I have had a lot of folks comment to me about how “… I didn’t know I was in trouble financially until I was in the middle of it…”, which is (unfortunately) true for many folks. In trying to help folks understand some of the warning signs that their debt load is starting to get out of control I will give you some personal examples of when you should really start doing something (i.e. make a plan, or talk to someone) about your debt load.
The Coyote Didn’t See it Coming Either
- If you have yelled at your spouse because they bought the “expensive” toilet paper. If you are that close to the edge that whether you get “ass ripping” or “soft on my bum” toilet paper matters, you are in trouble.
- You start devising plans to transfer monthly credit balances from one credit card to another one with a lower rate of interest. You shouldn’t be carrying debt on your credit card (even if it has a low-interest rate), and if you are thinking of consolidation loans, you are in trouble and should go get help.
- You try to put together a financial plan, or at least a list of known expenses, and you can’t remember all the places where you owe money, this is a big problem. More than once I have heard an associate tell me, “… I forgot that I had to pay the property tax this month..”. Really? Any bill that is bigger than $100 should be on your calendar with warnings on when to pay it.
- Your need to have a new vehicle fools you into allowing your car sales rep to “blend and extend” or “fold in” your previous car lease into your new one, because it’s only $50 more a pay (and you are paying every two weeks).
- If the phrase, “pay day loans aren’t that bad” is ever used by you and not in a sarcastic way, you are really up feces creek without a canoe or a paddle.
I realize very few folks make the conscious decision to let their debt get out of control, but it is scary to think just how simple it is to have things get out of control when it comes to your finance. Diligence is the watch word for your money.
Saw that question in Money Magazine as a frequently asked question, so let me help you out (for those in Canada), with a few helpful links and a few more helpful tables and such. As a precursor to these hints, you should always check with the CRA or a licensed Tax Accountant if you have questions about your Tax levels and such.
Where do you find out about the current Federal Income Tax Rates (for you as an Individual, not you as a corporation) ? Go to this page for individuals. That page will tell you the following (for 2015):
Federal tax rates for 2015
- 15% on the first $44,701 of taxable income, +
- 22% on the next $44,700 of taxable income (on the portion of taxable income over $44,701 up to $89,401),+
- 26% on the next $49,185 of taxable income (on the portion of taxable income over $89,401 up to $138,586), +
- 29% of taxable income over $138,586.
The Infamous Bad Pun
Remember that is Taxable Income, so this is what is left after you have taken your deductions, and credits and such. Remember also that if you earn less than the Basic Personal Amount (line 300) you don’t have to pay taxes (for kids with summer jobs and such).
However, that is not all, remember that you have Provincial Income Tax as well, and here are the 2015 numbers to keep in mind too:
Provincial/territorial tax rates (combined chart)
|Newfoundland and Labrador
||7.7% on the first $35,008 of taxable income, +
12.5% on the next $35,007, +
13.3% on the amount over $70,015
|Prince Edward Island
||9.8% on the first $31,984 of taxable income, +
13.8% on the next $31,985, +
16.7% on the amount over $63,969
||8.79% on the first $29,590 of taxable income, +
14.95% on the next $29,590, +
16.67% on the next $33,820, +
17.5% on the next $57,000, +
21% on the amount over $150,000
||9.68% on the first $39,973 of taxable income, +
14.82% on the next $39,973, +
16.52% on the next $50,029, +
17.84% on the amount over $129,975
||Go to Income tax rates (Revenu Québec Web site).
||5.05% on the first $40,922 of taxable income, +
9.15% on the next $40,925, +
11.16% on the next $68,153, +
12.16% on the next $70,000, +
13.16 % on the amount over $220,000
||10.8% on the first $31,000 of taxable income, +
12.75% on the next $36,000, +
17.4% on the amount over $67,000
||11% on the first $44,028 of taxable income, +
13% on the next $81,767, +
15% on the amount over $125,795
||10% of taxable income
||5.06% on the first $37,869 of taxable income, +
7.7% on the next $37,871, +
10.5% on the next $11,218, +
12.29% on the next $18,634, +
14.7% on the next $45,458, +
16.8% on the amount over $151,050
||7.04% on the first $44,701 of taxable income, +
9.68% on the next $44,700, +
11.44% on the next $49,185, +
12.76% on the amount over $138,586
||5.9% on the first $40,484 of taxable income, +
8.6% on the next $40,487, +
12.2% on the next $50,670, +
14.05% on the amount over $131,641
||4% on the first $42,622 of taxable income, +
7% on the next $42,621, +
9% on the next $53,343, +
11.5% on the amount over $138,586
A commenter has pointed out another excellent resource in this area TaxTips.ca , check them out too!
According to the Toronto Star, you will soon be able to play down your Ontario Student Loans with your (or maybe a relative’s) Aeroplan miles. The exchange rate is currently pegged at about 7/10 of a cent for each mile cashed in (the example given was 35000 points becomes a $250 payment). While I applaud the ability to help pay down the ballooning Student Debts in Canada, couldn’t I have just done this with my Amex Cash back Card, or my PC Financial Mastercard? I am not sure if this is a good rate of transfer or not, but if a student has a “Sugar Relative” heavily laden with Aeroplan points, maybe they could get some help?
