Category: Creditaid Blog

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Making Plans for Your Tax Refund?

There are so many things that you can do with a tax refund. It is not a lottery windfall, it is money that you worked hard for and you deserve to get the most out of it. It is understandable that you may want to spend it on lavish gifts for yourself and family. Alternatively, you can make your tax refund work for you, which will lead to much more financial security in the long term.

Reduce Debt
A tax refund can help you significantly reduce your debts. By paying off the debts that have the highest interest rate first, you are effectively adding to your monthly income. In the long run, paying off debts will save you more money than you received in your tax refund, too, so it is definitely an option for consideration.

Expand Your Portfolio
Look at your investment options, and see if your tax refund can help to expand your portfolio. You can also use your tax refund for future investments, which will help you to ensure a financially secure retirement. By investing your tax refunds in this way your portfolio is more likely to grow and generate more income for your future.

Pay Insurance Premiums
With so many different types of insurance to pay during a lifetime, most people find that their budget cannot stretch to the cover what they want. However, by saving your tax refund each year towards insurance, you can afford to protect your home, car and family should any unexpected issues arise.

Personal Reward
Finally, do make sure to reward yourself, too. Although it makes sense to invest the bulk of your tax refund, you should keep a little bit back for yourself. Reserve at least 10% of your tax refund to treat you and your family. Doing so will actually help you save and budget each month, as it won’t seem like you are saving every penny for a future that feels extremely far off.

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Ways to Downsize During Retirement


Downsizing during retirement, for many of us, isn’t so much of option as a necessity. Reasons for downsizing are not always financial, either; mobility and convenience also factor into the decision. Living within your means doesn’t have to be a struggle. In fact, being frugal with your money, time and energy will enhance your life during retirement. By working smart, there are a lot of cross over benefits from downsizing, too, so it is important to consider how every decision impacts on the rest of your lifestyle.

Home and Community

The size of home you live in and where it is located can determine how well you are set up financially for your retirement. Retirees can save around 25% on their
mortgage with a smaller property in a more affordable area, and greatly reduce tax and insurance payments, too. A smaller property also means less upkeep; saving precious time and energy for doing the things that you actually enjoy.

Transport

Although most retirees opt to keep their car, at the very least, do consider downsizing to a more cost efficient model. An area with reliable public transport or convenient facilities within walking distance is another option to reduce travel costs, for retirees who do decide to get rid of their car altogether.

Garage Sale

A garage or lawn sale will take care of a lot of unwanted possessions; including items such as paintings, small to medium furnishings and electronics. If you are selling a car, this is also a great way to draw attention from perspective buyers.

Donating

Donating to local charities or free recycling services is the quickest and most efficient way to de-clutter. Charities will take clothes, furniture and some electronics. A recycle service will take damaged furniture, clothes, electronics and other materials. Check with your local charities first, so that they can benefit from any items you can give them.

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Prepare Your Retirement Budget


There is no hard and fast rule for when you can begin preparing for your retirement. However, it makes sense to start preparations sooner rather than later. Keep in mind that, on average, retirees spend the equivalent of 70 to 80 percent of their work-life salary per year; all of which is income that you must start generating before retirement.

Saving and investments are the two main ways to generate an income for retirement. You could work overtime or take a second job to earn the initial money you will need for investments. Or, when buying your home, consider it as an investment that you can use to fund your retirement in the future. Your investments in your formative years will pay off in the long run, too, so make sure that you keep that in mind with every major purchase.

The bottom line is, if you want to live the good life when you retire, you are going to have to make some smart investments. Of course, if it was that easy, everyone would be doing it. Before you start investing in every plan that promises to deliver huge pay-outs, speak to a professional advisor that you trust.

Invest in a Registered Retirement Savings Plan (RRSP) as early as possible. If you are going to invest in equity and stocks, do so earlier in life so that you can make your money and quit while you are ahead. Remember, this is about securing a comfortable future in your retirement years. While not the greatest investment option for a return, Guaranteed Investment Certificates (GICs), is a good place to keep money in between better investments.

Plan in such a way that when you get closer to reaching retirement, you are thinking about downsizing your home and car. Make sure that you are on track to clear all your credit cards and other outgoings, so that you have as much disposable income as possible. Take the time to think about the type of retirement you want; and decide which aspects of your life will help or hinder you in achieving that lifestyle.

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Planning for Early Retirement


There is nothing quite as appealing in life as the prospect of retiring early. However, it is not a decision that you should make on a whim. Remember, while you will gain additional years in retirement, you will lose the income you would have generated in those years, had you continued to work. This leaves you with two choices; living on a smaller budget and making sacrifices in your lifestyle, or, finding other ways of generating an income that will allow you to have a long and happy retirement.

