Christmas Treats, RESPs, The Markets and Polkas and #MoneyTalk

With Advent upon us, it is not much time until Christmas will be here (and then gone). Did you realize there is actually a Financial Advent Calendar on this very site? You can consult it here.

With interest rates slowly rising, is it time to rethink short term savings? A good example is your RESPs for your kids. Should you be thinking about using GICs to ensure the money grows slowly but safely? Can you even use GICs in your child’s RESP? All good questions. Now you can get GICs with interest rates above 2%, maybe you should at least be putting your kids’ Grant money and put that in  there? Remember it is near year end, if  there is room still left you should  put a top up to get to your $2500 yearly maximum payment to the RESP.

My view of the Stock Market is it is currently having a shart. If you are unclear on what a shart means, please clock on the link. This shart might become something worse soon, given the trade stupidity going on, but for nice it is a mess caused by someone thinking they were only letting off gas.

Are planning on playing the Christmas Money Polka this season? It’s a simple game where you have bought many things on credit, and when the bill arrives in January, because you didn’t budget well you take the cash you got from family and pay off some of those bills. The money just goes round and round, and at the end of it you feel sick (just like a Polka), and broke.

Did you start your Emergency Fund with the idea that you were going to pay off Christmas with it? That’s not an emergency fund, that is a Christmas Fund. Maybe you should have both? Remember starting to plan for Next Christmas can start before this Christmas. You will have a better Christmas perspective now, than in July next summer.

Recent Articles

I really need to read letters more carefully, as I ended up blundering my way into a very large tax bill because of my inability to read letters well. I outline the predicament of my own creation in CRA and me: Assessment Excitement, the CRA was very helpful is the moral of this story.

Podcast of the Week

Finally you get to see what I actually look like, and you may realize why I have commented that I have a face for Radio. I do like the preview photo makes you wonder what I was thinking.

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CRA and me: Assessment Excitement

This past summer, the CRA sent me a letter of assessment for my son’s school fees. These kind of assessments happen often. While I am slightly freaked out by them, it is still not a big deal. The letter asked for all associated documentation supporting my medical claim for my son’s school fees.

I dutifully collected all the receipts for the School and for my son’s Occupational Therapist. I wrote a cover letter outlining what I was sending and I sent it via registered mail to the CRA.

In that previous paragraph I made two mistakes (one small and one critical error):

  1. I could have easily scanned all the receipts and submitted them to the CRA on line. Much faster, and less expensive. Hopefully I will remember that for the next time.
  2. The letter asked for all associated documentation, and I misinterpreted that to mean receipts, and that caused a big problem.

 For those unaware, if your child is disabled you can claim their schooling or training as a medical expense. You must have a DTC first, and then ask permission of the CRA to be able to make that claim on your taxes. This is where my blunder took place.

My son had changed schools a while back, and I had never done a new letter outlining how his new school would help him with his disability (Autism Spectrum). Without this letter, and supporting documentation from his Doctor and other medical professionals, the CRA had every right to deny this claim on my taxes. As I did not include any supporting documentation with my assessment, the CRA denied my claim, and sent me a bill for what I owed.

The CRA was in the right to do this, and I was in the wrong for not sending it. I want to be clear on this point, I am not casting any shade on the CRA, they have actually been very helpful in this case.

It took a while, but I finally received my Assessment response via email, and I was shocked and upset to see the results(an over $4000 tax bill). After reading the email a few times, my wife read it and pointed out my mistake. She realized that I had not sent a new package outlining how the new school helped my son. I believe I sputtered and swore, but then came to the epiphany that my wife was right.

The past few weeks I have spent collecting the needed data and letters to support my claim for my son’s school expenses, and submitted them (electronically) to the CRA.

As the date of when I was supposed to pay my new tax bill came closer, I realized my reassessment was not going to be completed in time. Again, this was due to my procrastination, not the CRA inaction. I decided to call the CRA, and they directed me to their collections group.

When I spoke to the collections person, he brought up my file, I explained that I had submitted the needed documentation, and they decided to give me a 90-day extension on my due payment. This means I won’t have to fork out $4000 at Christmas time.

