Bird in the Hand or Tax Refund Later?

So if I offered you “free” tax return preparation, and with that, I would give you an instant Tax Rebate, once I am finished (no waiting for the mean old CRA to pay out), would you take it?

Let’s just say, I am finding more and more people who seem to think this is a great idea, and it really sickens me.

If you want a fast rebate, submit your tax forms early, and it will show up pretty darn quick. If you wait until “Tax Day” (April 30, 2012) and you are owed money, you have just loaned the government your refund for that much longer (and it is going to take a long(er) time to get your refund as well). Is that an excuse to use an “Instant Refund” service? No!

Suck it up and grow a patient bone in your body, will ya?

First, you really shouldn’t be waiting for that big a refund (unless you have discovered some important deduction that you have forgotten). Make sure that you declare all your credits to your payroll office and get as much back on your taxes during the year, then your refund shouldn’t be that big. Ideally, I would say if you are getting more than $500 back, you need to go back to your payroll office, so you get paid more during the year (and you are loaning the government more than you should during the year).

Second, if you are using an “Instant Rebate” for a $500 rebate, you are in pretty dire straights, and you have bigger problems than needing your rebate. Wait a couple of weeks, get your WHOLE rebate and then pay down some debt with it.

Finally, why are you loaning money to the government and then giving that money to some stranger for simply giving you a percentage of your actual refund? You will give $45 for your first $300 in rebate and then $5 off every hundred above that (with H&R Block at least). So you are giving someone 15% pay back for $300 for a 2 month period, so that pays out to about a 90% pay out (if you amortize this over the year and such), wow, I should open my own Instant Tax Rebate firm, that is some nice coin.

Why aren’t people patient for their tax refunds any more?

 

 

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A Reason not to Trust Cash?

Let me state that while I espouse the use of cash (as opposed to credit cards), I still don’t trust cash (completely) either.

How could someone not trust cash? It’s so universal and colourful (in Canada) how could you not trust Sir John A., or Wilfred Laurier? I used to completely trust in cash, but then an incident happened to a co-worker that has made me wary of money, from that day on.

The story is a simple one, the co-worker was going to move about $5,000 from one bank to another, and wanted to do it as cheaply as possible (i.e. with no fees), so he went to the bank where the money was coming out, and asked for it in cash. Extricating this amount of cash was not easy, but eventually the bank relented and gave him the cash (for no extra fee).

Off this acquaintance went to the bank where he was going to make the deposit, the teller while surprised to see that amount of cash, deposited the money, no questions asked, and voila, large amount of money moved with no fees, or charges for bank drafts, or so he thought.

The phone rang an hour later at this chap’s home, it was the bank, evidently there was a problem with his deposit, and they’d like him to come in.  He arrived at the bank, and the manager was there and ushered him into an office and the questions about where the large amount of cash came from? My friend replied it came from another bank, and that this was his way of saving service charges. The Bank Manager was very skeptical, because one of the bills deposited was in fact counterfeit. What the fudge?!?! Sure enough the bill was bogus, and the depositing bank refused to honour it thus the deposit was now $100 less (and there was a large service charge for the screwed up deposit too). My friend pleaded with the deposit bank, to no avail, he then went back from the withdrawing bank, and they said it was not possible for them to have given out a counterfeit note, so they were not going to help either.

After a great deal of arguing, and anguish my friend ended up $100 in the hole plus a whacking service charge, all in the name of saving $5.00 for a bank draft, hence my incomplete trust of cash.

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Glory Days

Was it Better Back Then?

As I get older the expression when I was younger creeps slowly into my vocabulary. Everything seems to be better when I was younger (at least that is what my children have accused me of saying). A typical set of expressions that I use a fair amount are:

  1. When I was younger, I could eat anything and never gain weight.
  2. When I was younger, I seemed to have more disposable income.
  3. When I was younger, Canada Savings Bonds earned over 10% interest.
  4. When I was younger, music wasn’t so weird.

You can add many more to this, and this obsession with nostalgia that I have seems to be an off shoot of my own maturing.

If I look. the statements I have made may actually be true (the music one is debatable, since I did listen to Teenage Head and Jayne County and the Electric Chairs), but the reason for them being true are points that I don’t like to think about.

I used to be able to eat whatever I wanted, because I rode my bike everywhere, and had regular exercise every single day, nothing magical about this, it’s quite simple really. My metabolism has dropped a little, but the fact that I could eat a Large Miss Jean Talon pizza by myself and remain at 165 lbs., was not magical, it was because I exercised, pure and simple.

