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Jun 27, 2022

There are volumes of information out there explaining every aspect of Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs). Articles on how to optimize your contributions to each based on your tax bracket and expected future earnings, details of the TFSA over contribution rules and penalties, why the age of 71 is a big deal for your RRSP…. and plenty more.

We like getting the facts, but this information overload isn’t much help if you are simply wondering, “what is an RRSP account?” or “what does tax-free saving really mean?”. The mountain of details available is not only confusing, it may also discourage you from investigating more — and that would be a huge mistake!

Everyone should be aware of three things about RRSPs and TFSAs:

1. They are free to open and it’s not difficult to get one.

2. The TFSA age limit is 18, but there is no minimum age for an RRSP.

3. The younger you start, the more money you are going to make.

The biggest RRSP/TFSA mistake is procrastination; it has nothing to do with the minutiae of the TFSA rules or which investment fund is best for your RRSP. Do not put off getting your TFSA and/or RRSP until you are “older” and/or “have more money” — and don’t think these accounts are just for your retirement fund. You will definitely get older, but having “more” money is a pretty vague goal and that situation many never materialize. Keep reading this article to learn the essential facts, but make sure you put your newfound knowledge into action.

While TFSA and RRSP both have "savings" in their name, they are actually designed for investing your money, not saving cash.

After you put money into a TFSA or RRSP, you should be investing it, not just letting the cash sit there. Inflation will eat away at your cash pile over the years, so you need to invest to fight back against inflation and grow your retirement investments. Fortunately, you have a lot of options for investing your money.

Most Canadians invest the money in their TFSA and RRSP in some type of funds (mutual funds or exchange-traded funds) as part of their retirement savings plan. These funds are basically a basket of different stocks, bonds, and other financial instruments — there are thousands of funds available. Some are broad-based and include many companies across multiple industries, while others focus on a particular industry or region. The risk varies greatly from one fund to the next and you will need to factor your risk tolerance into the funds you choose.

Funds are professionally managed and you need to be wary of the built-in management fee (called an MER), but they make it easy for anyone to get invested. You don’t have to pick individual stocks and you don’t need anyone to help you if you want to do it yourself. Many Canadians handle their own investments and there are number of online options to self-manage the funds you hold in your TFSA or RRSP. There are also "all-in-one funds" with varying degrees of risk that are very convenient for beginning investors. There is even a fully automated online option called a robo-advisor that continuously adjusts the funds you hold to match your financial situation and goals — all you have to do is deposit the money!

While you don’t need a financial advisor to choose investments that are right for you, you are responsible for learning the basics of investing and making sure you understand the risks involved, regardless of whether you do it yourself or seek professional advice.

No one should be discouraged from opening a TFSA and/or RRSP because they only have a "little bit" to spare, and it wouldn’t seem to make much difference.

The first argument against this belief is that building a savings habit requires the right mindset and is a skill you need to practice. No one is born with a genetic predisposition to savings. You may be influenced as a child by the savings habits (or lack of) from those around you, but getting into the habit early will get you started down a very long, profitable road due to the wonders of something called ‘compound returns’.

Investing $200/month from age 18 to 65 at a 7% return (compounded for 47 years) in your TFSA would give you $790,139 tax-free at retirement. The same $200 invested with the same 7% return from age 28 to 65 (compounded for 37 years) would yield just $384,810. Sure, you would be contributing $24,000 more over those extra 10 years, but your nest egg when you retired would be almost double.

A lot of young people get discouraged by the sheer amount you are allowed to contribute — and for good reason! If you make $60,000/year, your annual contribution maximums are $6000 for your TFSA and around $10,800 for your RSSP. That’s $16,800; a pretty big chunk of your take home pay! The good news is that your yearly contribution limits can be carried over and as you grow older (and theoretically have more disposable income) you can catch up.

There is no need to choose between and RRSP or TFSA.

As your financial situation grows and changes you can definitely benefit from having both. The main reason is that the timing and impact of the income tax benefits is very different.

In short, you delay paying tax by putting money into your RRSP. When you fill out your tax return, you get to deduct the money you put into your RRSP from income — and that will result in a very noticeable reduction of your income taxes for that year. The higher your tax rate, the more you will save! However, before you go out and spend these tax savings, make a mental note that you are only delaying or deferring that tax to later in life.

Your RRSP should grow substantially over time if you are invested. However, you need to make sure your retirement budget reflects the fact that any money you plan to take out of your RRSP down the road is fully taxable in the year it is withdrawn. The primary advantage is that if you are retired, your income and associated tax rate could be substantially lower than when you were working. This will reduce the impact of taxes, but only to some degree! A lot of retirement advice focuses on maxing out your RRSP, but this could create a hefty tax bill if your retirement income is high.

If you had put the cash into a TFSA instead of an RRSP and invested it the same way, you would have the same amount of money, but you would be able to take it out and spend it tax free. You would have received no reduction in your taxes when you put the money into your TFSA, but you don’t have to pay tax on that money when you take it out of your TFSA.

An RRSP will put more money in your jeans today than a TFSA because of those immediate tax savings, but the opportunity to invest and grow tax-free money for the future in your TFSA is also very attractive. There are lots of other considerations (flexibility of withdrawals & your tax rate for example), but we will leave that debate for another article, just get one, or both accounts, and get started!

It is relatively easy to get started. The TFSA age limit is 18 but there is no minimum age to open an RRSP.

Both accounts require a social insurance number to open. You can open them in-person or online at most banks, credit unions and investment brokers. There are no fees to open one, although some institutions require a minimum balance. Both the TFSA and RRSP are a type of "registered account" and are not used for daily banking. They differ from your savings or chequing account because the cash flowing in and out is tracked to make sure you follow the rules and the tax implications can be managed.

You can put funds into an RRSP and TFSA anytime throughout the year, but there are annual limits.

For a TFSA, the amount is the same for every Canadian regardless of their income. For 2022, the maximum contribution limit is $6000. For an RRSP, you can put away up to 18% of your income up to a maximum of around $28,000.

If that sounds like way more than you can spare, the good news is that you can carryover unused contributions and catch up later. In fact, if you are over 18 and are just now eyeing your first RRSP or TFSA, you already have unused TFSA contribution room available. You may also have some RRSP contribution room as well depending on your income. You can confirm these amounts on your most recent income tax assessment. Just remember that catching up on contributions will be harder than you think and as we already mentioned, your nest egg will have less time to grow.

Although you can contribute funds anytime during the year, there are some deadlines for tax purposes. For an RRSP, you need to get the money deposited (not invested!) by the end of February in order to claim a RRSP deduction on your taxes for the preceding year. If you miss the deadline (even by a day) you will have to wait until next year to reduce your taxes. For a TFSA, the official deadline is December 31, but since the contribution limit can be used in any subsequent year and there is no tax deduction, there really is no deadline. There are also penalties for overcontributing to either your TFSA or RRSP, so make sure you understand the rules.

Even if you are not forgetful, it is a great idea to set up your bank account to automatically transfer a fixed sum every payday into your TFSA and RRSP. You can’t spend what you can’t see, and it will force you to save. You also won’t have to run around like a lunatic every year trying to find the cash and meet the contribution deadline.

The last thing to know is that TFSAs and RRSPs are not just for saving for retirement.

You can use your RRSP to save up cash for a down payment on a home and then "borrow" up to $35,000 ($70,000 for a couple) from your RRSP to purchase the home under the Home Buyers’ Plan. You do have to repay the borrowed funds over a period of years, but you do not have to pay tax when you withdraw the funds.

TFSAs offer even more flexibility with no tax due on withdrawals and you get to keep your contribution room. If you don’t know how much to save for retirement, maxing out your TFSA every year is a good place to start. If your plans change and you need that money before retirement, it is available. You do have to wait one year before you can replace any of the funds you took out so be careful, there are penalties if you run afoul of the rules!

There is a lot more that can be said about TFSAs and RRSPs but the short story is, if you don’t have one, you are seriously missing out. It’s time to get moving!

May 23, 2022

It’s difficult to find timeless advice in the ever-changing world of personal finance but these five are about as close as you can get.

1. Start small and start early with investing

Starting small could be as little as $100 month and starting early means now! Invest what you can and don’t think a $100 monthly will never amount to anything. Only around 5% of Canadians under 25 have a TFSA, which means 95% have already missed out on 7 years of compounded returns! Investing that "measly" $100 month at 5% for 47 years (18-65) will give you $68,754 more than someone who did the same for 40 years starting from age 25. Time really is money when it comes to compounded returns, so get started as soon as possible.

2. Make more or spend less?

Our advice would be to do both, but there are limits on how much income you can generate and cutting back on expenses has a larger impact on your bottom line. You may even be able to cut back without a huge pain factor by first auditing your expenses and keeping track for a couple of months. You may find some expenses you could do without, like that "lightly used" gym membership or seldom watched 300-channel cable package. A part-time job or side hustle isn’t a bad idea, but it comes with its own pain factors. You will spend more time working and less time enjoying life, and any extra income is fully taxable — you might need to earn around $10 in order to get the same result as a $7 spending cut.

3. Re-evaluate your wants and needs

A 1200 square foot, 3-bedroom bungalow used to be the standard for many young Canadian families back in the early 1970’s. A lot of us grew up in a house like that with our parents, brothers, sisters, even the family cat managed to squeeze in! Houses are much bigger now (over 2000 square feet on average) and often come with a lot of high-end finishes. They call this trend lifestyle creep, and it is not limited to housing, it has inundated every part of our life. From what we drive to how often we eat out to where we go for vacation, we are constantly presented with a new norm as our wants slowly transition to needs. Being able to satisfy your wants later in life will only come from making smart spending decisions on your “needs” earlier in life and freeing up the cash to start saving and investing.

4. Understand credit and debt

131 months — that’s how long it takes to pay off a $1000 credit balance paying only the minimum amount — and it will cost you another $1000 in interest charges! Many people carry a credit card balance and are blissfully unaware of just how much it is costing them each month. Car loans are another area where the financing costs are often a lot more than most people realize. It is also important to realize that not all debt is bad, and mortgages are a great example. Even with recent increases in interest rates, 5-year variable mortgages are still a bargain at under 3%.

The key is to be knowledgeable about your debt. Track what you owe and what it is costing you as well as any alternatives that may lower that cost. For example, refinancing your mortgage or drawing on home equity to pay off higher interest loans or credit cards. If you struggle with debt, then it's time to bear down on expenses and draw up a strict repayment plan.  

5. Get financially literate

Managing your money has become more difficult as we have a lot more spending, saving, and investing options, but we also have access to a lot more information and tools to help us. Some things like a Registered Education Savings Plan (guaranteed 20% annual return for your child’s education) are a no brainer and can easily be understood with an hour or two spent online. Understanding the fees on your investments and how much they will cost you over the life of those investments is another need-to-know piece of information that can be easily confirmed.

Managing your retirement savings is more complicated because there are a lot of variables (lifespan, health, income, taxes, lifestyle) as well as options (TFSA, RRSP, investment properties, pensions) to consider. You may want some professional advice at some point but arming yourself with as much financial knowledge as you have the time and motivation to learn will help you better evaluate any advice you do get.

Enriched Academy offers complimentary, informative webinars every week on a wide variety of personal finance issues to help you become more financially literate. We don't sell or recommend financial products and we do our best to provide reliable advice and information that is easy to understand, practical and unbiased. Check out our events page to see the webinars coming your way over the next few weeks.

Jul 26, 2020

It’s been a few years now since the term robo-advisor has surfaced, and we get a lot of questions. So many in fact, we have an entire webinar dedicated to explaining what they are and how they work. No time for a webinar? No worries, we have answered most of the common questions below.

What is a robo-advisor?

A robo-advisor is an automated, online financial advisor. It combines a questionnaire or text chat regarding your investing preferences with a lot of high-tech software and algorithms to figure out an ideal asset allocation. It then builds a portfolio of exchange-traded funds (ETFs) for you and continuously manages this portfolio as necessary based on your investor profile — buying, selling, and re-investing dividends. If you don’t want to do DIY investing but still want the simplicity and convenience of investing in ETFs, a robo-advisor may be perfect for you.

What are the fees?

Robo-advisors don't use a lot of human management and have relatively low fees. They charge an MER fee (management expense ratio) on assets under management of anywhere from 0.30% to 0.60% for their services, and then you have to add on the ETF fees of around 0.10% to 0.30%. At the end of the day, you may be paying around 0.7%. This is probably going to save you a bundle compared to the other options.

Let’s break down how robo-advisors compare to actively managed funds (mutual funds) from the big banks. Canada has some of the highest mutual fund fees in the world and the MER fee can be as high as 2.3%. If you have a portfolio of $100,000 with a financial advisor, you could be paying more than $2000 in MER fees regardless of how your fund performs. But if you're using a Robo-advisor, you're only paying around 0.7%, or approximately $700. That extra $1300+ you're not paying in fees every year will really add up as your investment returns compound.

Which robo-advisor is best for me?

Good question! This really depends on your preferences, your goals, and the portfolios that the robo-advisors use. Each robo-advisor offers something different so it’s important to take a look at which one works best for you. Here are some of the different things to look into:

  • Fees (although this isn’t the only factor!)
  • ETF’s that make up the portfolio.
  • The dashboard.
  • Other benefits. Some robo-advisors provide you with a dedicated financial advisor, estate planning, insurance needs, tax-loss harvesting, etc. This may be something that you require, so it’s good to look into your own personal needs.

What next?

Well.... there’s no better time than the present! If your returns have been less than stellar over the last few years, it may be time to rethink your current investment strategy and take a hard look at why you are paying the fees you do. Or maybe you’re ready to grab the bull by the horns yourself and start to

secure your financial future… especially if you don’t have any high-interest debts that should be taken care of first! If you feel like you’re still lost, and need some guidance, you can always check out one of our upcoming livestreams or sign up for one of our free financial assessment calls.

Nov 06, 2019

People. Let me get real with you for a second. Tax season is upon us, and there is this magical unicorn of an account in Canada called an RRSP (Registered Retirement Savings Plan). It will help you reduce the amount of tax that you owe the government, and/or increase your tax return. Interested? I thought you'd be! I just maxed out my RRSP before the March 1, 2018, deadline. So get on it, open your account, and start contributing!

