In a recent World Economic Forum held in Davos, Switzerland, Steven Harper announced to the World that he was thinking of changing the rules governing Canada's Old Age Security. It would have been nice if he'd spoken first to those effected most by this - Canadians. Why am I not surprised at this bold and bald statement? Because it is just another of the high handed actions performed by our Prime Minister as leader of our elected government.
This week, Jim Flaherty, Federal Minister of Finance tabled his budget, and the new Old Age Security (OAS), and Guaranteed Income Supplement (GIS) rules were presented to the Canadian public. Flaherty pointed out a number of times that OAS is NOT a pension program (as opposed to the Canada Pension Plan which is), it is a social program, I guess so they can justify pushing back the age of eligibility. [Note: The OAS plan is funded by Canadians' tax dollars and every Canadian is eligible to receive this benefit (subject to claw back based on income), whereas the CPP is funded by employers and employees and the payout is based on what you contributed during your working life].
The new eligibility rules are a bit complicated, but here's the jist.
If you were born before March 31, 1958, you are not effected. You can still apply for OAS when you turn 65. If you are born after February 1, 1962 you will be entitled to OAS when you turn 67. And in between? (This is where it gets complicated). For every month after March 31, 1958, your wait time increases by one month. So, if you were born in December 1958, your wait time is 5 months. You have to wait for 5 months after you turn 65 (or until May 2024) to collect your OAS.
At present, you must apply for OAS. They suggest you apply 6 months ahead as it takes time to process your application. The new proposals for changes in Eligibility for OAS also propose a "proactive system" which will eliminate the need to apply for OAS. I guess that means once you reach the proper age, you'll automatically get it.
So how does this effect you?
There's been some furor over the change in age of eligibility for the OAS and GIS. These range from outrage on behalf of our impoverished elderly, to outrage over the high handed and disrespectful way the government has introduced these changes to the Canadian public.
However, look at the actual numbers and you get a better perspective. The maximum current OAS entitlement is $540 a month. If your annual income is $69,562 and above, this amount is clawed back, until at $112,772 you have to pay back all the OAS.
The maximum OAS for the year is $6,480. For a couple the amount is $12,960. That's not a lot of money. It won't pay the rent.
If you have to postpone retirement (and I repeat, don't forget, OAS is a Social Program, not a pension program) because of having to wait for OAS payments of $6,480 (which by 2023, when the new eligibility rules kick in will, hopefully, be more) you are definitely not ready to retire!
So what can one do to ease the loss. The first person in the group that needs to replace the entire 2 years of OAS benefits is now 50. They have 17 years before they reach 67. If they wanted to replace the amount lost from those 2 years of OAS benefits, I suggest they sock away $2.25 cents a day in a TSFA (the price of a large Timmies). By the time they reach 67, they will have just under $14,000. That should be enough to replace the 2 years lost OAS.
Saturday, March 31, 2012
Sunday, February 19, 2012
"The number one problem in today's generation and economy is the lack of financial literacy." Alan Greenspan
It’s a shame that financial illiteracy doesn’t hold as much of a stigma as regular illiteracy does. If it did, perhaps there would be fewer financial illiterates out there. You may not think financial literacy is important or relevant today, especially with so many demands on your time – your social media presence is so much more important – and it’s so boring and uncool. And why isn’t there an app for it? Being able to use your smart phone would certainly make it easier, wouldn’t it?
Sorry to burst your bubble, but when it comes down to it, no application does the job. It’s actually going to require some effort on your part.
So where do you begin? Simple. READ YOUR STATEMENTS. I know many people who do not even open their statements, let alone read them. How can you possibly manage your money without reading your statements is beyond me. And there really aren’t any good excuses why you aren’t reading them (unless of course you can’t read, and that’s a whole lot bigger problem).
Store Receipts. Let’s start with the easiest. When you buy something, you should check the receipt and count your change. Last week, I was busy chatting with the clerk at the grocery store and he rang an item in twice. I noticed the bill was more than I expected and went to get my money back. My son was astonished. He never checks his receipts. It’s easy to spot if an item is rung in more times than you have purchased, but what if the item rings in at more than the shelf price? When you point it out, the clerk may offer to reduce the price for you. "Fair’s fair," you think "that’s only reasonable" but did you know that you are actually entitled to that item for free (up to $10.00 and $10.00 off the item if it’s over $10.00). Well you’ll never take advantage of that if you don’t know how much things cost will you?
