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Your Finances

In this series of articles we'll cover the basics of personal finance. To create a sound investment plan you must first create a sound financial plan. You'll need to know how much money you need to save, how much you should be putting towards your mortgage, or your kids education, and so forth. Only once you know what your objectives are can you determine how best to meet them.

Is an RRSP contribution better than a non-registered investment or a mortgage payment?

Contributed by: martingale

Finances A recent article in the Toronto Star says "Disciplined savers who do not need the tax deduction are probably better served by keeping their investments in a non-registered account."(1). Is it true? Are people really better off saving money outside of an RRSP? Some say buying and holding growth stocks that pay no dividends is another way to defer taxes, and that investments in an RRSP lose access to the dividend tax credit. Others say that it's better to repay your mortgage than invest in an RRSP. There are a lot of people out there who say things like this and they are almost always wrong. The arguments for non-registered investments generally involve a lot of handwaving and grand claims so let's break it down and look at the numbers. First we'll look at buying stocks in and out of an RRSP, then we'll compare an RRSP to a mortgage payment.

Remember to file your T1213

Contributed by: martingale

Finances Happy New Year! One of the things you may have noticed recently is that rather large deduction of federal tax on your first pay stub of the year. Assuming that you contribute the maximum to your RRSP some of that money still belongs to you. You've just lent it, interest free, to the federal government until sometime next April. You don't want to do that. The solution is to file a Form T1213, Request To Reduce Tax Deducations At Source. Yes, it's nice to get a big refund at the end of the year, but it's even nicer to have that money all year long. A bigger monthly paycheque makes it easier to hit your personal savings target.

Why You Don't Contribute Enough to Your RRSP

Contributed by: martingale

Finances Why don't most people save as much as they should? Canadians can contribute up to 18% of their income to their RRSP in exchange for a generous income tax deducation--essentially, free money. Yet most fail to take advantage: In 2003 the median RRSP contributor earned $43,000 but their median RRSP contribution was just $2600, which is only 6%. Overall, only 34% of those eligible to contribute to an RRSP actually did so. When RRSP room left over from previous years is included the result is dismal: Canadians used up barely 9% of the available RRSP contribution room, leaving 91% of it unused. These numbers are astounding--Canadians left an enormous amount of free money on the table! In this article I'll explain the psychology behind why most fail to max out their RRSP contributions, and what you can do to make sure that you do contribute enough to your RRSP.

RRSP's and Income Tax Planning

Contributed by: martingale

Finances An RRSP is a tax deferral tool. While most people use their "registered retirement savings plan" to provide income in retirement, your RRSP can also be used just to defer taxes from one year to the next. This article will discuss the tax implications of contributing to, and withdrawing from, your RRSP, as a way of smoothing out your tax rate from one year to the next.

Form T1213: Reduce Tax Deducted From Your Pay When You Contribute to an RRSP

Contributed by: martingale

Finances Did your RRSP contributions win you a nice tax refund this year? If so you goofed. It's wiser not to overpay your taxes. If you make regular RRSP contributions you can ask to have less tax money deducted from your paycheque each month. Simply file a request to reduce tax deductions at source (T1213) and see a fatter paycheque all year long. The best part is that extra cash will make it easier to hit your 18% RRSP contribution target throughout the year, rather than having to scramble at the last minute. This article explains how to reduce your withheld taxes if you make regular RRSP contributions.

Your RRSP and your Mortgage: Is it a good idea?

Contributed by: martingale

Finances Many of you are interested in using your RRSP savings to finance the purchase of your home, either through the Home Buyer's Plan, or by holding the mortgage of your home in your RRSP. This may be a bad idea from an asset allocation standpoint. In this article we'll consider the risks associated with owning a home, and how best to mitigate them.

Your RRSP and Your Mortgage: The Home Buyer's Plan

Contributed by: martingale

Finances Should you borrow from your RRSP to buy a home? There are several ways to do this. The simplest is to take advantage of the Home Buyers Plan. In this article we'll look at the mechanics of doing this: Is it a good idea to use RRSP money to finance the purchase of a home?

Efficient Asset Allocation: Stocks or Bonds?

Contributed by: martingale

Finances One tough nut in investing is the question of asset allocation: how much money should you invest in short-term bonds? How much in stocks? There's much debate over this point, but I will do my best to give you some sound advice. You do need to heed this warning, though: there are no guarantees: For every possible investment strategy there is a future in which it was the wrong choice. First, we will cover the basics and work out the absolute minimum amount you should have in bonds. What's left can go into stocks. Then we will turn our attention to the efficient frontier: the interesting, counter-intuitive property of the market that it is always better to have a mix of stocks and bonds than to have 100% of just one or the other.

Pay Off Your Debts

Contributed by: martingale

Finances Most of the time, for most consumers, debt is a bad thing. If you find yourself carrying a balance from month to month, especially if it's credit card debt, you're in a financial crisis. You need to throw up a red flag, go into emergency mode, and pay that sucker off. Towards the end of this article I'll tell you how--but first, a few words about the very nature of debt. When is it a good thing? When is it bad?

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