"BUT ALANNA, I DON'T KNOW WHAT AN RRSP IS?"
Funny you should say that out loud! I had an infographic created last year about the RRSP. Note that the date on the infographic is for 2017 and this years' deadline is March 1, 2018!) And if you're like, "Alanna, I don't want to look at this cool and helpful infographic you had made for your readers", then read on Donkey Kong.

What is an RRSP and why should I have one?
A registered retirement savings plan is an account that will help you save for a happy and financially stress-free retirement. Want to live on a boat in the middle of the ocean, scuba diving all day, surrounded by Great White Sharks? Yes. Please. Mountain climb in the middle of Vancouver Island feeding freshly caught salmon to Grizzly bears every day? Fuck, yes - who wouldn't? The RRSP will help you achieve your dream retirement, but you need to start right NOW. There are two main reasons why:
1. The money that you contribute to your RRSP is deductible from your taxable income.
Um.... what?
Example time! Say you made $40,000 in 2017, and contribute $3000 to your RRSP. When it comes time to file your taxes, you can claim that $3,000 contribution as a deduction and can calculate your income as if you’ve made $37,000. This will likely put you in a lower tax bracket, saving you money and/or increasing your tax return. Cool, huh?
Yes. Yes, it is cool.
2. The savings in your RRSP are able to grow tax-free. Within your RRSP you can invest in stocks, mutual funds, ETF's, bonds, and other investments. If you make profits from these investments, they are not taxable until you withdraw the funds, which ideally occurs when you retire. And when you retire and have very little income, you will be in a lower tax bracket than you are now (hopefully), and will have to pay less tax on your withdrawals. Kapeesh?
YAS QUEEN.
sweet BOULDER HOLDERS. how do I start?
You can set up a managed RRSP through a Robo-Advisor like Wealthsimple (which helps to reduce your MER fees, rebalance your portfolio, and is just all around awesome), or you can open one up through your bank, credit union, trust, or insurance company. You can also have your RRSP self-directed, and manage it all on your own (that's what I do!) However, if you'd like to go that route, I'd suggest contacting me for more information on how to do this.
I'm sold! But I need some more facts.

• If you work and file an income tax return, are under 71 years old, and have a social insurance number, you should definitely consider opening up an RRSP. • Your RRSP contribution room changes every year, and is calculated based on the following: ◦ 18% of your earned income from the previous year, with a maximum of $26,230 for the 2017 tax year;
◦ Whatever remaining amount is available after any company contributes to your RRSP. If your company contributes 10% of your earned income from the previous year, you can only contribute the remaining 8%.
• You can withdraw up to $25,000 for a down payment on your first home, and not pay any tax under the Home Buyer’s Plan. However, you have up to 15 years to repay the full amount back into your RRSP. • Wanna go back and hit the books? You can withdraw up to $10,000/year, or up to $20,000 in total to help pay for your education using the Lifelong Learning Plan. All you have to do is repay at least 10%/year for up to ten years.
• It isn’t mandatory that you deduct your RRSP contribution on your tax return in the same year that you made the contribution. You can hold off and deduct it in a future year if you think you will be making more money down the road. So, if you have room in your RRSP and just want it generating some kind of income through an investment, you can just leave it in your RRSP and let that shit grow. Yay compound interest!
• You can set up a spousal/common-law RRSP, which you can contribute to, but your common-law partner/spouse owns. This reduces their taxable income with your help.

RRSP vs TFSA - CONCLUSION
The RRSP and TFSA are great accounts for all Canadians and you should definitely consider opening up one or both of them, and start contributing ASAP. Depending on your financial situation and short/long-term goals, one account may be more beneficial than the other. If you are only making $25,000/year and are in a low tax bracket, you'd probably be better off with a TFSA. But let’s say you get a raise and go from making $25,000/year to $60,000/year, it would probably be worth contributing to your RRSP to put yourself into a lower tax bracket, saving you some money at the end of the year.

So there you have it! Everything you needed to know about the RRSP. If you're still hella confused and need some more guidance, please contact me! I've helped over 100 millennials and Gen-Y'ers figure out what's best for them and how to get started - and I can help you too!

Nov 06, 2019

People. Let me bring you up to speed here. Are you still paying the big banks to take out your hard-earned money? How often do you really use a bank teller anymore? You're probably using the ATM and doing most of your banking online, right? And you're still paying monthly bank fees for a Chequing account?

The thought of all of this craziness makes me feel like this...YOU'RE NOT ALONESince launching The Budget Babes back in January; I've had just over 45 consultations and see the same pattern over and over again. People are spending a lot of money on their daily banking fees! Almost 95% of my clients have some kind of monthly fee that they pay without thinking twice about it. And if you do the math, you'll find that you're spending a lot every year. Are your bank fees worth it? If they are, then keep on banking. But if you find that your bank isn't doing that much for you, maybe it's worth making the switch to a no-fee bank account like PC Financial, Tangerine, EQ Bank or a Credit Union of your choice.

2017 COMPARISON OF BANK FEES
TD CANADA TRUST : 
The TD Minimum Chequing account will cost $3.95/month but can be waived if you keep $2000 or more in your account at the end of each day in the month. You'll get 12 transactions per month ($1.25/each for additional transactions), and access to their online/telephone banking. TD also offers an Every Day Chequing account for $10.95/month. This gives you 25 transactions (anything over is $1.25/transaction), free Interac e-transfers and access to their online/telephone banking. TD will waive this $10.95 fee if you keep $3000 or more in your account at the end of each day in the month.  CIBC: Their Everyday Chequing account is $3.90/month. This gives you 12 free transactions (anything over that limit is $1.25/transaction), access to their online/telephone banking, and, well.... that's pretty much it. They also have a Smart Account that is more flexible and charges you based on the number of transactions you make. You could pay as low as $4.95/month up to $14.95/month. This account gives you unlimited transactions, unlimited Interac e-transfers and access to their online service. CIBC will waive this fee if you keep $3000 or more in your account, and you make a recurring transaction or 2 pre-authorized payments each month.

 RBC:
Charges for RBC's Day to Day bank account is $4.00/month. This gives you 12 free transactions (anything over is $1.00/transaction), access to their online/telephone banking, and unlimited Interac e-transfers. They also have a No Limit Banking account for $10.95/month which gives you unlimited transactions, unlimited Interac e-transfers, and access to their online/mobile service.  SCOTIABANK: With fees starting at $3.95/month, Scotiabank's Basic Bank account gives you 12 free transactions (anything over is $1.25/transaction), 2 free Interac e-transfers, access to their online/telephone banking, and you'll earn SCENE rewards. Their Basic Plan is $10.95/month which includes 25 transactions ($1.25/transaction after you've used the 25), 2 free Interac e-transfers, you'll earn SCENE rewards, and they'll waive the $10.95 fee if you keep $3000 minimum as a closing balance after each day. And of course, you receive access to their mobile and online banking.

BMO: 
BMO's Practical Plan will give you 12 free transaction (anything over is $1.25/transaction) at a cost of $4.00/month which they waive if you keep a minimum of $2000 in your account at the end of each day. You'll receive unlimited Interac e-transfers, and of course, access to their telephone/online banking. Their Plus Plan will run you $10.95/month which will be waived with a minimum balance of $3000 in your account. This plan allows you 30 transactions, unlimited Interac e-transfers, and telephone/online banking.

Conclusion:
 Do the math! How much are you spending on bank fees? $50/year? $180/year? It really adds up quick and this is for most basic banking plans! There are still premium/small business plans that are offered. Keep in mind that the above information doesn't even include overdraft protection, the cost of paper statements, cheques, and the charges that apply when using a different branded bank machine. The big banks are making billions of dollars every year. Although it's not all from bank fees, it's definitely helping with some profits. Do you need some help getting your personal finances under control? Contact me for a budgeting consultation! Bank fees are one of many tips that I often give to my clients to save money over the long term, but there are so many more tips that I'd love to share with you.

Feb 09, 2020

A what?

A Tax-Free Savings Account (TFSA) is a Registered Investment Account that has a whack-load of financial benefits. Want to know why I bolded and underlined the word investment? Because this account will benefit you the most when you hold investments in it, and not use it as a day-to-day savings account. 

Here are some of the main benefits of the TFSA and why you should open one (and use it) right now.  

The Benefits of the TFSA:

  • Any income that you make from investments within this account is tax-free (hence the name). This means that you don't have to claim any income you've made from your investments on your tax return at the end of the year. I'm talking about free investment income here people.

    • Let's take an example - shall we?: Mary Lou Cannary contributed $10,000 into her TFSA on January 1, 2019, and invested it into the S&P500 ETF (VFV). In all of 2019, VFV made a whopping 25.13% return. WEO. What does this mean for Mary Lou Cannary at the end of the year? Well, her investment of $10,000 now has a current market value of $12,513 as of December 31, 2019. Now, because she invested this money within her TFSA, she could withdraw her investment income of $2,513 without paying a gosh-darn penny of income tax. Pretty neat huh? 

  • You can contribute to your TFSA from the age of 18 and do not need a job to open one (unlike the RRSP). The contribution limits change every year, based on inflation (mostly). As of January 1, 2020 you can contribute up to $69,500. If you're unsure of what your contribution room is, you can sign onto your CRA My Account for Individuals and find out. 

    • If you don't have a CRA My Account for Individuals, you should get one. Sign up here

  • The money that you contribute to your TFSA is used with after-tax dollars so there are no taxes to be paid when you with withdraw the funds, making the TFSA a relatively liquid investment account (depending on the investment holdings within the account itself). This is a great account to use if you're needing money on a short or long-term basis; travelling, getting married, downpayment on a house, sending the little ones off to school, beefing up retirement income, etc.

What the TFSA is not:

  • It is NOT a type of investment (contrary to some peoples' belief). You cannot purchase a TFSA. It is an account that is registered with the CRA which has tax benefits to it. Don't just put money into your account and have it sitting there. The whole point is to have your money working for you by investing it in either stocks, bonds, mutual funds, ETF's, Reits etc. 

  • It should not be used as an everyday bank account. Although you can deposit and withdraw into your account when you want, there are some rules surrounding this so make sure you understand them. The CRA really breaks that down here.

    • When I first started investing in my TFSA, I made the mistake of not understanding the rules (because I was an 18year old and nobody was there to teach me). Unfortunately, I was taxed by the CRA and had to pay a big chunk of money ($300 buckaroos!). I don't want this happening to you so make sure you know your limits, and play within it. (See what I did there?)

Where Can My TFSA Be Held?

  • At a financial institution of your choice. Your financial advisor will be able to open up a TFSA for you where they actively manage it (just be aware of the fees that you may be incurring as these can sometimes be hidden). 

  • With a Robo-Advisor. This is a great option for those who are trying to get away from the bigger financial institutions, want lower fees, and are big believers in ETFs. 

  • You can Self-Direct it. I do this. And I love it. Low fees, freedom to choose the investments I want, and the money that I make within my TFSA are completely made due to my efforts.

Conclusion?

If you've already opened a TFSA and have investments sitting within your account, you're doing good things (so long as your investments are making money). If you have a TFSA, have money sitting in one of those "high-interest savings accounts",  and you're not needing that money any time soon, you may want to rethink your strategy.  

If you haven't opened one yet, get out there and open one up today. You'll be happy you did. And if you're still somewhat confused, scared, excited, nervous, and potentially need some one-on-one coaching, contact us for information on our coaching program

Financial Coaching

A little accountability goes a long way in turning financial education into action!

Financial Coaching

A little accountability goes a long way in turning financial education into action!

Oct 04, 2021

You might have heard Enriched Academy Co-founder Kevin Cochran explaining how YOLO (You Only Live Once) is the most expensive word in the English language. Kevin has a great point – justifying clearly unaffordable purchases with a YOLO attitude usually leads to a pile of very expensive credit card debt and more than a little regret down the road.

However, YOLO has a contender for the expensive word title, and that contender is procrastination. We are huge believers in education, fact finding, and analysis before making any important financial decisions, but at some point, you have to take action. Whether it’s opening an online brokerage account, meeting with a financial coach, or simply inputting your monthly household expenditures into a spreadsheet, you need to get moving.

The cost of procrastination when it comes to getting your finances in order is easy to overlook, so we are making it crystal clear by highlighting six issues where failing to act is definitely going to come back and haunt you!

Attacking your debt problem
Throwing everything you have to pay off a 3% mortgage doesn't make financial sense for most people. However, if you have higher interest credit card debt, car loans, or a line of credit that you are in no hurry to eliminate, you need to look at how much it is costing you. Once you see how much money you are wasting on interest every year and how many years (not months) it will take to pay back, your laissez-fair attitude to eliminating that debt will likely change.

Starting your retirement planning
Too little, too late is the story for many Canadians when it comes to funding their retirement. CPP and OAS aren’t enough to save you. The good news is you don’t need a comprehensive plan to get started. For now, if you have no plan or don’t know what to do first, open a TFSA and focus on maxing out the contributions every year and invest in an index fund. You can even automate the process with a robo-advisor and make it as easy as paying the phone bill.

Analyzing expenses and budgeting
Next month is not the time to start figuring out where your money goes every month and where you could/should/need to cut back on spending. The time to get started is today, and it has never been easier with hundreds of online applications and spreadsheet software, or you can go old school with pen, paper and calculator. Enriched Academy has a number of easy-to-use proprietary tools in our programs to help you crunch the numbers.

Getting started with investing
For many of us, it’s hard to get over the risk-aversion and fear of loss that goes with putting our hard-earned dollars into the markets. You need to be comfortable with your decision to invest and knowledgeable of strategies to mitigate the risk, but you also have to realize that holding cash at the interest rates we have seen over the last several years is not going create much of a retirement fund. The TSX was hovering around 5000 in August of 1996 and is just over 20,000 today. Had you invested $300/month for that 25-year period and achieved average market returns, you would have upwards of $500K today.


 

Creating an emergency cash reserve and a will
Two things you never know when you might need, but if the pandemic taught us anything, it was to prepare for the worst. Your income could unexpectedly and very easily disappear for a number of reasons, so you need to have enough cash on hand to tide you over for a few months. As for a will, they are pretty easy to get these days and there isn't any valid excuse for not having one, especially compared to the mess it leaves behind for your loved ones if you die without one.

