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The 8 commandments | Debt | Shopping | Insurance | Home | Taxes | Investing | Retirement | Family
When we set out to look for the 50 best ways to grow your money, we had a few criteria in mind. We wanted ideas that were widely applicable (so we weren't interested in specialized tax shelters or tax loopholes that were only open to a favored few). We also wanted ideas that had stood the test of time (so we rejected a lot of flavor-of-the-month notions, such as buying gold futures or loading up on oil stocks). Finally, we wanted our ideas to represent the full span of personal finance, from basic notions to more advanced concepts.
We were delighted with the 50 ideas that made our final roster and we hope you will be too. They run the gamut from investing to saving to spending to estate planning. Have a tip you think should be included? Drop us a line. We're always happy to expand our list.
1. Pay yourself first
This is the single best money tip of them all and it's easy. Just set up an automatic payroll deduction that will whisk away 5% to 10% of your paycheque before you ever see it, and deposit that amount in a good, low-cost mutual fund. Soon, with no effort on your part, you'll have a healthy nest egg. Why does this trick work so well? Because most people find it hard to save money by sticking to a budget — it's just too tempting to spend what's left over. But if you make saving an automatic first priority, you quickly adjust to living on the cash that remains.
2. Mark it down
Use the calendar to your advantage, says Barb Garbens, a fee-only financial planner at BL Garbens Associates Inc. in Toronto. By contributing to your RRSPs at the beginning of the year rather than at the end, you can enjoy an extra year of tax-free compounding. And by paying your mortgage weekly or biweekly instead of monthly, you can pay off your mortgage years faster than someone who sticks to a monthly schedule.
3. Get real
About your expectations, that is. Advertisements depict a world in which everyone makes a six-figure salary, retires at 55 and earns 15% a year on their investments. The reality is different. Most Canadians make under $50,000 a year. The typical man retires at 63, the typical woman at 60. The median return of balanced mutual funds over the past five years has been a meagre 5%. What do all these numbers mean? That you shouldn't stress if you're not on track to retire in your mid-fifties — and that you should be very suspicious of fast-talking brokers who promise you 20% annual returns.
4. Think twice
Before hiring someone to take care of a job you could do yourself. Why? Because you earn money in pre-tax dollars, but you pay bills in after-tax dollars. Thus, many middle-class earners will discover that paying an $800 landscaper's bill (in after-tax dollars) really costs them nearly $1,500 in before-tax salary. Think about it: if you do the landscaping yourself, you're giving yourself the equivalent of a $1,500 raise.
The 8 commandments | Debt | Shopping | Insurance | Home | Taxes | Investing | Retirement | Family
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