Why You Might Want to Buy a Home During Winter

Winter is the coolest time of year, so house hunting is probably the last thing on your mind. If you’re anything like me, you’d rather be sitting in front of the fireplace, sipping a glass of hot chocolate. You’re probably more concerned with getting your last minute holiday shopping done, but winter can actually be a great time to buy a home. Purchasing real estate during winter offers many benefits. Let’s take a look at some advantages of winter house hunting now.

Less Home Buyers to Compete With

If you’re buying in a popular real estate market like Toronto, you’ve probably come up on the short end of the stick on bidding wars at least once or twice. It can be a frustrating experience to say the least. The best part about winter is that since there are traditionally fewer people looking to buy homes, that means less competition for you when making an offer on a property. Maybe during the springtime a home might see five or six offers, but in the wintertime it may only see one or two offers. This improves your chances of making a successful offer and getting the home of your dreams. You make even be able to make your offer conditional on home inspection to further protect yourself.

Motivated Home Sellers

When negotiating with home sellers, it helps to know their motivation for selling. Let’s be frank, winter isn’t the ideal time to put your home up for sale. Chances are the seller could be a“motivated seller.” They could be selling their home for a slew of reasons –divorce, the death of a family member, job loss or relocating to another city or country. If your real estate agent can find out why the seller is listing their property, you can tailor your offer to suit their needs. For example, maybe they’re looking for a quick close. By doing a 30 day closing instead of a 60 or 90 day closing, you can make your offer that much more attractive without necessarily upping your offer price, keeping more of your hard-earned money in your pockets where it belongs.

Fewer Homes on the Market

At first glance this may seem like a negative. Fewer homes on the real estate market means you’ll have less choice,but hear me out. Too many homes can be a bad thing, too. It can be easy to get overwhelmed by the sheer number of homes for sale. With less homes available, you can focus your search on the homes that meet your needs and not waste time with the ones that don’t. Instead of looking for the perfect home with everything on your wish list, you may be more willing to be lenient and make an offer on a home with most of the important items you’re looking for.

Seeing a Home During the Toughest Season

Another advantage of seeing a home during winter is that you’re seeing it during typically the toughest season of the year. If a home has issues, they’re more likely to show up during wintertime. That being said, there’s a disadvantage to seeing a home during the winter as well. Things may be hidden. For example, if there’s snow all over the roof, you may not be able to see that the shingles are pealing. But there’s nothing stopping you from waiting until a warmer day when the snow melts or going on Google Maps and seeing the condition of the roof a few months ago.

The bottom line is that you want to weigh the pros and cons of buying a home during winter. If you’re financially ready to buy a home, there’s nothing stopping you from getting a head start on your home search. The worst that can happen is that you end up buying in the springtime, but maybe you’ll find a diamond in the rough. You never know, but you don’t find your dream home unless you’re open to looking at properties during wintertime.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

How Do You Protect Yourself in a Data Breach?

You’d like to think you’ll never be involved in a data breach, but the sad reality is that data breaches are happening all the time these days. A quick search online will bring up plenty of recent examples. Personal information that may be compromised in a data breach includes names, dates of birth, addresses, SINs and even credit card details. That begs the question, how do you protect yourself? Thankfully there are things you can do to be protect yourself if you’re ever a victim. Here are four simple ways to protect yourself in a data breach.

Fraud Alert

The first thing you can do is place a fraud alert on file with the credit reporting agencies Equifax and Transunion. A fraud alert is a great way to protect yourself in the event of a data breach. When a creditor pulls your file, they’re supposed to take extra precaution before approving your credit application. That means calling you on the phone to confirm your identity. This should help stop anyone who tries to a fraudulently use your personal information to obtain credit.

Credit Monitoring

While fraud alerts helps immensely, another way you can protect yourself is by signing up for credit monitoring. With credit monitoring, you can regularly check your credit history. Although it won’t stop fraud, it’ll help you spot anything suspicious. If you see anything fraudulent on your credit report, you can report it to the police.

