Some money saving tips

One of my clients, Mary recently became an empty nester when her son moved out earlier this year. Mary is single, working and has a married daughter with a toddler. She called me because her credit card debt is slowly creeping up and she wanted to see what she could do before it became a major problem. We sat down and reviewed Mary's income and spending patterns. It turned out that since her son moved out of the house, Mary has stopped going to the grocery store on a regular basis and so doesn't keep fresh food in her home. As a result, she has started to eat lunch out and stop for fast food on her way home from work. Mary was spending about $100 per week on coffee, lunch and take-out dinners. (We're not talking about meals that are social events.) I was at Subway last week and I spent $12.50 for their Chopped Salad and a bottle of water. If I had purchased the equivalent meal (prepared at the grocery store), it would have been about $6. If I purchased the component parts in the grocery store and assembled it myself, we're probably looking at $3 or $4 per salad. (We're talking bagged salad, pre-cooked chicken, some extra vegetables, some salad dressing and a bottle of water.) Mary is back to going to the grocery store and bringing lunch to work (most days) and is now taking advantage of the employer sponsored coffee and tea and has cut her $100 down to about $50 a week for these groceries and some fast food. (Mary still buys some lunches out - when she goes out with a co-worker, and one night a week eats fast food between work and a scheduled activity.) Mary told me that a side effect is that she's lost a few pounds. We also noticed that Mary's spending on her grandchild was climbing every month. She would go out with her daughter shopping and then pay for everything, even though her daughter could afford to buy the items herself. Mary now takes out $200 a month cash, puts it in an envelope in her purse and only buys "treats" until the money runs out each month. Do some of these spending patterns look familiar? Are there simple things that you can change? Give me a call and we can review your spending and saving patterns.

 

Books educate, movies inspire, people cause change.  This was the take-home message from a number of the Q & As with the directors from the movies I saw at TIFF (Toronto International Film Festival) this year.

TIFF started as a small “Festival of Festivals” in Toronto in 1976 collecting the films from other film festivals around the world and showing them to eager audiences in Toronto.¹ That first year, 35,000 enthusiasts watched 127 films from 30 countries.  Today TIFF shows around 400 movies (most 3 times) to over 400,000 people over the course of 10 days in September. Many of these movies are International or North American Premiers.  In addition, to the public screenings, there are screenings for the press and industry insiders.

I have been going to TIFF and seeing around 20 movies each year since 2007.  For 4 or 5 years before that, I went to 2 or 3 movies each year.  I’ve been fortunate that each year I see a couple of great movies that often don’t play for years (if ever).

Several of the movies I saw promote the values of transforming the way people see the world and the way that we interact. 

Music of Strangers: Yo-Yo Ma and the Silk Road Ensemble will be released in the spring of 2016.  Yo-Yo Ma does not see himself as a musician, but as an agent of change. The Silk Road Ensemble's aspiration is to "create unexpected connections".  In the movie, we hear the magnificent results of blending musical cultures; If you’re into music or exploring the variations in culture, this movie is for you.

I saw two environmental movies – Return of the Atom and This Changes Everything.  Return of the Atom explored the issue of nuclear energy from multiple perspectives (scientific, safety, pro and con opinions) and encouraged the viewer to draw their own opinion.  This Changes Everything (based on the book by Naomi Klein) encourages people to take action to change the world.   No matter your opinion on the environment (or your business), it is important to continuously educate yourself and be true to yourself.  This was also the theme of Michael Moore’s new movie – Where to Invade Next. Michael Moore travels the world looking at what he refers to “American solutions” being used around the world for American problems.

There’s always a way to get to your goal.  You may be a movie director in Iran who has been banned from making movies, so you drive around Tehran in a cab recording everyday life as Jafar Panhai did in his movie Taxi.  You could also live in a small village in Tibet and decide to go on a “bowing” pilgrimage (laying your bodies flat on the ground after every few steps) along the 2000 kilometre road to Lhassa in Paths of the Soul (a fictionalized true story). Or a 70 year old man who has never left his village, driving 3000 miles to Darwin, Australia to participate in assisted suicide in Last Cab to Darwin.  These movies depict human perseverance in a positive light and reaffirm your belief in other people and in the helping relationships that we all develop though our lives.