First of all you need to determine how your current income stacks up against your chosen retirement age. The earlier you retire the less time you have to save. With improvements in lifestyles and healthcare you should anticipate living into your nineties, which means more retirement years, too. So begin by calculating how much assets you will have per year, based on your current income.

If you really want to enjoy your early retirement, make the sacrifices while you are young. Take a second job to offset the income you will lose in your retirement years. You should also consider easing into your early retirement, by continuing part time work to support yourself. Many retirees start their own small business, drawing from life skills to do something that they enjoy and earn an income as well. Start planning your second career or business now, so that you are well prepared for your retirement.

Higher growth investments are a good strategy for generating retirement income, provided that you start early. Taking risks with equities can pay huge dividends if you allow yourself the time to recover from dips in the market. Potentially, you could end up making up your shortfall without having to work a single day longer than you want to. When you get closer to your retirement age, you can then move to more secure investments. Don’t leave it too late to get in on investments that will work for you, organize your retirement portfolio today.

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Financial Blues – Spending Hangover


There is nothing like a spending hangover to take the wind out of a good spending spree. Once you are done congratulating yourself on the great gifts that you purchased for friends and family, the reality begins to set in. You have stretched your budget beyond all recognition, and have no idea how you are going to pay for all this. It is time to stop thinking in the moment and start planning ahead.

When you look at it, most of what you spend can be anticipated. Holidays, birthdays and seasoning spending are good examples of constants in every person’s life. So why wait until the last minute to generate the income that you need for special occasions? Instead, save throughout the year so that you have disposable income set aside for gifts, holidays and clothes.

Take advantage of sales throughout the year, too. Just because a birthday is a few months away, it doesn’t mean you can’t pick up a great early deal. If you are in a month where you have some spare cash in your budget, take full advantage by getting ahead of the game and purchasing gifts or paying off a holiday early.

You don’t have to spend a fortune every time you take out your credit card or visit an ATM, either. There is much more pleasure to be derived from being creative with your budget. Retro and thrift shores are treasure troths, where you can buy a whole wardrobe of items for the price of two or three. Alternatively, if you have a creative talent you can make your own gifts for little to no cost, which adds a personal touch, too.

It’s the little things that matter, and when it comes to a budget, it’s the little things that often break the bank. You can avoid these last minute expenses by planning carefully for every eventuality. Make sure you don’t end up with a list of things you need to buy, with no room in your budget to pay for them. Make a list for every event, from your daily expense to your next holiday.

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Getting Out from Under, A Personal Story

The following is a letter we recently received from a client who wanted to share their debt story anonymously. They want people to know that you are not alone in your struggle.

If you are interested in sharing your Debt Story, post a comment below or email us at info@creditaid.ca
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When I reached adulthood as dinosaurs continued to walk the earth I could never have imagined that I would some day be a senior citizen with a debt problem. But here I am at 65 years of age, trying to rid myself of credit card balances and a bank line of credit totaling more than $40,000.

We are told that more than 30% of Canadians are in, or have been in a similar boat. Our economy is a house of cards and I am very grateful that there are folks like Creditaid available to help us.

For Baby Boomers like me, a credit problem was much less possible back in the 1960’s. Visa and Mastercard didn’t come along until the 1970’s and most of us were raised on mottos like “pay as you go, and if you can’t pay, don’t go”.

In 1978, at age 31 I got an American Express card. I felt uneasy having it in my wallet, and I used it very sparingly. As the years went by I added both Visa and Mastercard to the collection, but for the most part I paid the outstanding balance in full each month. I was always fully employed and I was never a reckless spender.

If there was a turning point, it was probably around the age of 40. My personal version of a midlife crisis included a marriage breakup, a job change and dealing with aging parents with failing health. Other than that life was still ‘one laugh after another’, and I still invincible in every way, including financially.

My income continued to grow and there was no reason to believe that would change anytime soon. Slowly but surely those cards in the wallet started to have outstanding balances that were carried over from month to month.

My well meaning friendly banker suggested a personal line of credit. That way the credit cards could be kept closer to zero in favour of one larger balance with a substantially lower interest rate. Eventually I found myself on a career path that was shrinking rather than growing, and some bad choices got me where I am today.

“Where will it end?” you wonder at times. But you don’t dwell on the problem. I think it’s called denial and it makes basic functions like sleep possible. You do silly things like buy more lottery tickets and plug coins into VLTs. You believe the old slogan “You can’t win it if you’re not in it”.

