How To Earn a TFSA Paycheque Every Month and Pay No Tax On It

Your TFSA has a $6,500 contribution limit but no withdrawal limit. Start preparing for a monthly TFSA paycheque on which you pay no tax.

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It’s that time of month when your paycheque arrives. What if this time could come more than once a month? While the paycheque from your employer is still the primary source of income and is also taxable, you can also receive a paycheque from your Tax-Free Savings Account (TFSA). Moreover, the TFSA paycheque will keep coming whether you work or not. You can even pass on this paycheque to your spouse after your demise. 

The initial steps to earn a TFSA paycheque 

You invested five to seven years studying and upgrading your knowledge to land your current job that gives you a fat paycheque. Similarly, you have to invest your money in growth stocks for the first five to seven years to build a lump sum portfolio, and gradually you can convert this amount into dividend stocks that pay you a TFSA paycheque. 

The TFSA has a $6,500 contribution limit, which you can use throughout the year. Just invest $500/month or $1,000 every two months in the top growth stocks of that month. For July, I have a growth stock for you. 

Nuvei stock

Nuvei (TSX;NVEI) stock surged 7% in three days after falling 37% in the last seven weeks due to the second attempt to short it by short seller Spruce Point Capital in April. The short-seller questioned Nuvei’s exposure to the crypto exchange FTX, which went bankrupt earlier this year, and its acquisition of Paya Holdings. The first attempt was in December 2021, wherein the short seller questioned the background of the management. The stock surged when Spruce Point said it is no longer short on Nuvei. 

As the market noise has stopped, Nuvei stock can now take the normal course, whereby the stock price is influenced by fundamentals and retail investors instead of hedge funds’ short selling. 

Nuvei is a payments platform that helps businesses collect and make payments in 150-plus currencies using 600-plus payment methods, from credit and debit cards to payment apps and cryptocurrencies. The company collects commissions on every transaction that happens through its platform. Hence, transaction volumes are vital to the success of Nuvei. This year, Nuvei acquired Paya to integrate its platform into the enterprise resource planning (ERP) of multinationals that have huge global transaction volumes. The second half looks promising for the company as it will witness the holiday season e-commerce volumes plus the revenue synergies from the acquisition. The stock could surge 30–60% in a bull market over the next 12 months. 

Converting your TFSA portfolio into a monthly paycheque 

Like Nuvei, you can invest in five to six growth stocks. Sometimes you can add to the existing shares. But also book profit in the growth stock when the reason you were bullish on the stock is achieved. 

For instance, I expect Nuvei stock to jump to $58 or $60. So if I own 100 shares of Nuvei, I will keep 30 shares for short-term profit booking at $60, 40 for the medium term at $74, and the rest for the long term. Even Warren Buffett keeps buying and selling shares of a company over time, booking profits and accumulating stocks at discounts. 

Now with the profit you book on growth stocks, you can buy dividend stocks. For instance, you sell 30 shares of Nuvei at $60 and get $1,800 in your TFSA. Instead of withdrawing your profit, you can buy shares of CT REIT (CRT.UN) and lock monthly distributions while keeping your investment safe as the stock is not as volatile. This way, you are not limited to the $6,500 contribution limit. You are reinvesting your investment income and that too is tax-free. 

If you have any profits from a growth stock in your TFSA, you can buy CT REIT stock now and lock in a 6% yield. The stock price of the REIT has been falling since the central bank began increasing interest rates. Higher rates increase its mortgage. However, the REIT has 91% of its rental revenue secure with Canadian Tire’s leases. That will keep the distributions flowing and growing. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nuvei. The Motley Fool has a disclosure policy.

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