How much money should I be saving?

Though a 10 per cent savings rate may be a popular savings norm, it’s probably not a savings rate that will afford you your dreams, it’s not a savings rate that will allow you to stop working or retire early or achieve the financial goals that matter most to you.

If you maintain your current savings rate on your current take home salary, how much will you have saved in one year, five years or ten years? And how does that sum compare to the cost of the lifestyle you want to live and the money milestone dreams you want to achieve?

Maybe, instead of shooting for an arbitrary savings rate like 10 per cent, we can reframe our savings rate within the context of what we actually need to achieve our savings goals.

If you can’t save 10 per cent of your pay right now, please don’t be discouraged. If you’ve just graduated or you’re paying off a lot of debt or you’re recovering from a job loss or a divorce, it’s going to take some to get your finances in order and start saving. In such cases, establishing (or re-establishing) the habit of saving is more important than the actual amount you save.

You might not be able to save 10 percent of your paycheque, but can you save 2 per cent or 1 per cent or even just $5 each week?

You can always increase your savings contributions as you’re more able – when you get more of your debt paid off or you get a new job or you score a raise – but having the savings habit already in place, (no matter how small your contributions currently are), will serve you when the time to scale those contributions comes.

If you’re not saving at least 10 per cent of your paycheque for other reasons, (like overspending), it might be time to get serious about learning to live within your means.

Here is an approach that can help curb your overspending.

  • Consider both your short- and you long-term goals. Yes, you might want to buy a house in 5 years, but you also want to consider how much progress you’ll want to have made on your longer-term goals like saving for retirement.
  • Rethink your idea of what’s 'normal' and rejecting 'standard rules' like 'save ten percent of your income', in order to open you up to longer term opportunities.
  •  Brainstorm different possible futures, and write down the pros and cons of each. Think through your fears and identify what it is that’s holding you back from making these kinds of drastic lifestyle changes, and conversely, write down what you would stand to gain by adopting them.
  • Identify resources for support and opportunities to increase your income so that you can increase your savings contributions.
  • Print out a picture of your goal purchase or lifestyle, and put it in your wallet wrapped around your cash and credit cards, so that every time you consider a purchase, you have to consider the trade off of not saving.

What can you do with your tax return?

Receiving a chunk of money back from the government at tax time is a double-edged sword. It can give a false sense of financial calm, leading you to make irresponsible choices you would never consider otherwise. Eventually, those can turn into expensive habits and an unsustainable lifestyle. The key is to have a solid plan from the start.

Step 1: Pay off high interest debt
The number one step to take after receiving a windfall is to pay off any high-interest debt, such as credit cards or personal loan bills. If the interest rate is eight percent or higher, you should always pay that off before doing anything else.

Step 2: Bulk up your emergency fund
Once you’ve cleared your most important debts, it’s time to focus on your emergency fund. Go through your bank accounts and determine how much liquid cash you have to use in case you lose your job, require an overnight stay at the hospital, or your car breaks down. Write down that number. Most experts recommend stashing at least three months’ worth of expenses, but if you have a home, an unstable job or a child, you should have between six to 12 months’ worth of expenses.

Step 3: Increase your retirement contributions
Adding money to your retirement accounts is a smart next step, because the money you invest will pay off when it’s time to stop working. The power of compound interest could turn your RSP into a goldmine.

Step 4: Pay off other debt
If you have a mortgage, car loan, student loans or personal loan, a windfall can help you wipe them out entirely. If you don’t have enough to pay off all your debt, there are two methods you can use to decide which ones to choose. The snowball method recommends paying off debts with the smallest balances first and using those monthly payments to add onto your other debts. Another popular strategy is the avalanche method, which advises consumers to pay off debt with the highest interest rate. Paying as little interest as possible will save you the most money in the long run.


What’s a blockchain? A primer on cryptocurrencies

A public blockchain is a massive, freely-available financial ledger, that is both global and impossible to forge because of the depth of its digital encryption.

For example, the digital currency Bitcoin is grounded in a peer-to-peer network that is not linked with a bank or a state currency in any way. At the same time, blockchains are, and can be, connected to other, non-digital financial assets such as stocks and bonds. This means that it can be used to move these assets in a more covert way than through other means.