But there has to be a day of reckoning for most of us. Finding the right path then becomes the issue. Over the radio you hear the slick pitches with their toll free numbers. You call one or two of them and you know there’s something ‘too good to be true’ about what they’re selling.

I’m very glad to have found Winnipeggers at Creditaid who have been able to help me come up with a plan that works. It’s nice to know that you are not alone.

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Christmas Shopping Is Not All Black and White

Budgeting for the Christmas holidays is always difficult; in fact, it’s the one time that is guaranteed to wreak havoc far into the next financial year. For holidays in general, we would advise incorporating your spending into your monthly budget. However, if you haven’t already, don’t despair, there may be some Christmas cheer for you yet.

Knowing how much money you have for shopping is one thing, being able to allocate where that money goes, when contemplating your holiday shopping is something else.
Click to download our Holiday Gift Giving Planner that can help.

Christmas, as we all know, is in December – which conveniently follows the month of November, and two of the biggest shopping days of the year – Black Friday on November 23rd, closely followed by Cyber Monday on November 26th. Although these two shopping holidays are more popular with our neighbours to the south, an estimated 80% of Canadians took advantage of the deals on offer in the 2011 sales. While you may not wish to fight for this year’s big sellers during these mega sales days, they are ideal for swooping under the radar and picking up deals on gifts for extended family and friends.

Another great idea for holiday budgeting, although a little sneaky, is to invite the whole family around for dinner and subtly find out what they want for Christmas. It will get everyone in the holiday spirit, and you’ll save yourself from that frantic, and often expensive, last minute search for the ideal gift. Make sure to set a limit for each person you buy for and keep track of what you bought for whom and how much you paid.

Remember too, that not everyone is concerned with material gifts. Consider making a donation to charity, or, buying a gift with a conscience, such as a milking goat for a 3rd world family on someone’s behalf. If you really want to go the extra mile, why not accompany them on a food drive or to serve at a soup kitchen over the Christmas holidays?

When the holidays are over, your budgeting tasks are not yet done. Take advantage of the New Year’s sales, where you can make huge savings on clothes, toys, electronics and even gifts for the following Christmas.

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Students Can Create a Better Future by Saving Now

Sometimes saving isn’t easy – especially when you look at it as a luxury – reserved only for
times when you have the cash to spare. The first step to successful savings is, ‘out of sight,
out of mind’. Your savings should be part of your budget, and as such, you should consider
that money spent before it is earned. Where does the money come from for savings in the first
place? You may ask. Well, if you budget smart, you will find a number of sources at your
disposal.

First of all take a look at the monthly services you subscribe to. Do you really need those
extra cable channels? What about that gym membership that you have neglected for over a
year? Your internet and phone service may come with added features; most of which you are
probably not even aware of, but are paying for every month. Cutting those payments, and
reallocating them to savings, is simply making better use of money that you never missed in
the first place.

The money you are left with after loans have been paid is ideal for saving. You have already
resigned yourself to that money being debiting from your account each month, so you won’t
miss it by paying it to your savings account instead. However, be careful when you actually
open a savings account – for example, some banks may charge you fees for falling below a
minimum balance. Check the terms and conditions carefully, and choose the account that best
suits your savings budget.

While it is important to save for your future, ensuring you have good credit is equally
important. The easiest way to have good credit is to pay all you bills on time. For credit
cards you should look for a low, fixed rate card, with no annual fees, and, clear and concise
terms for additional services, late fees, balance transfers and other charges. If you are going
to use a credit card pay off the entire balance each month and make sure you pay it on time!

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Paying Down Debt Is an Increasing Priority According to RBC Survey

There were some very interesting statistics generated from a recent online poll conducted by the Royal Bank of Canada, which made comparisons between the debt carried by Canadian households in 2012 versus 2011. The number of survey respondents who had no personal debt, outside their mortgage, increased from 22% to 26% during the last year; a very positive move towards debt-free living.

In spite of this positive direction, there were still some indicators of concern.

For those respondents which did have personal debt, the average amount of that debt did increase by $84 over last year’s number, instead of going down. Just over half, 51% of the respondents, indicated that they were more concerned with paying down debt than investing in the future. In addition, one in three of the survey’s participants noted that they experienced anxiety over their debt levels, an increase in those statistics over 2011.

Canadians appear to be moving in towards more debt-free living, according to this survey, but there is still work to do, to increase the financial stability of Canadian households in general.

Read More about RBC Debt Poll – http://www.rbc.com/newsroom/2012/1010-debt-poll.html