Tuesday, February 7, 2012
A new year, taxes, RRSPs, TFSAs and investing.
Once the calendar rolls over to 2012, the books can be tallied and closed on 2011. It might have been good, it might have been bad, or you might have plodded along with little change.
I experienced a bit of increased success in 2011, but due to the new family member at home we have much less to work with than we did before. Now how can this be you ask? There's only so much blood you can squeeze from that stone! Less than a pittance is still a pittance!
Yes, it's rough but changes were made not out of our own choice... Our little baby decided them for us! Stay with me! WAAAAAHHH! And now that he's running around, saying stuff, terrorizing the contents of shelves and counter-tops, as well as starting to be able to open doors on his own. (Uh oh) We haven't missed going out since we've been too busy/tired/cranky to do anything else but stay home with the little man. Don't get me wrong, I wouldn't have traded this for anything. He's awesome, horrible, joyous, messy, snuggly, bitey, curious, drooly, smelly and exhausting but absolutely wonderful.
So where does that leave me? NO contributions to RRSPs were made. But since I will no doubt be in the bottom basement tax bracket a RRSP contribution would only save me FUTURE tax deferral as I will no doubt pay very very little this year. I suspect it will only amount to HST (harmonized sales tax) collected and a token amount to the CPP coffers. (Canada Pension Plan)
If you didn't already know, if you think you will be EARNING a mint from your labours in the future, then contribute now to a RRSP, but don't use the tax deduction until you really need it. So contribute what you can AFTER you max out your TFSA.
So that's all I did really was to contribute $5k to my TFSA. This is going to be my (and hopefully your) golden ticket to enjoying life on easy street, or at least more than a subsistence lifestyle 25+ years from now. If the government doesn't mess it up then it's going to be an amazing thing for everybody... if you INVEST rather than save.
Saving at today's rates will get you NOWHERE. Inflation is HIGHER than every savings rate you can get on savings accounts in Canada. The latest announcement from the BOC (Bank of Canada) said it was 2.3%. The best savings account is 2%. So you're losing 0.3% to inflation AND you get taxed on your savings just like you earned that money. (So at your tax-bracket rate) Thus your "savings" will become less and less valuable as time rolls on.
I beg you my friends... My 20-something, 30-something friends, invest NOW. Don't wait another second. DO IT NOW. Markets go up and down, but if you don't need the money right away you will have time to recover (and recover well) through any dips and doodles world shenanigans do to the global markets.
As I've said before, you have to start somewhere... why not start with $25/w or even $25/m if you're truly impoverished. (I contributed $0 a year for about 6 years in a row... yeah, that slowed me down.)
Things are looking up for me now that my investment portfolio is consistently spitting out a bit of money EVERY MONTH that I always re-invest at this point, but it would be very easy to use that money to pay my rent or groceries if need be.
It's been a long arduous road to get here, but I can finally see the light... It's still at the end of a long tunnel, but at least now I can see it.
Investment idea of the day: find something in your life you can't do without. Look up who made it and where. There must be a company involved getting you that thing to you and see if it's traded publicly... You might be able to buy a bit of said company!
Disclaimer: I'm writing this article to HELP you. If you do something stupid based on my advice without thinking it through yourself, then you have only yourself to blame. Plus if you try to sue me for bad advice I don't have any money either, so good luck with that. Seriously people, stop making your lawyers rich... they don't need the cash! WE DO! If you get burned a couple times, it's a learning experience. Just try to remember to NOT fall in love with your holdings.