- How to get out of debt
- How to pay for education
- How to plan for retirement
Getting out of debt
I have been rich and I have been poor, but the fear of being poor has taught me to be frugal and to always stay out of debt.
For some people, being frugal is difficult because we are constantly bombarded with advertising which makes us desire and purchase things that we can’t afford. It therefore takes a lot of effort and discipline to stay debt free.
The most efficient way to get out of debt is not to incur it. Question all your expenses. Ask yourself: do I really need this? Does it have to be new or can I buy a used one? Can I do with a less expensive model? Do I have to buy it now or can it wait a bit longer? Make it a point not to buy things on credit and not to buy things that you can’t afford.
I consider credit card debt the greatest enemy of financial independence. I recommend paying the debts with the highest interest rate first and then continuing down to the one with the lowest interest rate.
My preferred tactic to accelerate the payment of credit card debt is to get a line of credit at the local bank and to pay all the credit card debt. Then you’ll only have only one debt at a lower interest. This process makes your debt payment more manageable and you can save lots of money by paying less interest.
Paying for education
We Canadians are lucky to live in a country which subsidises education. A school year in Canada can cost between $3,000 to $6,000 while in the United States the same school year could could be than $20,000.
If you are a student and your parents allow you to stay at home until graduation, you could easily earn $3,000 working part time or working during the summer. A diploma is within reach of almost every Canadian.
If you are a parent and you would like to pay for your child’s education, you have a wonderful tool called “Registered Education Savings Plan.” This plan allows you to save and invest money for education tax free. Even better, the government is willing to contribute up to $5,000 towards your child’s education. This is a wonderful opportunity to get some free money and to invest it tax free.
Planning for retirement.
The main ingredients to plan for retirement are discipline and consistency. Many of us put off the idea of planning for retirement, until one day we wake up with the feeling that it might be too late. For me, I began to have a sense of panic during my early 40s and ever since then I have been working on my plan. At the same time, I realize how much better off I would be if I’d have started saving in my early 20s.
It’s my opinion that a person should start saving for retirement as soon as they start earning money, even if it is a small token amount, to get into the habit of saving and planning.
In Canada the most popular saving tools are RRSPs (Registered Retirement Savings Plan) which allow you to defer taxable income until age 65 and TFSAs (Tax Free Savings Account) which allow you to invest money and not pay taxes on its gain. I will give more information about these plans in future articles.
After taking advantage of those two savings plans, the next step is to invest in non-registered savings accounts or real estate.
If a person has the proper plan, it’s not difficult to stay out of debt, pay for education and retire comfortably. It is all in the planning.
I offer money coaching services in person for people living in Montreal or via Skype if you live in the rest of Canada or the United States. The price is only $20/hour. To book a session, send me an email at email@example.com.