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I’m Working Really Hard, But Not Getting Ahead. Five Misconceptions Keeping You Stuck

By Alison Stafford, CFP®

How often have you thought—I could get out of debt and save more for retirement, if only I made more money. It appears to make sense; that more money would be the answer to your financial worries. So it may surprise you, that debt often increases with higher income levels.

Stats Canada reported that households earning at least $100,000 had an average debt of $172,400. Compare that to households earning between $50,000 and $100,000, which had an average debt of $95,400. More income, more debt.

If your first reaction to that is despair, you need to think about it in a different way. If you earn over $100,000 a year and still find yourself in debt, the challenge isn’t income, it is mindset. And that puts you in the driver’s seat of change, so that is a good thing. Getting out of debt, saving for a home, or funding your retirement, don’t have to be dreams. They can be practical, achievable goals, if you are willing to let go of some common money misconceptions.

We’ve identified the top five beliefs that sabotage high earners, and offer new ways of looking at your spending and saving habits. Continue reading

Posted in Budgeting and Cash Flow, Debt, Relationship to money


Allowance: Tips on Giving Children Allowance

You are standing in the check out line at the grocery store dreading the nagging you are sure to get from the kids about buying another pack of gum. All the stuff at the check out line is a total temptation for the kids, and a total irritation for you. Sounds like it is time to start giving your children an allowance so they can start spending their own money.

It can be a difficult thing to start, there are so many questions about how to do it and how much to give. Continue reading

Posted in Kids and Money


Are You On-Track To Retire in 10 Years? Do These 5 Things Right Now To Be Sure

By Sandra Mann, CPA, CGA, FPSC Level 1®

Are You On-Track To Retire in 10 Years? Do These 5 Things Right Now To Be Sure

 

With 10 years to retirement, your daydreams may be turning to a morning latte on your deck, instead of a tepid coffee on your commute. But before you buy that Life Begins at Retirement bumper sticker and toss out your alarm clock, you have some work to do. It’s imperative that the financial decisions you make in this last decade before retirement are forward focussed and carefully planned.

Here are 5 things you must do now to ensure a smooth transition into the next chapter of your life. Continue reading

Posted in For your information, Money Coaching, Retirement savings


How Can My Home Equity Support My Retirement Goals?

By Christine Williston, B.A., FPSC Level 1®

For older Canadians, with a paid or almost paid mortgage, ever increasing home values feels like watching winning numbers come up in the lottery. But how best to cash in the ticket? Or should it even be cashed in at all? The answer of course, depends on individual circumstances.

The optimal financial scenario for anyone approaching retirement is; a good pension, substantial savings, solid investments, and a mortgage free home. But quite often, life falls short of optimal scenarios. Many people arrive at retirement age, living in a very valuable asset, but with limited cash flow to live the way they imagined. This is often referred to as being house rich and cash poor and it can be quite a challenge to decide how (or if), to access that equity. But before you make any decisions, it’s important to have clarity on your situation. Continue reading

Posted in Ask Your Money Coach, Money Coaching, Retirement savings


Income tax challenges for the self-employed

By Melanie Buffel, BA Psych, MBA Candidate

iStock_000018832279SmallWhen people choose self-employment, they are often attracted to the challenge and excitement of creating a business they are passionate about. They may look forward to a more flexible work schedule, or the possibility of earning more than they did as an employee. The one thing most people don’t get excited about is keeping track of all their expenses and planning for their income taxes.

If you are self-employed, you need to be aware of a looming tax deadline. Sole proprietors have until June 15th to file (as do their spouses), but their balance owing is due as of April 30th. If you aren’t paid up by then, interest will be charged until you are.

When your numbers are in order, then reach out to the CRA with a proposed plan to pay off your balance owing. Keep in mind that you’ll also need to save the money for the taxes you are incurring on your new income…it’s a classic case of between a rock and a hard spot but with careful planning and focus on generating your target income, it can be done!

Procrastination in handling the financial side of your business can result in frustration, or even panic, as the tax deadline looms. To help, I’ve outlined a few suggestions on what to do if you find yourself unprepared to file this year’s return and what you can do differently going forward.

But first, let’s look at some of the challenges and pitfalls you may encounter as a small business owner.

There are some real tax challenges for the self-employed:

  • Your income may vary month-to-month making it difficult to estimate annual earnings and thus the appropriate tax rate.
  • A varied income also makes it hard to create a cash flow plan.
  • Even if you create a plan it can be difficult to honour it when cash flow is tight.

Then there are the pitfalls of inexperience:

  • Losing track of receipts.
  • Mixing personal expenses with business expenses.
  • No clear sense of how much to set aside for income taxes.
  • Falling behind and still trying to catch up on last year’s taxes owing.
  • Missing the filing deadline and incurring penalties.
  • Not using a bookkeeper or professional accountant to help with your tax preparation/filing.

So what do you do if you find yourself unprepared for this year’s return? Continue reading

Posted in For your information, Money Coaching, Small Business


How to Make the Most of Your Inheritance

By Janet Gray, B.A., B.Admin, CFP®, CHS, EPC, CPCA

Waiting for an inheritance is not a solid financial plan. But the fact is, Stats Canada reports that the total net worth of Canadians over age 65 is $2.18-billion, and much of that legacy will be passed on. Those on the receiving end of a generous bequest have the opportunity to make a real impact on their financial well-being, but only if they make the right choices in the short and long term.