Change Passwords

Sometimes it’s not just your name, address and personal details that are compromised. If you use your online password for more than one website, your other accounts could be compromised too if the fraudsters gain access to your email address or bank account. As such, it’s a good idea to change any of your passwords associated with the data breach. It’s better safe than sorry as the saying goes.

Credit Card Alerts

Credit cards alerts are another great way to prevent fraud. Usually there’s a bit of lag between when a data breach is discovered and when it’s made public by the company involved. As such, your credit card details may have been stolen without you even knowing it. However, by adding an alert on your credit card, you can help protect yourself. You can add an alert by text message or email every time someone makes a purchase on your credit card. If it’s too much, you can set it up so you only receive an alert for purchases over a certain threshold.

Most of us don’t check our credit card statements every single day, but by setting up alerts, you’ll know right away if someone is going on a shopping spree at your expense instead of days or weeks later.

Are you looking for other ways to protect yourself in the event of a data breach? Contact our offices today for some assistance.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

Going Back to School Without Breaking the Bank

Can you believe it’s almost that time of year again? You know what time I’m talking about – the “most wonderful time of the year.” No, I’m not talking about the holiday season; I mean back to school.

While back to school can be an exciting time for parents, it can also be a costly time. The last thing you want to do is start the school year in debt, but with the list of must-haves for children getting longer and longer every year, keeping your back to school budget in check is often easier said than done. Thankfully it is still possible.

Here are some ways to go back to school without breaking the bank.

Plan Ahead

Did you know that people who go to the supermarket without a shopping list are more likely to spend more than those who go with a shopping list in hand? It shouldn’t come as a surprise. Those with a shopping list know exactly what they’re going to buy. They can get in and out, without the temptation to wander and wonder what they need.

You may be wondering what the supermarket has to do with back to school shopping, but the two have more in common than you think. Similar to going to the supermarket, you want to plan ahead for back to school shopping. Take the time to do an inventory of what your child already has. That way you won’t end up buying supplies like pencils, pens and paper that your kid already has a ton of at home.

Once you know what your kid has, create your list together with your child. This can be a great learning experience for them. They can help you choose the items that they need, while still working within the budget you’ve set for them, teaching them a valuable money lesson.

Shop Around

For basics like pens and papers, there’s nothing wrong with heading to your local retailer, but if you’re going to be buying anything expensive or anything in large quantities, it’s worth spending the time to shop around. By shopping around, you can see if there are better details to be had out there.

And don’t just limit yourself to brick and mortar stores. See if there are better deals to be had online. You may be surprised about the deals available out there.

Share with Other Parents

Buying in bulk can save you money, but what if it’s way too much of something like pencils and you’re afraid your child isn’t going to be able to use them all even when they graduate from university? You might consider going in “halfsies” and split the cost with another parent. By doing that you can still get a great deal on an item and not end up with way too much of it. It’s a win-win situation for everyone involved!

Start Shopping Early

Don’t make the mistake of waiting until the day before school is back in session to go shopping. Not only could the supplies you need to be sold out, you’re probably not getting the best deals on them either. By planning ahead of time, at the end of July or early August and starting your back to school shopping early, you’ll save money (even if your kids don’t like hearing about back to school so early on in the summer).

Are you looking for other ways to save on back to school? Contact our offices today for more great savings tips.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

Identity Theft: What It Is and How to Prevent It

Identity theft is a growing problem in Canada. Every year thousands of Canadians fall victim to it. While the Internet and computers have made our lives easier in a lot of ways, it’s also made it easier for fraudsters to steal your personal and financial information. The good news is there are ways you can protect yourself. Let’s take a look at what identity theft is and how you can prevent it.

What is Identity Theft?

Identity theft is the deliberate use of another person’s identity, usually for financial gain. Identity theft comes in all different shapes and sizes. It can be something as simple as stealing someone’s mail or more sophisticated like hacking into your computer. Even companies aren’t safe from data breaches. There have been countless stories of personal data breaches over the years.