Early Happy Father’s Day (Fathers’ Day) to all the Dads out there. It used to be that Father’s Day was the day when the most collect long distance calls were made, not sure what the 21st century version of that factoid might be. My Dad passed on a few years ago, but the things he taught me keep him with me always. The scary part of Father’s Day is realizing I am a Father as well.
To my Muslim readers, Ramadan is here. For folks in Canada this is going to hurt, because now we have the longest days of the year, so you are going to have to work hard on your fasting during the day. Eid is coming, but not for a while.
KPMG says we should stop the Canada Savings Bonds program? Remember that most of the Bonds these days are held by folks over the age 60 (OK, that is a guess on my part) but those are also the folks that remember when bonds had interest rates of 19% (yes that was 35 years ago, but you never know).
My Writings for Week Ending June 19th
No more Hockey or Basketball, guess it is Rugby, Formula 1, Soccer, and catching up on series I missed in the Winter season :
- To start the week off, I published some notes I made up for an interview with the Toronto Star (that has disappeared into the ether from what I can tell), with Really Useful RESP Tips, I am available for interviews, Frat Parties, Bar Mitzvahs, and Weddings(check the About menu for details).
- Evidently Thursday was “Let’s Splurge Day”, so my post Today Do Something for Yourself ( Financially ) was very topical (whodathunkit). No it’s not what you think.
- On one of my other sites, I tried out a new old idea with the Best of Technology and Security this Week, have a look it has some interesting tid bits.
Click here for many more great financial stories
You have worked hard for your pay, and you deserve to do something for yourself with all that cash you earned, so here are some of the best things you can spoil yourself financially.
- Go to the Mall, find a Banking machine, and deposit that money into your savings account. If you don’t have any cash on you and all of your money is in your bank already, indulge by walking by that ATM (and get a special warm feeling of accomplishment if it is a “White ATM” which might have charged you $3.00 to withdraw your money).
- While you are strolling through the mall, if you see something you really want to buy in one of the stores, realize how many hours you would have to work to pay for that thing, and then bask in the warm glow of knowing how much money you would keep by not buying it, and then don’t buy it.
- As you pass the Restaurant that you love to eat at, remember that wonderful sensation that isn’t the ten kilos of fat. that you would have accumulated if you continued to eat their huge portions. Self-control is a wonderful feeling and you deserve the rapture you experience when you exert it. You also won’t need that gym membership, because you didn’t put on those extra 10 kilos.
- If you are at your computer, go to the BMW web site, and design your dream car, give it all the extras you have always wanted (include a heated coffee cup holder). Take in this glorious piece of Bavarian Auto Prowess, then make sure that your bus pass is up to date, and know that by not buying this gorgeous piece of auto porn, you will be able to make a down payment on a house.
- Find all of your credit card statements, and see how many you can pay off this month, and think of all the money you didn’t have to spend on high interest charges, because you are that person. You may use your credit cards, but you are also an Adult, and know that you should pay off your debts.
Doesn’t it make you feel special spoiling yourself like this? Are there any other decadent financial pampering you can do for yourself ?
A while back I was “interviewed” for an article that was supposed to appear in the Toronto Star, and you will be happy to hear that I am turning over a new leaf when being interviewed, I actually prepared for it!
RESP’s Are Savings For Your and Your Child’s Future
Previously, if during interviews it sounded like I was talking out of my hat, I was, but things are changing. What happened to the article with the Toronto Star about Registered Education Savings Plans (RESP) I have no idea, but let me give you some of my notes that I had prepared, along with some links to some of my own thoughts on the subject.
- Remember that there is a $50K Lifetime deposit limit
- If you only deposit $2500/year, you will be under that limit, so maybe start with a larger lump sum to give it time to grow ?
- If you miss giving up to $2500 one year, you roll $1000 of that limit to the next year
Canada education savings grant (CSEG) is typically 20% up to $2500 deposited (can get higher for lower-income families)
- If one child doesn’t use the money, you can transfer it to other children under the age of 21 (without penalties), but still can be transferred to blood relatives older than 21 ( there will be penalties there).
CLB – Canada Learning Bond
- Little or no money needs to be deposited to get this, an initial $500 gets put in even if no money is deposited. Most banks are leary to do this, but talk to SmartSaver.org and they will help set things up (in the Toronto Area)
General RESP Advice
- Start early, get your child a SIN, and maybe start with a larger lump sum to get things going (longer it has to grow, the better for you, remember the rule of 72 ).
- If I had a chance to do it over again, I’d use a Self-Directed non-mutual fund bound system like TD Waterhouse, Questrade, BMO, etc.,
- Beware programs that might have penalties on the principal, yes the CESG and CLB can have penalties if the child does not go to school, but you should get the money deposited back (and pay tax on the growth)
- Invest in a simple couch potato portfolio with Index Funds or Index ETFs, no need to be aggressive here.
- Acadia cost about $3800/term Trent is about $3500/term, so your RESP isn’t going to be able to deal with much more than Tuition costs, there are many many more costs associated with school.
Most schools will show estimates of how much a typical year might cost (U of Waterloo, Trent and Queens do).
- A lot of folks think their kids should pay for their education, but even if you only put $50 a pay in, it might help your kids start out? It is free money from the government.
As usual you can peruse my Registered Education savings Plan web page, which has a large amount of information on the topic. If you are interested in interviewing me see the About section of this site for details on this.