This may seem complicated, but think of it this way: the value of money has always been based on a social belief in its worth rather than on the intrinsic value of its physical form. We don’t carry gold around in our pockets, we use paper or plastic representations of money.

While it is a type of money that has been created through a different approach than in the past, therefore, blockchains are still currencies. This does, nonetheless, make this kind of money hard to classify. The power in money is connected to the social contexts in which it is exchanged, and in the case of blockchains, this power is linked to their current popularity as investments. 

Does this mean that blockchains are the same as other forms of currency?

The reality is that they are not, simply because they do not have a policy framework behind them. Economies depend upon the monetary policies that shape the use of money and its value in terms of interest rates. A blockchain -- at the present time -- operates outside of these boundaries. This means that many states are concerned about the fact that these currencies lack their oversight and control. Blockchains could have deep impacts on the way in which interest rates proceed, and also the way in which the currencies in states are traded and valued internationally. This, in turn, can have an effect on states’ GDP, trade conditions, the ability of people to gain access to mortgages, and many other aspects of the financial world.

The fact that people do not know much about Bitcoin blockchains is likely a bit part of what they are so valuable at the present time: they present a mystery upon which some people are betting. The pseudo-anonymous nature of its use is attractive to people in some echelons of digital society, and this has led to the creation of even more blockchains. This new infrastructure is likely to become more complex, however, as competing digital currencies arise. In fact, the Canadian government is looking to create its own blockchain currency.

With the increase in the price and value of Bitcoin, it is evident that there will be new ways of working with digital currencies that will emerge as a part of a globalized social change, but we are only at the very beginning of that process.


5 reasons to file your taxes early

It’s that time of year.

Many of us wait until the last moment on April 30, or even later, to file our tax returns. While you need to take as much time as you need to complete your taxes accurately and fully, it can be beneficial to file earlier rather than later in the tax season. Here are five reasons why early tax filing is a good idea.

1. To beat the scammers.
Canada hasn’t made as much progress as we have wanted in reducing tax identity theft, payment fraud, and refund fraud problems leading to consumer complaints across the country. The CRA warns that even more scams are on the rise. The faster you get your taxes done, the less likely that you’ll fall prey to scammers that are poised to pounce after April 30. You’ll know that you have already finished the process, and you’ll have that return in the bank or be well on your way to paying off any overages.

2. To get your refund sooner.
Most people who file early do so because they're getting a refund, directly depositing it into your bank account. In doing so, you’ll be waiting less time than those who are expecting a paper cheque. You can then invest that money in something you need or want, including next year’s RSPs.

3. To figure out how to pay what you owe.
Many people delay filing because they know they owe taxes. But filing early actually can help here, because it will give you time to gather the funds you need to get your tax situation sorted. Do you need to raid an emergency savings account? Or borrow from a family member? Or set up an installment payment with CRA?

4. To start focusing on the new 2018 tax changes.
Most of us put off things because they are unpleasant. That's definitely true of filing taxes, even when you get a refund. But many new tax laws that took effect on Jan. 1, 2018, and this means that there may be some shifts in how you manage your money and your investments this year. You may want to make pre-planned estimated tax payments to cover expected federal tax shortfalls due to things such as investment earnings.

5. To beat other accounting customers in line.
If you can get your taxes done within the next couple of weeks, you're probably going to be in a better filing situation, if only for the fact that you won’t risk facing the queue at your accountant’s office. This is especially the case if you are self-employed or have had a challenging year (divorce? move? job change?) that may require more paperwork. Your accountants receive everyone’s files in a very short period of time, and if you want more attention paid to your taxes, get in right away, and benefit from fresh minds!

Mistakes University Students Make with Their Money

When students go to university or college for the first time, managing their money may be another first. It’s important for students to gain an appreciation for how to spend, save, and plan for the future, especially if they are paying for their own education. Here are some tips and some traps to avoid.

Moving to a distant school
When you aren’t familiar with your university or college community, you may make poor financial choices. This means paying more for a place to live, for food, and for transportation back and forth every term.

Students shouldn’t feel constrained to their local educational institution, but planning ahead for the extra expenses of a first year in a different province or overseas needs to be a part of the equation. Plan financially as well as academically for the choices ahead. Research the tuition, the flight costs per year, as well as the cost of living for the community before making a decision.

