Toxic Workplaces: How to Stay Positive
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Keeping a positive mindset in a toxic work environment can be an extremely difficult task. I've spent some time in toxic work places and motivating workplaces and there is a vast difference between employee moral …

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Swim out of Debt

Submitted by on Tuesday, 11 May 2010One Comment
Swim out of Debt

Low interest rates, attractive financing plans and surplus of available cash from banks really opened up possibility for many North Americans. They were now able to purchase that dream house and buy that fancy car – however, many of these same individuals were not economists and not able to foresee their future of the credit crunch. Banks got tighter with lending and while rates increased many had to forfeit their house as a result of not being able to afford their home. North American’s have a low propensity to save and especially rely on credit to fund their purchases. The average household carries an enormous debt and sometimes the monthly payments outweigh what their bring in. Another interesting fact is that the singles biggest expenditure for North Americans is tax whether it be sales tax or income tax. So this begs the question of whether there is opportunity to divert some of those taxes towards your debt. The answer is yes. Here are five of my key financial planning and tax savings strategies. Although these are written accordingly to the Canadian tax system, similar strategies can be used in your home country. Speak to a financial planner for more details.

Strategy 1: Contribute to your RRSP and TFSA accounts. The benefits of these are it helps defer your tax until you retire at which point you will be charged a lower tax rate. If you are into investing into stocks then the TFSA is your product because there are no taxes payable on the capital gains.

Strategy 2: Don’t donate after tax cash dollars to a charity, rather donate stocks. The benefit in this strategy is when you donate shares to a charitable organization, you are not required to pay capital gains. This increases your charitable contribution and in turn reduces your overall tax burden at the end of the year.

Strategy 3: If you have stocks and are looking to purchase a new home, sell your stock and use that as down payment towards your new house, then take an equity line of credit on your home in the amount you sold your stocks for and re-purchase them. In Canada you can write off interest on a loan if you are using it for the purpose of investing. What this does is it helps you theoretically write off part of your mortgage. While this strategy is effective it carries some risk so please consult your financial planner for more details.

Strategy 4: Make full use of tax credits. If you are a first time home buyer or renovating your home, using the government tax programs can help with your tax burden. This in turn can help you take advantage of some rebates, and reduce your overall tax payable.

Strategy 5: Consolidate your debt to a low interest account and set up monthly payments to avoid any negative impact to your credit rating. Furthermore, in an effort to lower your sales tax payable try to separate a must purchase from an impulse purchase. Often times we purchase things that we really don’t need. Write down what you think you need on a piece of paper and wait 48-60 hrs and if you still feel you need that item then you can justify purchasing it. Controlling your spending will not only help with debt repayment but also save you on sales taxes payable.

There is light at the end of the tunnel. While some of us may feel that we are drowning in debt, only you can really pull yourself out if it. Write down a plan on a piece of paper and stick with it. Control your spending and contribute to debt repayment and you too can be debt free.

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  • Tara said:

    Regarding strategy number 3. My husband and I do have stocks and we were looking to buy a new home. I will definitely speak to my financial advisor about this. Great post!