Make Your Money Work For You

We always want what we can’t have, and even though they say money can’t buy happiness, it’s hard to think otherwise when everything you feel you want to do and need in life has a dollar sign in front of it. But putting your money to work for you can put you on the path to be financially independent, to meet the savings goals you’re trying to reach, or more. 

It’s important to realize that money is a tool that can help you achieve your goals, and for you to reach that financial independence you want, you need to have your money work for you. Not you for it. Here are some tips that can help do just that… 

Eliminate your debt

If you have debt, this is your first order of business. Your money can only work for you once you’re out of debt. You can’t properly invest in your future if you have a mountain of student loans, credit card debt, etc. that you haven’t addressed yet. 

We don’t get taught in school how credit cards work (unfortunately). There’s no 101 class, and that’s why we have so many people out there irresponsibly spending outside of their means. Thankfully, there are some steps you can take to get out of debt no matter how much you owe. 

• Find the exact amount you owe. Shockingly, many people don’t actually know. This only leads to blindly getting into more debt and suddenly going through major shock when you see that statement. Leaving it hard to climb out of the hole you may have unintentionally put you in. 
• Utilize the Snowball Method was created by Dave Ramsey who built this method to help people get out of debt. This involves paying the minimums on all of your debt, but paying more money to the card with the lowest balance first. Aka you’re picking the one that will allow you to pay it off the quickest. 
• Decide how you’re going to pay your debt. There are a number of ways you can approach this. You can negotiate a lower interest rate and put the money you save toward chipping away at what you owe, you can re-evalute your budget and look how you can reallocate dollars. Choose what works best for you. 

Eliminating debt can be easier said than done. Here are some additional tips that can help get you there: 

• Put work bonuses toward debt
• Sell unwanted gifts or items in your house & use the dollars made to put towards debt 
• Halt your credit card spending completely 
• Put work bonuses towards your debt 
• Change your habits 
• Get a second job or pick up side work to get extra income to put on debt 

Need some financial help until you reach payday? Our GoDay payday loans can be a great, and responsibly way to make ends meet when you’re in a pinch. Learn more.

Invest in your RRSP and TFSA

These are accounts that you can use to help your money go further when saving. A TFSA or a Tax-Free Savings Account is an excellent way to save some money for the future. A large portion of Canadians using TFSA’s do not know how to use them to maximize their return. A good strategy is to take a little bit of money from each payday and deposit it into your TFSA. This will add up over time.

An RRSP, or a Registered Retirement Savings Plan, is similar to a TFSA, except that the money put into it aren’t as easy to take out given they are meant to be withdrawn when you are in retirement. The benefits of this savings account is that you can say $400 for every $1000 you contribute depending on your tax bracket.

Here are some tips when just starting out with an RRSP or TFSA: 

• Start saving early – the younger the better 
• Think of the tax benefits of contributing 
• Buy low-cost, low-risk investments if you’re not confident in investing
• Make additional contributions when you can 
• Remember RRSP’s aren’t just for retirement, they can also be for a major life purchase like buying a house

These types of accounts are great because they allow you to put your money in one place, but also grow that money over time, and not be taxed on it from the government. 

Save automatically

If you want to one day buy a house, a nice car, travel the world, or whatever your goals may be, then you need to plan for it. You want your money to already be there before you make any of those financial decisions. But how? Automated savings. This is a set-it-and-forget-it approach which allows you to save big because you get used to not living with that money, and don’t need to remember to deposit money into your savings each month.

It’s easy when money isn’t automatically going into savings for you to make excuses or use those dollars towards something else. To start automating, walk through these steps: 

• Look at your investments. Auto add money into your savings accounts like your TFSA and RRSP. Try your best to mix the max amount you’re allowed to contribute each year. 
• You should use sub-saving accounts that you’ve created for long-term goals like your wedding, new house, etc. Essentially what this is, is that banks will allow you to create small sub-accounts in your normal savings account. This makes it perfect for goal setting. 
• Fixed costs are bills that can’t be paid off with a credit card, such as rent, electric, and water. Make sure to automate these payments to avoid interest and so you can anticipate them each month. 

Choose credit cards with rewards that work for you

Using the wrong credit card for you is so common. People often don’t think twice about their credit card they are using and if there are better options out there. However, although you don’t want to end up in credit card debt by overusing your credit card in irresponsible ways, a credit card is often a necessity and important to have. One of the benefits of using a credit card can be rewards programs. There are several different types of cards that offer things like travel rewards or cashback. Look at your options and figure out what card you can earn the best rewards on for you. 

To pick the best credit card for you, here are some questions you can ask yourself: 

• What will you be using the card for? Can you earn additional rewards with certain cards based off where you’re spending? (Ex: double the points when buying gas) 
• Determine your interest rate and if you’ll be carrying a balance 
• Look at your spending habits and where the bulk of the dollars are spent – this can help you determine the best type of reward
• Consider the best, most practical awards for you 
• What do you need your limit to be? (Aim for lower if you can) 
• What are you willing to spend in an annual fee and does it financially make sense? 

Invest in income-producing assets

This is a tip that we strongly advise you speak to a professional about unless you are incredibly knowledgeable about investing. Owning assets that produce income is among the simplest ways to let your money work on your behalf, and it can be as hands-off as you want it to be. Here are some assets you can consider investing in outside of the TFSA and RRSP we spoke about above. 

• Stocks
• Mutual funds
• Bonds
• Certificates of deposit
• Real estate

Increase your skillset 

Another way to use your money in a smart way is to invest your money into getting more education, or doing a certification that can get you ahead at work into a role that may make you more dollars in the long run. This of course isn’t the case with every career track, but if for example you are a nurse now, and would like to become a nurse practitioner, and know in the long-run the investment in school will pay off, consider investing in the opportunity. 

Take steps to reduce your taxes

Two things in life are certain and that’s death and taxes. But when you plan, you can minimize your tax liability and keep money for yourself. When you file your taxes or have someone prepare them for you, are you positive you are taking advantage of all the tax advantages, credits, and deductions? Often taxes can be confusing to people and they don’t actually know. Make sure you are triple checking each year that there’s nothing additional you can claim come tax season. Some areas to look into are: 

• Medical and dental expenses
• Work, education, or moving-related expenses
• Charitable contributions
• Income or property tax payments
• Retirement contributions (RRSP) 
• Child care expenses & benefits

Consider these questions as well: 

• Do you deduct items like qualifying contributions to retirement plans, one-half of self-employment taxes, alimony payments, contributions to health savings or dependent care accounts, qualified moving expenses, etc. to reduce your adjusted gross income? 
• Did you fill out your W-4 form to put all the money you possibly can into your pocket? 
• Are you familiar with the tax deductions and credits you can take? 
• Do you work with a financial or tax planner to ensure you are getting the most back?

Making your money works for you is important in building a financial future you are happy with. We can’t always make more money in our day-to-day jobs at any given moment. That’s life. However, taking the money you have and using, spending, and investing it wisely can have a big impact. What are ways you can be making more money? Whether it is by small changes like changing the credit card you’re using, or big ones, like finding the right places to invest your dollars, there is an option out there for everyone and it’s important to keep these things in mind as you try to make your money grow!