Canadian Personal Finance Blog

Deficit? Booo!

Yes, Jim Flaherty announced the likelihood of a budget deficit in 2009 for the first time (a planned one at least) in a while.

“There tend to be delays in infrastructure projects and, given the seriousness of the economic situation, it’s important that shovels get in the ground, that repairs on buildings start as quickly as possible,” Flaherty told CBC News.

He also warned of much higher unemployment as well. The year 2009 is shaping up to be a very “interesting” year economically.

The Day the TSX Died

Unbelievable but, the TSX did not open yesterday due to a network glitch? Amazing. An allegedly world class stock exchange is crippled by a network problem, in the middle of the Financial Apocalypse?

“Because the data feeds provide information to investors to guide their trading decisions, trading was halted to ensure market integrity,” the TSX said in a statement.

Integrity may have been saved, reputation on the other hand, who knows?

Are Banks a Bargain?

For those who remember, I still hold banks in my portfolio, mostly because I view them as a good Dividend providing investment.

BMO

Bank of Montreal had a new stock offering and thus added more shares and lowered their stock value thanks to this, which doesn’t make me very happy, but on the converse side of things, thanks to this my DRiP(Dividend ReInvestment Plan) will be buying more this quarter for this stock.

TD

Toronto Dominion continues to get hammered as part of the Bank Backlash with all the shenanigans that have gone on in the U.S. (and around the world).

Again, this means my dividend reinvestment program will be buying more shares, so that is good.

I am holding these stocks as a long term investment vehicle, which creates dividend income as well, and they continue to be good for that.

Advent Financial Calendar Box Day 19

Opening this box, you find a card, a Library Card. The Library is our friend, because we can do our Personal Finance research without having to buy books to do it. In Ottawa you can get books on CD, DVDs and a lot of on line information as well. Research is a cornerstone of your Personal Finance Journey, the more you read, the more you learn and the more you can apply to your financial planning.

If you are planning for next year (as you should in Advent), visit your Library and use your Library card.

So today I had an excellent presentation about the financial aspects of my severance from my employer, by a C.A. who is also a Financial Planner. He brought up several very interesting points, one that I had heard about but didn’t understand and another that I wasn’t even aware of (and caused me to write down many more questions for my one on one session with him in the near future).

RRSP Severance Rollover

Up until 1996 the rules for moving severance packages into RRSPs was pretty wide open, but then in 1996 the rules changed and you were not allowed to simply plow your severance directly into your RRSP (if you didn’t have room to put the severance allowance in your RRSP). The accommodation for folks like me that were still employed (and have been) by the same employer before 1996 (and haven’t received a severance package), I get a $2000 per year RRSP “bump up” for every year I worked for my employer before 1996 (and working in the year, could entail only 1 days work, too bad I didn’t work there as a Co-Op student).

For me this means that since I was employed from 1988 to 2008, I get 8 years counting in there or an RRSP bump up (for this one time) of $16,000 which I can put some of my severance package in (which is a good thing).  Since it is so late in the year, any dollar I shelter most likely saves me 46 cents of taxes I don’t have to pay on this year’s CRA tax forms (sorry Mr. Harper).

Severance Income is the Worst Kind of Income

Well, if there is such a thing as bad income, a severance package is that, because you get a T-4A for this income, but this income will not increase your RRSP room for the year, and it is not really counted as income per say (other than the fact that it gets TAXed like it is income). What I am trying to say is that severance is not an EARNED Income, thus you don’t pay CPP or EI premiums against it, but you don’t get RRSP room for it either.  I didn’t know that one either.

Another Idea the Lifelong Learning Program

Instead of simply cashing in RRSPs to pay for going back to school, the government has set up the Lifelong Learning Plan (LLP) where you can withdraw $10,000 in a  year and $20,000 total over 4 years to help pay for your schooling. There are rules for you to repay your RRSP the amount you borrowed to pay for your education, but I thought this would be a really good idea (for me or my wife). I don’t think this is something I will use now, but it is an interesting concept.

Best Joke to Say Around Former High Tech Workers

The presenter had a great comment for the section we skimmed over, “So this should be a short section, it’s about what to do if you make profits on your stock options during your severance period…”, everyone in the room burst out laughing, as did the instructor. If you aren’t in High Tech, you might not get it, but if you saw the Simpsons episode where it showed a high tech company giving out Stock Options from a toilet paper roller, you might get the joke.

I learned a lot today.

UCCB ?

Yes, tax time is coming folks and as I trip over the mistakes I have made, and things I have forgotten, I will post hints and reminders for you, so you don’t make the same mistakes that I might be making.

Last night we got our “Beer and Popcorn” money from the government again (said he belching as he types), or as it is officially called, the Universal Child Care Benefit (or something that gives an FLA of UCCB). It then dawned on me that it is important to show this benefit as income for your family, on your tax form for last year. Now I have it in my records that I was only running down to the Beer Store since July, so $600 worth of income, that you should claim on the spouse’s return with the lower income. If you both make a nice amount of money, you’ll be paying tax on it (ouch!), in that case the UCCB may not be your best friend.

To paraphrase a well known Oktoberfest song, “In Heaven there is no beer, that’s why we have to claim it on our income tax…”?!? Or something like that. UCCB, our new friend.

So, we now have figured out that the Government of Canada thinks little of the “traditional family” (IMHO), so let’s just ask another interesting question.

That’s a darn good question. If we go back to our happy calculations from our last set of Blogs:

1. Assume an income of $100K (yes, I keep choosing that number because it is easy for me)
2. All we need to compare is the income of a Single Person that makes $100K and someone with a spouse, right?
3. Assume this is Ontario (the good) of course.

Well if we look at how much a single person (who doesn’t do anything with their money except LIVE), the would pay approximately: $29,952.00

That is a lot of money, no matter how you slice it eh?

OK, if we now look at a married couple where one spouse makes $100K and their spouse or live in partner do not have enough income for the Tax folks to notice, they would pay: $28,219.00

So this says to me (and I could be mistaken), that my spouse who works very hard at home is worth: $1733.00

That is real money too guys (i.e. it’s money you aren’t paying in Tax, so it is REAL money). If I get paid every two weeks, that means my spouse is worth $66.00 per pay cheque.

That is not fair, now is it? My spouse’s labors to take care of our kids, the house and keep me from killing myself is worth $66.00 every two weeks? NO! That is not right.

Again my numbers are thanks to our friends at Quicktax.