Advice for New Grads?

I got called by Insight Magazine to give some advice to new grads on what they should be doing about their finances, many years ago. It was so long ago, the magazine no longer exists. I gave some answers to the interviewer, but as usual, I was not sure I was very clear or eloquent, so now I will attempt to be more clear to those that might have read the article.

Get The Heck Out of Debt

You have just graduated from University, and you might be carrying upwards of $70K in debt (hopefully in student loans only). You most likely won’t be paying that debt off in your first year of working (should you find a job right away). If you can pay it off, good for you! However, you should put together a plan on how you are going to pay off that debt and WHEN it will be retired.

Carrying debt is a drag on your finances, and the sooner the debt is retired, the easier your financial life will be. You should not aspire to “get used to living in debt”, this is the one thing my generation does NOT want to hand down to you.

Don’t Fall In Love With Having Money

Just because you have graduated from University and you no longer have to eat Kraft Dinner with Hot Dogs for dinner, does not mean you must go out every night to eat. You have lived a frugal lifestyle as a student (I am assuming), but if you continued that frugal lifestyle for a while longer, you may be able to pay down your debt faster and then be on a much stronger footing financially.

Yes, you deserve to enjoy life, but it is very easy to get used to the “Let’s go out to dinner tonight we deserve it” lifestyle, and once you are in that lifestyle the habit is very hard to break (speaking as a 49 year old, I can attest to that issue).

You cannot live your parents’ lifestyle (yet) so don’t try. It took them 30 years to get where they are, don’t rush your spending habits to mimic their spending habits.

If your parents paid for you to have a Samsung or an iPhone or paid for your Cell phone bill, maybe it’s time to get rid of this expensive toy? You don’t need $120 a month cell phone bills. Discretionary spending (i.e. money haemorrhage) is a bad thing which you must watch diligently. Middle age mens’ wastes spread, but their spending spreads like that as well, don’t let it happen to you.

Have a Savings Plan

The sooner you start saving, the better it will be for you when you reach my age, however, saving while still carrying discretionary debt (i.e. non-mortgage debt) is paying Peter to feed Paul. Lowering your debt is first and foremost, if you have left over moneys from your year, yes, starting an RRSP early is a good thing to do, but pay your debts first.

Savings is good, getting out of debt is better.

Get the Heck out of Debt

Did I mention this yet?

Banks Can be Negotiated With

As I have pointed out before Free Banking is possible, but it is more likely for old farts like me, who have a good track record with the bank already.  Paying $12-$25 a month in bank service charges you should try to avoid, since you most likely don’t use enough services with the bank to justify this charge. Go with as cheap banking as you can.

The Three Worst Ideas After Graduation

  1. I deserve a new car! -or- I deserve a vacation in Las Vegas!
  2. I’m a little short until my next pay cheque, I’ll get a pay day loan
  3. I am only carrying a few hundred dollars on my credit card balance this month

Keep this in mind, did I mention Get the Heck Out of Debt?

Last Pieces of Advice for New Grads

Originally published in 2010

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Property Tax Alternative

Alternate Property Tax Model

So after whining about my Property Tax bill, I think I have come up with a simple(r) model for Property Tax valuations which could make lives simpler (simpler for me). Remember that Property Tax is a Wealth Tax, taxing the apparent value of your house.

Simply put, your Property Tax is set when you buy your house. When the price is set, that is what your property taxes will be based on, until the house is sold again. It no longer is a wealth tax or a perceived value tax.

Sounds easy doesn’t it? The municipalities could tweak it so that they could add an inflationary increase each year, so that their incomes could slowly increase. Maybe a check on the valuation at sale (i.e. the City can have an independent body valuate the house at sale time and then base property taxes on that value), in case folks try to sell houses for $1 or the like.

PolicyAdvisor - The Brand New Way to Compare and Buy Life Insurance

Advantages?

  • Property tax increases would be limited year over year to only an inflationary increase. Currently in Ottawa Property Tax has been going up higher than inflation in terms of percentage of perceived value.
  • If someone stays in their house for a long period of time, they will not end up having to sell their house because their neighbourhood suddenly went “up scale” and their Property Taxes have sky rocketed (as in Vancouver), good for Fixed Income seniors.
  • May cause a boom in contracting work for upgrading houses, since it’s value will not increase unless it is sold (i.e. why move to a bigger house, when it ends up being cheaper to add a room to my current home)
  • Less yearly paper work with new valuations and warning home owners of the pending change.

Disadvantages?

  • Municipalities incomes may not be as large as they need them to be and it may force them to cut services (to run a balanced budget)
  • Tom-foolery and shenanigans are still possible given there can be manipulations of these systems, like we have seen with rent controlled properties and such.
  • Might throw cold water on the housing market, with folks maybe staying in an older house, instead of buying a brand spanking new one, because it costs more (and the older house has been inhabited in for a while)

Opinions? Should I write this one up and present it to the Ottawa City Council as a progressive and exciting way to move forward in the 21st century? Maybe if I add a Green element to it, it might be an easier sell (it will help the environment, because it will slow housing developments)?

Rewritten from an article in 2010.

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How do You do your Taxes?

Gone are the days where I did my taxes with pen and paper. Happily those days are over.

I use TurboTax to do my tax returns and for those of my direct family. Other software solutions work just as well, but I am comfortable with this tool, so I keep using it.

Typically I do my taxes over about a 1.5 month period. I must wait while the various tax receipts and such arrive at my house.