Our goal at Enriched Academy is to educate and inspire you to take control of your financial life. We do our best to prepare you and get you moving, but it’s up to you to ensure procrastination and YOLO are not holding you back from reaching your financial goals!

Oct 04, 2021

Financial planner? Money coach? Financial advisor? There are several titles for the people who can help you manage your money, but it isn’t always clear what each one does, and more importantly, which one is right for you?

With the exception of Quebec, anyone in Canada can call themselves a financial advisor or a financial planner —there is no guarantee of expertise. The level of experience, education, professional accreditation and the range of products and services offered varies greatly. Some advisors focus only on investments and will help purchase and manage a portfolio of stocks, bonds, ETFs, mutual funds, etc. Others take a broader financial view and will advise you on investing as well offer advice on issues such as taxes, insurance, or retirement planning.

A financial coach is both educator and advisor. They use a holistic approach and take a deep dive into all aspects of your financial situation. It includes cash flow management, budgeting, savings, investing (RRSP, TFSA, income properties, other passive income investments), debt management, building credit, wills and estate planning, insurance, and retirement planning. The program is customized to each client's needs, and you have the option to go into more detail on any aspects that are particularly relevant to your case.

In addition to the scope of their advisory services, the other primary difference is that a financial coach teaches you as you move through the program. The focus is on equipping you with the confidence and knowledge to make a lifetime of informed financial decisions. A coach teaches you the facts and provides a structured plan, an impartial opinion, and plenty of motivation and inspiration – but the decisions are ultimately up to you.

Aside from the education and guidance, there are also intangible benefits to a coach. Many people have trouble shifting from the learning phase (like reading this blog) to the action phase (purchasing an index fund online for example). As with any sport or activity, the presence of a coach is super motivational, and the structure and accountability built into the coaching sessions really helps to boost confidence. A coach can definitely help turn financial complacency into actions that build a robust financial plan.

The best way to highlight how coaching helps is to look in more detail at one of our Enriched Academy clients. “Stacey” and her husband called themselves “middle-class professionals” and they are in their 30's with three kids. They were looking for solutions on how to pay back debt and build a fund for their future. Stacey felt she did not have a good understanding of their overall financial picture and was unsure where their money was going every month.

After six months of working with a coach, she felt like they had made some “serious progress” and the results supported her feelings. Their net worth climbed by $16,388.62 and they also paid-off or consolidated a lot of high-interest debt. They saved almost $3400 in interest charges over the 6-month coaching period.

Stacey noted their gains easily covered the initial cost of the program and it will continue to provide positive returns for many years into the future. She also noted that the results were "super motivating" and she is looking forward to seeing how their financial situation changes for the better over the next two to three years.


 

Coaching is not for everybody, and Stacey pointed out that she did spend a fair amount of time studying the self-help resources her coach provided as well as drilling down into the details of their finances. Enriched Academy coaches have access to a huge library of proprietary teaching resources and tools to help their clients learn, but you will need to put in a few hours each month to maximize the effectiveness of the program.

For those who would like to have more control of their finances or take over management of them completely, coaching is a great way to transition and get the ball rolling. You get a period of expert support and guidance when you may be lacking the confidence or knowledge you need, and you are steadily preparing yourself for more independent decision-making down the road.

If you would like to read more about Stacey's review of her experience with the Enriched Academy Coaching Program, click here

Learn more about our financial coaching program

Aug 02, 2021

Why hello there!

Have you been wondering about our coaching program since we launched in October 2017? Well, wonder no more! 

We took a few readers from Million Dollar Journey and took them through our 6 months of Financial Freedom coaching. They achieved some really amazing results, and THEN they wrote a really amazing review about us. 

If you've ever been looking for a completely unbiased review of our coaching program, you can read about it here

Enjoy:)

Feb 26, 2021

And no, the holidays did not come early this year. It’s RRSP season and the most exciting time of the year when you need to start preparing to file your taxes.

If you haven’t made a contribution towards your 2020 year yet, you only have until March 1 to do so. This date hasn’t really ever changed, so it always amazes me to see how many people are always scrambling in the last week to put money away into their RRSP’s. This is something that you can set up, and contribute to, at any time during the year. You don’t just have to wait until February when everyone starts marketing that the RRSP deadline is coming up.

If you don’t know what an RRSP is, let me tell you as simply as I can.

It’s a government-regulated account (registered) where any contribution that you make will give you an immediate tax deduction. Within your RRSP you can invest in things such as ETFs, stocks, bonds, mutual funds, real estate, etc.

Example: if your income at the end of 2020 was $75,000, and you contributed $10,000 into your RRSP throughout the 2020 year, then you are only being taxed as if you made $65,000 in 2020. This would bump you down into a lower tax bracket, and either provide you with a bigger tax refund, or would reduce the amount of taxes owed.

Keep in mind as well, that when you invest in a healthy and diversified portfolio within your RRSP, that your contributions grow tax-free until you start to withdraw them. And most people withdraw their RRSP when they need the income in retirement, so they’re typically in a lower tax bracket. You do eventually pay tax on your withdrawals, but if you’re retired and farting around the golf-course or sipping Pina Coladas on a beach somewhere, chances are you won’t be in a high tax bracket already, because most retirees don’t work. If you start young, build your portfolio up to $1,000,000, and only need $50,000 in retirement, then you’re only paying tax on your $50,000 withdrawals.

How Do I Get Started?

Well, to be honest, you should contribute to your RRSP throughout the year, but if you haven’t been contributing then you should do so before March 1. The contribution room that you have available to you can be found through your CRA My Account, or on your NOA from the previous year. Your accountant should also have that number somewhere. So don’t delay, start today.

Here are the three main ways that you can open an RRSP;

1. Managed: Personalized investment portfolios that are managed by advisors and professional money managers at financial institutions. Portfolios are tailored to the specific needs of the client depending on a number of factors such as your age, risk tolerance, and short and/or long-term goals. There are typically high fees associated with managed accounts since a human is deciding what securities to hold within that account and are actively managing it.

2. Robo-Advisor: A new class of financial advisors. It uses algorithms to provide investment management and advice with little human supervision. Using a certain type of software, a Robo-Advisor is able to automatically buy, sell, and rebalance assets in your portfolio. Don’t know the first thing about investing but want to invest in ETFs? Don’t you worry. Robo-advisors will do it all for you. So, if you’re new to investing, and want to reduce the fees you’re paying, then a Robo-Advisor may be a perfect fit for you.

3. Self-Directed: You have full control over the buying and selling of securities in your account. By managing your own account, you can reduce the amount of fees that you pay, putting more money in your pocket at the end of each year. With a self-directed account, you do all of the dividend re-investing and rebalancing of your portfolio.

We’ve helped 100’s of clients in our Financial Freedom Coaching program set up an RRSP and use it as an investment vehicle throughout the year. And we can help you too. If you’re ready to set up a Free Coaching Assessment call with our team to see if you’d be a good fit for our coaching program, then sign up here.

We can help you build a solid budget, set you up on a plan where you’re making weekly-monthly contributions into your RRSP, and save you from pulling your hair out every February as you scramble to find money to contribute.

Jan 22, 2021

Happy New Year to all of you. I LOVE January.

Why, do you ask?

Because it marks the beginning of my personal financial year. This is where I sit down, complete my Net Worth Tracker, organize my budget, and fill out my Financial Freedom calculator so that I can figure out how much to set aside for the year ahead. My current financial goal is to retire by 45, and I seem to be on the right track (right now). Wish me luck.

I thought I would take this opportunity to write a post for parents out there who are wanting to motivate and teach their kids about financial literacy and money management. We get a lot of clients in our  Financial Freedom coaching program who take the education that they’ve learned and pass it on to their little ones. Financial literacy should start as young as possible!

Growing up, my grandparents always gave me Israeli Savings Bonds for birthdays and holidays instead of physical presents. I never understood why, and to be honest, it always pissed me off. Until I hit 18. Around my 18th birthday, all of the bonds had matured, and I was presented with a cheque for $10,000. I couldn’t believe my eyes when I saw all of those zero’s! I kept thinking about all of the things that I could buy with that money, but my mom had another plan in place for me. I’m so glad that I listened to her advice. Looking back now, I don’t think I’d be where I am today without my mom’s guidance and financial education.

She immediately took me into the bank and had me open up a self-directed TFSA where all of the money was invested into Index funds. At this time, I had NO idea what any of these words meant. I just thought that there was a savings account and a chequing account. But my mind was blown after my mom had taught me about the different types of accounts one could have – and this was at the young age of 18.

For the entire year after, I didn’t think about or look at the TFSA. I just let it sit there and allowed the market to take its course. One day, I decided to take a peek and see what was happening. I had made just over $800! And I literally did nothing all year with that money. It just sat in the account, made a 7.5% return, and compounded interest while invested in these Index funds. Seeing the $800 return sparked my interest in investing. I had a conversation with my dad afterward about the money I had made, and about investing in general. He told me to “make your money work for you, and don’t work so hard for it”. That saying has stuck with me to this day.

Three years ago, I hit a milestone. I turned 30 (I’m currently 33). And since I’ve been tracking my Net Worth for the last 3 years, I remember taking a look at my savings and investment portfolio and having just over $100,000, at the age of 30. I’m now 33, and my investment portfolio has doubled in growth over the last 3 years. What’s the secret you ask? I’ll tell you how I did it.

Keep in mind that I am not a homeowner. I choose to rent. But I do have a partner, a car, and a lovely 2-year-old Bernese Mountain dog (named George). We live a great life in Toronto (one of the most expensive cities in Canada. So yes, it is possible to save).

  1. Set goals for yourself and work hard. After that first year of investing, it became a personal goal to max out my RRSP and TFSA every year. And I can happily say that I’ve completed this financial goal since the age of 19. Before working for Enriched Academy as the head of their coaching program, I worked as a freelancer in the entertainment industry, and prior to that, worked in the restaurant industry.
  1. Pay yourself first, and have fun after. I know that I have a different mentality about money than other people my age do. I don’t spend a lot on material things. I go out for dinners and drinks with friends, have a great apartment in Toronto, and bike/walk almost everywhere I can. I spend the majority of my money on experiences, food, and travel. I have the mentality that I need to pay myself first by maxing out my RRSP and TFSA, and then I can have fun afterwards. Knowing that I have that money in an account makes me sleep like a newborn baby every night.
  1. Educate yourself and invest! I know that I wouldn’t be where I am now without investing. Learn the basics, take a course (like our one-on-one coaching program), and put some money into diversified investments so you begin to understand the principles. It doesn’t need to be a lot! Start with $10/week. A majority of my portfolio is invested in Index ETF’s, but I hold a few blue-chip stocks that pay out a dividend.
  1. Budget, budget, budget. This is so important and will be the basis of your financial plan. Once you have a budget in place, you will see where your income is coming from, and what you’re spending money on. And if you have any “leftovers”, you can start putting it into your savings/investment account. This is really where you’ll start to see your Net Worth grow.

I know that I’m not like the majority of Canadians. And that’s ok. I'm incredibly thankful to both of my parents who took the time to educate me about money. It’s never too late. So make sure that you take the 2021 year as a teaching opportunity and start to make the financial changes that you need to yourself. Your kids will thank you later.

Dec 07, 2020

What a Year.

How did you manage? What did you learn? What are you bringing with you into 2021?

2020 was tough. Emotionally. Mentally. Physically. The pandemic has definitely taken its’ toll on my emotional and mental well-being. Not being able to freely walk around, see friends and family, and be constantly mindful of the people around me has really made this quite the year. It’s definitely been hard, but I think after all of this, there are probably a few things that we’ve learned in regard to our finances.

Here are a few things to bring with you into 2021. 

  1. We don’t need a lot to live. I think for the majority of our coaching clients, the thing we hear the most is that the pandemic really taught them about the most important things in life. It wasn’t about the car they drove, the clothes they had in their closets, any other material object they once had, or even going to get their hair done bi-weekly, we’re surviving without all of it. There are always going to be things that we like to have. But when you really get down to the nitty-gritty of it, we don’t truly need a lot to live. Head into 2021 by taking a good hard look at your finances, cut out those things that may not be bringing you joy, and focus on those things that matter most to you.
  2. You can manage your cash flow, regardless of your financial situation. This one was SO interesting to me. We had a number of coaching clients who had joined us back in February, and then lost their jobs because of the pandemic and had to take a paycut or live off of the CERB. And guess what? They still managed. By working one-on-one with our coaches, our clients were able to re-work their budgets and focus on the priorities of putting food on the table and a roof over their head. It just goes to show that it’s not the money you make, but the way you manage it.
  3. Pay off your high-interest debts – ASAP. Being in debt can be hard. Being in debt during a pandemic can be even harder. But I hope (if you were one of the 1000’s of Canadians who had debt before the pandemic) that you had some ah-ha moments. Our coaching clients certainly did. Always pay off high-interest debts (above 5%) every month, or as fast as you can. Nobody knows what’s going to happen in the future, and I think the pandemic made a lot of us realize that our finances are not finite. Manage your income, dollar by dollar, and get out of the weeds when you have the ability to.
  4. Have money set aside for an emergency fund. Remember how we always talk about having 3-6 months of necessary living expenses in an account that you can dip into for emergency purposes? I’m sure that really came in handy back in March if you were someone who lost your job. Figure out what your absolute necessities are, and keep a 3-6 month emergency fund in an out of sight, out of mind account that pays some kind of high interest.
  5. Invest, Invest, Invest. Once you’ve gotten rid of all of those high-interest debts (above 5%), you can start to invest. Back in March, I was in the airport heading to Belize when the markets were crashing. I kept seeing them drop. Lower and lower and lower. Do you know what I did? I didn’t sell my investments. No, no, no. This was the opportunity that I’ve been waiting for. Everything went on sale! I maxed out my TFSA, RRSP, and had my partner do the same. To this date, our investments are up over 30%. Now, I’m not telling you to time the markets, because nobody can. But if you can keep costs low throughout the year, manage your cash flow, and have cash set aside for these kinds of opportunities, then you’re all set. Buy low, sell high, remember? Don’t panic. If you’re properly invested and diversified, you’ll never lose all of your money. Yes, it may be volatile, but if you can think of the future, you’ll come out on top.

