TURN $5500 IN SAVINGS INTO $200,000!!

TURN $5500 IN SAVINGS INTO $200,000!!

I recently asked over 50 Realtors what $ topic they would show up to hear about. One of the most popular – how to increase Savings!

I chose $5500 as the Savings amount for this Post on purpose…it is the amount you are allowed (thanks to the Liberals cancelling the increased TFSA contribution amount – great start guys) to contribute to your Tax Free Savings Account every year.

Yes I understand there are no immediate tax savings with your TFSA so you have to come up with ‘after tax dollars’…and I still feel the TFSA is the best tool Canadians have for building a REAL retirement nest egg. If you want to find out why, read this.

Today though we are talking about how to turn $5500 into $200,000…and for those ahead of me…yup, if the $5500 goes into your TFSA and you DO turn it to $200k…you PAY NO TAX when you withdraw it.

So um…how exactly are we going to create this Festivus miracle? Read on my captivated friend, read on…

First, we have to come up with $5500 after expenses, taxes and we’ve contributed to RSP’s, RESP’s, College Funds etc. It’s easier than you believe!

Well, you know (if you are a regular reader WHICH YOU BETTER BE!!)…there are always ways to find money by examining spending and making a few simple choices that take you closer to your Savings goals.

Do you always order alcohol and/or dessert when you go out for dinner? Restaurants have HUGE markups on these and you can literally double your bill ordering them.

I’m not saying never indulge, but choose one (hey let’s have wine with dinner this time and dessert next time honey??) or agree to have a nice dinner and then go home for dessert or a nightcap.

You’ll save dough, probably stay closer to your Health goals (desserts in restaurants are typically massive and have tons of fat and sugar you’ll avoid if you make your own) and it can be a fun end to ‘date night’ (hubba hubba).

If you go out 2-4 times a month, that could easily add up to $100-$400 per month. That’s $1200-$4800 per year!

Are you the type that hits Starbucks every morning for your breakfast sandwich and extra hot, medium whip, please-stir-it-only-with-a-hand-carved-stainless-steel-spoon grande latte?

Have you ever taken a look at what that costs? It can be $15-$20 per visit. There’s $3600 – $4800 per year for a sandwich and coffee for the love of…

I enjoy a fancy beverage and lounging in the comfy chairs as much as the next yuppie, but if you want to reach your goals in the future, you have to make good choices today.

Go back and re-read the 2nd part of that last sentence…it is perhaps the most important thing I can share with you. For those of you familiar with the Marshmallow Experiment done back in the 60’s, you’ll know that self control and being able to delay instant gratification are, what scientists are now proving, critical components of future success and happiness in our lives!!

If you want to know more about this or just love learning about the science behind success, then watch this Ted Talk here.

So bottom line…it is absolutely possible; with the right intention, mindset, conscious goals and support; to save an extra $5500 per year for your TFSA. 

Now that money does you no good if it isn’t then invested to grow…and as I have stated before…the piddly rates being offered by Banks (described as Great Rates or High Interest PFFFTT!!) are NOT where I have my TFSA money invested.

If my money isn’t making me at least 10%, I’m not interested. Remember…whatever it grows to you can withdraw TAX FREE! For me, this is where I want to invest a little more aggressively (while still protecting the Principal – I’m not suggesting unnecessary risk!).

Are you familiar with the Rule of 72?

72 divided by your rate of return will tell you how long before your investment doubles (in years). So 72 divided by 10 = 7.2 years for your money to double (from $5500 to $11,000). 7.2 years later, your money has doubled again to $22,000…and so on.

However…we are going to save and contribute $5500 to our TFSA EVERY year. And if we continue to get 10% (which is completely possible and if you don’t believe me…contact me here RIGHT NOW and ask how I do it) through the power of Compounding Interest and The Rule of 72, our TFSA amount will grow to…yup you guessed it…$200,000 in just 15 years!

Don’t believe me…okay go here to a Compound Interest Calculator.

Plug in 5500 as your Current Principal and Annual Addition; 15 for Years to Grow and 10 as your Annual rate; Compound 1 time per year and Calculate at the end of the Period.

Click Calculate and the amount is: $197,723.51

You can withdraw it all from your TFSA, to use however you wish, TAX FREE.

Are you going to retire on $200k? Probably not. But plug in 20 years and the amount is $350,000+. 25 years is $600k. And so on…

Combine this with your RSP and other investments (your home, other Real Estate) and suddenly you have a Nest Egg you COULD retire on!

And/or if plan on working into your retirement years, $200k could be an amount that helps you at least slow down.

The point is…it’s easier than you believe but you need to start RIGHT NOW (to take advantage of the Time factor in Compounding Interest). Continuing to make excuses, ignore what you know is true or do what you have been doing is not going to get you to your goals.

Today is the day to make a choice to Take Action for YOUR future. NOW is the time to do something that will produce the results you dream about.

Make an investment in yourself. Send me a message here for a FREE Financial Snapshot.

Or, as I’ve said before, Work till you Die. Somebody has to take my order or clean my tray…might as well be you in your ‘Golden Years’.