Wednesday, 26 April 2017

Fixing an RRSP Over-Contribution

What to do about an RRSP Over-Contribution

RRSP's can be a valuable tool when saving for retirement, not only do they give you a tax refund when you contribute, they also allow your money to grow tax-free until you withdraw it. I've talked more about the details of RRSP's both here and here

As a quick recap, every year that you work you earn contribution room. The amount works out to 18% of your annual income up to a maximum amount set by the government; for 2017 it is $26,010. If you don't use your room, it does carry-over for future use. To figure out how much room you have you can look to your most recent notice of assessment, it will be listed on there, or you can log in to your CRA online access. You might think you have tons of room available but keep in mind that if you are contributing to a pension plan through your employer that also counts towards your limit. 

CRA gives you a cushion of $2,000 (lifetime) in case you do exceed your contribution room. If you do use that amount you won't have to pay any penalties but you won't get the tax refund on that excess. It will still grow tax-free in your RRSP though. The problems arise if you go over and above that $2,000 cushion. The CRA is really punitive in their penalties, and you will be looking at a 1% charge PER MONTH, which can add up real fast. That means you will want to get on top of the issue and fix it ASAP. This is the same penalty you have to pay if you go over your TFSA contribution limit, but there isn't even a cushion for that. 

If you do find yourself in the situation of putting too much into your RRSP, then you will want to work fast. There's a chance you'll figure out your mistake yourself before CRA even knows about it. Usually, it would come up when you're doing your taxes. If not then you'll end up getting a letter in the mail from CRA informing you of your screw-up. Isn't mail from CRA the worst? Even when you're pretty sure it's just your notice of assessment there's always that moment of dread when you tear open the envelope! Whenever you do learn about the over contribution, you will want to act fast to fix it and avoid any unnecessary penalties. So how exactly do you do that? Well, you have two options...

1. Pay the Penalty
You can choose to leave the excess contribution in your RRSP and pay the penalty. This might be an option to look at if you hold an investment that has been doing really well or if the amount owing isn't that substantial. 
If you are choosing this route, you will need to fill out and submit form T1-OVP which will determine how much you owe. Try and do this within 90 days of the year after the over-contribution was made otherwise you may have to pay interest and a late-filing fee. That means that if you contributed too much in 2016, you would want to make the payment within the first 90 days of 2017. 

2. Withdraw the excess and beg for forgiveness
The second option, and likely the one you will go with, is to pull out the excess amount from your RRSP and then write a letter to CRA indicating why the over-contribution happened in the first place and provide proof that you have corrected the situation. The sooner you can make this happen the better. Now, to make things even more confusing, you have two options when it comes to withdrawing the funds.
  • Pay the tax: The easiest and fastest option is to contact your financial institution and have them pull out the amount you are over-contributed by. In this scenario, they will need to withhold tax based on the size of the withdrawal. If the withdrawal is under $5,000 it will only be 10% tax, if it's between $5,000 and $15,000 it is 20% and anything over $15,000 is 30%. If you need to withdraw more than $5,000 you can request that it be broken down into multiple transactions to keep the tax at 10%. The tax paid will count towards your next tax return, so you will get the money back at that point. 
  • Complete a T3012A to avoid the tax on the withdrawal: Your other option is to complete the tax deduction waiver form, and your financial institution will not have to withhold any tax on the withdrawal. Honestly, the form is a bit of a pain. You need to fill it out (potentially with the help of your accountant for a fee), send it to CRA for approval, receive it back and then forward it to your financial institution for processing. 
Whether you choose to pay the tax or get permission to skip it, you will need to submit proof of the withdrawal (account statement) along with form RC4288 to CRA to see if you can get the over-contribution penalty waived. Make sure you provide a detailed summary of what happened and why the over-contribution was an honest mistake. Hopefully, they will accept your explanation and see that you corrected it as soon as possible and will waive the penalty. 

Obviously, whatever option you choose, the whole process is a complete pain so avoiding an over-contribution is always the best option. Pay attention to your notice of assessment and ensure you aren't going over your contribution room at any time during the year. If you are making automatic payments to your RRSP every month (yay for you!) make sure they still make sense and don't need to be lowered because you are suddenly contributing to a pension plan or your income has changed. Most financial institutions only submit information to CRA early in January, so if you catch a mistake early enough they might be able to correct it internally, and CRA will never even know. 

What to do about an RRSP Over-Contribution

Wednesday, 19 April 2017

My Travel Bucket List

Today I'm taking a little break from talking about money and am instead going to daydream about my travel bucket list (you know, where I would go if I had ALL the money). Lately, I've been feeling plagued by the travel bug and have been dreaming up all sorts of places I would like to plan a trip to. We were in Barcelona last November, and I fell in love with the city, and it made a short trip to Europe seem completely doable. Before we went, I was a little hesitant because I didn't know if it was worth it to go all that way just for a week, but let me tell sooooo was! The one downside though was that a big trip in November meant we were stuck in Edmonton for the whole winter. And by whole winter I am including the April snowstorms that have been happening this past week...seriously, shoot me. It's halfway through April and we have more snow than at Christmas! So yes, I have a major urge to get the heck out of here.

