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Uncover hidden investment money

Faced with a constant flow of day-to-day living expenses, it can appear difficult to set aside money for investing. But you know you should! Paying yourself first by contributing regularly to your Registered Retirement Savings Plan (RRSP) and other investments is the best way to achieve your retirement and long term financial goals.

To help you do the right financial thing, here are three tips for uncovering hidden money to fund your investments.

Do consolidate debt

  • Gather up your small loans and credit card debt and combine them in a larger debt consolidation loan – preferably at a better interest rate and with a lower overall monthly payment.
  • Transfer your credit card balances to a personal line of credit at an interest rate that is lower than the 18 to 28 per cent annual rates of most credit cards.
  • Use the ‘found’ money now available from your lower monthly loan and debt payments to fund your investments.

Do make your life less taxing
By having too much tax withheld from your pay each month, you are actually lending the government your money, interest-free. Instead, apply to reduce the amount withheld from your cheque (file a T1213 form with the Canada Revenue Agency) and invest that extra money each pay period.

Don’t make that a double-double
You buy a coffee on your way to work each day – probably paying two, three, or even four dollars. Seems like a small amount – but cut your coffee habit and invest those small dollar amounts in your RRSP and here’s what happens:

Thanks to the magic of compounding, the price of your daily coffee will add up to an additional $11,000 in your plan in 10 years (based on an annual return of six per cent).¹

Over 30 years, you would accumulate $67,000 –providing an annual pre-tax retirement income of approximately $5,000 over 25 years. And that’s just for investing the price of a regular coffee. Cut your (more expensive) latté habit and you would have an additional $22,000 in your RRSP after 10 years and over $132,000 after 30 years – for an annual pre-tax retirement income of $10,000 for 25 years!

It can be tough to discipline yourself to invest those hidden dollars. Make it easier with a Pre-Authorized Contribution (PAC), where direct withdrawals are made from your bank account to an investment account.

Your professional advisor can help you use these and other strategies to get the most out of your money and reach your financial goals faster.

Date reviewed: February 11, 2015

1The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment.

This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial Services Firm), presents general information only and is not a solicitation to buy or sell any investments. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values or returns on investment. Contact a financial advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.