Can You Withdraw From Your RRSPs Before You Retire?

If you have a traditional RRSP, you might be wondering if it is possible to take money out of it for an emergency before you reach retirement age. The answer is “yes” – you can withdraw from your RRSP before you retire, but you will have to pay tax on it immediately. And the sad reality is the taxes might be much more than you would pay if you waited until you were retirement age. Also, if you withdraw money from your RRSP early, then you take the chance of permanently altering the original contribution room you had to save according to government guidelines.

What are the tax consequences of withdrawing from your RRSP ahead of time?

When you withdraw from your RRSPs before you actually retire, then the financial institution holding the funds is required to take an immediate tax and pay it to the government in your name. Depending on what the specific tax rate is, the amount you will pay will probably be somewhere between 10-30% and is determined by how much you withdraw. If you live in Quebec, you might get a slight break with the taxes only being between 5-15%, but there will also be a provincial tax amount held back.

Also, if you withdraw money from your retirement account early, then the amount that you take out is subject to being taxed. The money from your RRSP becomes “taxable income” – so in reality, you are taxed on the same money twice. Whether or not that will affect how much you owe on your taxes is related to your earnings and income situation. But before you take money from your RRSP, it is essential to understand whether it could put you in a higher tax bracket and end up costing you a whole lot.

What is the anti-avoidance rule?

In July of 2011, a new anti-avoidance rule went into effect to encourage people not to take money from their Assiniboine Credit Union RRSP accounts. The government decided that any money that you withdraw before retiring is considered income and taxed accordingly. The rule is that you are supposed to pay the amount of tax that equals the total amount of money that you gained at a rate of 100%.

What are the two reasons that withdrawing from your RRSP makes financial sense?

If you use it to buy your first home

The laws state that you and your spouse are both allowed to borrow as much as $25,000 out of your RRSP account if you are going to use it as a down payment on your first home. Under the Home Buyers’ Plan, if you use your RRSP money for a home purchase, then you don’t have to pay any taxes on it – as long as you pay it back within 15 years from when you borrow it.

If you use it to pay for training or education

If you or your spouse wants to use your RRSP for educational goals or to attend training, then you may both borrow up to $20,000 from your plan to pay for either part-time or full-time educational expenses under the LifeLong Learning Plan. The maximum you can withdraw in any one year is $10,000. If you do take out money to further your educational goals, it won’t be taxed as long as you pay it back within 10 years from when you borrow it.

If you find yourself in an emergency where you need money quickly, then you might want to really think twice about withdrawing money from your RRSP instead of trying to take out a loan. Sometimes, depending on the amount you withdraw and your income tax bracket, you might end up owing more than you think. If you use it for either a first-time home purchase or to further your education, then it might be a good idea. Just make sure that you pay it back in the time allotted, or you can end up being taxed on it twice – which can add up quickly.

Benefits of Owning Your Own Business

A lot of people would agree that putting up your own business brings a lot of benefits. Surely enough, that is true, but it has to be a successful one.

Now, if you’ve saved up some money and you’re still contemplating whether or not you’re going to create your own business venture, then I am here to convince you.

In today’s article, I will be going over some of the benefits of owning your own business.

  1.    You are the Boss

So, you’re probably accustomed to taking orders from your boss and doing what is required of you every single day.

That may be good and all, but there might be times where you just don’t want to work on something, especially if it is something that you do not want to do.

Well, if you have your own business, you are the boss. You are going to be the one calling the shots. You are going to be the one who steers the company/business towards the direction you want to go.

Essentially, you have all the power. Don’t want to work for today? That’s fine, you can just have someone to work on something for you.

  1.    Hire Your Own Staff

When you are going to do something grand, say, putting up your own money-making machine, you need to have people who you can trust.

When you are the leader of the business, you have the responsibility of hiring your own staff. Perhaps you want to hire your best friend to do some accounting duties. Or maybe, you want your wife to do the Human resources work that is needed by your business. Whatever it is, you have complete control of who you want to hire.

  1.    You Can Make Investments

Maybe you want to create a restaurant business or maybe, you want to sell some computer components. Whatever it is, you’re going to be the one to make the investments. After all, you are the boss, right?

  1.    Management

Running a venture from the ground up can be tiresome, so you definitely need to be in complete control.

If your business has grown considerably, you will need to hire more personnel to handle the workload. The beauty of owning your own business is that you can manage everything in your company. You even have the power to manage the finances as well.

Speaking of finances, if you find that your business requires some more money, you might want to consider getting some from cash advance online schemes.

From the staff person to the manager, you have what it takes to keep your service up and running.

  1.    Feel Pride

And lastly, once you’ve built your own business and made it successful for the years to come, you will feel that sense of pride and accomplishment.

Let me tell you, owning your own business is hard. But, once you’ve figured it out how to stay relevant for the years to come, nothing can beat that feeling of pride.

