By Sheryl Smolkin

This week the country mourned the untimely death of Jim Flaherty, the former federal finance minister. In Goodbye Jim, Canadian Dream Free at 45 blogger Tim Stobbs says the most important lesson he learned from Flaherty is “life is short, so don’t spend all your time working.” 

With the deadline for filing 2013 income tax returns extended to May 5^th because of temporary system shutdowns due to the Heartbleed software bug, procrastinators have several more days this week to delay the inevitable.

However, there are some cases where it may be a good idea to defer taking tax deductions you are entitled to this year to a later year. In the blog Taxes: When it Pays to Procrastinate or Defer on Young and Thrifty we learn that you will get more “bang for your buck” on your RRSP deduction if you contribute this year but do not take the deduction until a later year when you are in a highrt income bracket. The same goes for your educational tax credits.

Financial Procrastination can also result in making bad financial decisions, says Dave on Canadian Dream Free at 45. For example, he recently accepted the first house and car insurance package offered to him, instead of making the time to shop around (a serious personal finance no-no).

For many people, the reason to scrimp and save during their working life is to leave a legacy for their children. But on Boomer & Echo, Marie Engen says if you have sufficient money to Leave A Legacy Before The Will Is Read, consider giving your children a financial boost when you are still alive to see them enjoy it. Helping with a down payment on a house, funding RESPs for your grandchildren and family vacations can be very gratifying.

Finally, Squawkfox questions Repair or replace: When does it make sense to mend the threads you’ve got? She says it depends whether the item is busted or just worn out. It costs $50 to repair the heel and sole her eight year old blue Fluevog boots instead of $350 to replace them so she opts for the repair. But she regretfully acknowledges that even good quality items won’t last forever.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

 

Hi,

Today we are continuing with the 2014 savewithSPP.com series of podcast interviews with personal finance bloggers. I’m talking to Krystal Yee who blogs on “Give me back my five bucks” and the “Frugal Wanderer.”

With over eight years of professional experience in marketing, communications, and writing, her career has spanned a variety of different industries. From ghost writing in the provincial government, event coordinating for a professional hockey team, to marketing cold water survival gear – she’s done just about everything.

In 2012 Krystal lived in Stuttgart, Germany. There, she worked remotely for clients such as the Toronto Star (moneyville.ca), Canadian Living, and Flare Magazine. In her spare time, she loves travelling, hiking, tweeting, and analyzing baseball statistics.

Hi Krystal. Thanks for joining me today.

Thanks for having me.

Q: When and why did you start your blog “givemebackmyfivebucks”?
A: Well, I started that blog back in February 2007, because I was finding it hard to relate to my friends in real life about the money issues I was having. I was uncomfortable bringing up a topic that, at the time, seemed really personal.

So once I found that personal finance blogs existed, I became really inspired and motivated, knowing there are other people out there like me who wanted to change their lives. That was the reason why I started my own blog.

Q: Seven years ago you had over $20,000 in student debt and no money. Now, you are a debt free homeowner. How did you do it?
A: It was a lot of hard work and sacrifice, but I knew that I needed a life change. And I decided not to hide from my debt any longer, and that was really, really scary. The first thing I did was calculate how much I owed. I gave myself one year to get out of debt. So I started building budgets, saving money any way I could, and increasing my income. And actually attacking my debt from all of those angles helped to speed up the process.

Q: What are some of the mistakes you think that you made along the way before you got on your debt repayment plan, and what would you do differently if you had it to just do all over again?
A: I think one of my biggest mistakes was not creating a realistic budget. I wanted to get where I wanted to be as fast as possible, but I didn’t take into account how unsustainable that would be. After taking that year to get out of debt, I thought I could keep up with this bare bones budget to save money faster but I started to get really tired of what I perceived as constant deprivation.

As a result I found that I was rebelling against myself and my goals, and that was a really strange feeling. It actually took me a few months to realize what was actually realistic in the long term. And even today, I really have to question the budgets I make for myself and the goals I’m settings, just to make sure they satisfy the saver in me, but it also lets me live the kind of lifestyle that I want.

Q: Now, in “givemebackmyfivebucks,” you discuss your financial goals, your successes and failures. You put up weekly and monthly budgets. That’s really baring your soul. What reaction have you had from family and friends and your readers?
A: Well, for the first few years I started my blog, I was actually anonymous, so I felt safe. I was scared of what my family and friends would say about how much I was sharing on the internet, but once I actually started writing for The Toronto Star’s website moneyville.ca, I realized that speaking frankly and opening myself up, was really empowering.