There are many ways to use a large inheritance, and we’ll look at several of them in this article, but whenever you receive any kind of financial windfall, the first thing you need to do is catch your breath.

Take a Deep Breath and Park Your Money

The gift of an inheritance is bound to the sadness of loss. Allow yourself time to grieve. Don’t make important decisions for at least three or four months. Park the assets in a high interest savings account until the emotional fog begins to lift. In fact, parking your money is good advice for any sudden financial windfall. The shock needs to normalize before you make decisions.

When you are ready to make some decisions, they should be made under the umbrella of a comprehensive financial plan.

Here are some of the options to consider. Continue reading

Posted in Ask Your Money Coach, For your information, Money Coaching, Will & Estate Planning


My Financial Advisor is Making More from my Investments Than I Am; What Should I Do?

By Karin Mizgala, Co-Founder and CEO, Money Coaches Canada

Frustration over financial fees

To say that many Canadians are cynical and wary of advice from the financial industry would not be overstating the situation. The idea of hidden fees and commissions buried in investment transactions was tough enough to swallow, but now bank employees are speaking out about sales quota pressures, that lead them to sell you products and services you may not even need.

Last summer the Canadian Securities Administrators (CSA) introduced Phase 2 of the Client Relationship Model, known as CRM2. As a result, if you have investments, you will be receiving two new reports this year: The Report on Charges and Other Compensation and the Report on Investment Performance. The report names speak to their content, but for a deeper understanding, you can read my article Are You Ready for the Truth About Your Investments.

The CSA wants to ensure that investors are provided with an itemized transparent account of what they are paying in fees, and what commission advisors are being paid and by whom. This information wasn’t completely unavailable before CRM2, but it was more difficult to obtain. The Investment Performance report endeavors to present a measure of how well your investments are doing, but unfortunately, without a comparative context, such as the performance of the underlying market, the numbers aren’t as meaningful as they should be.

The biggest eye opener, for many Canadians, will be the realization that the person making the most return on their investment may be their advisor. It isn’t that fees are inherently wrong, but it’s important to know whether or not you are receiving value for your money. Continue reading

Posted in Investing, Money Coaching


How Do I Take Money From My RSP in Retirement?

By Tom Feigs, CFP®, CET

Withdrawing retirement savings

What do you think when you hear the term RSP? If you are like many people, you probably think: contributions. Certainly the banking industry focus is on RSP sales, because that’s where they make their money. But the point of all this saving is to provide for your future. How you withdraw money from your RSP will have a big impact on your retirement.

In this article we’ll look at how you can create a strategy to ensure you make the best choices for your situation.

Don’t Do Anything Without a Plan

Before you can make decisions regarding RSP withdrawals, you need to create as clear a picture as possible of your retirement income and expenses. You can do this on your own, but it can be daunting. You may want to consider working with a professional.

If you have registered and non-registered accounts, you may have seen conflicting information about where it is best to withdraw from first. It used to be accepted wisdom to defer RSP/RIF withdrawals as long as possible, but now balanced withdrawals from various accounts is often recommended. With a better understanding of your needs, creating a withdrawal game plan becomes more achievable.

But before we get to an ‘exit strategy’ for your RSP funds, let’s have a closer look at the basics. Continue reading

Posted in Ask Your Money Coach, For your information, Retirement savings


I Make a Good Income, But Can’t Get Out of Debt. What Should I Do Differently?

By Kathryn Mandelcorn, FMA

You did all the right things. You went to school and earned a good education. You’ve worked hard and been promoted. You earn upwards of $100,000 a year; yet increasing debt has your stomach in knots.

You are not alone. According to statistics Canada, higher income is associated with a higher debt load. Households earning at least $100,000 had an average debt of $172,400. Compare that to households earning between $50,000 and $100,000, which had an average debt of $95,400.

It doesn’t have to be this way. But before you can turn things around, it’s important to understand how you arrived where you are.

How Did I Get Here?

Technology has changed the world dramatically in the last 20 years. In many ways for the better, but the internet has also put shopping at our fingertips and smartphones keep us constantly connected to our work, and the work and lifestyles of everyone around us.

This new world has given rise to three of the primary reasons so many people are in debt despite earning a good salary: increased expectations of what we “deserve,” reduced downtime, and the erosion of debt stigma. Let’s look at the effect of each one. Continue reading

Posted in Ask Your Money Coach, Debt


How Divorce Can Affect Your Retirement

By Annie Kvick, B.Ed, CFP®

The ending of a marriage is an unfortunate reality for many Canadians, it creates emotional upheaval for both partners and any children involved. But studies have shown that it generally impacts a woman’s financial well-being longer and more significantly than it does a man’s. This imbalance can have serious consequences for women approaching retirement.

Today is International Women’s Day, and this year’s theme is #BeBoldForChange. Organizers want us all to take bold action in our spheres of influence, toward gender parity. An important initiative; but I believe that it is equally important for women to take bold action within their own lives—to be financially secure and confident, ready for whatever life circumstances unfold. Continue reading

Posted in Financial Literacy, Relationship to money, Retirement savings