Test Your Knowledge
1. What are the three things to do to get your finances in order?
Answer
b, c and e.
Making a budget allows you to balance your income and expenses. You will know whether you can put money aside to fund your projects and how much you can save. By transferring an amount of money regularly, you are automatically saving without thinking about it and having to calculate what amount you need to put aside from each pay. Once your savings have been programmed, set up an emergency fund to face unforeseen events without getting into debt.
3. Which of the following types of accounts allow you to reduce the income on which you pay income taxes?
Answer
b and c.
The amounts you deposit in an
FHSA or an
RRSP are tax deductible. Therefore, they reduce the income on which you pay taxes, which can entitle you to a tax refund at the end of the year. You can choose between using the tax deduction for the current year or waiting one year for your income to be higher.
5. What are the advantages of a workplace pension plan?
Answer
a, b and c.
Contributions to the plan are automatically made through payroll deductions. It makes saving much easier. The management fees are normally a lot lower than those in individual plans. Under certain workplace pension plans, your employer contributes the same amount as you. Under other workplace pension plans, your employer contributes less than you, but he or she puts money toward your retirement.