Conclusion

So there you have it. There are a lot of benefits to owning your own business. You are the boss, you can hire the people you trust, you can steer the company to the right direction, and best of all, you can feel awesome just making a venture from the ground up.

Refocusing Your Financial Strategy for 2018

A troubling trend is taking hold in U.S. households; nearly 8 out of 10 workers report they are living paycheck to paycheck, and the number of Americans living on the financial edge is only growing. The paycheck to paycheck lifestyle drives many people to incur debt or otherwise struggle and sacrifice when expected expenses arise, and far too many people are relying on credit cards to make ends meet. This has resulted in crisis-level debt situations for far too many families, with 1 in every 50 households (approximately 2 million families) carrying more than $20,000 in credit card debt. In fact, revolving credit has experienced an annual growth rate of about 4.9 percent, and with a greater number of consumers (even those with subprime credit scores) being approved for credit cards, it’s likely those numbers will continue to rise.

But credit card debt isn’t the only storm cloud hanging above the heads of the American majority; mortgages, student debt, auto loans, and personal loans account for a huge portion of the debt burden in the United States as well. For many American families living paycheck to paycheck, what feels like a manageable amount of debt one day can start to feel like drowning in the space of one small crisis.

For all these reasons, it’s important to refocus your financial strategy as we enter into the new year; when it comes to getting out of debt, saving for retirement, or making smart investments, time is money.

  1. Analyze your spending habits. If you haven’t already taken control of your finances by getting a realistic sense of where your money is going, it’s time to start balancing the budget. Many people not only don’t know what they actually spend their money on, but also don’t have any real knowledge of just how much they owe. You should be managing your finances with a big picture sense of all your expenses and an honest assessment of how much money you have coming in each month. Once you’ve sorted out the budget, you can start making adjustments to your spending habits. Analyze what financial planning strategies work for you and which don’t pay off, and adjust accordingly.
  2. Invest in yourself. If you’re regularly finding that you’ve got a bit too much month at the end of your money, it may be time to consider some sort of side hustle or a second job to gain some financial traction. While most people are in debt, nearly 80 percent of Americans report that they incurred that debt to invest in themselves or opportunities. If you’ve got a creative talent or a compelling product or service, check out Shopify templates to earn some extra cash on the side or even launch a full-time entrepreneurial endeavor.
  3. Take advantage of balance transfers. One of the fastest ways to get out of debt is to transfer the high-interest debt to a low or 0 percent interest balance transfer card so that the money you put toward your debt makes a greater impact. Assess all your credit card debt and consolidate as many high-interest cards as possible; since most people have debt spread across several credit cards, you’ll want to understand exactly which transfers will make the greatest difference in your overall financial health. Remember that your best bet is to pay off the balance of your transferred debt within the promotional period so you save money on interest, so pay particular attention to those details when selecting a balance transfer card.
  4. Avalanche debt. You may have heard of debt advisor and media personality Dave Ramsey’s recommendation of “snowballing debt,” in which you pay off the lowest balance first, then apply those payments to the next lowest balance once the first is paid off, and so on. This strategy can be super motivating since you get to see debt disappear quickly when you focus on the smallest bills, but an even more focused version of this strategy is the “avalanche” method, where you attack the highest interest rates first to reduce the amount of unnecessary interest spending. The most targeted financial strategy would be to strike a balance between the two; for example, taking the extra money you save each month by paying off the lowest balance debt and applying it to the card with the highest interest rate instead of the next smallest balance.
  5. Start tracking your credit. Now that you’ve got a handle on what’s happening with your finances, it’s important to stay in the know. Start tracking your credit through any number of free websites and apps; not only will a healthy credit score help you get the best rates and offers, but tracking it will ensure identity fraud or other security threats don’t compromise all your hard work.

If you feel as though you’re shackled to your debt and the risky paycheck to paycheck lifestyle that necessitates it, know that you can remove the irons. By refocusing your financial strategy as we approach the new year, you can start taking steps toward establishing greater financial freedom in the future.

What strategies have helped you focus on and improve your financial health?

Use These Steps to Budget for Your Next Home Improvement

Does your house need a makeover? As much as you may have loved your home when you first purchased it, the years you’ve spent living in it has created some memories, and some wear and tear. Home improvements like painting, kitchen and bathroom upgrades, as well as additions or add-ons, not only make the home look better, but also help to drive the value up. If you’re planning to renovate your home soon, you’ll want to follow these budgeting steps.

Get an Idea of What You Want

Before you can determine whether you can afford a home improvement project, you’ll first need to understand what you want so you can get a ballpark idea of what it would cost. Though any improvement is better than none, some home improvements known to increase property value include:

  • Deck or additional patio space
  • Upgraded kitchen and/or bathroom
  • Room addition
  • New roof

There are also smaller jobs you can do to update the aesthetics of the home like painting the interior and exterior of the home or updating the landscaping.

