Growing Wealth Through Investing with the Sassy Investor

Growing Wealth Through Investing
with the Sassy Investor

 

The money journey is a long road for some. We know that it’s best to pay off debt as fast as possible, but then what? Do you know where to start saving for retirement, a home or other big value goals?

 

How do you know where to start investing, and what if it's too late? Michelle Hung of the Sassy Investor shares her advice as a CFA. #investing #wealth #advisor #money #investor

 

I reached out to Michelle Hung, an Chartered Financial Analyst and advisor in Ontario, and asked her some questions. My questions are in bold, and her answers follow.

 

Who is Michelle Hung? 

 

Michelle Hung is the founder of the Sassy Investor.  An advocate for financial literacy, she is on a mission to spread the word on the on the importance of financial independence and how to achieve it.  She graduated from the University of Waterloo in 2008 with a Bachelor’s of Mathematics, with a specialization in Finance.

She spent seven years working in investment banking and venture capital in Toronto.  Through her experience in advising companies in capital raising, mergers & acquisitions, and initial public offerings, she has a rich understanding of capital markets and how it all ties in with the average investor.  In 2014, she obtained the Chartered Financial Analyst (CFA) designation, a globally recognized investment management credential.

 

savvy Investor

 

What does your designation of being a Chartered Financial Analyst represent?

 

The CFA (Chartered Financial Analyst) is a globally recognized investment management designation that holds its charterholders to one of the highest fiduciary standards in the world.

 

Do you often work with new investors?

 

Yes, I teach women, specifically, how to invest, step-by-step, what they need to know and what they need to do to be able to build and manage their own investment portfolio.

 

What is the first area you suggest new investors start with?

 

I always say, you have to start with YOU. That is, looking at:

  1. What you owe
  2. What you own
  3. What you make
  4. What you spend
  5. So you finally get to what you want

 

It starts with looking at one’s personal finances because there are a few things they’d have to tackle before starting to invest, like clearing consumer debt.  Then they’d have to look at what they want and when they want it, because money being allocated to an upcoming wedding in a year, for example, will not be invested, but instead, put into a high-interest savings account.

 

What advice do you have for people who are starting late?

 

It’s never too late. Too late is never starting! Many people over-estimate their age and when they should start investing, and then give up. I’ve had people in their early 30s believe they were starting too late. There are solutions for every age, every stage in life – they just need to seek good advice.

 

It’s never too late to start investing.There are solutions for every age, every stage in life – they just need to seek good advice. - Michelle Hung, The Savvy Investor Click To Tweet

 

Do you believe in paying off debt before investing?

 

Yes, particularly consumer debt (credit card debts), or any debts that bear a high interest rate.

 

Do you recommend using real estate as an investment vehicle?

 

It depends on your situation. To throw all of your eggs in one basket, like real estate, is not smart. Real estate has its risks and many people see it as the only solution to wealth building, but it’s not the case.

 

I bought my first house in university and rented it out to students and I discovered how labour-intensive it was! And then when I was selling it, I had to bear all of the carrying costs while it was being listed and shown to potential buyers.

 

On the other hand, there are alternative solutions to adding real estate into your portfolio mix, and that is investing in REITs (real-estate investment trusts), where you get the exposure to real estate, both commercial and residential, but you don’t need to be a landlord and fork out your labour and tons of cash.

 

What else do you recommend for new investors?

 

Diversify geographically. North Americans tend to have a “self-centred” mentality where we only deem Canada/ US as the only “safe” countries. Imagine, you’re American, get paid in US dollars, your employer is American and maybe you get some stock-options or bonus pegged to the performance of your employer – it’s a huge bet on your home country, especially if your investment portfolio is comprised of American companies as well! No single country is immune from an economic downturn, so it’s important to diversify geographically.

 

Countries like Belgium, Switzerland, Singapore, Japan, Panama – we embrace travelling to these countries, so why not invest in them as well? Each country offers a different type of economy and adding that to your portfolio mix can have some great benefits, like when the markets at home experience volatility from political issues, for example.

 

How can people reach you? Are you on social media?

 

You can reach me on:

Instagram: https://www.instagram.com/thesassyinvestor/

Facebook Group: https://www.facebook.com/groups/sassyinvestor/

Website: https://thesassyinvestor.ca/

Also, stay tuned for my book coming out this winter!

 

Thank you, Michelle, for sharing these important words with our readers. It’s critical to know it’s never too late to start, no matter what your age is. Hopefully we will get a chance to talk to Michelle again when her new book is out! 