The aftermath of identity theft can leave you in financial ruins. Not only could fraudsters ruin your credit, but you could also suffer thousands of dollars in losses. This can hurt your ability to get credit later on when you need it if you want to get a mortgage or car loan.

How to Prevent Identity Theft

You don’t just have to sit idly by hoping you aren’t the victim of identity theft. There are things you can do to be proactive and prevent it. You should be extra careful about handing over personal and financial information, especially your address, date of birth, social insurance number (SIN) and credit card information. If someone were to obtain those online they could assume your identity.

Without further ado here are our best tips on how to prevent identity theft.

Safeguard Personal Information

Be extra cautious when sharing your personal information. Examples of sharing personal information include buying goods online and filling in an application for employment. Before willing handing over your personal data, you should ask why it’s needed and how it will be used.

Be even more careful with your SIN. If your SIN ends up in the hands of fraudsters, your credit could be damaged. Unless your SIN is absolutely required, it’s best to leave it off a form.

Protect Your Wallet or Purse

Hold onto your wallet and purse and keep eyes on them at all times. A criminal will have hit the jackpot if they obtain them. When you bring your wallet or purse with you, it’s a good idea to leave as much of your personal data at home. For example, don’t make the common mistake of bringing your SIN card everywhere with you. Only bring it when you truly need it.

Be Cautious with Your Credit Card

You should be cautious when sharing your credit card information with anyone. Although the majority of credit cards have zero liability protection where you aren’t at fault if your credit card is fraudulently used, it’s still a good idea to be proactive and takes steps to prevent it from happening in the first place.

Although it’s convenient, don’t save your credit card information directly on websites. If the website is ever hacked, your credit card information could be stolen.

Also, only share your credit card information with companies that you trust. Don’t ever give it to an incoming caller unless you’re 100 percent certain who it is.

Looking to rebuild your credit after being the victim of identity theft? Contact our offices today to come up with a game plan.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

Ways Parents Can Help Adult Kids Buy a Home Sooner

For Canadians in most parts of the country, spring had a later start than usual. Whether your adult child is looking for a home this year or is planning to purchase a home in the coming months or years, it’s never too early for them to get their finances in order.

Buying a home isn’t as easy for kids these days as it was even a decade or two ago. High home prices coupled with the mortgage stress test means that it’s tough to even afford a starter home in a decent location. This had led to a lot of parents helping out their adult kids financially to afford a home.

Let’s take a look at some good ways parents can help adult kids buy a home sooner.

Gifting the Entire Down Payment

The first way to help out your adult child is by gifting them their down payment. If you’re in the financial position to do that, gifting them their down payment can let your adult child buy a home in a decent neighbourhood sooner. Maybe they’ll even choose a place close to you. You might do what is called “living inheritance,” when you gift your adult child part of their inheritance when you’re still alive.

A word of caution about this – gifting your adult kid their down payment is fine as long as they appreciate it and it won’t set you back financially. As much as you want to help, gifting your adult child their down payment shouldn’t set back your retirement or involve taking out a reverse mortgage on your home. If that’s the case, maybe you can to help them in other ways.

Matching Down Payment Money

If you can’t afford to gift your adult child their entire down payment or you’re afraid they won’t appreciate it as much as they should, you might consider only gifting them a portion of their down payment. This can be done in several ways.

Personally, my favourite way is to match your adult child’s down payment. This helps your child work towards their down payment and incentives them to save. For example, if your adult child saves $10,000, you’ll match it with $10,000 of your own. This can help them get in the good habit of saving later in life.

A variation of matching is topping up your adult child’s down payment. For example, if your adult child saves 15 percent towards a down payment, you’ll top it up by 5 percent to help them avoid mortgage default insurance (this adds up to a 20 percent down payment). It’s a really nice gesture!

Living at Home Longer

There’s no shame in not being able to afford to gift your adult child money. However, a way you can really help them out is letting them live at home longer. This lets your adult child “supercharge” their down payment since they won’t be paying market-level rents.