Getting access to student loans
Many students get an influx of cash from student loans and spend it right away, thereby leaving them strapped for the rest of the term or even the whole academic year.

While some students make careful choices, or even invest their student loans in short term GICs to create income, this isn’t the case for many. Parents should go over all of the options with their children to manage their money and their ideas for how it ought to be spent in order to avoid running out of money before the school year is up.

Counting on scholarships and bursaries
Yes, you can get scholarships, but you need a plan for attaining these in the same way you need a plan for getting into university and college in the first place. You don’t always need the best grades, but you do have to put in the time and effort to make your case to those who can help you out. Do your research, and reach out to those who may be able to help you at your new school. Talk with an advisor to see what is right for you.

As well, school-based bursaries are awarded simply on a first-come, first-serve basis to those in need. Large Canadian universities will provide bursary support to those who are struggling throughout the year, but you have to apply, and you may have to show why you need the money more than others. Contact Financial Services at your university to make the connections you need.

Set up an emergency fund
Just like those who have full-time jobs, students also need to set aside some money for emergencies. This can help them modulate their debt, and ensure that they don’t have to call on their parents at the last minute to pay their hydro bill.

The Wealthy Barber says that putting aside ten per cent of your income is a good start. If this is the first time a student has set up a savings account, they may want to look into all of the options available, such as higher-interest online savings systems.

The credit card crunch
Colleges and universities always have booths from credit-card companies willing to hand over new accounts to students. Spending through the credit card can, however, be problematic if planning ahead is an issue. Budgeting needs to match spending, no matter what payment process you use.

It is possible for students to build up credit in a positive way as long as they make a commitment to paying off their balance every month. Having no credit is almost the same as having bad credit, so using a credit card wisely can be a boon. 

Keep Your Money Safe Travelling This Summer

Travelling during the summer months means that, no matter where you go, you’ll be in a crowd somewhere. Walking around a new city in the midst of other tourists and locals, some of whom may not have the best of intentions, means that you need to be vigilant about how to use your paper and your electronic cash. Here are some tips to keep you and your money safe.

Backups upon backups
Even if you lose your wallet, all is not necessarily lost if you plan ahead of time. Keep copies of your key banking information in a locked part of your suitcase or a password-protected USB, and have your bank’s international phone number on file.

Don’t carry took much cash
Many people, despite common sense, carry a lot of cash on hand. Generally speaking, make sure you only carry what you need for the day, and separate your money and valuables into different pockets or cases.

For example, if you have a laptop or phone with you, carry it in a bag, and leave your cash in an under-clothes pouch or wallet. You can also purchase Radio-frequency identification (RFID) protected wallets now, which can track your valuables if they are lost or stolen. Pacsafe has many options that are highly rated for travel protection.

Use credit and debit whenever you can
You can use your credit card the entire time you are on vacation and pay it on your return. This provides you with extra protection; not only is your credit card protected by a PIN, but it also provides you with buyer protection and liability support if your cards are stolen and used.

Many countries are beginning to use chip-and-PIN debit systems such as those in Canada, and your debit card may offer you the same protections as your credit card. Bringing your debit card (or memorizing your bank numbers) will allow you to do online banking and check your transactions while you are away.

In any case, make sure your card of choice is one with no foreign transaction exchange fees. Check with your bank. Also, bring a back-up card so that you have access to a second source of money if you run into issues with your primary card.

Spend wisely
A big part of keeping your money safe when travelling is not giving it away unnecessarily. Do your research before you leave. What are the tipping customs in your destination? Should you haggle over prices? How you can you avoid tourist traps? Don’t assume that you have to pay more to meet expectations; sometimes its actually more polite to follow local rules.

Also, remember that not every day has to be a restaurant day. Grocery stores offer great value on fruit, water, bread, and other daily necessities. Browse for local specialties at a fraction of the tourist price, and get the best deal on breakfast if you plan ahead.


How to Save Money on Your Next Vacation, Even After You Buy Your Airline Tickets

It pays to do your research, but when you’re on the hunt for the best deal for a flight for your next family vacation, you may get nervous when it comes to clicking on your final purchase, fearful that you’ll find a better deal later.

