Post-bankruptcy investing can be intimidating for people who have just gotten out of bankruptcy. The thought of injecting money into things other than expenses can be scary – understandably so. However, investing doesn’t need to be high-risk and scary. You can start investing on a very small budget. There are tons of strategies and simple ways to get your portfolio going. We have detailed some tips to help you find your feet in the investing world.
Continue reading below to learn more.
How to get started?
The best way to start investing is to clean up your finances and start saving regularly. This way, if you decide somewhere down the road to investing in higher-risk items, you’ll have a good foundation. Even if you are putting money into low-risk investments, you should still utilize these steps.
Get your debts sorted
Paying off debts is essential in starting your investments off well. Having debt is an expensive burden to carry. It’s important to note how your interest rates impact your bank balance as well. Even if you were guaranteed to make a 20% return on your investment (which you’re not), you’d be better off financially channeling that money into paying off debt with high-interest rates early. Getting rid of debt before you start making investments will leave you more secure and stable. Especially, if you decide to start making higher-risk investments. Despite this, it makes sense to invest your money if you can earn more interest by channeling your money elsewhere, compared to the expense of your debts. With this in mind, paying off debt remains the safest option and it sets the tone for good money management.
Determine how to consistently add to your savings
Adding to your savings each month ensures that you will have money in the event something goes south. It allows you to put cash aside, save for your next milestone, and pay your fixed expenses. Before you get paid, having a plan to guarantee you save enough money for yourself is essential. Using apps or talking to your bank about automated savings may be of benefit to you. There are several round-up apps that allow people to save money on their purchases. This is done by rounding up the cost to the nearest dollar. For instance, if you spend $10.12 at the store you will get transferred ¢88 into your savings account.
Although this may seem minuscule, it quickly adds up as you purchase things throughout the month. This is a particularly useful method to save money for people interested in post-bankruptcy investing. Or, for those who struggle to follow through with saving money.
Give thought to your retirement
Saving for your retirement is best started early. The sooner you start, the more you’ll have when you retire. And, the faster you’ll be able to retire. The last thing you want is to be working until you’re in your 70’s at a job you hate. Moreover, if you have enough cash set aside, this won’t be an issue. Finding a retirement plan that works for you and sticking to it is necessary. For help, you can visit your bank or speak with a financial planner to determine how to go about saving for retirement. There are a variety of different types of retirement plans in Canada including:
RRSP – Registered Retirement Savings Account
An RRSP provides a person with great tax benefits and the ability to contribute money to a savings plan. The maximum amount you are allowed to contribute is based upon your previous year’s tax return. By contributing large amounts to your RRSP you can reduce taxable income. The sum in your RRSP will increase tax-free. If you put more than the maximum amount for the year into your RRSP it can be forwarded to the next year. More info on RRSPs can be found here.
TFSA – Tax-Free Savings Accounts
A TFSA allows Canadians who are 18+ the ability to contribute sums of money in an account that charges no tax for withdrawal. This provides you with the ability to both take out and grow your money without tax charges. However, there is an annual limit on the amount you can put into a TFSA. Arguably, this is the best method for a retirement savings plan. More info on TFSAs can be found here.
Company Pension Plans
Company pension plans are another way in which individuals choose to save for retirement. Post-bankruptcy investing requires being diligent with your money. One way to do so is to take advantage of your company’s retirement plan. Do so as soon as possible! If there is no pension plan, inquire about a TFSA or RRSP matching program. It is essentially like free money.
Post-bankruptcy Investing with TransCan Leasing!
Post-bankruptcy investing is a new concept for some people. However, it is a process that will help you get ahead in your finances and achieve a new sense of freedom. Contact us at Transcan Leasing today if you need additional help or if you have any questions about getting a car loan after bankruptcy. Feel free to reach out to us as we are more than happy to help you during this difficult time. Be sure to check out our other resources in the Transcan Leasing credit education center.