Do you ever wish you had more disposable income? Negative cash flow occurs when your living expenses exceed your overall income. The opposite is called positive cash flow, when you have a surplus of cash after paying all the bills. Developing strategies to help you keep more of what you earn will provide more cash to help you achieve your Bucket List dreams.
As a Financial Planner, I can help you identify one of the most significant living expenses; your income tax expense. Very few people have come to me and said; our combined household income tax bill is our single largest expenditure. Consider reviewing your 2014 notice of assessment and look at the line showing total amount payable for Federal and Provincial.
Now is the time to do tax planning, not next year when you are filing your 2015 tax return. There are many allowable strategies identified in the Income Tax Act to help you save tax as you plan your financial priorities.
Turn bad debt into good debt. Refer to your unused RRSP deduction limit shown on your 2014 notice of assessment and consider an RRSP loan and make a large RRSP contribution. The expected tax credit/refund could be used to pay off bad debt. Your new RRSP loan will attract a lower interest rate than your other debt. Your RRSP’s will likely increase in value over time making this a good debt.