If you do this have a serious conversation with your adult kid ahead of time. Explain why you are letting them live a home. Set rules and responsibilities. Let them know any chores they are expected to do and how long this arrangement will last. Emphasize that you’re doing this to help them save a bigger down payment sooner. That way they’re less likely to blow their extra money on frivolous things.

There are several ways to do this. You can let them live at home and charge them below-market rent. You could also choose not to charge them any rent at all. Regardless of how you do this, by getting your adult kid on board, it will help make this a win-win situation for both parent and child.

Are you not sure the best way to help your adult kid with their down payment? Contact our offices today to come up with a good savings strategy.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

How to Read and Understand Your Credit Report

In my last article, I looked at how do you update or dispute information on your credit report. However, it’s tough to spot an error on your credit report, especially if you don’t know how to read it in the first place. Being able to read and understand your credit report is a vital skill to have. If you don’t know how to read it, you won’t be able to spot any potential mistakes. This can hinder your ability to obtain credit with the most favourable terms and conditions.

Let’s take a look at how to read and understand your credit report.

Reading Your Credit Report

There are two major credit reporting agencies: Equifax and TransUnion. Each has its own credit report. You can request one for free from each every 12 months. It’s a good idea to do that because one may be different than the other. For example, some lenders only report to one credit reporting agency. Likewise, one credit report may have an error, while the other doesn’t. Although the credit report format is slightly different, they both convey similar information.

At the top of your credit report, you’ll find personal information to identify yourself, such as your name, any aliases you go by, date of birth and social insurance number. Below that, you’ll find your address history and employment history. You’ll want to review to make sure it’s accurate.

A section you’ll want to pay extra attention to is any recent credit inquiries. If there are any creditors you don’t recognize, you’ll want to inquire with them. This could be a sign of identity theft – when someone steals your identity and tries to fraudulently apply for credit in your name.

Understanding Debt Ratings

There are so many different types of credit – car loan, credit card, line of credit, student loan and mortgage, to name a few. To make it easier to keep track, Equifax and Transunion have assigned the credit types with debt ratings. The codes are made up of two parts: a letter and a number.

The letter stands for the type of credit it represents.

I is for “installment loans” like car loans. An installment loan is any money borrowed as a lump sum for a specific timeframe to be repaid in fixed amounts or installments on a regular basis until the loan is repaid.

M is for “mortgage loans” like the mortgage on the home your family lives in. A mortgage is a lot like an installment loan. You typically spread the repayment over 25 years, making regular payments on a monthly basis.

O is for “open status credit” like lines of credit. You can borrow money as you need it up to your credit limit. You only need to pay interest on the amount that you borrow. Often you make interest-only payments to keep your account in good standing.

R is for “revolving or recurring credit” like your credit cards. This is the most common type of credit. Revolving credit is a lot like open status credit. You’re required to make a minimum payment based on the amount you borrow. Your minimum payment is usually a flat dollar amount or a percent of your outstanding balance.

Your debt rating also comes with a number. It can be between 1 (the best rating) and 9 (the worst rating to have). If you have a 1 rating on all your credit types, it will go a long way to boosting your credit score. If your credit score is higher than 1 too many credit items, it could negatively impact your credit score.

0 – Too recent/new for a rating; or approved, but not yet used

1 – Paid within 30 days of billing; pays as agreed.

2 – Payment 31-59 days late.

3 – Payment 60-89 days late.

4 – Payment 90-119 days late.

5 – Payment more than 120 days late, but not yet rated “9.”

6 – N/A

7 – You make regular payments under a special arrangement, such as a consolidating loan, with a credit counselling agency.

8 – The property has been repossessed

9 – The debt has been written off as “bad debt” and/or it has been sent to a collection agency; or you’ve filed for personal bankruptcy.

Let’s put them together. If you had a debt rating of R1, it means you have a credit card where you always make at least the minimum payment on time. However, if you have a M3 rating, it means that you have a mortgage where you’ve made a payment at least 60 to 89 days late.

