Happy New Year! I have been rummaging through my archives and a tradition seems to be talking about CPP & EI for each year. Who am I to argue with traditions?

Of course you realize this is for 2019, the numbers have changed for 2020 and you can read about them here!

As we start a new year, all we folks who receive pay cheques (I believe the Japanese term is Salaryman), we get to start paying CPP and EI premiums again.

For a lot of folks, they are just deductions that appear on every pay stub. For folks who make more, this deduction disappears some time in the year, and after that, they get a “virtual raise” given they do not have to pay these deductions for the rest of the year.

It is easy to approximate how much someone makes, by knowing when they stop paying EI premiums.

It’s actually a pretty simple game to play and well worth a couple of minutes time to create a little model to figure this thing out.

Meet Jill for 2019

Jill gets paid bi-weekly, lives in Ontario and works as an employee of private firm NUJAC. She gets paid a regular salary (assuming no bonuses ), so if we list the month in which Jill tells us “I stopped paying EI premiums in August” we can then approximate how much Jill actually makes in salary.

We learn from the EI web site that the 2019 premium is 1.62% of insurable earnings (and the maximum insurable earnings is $53,100 in 2019).

So Jill makes about $76,000 a year.

Let me be a little more exact, if you OWE money to the government today (May 1), and have not filed your taxes, you are now officially late! Always file by the deadline, or you may face penalties.

You can make an arrangement with the CRA, if you owe money (according to their web page):

If you can’t pay the full amount of tax you owe, you may be able to make a payment arrangement. If the CRA agrees that you are not able to make a full payment, an agent can work with you to develop a plan to help you pay your taxes.

So you had a chance, if you had called the CRA, and if you haven’t sent money yet, I would call the CRA anyhow, and see what you can do about it. Don’t do nothing, that is going to get you into more trouble, better to throw yourself on the mercy of the CRA now, than wait for them to come and get you!

If you are late, what kind of penalties might you get? Check here for the complete details, however:

If you owe tax for 2011 and do not file your return for 2011 on time, we will charge you alate-filing penalty. The penalty is 5% of your 2011 balance owing, plus 1% of your balance owing for each full month that your return is late, to a maximum of 12 months.

Yikes! Hope you paid on time (if you owed money). Oh, and you may be able to get these penalties waived if you can give the CRA a good excuse (an excuse that they agree is an extenuating circumstance). Keep that in mind too.

The CCPA (Canadian Centre for Policy Alternatives) put out a fun graphic on their site yesterday which has really caught the fancy of the Media in Canada. The graphic is an updating graphic showing the Clash for Cash: CEO vs. Average Joe which gives you an idea how much some of the top 100 CEOs in Canada make in compensation.

This kind of tool is always useful to show folks just how much is spent on the top end of the management tree in many of Canada’s largest companies. The actual numbers suggest that a CEO makes about 189 times what an average employee makes in a year (but the graphic is just so much more fun to look at).

The question does arise from this simple ratio, are the CEOs of Canada’s Elite 100 companies really worth the $8.38 Million (on average) that they make every year? I have no idea, but my opinion is that the reason these folks make what they make, is that they have convinced someone they are worth that, and thus they get that kind of compensation. Is this fair? Fair doesn’t really come into it, if the company is successful, then the CEO has earned their pay, and if they don’t they are fired, that should be the way it works (although in some cases like Nortel you had to wonder what was going on).

The mainstream media seems fixated on pointing out the 1% that make so much money and such, but I’d like to point out that there are a couple of Hockey players earning that much, a few more NFL Football players, even more Basketball Players, and pretty much every baseball player that earn that kind of compensation as well. Is that fair? Some billionaire is willing to make a Multi-Millionaire out of someone who is talented at their job, that is just what happens in this world.

Do I like all of this? Hell no, I’d love to make that kind of money myself, but if I did, just think how much folks who were more talented might make?

I do still like the graphic as well:

CEO Income, REAL BIG

If you go to the link (click on the picture) you’ll see it being updated (which makes it that much more depressing).

Let’s Go Crazy!

I am assuming that you will be receiving a tax refund this year (if you are not keep reading maybe you can get some ideas for next year). I have been reading a bunch of posts from various financial bloggers about what are the worst things to do with your tax refunds, and I must admit I have been berating folks about mis-spending money lately as well ,so let me first preface this post the only serious misgivings I would have with your Tax Refund would be:

1. You shouldn’t really have one, next year try to owe nothing, that way you already had the money to enjoy
2. You take your refund money and do something illegal with it, or worse you do something that puts you farther into debt
3. You get a quick refund from some place like Money Bamboozlers (or whatever)

With point (2) I mean using your refund as a down payment on a car or have it pay for only a small part of a ludicrously expensive vacation!  As for point (3), you know my opinion of the Pay Day Loan world and I lump the “quick rebate” firms in there too.

Don’t Go Crazy!

Now that you have this tidy pile of cash, what can you do with it?

Money, Money, Money!!!!

• You could use it on some of the projects on your Honkin Big Summer To Do List, or better still hire someone to do some of the things you want done.
• Repair the brakes on your car (no you shouldn’t be waiting for a rebate cheque if you are driving the car).
• Invest it in an RRSP or your TFSA? That is a good idea, and if you put it in your RRSP, you are setting up for another rebate next year (or you could lower your taxes at the source as well, if you fill in the right forms, and get a receipt right away).
• Pay down debt, is (in my opinion) the best choice, since that is an excellent way to get rid of debt (use found money to pay down debt). If you have debt, think about using this wind fall to get you out of the debt trap.

What are you planning to do with your tax rebate, or were you smart enough to not owe anything, or be owed anything?