Cheat Sheet

76 Tips For Investing in an Uncertain Economy For Canadians For Dummies

If you feel uneasy about the current economy, recent recession, or stability of your investments, you’re not alone. Many Canadians are looking for ways to invest safely and smartly during these uncertain times. This Cheat Sheet offers Web resources for finding reputable Canadian financial advisors, tips for improving your credit score, and information about Canada’s Tax Free Savings Accounts (TFSA) to help you invest successfully, no matter what the markets throw your way.

Find a Financial Advisor in Canada: Web Resources for Canadians

A good financial advisor can talk you through your panic, walk you through the holdings in your portfolio, and reaffirm your investment strategy. In Canada, both Registered Financial Planners and Certified Financial Planner Professionals have minimum education requirements and adhere to a code of ethics. The following Web sites can help you in your search for a trustworthy Canadian financial advisor:

  • Investment Industry Regulatory Organization of Canada (IIROC): Click on “investors” and go to the section called “Member/Firm Registrant Info” to get the low-down on the registration and disciplinary history of member firms. Don’t stop there, though. Your provincial securities commission may have information that isn’t available on the IIROC site. Doing due diligence is worth your while!

  • Financial Planners Standards Council: Visit this Web site to locate a Certified Financial Planner (CFP) in your area. The CFP designation is the most widely recognized educational credential for financial advisors and planners. A professional designation indicates that an advisor has completed certain educational and examination requirements.

    However, professional designations don’t guarantee that you’ll get competent or objective advice that best meets your needs. Quality personal financial planning education is critical, but it’s only part of the criteria to consider when choosing a financial advisor.

  • Institute of Advanced Financial Planners (IAFP): The IAFP offers the Registered Financial Planner (RFP) designation, which is considered the gold standard for financial planning in Canada. Like CFPs, RFPs adhere to educational and ethical standards. But they must also have a minimum five years of specific planning experience.

Improve Your Credit Score: Tips for Canadians

In Canada, your credit score plays a major role in your financial health, influencing everything from your mortgage rate and insurance rates to the interest rates you’ll be able to get on a credit card or car loan. Your credit score may even be considered when you apply for a job! Here are some tips on improving your credit score.

  • Get a free credit report. Your credit score is only as good as your credit report, and getting a copy is easy and free. You can get a free copy by mail once a year by contacting one of Canada’s credit bureaus:

  • Evaluate your credit score. If it’s 700 or higher, you’re above average. Anything below about 680 reaches the point at which lending institutions begin raising rates and denying credit. If your credit rating dips below 700, take steps to improve it, such as the following:

    • Dispute any errors and omissions on your credit report. You can ask to have a paragraph explaining your side of the story added to your report. To correct negative or incorrect information, send a dispute form, along with supporting evidence. Forms are available online, or by calling the credit bureau. Never send original documents and always track your submissions using certified mail or a similar service.

    • Apply for fewer loans and credit cards. When you apply for a loan or credit card, the lending institution typically orders an inquiry that shows up on your credit report. Evidence that you’re applying for a number of loans or credit cards in a short period of time can make you appear as if you’re grasping at financial straws. Have no more than two credit cards per spouse.

    • Pay off your credit card balance, or at least part of the balance. Your balance should be 50 percent or less than your available credit limit.

  • Add good information to your report. You can request that each of the three agencies add information to your file. Although they’re not required to do so, they often do if they can verify the information. Focus on missing positive account histories, even if the account is closed. Also add information that explains or corrects potentially negative information.

  • Check your credit report annually. Don’t assume that credit reporting agencies will add or permanently correct information on your report. Sometimes your corrections inadvertently disappear. Review your report at least annually, and more frequently if you plan on applying for a large amount of credit.

Tax-Free Savings Accounts: TFSA Tips for Canadians

Canada Revenue Agency gave us all a little gift recently. As of January 2009, you can shelter up to $5,000 a year in investments in a Tax-Free Savings Account (TFSA). The beauty of the TFSA is that you can withdraw cash as needed — and you don’t pay a tax penalty. Here’s what you need to know about the Canadian TSFA in a nutshell:

  • You can start contributing to a TFSA at age 18 — all you need is a Social Insurance Number (SIN).

  • TFSA contribution room accumulates even if you don’t open an account. What that means is that, if you don’t open an account or make a contribution this year, by next year, you’ll have $10,000 in contribution room waiting and so forth.

  • Over-contributions are subject to a penalty tax of 1 percent per month.

  • Eligible investments in a TFSA run the gamut, from daily interest savings accounts to stocks, mutual funds, bonds, GICs, and, in some cases, shares in small business corporations.

  • Income earned in a TFSA, including interest, dividends, or capital gains, isn’t taxable.

  • Unlike any other tax-advantaged savings vehicle, you actually recover contribution room the year after you make a withdrawal.

  • If you die, the fair market value of your TFSA goes into your estate tax free, but any gain or income that builds up afterward is taxable.

  • You can’t currently name a direct beneficiary for a TFSA, but future amendments to provincial laws may allow that.

  • The TFSA is versatile so you can use it in a number of ways:

    • Supplementing tax-sheltered money in RRSPs and Registered Retirement Income Funds (RRIFs)

    • Saving for your child’s education or your own education

    • Accumulating a down payment on a home

    • Keeping an emergency fund

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