"Be Greedy When Others' are Fearful and Fearful When Others' are Greedy" - Warren Buffet

At the end of all of this, it’s been really interesting to see our clients throughout this pandemic. Regardless of their financial situation, they’re excited about getting their financial house in order for a healthy and successful 2021.

Are you ready to join them? Sign up for your free Coaching assessment call here. Having someone else to give you a completely non-judgmental and non-biased view of your financial situation may just be what you need for your own successful year ahead. After everything is said and done though, make sure to not take any moment for granted. Hugged your loved ones. Take time away from technology, work, and enjoy every minute.

Happy Holidays and New Year from Enriched Academy

Oct 09, 2020

What Are You Thankful For?

As we approach one of my favourite holidays of the year (aside from Passover, and Christmas, and Hanukkah, and my birthday), I’d like to check in with you to see what you’re thankful for?

I’ll start. I’m thankful for the health of myself and my family and friends, and also the financial education that my parents taught me at a young age, which now has provided me with the financial freedom to not stress about money. And I’m 33 years old. How many 33-year-olds do you know who can say that?

As the head of coaching for our Financial Freedom program, our program sees 1000’s of clients every year who are in really difficult situations because of a lack of financial education. Just remember, this is not your fault. We live in a broken system. But there is a way that you can make a change, and that change starts with altering your behaviours and habits.

How To Make Habits Stick

We all know bad habits are easy to pick up and hard to drop. Good habits on the other hand? Well, if it was easy, we would all be wealthy and fit (and able to wear the same jeans that we did in high school). I’m currently struggling to fit into the same pants that I was wearing before COVID hit. Damn you quarantine.  
 
But I’m going to let you in on a super easy secret that can help you create strong, lasting habits.
 
Make those habits as easy as possible. 

If you sat down and made a list of habits that you go through in a day, you can probably come up with around 10-20 of them. Here are a few of mine that may help you to create your list.

  • Wake up and make coffee.
  • Review budget.
  • Read finance blog.
  • Walk the dog.
  • Brush my teeth.
  • Make breakfast.
  • Clean dishes.
  • Get dressed in workout clothes.
  • Work out.
  • Do yoga.
  • Shower.
  • Make lunch.

Pretty crazy eh? It’s not even 1 pm yet and I’ve already gone through 11 habits that I don’t think about. I’ve gotten into a routine where I just do them.  

Atomic Habits is our favourite book on creating winning habits. The author, James Clear, outlines a few tips you to follow... 

Use this formula: I will (behavior) at (time) in (location). For example, instead of saying, “I will budget each month.” Try, "I will budget on the 1st of each month at 5 PM in my office." 

Every habit is initiated by a cue. The cue triggers your brain to initiate a behavior because it predicts a reward. We are more likely to notice cues that stand out. Setting an alarm on your phone for 5 PM monthly is a cue that you need to budget. 

Forming a new habit is hard so Make it Easy. We really strive for that in our Enriched Academy Programs.

And now I’d like to share with you:

5 Money Habits of Wealthy People 
 

These concepts are honestly so easy, and they truly are the key to building wealth. We see most of our successful Financial Freedom clients live by these means, and you can start to see results today if you follow the list below.

  1. Live below your means. Spend less than what you earn. It’s as easy as that. Sit down and go through all of your sources of income, and everything that you spend money on. If you have money left over every month, and are putting money into an investment account, you’re beyond the majority of Canadians. If you’re overspending though, then you need to make some cutbacks unless you want to end up in debt for the rest of your life. It’s not about making more money. It’s about living with what you have and being smart with it. If Warren Buffett is worth over 70 billion dollar and lives in the same home that he bought 50 years ago for $31,000, and drives a modest Cadillac, then you can live within your means as well.
  2. Learn one new thing a day. No one has ever gone broke buying books. I read a daily personal finance blog that keeps me up to date with what’s going on in the world. If your new thing is a recipe, or a craft, or a new trade, then that’s awesome. But just force yourself to learn something new.
  3. Small steps each day. Have you ever read a book or taken a course but quickly found your motivation evaporated? Wealth is given to those that take small consistent actions daily. Ask yourself, what is one small thing I can do today to help me make progress with my finances? 
  4. Track your net worth and budget monthly. You cannot improve what you don’t measure. These two numbers are the foundation for financial and time freedom. 30 minutes per month, that's all it takes. This is one of the biggest ways that we measure our clients in our Financial Freedom coaching program. We get them to track their Net Worth month and start to track their cashflow as much as possible. This way, they can see the correlation between the two. When you start to track your cash flow, and you spend less than what you earn, then your Net Worth goes up.
  5. Learn to say “no”. Only spend money on things that bring you an immense amount of joy and happiness. Everything else, say no to. 

Once you’ve got the top 5 habits above in place, you’ll start to see dramatic results with your finances. You’ve just laid down the foundation to becoming financially successful. Congratulations. But there’s still more work to do! You need to review your financial goals and plan each month. Step 1 is creating that plan. Step 2 is constantly reviewing and making changes to your plan as things change. If you are not constantly reviewing your plan you could be headed in the wrong direction and not even know it. 

When COVID-19 hit and our economy, we worked with all of our coaching members to revise their financial plans because so many things were changing all at once. Some of our clients had lost their employment, their investment portfolios were going down, their kids were home from school, among many other things.

The one thing that we’ve heard over and over again is how thankful our Financial Freedom clients have been for having us work with them throughout COVID-19. Even though some of our clients have seen a decrease in income, they’ve seen an overall increase in their Net Worth. This education that we provide is something that will be with you forever. And we can help you change your habits.

Just the other day I received a note from one of my past students. It made my heart go all warm and fuzzy inside.

“I am not exaggerating when I say that what you all do is life-changing! You helped us so much and we are forever grateful ????”.

So, if you’re ready to take control of your finances and join the 1000’s of Canadians who have gone through our Financial Freedom Coaching, sign up here for your coaching assessment to see if we can help you.

You’ll be thankful.

Happy Thanks giving!

Aug 31, 2020

Have you ever gone through your bank to take a look at your credit score and haven't been super happy with the results? Or have you ever looked into getting a mortgage or needing to borrow money, and nobody will give you a loan? It's likely because you don't have a credit score that's in tip-top shape. This article will explain what a credit score is, and how to increase it. 

What is a Credit Score?

You Credit Score is a number (typically between 300-900) that is based on your credit report. Your Credit Score your financial report card, and it’s used by lenders to predict the likelihood that you will repay any future debt.  Your Credit Score is based off of your Credit Report, which is a summary of how you pay your financial obligations. Lenders use your Credit Report to verify information about you and how you have been with paying off your financial obligations in the past.

Why is This Important?

Your Credit Score will determine if you are a risk to lenders and it will affect the interest rates that you pay on any loan that you’re applying for. If you have a “Poor” – “Fair” score, and are looking at securing a mortgage, you may not qualify through a bank or Credit Union. You may have to go with a B-Lender or even a Private Lender, where you’re looking at interest rates 3-6% higher than a traditional A-Lender.

The Credit Score is one of the metrics that we track in our Financial Freedom Coaching program, and if you can believe it, we’ve helped our average coaching client increase their credit score by 21 points in a 6-month period.

How Can I Increase My Credit Score?

There are 5 main ways that you can increase your Credit Score. All of these ways need to be monitored and properly managed in order to work.

  1. Payment History: this is the most important factor in your credit score, and it makes up to 35% of it. Creditors want to know that you’re going to pay back the money you are asking to borrow from them, so they will look at what your payment history has been like from previous consumer debts. ALWAYS make your payments on time and make the full (or at least minimum amount owed) payment each time.
  2. Amounts Owed: this makes up about 30% of your overall score, so it’s an important one. How much you already owe on your debt vehicles will really matter to a lender. Try to keep your credit utilization rate less than 35% of your available amount, and don’t max out all of your available debt vehicles. If you use a lot of your available credit on your debts, lenders see you as a great risk EVEN if you pay your balance off in full by the due date.  

For example, if you have a credit limit of $10,000, you should not carry a balance of more than $3,500.   

  1. Length of Credit History: this makes up about 15% of your score. Creditors and lenders like to see that you’ve been able to handle credit accounts correctly over a period of time. Newer accounts will lower your average account age, which may negatively impact credit scores. Never cancel one of your first cards because that marks the beginning of your credit history. 
  2. New Credit Applications or Credit Checks: every time you apply for more credit, your score will be affected, so try to limit hard inquiries. There is a difference between a soft credit check (checking your credit score) and a hard credit check (looking for more credit). Every time you do a hard credit check, your credit score will be lowered. This takes place when you apply for a mortgage, loan or credit card. 
  3. Use Different Types of Credit: You should have at least 2 credit vehicles open (credit cards, LOC’s, car loans and mortgages.) Showing you can manage different types of credit will have a positive impact on your score. 

You should check your credit report and score once per year. One small error can have a horrible long-term impact on your credit score, which is why we get our Wealth Mastery and Financial Freedom Coaching clients to check it. Your credit score is like your financial report card and having a bad score can have a really negative affect on your long-term financial plan. We’ve helped 1000’s of clients increase their score by an average of 21 points through our Financial Freedom one-on-one coaching program. If you feel like you need a little one-on-one help, make sure to sign up for our free Coaching Assessment Call.

Jul 26, 2020

It’s been a few years now since the term robo-advisor has surfaced, and we get a lot of questions. So many in fact, we have an entire webinar dedicated to explaining what they are and how they work. No time for a webinar? No worries, we have answered most of the common questions below.

What is a robo-advisor?

A robo-advisor is an automated, online financial advisor. It combines a questionnaire or text chat regarding your investing preferences with a lot of high-tech software and algorithms to figure out an ideal asset allocation. It then builds a portfolio of exchange-traded funds (ETFs) for you and continuously manages this portfolio as necessary based on your investor profile — buying, selling, and re-investing dividends. If you don’t want to do DIY investing but still want the simplicity and convenience of investing in ETFs, a robo-advisor may be perfect for you.

What are the fees?

Robo-advisors don't use a lot of human management and have relatively low fees. They charge an MER fee (management expense ratio) on assets under management of anywhere from 0.30% to 0.60% for their services, and then you have to add on the ETF fees of around 0.10% to 0.30%. At the end of the day, you may be paying around 0.7%. This is probably going to save you a bundle compared to the other options.

Let’s break down how robo-advisors compare to actively managed funds (mutual funds) from the big banks. Canada has some of the highest mutual fund fees in the world and the MER fee can be as high as 2.3%. If you have a portfolio of $100,000 with a financial advisor, you could be paying more than $2000 in MER fees regardless of how your fund performs. But if you're using a Robo-advisor, you're only paying around 0.7%, or approximately $700. That extra $1300+ you're not paying in fees every year will really add up as your investment returns compound.

Which robo-advisor is best for me?

Good question! This really depends on your preferences, your goals, and the portfolios that the robo-advisors use. Each robo-advisor offers something different so it’s important to take a look at which one works best for you. Here are some of the different things to look into:

  • Fees (although this isn’t the only factor!)
  • ETF’s that make up the portfolio.
  • The dashboard.
  • Other benefits. Some robo-advisors provide you with a dedicated financial advisor, estate planning, insurance needs, tax-loss harvesting, etc. This may be something that you require, so it’s good to look into your own personal needs.

What next?

Well.... there’s no better time than the present! If your returns have been less than stellar over the last few years, it may be time to rethink your current investment strategy and take a hard look at why you are paying the fees you do. Or maybe you’re ready to grab the bull by the horns yourself and start to

secure your financial future… especially if you don’t have any high-interest debts that should be taken care of first! If you feel like you’re still lost, and need some guidance, you can always check out one of our upcoming livestreams or sign up for one of our free financial assessment calls.

Jun 17, 2020

Crush Your Debt – For Good

Have you heard about our brand spankin’ new program that we launched in May? It’s for all of you out there that have a little (or a lot) of debt to pay off. And we’re not just talking mortgage debt. This goes a little bit deeper than that. This program is tailored specifically for those who have credit card debt, line of credit debt, personal loans, and debts to family members. Interested in finding out more? You can take a look at the program here: https://enrichedacademytraining.com/debt-sales-page

Why did we create this program?

Getting out of debt is hard if you’re not educated on a wide range of topics. After launching our coaching program back in 2017, we saw a need for continual education surrounding debt. We kept seeing the same debt patterns time and time again, and we wanted to help our followers get out of debt by being able to use the same tools and worksheets that we use with our one-on-one clients. Introducing…….our Debt Elimination Program.

What’s so great about this program?

I think the question is, what is NOT great about this program? It’s specifically constructed to provide you with the education, tools, and resources that you need to get rid of your debt. These are proven methods that we teach to our one-on-one clients, but now you can have access to the education, the resources, and the worksheets to feel more empowered and confident in the next steps. The principles work, so long as you’re willing to do the work yourself.

The other thing that is really great about this program, is that we wanted to make it affordable because we know that getting out of debt can feel really daunting. We priced this at $197+tax. That’s it. And you get 7 modules, tools, resources, and an exclusive Facebook group to ask questions and get support.

What do you cover in the program?

Here are the 7 modules that we cover:

  1. Creating Your Net Worth Tracker and Analyzing For Quick Fixes
    1. This is probably the most important thing that you can do to help organize your finances. We’re going to teach you how to go through all of your assets and liabilities with a fine-tooth comb and figure out any opportunities you can go through to get rid of your debts faster.
  2. Understanding Your Cash Flow and Creating Your Budget
    1. My personal favourite module is all about creating your budget, and figuring out different way to manage your cash flow moving forward so you can prioritize your spending towards what matters most (getting out of debt).
  3. Creating New Goals and Tracking Your Spending
    1. Chances are that you got yourself into this debt because you didn’t track your money coming in and money going out. We’re going to help you create some realistic goals that you can stick to moving forward so you can get our of debt faster.
  4. Using the Debt Crusher Tool
    1. We have this really amazing tool on our website that calculates how much you need to put onto debts to get rid of them by a certain time. This really looks into goal setting.
  5. Organizing Your Debts and Understanding Different Paydown Methods.
    1. Consolidation? Debt Avalanche? Debt Snowball? If you don’t know what these methods are, it’s difficult to focus on one thing at a time. This module teaches you all about those different method.
  6. Understanding Compound Interest and How Your Credit Score is Calculated.
    1. Do you know your credit score? Do you know how your credit card or line of credit calculates interest? If you don’t, this module is for you.
  7. Financial Freedom
    1. Ahhhh yes. Finally, debt-free. Now what? This module will take you through how to become financially free and what the next steps are.