Get an Idea of Costs

Now that you’ve chosen the projects you want to work on, you can do some research to determine how much you’ll need to get the job done. The best way to accomplish this would be to contact local contractors who specialize in the home improvement jobs you want to have done. Discuss your ideas and have them do a view of the home and provide you with an estimate. You should get at least three different estimates to ensure you’re choosing the best rate.

Can You Afford It?

Based on the estimates you were provided; can you afford the home renovation? Since most major home improvements can cost thousands of dollars, unless you’ve been saving for a while, you likely don’t have the money to afford the renovations on your own.

Homeowners who want to improve their homes do have options, however. One option would be to search for a mortgage company that would give you a loan. Cash-out refinance loans, second mortgages, home equity loans, and home equity lines of credit could be reasonable options to secure the cash. These options, however, should only be considered if you have the means to repay the loan. As the loan will be attached to your home for collateral, should you default on it, you’ll lose your home and all the hard work you put into it.

Dreams Vs. Budget

If you’re not in the best position financially, there’s not much equity in your home, or you still won’t have enough for the home renovation, you can find ways to budget and cut costs so that you can afford the improvements. Here are some tips below:

Trim the fat – The first bit of advice would be to review your budget and get disciplined about sticking to it. Review your income to expenses and find ways to trim the fat on your budget. If there are things you can remove or reduce to save money for your home improvement, do it.

DIY – Depending on what you want to have done in the home and your level of skill and comfortability, you can do many home improvement jobs on your own to save on labor costs. Things like painting, updating the landscaping, and even small kitchen and bathroom upgrades can be done with the right tools and references to guide you.

Consider low-cost alternatives – Though you may have imagined granite kitchen countertops, scaling back and finding affordable alternatives can be just as attractive. Choosing laminate countertops, for instance, can save you hundreds of dollars, but give the same chic and timeless look you were dreaming of.

Refurbish some things – Instead of getting all new kitchen appliances or living room furniture, see what you can salvage to save you some money. You’d be surprised how you can bring kitchen cabinets back to life with a little sandpaper, paint, and new handles. This would eliminate the need to buy new kitchen cabinets but still give the room a facelift.

Buy the supplies yourself – Homeowners can save a lot of money on the cost of home renovation projects by purchasing the parts and supplies themselves. Talk with your contractor to ensure that you’re getting the right products.

Figuring out how you’d like your dream home to look is easy, the hard part is figuring out how you’re going to afford it. Whether you’re doing improvements to sell the home or you just want to give your home a makeover, there are options for making your home look great. Before getting involved in any home improvement project make sure that you have a financial plan that includes getting estimates, finding a source of cash, and budgeting. If you’re not able to afford it now, try doing one project at a time and before you know it, your home will look just the way you dreamed it would.

When is it time to refinance your home?

The last few years have been great for those who took advantage of the low mortgage rates the real estate market has been experiencing. If you did not take advantage of it, then you missed a really good deal.

The Fed has come in the recent times to increase rates bringing an end to the days of 3.55% financing. Since it is hard to identify the best times for home refinancing, we are going to look at the best times you can use .

When the interest rates are low

The current economic climate is right for a rise in interest rates. In the start of 2017, interest rates on 30-year mortgages climbed above 4% compared to 3.55% which was in 2016. By 2019, researchers predict that it could hit 6%.

These statistics show us that paying a percentage higher than the current rate in the market should be ideal for refinancing. This is the best time to refinance before rates move higher. When you get in when the rate is low, your monthly expenses will come down by hundreds of dollars.

When home values increase

Buyers can be pushed by rising interest rates. When the potential buyers jump into the real estate market, prices will rise, and it increases the value of homes. If you are planning to refinance, this is is the best time, and we are going to explain why.

  1. You will get great terms for a house that has a high appraised value and a mortgage balance that is low. This home is a low risk when the banks come into the picture, and they can easily recoup the loss in case you default.
  2. In case you have equity that is above 20% the value of your home, you can drop the insurance of the private mortgage you purchased using the original loan. PMI costs typically 1% of your loan on a yearly basis; when you have a $100,000 loan, you will be saving an additional $100.
  3. When the home values are high, you can go for a cash-out refinancing where you can access a new loan for part of the equity of the property, instead of going for alternative loan options.

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Ways Not to Go into Debt on a Move

Let’s face it – moving can be expensive. You have all sorts of things to pay for, and this includes things like packing supplies, a moving van or service, gas for the moving vehicle(s), utility deposits to have your utilities turned on at the new place, and if you will be renting, you will also need the first month’s rent and deposit. These are just the basic things you will have to pay for and they can add up quickly. However, with some careful planning and the tips you will read here, you don’t need to go into debt to get moved into your new place.

