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File Income Tax as a family to get the best deductions

2/3/2012

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File as a Family to Save on Income Tax

You can save thousands of dollars by filing all your family's income tax returns together. If you file as a family, you can transfer deductions and credits amongst family members, split income for better after-tax results and even make better investment decisions.

So, start with the lowest-income earner, then work your way up to the highest-income earner. Keep an eye on net income levels and sources of income.

 Does each eligible family member contribute to his or her RRSP and Tax-Free Savings Account? Do you know who in your family qualifies for each? Do you know how much contribution room is available? 

Find out more strategies to Save on Income Tax Sign up Here
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4 TIPS TO SAVING MORE MONEY

1/11/2012

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Saving more money, so that you have an emergency fund should be a major goal. Your emergency fund should be large enough to provide all the necessities for your family for 6 months. 

The latest polls show that Canadians are very pessimistic about the economy. How do you feel about the economy and would you feel better if you had 6 months of living expenses just in case something unexpected happened

4 TIPS
1) Pay down credit card debt and save on interest payments, by consolidating debt with your home mortgage.

2) Make an RRSP contribution and save on income taxes, the contribution deadline is Feb 29th.  Does and RRSP
Loan make sense? Your income tax refund can be used to pay down credit card debt to save even more.

3) Make a contribution to a Tax Free Savings Account.(TFSA). You have an additional $5000  of contribution room for 2011 plus any unused contributions from previous years. The income you earn  is Tax Free. If you have non registered money in other accounts transfer this money into TFSA. This can be part of your emergency fund because money can be taken out of the TFSA at any time without penalty. ( depending on the type of investment within the TFSA)
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4) Pay yourself first. From every pay cheque set aside 20%  of the cheque in a separate account. Do this every month even if you do need to dip into this account for some payments, continue to do it every month and look for ways in which you can reduce payments so that you will gradually make progress on the savings account.
Get Help with your plan 
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The Trick to Saving More Income Tax with a TAX FREE SAVINGS ACCOUNT

11/29/2011

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Tax Free Savings Accounts are popular, but many Canadians are choosing only interest bearing TFSA plans that pay so little that the accompanying tax savings are negligible. This is generally what your financial institution will suggest, because it is simple and easy for them to set up and there is no advice required. The teller takes your money and signs you up and the teller gets a sale( one of the performance measurements for the job). Everybody is a winner except the investor.

With low interest rates of about 2% offered by your banking institution $5000 earns $100 in yearly interest which is actually less than the inflation rate.  If you are paying a 30% rate of income tax you save $30.00 in tax, not exactly a windfall.

A study by one of the major banks found that 90% of TFSA’S are in term deposits or high interest savings accounts.  The same mistake is often made today with RRSP’S. Self directed TFSA’S and RRSP’S can invest in stocks, bonds, mutual funds, segregated funds, and ETF’S as well as interest bearing securities. The point of the TFSA is to save on the income tax you earn on your investments, so the better the return you earn, the more tax free money you keep in your pocket. A better option for TFSA investments is dividend paying stocks or segregated funds, both of which will have returns in the range of five to seven percent.  


To Find out more about investing your TFSA in dividend paying stocks and segregated funds. Contact us.
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Financial Advice that applies to everybody!

9/26/2011

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Over the last few years I’ve been freely dispensing financial advice.  In the present article I’ll summarize my recommendations.  These are conservative tips that would be appropriate in any setting, but are particularly important given my dire views on the Western economies.

Save More
It’s common knowledge that if a person has the wisdom and discipline to save for the future, then he or she can eventually enjoy a permanently higher standard of living.  As Albert Einstein reputedly remarked, the most powerful force in the universe is compound interest.Incidentally, people shouldn’t feel guilty about saving more, notwithstanding the handwringing coming from mainstream economists. Everybody can increase his or her standard of living through saving. In other words, it’s not the case that if Alice makes a better future for herself by saving a higher fraction of her income, then there must be some Bruce out there who is going deeper into debt. Society really can save and invest “on net”, in the sense that everybody can obtain claims to a growing stockpile of capital goods that make workers more productive. If households and firms save more, they will actually speed the general economic recovery.

