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How the banks persuaded Canadians to pay off their debts

Canadians responded to rising interest rates on line of credit and loan products by paying down loans. According to the latest stats, the ratio of household debt to net income fell to a two-year low of 168 percent in the first quarter of 2018. These payments appear to have slowed down, but further reduction of debt should not be ignored as rates will likely rise again in July. Instead of putting your money into investment and saving products that offer small interest rates, experts argue paying off debt is the smarter option.

Making sense of how the tax exemption on your residence works

If you are trying to claim a Principle Residence Exemption (PRE) on your taxes, you need to be sure that you are qualified to claim it because if the CRA notices you don’t qualify, the penalties are high. Often owning multiple properties does not allow you to use this credit, but there are ways to do so, depending on how often you reside in these properties with a one year overlap. If you are unsure about using this credit correctly, be sure to read the CRA regulations.

Key Takeaways:

Our Canadian tax law has strict rules around what properties can qualify for the PRE exemption.
The CRA is looking at about 10,000 transactions a year that involve the PRE.
If you own more than one property at the same time, you could end up paying tax on one or both of the properties eventually, if they’ve gone up in value.

“Each family unit (which includes you, your spouse or common-law partner and any children under the age of 18) is allowed to designate one property as their principal residence for each calendar year.”

Everything you need to know about paying taxes by instalments, and why ignoring the CRA’s reminders is a bad idea

Not everyone is required to pay their taxes in quarterly installments, but if you do then the June 15th payment deadline is important. If you have to pay quarterly payments, there are several ways to calculate what you owe. This year, the CRA is notifying certain taxpayers through automated telephone messages, so if you hung up on them (thinking it was a spam), then you’ll want to follow up with CRA and make a payment ASAP. It is a mistake to ignore your installation payments. Failure to pay installments on time can result in arrears interest and may also result in penalties.

Three portfolio presets for summer

Many investors choose to step away from their portfolios to enjoy their summers, but before you do there are some presets you can set up to protect your investments. First, you can create a stop-loss order, which will decrease any potential loses if your stocks go down in value. Second, you can set up accounts for dividend reinvestment programs. This allows you to purchase more of the same shares using your dividend payout with the added advantage of not paying fees. Third, you can also set up automatic deposits into your RRSP and TFSA accounts to help spread out your contributions into these accounts throughout the year.

Be Smart About The Hidden Costs Of Sending Your Kid To University

Along with the many joys of parenthood comes the financial burden of paying for them, and often that includes paying for them all the way through to completing a university or college degree. There are Registered Educations Savings Plans (RESPs) to help Canadian parents. However, with the soaring costs of post-secondary education, they’re frequently not enough. Along with students taking up a part-time job, there are other ways to make it more manageable and in the process help your child acquire some financial literacy, which will help them well beyond their school days.

Key Takeaways:

Teach your children about money and how to budget. This should include a working knowledge of how a bank account works, credit-card interest rates, credit scoring and a general understanding of how much things cost.
Look into scholarships, bursaries and grants. There are many smaller ones that people don’t know about and don’t apply for.
Consider second hand textbooks, technology, furniture, automobiles and more to stretch those dollars and save during their school years.

“Almost from the minute your baby is born, you might start thinking about the financial implications of this wondrous bundle of joy. Not just the costs associated with having a baby, but throughout their life, culminating in what many parents see as the largest expense they will incur with a child: university or college.”

Personal Investor: 4 ways HELOCs can make life easier

Canada has a high number of people who have home equity lines of credit (HELOC). Frequently, these people only pay the interest on these loans each month, which has caused the average HELOC to grow to $70,000. For disciplined borrowers, a HELOC can be beneficial, for instance, to consolidate debt as well as set up an emergency fund. Additionally, people can use them to add value to their home by renovating or boosting their retirement savings plan contribution.

“With borrowing rates on the rise, HELOCs can be dangerous in the wrong hands. But for disciplined borrowers, they can be a lifeline when times are tough and a springboard to grow household wealth.”

What today’s savers can learn from today’s seniors about retirement planning

A new study of retirees, from 30 countries including Canada, provides valuable insight to those looking to retire in the future. When asked, 44 percent of retirees said they wished they had saved “a little” more and 14 percent wished they had saved a lot more. Nearly 1/4 of them are using pension income, which may not be available to those currently working as pensions and benefits are on the decline. While Canadians need to be saving more to make up for the difference, many are saving less due to spending more on real estate and higher debt levels. The Canada Pension Plan (CPP) and Old Age Security (OAS) will only provide a modest amount of the average Canadian retirees’ income, so Canadians should be thinking more about saving independently.

Small businesses that embrace technology do better, says BDC

Although technology is used successfully by most large businesses, a recent poll of Canadian and American businesses has shown a high percentage of small businesses do not take advantage of available technologies for inventory to human resources to make them more successful. The biggest reason is that these businesses are worried about the start-up costs, but in reality, they are hurting themselves by not making the investment. Businesses that invest in technology are outperforming those that don’t use it.

“According to a new study from the Business Development Bank of Canada (BDC), small and medium-sized businesses in Canada are lagging behind when it comes to adopting technology, with only one in five having what the bank calls an ‘advanced digital profile.'”

What you need to know about inheriting or transferring a foreign pension

In Canada, if you receive an inheritance, whether from a Canadian or foreign estate, it is tax-free. However, there are exceptions. A recent case involved “inheriting an IRA” from his father in the United States. When the taxpayer did not report the IRA payment on his Canadian tax return, the Canada Revenue Agency reassessed him and added it to his income minus the A judge upheld the ruling that the payment was taxable, because the payment didn’t come from his father’s estate and since there is a specific rule in the Canadian Income Tax Act stating that a taxpayer must include any pension benefit in their Canadian income. The taxpayer could have done things different to avoid the tax, but it does get complicated and depends on your unique circumstances.

5 Tips For More Cost-Effective Giving This Year

Ultimately, giving is a way to support a cause that you’re passionate about and that you believe in. And so, it’s important to ensure that your donation makes the biggest impact towards the cause, as opposed to an organization’s overhead or other activities like fundraising. To safeguard your giving and make sure it goes to the right coffers, check to see if who you’re giving to matches the kind of passion you have, and don’t be afraid to audit charities. You should be able to look at what you give to a charity as a step toward building the kind of world you want to live in.

Key Takeaways:

Always do your homework before giving and make sure the charities you consider are legitimate and see how they spend their funds.
When you find a charity that is important to you, that you care about and believe in, consider setting up payments to give regularly.
Charities and non profits are not exactly the same, so be sure it is a registered charity by checking the CRA website if you’re wanting a tax deduction.

“Using your head as much as your heart when giving is important, so ensure you’re giving to a charity/cause that will most effectively manage your contribution.”