 

If you are interested in real estate investing, I recommend:

Real Estate: 10 Simple Steps on Buying and Selling Property in Ontario

411 on Home Inspections: 5 Experts Weigh In

Save My Rental: What You Need To Know About Tenant Selection

 

New to TFSAs and RRSPs? Check out my e-Book on Amazon:

investing in RRSP & TFSA

 

This post may contain affiliate links, meaning, at no additional cost to you, I may earn a small commission if you choose to purchase through these links. Please see my disclosure for more information. Amazon Affiliate Disclosure: I am a participant in the Amazon Associates Program, an affiliate advertising program designed to provide a means for me to earn fees by providing links to Amazon.ca and affiliated sites.

31 Ways to Max Out Your TFSA (or IRA)

TFSA savingsWhy $5,500? 

$5,500.00. This is the amount that you can contribute to a TFSA or IRA this year. Let’s talk about how you can max it out, or if you don’t have a TFSA or IRA in your country, how you can max out your savings and investing power as well.

If you aren’t sure what a TFSA is, start here. If you do not have TFSAs in your country, scroll down just a little more.
(IRA information can be found here. Remember, I’m a Canadian gal, so IRAs are not my forte.)

TFSA 31 ways to save

TAX FREE SAVINGS ACCOUNTS

A Tax-Free Savings Account is an account that is designed to help you save money. The funds that are deposited into a TFSA account can be invested, and the earnings from the account are tax free. Since you do not get a tax deduction for contributions to a TFSA, the benefit is from the tax-free earnings, and the ability to withdraw from the TFSA at any time without penalty.

There are guidelines and rules as to how much you can contribute into a TFSA, and how much you can withdraw and re-contribute.

Here’s the example from the CRA:

“Since opening her TFSA in 2009, Jenny has contributed the maximum TFSA dollar limit in each year. By the end of 2016, she has accumulated a total of $46,500 in her TFSA account. In 2017 Jenny makes a $5,500 contribution, the TFSA dollar limit for 2017. Later that year, she withdraws $3,000 for a trip. Unfortunately, her plans change and she cannot go. Since Jenny already contributed the maximum to her TFSA earlier in the year, she has no TFSA contribution room left.

If Jenny wishes to re-contribute part or all of the $3,000 she withdrew, she will have to wait until the beginning of 2018 to do so. The $3,000 will be added to her TFSA contribution room at the beginning of 2018.

If she re-contributes any of the withdrawn amount before 2018, she will have an excess amount in her TFSA and will be charged a tax equal to 1% of the highest excess TFSA amount for each month that the excess remains in her account.”

TFSAs are not only for retirement savings, but are also great vehicles for saving for a house purchase, a trip, a new car, or anything else you are working towards. 

TFSA 31 ways to save

How to find $5,500 over the year:

Now that we are clear on how to use a TFSA, let’s focus on how to max it out. In 2018, the maximum contribution amount is $5,500.  This the goal to contribute.

The Simple Way:

There are 52 weeks in a year. $5,500 divided by 52 = $105.77/week. You could set up an automatic transfer for $105.77 weekly.
Are you paid bi-weekly? Your automatic withdrawals should be set at $211.54 to save $5,500.00 a year.

How to fill that account without using your weekly income:  

Bonus Pay

Let’s say you receive a bonus each year of $1,000.00 as part of your performance package. If you directly contribute that to your TFSA, your weekly savings would decrease to $86.54. That’s a lot more manageable, but you need to know yourself and make sure that bonus goes directly to your savings account: do not pass go, do not spend $200!

Raises

If you receive a raise at work (congratulations!), immediately calculate the difference between the previous pay amount and the new pay amount. Set up an automatic transfer to deduct that amount from your account and move it to the TFSA before you see it in your chequing account. Resist the urge to inflate your lifestyle – those few dollars will serve you better if saved for a future time.

Overtime

Did you stay to finish a project, or to complete paperwork? Maybe you signed up for a few hours here and there. Move that money immediately to your TFSA. More money for savings, and no change to your weekly pay. Win Win!

Expenses

Do you get reimbursed for gas for running errands at work? Bank it. Do you get tips? Bank it. Anything extra, bank it.

Tax Refunds

Tax refunds is the government’s way of returning the excess money it collected from you throughout the year. At the same time, it’s a great feeling if you have a few bucks (or many bucks!) coming your way. Since a tax refund is not part of your weekly budget, bank it. You will not miss it, and it will go a long way to filling up your TFSA.