Professional Movers

If you know a few people who have trucks and strong backs who are willing to help you move, great! If not, you will be stuck doing it on your own. You might think that doing a DIY move will be cheaper than hiring professionals, like North American Van Lines, to handle your move, but that isn’t always the case. Depending on when you book the move, how much you are moving, and the distance, it might actually be more cost effective to hire someone to do it for you. See, there are always hidden costs to moving, whether you do it yourself or have someone else do it. If you book a move early enough and during the offseason, you can be surprised at how much you might save. Just check around and get estimates IN WRITING, before making any decisions.

Make a Budget and Stick to It

This is a step in your move that is critical. If you don’t create and stick to a budget for your move, you might be shocked to find out what you spent, which can lead to even more frustration and debt. Moving sucks enough already, you don’t need to make it worse by not budgeting. Take a few minutes to sit down and make a list of everything that will have to be paid for during the move and how much will have to be paid. This will ensure that you are more prepared when the time comes and will have one less thing to stress about.

Packing Supplies

This is one of the easiest ways to save money on your moving expenses. You don’t need to go out and spend a small fortune on things like boxes, markers, bubble wrap, moving blankets, etc. Some of those things you might already have something in your home that you can use instead. You can use the blankets and sheets you already have to protect your furniture. You might have Sharpies already (or kid’s markers) that you can use to mark the boxes. Instead of bubble wrap, you can use old newspapers. You might also use things like Styrofoam plates to put in between your dishes as you pack them so they won’t break. You can pad your glasses by slipping each one into a clean sock. Creativity here can save you a lot of money. As far as boxes go, you can easily get them for free. Call or go to your local grocery stores, liquor stores, and even some offices to see if they have any empty boxes. Most of them will tell you to help yourself.

Get Rid of It

Moving is a great time to get rid of things you no longer need. This is one of the few times in your life that you will literally be going through everything you own. As you are packing, make a pile of things that you don’t need anymore to get rid of. You can take this stuff and make money with it by having a moving sale. You might also sell it online at sites like eBay or Craigslist, or on apps like 5Miles and LetGo. Beyond that, anything that doesn’t sell can be donated to charity. If you do this, be sure to get a receipt so you can use your donation as a tax deduction when tax season rolls around.

As you can see, there are ways you can save money on a move instead of going into debt. The ones listed here are just a few of them. If you are creative, there are so many more ways to save on your move.

Paying Online: How Much Does it Cost You?

Taking your wallet out of your pocket and handing over the cash to the merchant is by far the cheapest way to pay today – and it has been ever since the invention of money. Today, we have many other – more convenient – forms of payment at hand that allows us to walk around with no cash at hand, pay for stuff over the internet or even order the next revolutionary thing from a TV shop. But all these cost us money – and, depending on the form of payment chosen, this cost can add up to a nice sum at the end of the year. Today, let us take a look at what payment solutions are the most common and how much they cost the payer – you.

E-Wallet services

E-Wallets have seen a rise in the last decade, becoming a widespread payment method online. No wonder – they are an instant and quite convenient way to send and receive money to and from people all over the world. One of the many reasons for their spread was the emergence of online casinos, services that were made possible by the introduction of secure online payment services.

Depending on the service you use, there might be no charge for you sending money to someone else (or a business) or there might be a small fee deducted on your side. Besides, there may be currency exchange fees applied to your payment, too. Make sure to check them before committing to one or another. Yet there is no maintenance fee applied to your account ever, which makes this method perhaps the cheapest way to pay online.

Credit / debit card payments online

Another method that won’t cost you a thing – in short term. By using any payment gateway online, you will be able to pay for the products and services you order online with no further costs to you. The costs of handling such payments fall on the payee, the merchant or service provider accepting your payment. Well, most of the times.

When using a debit card, which only allows you to pay as much money you have in your account, this is where it all stops – aside from the monthly fee you pay for the card and the bank account it is attached to (usually not a very large amount). When it comes to credit cards, though, going into credit can be pretty costly – that if you don’t top up your card quickly. In that case, you may have to take out quick loans to get you through. Usually, you have a varied amount of time at hand – anywhere from two weeks to two months – to return the cash you borrowed without paying any fees. But after that, you’ll likely have to pay interest and various other fees on the amount, which makes this method a relatively expensive way to pay online.

Fast money transfer methods

Western Union, Moneygram, and their likes – these money transfer services have the massive advantage of being fast, but at a cost. They do provide a service that allows you to put cash into the funnel on one side of the world and have it end up in the hands of another person half a world away, but they do have fees that can be prohibitive in some cases.

These services represent the fastest way to get money from your hand to another – literally. But with great speed come great costs, too, so only use such a method to pay for your internet purchases if you have no other option.