Develop Multiple Streams of Income
When people hear the advice to save more, they typically think that they need to stop spending. Although one obvious way to save more each month is to reduce frivolous expenditures, that’s not the main thing I have in mind. If a person really wants to start socking away a lot more each month, the best avenue is to boost income, not cut spending. There’s no limit on how much (in principle) someone can earn.Don’t misunderstand me. By all means keep your expenditures sensible. Having huge payments and over the top living expenses on a modest income doesn’t work. Yet even after looking at your expenses and cutting out the stuff that you really don’t need, everybody — should start brainstorming about how to bring in more income. Notice here that I don’t simply mean someone who currently works in an office should consider working nights as a waitress. In fact, that’s not primarily what I have in mind. Instead, I think  people should consider a host of entrepreneurial ventures. Rather than looking for other bosses, people should become their own bosses, at least in a few limited areas. Self employment opens up a bunch of ways you can save on the income taxes you pay on your self employed income.
To some people this suggestion may sound intimidating, but you can find customers (usually through word-of-mouth) and provide a service  for which you get directly paid.  Look for a service which people need  or want. When I am not doing financial planning or taxes. I like boating and have a certification as a skipper. People will pay me to help them learn how to handle their boat and to get a Pleasure Craft Operator certification. This certification is required by law in Canada, so everyone who has a boat needs to get it. Think about any skills or hobbies you have and how you can earn some extra income from something you like to do.
I’m not saying a person needs to brainstorm until finding “it,” the fantastic idea that will eventually make someone rich. It’s worthwhile doing all sorts of different ventures, so long as each one is self-contained and doesn’t threaten to absorb too much time. It may take a lot of trial and error to gain the skills, confidence, and knowledge of customer demand before finding something really profitable.As with all of my recommendations in this article, generating multiple sources of income is always a wise thing. However, in the present environment it is critical. Even someone who currently has a “good, steady job” can’t be sure of his position even a year from now. It’s much better to get a fledgling business established now, during the weekends or other days off, so that the owner will already have a solid base of customers when the economy slumps again.To reiterate, my advice is not to try to save more by looking at the monthly budget and saying, “Well, this is how much I make, and so if I cut back here, here, and here, then I can afford to put aside $250 more per month.” No, I would much rather a person say, “If I cut back here, I can free up another $100 per month. And if I cleaned three houses every Saturday, then after expenses and treating myself to a nice dinner every weekend, I could save an additional $600 per month.”

Build Up at Least a Month’s Worth of Expenses in Cash.
Now if a person is saving more each month, the obvious question is: How should those savings be used?  The point of doing this is to get out of the habit of living paycheck to paycheck. Such a lifestyle is bad for (at least) three reasons: Most obvious, it leaves a person vulnerable to even a minor setback. If there is an unexpected expense, or if the person gets laid off, then obviously a small cushion of cash would be crucial.Yet beyond this obvious justification, there are two other reasons that building up at least a one-month window of cash balances is a vital, immediate step. First, it frees up more time, especially for a person who has followed the earlier steps and is now earning income from several sources. Rather than having to run to the bank every time a new check comes in the mail, and rather than having to go online and check the bank balance every other day to make sure nothing is going to bounce, a person with at least a one-month cushion can better afford to let the paychecks and bills accumulate, then deal with them in one fell swoop. This allows for the person to spend more time focusing on the business(es), rather than stressing out about cash flow.The other main reason the paycheck-to-paycheck mentality is destructive for the entrepreneurial person, is that the person is more prone to goof off whenever he’s done enough to “get through the month.” But once that critical threshold has been extended past the one-month barrier, there is little difference between having enough to pay for one month versus two or three months. Once a person takes it for granted that he will have money left in his checking account even after paying all his bills for the month, that surplus will mysteriously begin to drift upwards with each passing month.

Eliminate Variable-Rate Debt as Quickly as Possible
.If a person already has a decent amount of cash on hand, I think the next goal should be to eliminate variable-rate debt as quickly as possible. The most obvious example is credit-card debt Note that “eliminating” variable-rate debt doesn’t have to mean paying off the balances. Using a new balance-transfer promotional offer, for example, might allow a person to lock in a fixed rate for a year or more. Taking an RRSP loan at prime plus 1% and using the resulting income tax you get back from the government to pay down credit card debt is one method that converts credit card debt at 19% to debt at prime plus 1%In closing, I want to stress that I am by no means a role model in this arena. I can write with confidence on the above matters precisely because I have seen firsthand what happens when you don’t follow these ideas. 
Experience is a great teacher, so take advantage of someone who has been there.

Contact us anytime for further information on saving taxes and financial planning ideas.
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File Income Taxes as a family for the best deductions!

11/15/2010

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When it comes to getting the best return for money, it is important to file all family returns together, and get to understand them too, by keeping an eye on income levels and sources. This will help you make better investment decisions...like when to contribute to RRSPs and the Tax Free Savings Accounts-and get more cash back from tax credits and social benefits.

If you are working with a professional advisor, enlist their help before year end. There are three simple steps you'll want to know more about:


1. Review each return separately and make sure it's prepared to the individual's best tax benefit, starting with the lowest income earner and working you way up the the highest.


2. Now look at the results on each return from a family, rather than individual, viewpoint. Did you claim all transferrable deductions and remember to split family income?


