Mind, Body, and Soul is sponsored content from Fresh Ground Financial.
A couple of weeks ago, I introduced you to the Financial FACTS
F - Flexibility.
A - Accessibility
C - Control
T - Tax-Savings
S - Security
Over the years we’ve seen clients have much better results and more consistently build their wealth when they focus on Financial FACTS rather than putting their focus on high rates of return and annual tax breaks.
Accessibility often goes hand in hand with flexibility. If your financial tools limit your flexibility, they also likely limit your accessibility. The more flexibility you have, the more access to your money you have.
The more flexibility and accessibility you have, the easier it is to take advantage of opportunities, to deal well with emergencies, and to limit your future need for financing bigger items in your life.
So, what does having access to your money in your financial plan look like?
- Access to the equity in your house.
- Most people go for the lowest interest rate when getting a mortgage. The problem is usually that low-interest rate comes with a 5 year fixed contract. With a 5 year fixed mortgage contract, you’ll have high penalties to pay if you want to access the equity in your house to increase your wealth, like financing a house renovation or investing in a great opportunity. Surprisingly, nearly 70% of 5 year fixed mortgage holders break their contract. Access to cash must be important if so many people keep breaking their contracts to withdraw equity.
- Access to your saved or invested money without penalties or fees.
- Some saving tools offer slightly higher interest rates to lock in for 3 to 5 years. With most savings tools - whether you are locked in or not – the interest rates are not high enough to beat inflation. This means your money is losing value. The advantage of savings is having access to it for emergencies. Locking in your savings limits you from its only advantage - having access to it.
- Some investments have sales charges that cost you should you withdraw your investment too soon. There are investments where you can earn very competitive interest rates without dealing with fees should you need access to that money.
- Access to your money without increasing your taxes.
- Many people use RRSPs to store their savings and investments. While there can be benefits to doing so, it can also limit your access to money. The more income you make, the more taxes you’ll pay. Every time you withdraw from your RRSP, the money withdrawn is considered income. This increases your overall income for the year, which in turn will increase your taxes, and maybe even push you into an entirely new and higher tax bracket. This limitation often causes people to miss out on, or choose against great opportunities because of the increased taxes they may have to pay.
- Ensuring that a good portion of your savings and invested money are held in tax-free accounts will offer you easier access to your money without tax consequences. You'll be happy to have tax-free and accessible money when you come into good financial opportunities.
Do you have access to money in your financial plan?