Author: citicinn

There are 2 financial topics that many people avoid and procrastinate on or even refuse to discuss. The first is the B word. The second is your tax return.

A lot of taxpayers see the filing of the tax return as a dreaded chore to be done in the least amount of time, at the last possible minute(or even later), and preferably with eyes closed. I will give those people a high five for being a DIY and not getting someone else to do it. More on that later.

Some people would rather clean their Kitty’s litter box than do their taxes. But although you will not find any gold nuggets in kitty’s toilet, you must view your tax return the same as going on a treasure hunt. That is because the government saves money due to taxpayers missing opportunities to pay less tax.

I am serious. Although we have a legal duty to file a return, we also have a privilege to pay the least amount of tax possible. After all, when you get your paycheque the government gets paid even before you do, unless you are self employed.

Part of the hesitation to see doing your tax return as a joyous pastime is that a lot of the numbers have the habit of changing yearly. People also have the mindset that a tax return is like doing a puzzle. There is only one place to put that piece to get a nice picture.

Unlike a puzzle, there are certain flexible parameters that can be considered to maximise your refund or minimise your tax owing. Some of these moving targets will be a result of a changing family situation, for example unemployment, time off work for life events, medical challenges in the family, severance, postsecondary education, or moving. Certain benefits can only be received if you file a tax return.

Tax service companies charge a lot to do a tax return. I have a friend that works at a well known company every year. Her hourly wage is 10% or less of the company’s profit per hour. Therefore it is worthwhile to take the time to do your own. Also if you do not get the same professional to do it every year they will not know you or your financial situation well enough to ask the vital questions that will help you save money.

In the next blog post I will discuss how to organize your tax documents, and the areas of the tax return where taxpayers could have a second look

I have always maintained that my favorite color was purple, and that pink was lower down the list of likes. Until one day I counted the shirts in my closet. There were 8 variations of pink and 2 purple shirts neither which I wore regularly,

What does this have to do with financial planning you ask? Here is the background you need to know.

The ongoing oil price drama has Calgarians and Albertans concerned. Even if you have employment that is immune to its fluctuations it is the resource that presently drives the provincial economy. Of course we all feel empathy for friends and family who may be worried about job security. Or maybe you are yourself.

To succeed in your financial goals your beliefs must translate into positive action. You may think you are being careful with your money “just in case” but it always helps to check as I did with my pink shirts. My actions didn’t match my belief about myself.

So to cope positively with an unexpected event, here are 2 parts of a worry less kit. I will provide the first part, in the form of thought provoking questions that will help you assess your current money paradigm. The second part is up to you. You are going to, if you haven’t already, start a cash stash. This is money you will not touch unless absolutely needed. How much you ask? Three to six months of non-negotiable expenses. Non-negotiable expenses are the expenses that are the same every month and must be paid such as rent, mortgage payments, insurances, property tax, condo fees. Some of my clients have wisely saved more than 6 months of expenses.

Here are the questions:
If your job is potentially insecure, you have taken a pay cut, had your hours or days of work reduced, or are unemployed, have you adjusted your discretionary spending accordingly? These are the categories of eating and drinking out, entertainment, and shopping, for example.
Do you know how you spend your money each month?
Is debt repayment a priority?
Do you find more satisfaction in spending and consuming or saving and investing?
Have you ever judged the affordability of a desired purchase by the standards of your peers?
Have you ever said I will spend now and whatever is left I will save and invest?
Do you believe today will be the same as tomorrow, next week , next month or 5 years from now? Why or why not?

Questions and comments are welcome and if you want to discuss these topics in person please let me know.

With financial news making headlines regularly since the start of 2016, I want to depart from my usual rule of not commenting on the financial markets.

Since it is statement time, some background is necessary to ease any concerns you might have about your investments.

Let’s start with 2 fundamental tenets:
1. You hire me to advise you so you can reach your financial goals. I take that responsibility very seriously, so you can let me worry for you. I am monitoring occurrences and making changes where necessary.

2. Your news about your life events and financial situation will influence your outcome positively or negatively far more than headlines in the general media. The more relevant information you convey to me the better advice you will get.

Part of my hesitation about writing this post was the fact that I find the analysis of market conditions fascinating. Yes I am a data geek. But in reviewing what I could write about, it became apparent that most of you would find my recitations so boring you would fall asleep faster than if you had eaten a turkey sandwich and drank a glass of warm milk.

So where to begin? Oil prices continue to drop and drag down the loonie with it. One silver lining in this cloud is that a low loonie can positively affect the return of your non Canadian mutual funds.