There you have it. How to read and understand your credit report in a nutshell!

Need some help understanding your credit report? Contact our offices today. We’re happy to walk you through it.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

Lines of Credit versus Personal Loans: Which Should I Choose?

You want to borrow money, but you’re not sure the best way to do it. You know a credit card doesn’t make sense since it will be a large expense that you plan to pay off over an extended period of time. You’re thinking a line of credit or personal loan makes sense, but you don’t know which one is best.

Let’s take a closer look at lines of credit and personal loans and when you might want to choose one over the other.

What’s a Line of Credit and When Might It Make Sense?

Lines of credit are loans that allow you to borrow up to a predetermined limit. A line of credit is quite flexible. You’re able to borrow as much money as you need and pay it back on your own schedule (when you’re approved for an interest-only repayment schedule).

A line of credit is revolving credit. This is just a fancy way of saying that you’re able to borrow against it whenever you want and pay it off on whenever you like without applying for a new loan. Lines of credit don’t have a specific date you’re required to pay them back in full. Instead, you can pay them off on a schedule that works with your finances. (However, the longer you take to pay off your line of credit, the more you’ll pay by way of interest.)

With a line of credit, you can make interest-only payments, making your payments more affordable. Also, you’ll only pay interest on money that you’ve borrowed. (You’re charged interest only on the money you withdraw from your line of credit, not on the credit limit itself.)

Lines of credit can make the most sense for both short- and long-term borrowing needs. For example, if you’re looking to consolidate debt and you may need to borrow more money down the line, a line of credit makes a lot of sense. You’ll be able to borrow more money later on without applying for a new loan.

Likewise, if you’re planning to borrow money for a major expense, such as a costly home renovation, or you’re planning to borrow money on an ongoing basis (i.e. for a serious of home renovations), then those are other instances when lines of credit can make sense.

What’s a Personal Loan and When Might It Make Sense?

A personal loan is a loan in a fixed amount that you agree to pay back over a specific time period by way of instalments. Loans usually need to be paid back over six to 60 months.

Loans are less flexible than lines of credit. If you need to borrow additional funds or you’d like to extend the repayment period, you may need to apply for a new loan.

The monthly payments on loans tend to be higher. Unlike lines of credit where you can make interest-only payments, the payments on loans must consist of interest and principal. Also, unlike a line of credit, you’re charged interest on the total loan amount the moment you take out a loan, regardless of when you use the money.

Loans make the most sense for specific needs, like paying for a vehicle or a one-time home renovation. If you don’t plan to borrow any more money, a loan can make a lot of sense.

A loan is also handy for those who lack financial discipline and prefer a fixed payment schedule. With a line of credit, it can be tempting to make interest-only payments, but by doing that, you’re no further ahead. With a loan, you’re required to make interest and principal payments. Because of that, your minimum monthly payment is higher, helping you pay off the loan sooner and save on interest.

Are you still not sure whether a line of credit or personal loan makes the most sense for you? Contact our offices today. Our credit consultants are happy to help.

Climb’s Personalized Credit Prescription provides you with customized recommendations to help rebuild your credit score.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

4 Simple Ways to Make Your Grocery Budget Work Double Time

Do you have a family budget? You’re ahead of a lot of Canadian families. According to this Ipsos survey, three in 10 Canadians say that they’ve never created a budget for themselves or their household.

If you have a family budget, the biggest spending category after mortgage/rent and transportation for most families is groceries. We all need to eat. There’s no debate about that, but that doesn’t mean you can’t save money off your grocery bill. While I was paying down my mortgage in three years by age 30, I managed to spend about $100 a month on groceries. I’m not saying you have to follow on my footsteps, but it just goes to show you that there are plenty of ways to save.

Here are four simple ways to make your grocery budget work double time, so you don’t have to.