Q: In 2012, you moved to a very small apartment in Stuttgart and worked remote. What were some of the challenges you faced and how did you overcome them?
A: It was really liberating moving to Germany and working for myself. You know, everyone dreams about quitting the 9-to-5 routine and becoming your own boss. I imagined sitting in European cafes all day long people watching and writing for clients. While I did that almost every day, because of the time zone difference, I also had to work a lot of late nights since my clients were all in North America. It was a really big adjustment for me.

But I think the biggest challenge was the isolation. Not only was I in a country where everyone spoke a different language, but working for myself. So when I moved back to Vancouver, I went back to a corporate job because I needed that daily interaction with other people.

Q: You love to travel and you manage to travel economically. You write about your experiences on the “frugalwanderer.” What has been your favorite trip to date?
A: Oh, my favorite trip was the one I took in November 2013 to Morocco. It was a mix of the people and the landscape and the food that made it so exciting. And I never thought I’d get the opportunity to travel to Africa, sleep under the stars in the Sahara, drink tea in Marrakesh or go hiking in the mountains. It was fantastic. And once I took the time to budget out how much everything costs and how I could save money on the trip, it quickly became a reality.

Q: How many hits do you typically get when you post a blog?
A: Well, it really varies depending what the content is and whether other websites pick up the blog posts. If it’s just my traffic on a daily basis, you know, it can be anywhere from 2,000 to 5,000 visitors a day. When I get picked up by another website, it can go up to 10,000 visitors a day or higher.

Q: What have some of the most popular blogs been?
A: Surprisingly, over the last seven years, my most popular posts have been about how to upgrade ramen soup to make it taste better and how much you’ll need to save up in order to move out of your parents’ house the first time.

Q: Oh, that’s interesting.
A: Other popular posts have been a comparison of prices at Target Canada to Target USA; what your net worth should be by the time you’re 30; and a post about the myth of having to travel when you’re young.

Q: What have some of the spin-offs from blogging been for you?
A: Having my blog has opened up a lot of doors for me that I never would have thought possible. What started out, essentially as an online diary to help me stay accountable for my goals has turned into this vehicle that I can actually use to make money and help people at the same time.

You know, through blogging, I’ve been offered writing contracts with moneyville.ca, The Toronto Star, Canadian Living, Flare Magazine, Metro News and other publications. I’ve spoken to the media on different topics and I get to partner with really fun companies at the same time. Recently I finished a campaign with H&R Block and I’m a regular Twitter contributor for RBC.

So I think that those kinds of partnerships make blogging fun and make it more interesting. In the future, I hope to continue blogging about my journey towards financial independence. And I really love how my hobby and what I’m passionate about has turned into a part-time job for me

Q: If you had one piece of advice for Canadians trying to get their finances in order, what would it be?
A: Oh wow, just one piece of advice. If you’ve never taken a good look at your finances, my advice would be to create a budget and stick to it. I mean, it’s fun to spend money. So we convince ourselves that it’s okay, because we have a better job around the corner, a bonus that will cover the shortfall, or because we think we deserve it.

But the truth is no matter how much money you make, there’s always going to be something you can’t afford. When I first started budgeting, I saw it as a restriction. It was a way to stop me from having fun. I didn’t understand that it was helping me manage my money, so that I could have even more fun with my life.

And by choosing where my money went and how I spent it, and by living below my means, I was creating a really stress-free lifestyle which I never had before, and a better future. So I think budgeting is the number one thing that I would tell people to do.

Thank you very much Krystal. It was a pleasure talking to you today.

My pleasure. Thank you.

—

This is an edited transcript of the podcast you can listen to by clicking on the graphic under the picture above. If you don’t already follow Give Me Back My Five Bucks and Frugal Wanderer, you can find them here and here. Subscribe to receive blog posts by e:mail as soon as they’re available.

By Sheryl Smolkin

If there are snow flurries as forecasted for this week, it’s probably all my fault because I took our winter coats to the dry cleaners this past weekend. But when the temperature goes up, the temptation to put away boots and down jackets for another year is irresistible.

Sometimes your financial accounts also need a spring cleaning. In Spring Financial Cleaning Big Cajun Man recounts how he cleaned up his Quicken data files removing redundant accounts so they give him a more realistic financial picture.

Jim Yih reminds us that investing and taxes go hand in hand, particularly outside of your RRSP. That’s because different forms of investment income can provide significant tax benefits.

In spite of the plethora of personal financial blogs and other sources of financial advice available to Canadians, Brighter Life editor Brenda Spierling reports on Brighter Life that Women lag behind in financial planning. Does this sound familiar? She suggests that you create a financial plan and open an automatic savings plan or payroll deduction plan as soon as possible.

