How to take money from your RRSP without paying tax

Sometimes, you CAN take money out of your RRSP without penalty. But you have to pay your RRSP back – or pay the tax.

Sometimes, you CAN take money out of your RRSP without penalty. But you have to pay your RRSP back – or pay the tax.

Are you looking at a major expense you didn’t see coming? Short of available cash? Perhaps you’re thinking about tapping your registered retirement savings plan (RRSP). It’s your money, after all, so why not?

Here are three good reasons why not.

1. You’ll owe tax

The first is the tax bill. Since you used pre-tax income when you put money in your RRSP, you’ll have to pay tax when you take it out. And while there’s no tax on investment growth inside your RRSP, you’re taxed when it comes out. RRSPs make sense because you’ll typically cash them in after you retire. That’s when your income and your tax bracket will likely be lower. You’ll still pay tax, but you’ll pay less. If you take the money now, while you’re working, you’ll face more in taxes.

2. You’ll miss out on investment growth

The second reason is lost investment growth. Every dollar you take from your RRSP is a dollar less to build up through compounding. So that little nibble from your plan today could mean a big bite missing from your savings come retirement.

3. You’ll use up contribution room

And the third reason: When you take money from your RRSP, putting it back generally uses up your contribution room. What’s contribution room?  Each year you can put as much as 18% of your earned income from the previous year into your RRSP, up to an annual maximum. The difference between your limit and what you actually put in your RRSP is the unused contribution room. You can carry that forward to use another year. Unused contribution room plus your annual maximum becomes your total contribution room. But whatever you put in your RRSP – replacing a temporary withdrawal or making a brand-new contribution – can use up contribution room. Let’s say you take $5,000 out of your RRSP this year and plan to pay your RRSP back next year. That repayment will reduce your contribution room by $5,000.

There are two ways to avoid paying tax on RRSP withdrawals, without using up contribution room:

  1. Use your RRSP to help buy your first home, or
  2. Use it to go back to school.

What’s the RRSP Home Buyers’ Plan (HBP)?

Are you a first-time homebuyer living in Canada? If so, you can borrow up to $35,000 from your RRSP to put towards a down payment. If you and your spouse are buying together, that’s $70,000 you could use for your home.

The HBP lets you take out the money tax-free. But there’s a catch: You have to pay it back in equal installments over 15 years. Any year you don’t pay the full installment, you have to pay income tax on the outstanding balance. You’ll also lose the chance for that money to grow within your RRSP.

Thinking of using the HBP? When you’re crunching the numbers, be sure to include the RRSP repayments along with your mortgage payments.

What’s the Lifelong Learning Plan (LLP)?

This is another way to take tax-free money from your RRSP:

  • Take out up to $10,000 a year, for a total of $20,000.
  • You can spread those withdrawals over a maximum of four years.
  • Use that money for full-time education or training for yourself, your spouse or partner. 
  • As with the HBP, you need to repay your RRSP or pay income tax on your withdrawal.
  • With the LLP, you have 10 years to repay your RRSP in equal installments.

What about the tax-free savings account (TFSA)?

You might need money for anything at all – not only buying a home or going to school. An option is your TFSA. You don’t pay tax on TFSA withdrawals for any purpose. You’ll still lose potential investment growth while your money is out of the account. But your contribution limit will grow back. Whatever you take out gets added to what you can put in the following year. You can pay your TFSA back according to your own schedule.

9 Excellent Black Friday Shopping Tips

The biggest shopping day of the year is about to happen in a few weeks. I’m pretty sure it now rivals and perhaps beats out Boxing Day sales in Canada. Black Friday can be a fantastic time to score great deals on Christmas gifts. It can especially be a great time to shop if you know a few tips and tricks to make your shopping successful.

Here are 9 excellent Black Friday shopping tips:

Black Friday is a great time to shop if you know a few tips and tricks to make your shopping successful!

Bookmark my giant Black Friday post

Coming up next week, I will have my annual list (it’s giant!) of Canadian Black Friday deals. Simply peruse the list to find the stores that interest you, click the links, then start shopping from the comfort of your own home!

Buy discounted cards for the stores you will be shopping at.