Pay slip. It astounds me how ignorant people are about their pay. How can you know how much you can spend in a month if you don’t even know how much you are going to get paid? Do you ever read your pay slip and would you know if you are suddenly getting more or less pay? I’m going to do a blog post just on pay slips later, but for now you should be aware of what your pay is and if it changes significantly you should check out why this is so.
Bank Statement, mortgage statements, insurance statements. Do you ever look at your bank statement? In fact do you know how much is in the bank on any given day? If you don’t go over your bank statement you won’t know if someone has stolen your pin and debit card details and is busy spending all your money! Or if your car lease company has taken 4 payments in the month instead of 2!
Credit card statements. Ouch, I can’t look at my VISA statement, it is 2, 3, 4 pages long. HELLO, if your VISA statement is that long, you are putting too much on your credit card. We won’t go into minimum balance payments etc. at this time but save that for a later date.
Investment statements, from bank, broker etc. After the dot com bubble burst and the market tanked, many people who had lost their shirts (and that’s another blog post) couldn’t bear to open their statements and face the reality of their stupidity or cupidity. Been there, done that. It’s time to push on and face the reality and do something about it. Perhaps sell off those ridiculous losers, as they’re only going to make you upset every time you look at them. If you don’t perhaps you will be reminded never to be so stupid again.
So, once you’ve taken these first few steps to financial literacy and gotten into the habit of spending a few minutes looking at your statements when they come in the mail, you’ll become familiarized with what they look like, the kinds of jargon they use, and you’ll be ready to proceed to learning a few other concepts.
Sorry to burst your bubble, but when it comes down to it, no application does the job. It’s actually going to require some effort on your part.
So where do you begin? Simple. READ YOUR STATEMENTS. I know many people who do not even open their statements, let alone read them. How can you possibly manage your money without reading your statements is beyond me. And there really aren’t any good excuses why you aren’t reading them (unless of course you can’t read, and that’s a whole lot bigger problem).
Store Receipts. Let’s start with the easiest. When you buy something, you should check the receipt and count your change. Last week, I was busy chatting with the clerk at the grocery store and he rang an item in twice. I noticed the bill was more than I expected and went to get my money back. My son was astonished. He never checks his receipts. It’s easy to spot if an item is rung in more times than you have purchased, but what if the item rings in at more than the shelf price? When you point it out, the clerk may offer to reduce the price for you. "Fair’s fair," you think "that’s only reasonable" but did you know that you are actually entitled to that item for free (up to $10.00 and $10.00 off the item if it’s over $10.00). Well you’ll never take advantage of that if you don’t know how much things cost will you?
Pay slip. It astounds me how ignorant people are about their pay. How can you know how much you can spend in a month if you don’t even know how much you are going to get paid? Do you ever read your pay slip and would you know if you are suddenly getting more or less pay? I’m going to do a blog post just on pay slips later, but for now you should be aware of what your pay is and if it changes significantly you should check out why this is so.
Bank Statement, mortgage statements, insurance statements. Do you ever look at your bank statement? In fact do you know how much is in the bank on any given day? If you don’t go over your bank statement you won’t know if someone has stolen your pin and debit card details and is busy spending all your money! Or if your car lease company has taken 4 payments in the month instead of 2!
Credit card statements. Ouch, I can’t look at my VISA statement, it is 2, 3, 4 pages long. HELLO, if your VISA statement is that long, you are putting too much on your credit card. We won’t go into minimum balance payments etc. at this time but save that for a later date.
Investment statements, from bank, broker etc. After the dot com bubble burst and the market tanked, many people who had lost their shirts (and that’s another blog post) couldn’t bear to open their statements and face the reality of their stupidity or cupidity. Been there, done that. It’s time to push on and face the reality and do something about it. Perhaps sell off those ridiculous losers, as they’re only going to make you upset every time you look at them. If you don’t perhaps you will be reminded never to be so stupid again.
So, once you’ve taken these first few steps to financial literacy and gotten into the habit of spending a few minutes looking at your statements when they come in the mail, you’ll become familiarized with what they look like, the kinds of jargon they use, and you’ll be ready to proceed to learning a few other concepts.
Monday, January 30, 2012
The home line equity line of credit. Or how the bank gets to own your home.