This week Robb Engen on Brighter Life writes tongue-in-cheek about Bank Slogans And Taglines, Translated. For example, he says TD’s “Open earlier, open later. Even Sunday” really means, “We don’t care that most of you want to bank online. We’re going to make you come in and speak to an advisor so we can sell you more products  any time, day or night.”

Finally, after a foot injury in January, on Give me back my five bucks, Krystal Yee reports that she laced on her running shoes for the first time 75 days later and that she is determiend to run and blog her way back to top physical condition.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

Making a will and getting our financial affairs in order is something we all know is important, but many of us never get around to it. Younger people in particular often feel they are invincible and that it is too soon to think about death and dying.

But people die as a result of illness or accidents at all ages. And where they have not done the necessary planning, spouses left behind may not have the money or information they need to pay the mortgage, support their children and move on with their lives.

“Managing Alone” is a self-published book by Manulife Certified Financial Planners Jennifer Black and Janet Baccarani (co-owners of Dedicated Financial Solutions). The authors use 10 fact scenarios to help both young and old widows and widowers in different situations coping on their own without the help and support of their partners.

The book is short (119 pages) and easy to read. The stories are based on actual situations encountered by Black and Baccarini while advising clients. Each chapter focuses on two or three critical financial issues for the widow or widower profiled. Only a few of the many topics covered are how to:

• Locate and access your deceased spouse’s assets.
• Claim government benefits available to widows/widowers and their children.
• Deal with final expenses and your spouse’s final tax return.
• Establish your own credit and financial identity and why this is important.
• Obtain the right insurance coverage at the lowest possible cost.
• Manage if your spouse did not leave a will.
• Get family affaris affairs in order when death of one spouse is imminent.

A story that should resonate with younger readers is about Kayla and Jacob, a couple in their 20s with three young children. When Jacob drowned on a fishing trip without a will, Kayla had no idea how to manage the family finances. To compound matters, all of Jacob’s bank accounts were frozen. The bank also refused to pay on the mortgage insurance policy because he had traces of alcohol in his blood at the time of death and was engaged in “a dangerous activity.”

This chapter discussed in detail how Kayla met with a financial planner who advised her to use the proceeds of Jacob’s small insurance policy to cover expenses until she could get a job. He also helped her to develop cash flow projections and cut back on expenses so she could get by without selling the house.

Several years later she remarried and her new husband adopted the children. As part of their financial planning, the couple opened joint bank accounts; switched the ownershp of Kayla’s house to joint ownership; made beneficiary designations on company pension and insurance plans; purchased life and disability insurance with named beneficiaries; and drafted wills and powers of attorney.

Another interesting scenario features Walter and Anna, a financially well-off couple in their 60s. Anna died suddenly of bacterial meningitis. Eventually Walter felt ready to meet a new companion again, but his family was concerned that unscrupulous potential partners may try to take advantage of a grieving spouse. Working with his lawyer, accountant and financial planner in consultation with his children, Walter set up a trust to protect the estate. This section clearly explains the different kinds of trusts and how to set them up. He also updated his will and powers of attorney.

At the end of every chapter, there is a work sheet where you can fill in points to think about that may apply to you and questions to ask your advisor.

In addition to the book, the authors have established the website widowed.ca, a free online resource for widows, widowers and their loved ones, providing an easy way to locate a wide variety of information and services needed after the loss of a cherished companion.

You can find articles, event notices, Q&As, discussion forums and links to government websites on this frequently updated and valuable resource.

I highly recommend this book for couples, the recently widowed and their family members. The website covers an added continuum of valuable information and networking opportunies. Information on purchasing a print or electronic copy of the book can be found here. The ebook for Kobo can also be purchased from Chapters/Indigo for $10.99.

By Sheryl Smolkin

With spring finally in the air, high school and university students are pounding the pavement looking for work.

The pros and cons of unpaid internships have been all over the news lately with prominent publications cancelling illegal internships that were little more than free labour. On his blog youth and work Toronto lawyer Andrew Langille writes about The Growing Influence of Canada’s Intern Rights Movement.

Talentegg’s Sidneyeve Matrix says instead of waiting for opportunity to knock, students should get out there and create their own career luck. She gives four DIY opportunities that give young people ways to take the initiative and open doors for themselves.

Spring is also the time when many homes are bought and sold. When you apply for a mortgage, the bank will probably try to sell you mortgage insurance. Brighter Life blogger Helen Burnett-Nichols considers whether mortgage insurance or increasing life insurance will give you the best protection.