So, if you’re unsure of any of the module breakdowns mentioned above, it sounds like you’ll get LOTS of value out of this course. Come check it out. You can learn more about it here.

May 15, 2020

We’ve been in isolation now for what seriously seems like forever. But the time is flying by, isn’t it? Our coaching division has been working diligently with our clients to help them navigate through this time, and I’ve compiled a list of ways to help clients cut back and think outside of the box to stretch their dollars the furthest. Here are some that may help you if you’re finding that funds are tight.

Take This Opportunity to Clean the House and Sell Your Unused Stuff: Have you ever taken a step back and thought about how much stuff you have but never use? Craigslist, LetGo, Kijiji, Bunz, Facebook Marketplace are some of the amazing platforms out there that allow you to sell and buy used (if you need anything). Not only will it feel amazing to get rid of everything, but if you can free up some cash, it will help in the long run. One person’s trash really is another person’s treasure!

Do You Have Any Reward Points That You Can Use?: I don’t know about you, but I’ve been accumulating PC Points for years. I signed onto my PC Points last week and found that I had $500 worth of free groceries. WINNING! So, then I started to look at some of my other rewards points that I’ve been accumulating all of these years and found that I had $100’s of dollars in reward points. This is the PERFECT time to use those points if you find that you’re strapped for cash. Air Miles? Coffee rewards? Points from your bank? Sign onto your platforms and see what you have and start to use them if you need. Also take a look at unused gift cards!

If You Absolutely NEED to Shop: Have you Heard of Rakuten? We all have things that we absolutely need right now. Perhaps those necessities can be purchased through Rakuten. It’s a website that gives you cash back on purchases that you’d be making in-store anyways. And if you use this link, you'll get $5 cash back on your first purchase!

Take a Look at Your Insurance: Do you have insurance on two or more cars that you’re not driving right now? Time to call your provider and cut one of the monthly car insurance premiums. If you’re able to drive one car between a family, you might as well scrap the monthly cost for the time being. Have you read the fine print of your insurance premiums? Maybe you haven’t taken a look at your insurance policies in a while. There are a few really awesome websites out there such as PolicyAdvisor and PolicyMe that will provide you with a quote in minutes. You can compare them to the policies you currently have. Maybe you can save a few bucks every month by making the switch.

Get Rid of Those Pesky Monthly Bank Fees: I've always asked my friends why they're paying a financial institution a monthly bank fee to take out their own hard-earned money? Unless you actually need a service that a No-Fee bank cannot provide you with, this idea has never made sense to me. Bank fees typically range anywhere from $5-$30/month, but it doesn't need to be that way. There are TONS of no-fee banking options out there that also offer high-interest savings accounts. Here are a few of them; Simplii Financial, Tangerine, and EQ Bank.

I know that times are tough right now, but with a little more thinking outside of the box, I’m sure there are a few other ways that you can think of. Feel free to share them with us!

Apr 21, 2020

Looking for a few extra ways to cut back during COVID19? We’ve compiled our top 5 list of proven ways that you can cut back on your spending to allocate your finances to what’s most important to you during these tough times.

  1. Call current utility providers and ask for a better deal. I recently called my car insurance provider and cut back on my annual premiums by $150. It took me 5 minutes on the phone, and I was able to cut back on my car insurance since I’m no longer driving anywhere. You can do the same with all of your recurring bills. You just have to make time to call. And most of us now have the time! This is always something that you should always do on a yearly basis. Negotiate, negotiate, negotiate. 
  2. A lot of the restaurants are no longer open, so your dining out and coffee bills are probably minimal. This is a good thing. Take this as an opportunity to get ahead of your spending and cut back in dining out as much as possible. This should also be a good opportunity to learn about your habits and how much you spend on a monthly basis on areas that may leave your wallet empty.
  3. Sell unwanted stuff on Craigslist, Kijiji, Facebook Marketplace, or other apps like LetGo and Bunz. This is the PERFECT time to organize your house and go through your stuff to figure out what you need, and what you could sell for a little extra cash in your pocket.
  4. Negotiate your Mortgage or look into a refinance. With dropping interest rates in Canada, it would be a good time to take a look at your mortgage and look into refinancing at a lower rate if it makes sense. Talk to your bank representative or connect with a mortgage broker.
  5. Organize your pantry and make a shopping list when grocery shopping. If you already have lots of dry goods in your pantry, this will assist in not repurchasing it. Use up when you need and organize your pantry so that you know exactly what you have. On top of that, when you go grocery shopping, there is often a discount section for produce at the grocery store where products can be anywhere from 30-50% off. If you’re anything like me, I like to do my grocery shopping on Sundays which is also when I prepare my food for the week. I always hit up this discount section first to fulfil whatever I can in my shopping list. That extra 30-50% in money saved goes a long way and you’ll see this reflected in your grocery bill.

Some of these techniques have helped our own coaching clients save $1000's per month by executing on these tasks. It's a good time to start to analyze your credit card bills to make sure that you're not spending money on something you're not using. 

And now is the perfect time to do so, since we all have a little bit more time on our hands. 

Apr 04, 2020

In light of everything that’s going on in the world right now, I thought there was no better time to write about managing your cash flow. Hundreds of thousands of Canadians have lost their jobs and income over the last few weeks, and they’re scrambling. This is not good. And from what I’m seeing, I think this is going to be a wakeup call for a lot of people. I wish things didn’t have to be this way, but this should be a learning lesson that money is not infinite. It comes and goes. But when it comes, it’s important to manage the crap out of it, and set yourself up for anything that may come.

I find it fascinating (and also scary) that a number of Canadians couldn’t financially support themselves until the end of the month. The amount of calls that the big five banks have received in regard to mortgage deferrals is incredible. Almost 300,000 as of today (April 4, 2020). And the number of people who couldn’t pay their rent on April 1 was through the roof (I’m sure).

However, regardless of where everyone is right now in their financial situation, it’s important to take a step back, look at what you do have, and stretch your dollars as far as you possibly can. Here’s a step by step breakdown on how to approach the next few months. More on managing cash flow in weeks to come, but here’s where to start.  

  1. Sit down and organize your finances. Take a look at your deposit and investment accounts (or look at your Net Worth Tracker if you have one), and understand which accounts are easy to take money from, and which ones aren’t worth touching right now. Write down the total amount of money that you have in all of these accounts.
  1. Figure out how much income you have coming in every month. If you had to apply for EI, or will be applying to any government assistance programs, write down these amounts. If you have other income from other sources, include those as well. I don’t care if it’s a few dollars here and there – every dollar counts.
  1. Print out the last 3-6 months of your credit and debit statements and add up the averages in each category that applies to your spending. Figure out what you spend on a monthly basis. Write it down somewhere.
    1. Fixed Expenses don’t change on a monthly basis (rent/mortgage, insurance premiums, bank fees, etc).
    2. Variable Expenses change every month (grocery bills, dining out, utility bills, etc).
    3. Irregular Expenses are those expenses that happen infrequently (holidays, vacations, car maintenance, annual membership fees, etc).
  1. Analyze. On a monthly average, are you spending more than you currently make? If you are, it means that you have some serious cutting back to do. You have to rework your numbers and completely change your lifestyle around for the time being (and maybe for a little while after that if you didn’t have an emergency account). On top of that, once you have your monthly expenses figured out, does the money in your accounts from Step 1 cover those expenses for the next 3-6 months? Example: if you spend $3000/month on average on everything, do you have $9000-$18,000 sitting somewhere that you can live off of?

Just remember that what we are going through is not permanent. There are going to be sunnier days, and hopefully, we’ve all taken something away from this. There are lessons to be learned, and mindsets to shift. There is no better time than now to actively start learning about personal finance because of how important of a role that it plays in our society.

If you're interested in learning more, please take a look at our website and find some upcoming webinars. www.enrichedacademy.com

Mar 17, 2020

Unless you've been living under a rock within the last week, or have completely shut yourself out from the outside world, you've probably heard that a majority of the services, restaurants, schools, and a majority of Canada, has seen a drastic shift due to COVID19. 

So - what does this mean for your finances? A lot. No need to panic, but it's very important that you grab this bull by the horns and understand how this shut-down will affect the economy.

I'm hoping though, with a little bit more information and education through this blog post, that I'll be able to give you a few tips and exercises that I urge you to do NOW to ensure you can stretch your dollars as far as possible. 

1. Figure out your Net Worth: the best thing to do right now is to sit down and organize all of your finances. What are the values of the assets that you have? Where are they? How easy are they to liquidate? Now, take a look at your liabilities. What do you owe? What are the interest rates?

2. Once you've gotten pretty organized with what you own (assets), and what you owe (liabilities), it's time to look at your cash flow. I suggest (now that we all have some extra time at home), that you print out the last 3-6 months of your credit card and debit transactions, and get real with your spending in as much detail as possible. I want you to figure out what you spend on housing, services, interest rates on outstanding debts, transportation, etc. When you add it all up, what do you spend on a monthly basis? 

3. Time to cut back. There are always ways to cut back in your spending, and there's no better time to do it than now. Restaurants are closed, your favourite coffee shop is cutting back on tables and chairs to socialize at, and we're being told to stay at home. Listen to this advice. It will not only keep you healthy, but it will keep your wallet healthy as well. Take this opportunity to only spend money on the absolute essentials; your mortgage/rent, groceries, monthly services such as internet and cell phone, insurance premiums etc. Nobody knows what the future holds, but it's important that we understand our cash flow as best as we can now so that we can understand how long our savings and assets can sustain us. 

I really wish I had a crystal ball and could tell you when this will all be over. Unfortunately, I can't. But what I can do is urge you to take action with your finances now. Nobody knows what will happen next week, next month, or next year, but let this be a wake-up call for all of us. Make sure that you're always saving for a rainy day, putting money into your emergency fund, and spending less than what you make. Your finances are always evolving and will continue to do so throughout your lifetime. What you do with those finances, at the end of the day, is really what matters. 

Be smart. And stay healthy. 

Feb 09, 2020

A what?

A Tax-Free Savings Account (TFSA) is a Registered Investment Account that has a whack-load of financial benefits. Want to know why I bolded and underlined the word investment? Because this account will benefit you the most when you hold investments in it, and not use it as a day-to-day savings account. 

Here are some of the main benefits of the TFSA and why you should open one (and use it) right now.  

The Benefits of the TFSA:

  • Any income that you make from investments within this account is tax-free (hence the name). This means that you don't have to claim any income you've made from your investments on your tax return at the end of the year. I'm talking about free investment income here people.

    • Let's take an example - shall we?: Mary Lou Cannary contributed $10,000 into her TFSA on January 1, 2019, and invested it into the S&P500 ETF (VFV). In all of 2019, VFV made a whopping 25.13% return. WEO. What does this mean for Mary Lou Cannary at the end of the year? Well, her investment of $10,000 now has a current market value of $12,513 as of December 31, 2019. Now, because she invested this money within her TFSA, she could withdraw her investment income of $2,513 without paying a gosh-darn penny of income tax. Pretty neat huh? 

  • You can contribute to your TFSA from the age of 18 and do not need a job to open one (unlike the RRSP). The contribution limits change every year, based on inflation (mostly). As of January 1, 2020 you can contribute up to $69,500. If you're unsure of what your contribution room is, you can sign onto your CRA My Account for Individuals and find out. 

    • If you don't have a CRA My Account for Individuals, you should get one. Sign up here

  • The money that you contribute to your TFSA is used with after-tax dollars so there are no taxes to be paid when you with withdraw the funds, making the TFSA a relatively liquid investment account (depending on the investment holdings within the account itself). This is a great account to use if you're needing money on a short or long-term basis; travelling, getting married, downpayment on a house, sending the little ones off to school, beefing up retirement income, etc.

What the TFSA is not:

  • It is NOT a type of investment (contrary to some peoples' belief). You cannot purchase a TFSA. It is an account that is registered with the CRA which has tax benefits to it. Don't just put money into your account and have it sitting there. The whole point is to have your money working for you by investing it in either stocks, bonds, mutual funds, ETF's, Reits etc. 

  • It should not be used as an everyday bank account. Although you can deposit and withdraw into your account when you want, there are some rules surrounding this so make sure you understand them. The CRA really breaks that down here.

    • When I first started investing in my TFSA, I made the mistake of not understanding the rules (because I was an 18year old and nobody was there to teach me). Unfortunately, I was taxed by the CRA and had to pay a big chunk of money ($300 buckaroos!). I don't want this happening to you so make sure you know your limits, and play within it. (See what I did there?)

Where Can My TFSA Be Held?

  • At a financial institution of your choice. Your financial advisor will be able to open up a TFSA for you where they actively manage it (just be aware of the fees that you may be incurring as these can sometimes be hidden). 

  • With a Robo-Advisor. This is a great option for those who are trying to get away from the bigger financial institutions, want lower fees, and are big believers in ETFs. 

  • You can Self-Direct it. I do this. And I love it. Low fees, freedom to choose the investments I want, and the money that I make within my TFSA are completely made due to my efforts.

Conclusion?

If you've already opened a TFSA and have investments sitting within your account, you're doing good things (so long as your investments are making money). If you have a TFSA, have money sitting in one of those "high-interest savings accounts",  and you're not needing that money any time soon, you may want to rethink your strategy.  

If you haven't opened one yet, get out there and open one up today. You'll be happy you did. And if you're still somewhat confused, scared, excited, nervous, and potentially need some one-on-one coaching, contact us for information on our coaching program

Jan 19, 2020

Happy New Year to you. And you. And you and you and you. 

I don't know about you, but I LOVE January 1. 

Why do you ask?

It's the first day of the year when there is not much else to do except set myself up for financial success for the year ahead. 

