Wednesday, August 29, 2018
Don’t be a Fool…Take Advantage of These 10 Financial Goldmines
When it comes to your finances, sometimes it is not a matter of what you do, but what you don’t do. Avoiding mistakes can be just as valuable as making the right moves. I consider not taking advantage of situations a mistake. There are programs in place out there that will allow you to flourish, so long as you have the discipline and dedication to follow through. Today, I am going to show you 10 Advantageous Financial Products that will benefit your life greatly. While money can have an emotional aspect to it, today is all about the bottom line and keeping it in your favor.
1) The Tax-Free Savings Account or TFSA
I do not care if you are 18 years old, or 80 years old. I do not care if you are poor, middle class or affluent. Every adult should have a TFSA or what my brothers in the States call a Roth IRA. The reason is simple, TAX-FREE! The concept of paying taxes on investment growth is foreign to most people. They seem to think that the government will allow them to invest in something, watching it triple in value, and then take all the money and run. That is simply not the case. What do you think these Wall Street guys get busted for? The TFSA allows you to take your money, watch it grow, and then withdraw when you wish, completely tax-free. Used to its full potential it has the power to help younger individuals retire with well over a million dollars. Make sure you are invested in something and not just keeping your money in cash, or fixed income investments. Why lose out on growth if you don’t have to right?
2) The Registered Retirement Savings Plan or RRSP
While I believe everyone should have a TFSA, I do not think the RRSP is correct for all people. In America, it’s called your 401K or IRA and it works the same way as it does here in Canada. Why I think the RRSP is useful is because it is funded with “pre-tax” dollars, meaning it lowers your taxable income for the year. You, therefore, will pay less tax come next spring, which is always a good thing. For those of you in a lower tax bracket, focus on the TFSA first, then use the RRSP. Ideally, everyone would have both. The RRSP, like the TFSA, allows for tax-sheltered growth. Unlike the TFSA, you are taxed as you withdraw your money, hopefully, later in life when you are in a lower tax bracket, ie. Retirement.
3) Cheap Term Life Insurance
How is buying life insurance a goldmine? Well, my friends, it is potentially a goldmine for your beneficiary if you die. Why this is important for you is simple, it’s cheap. Last week I put through an application for a 28-year-old female for 500K of term life insurance. Want to know how much it cost? $17.55 a month. That’s right, for less than the cost of 2 beers she now can provide half a million dollars to her family should the worst happen. Now, no one likes to think about death, but it happens every day. We are all going to die, so the question is: What kind of legacy will you leave? I love the idea of my family receiving money because I have the heart and diligence to cover myself at a young age. I also know that getting coverage cheap allows me to do things with the rest of my money like, say umm, invest in a TFSA! Ding ding ding, straight gold friends!
4) Critical Illness Coverage
A lesser known form of coverage is Critical Illness Insurance. Oh god, not more insurance. Why is this a goldmine? For me, it is quite simple. I have not taken a sick day in 8 years. In fact, the last time I was off work sick, I was in the hospital for a week. I know that the only thing that would make me miss work would be something serious like cancer, a heart attack, or a stroke. I know that if I miss a day, it probably means I will miss a month, or a year. I like the idea that there is a form of insurance that will pay me a lump sum should I get seriously ill. I can then take time to recover on my terms and not be forced back to work. 2 weeks ago, I insured a 21-year-old client of mine with CI coverage for $15 a month! He will now receive 50K should he contract one of those big 3 illnesses or any one of 21 other serious impairments, which 1 in 3 people will get in their lifetime. Another great part of CI is that you can have the option of getting your premiums back should you not use the coverage. That’s a goldmine if you ask me.
5) Company Matching
My mother is the supervisor at a dairy factory here in Ontario. Her company offers a retirement matching program for their workers. They are generous enough to match, up to 5%, of their employee’s contributions to their retirement accounts. What they should call their program is, “Take the free money you fool!” There is almost nothing free in this world and if someone is willing to give you a healthy retirement for free, take it! My mom is blown away by all the young people who don’t take advantage of this program. It is absolutely insane not to take any free money you can. $100 each paycheque for 35 years is $390K by the time you retire (7% rate of return). $200 during that same time is you guessed it, $780K! I don’t know about you, but I like the last number better, much better.
6) Company stock options
Some companies will allow you to get involved in their stock program as well. Many will buy a share for every share you buy, or some variation of that. While this might not seem like much, it can really add up over time. The secret is to not cash them out every chance you get, which is what I see a lot of younger people doing. A free share of your company’s stock is more free money and you should never turn away free money. The companies that offer this type of program are usually ones that have been around for a while, so I wouldn’t worry or even pay too much attention to the ups and downs of their share price. Let it build up and watch how your net worth grows alongside it.
7) Registered Education Savings Plan or RESP
If you have children, there is no better place to help them with their educational goals than the RESP. The government of Canada will add to that investment account free grant money and if you have been reading up until now, you know how much I like free money. In the lifetime of the account, the government will put up to 7K in free money to help with educational costs. It also grows tax-free and you can invest it in what you want as well. A university degree is the new high school diploma so helping your children in their future educational goals is very noble indeed.
8) Registered Disability Savings Plan or RDSP
Much like the RESP, the RDSP also receives government grants that help it grow. A big difference between the 2 accounts is that the RDSP cannot be obtained by anyone. If you qualify for the Disability Tax Credit (DTC) you automatically qualify for the RDSP. This program was put in place to help parents pay for the needs of a child with a disability. I look at it as a way to help secure the older years of someone who will not have a robust retirement account or pension plan. Up to $75K in free grant money is available over the lifetime of the account, so if you qualify it is a no-brainer in my opinion. Oh, Canada!
9) Whole Life Asset Transfer
This concept is one that many people use in order to leave money to the next generation. Whole Life Insurance is not for everyone, but for the people that is beneficial to, it is super sweet. Just like term life insurance, whole life insurance leaves money tax-free to the beneficiary. Unlike term life insurance, whole life insurance can grow over time and build cash value. Also, unlike term life insurance, there is no expiry date on it. It ends, when you end, whether that’s tomorrow or 90 years from now. Where it is super beneficial is when someone wants to leave money to their children, or family, or even a church or charity. Any investment proceeds are taxed when left to someone other than the owner’s spouse, except within a TFSA. Using the money in the investment account to purchase whole life insurance takes money that will be taxed and puts it into a vehicle that will not be taxed. It also buys a dollar worth of inheritance for less than a dollar. There is truly no better way to leave money behind and it could magnify your estate anywhere from 2-10 times what it would have been otherwise. That is called inter-generational wealth folks.
10) Group Benefits
While using your group benefits at work is simple as to why it is beneficial, providing them for your employees appears to be less beneficial. They obviously cost money and business owners are always conscious of the bottom-line. They must be. What many owners do not realize is that having group benefits is a key tool in recruiting, retainment, and providing an overall quality of company culture. Most people state that the benefits offered are a key factor in their employment choices. Most people would, in fact, take less pay if it meant they had group health or pension benefits. Training new people costs a lot of money so any edge you can have at retaining key talent is worth its weight in gold. Also, group benefits can be as elaborate or as basic as you want, and it is always tax-deductible to the employer. Seems like a win-win to me.
A key thing to remember is that everything in life costs money. Alternatively, not everything fully benefits you, or your family, or gives you free money in return. We all know we need to plan for the future so why not do it in a fashion that maximizes our return on investment. Simple is as simple does’ folks!
“The expectations of life depend upon diligence; the mechanic that would perfect his work must first sharpen his tools.” – Confucius
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