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Save and Invest

Now that you have paid off all your non-tax-deductible debt, there are 4 things you can do with your pay yourself first money.  Any of these is a good choice.  In Canada Tax Free Savings Accounts (TFSAs) can be used instead of or in addition to Registered Retirement Savings Plans (RRSPs). The new tax free First Home Savings Account (FHSA), introduced in 2023, is a tax-free registered savings plan - tax deduction for contributions, and no tax payable on eligible withdrawals.

1.  Use your pay yourself first money to make extra payments on your remaining non-tax-deductible debt.

    This is the safest option.  You need to pay off your debt before you retire, and by paying it more quickly you have guaranteed savings.  However,  in the long run you should be better off by investing in RRSPs as long as the return on your RRSPs is higher than the interest rate on your debt.  See our RRSP vs Mortgage Calculator.

2.  Use your pay yourself first money to invest in RRSPs, and use the tax savings as extra payments on your debt.

    This option is also relatively safe, but you will experience some volatility in the stock market.  You can slowly start learning about investing.

3.  Use your pay yourself first money to invest in RRSPs, and use the tax savings to contribute to your RRSP.

    If you earn $60,000 per year and contribute $6,000 (10% of your earnings), if your marginal tax rate is 30% you will get $1,800 in tax savings.  When you contribute the $1,800 to your RRSP it will generate another $540 of tax savings.  When you contribute the $540, it will generate another $162 of tax savings, etc., etc......

    In order to have the same after-tax money as in #1 and #2 above, you will have to contribute about 15% of your earnings to your RRSP.  You can then do what you want with any tax refund.

    If your contributions are made through payroll deductions, you may be able to reduce your taxes right away, instead of waiting until next year to get a refund.

    With this option you will probably have the most money when you retire, but market volatility may keep you awake at night.  If it does, pay down your debt first.

4. Use your pay yourself first money to invest in RRSPs, and do what you want with the tax savings.

    With this option you will have more money to spend right now, but less money when you retire.

Tax Tip:  Pay yourself first by payroll deduction or automatic bank transfers to your RRSP or mortgage.

Now that you have some money to invest, read these articles:



Historical returns on stocks and other investments

Recommended stocks/ETFs for inside or outside of your RRSP

How much do you need to retire?

See our Stocks and Bonds page for more investing information.

Tax Tips: 

Make your money work for you instead of you working for it.

Nobody plans to fail - they just fail to plan!

Your financial plan should include the following steps:

  1. Pay yourself first!
  2. Set aside emergency funds
  3. Define your goals
  4. Personal budget
  5. Buy a home
  6. Get out of debt
  7. Save and invest

Revised: October 26, 2023



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