Want to save extra cash?
Run to your local bank and open a Tax-Free Savings Account.
If you already have one – perfect. If you need to set one up, it only takes a single visit.
Next up: Take a minimal amount of your paycheque (every paycheque!), and automatically invest it into a dividend or income fund.
Set it up for a small amount; you won’t miss $25 per paycheque. It’s the price 1.5 martinis at a Toronto hotel bar or fuel for a longer road trip; trust me, you’ll never miss it.
By investing in an equity-based dividend or monthly income fund you’ll get all the upside of the market plus a stream of income in times like we are in now where the market is range bound. Be sure to have the banker re-invest the dividends or distributions, so that you get a compounding effect on your money. The compounding effect is when your dividends that you are paid buy more shares and then next quarter those shares pay you more dividends. You can see how this accelerates your growth.
If you invest a simple $25 bi-weekly into a TFSA you’ll have – wait for it – $51,731 at 8% growth in 25 years! At a $60k annual salary, you’ll save $17,254 over that same period in tax that would have been paid on your gains.
Who would have thought? A simple martini and half every other week would result in over $50k in 25 years. That is the gift of compounding growth in a tax-free account. And how good would it feel to have saved that amount with almost zero effort?
Open a hidden account and look forward to those sweet savings!
Dave
David C. Lester is a Professional Financial and Life Coach and author of the popular Canadian personal finance lifestyle blog, iheartmoney.ca. Throughout his career he’s gained his personal finance expertise from holding advisory positions within various financial institutions. David currently resides in Toronto, ON with his family dearest friends never far away. In his spare time Lester is an active equestrian and is passionate about art.
Thought that was sweet? You'll enjoy: