There Are Two Certainties in Life and One is Taxes

It’s the time of year where the working world is split into those that look forward to tax refunds and those who dread seeing how much they owe. Yes, that’s right, it’s tax time. The buzz has begun with the distribution of T4s, which companies have until the end of February to deliver. Tax returns are one of those things in life that are necessary, but are never really reviewed. It’s a wonder there isn’t a life skills course offered in high school which covers real life lessons such as budgeting, tax requirements and filing, resume writing, interview skills and grocery shopping. Now is the time to gather all the documentation you need to prepare your taxes.  These include slips such as T4, T4A, T4E, T5, T5007, receipts and certificates. While most personal tax returns are filed electronically, paper copies or records must be retained and available for CRA by request. One of the tax reduction options still available is RRSP contributions. The deadline for RRSP contributions for the 2017 tax year is March 1, 2018. It’s important to keep track of your RRSP contributions to ensure you don’t go over the limit and incur over-contribution penalties. While you are allowed a lifetime over-contribution of $2000, it’s best to carry any overages into the next tax year. Investments are another unclear area for most people. There are a multitude of qualified RRSP investments available such as segregated or mutual funds, stocks, bonds, ETFs and GICs. It’s important to have a diversified portfolio. In other words, don’t put all your eggs in one basket. If you haven’t before, this would be a great time to talk to a professional financial advisor. Financial Planners understand all the benefits and risks of each of these options and which would be best suit you and your stage in life. Now that we’ve talked about planning for the upcoming tax season, stay tuned for more advice on tax saving opportunities.

How To Shrink Your Interest Payments

Currently, there’s a lot of talk about what may happen if interest rates rise. So, chances are, you’re looking for tips on how to protect your income and balance your portfolio.

However, capturing money that’s wasted on inefficient interest payments should always be a priority. When it comes to cash flow planning, that’s one of the main ways people are able to save money and free up income. Paying more interest on debts than you need to can significantly affect your finances. So consider whether you’re falling into the following traps.

• Mortgage myopia. You may assume your interest rates and mortgage payments will remain the same over a long period of time, or you may not know how to plan for fluctuating rates. As a result, you could fail to build interest rate-movement assumptions into your financial plans and projections.
• Amortization risk. It’s easy to compare interest rates, so you may focus on doing only that when choosing mortgages and structuring your debts. Yet, amortization is one of the main variables you should consider, given it impacts the total repayment cost of your debts.
• Lower rates aren’t always better. Paying 3% versus 4% interest may seem better, but there’s more to calculating the total costs of debts than comparing rates. Along with looking at amortization risks, you need to review all of your repayment options, as well as the total cost of debts over your lifetime.
• Other debts. What matters is the total average rate that you pay over all debts. So, you can consider whether combining all of your debts is more cost-effective.

Just as you can save money through tax planning and insurance solutions, you can protect your income through cutting down on inefficient interest payments. Through cash flow planning, you’ll better understand the importance of paying down debt principals quickly, as well as how to reduce exposure to fluctuating interest rates. As published in Advisor.ca December 22, 2015