At the beginning of the year most people make resolutions to eat better and exercise more. We are now well into February and how many of you are on track with your resolutions?
When it comes to your financial planning, budgeting and planning for your financial independence should be paramount. As the New Year started you received another $5,500 of Tax Free Savings Account (TFSA) headroom and the RRSP deadline is March 3rd.
One way of avoiding a mad dash to beat the RRSP deadline is to set up automatic monthly contributions. This can be done in a variety of ways: monthly, semi-monthly, or bi-weekly (to match your pay periods). You can do the same for your TFSA.
When you set up your monthly contributions it’s like setting up a new exercise plan. Only better. You don’t have to get of bed early, watch what you eat, or wipe down sweaty equipment. By setting up automatic contributions you’ll typically adjust your spending habits. The best thing is you can always adjust the contributions to a lower or higher amount.
Plenty of Benefits
What kind of benefits do you get from all the financial hard work and discipline?
1. Your tax return should be bigger.
2. You will have more than CPP and Old Age Security (OAS) to rely on in retirement.
3. If you make $100 contribution per bi-weekly paycheque ($2,600 annually) for the next 25 years and assume a compounded rate of return of 6% you should have an estimated total of $151,206. If you were to do the same thing but with $150 per bi-weekly paycheque ($3,900 annually) your estimated total would be $243,548.
Just like a fitness routine, a financial plan needs to be tailored to your needs and goals. That’s why it is important to work with a Certified Financial Planner like myself.