Go shopping with discounted gift cards instead of cash to save yourself some moolah! There are many stores like Real Canadian Superstore/Loblaws, Rexall and Shoppers Drug Mart that offer discounts on gift cards for stores such as Old Navy and Gap during their weekly sales. You might also want to take a look at CardSwap.ca for discounted gift cards.

Ditch the big shopping cart if you’re shopping in-store.

Just don’t even think about getting one of those large cumbersome shopping carts if you plan on shopping in-store. Grab a basket or bring a large reusable shopping bag (IKEA bag anyone?) to avoid collisions or getting stuck in an aisle when you just want to get in and out of the store as quickly as possible.

Make your shopping list in order of importance.

Is Santa promising to bring a Lego set this year? You better put that first on your shopping list! By making your shopping list in order of importance, you’re really helping yourself to not forget that all important gift.

Sign up for emails for the stores you will be shopping at.

Whether you’re shopping in-store or online it can be extremely valuable to sign up for the email list of the stores you will be shopping at. Almost certainly, they will include coupon codes or coupons you can print/show on your phone for an extra discount. Often times email subscribers can also start shopping the sales earlier online.

Shop online.

The same sales are typically available online too, save for the extreme doorbusters. Save yourself some time and energy by shopping from the comfort of your own home. (This is my preferred method ;))

Join loyalty programs

Might as well join the loyalty programs for the stores you will be shopping at if you haven’t already! Collect points that can translate into free items or even extend certain perks. (I’m thinking the TJX card from Winners.)

Shop online at Amazon.

Because I’m such a fan of online shopping, I usually check Amazon first. Black Friday will be no different because I find that they usually have some great one day deals. Another Amazon tip: Use CamelCamelCamel to track Amazon prices so you can see how today’s Amazon price compares to the rest of the year. Just enter the Amazon URL to see a graph of the price history. You can even sign up for price-drop alerts.

Set a budget and stick to it.

You’re really not getting any deals per say, if you put yourself into debt trying to get the latest and greatest thing. If you’ve created a shopping list, it should be easy to stay within budget because you have an idea of the price of each item. Don’t ruin your holidays worrying about debt! There’s rarely any deal that is worth that amount of stress.

Do you shop on Black Friday? I’d love to hear your Black Friday Shopping tips in the comments below.

8 Weeks to a More Organized Christmas: Create Your Holiday Budget

How to create your Christmas budget. Sit down with a hot drink and create your Christmas budget with these tips! #Christmasbudget #budgettips

Are you excited to work your way to a more organized Christmas?  Today marks the first day and task in the 8 Weeks to a More Organized Christmas series that I hope will be super helpful to you!

Before we get started, I have a whole bunch of printables and checklists for you to print out to help you along:

Alright, on to the first task, an important one. 🙂 This week, if you haven’t already, sit down with a hot cup of tea, coffee, hot chocolate… and create your holiday budget.  This is what you think your holiday season will cost and will allow you to put limits on your holiday spending to keep you from shopping regrets if a credit card bill comes your way!

Related: How to Have a Merry Christmas Without Spending a Dime

Here is an extensive list of things you should keep in mind when you create your holiday budget:

Gifts:

  • spouse
  • kids
  • parents
  • siblings
  • nieces/nephews
  • grandparents
  • neighbors
  • coworkers
  • friends
  • secret Santa gift exchanges

Activities/Events/Parties:

  • tickets
  • dining out
  • clothing

Food (not including regular groceries):

  • baking ingredients
  • dessert ingredients
  • Christmas eve
  • Christmas dinner/brunch
  • Boxing day
  • parties

Cards:

  • stamps
  • cards/envelopes
  • stationary for family newsletter
  • photos

Clothing:

  • outfits for photos
  • parties
  • Christmas day outfit

Decorations:

  • tree
  • lights
  • ornaments/candles/wreath/etc.
  • craft supplies

Giving:

  • charities
  • volunteering

Now, these suggestions are just a guideline. Every family is different and has different needs. My intent is to bring to mind every possible thing that could incur an expense during the holiday season.  I’m sure many of you won’t even spend money on half of these things this year. Also, in my mind, the more planning you do, the more money you will save and the saner you will feel. 🙂

As for my family, we only buy gifts for immediate family and a couple of close friends. My husband and I only exchange stockings. I make some homemade gifts as well as collect credits throughout the year so I can do some online shopping for “free”. Of course, I search for deals too. I will probably buy a few inexpensive Christmas decorations this year. This year, I’m toying with the idea of having a cookie decorating party with the girls’ friends. I think that would be fun! As for any party that we are invited to, I like to bring some baking along.