Robb Engen (Boomer and Echo) also has a new blog called Earn Save Grow. It is still very much a personal finance site, but it focuses less on frugality and more on topics like how to increase your income, and how to save wisely in the areas that impact your finances the most. Check out his latest post Long term outlook: Where do you see your finances in 20 years?

And last but not least, if you use a Keurig or other one cup coffee maker with disposable K-cups or pods you don’t even have to do the math to know you are over-paying for the small amount of coffee contained in the excessive packaging.

But in case you never gave the subject any serious thought, check out Squawkfox where Kerry K. Taylor calculates that if you use Starbucks French Roast Ground Coffee in the K-cup mini reusable filter it only costs 26 cents per cup, while using a K-cup will ratchet the cost up to 67 cents for eight ounces of java.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

For the last five years all Canadians over 18 have been eligible to open a “Truly Fantastic Savings Account” (aka a Tax-free Savings Account). These accounts are a particularly valuable retirement savings option for lower-income people who will not be taxed at a reduced rate after retirement and more affluent Canadians who have used up all of their RRSP contribution room. 

You can open a TFSA at age 18 even if you are not earning income, as long as you have a social insurance number. TFSA contributions are not tax-deductible, but investment earnings accumulate tax-free. You can also continue contributing to a TFSA beyond age 71 when RRSP contributions must end.

According to the BMO Annual TFSA Report released in late December, almost half of Canadians (46%) now report having TFSAs – up 23% from 2012. However, one-third of account owners are still not fully familiar with how TFSAs work. As a result, since opening an account, one in 10 people have over-contributed and paid a tax of one percent per month on overpayments.

To avoid a penalty tax, you must understand how much you can contribute each year, the way unused contributions are carried forward and when withdrawals can be replaced.

Starting in 2009, TFSA contribution room accumulates every year even if you do not file an income tax return or open a TFSA. The annual TFSA dollar limit for the years 2009, 2010, 2011 and 2012 was $5,000.The annual TFSA dollar limit for the years 2013 and 2014 is $5,500.

The TFSA dollar limit is indexed based on the inflation rate. The indexed amount will be rounded to the nearest $500.

Investment income earned by and changes in the value of TFSA investments will not affect your TFSA contribution room for the current or future years. For an example, if you earn $1,500 in interest on your 2013 balance, you can still contribute $5,500 in 2014.

The TFSA contribution room is made up of:

• Your TFSA dollar limit ($5,500 per year beginning in 2013 plus indexation, if applicable);
• Any unused TFSA contribution room from the previous year; and
• Any withdrawals made from the TFSA in the previous year.

The mistake that many people make is to withdraw funds and re-contribute them in the same year, after they have made their maximum contribution for the year, thus triggering an overpayment.

For example, assume that at age 18 in 2011. Jane opened a TFSA. At the end of 2012, Jane had contributed $10,000 to her account and had used up all of her 2011 and 2012 contribution room.

• In January 2013 she contributed the maximum amount of $5,500 for the year.
• In March 2013 Jane withdrew $10,000 to buy a new car.
• In September 2014, using her annual bonus, Jane re-contributes $10,000 to her TFSA.

Jane will have a $10,000 over-contribution that will be taxed at 1% per month until the end of 2013. To avoid triggering the tax, she should have waited until the next year (January 2014) to pay back the money she withdrew from her account in 2013.

Your TFSA contribution room information can be found by going to one of the following services:

• My Account;
• Quick Access; or
• Tax Information Phone Service (TIPS).

If the information that CRA has about your TFSA transactions is not complete or if you have made contributions to your TFSA this year, use Form RC343, Worksheet – TFSA contribution room, to calculate your TFSA contribution room for the current year. If CRA has deemed your unused TFSA contribution room to be a specific amount and you believe it is incorrect, instead of using this form, contact CRA for more information.

So keep records about your TFSA transactions to ensure that you do not exceed your TFSA contribution room.  CRA will also keep track of your contribution room and determine the balance of room at a particular time for each eligible individual based on information provided by TFSA issuers.

Also read:

TFSA Infographic

BMO Annual TFSA Report

Misunderstanding this simple TFSA rule could cost you a lot

By Sheryl Smolkin

Do you have a spring or summer wedding coming up? Squawkfox aka Kerry K. Taylor discovered H+M now has a Grecian style wedding gown on sale for USD$99. This happily married lady says if she were looking today she would say yes to this dress! The 38 comments (the last time I checked) are even more interesting with lots of great ideas on how to save money on a beautiful dress you may only wear once.

Whether or not to tip the people who provide you with services and how much is a perennial dilemma. On When Life Gives You Lemons Add Vodka, Sarah Greesonbach discusses how much it costs to get a massage and why your tips may be an important part of your massage therapist’s compenstation. Money saving idea: If you need a massage for therapeutic reasons, make sure you see a registered massage therapist in case you can claim all or part of the cost on your employee benefit plan.

In a recent Globe & Mail column Preet Banerjee had some great information on discounts for seniors and you don’t always have to be over 65! For example, by signing up for a membership with the Canadian Association of Retired Persons (CARP), you can get an annual gym membership to GoodLife for $400 per year (plus tax) as long as you are 45 years or older. The cheapest CARP membership is $14.95 per year.

Tim Stobbs writes an interesting blog on Canadian Dream: Free at 45 about adjusting to having a higher self-worth as your savings grow. He says the first most obvious change is that you gain the ability to self-insure for more minor events. For example, you don’t have buy the extended warranty on your appliances because if something stops working you can just buy a new one.  Later on when you have even more saved, you can raise your home insurance deductible since you can comfortably handle greater risks.

There has been considerable press recently about the number of illegal, unpaid interns in both Canada and the U.S. However Cait, a Blonde on a Budget says that an unpaid internship, writing her own blog and writing posts for other blogs she is really passionate about have led to her current full-time job with RateHub.ca.

“My boss saw that I could manage numerous projects with multiple deadlines, I obviously want to learn new things, and she loved that she never found any spelling mistakes in my posts.” Of course, Cait had been trying to build up her writing portfolio, but until that job offer came along she wasn’t conscious of the fact that her blog was a portfolio in itself.

Do you follow blogs with terrific ideas for saving money that haven’t been mentioned in our weekly “Best from the blogosphere. Share the information with us on http://wp.me/P1YR2T-JR and your name will be entered in a quarterly draw for a gift card.

By Sheryl Smolkin

You just got a job offer and in addition to a hefty salary increase you are getting all kinds of new perks like life insurance, free parking and a cell phone. The company even has a subsidized cafeteria where you buy lunch and pick up dinner- to-go for the family.

But not all employee benefits are created equal. In some cases the value of the benefits is viewed as taxable income by Canada Revenue Agency when you file your tax return.

Here are seven things that may form part of your compensation and how they are taxed by CRA.

1. Group benefits: Amounts your employer pays for your life, accident and critical illness insurance coverage are taxable benefits. But when the company pays all or part of the cost of your extended health care, dental plan, short-term disability (STD) or long-term disability (LTD) insurance you do not pay tax on the premiums. If you collect on your short-term or long-term disability insurance you will pay taxes if any part of the premiums were employer-paid.
2. Pensions/Group RRSPs: Your company’s contributions to your pension plan are not taxable. However, your employer’s contributions to your Group RRSP account are viewed as additional taxable income by CRA. But you can deduct RRSP contributions (up to $23,820 for 2013) so you will not actually have to pay taxes on Group RRSP contributions made by your employer on your behalf.
3. Service and recognition awards: Cash, gift certificates and things like gifts of stock certificates and gold coins are always taxable benefits. However, you can receive tangible tax-free gifts or awards worth up to $500 annually in some specified circumstances, such as a wedding or outstanding service award. In addition, once every five years you can receive a tax-free, non-cash long-service or anniversary award worth $500 or less.
4. Tuition reimbursement: If you get a scholarship or bursary from your employer it will be a taxable benefit unless you took the program to maintain or upgrade your employment skills. For example, if you need an executive MBA to be promoted, no tax is payable on the value of company-paid tuition. Where the company gives your child a scholarship or bursary, generally neither you nor your son or daughter who benefit from the scholarship have to pay taxes on the amount.
5. Parking: Employer-provided parking is usually a taxable employee benefit unless you have a disability or the parking spot is provided because you regularly need to drive a car for work. If you work in a shopping centre or industrial park where parking is free to employees and customers, a taxable benefit will not be added to your remuneration. Similarly, if there are fewer parking spots than the actual number of employees (scramble parking), free parking is not valued or included in taxable income.
6. Mobile phone: Charges paid by the company for the business use of your cellphone are not taxable. If your phone is used in part for personal reasons, that portion of the bill should be reported on your T4 as a taxable benefit. However, if the cost of the basic plan has a reasonable fixed cost and your use does not result in charges over the cost of basic service, CRA will not consider any part of the use taxable.
7. Subsidized meals: If the company cafeteria sells subsidized meals to employees, this will not be considered a taxable benefit as long as employees pay a reasonable amount that covers the cost of food preparation and service.

More details about the taxation of these and other employee benefits or allowances can be found on the CRA website.

Also see:

CRA Benefits and Allowances Chart

Income Tax Treatment of Taxable Benefits

Some workplace benefits come tax-free