Risk of Needing Money Suddenly

Risk is an unavoidable part of life. What comes to mind when you think about financial risk? Investing in the stock market? Overpaying for something? Losing your job? Being broke at retirement? In this post series I’ll discuss the ways you may be risking your money.  Being aware of these will help you make smarter choices when managing your money. Here is Part One - Inflation Risk Part Two - Risk of Needing Money Suddenly There are many reasons that you might suddenly need more money (or have less income). Some of the common ones include: Job loss or decrease in hours from: being fired…

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Passive Investing Rules

Last week I wrote about the risk of inflation. My solution to this risk is an investing method called Index or Passive Investing. (I recommend reading the website Canadian Couch Potato for all the little details.) This method can provide a reasonable long term return on your investments (7-8%) with a variable risk of losing money. The chance of losing money is variable because it is related to your actions or inactions. Today I'll discuss some of the basic concepts of this method and provide some rules of passive investing to help minimize the risk. Rule 1 - Pick an appropriate Asset Allocation for your situation.…

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Inflation Risk

Risk is an unavoidable part of life. What comes to mind when you think about financial risk? Investing in the stock market? Overpaying for something? Losing your job? Being broke at retirement? In this post series I’ll discuss the ways you may be risking your money.  Being aware of these will help you make smarter choices when managing your money. Part One - Inflation Risk (or the risk of running out of money) When I first started working, almost twenty years ago, you could rent a one-bedroom apartment for around $400 a month. Now that cost has roughly doubled, with apartments easily going for $800…

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Saving for your Child’s Education – Comparison

In recent posts I discussed the TFSA and RESP programs. But which is the better choice when saving for your child's education? It's a complicated question without a simple answer. Let's start with a chart comparing the highlights of the two plans: Here are the most significant points to remember: With the TFSA your contribution room never goes away. Withdraw $10,000 for education and you can put it back the following calendar year. Usually higher overall limits with the TFSA (depending on number of children and number of contributors). TFSA can be used for any purpose. Using an RESP will result…

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Basic TFSA Information

Before I discuss using a TFSA to save for your child's education I wanted to provide an overview of the Tax-Free Savings Account program. First off, the Tax-Free Savings Account is not an actual savings account. Rather it is a vehicle to place investments into. Many different investment types are suitable, including mutual funds, index funds, exchange-traded funds, GICs, stocks, bonds, and savings accounts. What does tax-free mean? The money you deposit into a TFSA has already been taxed. Once that money is within a TFSA, regardless of investment type, there is no more tax to be paid; not on any…

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