But enough about us.  🙂

If after writing down your expenses, you’re scared of the number you see, you have two options: Decrease your expenses or increase your income.

Decrease your expenses

To make a happy holiday season, you really don’t need to spend a lot of money.  In fact, I’m daring to say, that being extravagant in your spending can be overwhelming not only to you, but the recipient as well. When I was a child, one set of grandparents used to be quite extreme in their gift giving.  It was SO exciting, but I remember being quite overwhelmed with all the gifts once Christmas was over.

Gift giving is probably the easiest expense to cut back on.  If you have a large extended family, consider drawing names so each member is only responsible for one gift.  Or do what our family does and only give gifts to the children.  My parents have also started to set a $20 limit on each other in recent years.  Jesse and I exchange stockings.

Setting a price limit on each gift will allow you to shop within that budget.  If your limit on sister Sue is $30, then that $50 purse is off limits.

It’s possible to decrease your food budget too by shopping the sales and limiting the baking and Christmas dishes you prepare.

When it comes to decorations, why not create some memories by making some homemade decorations?  (I’ll be featuring some ideas in a few weeks)  Or read my Fond, Frugal Christmas Memory post for a fun Christmas tree idea.

Increase your Income

If decreasing your holiday expenses is not an option, then consider increasing your income.  Many retailers hire for the holiday season (and may offer an employee discount!).

A couple of other ideas are to:

  • Sell extra baking to those that may not have much time to create their own.
  • Sell unwanted household items for cash (make room for new stuff too!)

What are your tips for staying on budget at Christmas time?

Sign up for the 8 Weeks to a More Organized Christmas newsletter to receive a FREE Christmas Dinner Checklist!  This checklist is quite detailed and will help you remember all the details needed for a memory filled dinner with family and friends. You’ll also receive a weekly email with each week’s “task”.

Not only do I want a more organized Christmas season of my own, I'm hoping I can help you as well! Introducing... the 8 Weeks to a More Organized Christmas series!

October Money Saving Calendar

Happy October! Get ready for the quickest blog post ever that will save you a TON of money!

It’s a new month and I’m trying something new for you guys. I thought it would be fun to create a calendar each month with a super easy money saving tip each day of the month.

So this month, you get the NEW Money Saving Calendar for October 2019!

You can grab your calendar for FREE here.

I’d love to know what you think of this and if you think I should keep doing them each month for you!

Fall Bucket List for Frugal People

Create the BEST Fall Bucket List with these ideas. These ideas are perfect for frugal people, who are looking for free or low cost activities to do this fall.

Create the BEST Fall Bucket List with these ideas. These ideas are perfect for frugal people, who are looking for free or low cost activities to do this fall.

Fall is nearly here! One of my favorite seasons (besides Christmas time) is Fall! I love the comfort food, the way the light changes in the evening, the crisp fall air, and warm, cozy sweaters. Along with those things, Fall is a great time to do fun, frugal activities specific to the season.

Here is a Fall Bucket List for Frugal People that you are going to love! There are plenty of ideas to fill up your fall calendar with frugal fun.