3. Now tweak your tax and financial plans, to make the best investiment decisions for the family unit as a whole.

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Financial Security and Tax Free Savings Account News

6/30/2010

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Manifesting Wealth Newsletter July 2010

Top Ten Ways To Achieve Financial Security

Thousands of Canadians have learned a painful lesson during the recent economic downturn – they've been living beyond their means.

1.        Understand what real wealth means.

It's what's left after debt, taxes, inflation and costs. It's the money you need for your life now -- and in the future. To get more of it, you need to understand the value of every dollar spent and saved.

 

2.        Get started – even if you're not in great financial shape.

The sooner you start, the better your chances of growing your pot of gold. Record your assets and debts, income and expenses. You need to know where your money is going. Until you do, you won't be able to build real wealth.

 

3.        Don't build your lifestyle with debt.

Many Canadians have fallen into the trap of using too much credit. By not paying off their credit card balances each month, they're incurring large, non-deductible interest expense. That works against the accumulation of real wealth.

 

4.        Use your income wisely.

Employ it to acquire assets that will help build, not erode, your real wealth – after debt, taxes, costs and after inflation.

 

5.        Don't go it alone.

A team comprised of a financial planner, insurance specialist, accountant and lawyer may be required in various life stages – and can bring value that will really pay off.

 

6.        Protect your wealth.

Insurance isn't just an expense. It can protect the assets you've acquired and are growing. Fully understanding the insurance products you're buying is a key to achieving your financial goals.

 

7.        Minimize your taxes.

Simple strategies can save a lot of income taxes. You have the right to arrange your affairs to pay the least amount of tax the law will allow. Various products and income streams can all be taxed differently – and will either be better or worse for your financial situation.

 

8.        Pay attention to inflation.

Increasingly, Canadians are living as long in retirement as they worked. It's important that our retirement income increases to overcome inflation or that we have enough financial assets to draw upon. Inflation erodes future purchasing power.

 

9.        Ensure you get value for your money.

All products, including financial products, cost money. Their prices vary, as do the ways of paying for them. Don't be afraid to ask what something costs – and what you're getting in return.

 

10.     Know what will bring you financial peace of mind.

Know what's important for you to achieve financial peace of mind and access the people, products and processes that can help you attain it. Remember that it's always okay to ask for help.

 

TFSA News The Canada Revenue Agency and its political masters are in a forgiving mood toward at least some of the holders of tax-free savings accounts (TFSA) who face stiff penalties for exceeding the annual contribution limit.

About 70,000 individual taxpayers are currently under review by the CRA for their 2009 TFSA activity. They received letters in early June from the tax agency, asking them to provide details about their contributions and withdrawals. The penalty for excess contributions is 1% of the highest excess amount in the month, payable for each month you are in an excess-contribution position. Under the TFSA rules, you're allowed to make withdrawals at any time, and you won't permanently lose any contribution room by doing so, since you can re-deposit the amount in future years. Many individuals ran afoul of the rules, however, by withdrawing funds and then putting them back in the same year. Under the TFSA rules, withdrawals made in one year cannot be added back to your TFSA contribution room until the beginning of the following year. In response to an outcry from taxpayers who didn't realize that they'd broken the TFSA rules, the federal government confirmed that it won't be enforcing the letter of the law.

Originally, the CRA gave the 70,000 individuals it contacted a June 30 deadline to reply to its request for more information. On June 25, the federal government extended that deadline to Aug. 3. More importantly, Ottawa acknowledged that there has been "some genuine confusion" about the TFSA rules. It served notice that taxes on excess contributions made in 2009, the first year of the program, may be waived on a case-by-case basis. "We understand that it may take time for some Canadians to learn about the program and for some financial institutions to properly inform their clients about this product," the government said in the June 25 statement issued jointly by Finance Minister Jim Flaherty and National Revenue Minister Keith Ashfield. The ministers said the government has decided to "be as flexible as possible in cases where a genuine misunderstanding of the TFSA contribution rules occurred." In line for relief from penalties are individuals whose gross contributions in 2009 exceeded the allowable $5,000 limit, but whose net contributions during the year did not exceed $5,000.

As examples of circumstances under which penalties may be waived, the government cited contributors who used their TFSA as a "regular banking account," making frequent deposits and withdrawals, or who transferred funds between TFSAs at different institutions Individuals who are penalized and who disagree with the CRA's assessment are permitted to file a notice of objection. The deadline for doing so is one year after the revised Aug. 3 due date for the TFSA return. Only the small minority of taxpayers whose TFSAs are under review are required to complete a TFSA return. Ottawa's review of over contributions affects less than 2% of the nearly 4.7 million Canadians who hold TFSAs

 

 

 

 
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First Post!

4/27/2009

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