I tell people that going to TIFF isn’t a vacation.  I consider that seeing movies is a way to get a fresh perspective on my life and my business (especially when you see 20 films in a 10 day period).  If you missed TIFF and don’t want to wait until next September, Toronto is very fortunate to have many film festivals throughout the year - https://www.facebook.com/TorontoFilmFestivals  or http://www.blogto.com/toronto/the_best_film_festivals_in_toronto/

Check out the full list of movies that I saw (with short summaries).  The ones that I recommend are marked with an “*”. If there are 2 “*” it is a highly recommend and I think that you should see it when it plays near you. 

¹ Check this link for the history of TIFF - http://tiff.net/explore/history and https://en.wikipedia.org/wiki/Toronto_International_Film_Festival

Alphabetical List of 2015 TIFF Movies I Saw

ARABIAN NIGHTS TRILOGY – This art trilogy, won many awards. 

BABA JOON - Chronicling the burgeoning conflict between father and son in a hard-working Iranian-Israeli family.

*CROMO – an Environmental / Thriller TV series that will be airing in Argentina.        

*JAFAR PANAHI'S TAXI – Jafar Panahi is an Iranian filmmaker who is banned from making movies, so I guess this isn’t a movie.  It shows a side of Iranian life that is the same as everywhere else in the world.

*JOURNEY OF A THOUSAND MILES: PEACEKEEPERS – a documentary about female Peacekeepers from Bangladesh that are sent to Haiti for a year.

**LAST CAB TO DARWIN – Assisted suicide was briefly available in Australia. This is the moving story of one man’s journey.

*LEN AND COMPANY – The story of how we are influenced and changed by the people around us

*LOOKING FOR GRACE – An Australian film, about parents looking for their teenage daughter

*MAGGIE'S PLAN – a chick flick about a women who needs to control everything     

**MUSIC OF STRANGERS: YO-YO MA AND THE SILK ROAD – This ensemble is the result of a workshop at Tanglewood and is a microcosm of the world.  If you’re into music, the blending of cultures or how blending different points of view can be much better than its parts.  This will be released Spring 2016

*PATHS OF THE SOUL – a documentary about members from a Tibetan village who go on a pilgrimage    

PROMISED LAND -  A Chinese film discussing the movement of the young people to the big cities       

*P.S. JERUSALEM – This is an autobiography of Danae Elon (daughter of Amos Elon) on her return to live in Jerusalem with her family after an absence of 20 years. They are currently living in Montreal.

*RETURN OF THE ATOM - A documentary showing all the viewpoints of the construction of a nuclear power plant on the remote Finnish island of Olkiluoto.

SONG OF SONGS - The film recreates the idyllic village life of a Hasidic community in a turn-of-the-century Ukrainian shtetl.  

SHORT CUTS PROGRAMME 10   

Quiet Zone

Clouds of Autumn

Nulla Nulla

Hide & Seek

Tuesday

Oslo’s Rose

A Tale of Love, Madness and Death

*THIS CHANGES EVERYTHING - Directed by Avi Lewis and based on Naomi Klein's bestselling book of the same name, This Changes Everything is an urgent dispatch on climate change that eschews the abstract and rhetorical in favour of the personal and immediate. Can be seen everywhere – check their website

WAVELENGTHS 1 - FIRE IN THE BRAIN

3D Movie

Fugue

Prima Materia

A Fire in My Brain that Separates Us

Something Horizontal

The Exquisite Corpus

**WHERE TO INVADE NEXT –Michael Moore’s latest movie. He travels the world (mostly Europe) to find solutions to the problems in the USA (e.g. gourmet school lunches in France, 8 weeks of vacation in Italy, free college education [including for Americans] in Slovenia, etc.}

*WHITE KNIGHTS – The story of an NGO trying to rescue 300 children from the civil war in Chad. Or are they?  You get to write the ending.