Our finances are always changing. Every. Single. Day. And it's important to evolve and change along with our finances and ensure that we're adapting as our circumstances change. 

Here are the top 3 things that I accomplished on January 1.

1. I updated my Net Worth Tracker. I love a good Net Worth tracker. It allows me to analyze and understand where all of my finances are, and how they've improved over the last year. 

2. I filled out the Financial Freedom calculator. Every year, I fill out a calculator that determines how much I need to save for the year ahead in order to reach financial freedom. I also use the CRA retirement calculator, which helps me determine what kind of CPP and OAS I'll be receiving when I hit a certain age. You can find that calculator here. https://www.canada.ca/en/services/benefits/publicpensions/cpp/retirement-income-calculator.html. Once I've figured out my CPP and OAS income, then I can go back and fill in the rest. Easy peasy lemon squeezy. Once I have my Financial Freedom number, it's time for me to set up my financial plan. 

3. Go through my budget and understand my cash flow for the year ahead. We all have financial goals. We also all have expenses. It doesn't matter if we work or not, at the end of the day, it costs money to live, and it's important that we understand our expenses on a monthly basis. Personally, this is a big year for me. I just bought a car, I'm going on a trip to Belize in March, and I'm getting married in August. There are a lot of expenses coming up, but I'm not worried. I have a solid understanding of my expenses for the year ahead, and I will have to change my lifestyle for a few months so I can accommodate all of those upcoming expenses. I track every single dollar that I have coming in, and every dollar coming out. I know that most people brush this idea of a budget aside, but what better way to manage your finances than to track it? 

So before you spend another day heading into work, I suggest sitting down and doing some of the above. It will not only help relieve some of the financial stress that you may be facing, but it will help put your finances into perspective and will allow you to focus on what's a priority. 

Nov 06, 2019

People. Let me bring you up to speed here. Are you still paying the big banks to take out your hard-earned money? How often do you really use a bank teller anymore? You're probably using the ATM and doing most of your banking online, right? And you're still paying monthly bank fees for a Chequing account?

The thought of all of this craziness makes me feel like this...YOU'RE NOT ALONESince launching The Budget Babes back in January; I've had just over 45 consultations and see the same pattern over and over again. People are spending a lot of money on their daily banking fees! Almost 95% of my clients have some kind of monthly fee that they pay without thinking twice about it. And if you do the math, you'll find that you're spending a lot every year. Are your bank fees worth it? If they are, then keep on banking. But if you find that your bank isn't doing that much for you, maybe it's worth making the switch to a no-fee bank account like PC Financial, Tangerine, EQ Bank or a Credit Union of your choice.

2017 COMPARISON OF BANK FEES
TD CANADA TRUST : 
The TD Minimum Chequing account will cost $3.95/month but can be waived if you keep $2000 or more in your account at the end of each day in the month. You'll get 12 transactions per month ($1.25/each for additional transactions), and access to their online/telephone banking. TD also offers an Every Day Chequing account for $10.95/month. This gives you 25 transactions (anything over is $1.25/transaction), free Interac e-transfers and access to their online/telephone banking. TD will waive this $10.95 fee if you keep $3000 or more in your account at the end of each day in the month.  CIBC: Their Everyday Chequing account is $3.90/month. This gives you 12 free transactions (anything over that limit is $1.25/transaction), access to their online/telephone banking, and, well.... that's pretty much it. They also have a Smart Account that is more flexible and charges you based on the number of transactions you make. You could pay as low as $4.95/month up to $14.95/month. This account gives you unlimited transactions, unlimited Interac e-transfers and access to their online service. CIBC will waive this fee if you keep $3000 or more in your account, and you make a recurring transaction or 2 pre-authorized payments each month.

 RBC:
Charges for RBC's Day to Day bank account is $4.00/month. This gives you 12 free transactions (anything over is $1.00/transaction), access to their online/telephone banking, and unlimited Interac e-transfers. They also have a No Limit Banking account for $10.95/month which gives you unlimited transactions, unlimited Interac e-transfers, and access to their online/mobile service.  SCOTIABANK: With fees starting at $3.95/month, Scotiabank's Basic Bank account gives you 12 free transactions (anything over is $1.25/transaction), 2 free Interac e-transfers, access to their online/telephone banking, and you'll earn SCENE rewards. Their Basic Plan is $10.95/month which includes 25 transactions ($1.25/transaction after you've used the 25), 2 free Interac e-transfers, you'll earn SCENE rewards, and they'll waive the $10.95 fee if you keep $3000 minimum as a closing balance after each day. And of course, you receive access to their mobile and online banking.

BMO: 
BMO's Practical Plan will give you 12 free transaction (anything over is $1.25/transaction) at a cost of $4.00/month which they waive if you keep a minimum of $2000 in your account at the end of each day. You'll receive unlimited Interac e-transfers, and of course, access to their telephone/online banking. Their Plus Plan will run you $10.95/month which will be waived with a minimum balance of $3000 in your account. This plan allows you 30 transactions, unlimited Interac e-transfers, and telephone/online banking.

Conclusion:
 Do the math! How much are you spending on bank fees? $50/year? $180/year? It really adds up quick and this is for most basic banking plans! There are still premium/small business plans that are offered. Keep in mind that the above information doesn't even include overdraft protection, the cost of paper statements, cheques, and the charges that apply when using a different branded bank machine. The big banks are making billions of dollars every year. Although it's not all from bank fees, it's definitely helping with some profits. Do you need some help getting your personal finances under control? Contact me for a budgeting consultation! Bank fees are one of many tips that I often give to my clients to save money over the long term, but there are so many more tips that I'd love to share with you.

Nov 06, 2019

Greetings from Wiesbaden, Germany! I've been here for the past week and a half for my Oma's 80th birthday. This is me stuffing my face with the Thanksgiving dinner that we prepared for our German family. Do you know how hard it is to find a Turkey in this country? It's not easy - let me tell you!

Travelling is an important part of my life, and it’s something that I try to do at least once a year. However, it can get expensive, and it’s something that definitely needs to be budgeted for. I’ve met lots of travellers who end up stressing during or after a trip because they’ve dug themselves so deep into debt.One of my personal goals is to help others create and manage their personal finances and budget for short or long-term goals. So, this post is a list of some handy tips to ensure that you have financially stress free travels.

1. Plan and research: 
It’s always smart to have some kind of idea as to where you want to travel to so you can start looking into flights and accommodation. This will be the most expensive part of your travels. Sites like Google Flights, Kayak, Momondo, and Cheapoair will scrounge the Internet for the cheapest flights possible. And with so many great accommodation websites like Airbnb, Couchsurfing, Booking.com, Agoda, Priceline, and Hostelworld, it’s always great to give yourself enough time to find the cheapest nights available in parts of the city you want to explore. It’ll also be helpful to read some travel bloggers who have recently travelled to your destination as they often discuss how much money they spent. On top of your flight and accommodation, you’ll also want to budget enough money for your food and drink, daily excursions, transportation, and a small emergency fund in case anything goes wrong.

2. Budget:  Just like your food, clothes, rent/mortgage, car etc., travel should be a line item in your budget. If it’s something that you foresee doing in the near future, add it into your yearly budget and account for it from the get-go. That way you won’t be scrambling a few weeks/months before you leave, and you’ll have already had some money set aside.

3. Save, Save, Save: When I saved $20,000 for my trip to South America and Southeast Asia in 2015, I took 15% of my paycheques and put it into a high-interest savings account that I didn’t touch. If I had any money left over after all of my bills were paid and my fun was had, it went into a TFSA where I invested in Index Funds. These funds paid out a dividend and gave me between a 5-10% return for that particular year. It’s one thing to save, but investing your savings will help you make money even faster, getting you one step closer to take off.

4. Open a Separate Account: Once you have a rough idea as to how much money you’ll need, open up a separate bank account that’s out of sight, out of mind. A TFSA and/or high-interest savings account is great because it will accumulate interest faster than an everyday savings account. For those who don’t know the first thing about investing, Wealthsimple is a really great platform that makes saving and investing easy and effortless.

5. Be Flexible and Open: When I was in Brazil, I was complaining to this Irish girl that the flight from Chile to Thailand was $2300. She suggested that I try to be a little more flexible with my timing and not look for a direct flight, but rather create my own trip around the world and book different lags of the flight myself. At first, I was a little skeptical but she helped me research some different itineraries and I booked 3 separate flights. Although it took me 48 hours to reach my final destination, I ended up saving over $900. It’s definitely worth being flexible and having an open mind because you can find some really great deals if you just think outside of the box.

  Conclusion? be smart with your money
For those of you who are as gung-ho about seeing the world as I am, be sure to work hard so you can play hard when on the road. The worst thing that could happen is that you start to travel and realize that you don’t have enough money to do the things that you want to do. This is a once in a lifetime opportunity for most. Make sure you’re smart with your money before you takeoff so you can leave your financial stresses on the runway. And as always, if you're planning a trip and need some personal finance guidance, please contact me!

The Industry of Financial Advice

Understanding financial advisors and their fees is critical to improving your saving and investing efforts.

The Industry of Financial Advice

Understanding financial advisors and their fees is critical to improving your saving and investing efforts.

May 23, 2022

It’s difficult to find timeless advice in the ever-changing world of personal finance but these five are about as close as you can get.

1. Start small and start early with investing

Starting small could be as little as $100 month and starting early means now! Invest what you can and don’t think a $100 monthly will never amount to anything. Only around 5% of Canadians under 25 have a TFSA, which means 95% have already missed out on 7 years of compounded returns! Investing that "measly" $100 month at 5% for 47 years (18-65) will give you $68,754 more than someone who did the same for 40 years starting from age 25. Time really is money when it comes to compounded returns, so get started as soon as possible.

2. Make more or spend less?

Our advice would be to do both, but there are limits on how much income you can generate and cutting back on expenses has a larger impact on your bottom line. You may even be able to cut back without a huge pain factor by first auditing your expenses and keeping track for a couple of months. You may find some expenses you could do without, like that "lightly used" gym membership or seldom watched 300-channel cable package. A part-time job or side hustle isn’t a bad idea, but it comes with its own pain factors. You will spend more time working and less time enjoying life, and any extra income is fully taxable — you might need to earn around $10 in order to get the same result as a $7 spending cut.

3. Re-evaluate your wants and needs

A 1200 square foot, 3-bedroom bungalow used to be the standard for many young Canadian families back in the early 1970’s. A lot of us grew up in a house like that with our parents, brothers, sisters, even the family cat managed to squeeze in! Houses are much bigger now (over 2000 square feet on average) and often come with a lot of high-end finishes. They call this trend lifestyle creep, and it is not limited to housing, it has inundated every part of our life. From what we drive to how often we eat out to where we go for vacation, we are constantly presented with a new norm as our wants slowly transition to needs. Being able to satisfy your wants later in life will only come from making smart spending decisions on your “needs” earlier in life and freeing up the cash to start saving and investing.

4. Understand credit and debt

131 months — that’s how long it takes to pay off a $1000 credit balance paying only the minimum amount — and it will cost you another $1000 in interest charges! Many people carry a credit card balance and are blissfully unaware of just how much it is costing them each month. Car loans are another area where the financing costs are often a lot more than most people realize. It is also important to realize that not all debt is bad, and mortgages are a great example. Even with recent increases in interest rates, 5-year variable mortgages are still a bargain at under 3%.

The key is to be knowledgeable about your debt. Track what you owe and what it is costing you as well as any alternatives that may lower that cost. For example, refinancing your mortgage or drawing on home equity to pay off higher interest loans or credit cards. If you struggle with debt, then it's time to bear down on expenses and draw up a strict repayment plan.  

5. Get financially literate

Managing your money has become more difficult as we have a lot more spending, saving, and investing options, but we also have access to a lot more information and tools to help us. Some things like a Registered Education Savings Plan (guaranteed 20% annual return for your child’s education) are a no brainer and can easily be understood with an hour or two spent online. Understanding the fees on your investments and how much they will cost you over the life of those investments is another need-to-know piece of information that can be easily confirmed.

Managing your retirement savings is more complicated because there are a lot of variables (lifespan, health, income, taxes, lifestyle) as well as options (TFSA, RRSP, investment properties, pensions) to consider. You may want some professional advice at some point but arming yourself with as much financial knowledge as you have the time and motivation to learn will help you better evaluate any advice you do get.

Enriched Academy offers complimentary, informative webinars every week on a wide variety of personal finance issues to help you become more financially literate. We don't sell or recommend financial products and we do our best to provide reliable advice and information that is easy to understand, practical and unbiased. Check out our events page to see the webinars coming your way over the next few weeks.

Mar 21, 2022

Rising inflation combined with a strengthening post-pandemic economy gives both reason and opportunity for the Bank of Canada (BOC) to raise interest rates aggressively in 2022. The 0.25% increase to its benchmark overnight rate in early March likely went unnoticed by most of us. However, it could be that interest rates are 1% or even 2% higher by this time next year, and that would definitely not go unnoticed! Don’t forget that the BOC dropped rates by a whopping 1% in just a few weeks at the height of the pandemic in March of 2020.
 
One common point of misunderstanding about variable rate loans is their basis on the prime rate. The prime rate is currently 2.2% higher than the BOC overnight rate and is determined by the major banks. Although the rates are much different, the key takeaway is the prime rate moves in lockstep with any changes to the BOC rate, usually within a few days. 
 
Now that we have the background knowledge out of the way, just how will future BOC rate hikes affect your debt? 
 
1. Variable rate mortgages 
The percentage of Canadians holding a variable rate mortgage surged in 2021 and now stands at about 50%. Any rise in the BOC rate is met by an equal rise in variable rate mortgages, so the impact is almost immediate. If rates rise 1% over the next year, a $500K mortgage payment will increase by over $200 month. 
 
2. Home Equity Line of Credit (HELOC) 
HELOCs usually have a variable interest rate that will rise in conjunction with any BOC rate hikes. A $100,000 balance carried on your HELOC will cost you about $20 more each month for every 0.25% increase by the BOC, so you could easily be looking at an extra $100 monthly a year from now. 
 
