Wednesday, March 30, 2011

To Become Wealthy

We have everything in place from the previous blogs to move forward and start accumulating assets! These will be generalizations to the road to riches and we will get into specifics of each avenue in future posts. A) Time is your biggest alley to saving and with that comes compounding interest, also
knowing your time frame will tell you how much to be put aside each month, then we look for investments that payout 6-8 % as the historical inflation rate has been 3%, so easy math; so depending on how many years we have the ratio could be 60% stock/40% bonds or maybe a 50/50 split. If you have a big window maybe do margins if your in the 20-30 age bracket and have the tolerance for risk  B) Boost your savings in your RRSPs to save taxes paid to the government and if your employer matches up to 50%......well there is nothing better than investing with someone else's money lol  C)  Increasing your income; hard to find a higher paying job so maybe work part time on the weekends or start a small company on the side to generate more cash  D) Real Estate; you know my opinion on house ownership with my past blog, but the 'X' Factor is location, location and did a mention location hahaha, so do your homework on this subject.  Also look at buying flats/duplex's so you can live in one and rent out the others and take advantage of your 'sweat equity' for some repairs/cosmetics around the property while your renters are paying down your mortgage for you.....nice!!

Sunday, March 13, 2011

Credit Score

Onto the next phase of any financial planning, knowing how your credit score works. First its the vehicle that any lending institution uses to check your history to evaluate you, the borrower. Now the higher the score the better rates of interest you ll receive and of course if on the low end of the scale I'm afraid higher payments are for you  as your deemed a risk. So you see its important to know how this system works, so here we go;  A) First get copies of your credit report and make sure the info is correct, also check for identity fraud  B) Pay your bills on time, as missing a payment is bad enough but if over 30 days can do major damage to your score, so set up automatic bill payments from your bank account  C)  Applying for too many cards/accounts will bring down your score as it makes you look like a risky borrower, even if you pay on time. Plus each credit check from this lenders results in points coming off your total.  D)  If you debt amount is too close to your credit limits, or even worse when you go over your set amount and are just making minimum payments will reflect on your score   E)  Inactivity on an account will raise some red flags, so maybe pay your utility bills with your credit cards to keep them active and again set it up for automatic payment before the 21 day window before you incur interest.

How to Save!

Hi everyone!! So we are reeling in the wasteful spending from our "wants and needs" list and also realizing we have to take care of our future ourselves. How are we to accomplish these goals?.....hang on for the ride!! First we need to save for a 6 month emergency fund, why you ask? Well life happens unless your living in a plastic bubble haha ( and that's not free from breakdowns lol)  So put aside 10% of your pay to you've accumulated the 6 months of income, then move onto removing your debt and finally then start saving for the golden years of your retirement. Now if thinking about a mortgage, ( it shouldn't be more than 25% of your gross income) find out what the house payment would be and when paying your rent put the difference in a separate account till you have at least 10% down deposit for your dream abode. For your children's education if your in that category, look for the tax free Registered Education Savings Plan (RESP) and much like any other investment plan, the earlier you start the more savings you will earn towards your kids schooling, also set it up so your parents/friends can contribute.

Why we need to take of overselves!!

That alarm you hear isn't your clock radio telling you to get up for your 9-5, its me saying you need to care of your affairs now for the future. Unless you have an Aunt Mary to leave you her estate or know how to calculate Loto odds (lol), here are some scary facts;  the average Canadian income is $41,000 so if your to retire now this is what you have to look forward to. Old Age Security and the max payment is $524.00 per month and the Canada Pension Fund and that max is $960.00, so in total you have $18,000 for the year. A far cry from the lifestyle of your work income, the answer? Canada its either RRSP ( Registered Retirement Savings Plan) or the new TFSA ( Tax Free Savings Account)  So if by yourself that's easy as its called discipline to save, but if you have a partner who loves to spend here is what to do ( and if you think the problem will go away on its own dream on,  peoples brains are geared towards spending rather than saving.....its called instant gratification!) sit down as a couple and discuss what you
are saving for which makes it easier, also talk about where you want to be in 2, 5 or even 10yrs and what are the big goals? After you agree on those subjects, discuss what each of you are willing to give up to attain your future retirement together. In closing, don't you want to control your own destiny?..... i thought so!