s cashless society; however, they can be misused.
Make it a resolution this year to control your spending and pay off credit card debt avoiding accrued interest charges.
You can also make it a point to look at your loans and whether there’s an opportunity to convert personal loans to a business or investment loan.
Interest can be deductible when the funds borrowed are used for the purposes of earning an income or a return from a business or investment.
2. Maximize Your RRSPs
The average couple spends $50,000 per year in retirement. If you’ve worked the majority of your life you could expect to receive approximately $30,000 per year from CPP and OAS.
The average life expectancy is 80 years. If you retire at 65, that’s a minimum of 15 years and a yearly shortfall of $20,000. However, you don’t want to run the risk of outliving your funds.
Be sure you make retirement savings a priority in 2014 and maximize your RRSP contributions. Speak with a financial advisor to determine your specific retirement needs and ensure you have a plan in place to meet any shortfall.
3. Maximize Your TFSA
A tax-free savings account allows you to set aside funds and earn a return tax-free.
Since the program’s inception in 2009, an individual’s total TFSA contribution limit (up to and including 2014) is $31,000.
A TFSA could be used to provide emergency funds. Withdrawals are available any time without penalty or taxes owing.
Investment opportunities for a TFSA include GICs, bonds and equities.
Be aware though that the various investment choices each carry their own terms and risk levels. Be sure to discuss your specific needs and goals with a financial advisor when determining where to invest funds in your TFSA account.
4. Save for Your First Home
The minimum required down payment for a home is 5%. However, if you can make a down payment of 20% or more you’ll avoid the additional expense of mortgage loan insurance.
You could withdraw up to $25,000 tax-free from your RRSP through the Home Buyer’s Plan to fund your down payment.
Make 2014 the year you improve your financial health by reducing debt and putting in place savings plans that will help you meet your goals for now and the long term.
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