Top Ten Ways To Achieve Financial Security
Thousands of Canadians have learned a painful lesson during the recent economic downturn – they've been living beyond their means.
1. Understand what real wealth means.
It's what's left after debt, taxes, inflation and costs. It's the money you need for your life now -- and in the future. To get more of it, you need to understand the value of every dollar spent and saved.
2. Get started – even if you're not in great financial shape.
The sooner you start, the better your chances of growing your pot of gold. Record your assets and debts, income and expenses. You need to know where your money is going. Until you do, you won't be able to build real wealth.
3. Don't build your lifestyle with debt.
Many Canadians have fallen into the trap of using too much credit. By not paying off their credit card balances each month, they're incurring large, non-deductible interest expense. That works against the accumulation of real wealth.
4. Use your income wisely.
Employ it to acquire assets that will help build, not erode, your real wealth – after debt, taxes, costs and after inflation.
5. Don't go it alone.
A team comprised of a financial planner, insurance specialist, accountant and lawyer may be required in various life stages – and can bring value that will really pay off.
6. Protect your wealth.
Insurance isn't just an expense. It can protect the assets you've acquired and are growing. Fully understanding the insurance products you're buying is a key to achieving your financial goals.
7. Minimize your taxes.
Simple strategies can save a lot of income taxes. You have the right to arrange your affairs to pay the least amount of tax the law will allow. Various products and income streams can all be taxed differently – and will either be better or worse for your financial situation.
8. Pay attention to inflation.
Increasingly, Canadians are living as long in retirement as they worked. It's important that our retirement income increases to overcome inflation or that we have enough financial assets to draw upon. Inflation erodes future purchasing power.
9. Ensure you get value for your money.
All products, including financial products, cost money. Their prices vary, as do the ways of paying for them. Don't be afraid to ask what something costs – and what you're getting in return.
10. Know what will bring you financial peace of mind.
Know what's important for you to achieve financial peace of mind and access the people, products and processes that can help you attain it. Remember that it's always okay to ask for help.
TFSA News The Canada Revenue Agency and its political masters are in a forgiving mood toward at least some of the holders of tax-free savings accounts (TFSA) who face stiff penalties for exceeding the annual contribution limit.
About 70,000 individual taxpayers are currently under review by the CRA for their 2009 TFSA activity. They received letters in early June from the tax agency, asking them to provide details about their contributions and withdrawals. The penalty for excess contributions is 1% of the highest excess amount in the month, payable for each month you are in an excess-contribution position. Under the TFSA rules, you're allowed to make withdrawals at any time, and you won't permanently lose any contribution room by doing so, since you can re-deposit the amount in future years. Many individuals ran afoul of the rules, however, by withdrawing funds and then putting them back in the same year. Under the TFSA rules, withdrawals made in one year cannot be added back to your TFSA contribution room until the beginning of the following year. In response to an outcry from taxpayers who didn't realize that they'd broken the TFSA rules, the federal government confirmed that it won't be enforcing the letter of the law.
Originally, the CRA gave the 70,000 individuals it contacted a June 30 deadline to reply to its request for more information. On June 25, the federal government extended that deadline to Aug. 3. More importantly, Ottawa acknowledged that there has been "some genuine confusion" about the TFSA rules. It served notice that taxes on excess contributions made in 2009, the first year of the program, may be waived on a case-by-case basis. "We understand that it may take time for some Canadians to learn about the program and for some financial institutions to properly inform their clients about this product," the government said in the June 25 statement issued jointly by Finance Minister Jim Flaherty and National Revenue Minister Keith Ashfield. The ministers said the government has decided to "be as flexible as possible in cases where a genuine misunderstanding of the TFSA contribution rules occurred." In line for relief from penalties are individuals whose gross contributions in 2009 exceeded the allowable $5,000 limit, but whose net contributions during the year did not exceed $5,000.
As examples of circumstances under which penalties may be waived, the government cited contributors who used their TFSA as a "regular banking account," making frequent deposits and withdrawals, or who transferred funds between TFSAs at different institutions Individuals who are penalized and who disagree with the CRA's assessment are permitted to file a notice of objection. The deadline for doing so is one year after the revised Aug. 3 due date for the TFSA return. Only the small minority of taxpayers whose TFSAs are under review are required to complete a TFSA return. Ottawa's review of over contributions affects less than 2% of the nearly 4.7 million Canadians who hold TFSAs