Pay Yourself First
You have probably seen it countless times in books and on television that you are to pay yourself first, and this statement makes perfect sense. However, on many occasions, I have had individuals tell me that they don't know how to find the monies to pay themselves first so I thought that I would provide you with a few examples:
1. Each year many Canadians will make their final premium payments to both the CPP and EI programs prior to the end of the year as they reach their contribution limits for both programs. The 2013 contribution maximum for CPP is $2,356.20 and for EI it is $891.12. Once you have reached these maximum contribution limits, premiums will no longer be deducted from your pay cheque until the beginning of the next calendar year. As a result, your net pay will increase. This provides you with extra monies that you can put away into your RRSP for retirement without affecting your cash flow, which is a win win situation all around.
2. Do you request that additional income tax be deducted off of your pay cheque and remitted to CRA in order that you don't have to pay tax at the end of the year when you file your income tax return? If the answer is yes, don't do it!!! What you should be doing is having additional monies deducted off of your pay cheque and deposited into your Group RRSP (if your employer has this type of plan), which will reduce your income tax payable at source and help you save for your retirement. You don't want to give your hard earned dollars to the government when you could invest in your future while reducing your income tax at the same time. If your Employer does not have a Group RRSP then have these additional contributions deposited into an individual RRSP at your financial institution on a monthly basis, which will provide you with a tax receipt and another deduction at the end of the year As these monies are automatically taken off of the top of your pay cheque or deducted from your bank account, you won't miss what you don't see.
3. Your Employer is not obligated to give you a raise each year, but you probably do receive one, if you have done a good job. Let's say your raise this year is 2%, you take 1% of this raise and put it into your RRSP. This means that once again you are saving for your retirement while still getting a 1% raise on your pay cheque. This is another win win situation for you!
4. You receive a tax refund after you file your income tax return why not take these monies and deposit then into either your RRSP or a TFSA.
The reason that it is so vital that you save as much money as you can for your retirement is because the bulk of your retirement funds is going to come from your own personal savings as indicated in the attached chart. I will be going through each of these items in greater depth under other sections of this site.
Over the last few months, I have discovered that firms are getting more and more aggressive trying to convince you to purchase products that you can't live without even though in reality you can. We need to stop letting organizations convince us that we can't live without the newest and best of whatever is coming to the market place, and we need to ensure that we are protected. This means that we must have sufficient retirement savings, life insurance, mortgage insurance (if applicable), disability insurance (if applicable), home and auto insurance to ensure that our needs will be met when the rainy days arrive as they inevitably will from time to time.
1. Each year many Canadians will make their final premium payments to both the CPP and EI programs prior to the end of the year as they reach their contribution limits for both programs. The 2013 contribution maximum for CPP is $2,356.20 and for EI it is $891.12. Once you have reached these maximum contribution limits, premiums will no longer be deducted from your pay cheque until the beginning of the next calendar year. As a result, your net pay will increase. This provides you with extra monies that you can put away into your RRSP for retirement without affecting your cash flow, which is a win win situation all around.
2. Do you request that additional income tax be deducted off of your pay cheque and remitted to CRA in order that you don't have to pay tax at the end of the year when you file your income tax return? If the answer is yes, don't do it!!! What you should be doing is having additional monies deducted off of your pay cheque and deposited into your Group RRSP (if your employer has this type of plan), which will reduce your income tax payable at source and help you save for your retirement. You don't want to give your hard earned dollars to the government when you could invest in your future while reducing your income tax at the same time. If your Employer does not have a Group RRSP then have these additional contributions deposited into an individual RRSP at your financial institution on a monthly basis, which will provide you with a tax receipt and another deduction at the end of the year As these monies are automatically taken off of the top of your pay cheque or deducted from your bank account, you won't miss what you don't see.
3. Your Employer is not obligated to give you a raise each year, but you probably do receive one, if you have done a good job. Let's say your raise this year is 2%, you take 1% of this raise and put it into your RRSP. This means that once again you are saving for your retirement while still getting a 1% raise on your pay cheque. This is another win win situation for you!
4. You receive a tax refund after you file your income tax return why not take these monies and deposit then into either your RRSP or a TFSA.
The reason that it is so vital that you save as much money as you can for your retirement is because the bulk of your retirement funds is going to come from your own personal savings as indicated in the attached chart. I will be going through each of these items in greater depth under other sections of this site.
Over the last few months, I have discovered that firms are getting more and more aggressive trying to convince you to purchase products that you can't live without even though in reality you can. We need to stop letting organizations convince us that we can't live without the newest and best of whatever is coming to the market place, and we need to ensure that we are protected. This means that we must have sufficient retirement savings, life insurance, mortgage insurance (if applicable), disability insurance (if applicable), home and auto insurance to ensure that our needs will be met when the rainy days arrive as they inevitably will from time to time.