Booking airfares seems to be an area mired in confusion, changing rates, and endless schemes. From cookies being buried in your browser that raise the rates every time you perform the same search, to having to search at on airline sale days at midnight to get their best rates, a decent price on airline tickets is hard to find. This is because airlines, as well as the websites that sell tickets at the last minute, all rely on algorithms so that they can make the most money on your dime.

There are, however, websites that can ease the pain of booking airfare and help you get the lowest price.

Here’s how it works.

Get a refund on your airfares
Did you know that some airlines will give you a refund if the price goes down even after you buy your ticket? Yapta specializes in tracking flight prices, both before and after you buy. It’s a user-friendly site with a standard search engine. You can track the price changes (and you register with only your email, first name, and a password), receiving emails with weekly summaries, as well as special alerts when prices go down. If your flight goes down in price after you buy, you can get the difference refunded directly from the airline.

Pay less for longer flights
FareCompare helps you find the best times to buy flights, and use a map to see where you can go given your travel budget. You can also search flights for price-per-mile. FareCompare educates you on how to become better at hedging your bets so that you get the lowest price flights in the first place.

Choose the least expensive vacation destination
If you haven’t decided where you want to go on vacation, KayakExplore is a fun way to choose a destination. Enter your home city, and filter results by selecting maximum price points, countries/continents you’d like to visit, flight times, and even by weather and the things you want to do with your family on your next vacation.

General tips
Here’s how to get the best price on your vacation no matter where you decide to go.

  • Act fast. If you get an alert that the price has dropped, jump on it. Price drops can last as little as a few hours, depending on how many seats they release at the lower price and how popular the route is.
  • Buy at least 7 days in advance. As soon as you get to less than a week from departure, the price skyrockets. If you can convince an airline to give you a refund on the price difference, don’t expect cash. Instead, you’ll receive a credit or voucher with that airline for future travel.
  • Stop searching after you book. Once you’ve bought your ticket, do yourself a favor and stop searching. Just go and have fun!

Your taxes: What can you do better next year?

  • Do you have a business? Consider how your employment, business or professional income is tallied, and what taxation options need to be addressed early
  • Do you have investment income, such as interest, dividends and capital gains? Figure out what the best portfolio practices are so that you can decrease your tax load
  • Are you gaining from deductions in the right way? How do your expenses figure into your taxes, and can you maximize RRSP contributions and other investments to offset gains? What deductible interest expenses can you bring to the table?
  • Do you have an estate plan? You will need to look at how to protect your assets and provide tax-efficient income for yourself and your beneficiaries
  • Do you donate money to charity? Figure out what your best options are for donations, especially if you contribute a significant amount to your chosen interests

RESPs: What's the scoop?

Registered education savings plan (RESP) contributions can be provided for your child or grandchild. What’s the scoop?

  • Every year you can contribute $2500 per child under age 18 to this fund
  • The federal government will contribute of $500 annually to your fund when you put in the maximum, and as much as $1000 when you double up two years’ contribution in one calendar year
  • The federal government will contribute a maximum $7200 per child in their lifetime

What’s the difference between an RRSP and the TFSA?

A tax-free savings account (TFSA) is an investment savings account, in which you will not be taxed on your earned interest. You can use it to invest in mutual funds and other direct investments. There are no available tax deductions for contributing, but in 2017 you can put aside up to $5500 in your TFSA account without incurring taxes on capital gains.

A registered retirement savings plan (RRSP) is an investment account for which you receive a tax credit for what you put aside for the future. You will be charged tax on the savings when you withdraw your funds. Try to contribute to your RRSP as early as possible; investments made before March 1 of this year can be counted towards this year’s taxes.

Tax credits: What can you claim?

What can you claim as personal or professional expenses for your taxes at the end of each calendar year?

  • Interest for certain activities (crediting interest for loans personal purposes is not permitted)
  • Child-care costs
  • Charitable donations
  • Political contributions
  • Medical expenses
  • Tuition fees
  • Transit pass costs
  • Eligible school supplies for certified teachers and educators

What is income splitting?

This refers to the practice of decreasing the reported income of the greater earner in a family in order to decrease the overall tax load. You can consider this as an option if:

  • You have your own business, and you employ your spouse, children, or partner for a reasonable salary instead of claiming it as personal income
  • You contribute to your spouse’s, children’s, or partner’s retirement income through RRSPs
  • You loan money to your spouse, children, or partner at 1% interest