Expert Tax Advice for Canadians

Get expert advice on filing your personal taxes for 2011. In this recent video shot for RateSupermarket I speak to H&R Block, Senior Tax Pro and National Spokesperson Cleo Hamel about how to best prepare for tax season.

Also read more in my latest blog for Ratesupermarket.ca Are You Ready for Tax Season?

Don't Forget These Important Deadlines:

• Generally the deadline for the 2011 tax return is April 30, 2012.
• If you carried on a business in 2011 your return has to be filed by June 15, 2012.
• If you have a balance owing for 2011, you have to pay it by April 30, 2012.   

My First Paycheck! Now what?

Getting your first full time job, it can be the most exciting time in your life, I know it was for me! Wow, so much money. It can be hard for someone who's been a struggling student all their life to deal with. Here are some tips for anyone in their first job to get their finances in order and get themselves on the road to financial freedom.

Pay off high interest debt

• This includes any credit card loans you've racked up, or a line of credit that's maxed out and your student debt. It's really important to get your high interest debt under control. Except for your retirement fund (more on that below) before you start saving aggressively for anything else take control of your loans that are costing you every month.

Start contributing 10 per cent to your RRSP

• Start putting 10 per cent of your after tax income away for retirement from they day you start making money. If you made $10.00 save $1 for when you turn 65. Adopting this habit early in life will guarantee you have a substantial nest egg to retire with and help you feel better about your financial health.

Build your rainy day fund

• This is fundamental to protecting yourself when life throws you a curb ball. Calculate how much money you need every month to live. Rent/mortgage, utilities, cable/phone/Internet, transportation (make this list exhaustive). Make sure you have 3-6 months in your rainy day fund. This means if you lost your job or were faced with a large expense, no matter what happens you will be able to survive for that amount of time without any impact on your lifestyle

Have a monthly financial plan

• Always know what is coming in and what is going out. Saving money starts with tracking where its going. Take a few months to track all your spending to see how your incoming and outgoing money flows. Build a realistic financial plan that includes all your necessities, variable expenses and your luxuries. Don't put only $50 down for going out to dinner if you spending patterns show you spend much more. This will only frustrate you because you keep going over budget. Rather see how you can trim back on those extras if you need to save money.

Seek professional advice

• Financial planning and taxes can be confusing and not all of us are good at it, seeking good advice from a professional can save you thousands over the long run. Make sure you are using a fee-only financial planner so you understand the cost of their advice up front. With an accountant find one that is available year round, you don't always have questions  about your taxes during tax time. Make sure you get good references in both cases from people you trust. Never take financial advice from anyone unless you have done your own homework and background check first.

Watch more on my interview with CTV Newschannel's Brad Griffen.
http://watch.ctv.ca/news/top-picks/saving-money/#clip626603

CMHC insurance stretched to its limit

Canadian debt levels are at historic highs and this is largely due to people taking on bigger mortgages.

Mortgages make up 68 per cent of Canadian’s total debt, according to the CMHC’s Canadian Housing Observer 2011. That’s a total of $1.042 trillion we owe on our houses. CMHC insurance is required for anyone buying  a home with less than 20 per cent down. 

As a result the Canadian Mortgage and Housing Corporation (CMHC) has been insuring more mortgages to satisfy the appetite of Canadians wanting to buy bigger and more expensive homes.  With interest rates at historic lows, money is cheap and this makes real estate very attractive.

In addition, banks are moving to take risk of their books and looking for insurance on loans that have higher ratios. It’s not required by law, but what it does is it securitizes these loans,  gets them off the banks balance sheet and reduces their capital requirements. Banks are paying the insurance premiums to do this, but its worth it- for them.

For more information on why the CMHC is approaching this limit now, check out my interview with George Hugh, President of Taurus Mortgage Capital.

Read my full blog on ratesupermarket.ca, CMHC Approaching Limit A Warning To Homeowners.

Is Your Inheritance a Fast-Track to Financial Success?

More than half of Canadians are waiting on a fat inheritance from their parents to help them out financially. And the majority of them expect more than $100,000. How realistic is this?

Not a fortune by any stretch!
According to the latest research from Investors Group, the estimated $1 trillion dollar  transfer of wealth forecast to occur in the next 20 years may result in fallen expectations for some.

Many who have received an inheritance (and are willing to disclose the amount) say the average is $57,000. One in five (18 per cent) who have already inherited said they received $100,000 or more while one quarter (26 per cent) received less than $5,000. 

Who can blame them.

Meanwhile, nearly half of Canadians aged sixty or more are concerned they are going to need their savings to fund their retirement and won’t have money left to give to their survivors. And most don't want to make  personal sacrifices to ensure an inheritance for their family.

“As people live longer and have higher expectations for their retirement, younger generations may have to adjust their own expectations about the anticipated transfer of wealth,” says Christine Van Cauwenberghe, Director, Tax and Estate Planning at Investors Group.

“Knowing the dollars and cents behind your inheritance can have an impact on your financial plans,” says Van Cauwenberghe. “It is smart to know what you can expect so you can plan accordingly and family dialogue is a good place to start.”

Mom and Dad when you're gone....

The poll reveals that many families are not taking the time to discuss or deal with inheritance issues. Four-in-ten Canadians whose parents have a will (39 per cent) say they have not discussed the terms of the will with their parents while sixty-one per cent of Canadians with deceased parents who had a will, admit they never had the talk.