Creating a Shopping List

You’d think this would be simple enough. You should create a shopping list before heading to the supermarket, but you’d be surprised to know how many of us fail to do this simple thing. Not only does creating a shopping list save money, it saves time. It saves money because you don’t end up buying perishable food, such as romaine lettuce, that you already have sitting in your fridge. It saves you time because you know exactly what you need to buy. You can quickly head to those aisles and leave, avoiding any temptation to spend on food that you don’t need.

Shopping at Discount Supermarkets

Instead of shopping at premium supermarkets, have you ever considered shopping at a discount chain? I’ve heard the argument that the produce and meat aren’t as good quality at the discount stores versus its premium counterpart. While it is true that the discount stores don’t usually have as good a selection as the premium stores, a box of cereal is a box of cereal. What that means is whether you buy a box of Cheerios from a premium or discount store; essentially, it’s the same box. The only difference is that you’re spending $1 or $2 more for the exact same thing at the premium store.

If you want to buy some items at a premium store that’s fine, but for a quick trip to the discount store for your other items, you can save yourself some decent money.

Buying in Bulk and on Sale

When it comes to non-perishable goods, you can save a lot of money by stocking up. When a staple like spaghetti or macaroni and cheese is on sale, load up. By buying enough to last you until the next sale, you’ll never have to pay full price for anything.

Just be careful with expiry dates and don’t go overboard. You won’t save any money if you end up throwing out half the jars of peanut butter you bought on sale because they went past their expiry date before you could use them up.

Buying in Season

You can really save yourself a lot of money by buying produce when it’s in season. I love cherries as much as the next person, but it’s going to cost you a mint if you buy cherries during the wintertime. I’ve seen the price at $10 per pound or higher sometimes. I know it may be tough, but by skipping cherries and watermelon during the wintertime when they’re most expensive and saving them until the summertime, you can trim your grocery budget considerably.

These are just four of the simple ways to save money on your grocery bill. By following one or all of them, you should have no problem saving yourself at least $25 or $50 a month on groceries. With that extra cash flow, you can put it to good use like paying down debt.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

RRSP’s vs. TFSA’s: Which One is Right for Me?

Should I contribute to my RRSP or TFSA? It’s a common decision faced by thousands of Canadians each year. Ideally, we’d contribute the maximum to both. Unfortunately, life has a way of being expensive. Many of us have other financial priorities, including mortgage payments, car payments, child care expenses, contributing to our children’s RESP and the list goes on. This means that although we’d like to contribute to both RRSPs and TFSAs, we might only have enough to contribute to one.

So how do you choose the right one? Let’s take a closer look at RRSPs and TFSAs to help you figure out.

RRSPs

RRSP short for “Registered Retirement Savings Plan” is a tax-sheltered account primary used for saving toward retirement. If you have earned income (you have a job), you can contribute to the RRSP. You’re able to contribute 18 percent of your earned income in the last year or the RRSP limit, whichever is less (unless you’re earning six figures, it’s most likely 18 percent of your earned incomed). If you’re fortunate enough to have a pension at work, please be aware that your RRSP room will be reduced to account for it. This is to help level the playing field between the pension have’s and the pension have not’s.

When you put money inside your RRSP, you’ll get an immediate tax break. Also, any money you invest inside your RRSP will grow tax-free until it’s withdrawn.

You can hold a variety of investments inside your RRSP, including savings accounts, GICs, ETFs, index funds and mutual funds. To find out your RRSP contribution room, refer to your notice of assessment you get after you file your taxes.

TFSAs

TFSA is short for “Tax-Free Savings Account” and is the newer of the accounts. TFSA started in 2009 and have been popular with Canadians ever since. In fact, Canadians now contribute more money to TFSAs than RRSPs. Unlike the RRSP, you don’t need earned income to contribute to a TFSA. You just need to be above 18 years old.

TFSA contribution room isn’t based on how much you earn. Everyone receives the same annual contribution room. In 2019, the annual contribution limit is $6,000.

Unlike the RRSP, you don’t get a tax refund up front, but similar to the RRSP, your investments grow tax-free inside. However, where the TFSA has a leg up on the RRSP is that when you withdraw your investments, you don’t have to pay any income tax (you do with the RRSP). Your contribution room is also restored January 1st of the following year after a withdrawal.

