Ask the Money Expert – Answering Personal Finance Questions from Canada Reddit

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In this article, we will be answering several personal finance questions asked on the Personal Finance Canada Reddit forum. Whether you are self-employed, in a couple sharing expenses, or looking to invest, we will provide expert advice to help you make informed financial decisions. If you’re looking for tips on taxes, proportional income for couples, choosing investments for your TFSA, what to do after buying a house, increasing your credit limit, or switching credit cards within the same bank, keep reading to find out more.

How Much Should You Set Aside for Taxes if You’re Self-Employed?

One user asked how much they should set aside for taxes if they are self-employed and planned on saving 40% of their billable amount. While setting aside 40% may be a good ballpark figure, it is important to consider a few factors. We recommend using a tax calculator to get a clear idea of how much you should save. Additionally, using a budget spreadsheet specifically designed for self-employed individuals can help determine your projected business revenue minus expenses, allowing for a more accurate estimation. By knowing your average tax rate and considering past years, you can ensure that you are setting aside an appropriate amount for taxes.

Proportional Income for Couples – Gross or Net?

Another Reddit user asked whether couples should use gross or net income when sharing expenses based on proportional income. While using net income may seem like the logical choice since it reflects the amount you both take home, there is an important consideration to keep in mind. If one or both individuals have pension plans or group RRSPs where money is deducted directly from their paycheck, it is essential to account for these contributions when determining how much each person should contribute to household expenses. By adjusting the ratio of contributions based on retirement savings, both partners can ensure they are putting enough towards their future financial security.

Choosing Investments for Your TFSA

When it comes to choosing investments for your Tax-Free Savings Account (TFSA), it is crucial to consider your goals, time horizon, risk tolerance, and specific criteria for the account. Rather than asking what investments to put inside your TFSA, ask yourself what you are saving for and when you plan to use the funds. If you are saving for a short-term goal, such as buying a home within the next two years, it is advisable to opt for conservative investments that are less volatile, such as cash or GICs. On the other hand, if you have a longer time horizon, you can afford to take on more risk by investing in stocks or ETFs. It is always recommended to conduct thorough research and consider your personal financial situation before making investment decisions.

What to Do After Buying a House?

One user asked the question, “I bought a house, now what?” This is a common question that arises after becoming a homeowner. One aspect to consider is obtaining disability and life insurance. Life insurance, specifically term life insurance, is highly recommended to provide coverage during your financially vulnerable years. If you already have a policy, it is important to ensure that it covers your full mortgage plus additional expenses. Furthermore, it is worth exploring the option of disability insurance to protect your income in case of unexpected circumstances. Additionally, the question addressed the difference between accelerated weekly and accelerated bi-weekly mortgage payments. While accelerated weekly payments may save you more money in the long run due to more frequent principal payments, the difference in savings may not be significant depending on your mortgage amount. Choosing the payment frequency that aligns with your budget and financial preferences is crucial.

Increasing Your Credit Limit

Increasing your credit limit can have both positive and negative implications. On the one hand, it can help improve your credit score if it prevents you from exceeding the recommended 30% credit utilization ratio. By having a higher credit limit, you appear less risky to lenders and credit bureaus. However, it is essential to consider the potential downside of having too much available credit. If you have an excessive amount of credit, lenders and credit bureaus may view you as overextended, which could negatively impact your creditworthiness. It is crucial to carefully assess your financial habits and decide if having increased credit will lead to irresponsible spending.

Switching Credit Cards with the Same Bank without a Credit Check

If you are considering switching to a different credit card within the same bank, it is possible to do so without undergoing a credit check. Instead of closing your current card and applying for a new one, which can lower your credit score, you can contact the bank’s credit card service department and request to switch products. This allows you to upgrade to a different card with better rewards while preserving your credit history and avoiding a new credit application. However, it is important to inquire about any potential sign-up bonuses that may be affected by the switch.

In conclusion, answering personal finance questions from the Personal Finance Canada Reddit forum provides valuable insights and advice for individuals seeking financial guidance. Whether it’s setting aside taxes as a self-employed individual, determining proportional income for couples, choosing investments for a TFSA, understanding post-homeownership responsibilities, considering a credit limit increase, or switching credit cards, being well-informed can lead to better financial decision-making. Remember to assess your personal situation thoroughly and consult professional advice when necessary.