Investors must put the present into a historical perspective. The stock markets that your investment managers participate in never go up in a straight line. Yes the trend is always upwards, but it is a ride with some turbulence. There is a name for this variation, it is called volatility. The last six years after the financial crisis has been a positive(bull) market, However, that growth has been based in part on world governments intervention in financial markets. That cannot go on forever; this is why the US has raised interest rates. Investors must understand that the returns they have enjoyed for the past few years will be tempered in the near future.

Volatility is the new normal. There are a number of reasons for this. The main one is that that technology permits rapid transfer of information and therefore creates opportunity for the potential overreaction from market participants, especially speculators.

Your investment managers see these volatile periods positively because they can buy great companies on sale. The best of them are backed by strong research teams and they use their experience to analyze companies and sectors of the economy. My job is to evaluate and choose the ones that suit your profile on your behalf.

If you want a more detailed analysis about your own investments, please feel free to discuss this with me by phone, e meeting, or in person.

Let’s welcome in 2016! I hope everyone had a restful and fun holiday break!

Since my own workload depends in part on whether other people or companies are working, I had a more relaxed schedule during the Christmas season.

As a result, from about midday Christmas Eve to December 27th, I had my cell phone turned off. It was only turned on the 27th because I was expecting exciting news about baby births. I saw those few days as a means to separate work and play time.

During those few days, family members, but especially my brother tried to contact me on my cell phone regarding details for Christmas dinner. He was mildly disapproving when I told him I had my phone off for 3 days. I haven’t had the chance yet to ask him why that was such a faux pas. In fact I am puzzled. It’s not like I was out on the international space station, or on a scientific expedition to Antarctica. I was available, all he had to do was call me on my landline telephone.

In all, there are 7 ways you can reach me when you need to. And yes, 6 of them are connected to a computer, iPad or cell phone. But 99% of the time I will be available in at least 1 mode of communication, and I am diligent in checking my messages.

So I will leave you with a few New Year’s questions to ponder:
Does your preferred mode of communication (if you have one), say something about your personality?
Does electronic communication require different etiquette? Is it less personal and easier to forget?
Has the ease in which we can communicate in various media decreased the meaning of our dialogue?

Please leave a comment on my blog post, or I look forward to discussing the answers at an in person meeting, an enjoyable means of communication that never goes out of style.

Albertans are living in economically uncertain times. Many of my clients are worried about job security, and some have even been laid off.
Because a significant part of Alberta’s economy is tied to non-renewable resources the low price of oil has a ripple effect through the economy. Even if you are not directly employed in the resource sector your job is most likely affected.
If you have been my client for any length of time you know that I am a big fan of the 2 Ps prevention and preparedness. Those 2 Ps are the foundation of financial success.
Since we all have known for some time the economy is slow all of us should be trying our best to save for a possibility of no or less work for an extended period of time. Yes, there is always EI to fall back on, but the maximum is only about $900 biweekly and it only lasts one year.
So the first step in being prepared is to have a financial safety net. And no, that is not a line of credit or credit card. You don’t want to borrow the bank’s money and put your future self in financial jeopardy.
The second step is to OWN your cash flow. You can’t own it if you don’t know it. Everyone who is serious about their financially secure future knows where and how they spend their hard earned dollars. Go over your spending habits with a strong magnifying glass. Ask yourself, what is a need and what is a want. What is an expendable and what is a necessity. Ask yourself what you could cut out if your boss told you your salary would decrease by 5% or if you could only work 3-4 days a week.
If the worst happens and you get surplused then you are prepared. The first action you should take is to call me.
Often but not always, an employee will receive a severance upon termination. It is crucial that you get advice as to how best to receive that severance. Sometimes options are available to minimise the tax burden that a severance will create. Every employee’s situation is different and I won’t go into all the possible scenarios here. It is very important to get professional advice both to decrease the tax liability and to make sure the severance serves its purpose: To tide you over until you are working again. For my clients who have experienced job loss they were grateful for the questions I asked, that helped them negotiate a most difficult time in the most positive way possible.

There are 3 noteworthy topics that I will present in this blog post. Although there will be some readers who may feel these topics don’t apply to their own situation, all of us know someone that will benefit from this information. So give a friend an early Christmas gift.

First of all the Canada Revenue Agency has informed Canadians there are more incidents of criminals misrepresenting the tax agency.
These attempts at extortion take two forms:
The first way is a phone call from a supposed agent. In most cases the caller aggressively threatens the taxpayer for nonpayment of taxes owing, which needs to be paid immediately. The taxpayers most frequently targeted in this tactic are newcomers to Canada and seniors.
Knowledge Bureau Report(KBR) suggests if the person receiving this call wants to verify that the caller is indeed a tax agent he or she should ask for his or her 2014 line 150 number. Line 150 is total income.
Fraudsters also send emails to taxpayers claiming that a refund is owed to them, and how to collect it.
The purpose of both the phone call and email is to collect either banking information and/or money via money order or a prepaid credit card. Citizens have lost close to a million dollars across the country, and is enough of a concern to law enforcement that alerts have been issued in several cities.
The preferred method of communication from CRA is SNAIL MAIL. They would only communicate with you electronically via My Account or My Business Account. They would usually not phone taxpayers, only if the taxpayer made the initial contact and they replied to that call.
Please refer to the sources for a hotline where a taxpayer can report suspected fraud.

With regard to the extra Universal Child Care Benefit(UCCB) families received in July. KBR wrote recently that the past government missed a chance to increase tax literacy of Canadians.
Eligible families received a one time payment of enhanced UCCB benefits retroactive to January 2015. For each eligible child under 6 the benefit increased to $160/month. Previously ineligible children over 6 now qualified for a $60/month benefit. I am sure families were pleased with the cheques they received.
However, it was not mentioned that in order to pay for those extra benefits the tax credit of $2255 PER child was eliminated. At 15% that elimination of $2255 equals $338 more tax paid per child. Also not explained was that the UCCB is taxable to the recipient, so that extra benefit will be taxable income in 2015.
I am sure there are some civil servants in CRA who are ripping out their hair awaiting changes to these benefits. Unless of course they are a numbers geek like me. When will the enhanced UCCB be cancelled? Will the tax credit be restored? We already know there will be a revamping of these child benefits and credits. The question is when? The 2015 tax return will be very interesting to complete.

A few clients have asked me about their quarterly statements. Regulatory organizations have made quarterly statements mandatory. Portfolio Strategies Corporation must by law send each of you a paper or electronic statement.

Some clients might get worried when they see variation in the market value of their investment from quarter to quarter. May I please stress that this is normal and unavoidable. The more important factor in the evaluation of the performance of your investment, is to look at it in terms of your stated investment time horizon.
Let me give you an example. I had a client tell me in February 2015 that she might retire in September 2015. This was not something she had mentioned in previous meetings. I asked her when she would know for sure. She said she had not decided yet. This situation makes it difficult for me to evaluate whether or not her portfolio was suitable for her stated goal. Your timely communication with me as your financial planner is important, and helps you take your quarterly statements in stride and with confidence.

http://www.knowledgebureau.com/index.php/news/mobilearticle/brief-clients-about-cra-fraud-and-e-mail-scams
http://www.knowledgebureau.com/index.php/news/mobilearticle/government-messaging-on-uccb-cheques-incomplete

With the recent provincial budget and election of a new federal government it would be a good idea to review actual and proposed financial changes that will affect Canadians. Keep in mind this is a list of the highlights, it is not comprehensive.
The most notable tax changes will be the proposed tax cut for middle income earners, so if your income falls between $44,701 and 89,401, you will pay 20.5% tax instead of 22%. For people who earn more than $200,000 their tax rate will increase from 29% to 33%.
The new government has promised to decrease the current TFSA limit from $10,000 to $5,500. The lower amount will likely be indexed to inflation.
The Family Tax Cut that benefited high income earners who had children under 18 and a stay at home spouse or spouse with minimal earnings will be abolished. The Child Tax Benefit and the National Child Benefit Supplement will also be eliminated. The Universal Child Credit Benefit will be replaced with an income tested Canada Child Benefit. This credit will not be dependent on the child’s age as was the UCCB.
The revamping of these various tax regimes will help the new government pay for some of its promises. The cancelling of the FTC alone will save the government 2 billion dollars.
There are also changes to OAS and GIS which will be positive for low income seniors. The tax credits for students also get revised, and low income students should benefit from the proposed legislation. The premiums for EI will be decreased, but there is discussion about increasing CPP contributions.
When will these changes take effect? Most likely when there is a new budget, which traditionally is early in the new year. It is possible that the changes might be made retroactive to the beginning of 2016 but that remains to be seen.
I was also asked if it is wise idea to run a deficit at the federal level. The new government has taken a different tactic than Europe where countries have applied austerity measures in order to get their economies back on track. The idea behind selective borrowing is to stimulate the economy so that people can be employed and earn a living. The amount of the proposed deficit seems like a large number but in percentage terms is a small amount. And the deficit is supposed to be temporary. Also the cost to borrow is at an all time low.
Here in Alberta the new provincial government has presided over falling oil prices. Previous governments had used royalty revenues for program spending. This dependence on oil revenues will now mean that the flat income tax that Albertans enjoyed will become a thing of the past. In line with the other provinces we will now be part of a graduated tax regime. The new tax rates are as follows
$125,001 12 %
$150,001 13%
$200,001 14%
$300,001 15%.
These rates will be fully effective in 2016. For 2015 they became effective October 1st. As a result, for the 2015 tax return these new rates will be prorated. If you want to know the exact percentages contact me.
Still for those taxpayers earning between $50 and 180,000 they are still better off under the new government because of the removal of the health care levy which the outgoing government had promised to implement.
If you want the sources for this information please contact me.

