DiscoveryFinance.Com » Tax Free Savings Account (TFSA)

My Networth: August 2009

Ryan A. Smith — Mon, 31 Aug 2009 04:21:44 +0000

Am I excited to calculate my networth again, since last month’s financial statement?

No!

I don’t think it will get better. As you can see, my income tax and CPP tax combined are already $52,000 as of today (not even counting the income for Sept to Dec). Is this normal??? [Compare to the national average.]

Overall

Assets: +8.5% (down from +11%)
Liabilities: +8.7% (up from +2%)
Equity: +8.4% (down from +19%)

Goals Accomplished To Date

1. My max RRSP contribution for year 2009 is reached.
2. Set aside $5000 for year 2010 TFSA.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 4 month
Time remaining: 4 years 8 months

Assets	$161,400
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA Year 2009	$5,000
TFSA Year 2010	$5,000
High Interest Savings	$89,400
Cash	$2,300
Car Worth (minus 30% depreciation rate for year 2008 & 2009)	$19,100

Liabilities	($74,800)
Income Tax & CPP Tax (estimated for tax year 2009)	($52,000)
Car Loan	($22,800)

Equity
Networth	$86,600

Others (not included above)
Money to parents each month	$5,000

What Others Are Reading…

My Networth: July 2009

Ryan A. Smith — Fri, 31 Jul 2009 05:00:06 +0000

I got my cheque for July. After finishing my accounting, the result does NOT look very good.

Overall

Assets: +11% (down from +21% )
Liabilities: +2% (up from -1% )
Equity: +19% (down from +55% )

Being single is so hard. Aside from loneliness, it takes too long to build weath by myself. I only have one-person work force; I only have 24 hours at maximum. In contrast, married couples can have as high as 48 working hours per day in combined.

In addition, being single is not tax-friendly. I cannot claim income splitting, spouse amount, dependent amount, “pooled” medical expenses, and several other tax advantages geared toward couples and families. Even though I give $5000 to my parents each month, I’m not eligible to claim caregiver amount because I don’t live with them.

Worst comes worst. Starting this month, my income tax will increase monthly, depending on my income. By the end of this July, I already have to pay $45,200 income tax!!! That’s 3x the average household income tax!!! See this article to find out why my income tax is 3x as high. This is insane!!! I’m not very happy today.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 3 month
Time remaining: 4 years 9 months

Assets	$148,700
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA Year 2009	$5,000
TFSA Year 2010	$1,000
High Interest Savings	$80,300
Cash	$2,700
Car Worth (minus 30% depreciation rate for year 2008 & 2009)	$19,100

Liabilities	($68,800)
Income Tax & CPP Tax (estimated for tax year 2009)	($45,200)
Car Loan	($23,600)

Equity
Networth	$79,900

What Others Are Reading…

RBC VISA TFSA Reward – is this cashback feature worth your points?

Ryan A. Smith — Sun, 05 Jul 2009 07:36:32 +0000

Last month, when I received my RBC VISA card monthly statement, I saw an advertisement about redemption of RBC Rewards points toward TFSA. Seems very interesting, but is it worth a try? I decide to take a close look.

Here is the advertisement:

RBC Rewards points can now be redeemed toward your Tax-Free Savings Account (TFSA). Redemptions start with a minimum of 12,000 points for a $100 RBC Registered Rewards voucher. For each additional 3,000 points you redeem, you will receive an extra $25 in vouchers. Not only do investment earnings grow within the TFSA tax-free, there are multiple investment options and no tax when you withdraw your funds. Visit www.rbcrewards.com/tfsa to redeem and start saving today.

Now let’s consider each of the RBC VISA cards that offer RBC Rewards points.

RBC VISA cards with annual fees

Earn 1 RBC Rewards point for every $1 spent.
Annual fee ranges from $15 to $120: Visa Classic II Student $15, Visa Classic II $35, Visa Gold Preferred $110, and Visa Platinum Avion $120.
Cashback Analysis: To receive $100 TFSA, you have to spend $12,000 on your VISA card. This gives you a cashback rate of 0.83%. This cashback rate will be even lower if you consider the annual fee you have to pay; eg, 0.71% cashback rate for Visa Classic II Student, and -0.17% cashback rate for Visa Platinum Avion (please note it’s minus! ).