Declutter for Profit

My method for decluttering includes four boxes. I have a KEEP box, a TOSS box/bag, a SELL box and a RELOCATE box.
Without going into a lot of detail:
Keep: things that I want to keep
Toss: things that are garbage, and things that have no value to someone else
Sell: things that are still in good condition and are unwanted. I start with a sell box, and anything not saleable is donated.
Relocate: things that belong in another room or part of another project that need to be dealt with at another time.
When your sell box is full, it’s time to decide the best way to sell these items. You could have a yard/garage sale, vendor sale, sell online with Craigslist, Kijiji or Ebay, or any other method of posting your wares. (There are tons of resources for how to price your used goods, but the easiest way I find the going rates is to look at what others are selling it for.)

Any profits that you receive, you know what to do. Bank it!

No Spending Challenge

Challenge the family or your partner or yourself to not spend money in a category for a period of time. That’s the equation. What you save, bank it.

Example:
For two weeks, your budget usually includes eating out 2-4 times. Instead of eating out, challenge yourself to make from the pantry. Take the money from eating out, and bank it!

For a month, challenge yourself to find no-cost entertainment. Take that amount saved, and bank it.

TFSA 31 ways to save

Hustle a little

Have you looked into any side gigs? Most common side gigs for cash:

  • Listings for one-time assistance, like handyman items or snow shovelling/grass cutting
  • Errands for seniors or housebound individuals
  • Haul loads to the dump
  • Caring for children, pets or houses
  • Clean houses or offices
  • Be a (paid) companion or assistant to someone with a disability or to a senior 

These are just a few examples of what you could spend a couple of hours on, and make some extra dough.

Hustle a bit more

These ideas tend to be more permanent or may require more preparation time to set up:

  • Start a landscaping/grass cutting business in the neighbourhood
  • Sell products from home (see more about that here)
  • Drive for Uber or Lyft
  • Seek out a part time job
  • Build an online business
  • Resell goods online or in consignment stores
  • Tutor or teach a skill

Cut the fat

By making changes to what takes the money OUT of your wallet, you can start directing more to your savings. Think of what is automatically withdrawn from your accounts as these are likely to be missed when considering where to tighten a budget. Here are some ideas where you could save (up to) enough to fill that TFSA:

    • Switch to no-fee banking
    • Move emergency funds or other savings to a high interest savings account
    • Cancel credit cards with annual fees in favour of one without
    • Music subscriptions: do you use this? Can you get it for free? Can you do without for a while? Is there a family plan instead of paying individual rates?
    • Television: consider downgrading or cancelling cable and subscription programs in the summer. A lot of people are outside most of the time, and wouldn’t miss the programming.
    • Cell phone: are you paying for any extras? Have you called and asked for a lower rate? As cell phone services are changing all the time, look around for a cheaper option. If you can’t find one, then negotiate to keep a rate the same in exchange for your contract. (If you are signing a two-year contract, you could ask to keep your rate plan from before and avoid the new customer increase.)

TFSA 31 ways to save

BIG ways to save:

  • Do you need a three-bedroom house? Could you live in a two-bedroom apartment? Consider the cost of utilities, rent, taxes, etc. Can you downsize and live as well?
  • Depending on the needs in your house, do you need multiple cars? Are you living somewhere that you could downsize and save? Could you use occasional services and save as opposed to paying for maintenance, gas, insurance and/or car payments?
  • Do you have a collection that you are no longer interested in? Are there other collectors that would pay for your collection? (Hard questions: do you have anyone to pass it on to, and would they appreciate it? If not, then you might be kinder to your children by liquidating it now for what it’s worth, instead of forcing them to feel guilty and not knowing the true value.) Do you have a room full of Beanie Babies, vinyl’s, model cars, Barbie Dolls, etc?
  • Do you have a second home, like a cottage or trailer, that you do not use as often as you once did? Can you rent it or sell it?

Do you have collections? Do you have anyone to pass it on to who would truly appreciate it? If not, then be kinder by liquidating it now for what it’s worth, instead of creating survivor's guilt about selling it for less than its… Click To Tweet

DID YOU KNOW?

If you save $5,500 in your TFSA account annually, and invest with a modest 6% return, here’s your savings over twenty years: (source)

 
Year:  Contribution 6% Return
Year 1 $5,500 $5,830
Year 2 $11,000 $11,680
Year 3 $16,500 $17,881
Year 4 $22,000 $24,453
Year 5 $27,500 $31,421
Year 6 $33,000 $38,806
Year 7 $38,500 $46,634
Year 8 $44,000 $54,932
Year 9 $49,500 $63,728
Year 10 $55,000 $73,052
Year 11 $60,500 $82,935
Year 12 $66,000 $93,411
Year 13 $71,500 $104,516
Year 14 $77,000 $116,287
Year 15 $82,500 $128,764
Year 16 $88,000 $141,990
Year 17 $93,500 $156,009
Year 18 $99,000 $170,870
Year 19 $104,500 $186,622
Year 20 $110,000 $203,319

WOW

In twenty years, your money has nearly doubled – and that’s with a modest 6% return. If you invested with a 10% return, you would have $318,376! 