In a conversation with 3 others recently the topic turned to what we do with our colleagues at work. One person mentioned he had participated in a lottery pool where each person had put in $2 a week for the office to buy lottery tickets. The pool had never won more than $50 or $100 which they contributed back to buy more tickets.
Now you may be thinking, $2 a week big deal. But this person had contributed for more than a decade and a half, and only stopped because he left that company. When you do the math it adds up to more than $1700. What could a person do or buy with that same money? But even me writing those 2 sentences shows MY money script!
I recount this true anecdote to show readers that everything financial in your life is determined by your money script and your financial personality.
Your money script will determine how successful your financial life will be. In fact, your script will define what you believe is success. For example is your definition of success reaching goals or beating the market?
Your history and upbringing has shaped your money script. Your observations of significant others’ past financial decisions has influenced your current outlook on money matters. There are subconscious, biological, and societal factors that helped you write your script.

Your money script will determine your financial personality. The more we are aware of both our money script and financial personality the more we can make it work for our future. In my financial planning practice I have seen how money scripts can be both a help and a hindrance. Reflecting on your money perspective will be very helpful in helping you make better and more rational decisions. Studies have shown that we believe ourselves to be more rational decision makers than we actually are.
Here are some questions that will help you reflect on your money perspective.
Do you consider money to be a renewable or finite resource?
Do you equate wealth with high income, or is your definition of wealth more involved? Is wealth status and power, or independence and productivity?
Does your money personality enable you to distinguish between wants and needs?
Let’s go back to that number you calculated in the last blog post. What was your reaction to that number?
Your yearly salary should be considered as part of a larger picture. Think beyond this year or next and its expenses. What will the balance sheet of a lifetime of working look like? Is financial independence a probability?
My role as your financial planner is to help you identify your financial goals, set out an action plan to achieve them and to keep you accountable to reaching them.

Women and Wealth: Insights into Female Clients’ Decisionmaking Process. Meagan Swanson CFA Commonwealth Financial Network.

This blog post is going to be a little different. Instead of an article I am going to ask a few questions. If you are serious about being a good steward of your financial resources you will give some thought to them. I have put them in a deliberate order; the questions will logically build on the ones before it. So lights, camera, action!
What influences your financial decisions?
What is your money script?
What is your money personality?
What is the purpose of money in your life?
How do you define wealth?
How do you define success?
And lastly this math exercise. Get a piece of paper and pen for this one. No smartphone or computers. The act of calculating and writing will make the result very important to your brain.
Take your pretax yearly salary and multiply it by the number of years you plan to work. Write down the answer.
What do you think of that number?
Now I know some readers might be thinking that there are some standard answers to the questions I just asked. But I am not looking for standard answers. You need to answer those questions according to your own personal circumstances.
In the next blog post I will present some possible answers to these questions.

So you have been diligently saving for your long term goals, one of them being an independent retirement. Government benefits should only be a supplement to your own nest egg for your independent retirement.
Few investors give thought to what happens to their RRSP or TFSA in retirement. For most of us it is a long way off and daily demands clamor for our attention, leaving little mental energy to reflect on a future goal.
However, circumstances can change suddenly, and clients can have to take a crash course in the rules of registered plans within a compressed time frame, for instance when a client loses or changes employment, or goes through a relationship change.
An investor can contribute to his or her RRSP until age 71, or longer if the spouse is younger. At that point the RRSP must be converted to a RRIF or Registered Retirement Income Fund. A RRIF is designed to provide retirement income for life. Government rules dictate a minimum amount that must be withdrawn every year based on the accountholder’s age(or sometimes the age of the spouse). The amount withdrawn is considered taxable income. Any amount above the minimum can be withdrawn.
Many Canadians will change careers at least once in their working years. If the employer provided a group plan, there are several options available. A group RRSP can be transferred to a private RRSP. A defined contribution plan can be transferred to an RRSP or Locked in Retirement Account(LIRA). A LIRA is like an RRSP with more restrictions. For a defined benefit plan the transfer options depend on the age of the pension holder and origin of the plan. Pension plans can sometimes be transferred to the new employer’s plan if there is one and it is allowed.
A LIRA becomes a Life income Fund(LIF) upon retirement or when elected. The year after a LIF is established the accountholder must start taking income from the LIF. There is a minimum and maximum annual withdrawal amount. This amount is taxable income. If funds are still remaining in the LIF by a certain age, the LIF might have to be converted to an annuity.
Registered plan rules are complex, and can change. Depending on the registered plan the rules are administered both provincially and federally. It is recommended to seek the advice of a financial professional to consider all the options and to decide on the best course of action for your own personal situation