RBC VISA cards with no annual fees

Earn 1 RBC Rewards point for every $2 spent.
Annual fee $0: RBC Rewards Visa Gold and RBC Rewards Visa Classic.
Cashback Analysis: To receive $100 TFSA, you have to spend $24,000 on your VISA card. This gives you a cashback rate of 0.42%.

Conclusion

Whether RBC cards have annual fees or not, the cashback rate of return is very low, compared to other Top Cash Back Credit Cards. Therefore, you might consider using the points for other things.

What Others Are Reading…

My Networth: June 2009

Ryan A. Smith — Tue, 30 Jun 2009 22:25:52 +0000

I just got my cheque today. Let’s see what’s been changed during the month June.

Overall

Assets: +21%
Liabilities: -1%
Equity: +55%

In terms of assets, I’ve contributed my maximum RRSP limit for year 2009 which is $21,000. As such, I put the remaining money in high interest savings accounts. I don’t have any plan yet to invest in mutual funds and/or stocks, because I need to save some “liquid” cash for the down payment of my first home. I figure the first home will probably cost me around $300k-$400k range.

I still need to set aside $5000 for TFSA for year 2010—six more months to work on that. And of course, $5000 for my parents which I give every month and have deducted in the cash portion.

Financial Statement

Financial goal: first million networth in 7 years
Time lapse: 2 years 2 month
Time remaining: 4 years 10 months

Assets	$134,500
RRSP (mainly GICs)	$19,600
RRSP for First HBP	$21,000
TFSA	$5,000
High Interest Savings	$68,200
Cash	$1,600
Car minus 30% depreciation rate for year 2008 & 2009	$19,100

Liabilities	($67,600)
Income Tax & CPP Tax(estimated for tax year 2009)	($43,200)
Car Loan	($24,400)

Equity
Networth	$66,900

What Others Are Reading…

RRSP – Maximize Your Retirement Savings

Ryan A. Smith — Fri, 12 Jun 2009 01:23:08 +0000

What’s an RRSP

Registered Retirement Savings Plan is a retirement plan that you or your spouse or common-law partner establish and contribute to. RRSP contributions are tax-deductible;ie, it can be used to reduce your income tax.

RRSP vs CPP

Why should I invest in RRSP when I can get CPP (Canada Pension Plan) benefit at retirement?
Reason: CPP – small plan, big potential?!

RRSP vs TFSA

What are the differences between RRSP and TFSA (Tax-Free Savings Account)?
See this article: RRSP vs TFSA.

RRSP vs IPP

For anyone who has reached their annual RRSP maximum limit and would like to attain more tax-deductible retirement savings than what their RRSP can offer, it is POSSIBLE with IPP option which allows an even more attractive contribution room than RRSP does!
See this article: IPP – Supersize Your Retirement Savings.

RRSP Contribution Deadlines

March 1 of the following year is the deadline for contributing to an RRSP for the current tax year; eg, March 1, 2010, is the deadline for 2009 tax year.

December 31 of the year you turn 71 is the last day that you can contribute to your RRSP.

How does the Government Calculate My RRSP Contribution Room?

It’s based on your “earned income,” not Total Income (line 150), Net Income (line 236), Taxable Income (line 260), or Gross Income.
See this article: How to Calculate RRSP Contribution Room.

How Much Do Others Contribute To Their RRSPs?

See this article: RRSP – national average annual contribution.

What Types of Investments is Better for RRSP?

RRSP is a registered plan; ie, the income earned is tax-deferred till you withdraw the fund during your retirement when your income will be in the lower tax bracket. Because of this, it is better to place RRSP in the investments that generate interest income which can be taxed as high as 45%, according to your tax bracket of that year.

In contrast, although investment earnings outside a registered plan are taxable, you can reduce the tax on investment income by focusing on investments that generate primarily dividends and capital gains, which are taxed less heavily than interest income. The tax on dividends and capital gains is usually around 25%.

What Can You Do With Your RRSP Fund?

Home Buyer’s Plan (HBP): Withdrawing your RRSP funds to buy or build a qualified home.
Lifelong Learning Plan (LLP): Withdrawing your RRSP funds for continuing education or retraining.
Registered Retirement Income Fund (RRIF): Transferring your RRSP funds to RRIF when you turn 71.