There is no guarantee that the CRA will accept my claim and documentation. Given the amount of supporting documentation I am hopeful that this is sufficient, but at least I won’t have to pay out a large sum of money now (that might be refunded later).

Conclusion

As I have said previously, if you don’t ask the answer is always no. I asked the CRA for clarification on what they needed, they provided that to me. The CRA also granted me an extension on payment, because I asked, and had a good set of reasons.

Sometimes the CRA screws up, but in this case, they are actually the heroes in this story (so far).

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A new Guest Post about Robo Advisors. The author is a newer face, but has some interesting opinions, well worth reading. All opinions are his.

You may have seen the ads from Wealthsimple. Here’s their youtube channel if you want a refresher. They are Canada’s most famous ‘robo advisor’ as they spend a lot of time and money attempting to reach Canadians. And when you hear about Wealthsimple you’ll often hear the phrase ‘Robo Advisor’.

So what is a Robo Advisor? It’s an investment company that helps you invest with the aid of technology. And because they make the best use of new technologies they can allow you to invest at a fraction of the costs that Canadians will typically pay. And that’s why the Robo’s are here – Canadians pay the highest mutual fund investment fees in the developed world. Those high fees can eat up a significant portion of your investment returns over time – even more than half. Those high fees are destroying the wealth of Canadians. But thankfully, there’s a better way for those that want a managed investment portfolio.

A Robo Advisor can help you invest with fees that are in the range of 50% to 80% cheaper. That can be life changing; potentially it might allow you to retire with a portfolio that is almost twice as generous, or you might be able to retire several years earlier. Those lower fees will usually allow you to better reach any investment goal, even saving for a house, or your child’s education.

And don’t let that word ‘Robo’ scare you. There are no robot advisors. In fact, while popularized, the moniker Robo Advisor is not all that accurate. At all of these investment companies there are many human advisors and customer service representatives ready to help. You can usually communicate by way of online chat or email as well.

As the CEO of Wealthsimple likes to offer …

“Humans when you want them, technology when you don’t.”

These companies simply use technology to manage the investments in an efficient and cost-effective manner. If you seek the ultimate in convenience you can certainly do everything online from your account set up (it might just take a few minutes) to the completion of an online investor questionnaire that will offer you the most appropriate comprehensive investment portfolio designed to help you reach your goals while you invest within your risk comfort level.

But once again, if you ever want that human touch, just pick up the phone.

All of these ‘Digital Wealth Managers’ offer the same style of sensible low fee investment portfolios. You’ll have a well diversified portfolio that includes large baskets of Canadian companies, US and International companies, and bonds are often present to manage the risk of the portfolio. The stock (companies) are there for growth, the bonds are present to reduce the risk or volatility. You’ll be offered a portfolio in line with your risk tolerance level.

And the portfolios are watched and professionally managed on a regular schedule. They are also re-balanced automatically to keep everything ‘in check’. There’s nothing for you to do but sit back and add monies on a regular schedule. You can view your progress online, you can call in to chat if you have questions or concerns.

You can do and get everything you would normally need; you’ll simply do it in a much more cost-effective manner. You will keep considerably more monies in your portfolio pocket.

And all of these investment companies have their unique characteristics and offerings. You can visit my Robo Advisor page for a list of the Canadian companies, and you’ll find reviews on many of these companies (I am still completing that writing process).

They also cover a wide spectrum. Questwealth and Nest Wealth offer the lowest fees; Questwealth for those with smaller to modest portfolios, while Nest Wealth is the most cost-effective for portfolios in the range of $300,000 and above. On any investment portfolio above $150,000 Nest Wealth will charge just $80 per month, capped. The savings on fees can be thousands upon thousands of dollars every year, depending on the size of your investment portfolio.

If you have a more complicated tax situation or are in need of a full financial plan you might consider Justwealth. Once again, that advice is included in the low annual fees.

Please have a look at the list of companies on my site, read some reviews and if you have any questions, please send a note to cutthecrapinvesting@gmail.com. If you are interested in this low fee approach I can direct you to the companies that might best suit your needs.

The key is to not pay those wealth-destroying high fees when you invest. Those monies belong in your pocket.