There are more than thirty ways to save and make money in this article. Between that and a weekly automated savings, and the motivation from you to do the work, there is a 100% chance of success.

AND… if you fill your TFSA to the brim, then move on up to door #2: Your RRSP!  Follow me on Twitter, Instagram and Facebook for more how-to money advice. You can also sign up for email updates here (it’s free!).

TFSA 31 ways to save

A Beginner’s Guide to RRSPs and TFSAs

Happy New Investment Year! With the beginning of March, the door closes on the ability to deposit money into last year’s retirement savings accounts. It’s time to contribute towards this year. Let’s de-mystify RRSPs and TFSAs so that we can grow our wealth and reduce our taxes!

Please note: I am not a financial advisor or a tax professional. Up until recently, I was a prime example of someone who had no concept of what retirement planning involved, or what I should or should not do. Feel no embarrassment or shame if you are like me. Let this be a foundation for learning, and for building on, and I recommend seeking a professional when your situation becomes more complicated. There are different guidelines for spouses, estate planning and other special considerations.

That being said, here’s what you need to know about your retirement contributions.

 

investing in RRSP & TFSA

 

RRSPs and TFSAs

The Government of Canada sets out the limits of your contributions to RRSP (registered retirement savings plans) and TFSA (tax free savings accounts). There is a maximum allowance for contributions per person, and it’s calculated using a few different criterions.

RRSPs

Maximum Contributions

In your first tax filing year, you can contribute the lesser of 18% of your earned gross income in the previous year, OR the annual RRSP Limit. For the 2018 year, the Canada Revenue Agency has set the maximum contribution limit to $26,230.00.

Example: Sarah works at the corner store on weekends and evenings while she attends school. Last year (2017), she made $16,500. This is before any deductions, or taxes. We know Sarah made less than the maximum contribution limit, which means that she would be able to contribute a maximum of 18% of her annual earnings. She can contribute $2,970.00 to her RRSP account this year.

INCOME ALERT: If your annual income exceeds $145,723 per year, then you can contribute a maximum of $26,230.00. (No math for you!)

How to increase your contribution above the maximum

If you did not contribute 18% of your earnings (up to the maximum contribution amount) each year that you earned an income, you can carry forward the remainder. Simply calculated, if your contribution allowance is not met, the difference of what was not used can be carried forward. Your tax return or Notice of Assessment should indicate the remaining contribution limit available.

Things you need to know 

  • Expenses cannot be included in your contribution calculations. Any amounts that you paid as administration fees, brokerage fees, interest paid on borrowed money to make the contribution, and capital losses cannot be considered as part of your contribution amount.
  • Be careful when calculating your contributions! Contributing more than the allowable amount can result in being taxed. You can request special considerations if the situation warrants it.

TFSAs

TFSAs began in 2009 with the intent to provide Canadian residents a vehicle to save money without being taxed on the interest (like investment income and capital gains). You do not need to earn an income in order to contribute to a TFSA. Contributions are not tax deductible, however the income is not taxable (in most cases). Withdrawal from a TFSA does not count as income, nor will you be taxed if you withdraw funds prior to retirement.

Contribution Limits

Again, CRA sets out the annual limits for contributions, but the limits are not dependent on an income. For the year 2018, you can contribute a maximum of $5.500.00, and like the RRSP contribution amounts, you can carry forward unused credit each year.

Cautionary Points

  • Again, watch your limits, as over-contributing can lead to being taxed.
  • Check to make sure your investment is “qualified”. Tax may apply otherwise.
  • TFSAs are only available to Canadian residents.
  • While you can use foreign funds, it’s advised to check out the rules in closer detail if you wish to go that route.

For more information directly from the CRA, you can start here.

I trust that the information above simplified some of the mystery about contributing to your future self. There are other programs that help you save towards a new home, or your child’s education, but we need to start by taking care of ourselves, and then moving on. 

Keep an eye out for ways to save for your RRSP and TFSA limits. In the meantime, take a look at your income amount last year, and figure out your maximum contribution for the year. There are creative and innovative ways to save money, invest in future you and/or pay down that debt!

Be sure to join my mailing list so you are notified of each new post, and to follow me on Twitter and Instagram as XennialBlogger.  I look forward to seeing you online! 

RRSPs and TFSAs Demystified
RRSPs and TFSAs Demystified