3. Credit card debt 
Credit cards have fixed interest rates, and you would have to dig into your card-holder agreement to see the details of how the rate can be changed. However, credit card rates are already so astronomically high that it is unlikely you would even notice a 1% increase! Our advice is to attack any outstanding credit card balance ASAP. Paying the minimum each month is futile and only keeps your creditors at bay. It requires over 10 years of minimum payments to eliminate a $1000 balance (at 20%) and will cost you another $1000 in interest charges! 
 
4. Personal lines of credit 
There are fixed and variable rate options out there. If you selected the lower variable rate when you signed the agreement, expect to pay more going forward on any outstanding balance. 
 
5. Car loans 
Car loans can be either fixed, variable, or sometimes have a combination where they change to a variable rate after a few years. You will need to check your loan agreement for any variable interest portion to see if your payment is going up…. in addition to those skyrocketing gas prices! 
 
6. Student loans 
The default choice for Government of Canada student loans is variable interest "at prime" with a fixed rate option at "prime + 2%". The point is mute right now as interest charges are currently suspended, but variable rate student loan holders will see a significantly higher payment when interest charges resume in April of 2023.


The bad news is that you will likely be paying more interest as we move through 2022, but the silver lining is that you will become more aware of just how much your debt is costing you. Not all debt is bad, but the cost of your debt can vary greatly, so make sure you understand your interest expense and adjust your repayment priorities accordingly.

Feb 08, 2022

The worst financial mistake you can make is believing that Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA) are something to look into when you are a little older and more able to set some money aside. The fact is, you don't use these accounts for saving at all, you use them for investing. Your retirement fund could grow to seven figures, even if you only contribute a fraction of the allowable yearly maximums. They also come with huge tax-saving benefits.

A lot of people get discouraged by the sheer amount that you are allowed to contribute to these registered accounts and the mere pittance they may be able to come up with — don’t fall into that mindset!

If you make 60,000/year from your job, you could contribute over $10,000 to your RRSP and another $6000 to your TFSA every year. Considering you are only going to have about $45K in your jeans after taxes, finding a spare $16K would require almost 40% of your pay-packet!

The good news is that your yearly contribution limits can be carried over and as you grow older (and theoretically have more disposable income) you can catch up. The bad news is that playing catch up isn’t going to happen unless you are very disciplined with your spending. Sure, you may earn more, but you will spend more... kids, cars, a house, vacation — even the family cat is going to cost you $800 year and he may hang around for 20 years!

That extra disposable income you were envisioning may not materialize until you are in your mid 50’s — if ever! You need to scrape together whatever investment savings you can now; even saving just 5% ($200/month) of a $60K salary would make a huge impact.

Putting off getting started is going to cost you way more than you ever imagined in lost investment returns. Ignore the pitiful interest rates you see on bank savings accounts, holding cash will actually cost you money at current interest and inflation rates. However, the average annual return on many stock indexes (S&P, TSX, DSJ) over the past 40 years is around 9%. If you do a little math, you are soon going to realize that even on a relatively small investment of $200 month, the difference between starting when you are 18 versus starting at age 28 is jaw dropping.

Investing $200/month from age 18 to 65 at 9% would give you $1,504,471. The same $200 at the same rate from age 28 to 65 would yield just $620,102. Sure, you would be contributing $24,000 more over that extra 10 years, but your nest egg at 65 would be almost $1,000,000 higher — more than enough to keep you poolside at a nice resort in the tropics a few months every winter while those “late starters” are stuck in the snow.

There are plenty of rules, regulations and strategies to consider and as the March 1 RRSP contribution deadline looms, the media will examine and re-examine every TFSA vs RRSP angle and option known to man. You need to understand the basics of how they work, but the goal for the vast majority of us is simply to put something, anything into one (or both) of these accounts on a regular basis and start investing — you can’t go wrong!

Dec 13, 2021

If you are trying to get your financial life in shipshape, one of the first tasks you should be focusing on is how to improve your credit score. Your credit score is a measure of your demonstrated ability to pay your loan commitments and other bills in a timely manner. It is derived from a credit report issued by either TransUnion or Equifax and ranges between 300 and 900. The Canadian average is 650.

Credit scores of 700+ are considered "good" and offer a higher chance of loan approval, greater borrowing limits, and lower interest rates and insurance premiums. If you want to get one of those super-low advertised mortgage rates you are going to need a top-notch credit score. Potential interest savings are huge on big-ticket items; qualifying for a preferential rate on your mortgage could easily save you tens of thousands of dollars. Vehicle loans are another area where a good credit score can let you keep a lot more money in your jeans every month.

However, credit scores are used for a lot more these days than just whether you qualify for a loan. Insurance companies, potential employers, and landlords are just a few of the people that will often request your credit score and use it for decision making. Understanding how to improve your credit score and ensuring you have the highest score possible is going to open doors to many opportunities and save you money. For a great overview of your credit score “must know” information, take 3 minutes of your time and watch ”How Does Your Credit Score Work” on our YouTube channel.

Five factors that affect your credit score:

  • Length of credit history (15%) It takes time to build your credit score, so get a credit card when you turn 18, use it, and pay it off in full each month. A car loan or student loan will also help greatly — but only if you stay current with the payments!

  • Credit utilization (30%) If all your credit cards are maxed out, your credit utilization rate is 100% and it indicates to potential creditors that you are overextended. Try to keep your balance under 30% of your credit limit at all times.

  • Credit mix (10%) Using a mix of different types of credit will increase your score. When you are young the only credit available may be a credit card, but as you grow older adding a car loan, student loan, or line of credit to the mix will help improve your score.

  • Credit application frequency (10%) Applying for a lot of new credit in a short timeframe will negatively affect your score. Potential lenders do what is called a “hard pull” on your credit history when you apply. You want to avoid having a number of hard credit pulls in succession as it may look like you are desperately seeking more credit. Please be mindful of this if you want to get more credit cards or are rate shopping for a mortgage.

  • Payment history (35%) This is the largest determinant of your score and the most critical factor to manage. You need to always make the minimum payments and avoid anything ever getting to the “collections” stage – this includes parking tickets, mobile phone or other utility bills, student loans, and credit cards.

Credit scores are continuously evaluated and adjusted. If you have "errored" in the past, rest assured that the damage is not permanent! Your score can be raised/rebuilt over time by using credit responsibly, but it is much easier to avoid mistakes that lower your score in the first place.

Errors and omissions are not uncommon in credit reports and it is a good idea to confirm the details of your report. Both TransUnion and Equifax have a process to report mistakes and getting them corrected.

Monitoring your credit score regularly is a great financial habit that will allow you to track improvements, detect errors, and prevent identifying fraud. Please note that checking your own credit score is a "soft" inquiry and will not affect your score.

If you want to learn all the details about managing your credit score, make sure to check out How to Increase your Credit Score on the Enriched Academy YouTube Channel. Alanna Abramsky, our head of financial coaching and resident credit score expert, has packed everything you need to know into an easy-to-understand, informative session.

Nov 24, 2021

You don’t need a money coach or financial advisor to learn the basics of how to start saving money, Financial Literacy Month is all about educating yourself. This 3-minute DIY workout will help build your financial fitness and steer you around eight of the most common pitfalls we see every day.

  1. Spending too much on a car.
    You should be aiming for 15% of your take-home pay for the car payment, insurance and gas. The monthly operating costs of a brand-new Hyundai Santa Fe (base-model $33,284 at 3.19%) would be minimum $800 month for 84 months. You would need to take home over $5K/month after tax ($90 to $100K in salary) to “afford” one. Slightly used cars are still very reliable and offer a lot more value.
     
  2. Investing before paying off debt.
    Make sure you pay off the right debts first! If your only debt is a mortgage at 3%, relax and go ahead and invest. Any loans or lines of credit up around 7% or higher (credit cards are around 20%) should be on your hit list before you even think about investing.
     
  3. Spending more than you have.
    It hurts to write something so obvious, but how can something so simple in theory be so difficult in practice? Too many “wants” is the root cause, but easy credit (not cheap, just easy!) and failure to track your spending and see just how big a hole you are digging every month with that credit card debt facilitates this downward spiral.
     
  4. Putting off saving, investing and retirement planning.
    Maxing out your TFSA ($6000 year deposited to an index ETF) from the time you are in your early twenties to when you retire at 65 could easily make you a millionaire. Never underestimate the power of compound interest when it is working for you! And don’t forget, the TFSA and RRSP also offer huge tax sheltering benefits on top of the compound interest!
     
  5. Not understanding your student loan agreement.
    Many students are not fully aware of their loan details and mistakenly assume their interest rate will be low. They also underestimate the future monthly payment and how long it will take to completely pay off student loans. Repayment of student loans will put a bigger dent in post-graduation lifestyle than most students ever imagine! Education has great value, just make sure you do the math, confirm that value, and know what to expect down the road.
     
  6. Not creating and using a workable, realistic household budget.
    Have you ever failed at budgeting? Of course you have, everyone does! The problem is not budgeting itself, it’s your process for creating a budget and your system for tracking household expenses. Relying on guesswork and not your actual spending, ignoring an emergency fund, not leaving any "wiggle room", too time-consuming – these are all fatal flaws for a budget.
     
  7. Getting caught up in "lifestyle creep".
    “The more you make, the more you spend”. It’s an old saying that rings true for most of us, but why not enjoy the fruits of your hard work? How much of your cash you can afford to use for enjoyment depends on your situation and you need to constantly re-assess your lifestyle. If you were just getting by before (and not saving for retirement) and get a $500 a month raise – do you get a shiny new car or a TFSA?
     
  8. Failure to build credit and ignoring your credit score.
    Completely eschewing credit will keep you debt-free, but do nothing for your credit score. And make no mistake, a good credit score will save you a ton of money over the course of your life! You can easily learn how to improve your credit score — simply using your credit card and paying it off in full every month; or financing a car (IF the dealer offers a great rate) are two ways to send your score soaring.

If these tips sound familiar, your financial literacy may be better than you think, or maybe you have been attending our free webinars? We offer great webinars on all sorts of topics and there isn’t a better way to improve your financial literacy with so little time. We do the research, present the facts, answer your questions, and get you motivated to act – all in 60 minutes!

Why not subscribe to our Financial Friday newsletter— you get all the details on our upcoming webinars, and it’s also crammed with practical, need-to-know personal finance facts, tips and advice.

Oct 04, 2021

We scrimp and save to fund our RRSP and TFSA contributions and meet the goals of our retirement plan, so why is it that so few of us really understand the fees we are paying on our investments? Despite increased transparency and fee disclosure, many investors remain in the dark about fees and how much of a bite they take out of long-term returns.

It’s only 2%, that’s just a couple of bucks out of a hundred!”

When it comes to investment fees, you are about to see these are very costly words!

Assume you are 25 years old and maximize your 2021 annual TFSA contribution limit of $6000. You are busy and don’t know much about investing, so you stop by your local bank and they recommend one of their “top-performing” mutual funds.

The bank gives you a glossy brochure highlighting the fund managers vast experience and dutifully informs you of the “management expense ratio” (MER) built into the fund. This 2.35% annual fee seems reasonable to you. Everybody has to get paid and you tip a restaurant server 15%, so this is a relative bargain! No one does any math; the whole matter is soon forgotten and becomes routine. In fact, you barely notice this built-in fee on your annual statement.

Fast forward 35 years and you are now 60 years old and ready for retirement. Your $6000 in that “top- performing” mutual fund has returned 5% annually (before fees) and grown into the tidy sum of $14,987.

Unfortunately, your lack of financial knowledge meant that you had no idea of an alternative investment; something called an index ETF. Buying an index ETF is dead easy and you could have done it yourself with an online brokerage account. Your annual fee would have been much lower at around 0.35%.

If we re-do the math with the same parameters ($6K for 35 years at 5%) and use a 0.35% annual fee, you can see that your investment in an index ETF would have grown into the much tidier sum of $29,446!

Doing some much simpler math ($29,446 minus $14,987) reveals that your retirement fund is $14,459 lower than what it could have been – half of your total gain has disappeared with that little 2.35% fee!

But wait…. How can a mostly set-and-forget index fund return the same as a highly managed “top performing” mutual fund? The answer is that index funds often match or outperform “managed funds” with much higher fees regardless of whether the market is stable or volatile. In our example, the mutual fund would have had to beat the index fund by at least 2% every year in order to return the same amount.

You can always find exceptions and some managed funds may have success over a couple of years. However, very few are consistently able to beat the returns of the index over the long term. When you factor in their low cost and ease of maintenance, the decision to rely heavily on index ETFs is a no-brainer for most investors.

Canadian DIY investment guru Larry Bates has created this online calculator to instantly show how fees can cut into your investment returns.

Our passion at Enriched Academy is to inspire everyone to improve their financial literacy and take control of managing their money. In this example, a little financial education would have done wonders for your retirement planning. The same can be said for many aspects of personal finance – saving, budgeting, passive income generation – so make sure to get the financial knowledge you need to make the right choices for today as well as build your plan for a secure financial future.

Nov 06, 2019

People. Let me get real with you for a second. Tax season is upon us, and there is this magical unicorn of an account in Canada called an RRSP (Registered Retirement Savings Plan). It will help you reduce the amount of tax that you owe the government, and/or increase your tax return. Interested? I thought you'd be! I just maxed out my RRSP before the March 1, 2018, deadline. So get on it, open your account, and start contributing!

"BUT ALANNA, I DON'T KNOW WHAT AN RRSP IS?"
Funny you should say that out loud! I had an infographic created last year about the RRSP. Note that the date on the infographic is for 2017 and this years' deadline is March 1, 2018!) And if you're like, "Alanna, I don't want to look at this cool and helpful infographic you had made for your readers", then read on Donkey Kong.