The same is very true for my money situation. When I was younger I could buy whatever I liked, but what I wanted was a much smaller subset of the things I want now, and I had free room and board. If I went back in time to tell myself how much money I would have now, I would be floored. I may have had more disposable income, but I can do much more about my disposable income now, than I could back then.

It’s easy to lose perspective on our younger days, and keep thinking how much better things seemed back then, but in my case, now is just fine.

Do You Want to Go Back?

Glory Days by Bruce Springsteen boasts of how better things were when someone was younger, but really, in my life at least, I am living in my Glory Days right now, no matter what you may read here to the contrary. To quote one of my favorite movie lines from Randall Pink Floyd “All I’m saying is that if I ever start referring to these as the best years of my life – remind me to kill myself.” (I mean this in reference to my younger days, of course).

I have enough disposable income, I have more treasures in my life than I deserve (and I don’t mean monetary) and I have enough health to appreciate all of this. All I would like to do is go back in time, and tell my younger self to save a little more, and that things will keep getting better.

When are your Glory Days?

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Top Ways to Pay Yourself

So one of the credos of Personal Finance that most experts agree on is you should Pay Yourself First , however, what that means to each of the experts is always a little different.

My big thing about the concept of Pay Yourself First is, make sure you are paying all your bills as well. What I mean, is that if you are building up your savings, while continuing to build up your debt load, so whatever I say this week, remember that my version of Pay Yourself First is assuming you are paying your bills and your debt as well!

Save, Save, Save

Those Pennies Add Up

With this in mind here is a list of the major ways you can (and should) pay yourself first (or more precisely what savings vehicle you should put your savings money in):

  • Pay off your debt! You want to pay yourself, decrease your debt and the money you save on Interest is going to pay you, so keep this in mind. Yes, I know I sound repetitive, but it’s important.
  • Put Money in your RRSP (or 401k). This is a great place to pay yourself because, you are saving tax money while saving money. You can do this a lot of ways, and I’ll talk about this later in the week. The drawback is if you need the money before you retire, there are a bunch of drawbacks, but even if you save the tax money you save somewhere else you are ahead of the game (like say paying off your debt).
  • Put Money in your TFSA, another good place to save your extra money or your savings, because the money grows tax free, and it comes out of it Tax Free (now remember there are limits and rules that you need to be up to date on, so please read up on this vehicle).
  • Put Money in your kids’ RESP, if you don’t have kids, don’t worry about this one, but if you have kids, when they are young is when you should use this savings vehicle. The government wants to subsidize your savings for your kids post secondary education, you should take advantage of this.
  • Put Money in your loved ones RDSP, if you don’t have a disabled love one, don’t worry about it, but if you do have someone you care for that is disabled, think about this program to help with their security. I have written about this before, and will continue talking about this program as it becomes more clear to me.
  • Take all your Tax Deductions, it amazes how many people who do not take advantage of the tax breaks that are available to them, such as:
    • Active child tax credit, if your kids are playing sports and is younger than 16, you need to take advantage of this program.
    • Mass transit tax credit, if you take the bus, or your kids do, why wouldn’t you use this tax credit?
    • Child Care credit, if your kids are in daycare, why wouldn’t you write this off?
    • Medical expenses, are you claiming these? If you don’t have a health plan, or it doesn’t pay for all your medical, look into this.
  • Don’t wait until April to get your tax credit, if you are taking advantage of these tax credits and breaks, make sure you get paid up front, don’t let the government hold your money all year and then give it back to you at the end of the year, Pay Yourself Now!

I’ll write some more about this topic, but remember you need to pay yourself first.

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Construction Boom?

My wife and I spent part of Saturday finding out how much replacing the windows on our house is going to cost (the short answer is HOLY CRAP!), however, I am sure I will have many interesting and poignant commentaries on this issue, but that is not what I am writing about today.

As we finished our discussions with the representative at Home Depot, the comment was made that we most likely would not hear from anyone for at least a week due to the “boom” right now in building in Ottawa (at least in the area of repairing and upgrading existing homes).

At first I took this simply as a “sales pitch” about how we should act soon, but then I looked over and saw something that made me think the advice was valid:

“… all booked before June 30th will not be subject to the HST…”

Then I understood the comment. It seems the impending HST is causing a “bubble” in the construction industry in Ontario (much like the Federal Home Upgrade tax credit did last year). It is interesting to see how government programs which are designed to increase Government revenue and allegedly make retailers jobs simpler can as a secondary effect cause consumers to spend money sooner.

My only question is, is this “rush” valid? Did the Provincial Sales Tax get charged for installing windows? Were windows exempt from these taxes? What about the old “cash discount” that has always existed in the construction industry?

All comments appreciated, to help me understand this “bubble”.

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