 

Your Assets (including digital)

 

 

Monetary Assets, Sentimental Assets and Digital Assets   What should you include in your Last Will and Testament and Power of Attorney documents?   For years, you have heard that you need the following documents: Power of Attorney for Personal Care Power of Attorney for Property Last Will and Testament Through the Power of Attorney documents, you grant the ability of a named alternate to make decisions on your behalf should you not be capable of making them while you are alive. Information about these documents can be found on the Government of Ontario website.     Your Last Will and Testament is a written document that sets out your wishes about how your estate should be taken care of and distributed after your death. It takes effect when you die. The Government of Ontario website is a great resource.     Traditionally, Power of Attorney for Property and Last Wills and Testament only dealt with real assets. What if you only do electronic banking or get all of your bills each month as e-bills or you have a Netflix or other monthly electronic subscription?   I don't know about you, but I inherited a box of family photos when my parents died. Most of my photos are stored electronically - either on a hard drive or in the cloud. I also have Facebook, LinkedIn, Twitter accounts, a web site, and many other online footprints.   Can the person that you name as Power of Attorney for Property or Executor of your Will access all of these accounts? Do they have access to all of your Usernames and Passwords? Do they know if you want these accounts closed or maintained?                                                                                                      To ensure that you have the proper documentation, you should consult with an attorney and ensure that all of your documentation is up to date.   For more information, you may want to check out this article on the Manulife web site put together by their Tax, Retirement and Estate Planning Services Group.

Estate Planning - it's never too early

In a recent article in The Toronto Star, Gordon Pape talked about tax efficient investments. Depending on whether your investments generate interest, dividends or capital gains, their tax rates vary. For example, if your income is from Canadian dividends, you could save $157.10 of tax for every $1,000 received, compared to interest income.

As per Wikipedia,

Estate planning is the process of anticipating and arranging for the disposal of an estate during a person's life. Estate planning typically attempts to eliminate uncertainties over the administration of a probate and maximize the value of the estate by reducing taxes and other expenses.

In reality, we should start estate planning early in life, as building your estate is step one of estate planning.

I often get asked by people where they should invest their money - paying off debts, paying off their mortgage, in an RRSP, in a TFSA, in real estate, etc. There is no correct answer, as many factors contribute to estate planning.

From a retirement perspective, your sources of income vary by how flexible they are. That is true based on when you can take the money, the flexibility of taking the money and how tax efficient during both the accumulation and withdrawal phases they are. In order of least to most flexible at retirement, most advisors would itemize them as follows:

1. OAS - money may be claw-backed starting at incomes of $71,492
2. CPP - can be started between age 60 and 70; can be shared by spouses; is considered taxable income
3. Annuity - once started, it continues for life; there may be guarantees; tax rates vary depending on the source of the original funds (e.g. registered or not)
4. Employment Income - is always taxed, but you may be able to decide how much you work and earn; if you are under 65, you may need to pay CPP on this earned income
5. Work Place Pensions - both Defined Benefit and Defined Contribution; can be shared by spouses
6. RRSP - at 71 must be converted to a RRIF or Annuity or cashed in (not recommended); watch the attribution rule for Spousal RRSPs
7. Non-registered investments - you paid tax through the accumulation phase, but they are normally not taxed when you spend the money
8. TFSA - growth is tax free. Current limit if you have not opened an account yet is $36,500; they are normally not taxed when you spend the money

At any stage of life, you want to minimize the amount of tax you pay. You really need to contact a Tax Accountant for complete advice.

April 21, 2015 Federal Budget Highlights

As you know, Finance Minister Joe Oliver delivered his Federal budget on April 21 in Ottawa.

 

While you've probably seen plenty of media coverage, I thought you would appreciate an overview of how some of the budget items that relate to investments and taxes.

 

This year, the government reported balanced books and wants that to continue. So it's introduced balanced budget legislation requiring Ottawa to stay in the black unless there's a recession, war, or natural disaster. One way the government will do that is by closing certain tax loopholes.

 

Still, this year's budget contains some generous changes

.

Foremost is an increase in the TFSA contribution limit from the current $5,500 to $10,000. The proposed change is retroactive to January 1, 2015, and clients over age 18 who have not contributed since the TFSA's creation in 2009 now have $41,000 in contribution room.

 

For some clients, especially those in lower tax brackets, this change means TFSAs can become more advantageous than RRSPs. Many clients nearing retirement also will benefit from the limit increase, because they can take advantage of early RRIF withdrawal benefits and then move the money into a TFSA and keep it sheltered.
 

Or, if you've already contributed the old $36,500 maximum, you could now move some non-registered investments into TFSAs. In cases where large capital gains might apply, this might not be a strategy worth pursuing. But we can talk about whether this strategy is a good idea when next we meet.

 

TFSA limit increases also have been decoupled from the inflation rate, meaning future increases aren't automatic and instead will have to be legislated by the government.