  1. Go to a Pumpkin Patch.
  2. Have a pumpkin carving contest with friends/family.
  3. Find fall festivals and harvest events happening in your area.
  4. Go to a local apple orchard to pick delicious apples.
  5. Go for a hike. The temperature will be much more bearable than in the summer time!
  6. Try Halloween themed cookies. Like Oreos. You can only get them this time of year.
  7. Try using fallen leaves in one of these ways.
  8. Go to a thrift store to find your Halloween costumes.
  9. Make apple crisp! This recipe is amazing!
  10. Throw a football watching party. To save money, make it a potluck and have everyone bring something.
  11. Make your own fall wreath.
  12. Make a pot of chili.
  13. Enjoy a pumpkin spice latte or apple cider.
  14. Make a Frugal Fall bracelet.
  15. Go through a corn maze.
  16. Take your own fall pictures.
  17. Rake up the leaves into big piles, then jump in them!
  18. Make a scarf out of an old sweater.
  19. Have a Halloween (or Fall) movie night at home.
  20. Bake pumpkin cookies.
  21. Visit your local library and check out some fall themed books.
  22. Check the kids’ school calendars to see what free family-friendly events are coming up.
  23. Attend a high school football game.
  24. Volunteer.
  25. Go geocaching
  26. Take a scenic drive around your city.
  27. Visit your local farmer’s market.
  28. Try a new soup recipe.
  29. Host a fall brunch, pot-luck style.
  30. Light fall candles around the house.
  31. Decorate your home with a few Fall decor items from the dollar store.
  32. Help a neighbor rake their leaves.
  33. Make a batch of these Fall M&M Monster Cookies.
  34. Create your own haunted house.
  35. Make your own Halloween costumes.
  36. Check your city’s website, you will find a ton of free events and activities happening around you.
  37. Knit a fall scarf.
  38. Write little happy fall notes to your friends.
  39. Decorate your porch with fall foliage from the neighborhood.
  40. Toast pumpkin seeds.
  41. Have a fall canning party.
  42. Go on a hayride at a local farm.
  43. Eat dinner by candle light.
  44. Have a nap!

How To Cut Your Grocery Bill Without Sacrificing

Did you know that with just a little bit of prep work and an open mind you may have the possibility of cutting your grocery bill in half?

It’s totally possible to eat better quality, healthy food while spending less on groceries. Here are some ways for you to cut your grocery bill without sacrificing taste or your health.

It's totally possible to eat better quality, healthy food while spending less on groceries. Here are some ways for you to cut your grocery bill without sacrificing taste or your health.

Plan Your Meals Ahead Of Time

I have many articles about meal planning, but this is because I can’t stress enough how important meal planning is. Especially if you want to cut down your grocery bill.

There are two ways to go about meal planning. You can plan meals based on what you already have at home or plan based on what is on sale in the flyers at your local stores. The first option would be your cheapest option since you’re using ingredients you have already purchased. It’s still quite possible that you will have to fill in missing ingredients with a trip to the store.

If you go with the second option, you can then plan and base your meals on the sale items. Most of the sale items will be in season so your meals will be too. By planning your meals to match what’s on sale, you’ll be surprised at how much that will cut from your grocery budget.

Take Advantage Of Coupons

The great thing about coupons and couponing is that you’ll never have to shop and pay full price for your groceries, it really becomes a fun game when you’re paying less than full price for your items. So, take advantage of all the coupons you can use to get discounts on grocery items.

You can start collecting coupons from your local newspaper or even from mobile phone apps. There are also websites like Simply Frugal that lists all the most recent Canadian coupons.

Purchase Generic Items

Name brand items can be really eye-catching but they can also have the ability to empty your pockets as well. Often the only difference between a grocery’s brand-name product and a store-brand product is the packaging.

If you take a closer look at the list of ingredients, in most cases, you’ll actually see that they are nearly identical. It’s just the price that’s different. So, before you take that name brand item off the shelf, do your research and you’ll definitely be rewarded with the best deal.

Tip:  Ingredients are listed in order of the amount in the item, so if sugar is the first ingredient in your cereal, you know there’s more sugar in it than anything else in the box. So, when checking ingredients between generic and brand name, be sure they are listed in the same order to ensure you’re getting the same “taste”. This is always a great way to determine which version is the more healthy version, if that is your goal with ingredients.

Buy In-Season Fruits And Veggies

Sometimes you just want to satisfy a craving with out of season fruits and veggies but to really make a dent in your grocery bill, you’ll want to purchase in season produce.

Out of season fruits and veggies will definitely be more expensive because they cost more and take more effort when they are not in season.

Plant A Garden

Growing your own food is the best way to go when you really want to lower your expenses and save money on your grocery bill. A great example is having your own herb garden.

If you buy a bunch of herbs they can be expensive and you may only need them for a meal or two (this is again where meal planning can be helpful). But if you have some potted herbs in your garden or kitchen, you’ll save a lot of money and have those herbs at your fingertips anytime you need them. Plus fresher always tastes better.

Cutting your grocery bill without sacrificing is definitely doable. It will just require you to make a few changes and find what works for you and your family. Taking control of how your money is spent and saved is a great feeling when you’re trying to stay within a budget.

Do you have some tips you can share to help cut the grocery bill? Please tell us in the comments below.