Typically the methodology followed would be something like:

  • Purchase TurboTax, at Costco. This is usually the cheapest place to get it.
  • Update TurboTax. The software does this automatically, but needs to be done. The updates are important.
  • Create this year’s tax returns for my family, based on last year’s TurboTax files. The software manages to bring forward a lot of useful info like personal info.
  • TurboTax allows you to import data from the CRA site. This year, it is more exciting, as I am locked out.
  • Use my last pay stub for most data needed, until my T-4 arrives.
  • Go into Quicken and glean out whatever information I think I can get, and do a rough estimate of what my taxes might be. Inevitably I overestimate how much tax I have paid and I start getting delusions of large tax refunds, but that is soon remedied.
    • TurboTax does have an import from Quicken tool. Every time I use it, it has not gone well, so I eschew this tool.
  • With this estimate I will see if there is a need to buy RRSP’s to lower tax owed, which usually is not the case
  • As each receipt and/or T-4 or such arrives I then type it into TurboTax and watch my estimate become a closer to reality number
  • Over this time I will remember things I have forgotten to input. I will add them with glee seeing my refund number inflate.
  • By the time the first week of March rolls around my return is 95% complete and factual (i.e. not based on estimates). I can then start thinking about E-Filing my return.
  • Finally the decision whether to submit my returns via E-File. This usually happens on a Sunday morning.
    • Sometimes, there are issues E-filing, so keep all receipts and take screen shots.

And Then?

With that, I await to see whether I forgot something (inevitably a receipt will appear near the end of March, which I have forgotten about), or whether I made an incorrect assumption, when the CRA sends me their response to my submission.

Addendum

This is a rewrite of an article from 2010.

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RDSP Grant Entitlement Statement 2021

Every year, an RDSP holder gets an update about how much money can be put into their RDSP. The Statement of Grant Entitlement, says how much money and how much the government will match, with a Grant.

RDSP Grant Entitlement 2021
RDSP Grant Entitlement 2021

As you can see this is an important piece of information. I now know, in 2021, I can deposit $1000 in my son’s RDSP and it will be matched with $1000 in grants.

This amount will increase once my son is over the age of 17, as the income they will use to determine the grant will be his income, instead of our household income. When he turns 18, his grants should be much higher, due to his estimated income at that age.

When he turns 18, my son will also have to re-qualify for his Disability Tax Credit as well. This is what we learned from the last time he had to re-qualify. Luckily the rules if he should not get a DTC right away, have changed.

Previous Posts on Grant Entitlements

  • 2020 Statement of Grant Entitlement
  • 2019 Statement of Grant Entitlement
  • 2018 Grant Discussions

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My CRA Error ERR.021

I have spoken about My CRA before, it allows access to your CRA account. The error I received (Error – ERR.021) was shocking. Updates for this can be found here.

I am now locked out from this with the following screen:

CRA Error ERR.021
Lock Out Error ERR.021 for My CRA account

The access I used was using my Banking Access (i.e. my bank card log in credentials). I have not applied for CERB (as background).

I managed to call the CRA, and was told that someone would call me back about the ERR.021 issue. This would allow me to get access to my account. I was attempting to see what my RRSP room was (as background).

Then I received the following email to the email address I have on file with the CRA.

CRA Email Deletion Message

So now, I cannot log into my CRA account, and I cannot receive emails either. I will receive something using Canada Post, explaining what is going on, and how to fix this issue.

The CBC has posted the following:

Christopher Doody, a CRA media relations representative, said in an email it was meant “as a security precaution in the context of ongoing investigative work, and is not due to a cyber security breach of CRA systems.” He said affected users can expect a letter in the mail with instructions on how to unlock their account.

CRA locks online accounts amid investigation, leaving users worried – CBC

Current Status

Still locked out of my CRA account. Conjecture is that my log in credentials were being sold on the Dark Web. (Feb 17th)

The CRA answered my tweet, with the following:

No phone call, and no letter as of yet either. The Dark Web Sale may have been of older data, however, can’t fault CRA for security. I can fault them for slow response. I have a T4 and most of my other tax forms, but I can’t actually check with CRA or submit my taxes yet. (March 1, 2020)

OH BOY! I get to call them, AGAIN!🤦🏻🤦🏽🤦‍♀️

I will have to dedicate a whole day to do this too. Yea! (March 3)

The call was made, I spent 4 minutes going through menus. They were too busy, so they hung up. 🤦🏻🤦🏽🤦‍♀️ (March 4)

Finally, Success!

I called on Monday at 8:05 AM (EST) (March 8), and finally got through after a short (10 minute) wait. Lots of resetting of things, but I now have access back to My CRA account .

You will need to set up:

  • A new 6 digit PIN Number for calls with CRA in the future
  • Have your 2019 return in front of you to answer questions
  • Have all of your direct deposit banking information as well
  • Your cell phone number for Multi-Level Authentication
  • An Email Address for correspondence.

(March 08)

And Now a Knuckleball

Just got the same email as before saying my account is now suspended. Problem is I can still log in using my banking credentials (for now). Also a very quizzical comment added:

If you are unable to use this online option, we ask that you please try again after March 22, 2021 and call the CRA only if the online option doesn’t work for you after this date.

CRA Email of March 13 2021

I have all the information I need, so I am OK, for now. I will check tomorrow, and see if I can log in. Come back and look for an update.

(March 13 2021)

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