 

Meanwhile, proposed changes to RRIF rules will mean seniors won't have to withdraw as much money from their retirement savings. The budget cuts the required withdrawal amount at age 71 to 5.28% from the current 7.38%. Required withdrawal rates still increase every year, but instead of topping out at 20% at age 94, the cap isn't reached until age 95.

 

Another budget item aimed at seniors and others who qualify for the Disability Tax Credit is a new Home Accessibility Tax Credit. This 15% non-refundable tax credit applies to up to $10,000 of renovations, such as wheelchair ramps, walk-in bathtubs and wheel-in showers.

 

And, small businesses will get to keep more of their earnings. This year's budget proposes to reduce the small business tax rate to 9% by 2019 - or 2% over the next four years. The reduction generally applies to the first $500,000 of business income.
 

Small business owners also will get a tax break if they sell their companies and donate the private company shares to charity. To be eligible, a sale must take place in 2017 or later.

 

Lastly, rules for reporting specified foreign income will be changing, again. Ottawa's announced a revamp of Form T1135 to streamline the process for people with assets between $100,000 and $250,000 in time for the 2015 tax year. But those reporting $250,000 or more will need to follow the existing requirements.

 

I hope you find these highlights useful. If you'd like to discuss these and other Federal budget initiatives and how they affect your financial plan, please don't hesitate to contact me.  

The need for Travel insurance

A study released by the Bank of Montreal (BMO) on March 24, 2015 examines why and how Canadians use travel insurance.

One of the findings of the study is that 36% of Canadians do end up requiring medical attention while they are on vacation, and that many have had to file a claim when they returned home in order to recover out-of-pocket expenses. Among those with travel insurance, 76% described the claims process as "easy" and none of those surveyed had their claims rejected. BMO says that 74% of those who had filed claims received the full balance of what was owed and 26% were partially reimbursed.

 

If you leave Ontario, do you ensure that you have Out of Province Medical Insurance? It can be part of your benefit package or on your "gold" credit card or purchased separately through your travel agent or a life insurance agent.  

Have you verified what it covers? For example some group policies will only cover you for travel in Canada. Some credit card policies will only cover you if you are under 65 and purchased the travel package using that card.

The best way to ensure that your claim is paid for is to contact the insurance company at the number on your wallet card as soon as possible. Not only will you know right away what is covered, they will often guide you through getting the medical assistance that you need.

Tax Return Filing Tips for 2014 Taxes

Filing a tax return isn't always an easy task. You want to ensure you claim every credit and deduction that you are entitled to, whether you do it yourself or give it to a tax preparer.   The following notes are designed to highlight some federal deductions and credits that may be of interest.     Home buyers' amount: Did you buy a home in 2014? You may be able to claim up to $5,000 of the purchase cost, and get a non-refundable tax credit of up to $750. Medical expenses threshold: For the 2014 tax year, the maximum is 3% of net income or $2,171, whichever is less. NOTE: If your medical expenses exceed 4% of your household's combined net income and are due to a medical condition, you may want to check out the Ontario Government Trillium Drug Program  Donation tax credits: after March 20, 2013, the first-time donor super credit is 25% for up to $1,000 in donations, for one tax year between 2013 and 2017 Lifetime capital gains exemption:The lifetime capital gains exemption is $813,600 in 2015. Low-interest loans: The current family loan rate is 1%. Children's Fitness Amount - Is now $1000 (it was $500) for children under 18 enrolled in a prescribed fitness program. Maximum RRSP contribution:The maximum contribution for 2016 is $25,370, and for 2015 is $24,930.  However, you should check your Notice of Assessment from your 2013 taxes TFSA limit: The TFSA limit for 2015 is $5,500, for a total of $36,500 in room available for someone who has never contributed and has been eligible for the TFSA since its introduction in 2009.       Maximum pensionable earnings: For 2015, the maximum pensionable earnings is $53,600, and the basic exemption amount is $3,500. Maximum EI insurable earnings: The maximum annual insurance earnings (federal) for 2015 is $49,500. Turning 65 this year? - There are a number of credits that take effect. Turning 71 this year? -In the year you turn 71, you must convert your RRSP to a RRIF Did your children turn 18? - Many credits and deductions may no longer be available to the parents For more information, the Canada Revenue Agency web site can be found here.