Similar to RRSPs, TFSAs can hold a variety of investments, including savings account, GICs, ETFs, index funds and mutual funds.

Deciding Between the Two

A lot of articles like to overcomplicate matters in terms of whether you should contribute to the RRSP or TFSA. I like to keep things simple. If you’re earning less than $50,000, you’re generally better off contributing to the TFSA. If you’re earning more than $50,000, you’re generally better contributing to the RRSP.

Other things to consider are your income in retirement. If you’ll be earning more in retirement than during your working years, then the TFSA can make more sense than the RRSP, since being in a higher tax bracket in retirement can lead to claw backs of government benefits such as Old Age Security.

Likewise, if you aren’t going to be earning very much in retirement, contributing to your RRSP often doesn’t make sense, since it would result in Guaranteed Income Supplement being clawed back.

These are just some things to consider when choosing between the RRSP and TFSA. My best advice is to choose one and make regular contributions to it. By getting into this good habit, you’ll reap the rewards later on in life.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.

How Do I Update or Dispute Information on My Credit Report?

Your credit report, in a nutshell, is a history of how you’re using and have used credit. It provides a snapshot of your financial history. It’s one of the main ways lenders, such as banks and credit cards, assess you before approving your credit application. Your credit report includes important information, such as your name, address history, social insurance number (SIN), telephone number, date of birth, employment history, credit history, public records (bankruptcies or judgments) and any credit inquiries.

So, you check your credit report and see an error or something that’s out of date. How do you update and dispute this information? Read on to find out.

How Do Errors Occur On Your Credit Report?

Although errors don’t happen very often, you’ll want to take steps to correct them when they do occur. Before we discuss correcting errors on your credit report, it helps to talk about how errors happen.

Here are some common reasons why errors or inaccuracies may occur:

  • You made credit applications under different names (i.e. Rick Cooper, Rich Cooper, Richard Cooper, etc.).
  • Your lender made a data entry error when typing in your personal information, such as your name or address.
  • You provided an incorrect SIN or your lender mistyped your SIN.
  • Credit payments were applied to the incorrect credit account.
How Do You Spot Errors on Your Credit Reports?

The easiest way to spot an error on your credit report is to regularly review it.

There are two major credit reporting agencies: Equifax and TransUnion. You can request your credit report for free once every 12 months from each. It’s advisable that you order a copy of each, as each credit reporting agencies might have slightly different information for you.

Here’s how to order your credit report by mail:
  • Make your request in writing using the forms provided by Equifax and TransUnion
  • You must provide copies of two pieces of ID, such as a driver’s licence or passport
  • You’ll receive your credit report by mail

Here’s how to order your credit report by telephone:

  • Call the credit bureau and follow the instructions
    • Equifax Canada

Tel: 1-800-465-7166

  • TransUnion Canada

Tel: 1-800-663-9980

  • Confirm your identity by answering a series of personal and financial questions
  • You may also need to provide your SIN and your credit card number to confirm your identity
  • You’ll receive your credit report by mail
Fixing an Error on Your Credit Report

You’ve spotted an error or an outdated piece of information and you want to update it. Here’s how.

  1. Gather documentations relating to your credit dispute. You may be asked to provide it to support your claim.
  2. Contact the credit reporting agency with the error or outdated information and request for it to be corrected and updated. Both Equifax and TransUnion have their own forms for correcting errors.
  3. You may be able to speed up the process by contacting the lender directly to have the error or information corrected.

There you have it. All the steps you need to update and dispute information your credit report. By getting into the habit of regularly reviewing your credit report, you can spot errors and get them corrected right away.

About the Author

Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Finance Journalist, Money Coach and Speaker, his articles and blogs have been featured in publications such as the Toronto Star, Globe and Mail, Financial Post and MoneySense. Connect with Sean on LinkedInTwitterFacebook and Instagram.