What is an RRSP and why should I have one?
A registered retirement savings plan is an account that will help you save for a happy and financially stress-free retirement. Want to live on a boat in the middle of the ocean, scuba diving all day, surrounded by Great White Sharks? Yes. Please. Mountain climb in the middle of Vancouver Island feeding freshly caught salmon to Grizzly bears every day? Fuck, yes - who wouldn't? The RRSP will help you achieve your dream retirement, but you need to start right NOW. There are two main reasons why:
1. The money that you contribute to your RRSP is deductible from your taxable income.
Um.... what?
Example time! Say you made $40,000 in 2017, and contribute $3000 to your RRSP. When it comes time to file your taxes, you can claim that $3,000 contribution as a deduction and can calculate your income as if you’ve made $37,000. This will likely put you in a lower tax bracket, saving you money and/or increasing your tax return. Cool, huh?
Yes. Yes, it is cool.
2. The savings in your RRSP are able to grow tax-free. Within your RRSP you can invest in stocks, mutual funds, ETF's, bonds, and other investments. If you make profits from these investments, they are not taxable until you withdraw the funds, which ideally occurs when you retire. And when you retire and have very little income, you will be in a lower tax bracket than you are now (hopefully), and will have to pay less tax on your withdrawals. Kapeesh?
YAS QUEEN.
sweet BOULDER HOLDERS. how do I start?
You can set up a managed RRSP through a Robo-Advisor like Wealthsimple (which helps to reduce your MER fees, rebalance your portfolio, and is just all around awesome), or you can open one up through your bank, credit union, trust, or insurance company. You can also have your RRSP self-directed, and manage it all on your own (that's what I do!) However, if you'd like to go that route, I'd suggest contacting me for more information on how to do this.
I'm sold! But I need some more facts.

• If you work and file an income tax return, are under 71 years old, and have a social insurance number, you should definitely consider opening up an RRSP. • Your RRSP contribution room changes every year, and is calculated based on the following: ◦ 18% of your earned income from the previous year, with a maximum of $26,230 for the 2017 tax year;
◦ Whatever remaining amount is available after any company contributes to your RRSP. If your company contributes 10% of your earned income from the previous year, you can only contribute the remaining 8%.
• You can withdraw up to $25,000 for a down payment on your first home, and not pay any tax under the Home Buyer’s Plan. However, you have up to 15 years to repay the full amount back into your RRSP. • Wanna go back and hit the books? You can withdraw up to $10,000/year, or up to $20,000 in total to help pay for your education using the Lifelong Learning Plan. All you have to do is repay at least 10%/year for up to ten years.
• It isn’t mandatory that you deduct your RRSP contribution on your tax return in the same year that you made the contribution. You can hold off and deduct it in a future year if you think you will be making more money down the road. So, if you have room in your RRSP and just want it generating some kind of income through an investment, you can just leave it in your RRSP and let that shit grow. Yay compound interest!
• You can set up a spousal/common-law RRSP, which you can contribute to, but your common-law partner/spouse owns. This reduces their taxable income with your help.

RRSP vs TFSA - CONCLUSION
The RRSP and TFSA are great accounts for all Canadians and you should definitely consider opening up one or both of them, and start contributing ASAP. Depending on your financial situation and short/long-term goals, one account may be more beneficial than the other. If you are only making $25,000/year and are in a low tax bracket, you'd probably be better off with a TFSA. But let’s say you get a raise and go from making $25,000/year to $60,000/year, it would probably be worth contributing to your RRSP to put yourself into a lower tax bracket, saving you some money at the end of the year.

So there you have it! Everything you needed to know about the RRSP. If you're still hella confused and need some more guidance, please contact me! I've helped over 100 millennials and Gen-Y'ers figure out what's best for them and how to get started - and I can help you too!

Nov 06, 2019

This is the day that Canadians fell in love with Enriched Academy!

Financial Wellness for Staff

Your team's health and wellness is critical to your business success. Learn how financial health has a significant impact on employee wellness and your company's bottom line.

Financial Wellness for Staff

Your team's health and wellness is critical to your business success. Learn how financial health has a significant impact on employee wellness and your company's bottom line.

Jun 27, 2022

There are volumes of information out there explaining every aspect of Tax-Free Savings Accounts (TFSAs) and Registered Retirement Savings Plans (RRSPs). Articles on how to optimize your contributions to each based on your tax bracket and expected future earnings, details of the TFSA over contribution rules and penalties, why the age of 71 is a big deal for your RRSP…. and plenty more.

We like getting the facts, but this information overload isn’t much help if you are simply wondering, “what is an RRSP account?” or “what does tax-free saving really mean?”. The mountain of details available is not only confusing, it may also discourage you from investigating more — and that would be a huge mistake!

Everyone should be aware of three things about RRSPs and TFSAs:

1. They are free to open and it’s not difficult to get one.

2. The TFSA age limit is 18, but there is no minimum age for an RRSP.

3. The younger you start, the more money you are going to make.

The biggest RRSP/TFSA mistake is procrastination; it has nothing to do with the minutiae of the TFSA rules or which investment fund is best for your RRSP. Do not put off getting your TFSA and/or RRSP until you are “older” and/or “have more money” — and don’t think these accounts are just for your retirement fund. You will definitely get older, but having “more” money is a pretty vague goal and that situation many never materialize. Keep reading this article to learn the essential facts, but make sure you put your newfound knowledge into action.

While TFSA and RRSP both have "savings" in their name, they are actually designed for investing your money, not saving cash.

After you put money into a TFSA or RRSP, you should be investing it, not just letting the cash sit there. Inflation will eat away at your cash pile over the years, so you need to invest to fight back against inflation and grow your retirement investments. Fortunately, you have a lot of options for investing your money.

Most Canadians invest the money in their TFSA and RRSP in some type of funds (mutual funds or exchange-traded funds) as part of their retirement savings plan. These funds are basically a basket of different stocks, bonds, and other financial instruments — there are thousands of funds available. Some are broad-based and include many companies across multiple industries, while others focus on a particular industry or region. The risk varies greatly from one fund to the next and you will need to factor your risk tolerance into the funds you choose.

Funds are professionally managed and you need to be wary of the built-in management fee (called an MER), but they make it easy for anyone to get invested. You don’t have to pick individual stocks and you don’t need anyone to help you if you want to do it yourself. Many Canadians handle their own investments and there are number of online options to self-manage the funds you hold in your TFSA or RRSP. There are also "all-in-one funds" with varying degrees of risk that are very convenient for beginning investors. There is even a fully automated online option called a robo-advisor that continuously adjusts the funds you hold to match your financial situation and goals — all you have to do is deposit the money!

While you don’t need a financial advisor to choose investments that are right for you, you are responsible for learning the basics of investing and making sure you understand the risks involved, regardless of whether you do it yourself or seek professional advice.

No one should be discouraged from opening a TFSA and/or RRSP because they only have a "little bit" to spare, and it wouldn’t seem to make much difference.

The first argument against this belief is that building a savings habit requires the right mindset and is a skill you need to practice. No one is born with a genetic predisposition to savings. You may be influenced as a child by the savings habits (or lack of) from those around you, but getting into the habit early will get you started down a very long, profitable road due to the wonders of something called ‘compound returns’.

Investing $200/month from age 18 to 65 at a 7% return (compounded for 47 years) in your TFSA would give you $790,139 tax-free at retirement. The same $200 invested with the same 7% return from age 28 to 65 (compounded for 37 years) would yield just $384,810. Sure, you would be contributing $24,000 more over those extra 10 years, but your nest egg when you retired would be almost double.

A lot of young people get discouraged by the sheer amount you are allowed to contribute — and for good reason! If you make $60,000/year, your annual contribution maximums are $6000 for your TFSA and around $10,800 for your RSSP. That’s $16,800; a pretty big chunk of your take home pay! The good news is that your yearly contribution limits can be carried over and as you grow older (and theoretically have more disposable income) you can catch up.

There is no need to choose between and RRSP or TFSA.

As your financial situation grows and changes you can definitely benefit from having both. The main reason is that the timing and impact of the income tax benefits is very different.

In short, you delay paying tax by putting money into your RRSP. When you fill out your tax return, you get to deduct the money you put into your RRSP from income — and that will result in a very noticeable reduction of your income taxes for that year. The higher your tax rate, the more you will save! However, before you go out and spend these tax savings, make a mental note that you are only delaying or deferring that tax to later in life.

Your RRSP should grow substantially over time if you are invested. However, you need to make sure your retirement budget reflects the fact that any money you plan to take out of your RRSP down the road is fully taxable in the year it is withdrawn. The primary advantage is that if you are retired, your income and associated tax rate could be substantially lower than when you were working. This will reduce the impact of taxes, but only to some degree! A lot of retirement advice focuses on maxing out your RRSP, but this could create a hefty tax bill if your retirement income is high.

If you had put the cash into a TFSA instead of an RRSP and invested it the same way, you would have the same amount of money, but you would be able to take it out and spend it tax free. You would have received no reduction in your taxes when you put the money into your TFSA, but you don’t have to pay tax on that money when you take it out of your TFSA.

An RRSP will put more money in your jeans today than a TFSA because of those immediate tax savings, but the opportunity to invest and grow tax-free money for the future in your TFSA is also very attractive. There are lots of other considerations (flexibility of withdrawals & your tax rate for example), but we will leave that debate for another article, just get one, or both accounts, and get started!

It is relatively easy to get started. The TFSA age limit is 18 but there is no minimum age to open an RRSP.

Both accounts require a social insurance number to open. You can open them in-person or online at most banks, credit unions and investment brokers. There are no fees to open one, although some institutions require a minimum balance. Both the TFSA and RRSP are a type of "registered account" and are not used for daily banking. They differ from your savings or chequing account because the cash flowing in and out is tracked to make sure you follow the rules and the tax implications can be managed.

You can put funds into an RRSP and TFSA anytime throughout the year, but there are annual limits.

For a TFSA, the amount is the same for every Canadian regardless of their income. For 2022, the maximum contribution limit is $6000. For an RRSP, you can put away up to 18% of your income up to a maximum of around $28,000.

If that sounds like way more than you can spare, the good news is that you can carryover unused contributions and catch up later. In fact, if you are over 18 and are just now eyeing your first RRSP or TFSA, you already have unused TFSA contribution room available. You may also have some RRSP contribution room as well depending on your income. You can confirm these amounts on your most recent income tax assessment. Just remember that catching up on contributions will be harder than you think and as we already mentioned, your nest egg will have less time to grow.

Although you can contribute funds anytime during the year, there are some deadlines for tax purposes. For an RRSP, you need to get the money deposited (not invested!) by the end of February in order to claim a RRSP deduction on your taxes for the preceding year. If you miss the deadline (even by a day) you will have to wait until next year to reduce your taxes. For a TFSA, the official deadline is December 31, but since the contribution limit can be used in any subsequent year and there is no tax deduction, there really is no deadline. There are also penalties for overcontributing to either your TFSA or RRSP, so make sure you understand the rules.

Even if you are not forgetful, it is a great idea to set up your bank account to automatically transfer a fixed sum every payday into your TFSA and RRSP. You can’t spend what you can’t see, and it will force you to save. You also won’t have to run around like a lunatic every year trying to find the cash and meet the contribution deadline.

The last thing to know is that TFSAs and RRSPs are not just for saving for retirement.

You can use your RRSP to save up cash for a down payment on a home and then "borrow" up to $35,000 ($70,000 for a couple) from your RRSP to purchase the home under the Home Buyers’ Plan. You do have to repay the borrowed funds over a period of years, but you do not have to pay tax when you withdraw the funds.

TFSAs offer even more flexibility with no tax due on withdrawals and you get to keep your contribution room. If you don’t know how much to save for retirement, maxing out your TFSA every year is a good place to start. If your plans change and you need that money before retirement, it is available. You do have to wait one year before you can replace any of the funds you took out so be careful, there are penalties if you run afoul of the rules!

There is a lot more that can be said about TFSAs and RRSPs but the short story is, if you don’t have one, you are seriously missing out. It’s time to get moving!

Apr 19, 2022

Financial literacy has many different aspects and most of what we teach focuses on methods and strategies to either generate more income, or better manage and control our expenses. A third area which doesn’t always get the attention it requires is protecting our financial assets and income streams against unforeseen circumstances.

Insurance is the primary tool to help us in this regard, but the details are often overlooked and many of us take it for granted that we are sufficiently protected in the case of an emergency. Reading an insurance policy is not for the uninitiated and most of us would struggle to understand one even if we made the effort.

Insurance can be complicated due to the many types and variations available as well as plenty of confusing jargon to go along with it. The appropriate amount of coverage required can also be difficult to determine. Most of us are familiar with car insurance and understand the coverage we have, but that certainly isn’t always the case, especially when it comes to life or disability insurance.

A survey from online insurance specialists Policy Me found that only 33% of parents with children under 18 had term life insurance. This was quite a surprising result given term life insurance is the most cost-effective means of protecting your family. The survey also showed that many parents rely solely on employer-provided insurance benefits that can be expensive and may not provide sufficient coverage in the case of an emergency.

In addition to holding permanent (universal/whole life) insurance instead of term life insurance, other common misbeliefs are centered around mortgage life insurance and holding life insurance on your children. Mortgage life insurance actually pays off directly your creditors and not to your family, so term-life insurance would allow more flexibility for your family and may also be cheaper for the equivalent coverage.

Insuring your children with some sort or permanent life plan is often pitched as a way to save for their future, but the reality is that these plans are expensive and there are more cost effective alternatives for anyone looking to create a nest egg for their child’s future.

Your home is your biggest asset and there are also a few insurance caveats there to be aware of. Most homes insurance policies now use Guaranteed Replacement Cost. This is the amount required to rebuild your home as it was, on the same site — not the market value of your home. Make sure you have replacement cost insurance and let your provider know if you have done anything that would significantly increase you rebuild cost.

Fire is the primary threat for most homes, but we are seeing more and more flooding these days as weather patterns change and covering your home against water damage — whether it is overland (surface flooding) or from a backed-up sewer — has become an issue. Cost, availability, and pricing will vary but you should inquire if flooding is a possibility in your area.

One final caveat with home insurance is making sure you are covered if you rent your home (or part of it) regardless of whether it is long-term or short-term (like Airbnb). Talk to you agent and let them know the details of your rental situation so they can adjust your coverage accordingly.

You most likely have a lot more types of insurance than we could cover in this article, but the key takeaway is simply to be knowledgeable about your insurance products — they play a key role in wealth management. Make sure you confirm the details of your employer benefits like life and disability insurance and call your agent with any questions about the details of your home or car insurance. You will get peace of mind knowing there won’t be any surprises when you least need a surprise, and you might even save yourself some money.