Dale Roberts is the Chief Disruptor at Cut The Crap Investing. A former advisor on low fee index portfolios, Dale now helps Canadians find the many sensible low fee options available. 

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Allow me to be clear on my opinion of GM shutting down their Oshawa plant, F*ck you GM! You take government bail-outs (fail-outs?), and you then turn around and do this? As a tax payer I am disgusted by this attitude. Yes, I realize this is a business, and it is only a “business decision”, but as a regular person, I still think the thing stinks. I have had 3 GM cars, and all have had issues, and the last one was a Lemon. My opinion of their products is they are low quality.

I recorded yet another Podcast with Doug Hoyes last week, and dropped in on the Hoyes-Michalos offices in Ottawa.  Spoke to a few of the folks in the office, and heard about the scope of the Phoenix pay debacle has had on Ottawa. The chap I spoke to said he has seen plenty of folks who ended up being burned badly by the Phoenix “Pay” system. This included folks who didn’t get paid, and tried to live on their credit which cause the entire “financial apple cart” to fall over. I passed on my personal findings of folks who are turning down promotions, for fear of it causing a “Phoenix Profile” change and endangering their pay.

The content of the Podcast was well-defined by Doug and he had questions written down, but as usual it all broke down quickly, and I am not clear exactly what the real topic ended up being. Stay tuned on the Debt Free in 30 podcast and see how he edited it together. There were cameras as well.

Banks News?

The Banks will be announcing their results, TD already has, and they seem to be doing well. Somewhere along the line things will change, but not today.

Speaking of banks, President’s Choice has redesigned their PC Mastercard site, and have decided that an ability to download into Quicken or Quickbooks isn’t needed. You can download in CSV format (for Excel or a spreadsheet), but not directly from your bank account. Given how competitive the marketplace is for Credit Cards, taking away functionality for customers isn’t something rd assume was a good thing. I have voiced my displeasure, we shall see whether I take action, or not.

Recent Articles

It’s been a while since I did one of these so here are a few of my articles from the fall of 2018.

Never was So Much Owed by So Many outlines the latest numbers from Stats Canada about household debt, and how consumer debt is a hobby Canadians dearly love. My apologies to Mr. Churchill for such a crass paraphrasing.

Make More by Reducing Debt has been sitting in my almost finished queue for a while. Again, I am being quite cheeky about the subject, but sometimes the simplest explanations are the best. Continuing in that cheeky line, Savings Motivating System really was just a quick bad bit of humor I thought up one night. Remember with interest rates going up, a savings account might not be a bad place to put money.

Do credit cards just appear on your doorstep? In Farewell New Credit Card I outline how an old credit card (that I had forgotten about) morphed into a new card, which I didn’t want. The one really important part of a credit report is to see which credit cards you thought you closed are still open.

Deep Financial Thoughts

Doug Hoyes has thoughts everywhere, and here he is in his car telling us why high interest lenders (59% rates) are causing stress.

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Farewell New Credit Card

Last week I received a new credit card in the mail. It was a Flexiti card, and they seem to have purchased the business from The Brick or some other store credit card. Every few months I keep getting new credit cards like this sent to me. They come with a simple activate procedure to turn them on.

Each of these new cards adds:

  • More liability to me, in the eyes of any reputable loan provider (i.e. bank or the like). In the good old days each credit cards credit limit counted against your ability to borrow I am not sure how things work these days.
  • Another attack vector for those attempting to fraudulently use my good credit. Each of these cards has a new number, a new login on-line and thus another place where thieves can attempt to steal your
  • Temptation, and this is the intangible nasty part of One day I might get into a position where if I had this card I might use it as a last resort (when maybe I should have done something sensible instead).
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Cancel the Card

To cancel this card, I called and spoke to a polite young man, who did try to convince me not to cancel the account, but relented when it became obvious I wouldn’t change my mind. I also asked for a confirmation that the card was cancelled. The credit card number and information have been put in a safe place as well (along with the date I cancelled the card).

The card has been shredded, so this credit vehicle should be dead.

As I have said previously I have too many credit cards, so cancelling this card and a few more is a very good idea for me. Your mileage may vary, but I think having one (or no) credit cards is a good idea.

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