Our local freebie newspaper had the following Advertisement on the front page last week. It was from one of our big 5 banks in Canada and it took up the entire page. It said simply in 200 point Times New Roman:
Is your home equity credit line weighing you down?
Turn the page and it offered 1/2 % better rate than the competition. Is that a good deal? Before you jump on the offer, we'd better examine what a Home Line Equity Line of Credit (LOC) actually is.
You have finally bought that house you've always dreamt of. You have negotiated a stunning rate at your local bank, with a 30 year amortization. You've managed a small downpayment, say $100,000.00 on a $400,000.00 home, but what the heck. The house is yours (well, you own the title of the house, but the bank actually owns 3/4 of it). Now you can settle back and enjoy your new home. Hold it just a moment, reality check time. Once the automatic deductions for the mortage payments start, coupled with the car lease payments, day to day expenditures maybe just about covered, but it doesn't leave much room for little luxuries, not to mention socking away that couple of months salary that you should have just in case you get laid off.
Ta dah, the bank has an answer! How about a line of credit. You shake your head. Not possible, the bank won't give you a line of credit. But hold on a minute ... don't you own your home (well, mortgaged of course)? The bank is more than willing to give you a line of credit using your home as security. (Well, it's a no brainer, the bank has your house as security, so if you default, the bank has your house!)
And what is even more attractive is the more you pay down your home, the more money the bank will loan you.
Here's a link to a lovely lady telling all about it. Copy and paste it into your address line.
https://www.rbcadvicecentre.com/how-using-the-equity-in-your-home-could-benefit-you
Doesn't it sound just wonderful? Hold on a minute. Think about this carefully.
You own $100,000.00 of your $400,000.00 home. The bank owns 3/4 of your home (the amount of the mortgage). Now the bank offers to loan you $100,000.00 (which is the part of the home that you own) at a very good rate.
Yippee!!! Now you can go and buy all those luxeries that you couldn't afford before. But do a little math. If you max out your Home equity line of credit (and believe me it's easy to do), how much will you owe the bank? $300,000 for the mortage and $100,000 for the Line of credit. So how much of your home do you really own?
A big fat ZERO.
Do you want to be a hamster in a wheel? Well, just get yourself a home equity line of credit.
Is your home equity credit line weighing you down?
Turn the page and it offered 1/2 % better rate than the competition. Is that a good deal? Before you jump on the offer, we'd better examine what a Home Line Equity Line of Credit (LOC) actually is.
You have finally bought that house you've always dreamt of. You have negotiated a stunning rate at your local bank, with a 30 year amortization. You've managed a small downpayment, say $100,000.00 on a $400,000.00 home, but what the heck. The house is yours (well, you own the title of the house, but the bank actually owns 3/4 of it). Now you can settle back and enjoy your new home. Hold it just a moment, reality check time. Once the automatic deductions for the mortage payments start, coupled with the car lease payments, day to day expenditures maybe just about covered, but it doesn't leave much room for little luxuries, not to mention socking away that couple of months salary that you should have just in case you get laid off.
Ta dah, the bank has an answer! How about a line of credit. You shake your head. Not possible, the bank won't give you a line of credit. But hold on a minute ... don't you own your home (well, mortgaged of course)? The bank is more than willing to give you a line of credit using your home as security. (Well, it's a no brainer, the bank has your house as security, so if you default, the bank has your house!)
And what is even more attractive is the more you pay down your home, the more money the bank will loan you.
Here's a link to a lovely lady telling all about it. Copy and paste it into your address line.
https://www.rbcadvicecentre.com/how-using-the-equity-in-your-home-could-benefit-you
Doesn't it sound just wonderful? Hold on a minute. Think about this carefully.
You own $100,000.00 of your $400,000.00 home. The bank owns 3/4 of your home (the amount of the mortgage). Now the bank offers to loan you $100,000.00 (which is the part of the home that you own) at a very good rate.
Yippee!!! Now you can go and buy all those luxeries that you couldn't afford before. But do a little math. If you max out your Home equity line of credit (and believe me it's easy to do), how much will you owe the bank? $300,000 for the mortage and $100,000 for the Line of credit. So how much of your home do you really own?
A big fat ZERO.
Do you want to be a hamster in a wheel? Well, just get yourself a home equity line of credit.
Sunday, January 8, 2012
"In this world nothing can be said to be certain, except death and taxes." Benjamin Franklin
At the beginning of every year, the Canada Revenue Agency mails out tax packages to everyone who filed a return the year before.