“When it comes to wills in Canada, there’s not enough action and certainly not enough talk,” Christine says.  “Broaching the sensitive topics of wills and estate details with loved ones can be daunting but having “the talk” early on can provide security for planning and make the process easier when the time comes.”

Interestingly, those who have discussed will and estate details with family members indicate it was not a difficult conversation. Three-in-ten (31 per cent) said the discussion was very easy while only three per cent said they found it very difficult. 

Inheritance should be seen as a bonus to your financial portfolio, it's important to plan for your own retirement and keep your own debt in control. Relying on an inheritance can also create what is called "moral hazard," where you are spending money in anticipation that you will get more and be bailed out.  And never forget the tax man takes almost half of your inheritance when it's released to you!

The Economics of Love

Valentine’s Day is only a few days away and if you haven’t bought anything for your significant other you may want to read this before you do.
Canadians will spend on average $144 million on chocolate and confectionery on the day of love. On top of that more than $20 million will be spent flowers, mostly by men. The pressure to buy a cute pink and red card for your sweetie is everywhere, as soon as the Christmas decorations come down the hearts and cupids go up, reminding consumers there’s still more you need to spend to show your love. Read my blog on ratesupermarket.ca.
 

Love and Money: They work together

Just in time for Valentine's Day a new survey shows most Canadians know little about their partner's finances. But 95 per cent say its important to date someone with a similar financial outlook. 
So, how do we know we are dating our financial match if we don't ask probing questions like. How much do you save? How much debt do you have? How much money do you make? Was money an important topic growing up? Some of these questions might sound impolite, and admittedly not the best question you ask on the first date! But its important to know how your partner feels about money especially if you plan on making them you life partner.

I'll be attending an event hosted by Financial Guru, Gail Vaz-Oxlade this week, who will be talking about how important it is to make sure we understand our partners financial outlook. Stay tuned for an update. 

Meanwhile, here are some interesting findings ING Direct released today. 

•  92% of Canadians say it’s important for them to date someone with a similar outlook on money. 58% of women say it’s very important compared to 43% of men.

•  89% of Canadians say it’s important for them to know about their partner’s finances, including income, debt, assets and investments. 

• 62% of women indicated this was very important, compared to 43% of men.

• One in five Canadians knows only a little, or nothing, about their partner’s finances.  

• Only 21% of Canadians cited the importance of discussing if and how finances would be merged.

• The most popular topics Canadians feel they need to discuss before committing to a serious, long-term relationship include: Debt, mortgages, car loans, lines of credit and credit cards (42%)How expenses will be shared (36%) Lists of monthly expenses (33%)

• 10% of Canadians say they have avoided breaking up with someone for financial reasons.

• 8% of Canadians say they have ended a romantic relationship with someone, but continued to “stay together” physically and financially.

My Debt to Income Ratio is Higher than 153%: But That’s Okay!

Experts will tell you your debt-to-income ratio is one of the best ways to gauge your financial position. The media often quotes the Bank of Canada saying Canadians are at dangerously high levels of debt at 153 per cent. But what does that mean? I’ve spent countless dinner parties arguing how to properly calculate debt to income ratios and how can you tell if your in the danger zone. There are many schools of thought on how to asses your financial health.  Here are a few that I highlight in my latest blog on ratesupermarket.ca.

Four-Week Financial Detox: As Seen on Steven and Chris

I'm teaming up with Steven and Chris to put you on a diet—a financial diet, that is. Your mission, should you choose to accept it, is to embark upon a month-long financial cleanse. Every week, join fellow S&C fans in tackling one of the fiscal challenges outlined below and share your experiences on Facebook. For an extra challenge try my daily detox by creating a money-do jar full of financial to-dos!

I'll be doing all the challenges and tweeting and commenting of Facebook along the way.  

 Week 1: Declutter & Make Money

Comb your home for an item(s) to sell. We all have extra stuff stashed away in our basements and closets. If you haven't used it in months, it's time to get rid of it. Whether it's furniture, clothing, shoes or electronics, your trash could be someone else's treasure. Immediately deposit any money you make on the sale into your savings account.

Week 2: Lower Your Interest Rate

Call your credit card provider and ask if it's possible to switch to a lower-interest account. If you are currently holding a $0 balance on your card, call your bank and ask to renegotiate your mortgage rate or try and get the interest rate lowered on your personal line of credit. The point here is to make the call and negotiate! Take back control by having a firm grasp on what you're currently paying and asking for something better.

Week 3: Talk Money!

Reach out to three people who you think are in good financial standing. Email or call them and ask if they would be willing to meet you and talk money. It's important to find out how other people are managing their finances so you can increase your knowledge and pick up some successful tips. Talking about money is not as taboo as it used to be—especially if it comes from a sincere place and you admire the person you're meeting. Get the conversation started with these three questions:

What is the best way to pay down debt?

How do you decide to make a big-ticket purchase (e.g. car, house, renovations)? How do you know if you can afford it?

What was your worst money mistake, and what did you learn from it?

Week 4: Get Organized...Big Time.

Dedicate the entire weekend to getting your financial paperwork organized—and yes, it will take the whole weekend. Set up a filing system, if you don't have one already. Organize your bills into "in" and "out" folders. Make sure each type of payment has its own specific folder. If you subscribe to paperless invoicing, go into your accounts and print off three months worth of summaries so that you have a paper trail. Most importantly, take this opportunity to collect all the papers required for tax filing and keep them in one spot

Bonus: Take a close look at your statements and see if there are charges that should be removed. Maybe you're paying too much for cable or you have an extra magazine subscription that could be cancelled; take the time to examine your financial paperwork closely.