January is still here and personal finance aficionados and bloggers are starting to eye tax season with a fervor most can’t quite understand. Why do these strange breeds lick their lips knowing they will file their returns in the not so distant future? Those who seriously think about tax season in January have been preparing their personal finances, investments and savings since last April to maximize their return. Yes, we’re a bit crazy, but you too can enjoy tax seasons with a some careful planning and foresight.
Knowing where to invest is not always easy to figure out. For our non-Canadian readers we have two primary investment vehicles where we can self direct our savings. The first is the Registered Retirement Savings Plan (RRSP) where we get a tax deduction for our contributions today, but when we retire we get taxed on withdrawals based on our retirement tax rate. The second, introduced in 2009, is the Tax Free Savings Account (TFSA) which is a base $5000 per year savings vehicle which is tax free, forever, and the base contribution amount will go up over time to try to reflect inflation. Both savings vehicles allow pretty much any type of investment to grow tax free. That being said, read on to learn more …
So which way should Canadians look? It really depends – everyone’s situation is different. TFSAs get tons of props these days but Canadian Capitalist gives a number of reasons RRSPs have an advantage over TFSAs. Very valid points but again, it really depends on your individual circumstances. In our situation the TFSA makes sense to max out first due to solid future pensions. However, once our TFSAs are maxed out you can bet we’ll turn our attention to RRSPs as well!
Paul Marshman, writing at Moneyville, challenges 5 accepted truths about RRSPs. For a very long time Canadians have been told to save, save, save (though many have not) and that the best way to do so was via the RRSP. Thing is, RRSPs have some faults and this article points some of them out.
Of course, after I highlight some of these RRSP “issues”, Do Not Wait teases use with 4 Tax Effective Ways to Invest in Canada by opening what appears to be a 2 part series on tax strategies for Canucks by highlighting – you guessed it – RRSPs. With luck Friday morning will present the other 3 methods and i’ll update this piece to reflect as much. When I commented I took a stab in the dark and guessed 2 of the next 3 may be TFSAs and Giving to Charity.
While not technically a “tax return”, the Registered Education Savings Plan (RESP) in Canada is one nifty way to saving for your kids’ education in that the Canadian government (and this is over simplifying) gives a grant of 20% of money you put into the RESP, well the first $2000 you contribute. That means the government gives you $500 if you invest $2000 – EVERY year (to a maximum of $7200). This is huge. As I said, i’ve simplified things so go check out Realized Returns‘ article RESP Basics which contains much more detailed information on this awesome way to try to save for post-secondary education.
Since we blog, we are keenly interested in some hints and tips regarding dealing with small business tax breaks. Elle, who writes at Couple Money wrote about Blogging Tax Tips for 2011. Great information here, but i’d like to add a tidbit our friend Young & Thrifty gave us (and jump on this PRONTO) – Canadians can claim the price of their computer(s?) for their small business between January 2009 and January 31, 2011. This could be an AWESOME tax break for Canadian bloggers to get a free computer.
Next up, more great articles I read this week, by category.
Sustainability
Frugal Confessions sure doesn’t like the waste after baking doesn’t work out, or, waste in the kitchen period. This article hit home as I see how Mrs. SPF gets frustrated when she she embarks on a bake your own adventure and it doesn’t work out (not often!). I think our stance on kitchen waste is obvious as well.
2 Cents at Balance Junkie asked Are Smart Meters a Dumb Idea? In theory, no. As implemented in Ontario – YES! We discussed our thoughts about “Smart” Meters already and let 2 Cents know so he could get some more info as well.
Really glad we found treehugger! We learned this week that San Fransisco is allowing food vendors to use reusable to go containers in Portland. About time! Great idea!
Personal Finance
There may come a time when you have to deal with a collection agency, or advise a friend, co-worker or loved one on how to deal with these vultures. Beating Broke tells us Don’t Take Abuse – Know Your Rights when you’re dealing with a collections agency.
Our friend Jeff over at SustainableLifeBlog posted something I think is really important. Too often the Personal Finance advice given over the web state: pay off debt, save, invest at all costs. Guess what? Life is worth living. By doing some priority spending you can balance your PF goals and living life – we’re human right?
Ever had an opportunity you regretted jumping at? Well, it can’t be ne arly as bad as this next group …. the founding 11 employees of Microsoft in 1978. We all know about Gates and Allen, and a few others did well, but others must be kicking themselves. Check out what happened to all 11 of the initial Microsoft employees.
Lifestyle
Now for a totally cool post. We could only wish to be included (yes, i’m a superhero fan). The Financial Blogger posted an awesome article title 6 Superhero Bloggers I Admire. Very cool.
Back to treehugger, the authors post there like 40 times a day or more. A lot of material. They told us that vegetables make you attractive. They taste good too.
Investing
So all of a sudden you’re making money and wondering what to do next? Passive Income Earner provides some ideas on approaches to take.
I think Canada is in a great place in the global economy. We’re resource rich, our banks are solid, we had few bailouts in 2008/09. Moneyville thinks so too stating Canada is in the sweet spot for a stock boom.
We got a bunch of mentions this week and we like to let those who promoted our articles know we appreciated it!
- Yes I Am Cheap liked how Mrs. SPF likes to Buy a Quality Jacket at a Bargain
- Canadian Finance Blog highlighted that it is possible to Make Your Own Cleaning Products
- Canadian Personal Finance was perplexed at a guest post we hosted, Paperless Billing: Punished for Being Green
- My Personal Finance Journey included My Journey to the Best Canadian Rewards Credit Card in the carnival of money stories
- Budgeting the Fun Stuff included our Brew Your Own Coffee and Water Bottles: Steel vs Plastic in the Total Money Blog Carnival
- Living Richly on a Budget and Funny About Money included Skip the Shower in the carnival of personal finance
- Invest it Wisely sees understands why we De-Ice with Clay Cat Litter here in Canada
- Spruce Up Your Finances highlighted our piece on Frozen Produce (Not Fresh) in the Winter
- Aloysas Kitchen Sink also noted our Water Bottles: Steel vs Plastic article
Nice roundup.
FYI – that tax tip doesn’t mean you get a free computer. It just means that instead of having to depreciate a computer over a minimum of two years – you can write it all off in the first year.
For a small purchase like a computer, the tax saving is practically zero. It does however, save a bit of book keeping.
Mike
Thanks for the heads up Mike! We learn more all the time. I’ll let Y&T know about this too so she’s aware of the ins and outs!
Tax time … ugh. It’s time to look at those numbers this weekend. Joy.
On the brighter side, I’m grateful that you guys included my article today. Thanks! :)
Hey 2 Cents – you’re a PF’er. I’m sure the numbers will turn out nice. It makes the “tax chore” bearable when you get some money out of big brother!
great round-up and thanks for including the RESP article!
This is very strange….about ten months later I just got a ping in my wordpress that you linked to me in this article!
Sorry for the late thank you! I wonder how many others I have not known about as well….
This happens to a few bloggers. No idea why – some people get our pings immediately and others take forever!