This year I got mine in December. Ouch. Is this a hint? Is our Government in desperate need for my tax dollars? Is this a preemptive move to save money by mailing all the packages out before the post office increases the mailing rates? Who knows? Maybe somebody was working overtime over Christmas and decided to just get them out.
Yesterday I went to Best Buy and got my tax software package. Now don't get me wrong. I know how to do my return on paper, in fact I've done my own tax returns - on paper - for over 20 years now. And believe me, February is a busy month, waiting for the slips to arrive and filing out the return, calculating, and should a slip come in late or a mistake in addition require, re-calculating my return. That's why I've decided to bite the bullet and use the software.
I now have 4 returns to do. One for every member of the family. You may ask, as a bookkeeper, isn't part of your job doing taxes? Well, a very good accountant friend of mine told me that 95% of his headaches and 5% of his business came from doing personal taxes. I did the math. I don't need the headaches. My business emphatically does not include doing tax returns.
However, doing the tax return, even if it physically takes very little actual time, is an art. A lot will depend on how you handle your money. And even more will depend on your knowledge of what tax efficiencies you can use to keep your money in your pocket and out of the coffers of the Receiver General.
I hope to be able to show you how a greater knowledge of personal finance can help you fill out your tax return to your advantage. And to make the deal even sweeter ... it's all legal!
This year I got mine in December. Ouch. Is this a hint? Is our Government in desperate need for my tax dollars? Is this a preemptive move to save money by mailing all the packages out before the post office increases the mailing rates? Who knows? Maybe somebody was working overtime over Christmas and decided to just get them out.
Yesterday I went to Best Buy and got my tax software package. Now don't get me wrong. I know how to do my return on paper, in fact I've done my own tax returns - on paper - for over 20 years now. And believe me, February is a busy month, waiting for the slips to arrive and filing out the return, calculating, and should a slip come in late or a mistake in addition require, re-calculating my return. That's why I've decided to bite the bullet and use the software.
I now have 4 returns to do. One for every member of the family. You may ask, as a bookkeeper, isn't part of your job doing taxes? Well, a very good accountant friend of mine told me that 95% of his headaches and 5% of his business came from doing personal taxes. I did the math. I don't need the headaches. My business emphatically does not include doing tax returns.
However, doing the tax return, even if it physically takes very little actual time, is an art. A lot will depend on how you handle your money. And even more will depend on your knowledge of what tax efficiencies you can use to keep your money in your pocket and out of the coffers of the Receiver General.
I hope to be able to show you how a greater knowledge of personal finance can help you fill out your tax return to your advantage. And to make the deal even sweeter ... it's all legal!
Saturday, January 7, 2012
Under Construction
I'm very excited to start this new blog.
I have really enjoyed working on my first blog, Kellygardens.blogspot.com. It renewed my love for writing and it gave me the opportunity to share my experiences with my friends. I'm not sure it will ever win me a Giller, but it is, none-the-less, inspirational to me. The inspiration for this blog was a question posed by my son regarding mortgages, and I thought that I should perhaps create a new blog to jot down the myriad of tidbits regarding personal finance that I've gleaned from first hand experience over the years. Perhaps, if they remember, they can visit here in the future when they want some advice.
For those of my faithful followers at kellygardens.blogspot.com, who have requested more pictures, I'll say up front, that I'm at a loss as to what pictures I might add to this blog. But, on a positive note, I hope to have guest writers! David has lead me to believe that he might like to do a blog post one day. I do hope so, as he has much of worth to say.
I have really enjoyed working on my first blog, Kellygardens.blogspot.com. It renewed my love for writing and it gave me the opportunity to share my experiences with my friends. I'm not sure it will ever win me a Giller, but it is, none-the-less, inspirational to me. The inspiration for this blog was a question posed by my son regarding mortgages, and I thought that I should perhaps create a new blog to jot down the myriad of tidbits regarding personal finance that I've gleaned from first hand experience over the years. Perhaps, if they remember, they can visit here in the future when they want some advice.
For those of my faithful followers at kellygardens.blogspot.com, who have requested more pictures, I'll say up front, that I'm at a loss as to what pictures I might add to this blog. But, on a positive note, I hope to have guest writers! David has lead me to believe that he might like to do a blog post one day. I do hope so, as he has much of worth to say.
Subscribe to:
Posts (Atom)