Unfortunately for me, it's just not in the cards right now. We are going on a road-trip out to Vancouver Island in June, but that will mostly be to visit family and friends, and while that's great and all, it's not the splurgy kind of vacation I'm dreaming about! Hopefully, we'll get away to somewhere hot early next year, but I think we've got a pretty lame year of vacation on our hands for 2017.

So, if I did have the time and money to travel where would I go? Obviously, there are endless places I'd love to visit but today I'm keeping things semi-reasonable. This is more of a 'drink my way through Italy' as opposed to a 'climb Everest' kind of bucket list ;)

Prague, Czech Republic
I've heard wonderful things about Prague and how beautiful it is, so I've got it on our radar for 2020. Why 2020? Well, the World Juniors! That's a big hockey tournament for all you non-fans out there. Sounds fun right? I've never travelled anywhere specifically for a sports event but watching the juniors is a Christmas tradition (it starts on Boxing Day every year) for many Canadian families, mine included, so I think it would be an amazing experience. Nothing is set in stone right now, but I'm hoping we can make it happen. The one issue is the timing. Travelling during the holiday season is always pricier and busier, and Prague won't exactly be warm. How do you even pack for somewhere cold?!

The Maritimes
I feel like a bad Canadian for admitting that I've never travelled anywhere further East (in Canada) than Ottawa, not even Montreal. I'd say it's time to fix that and I would love to road trip around the Maritimes. I think my plan would be to rent a car in Montreal and head East all the way to St. John's. That way I could stop off at all the highlights along the way and get more out of the experience. Fall seems to be the best time to make that trip as you'd get to see all the Fall colours along the way. How do you guys feel about road trips? I think they are fun, as long as you can make frequent stops and not have crazy long driving days. Basically, I'm a child and will throw a tantrum after 8 hours of driving. 

New York, New York
I don't have much desire to travel to the States right this second because of all the ridiculousness down there, but at some point, I have to make it to New York. I spent one year living in Southern Ontario and still regret not taking a weekend trip to the Big Apple. A Broadway show, Yankees game, an overload of amazing restaurants, and endless shopping...pretty much a dream come true for this girl.

This will likely have to wait a few years before it's an attainable dream (unless I win the lottery) because of the expense and the number of vacation days I'd need. There is just so much to see! Really though, who doesn't want to go to Italy; the food, the culture, the vino {insert heart face emoji}. Sidenote: I did a jigsaw puzzle with a very similar image of Cinque Terre on it like the one above and have dreamt of going there ever since.

I think Cuba will likely be our next winter getaway. We've done Mexico a few times now but it's time for a change, and the bf's family highly recommends Cuba. When I'm looking for an all-inclusive vacation, all I really want is hot weather, a decent hotel and a beautiful beach, so I think Cuba would work just fine. It's also fairly reasonable price-wise, and you can get a direct flight from Edmonton. The one complaint people seem to consistently have about Cuba is the food, but I'm not too worried about that...maybe it will be the one vacation I don't gain weight on ;) Plus, Havana looks beautiful with its vintage charm so I would like to spend a day exploring the city.

Wednesday, 12 April 2017

Treat Hiring a Financial Advisor Like Buying a House

How to Find a Financial Advisor

Many people have a negative impression of the financial industry, and of financial advisors in particular, but how bad is the situation? There have been numerous reports circulating recently (examples can be found here and here) about people getting scammed by high fees and improper sales tactics at their financial institutions, but there are things you can do to help protect your assets. 

You might be thinking that you are better off just going it on your own, and with the uptick in robo-advisors and discount brokerages, this is easier (and cheaper) than ever before. I'm not here to dissuade you from doing that, but make sure you are willing to put in the time and do your research before building your own investment portfolio. Yes, it will be cheaper, but if you don't really know what you're doing, then it could cost you in the long run. Some people love being in control of their investments, but others want nothing to do with it, and for them, having the right person on their side can make all the difference. If you want to take the DIY approach, then it's not a bad idea to seek out a fee-for-service planner in your area that can help you with more detailed planning when you need it. This way you can manage your own investments but still receive the expert advice and planning skills of someone but only when you need it. Most fee for service planners will charge an hourly rate or have a flat rate for the preparation of a plan. 

How do you know if you have a good advisor? 
There's no perfect answer to that question, and an advisor who might be the best fit for one person might not be the best fit for another. A lot of advisors have a particular focus and have more knowledge in some areas than others. For example, if you are planning to retire in the next year your needs will be very different from someone who is just starting to invest and wants to take more risk. There's also no magic number to look for when it comes to how much an advisor should charge or how high your rate of return should be. If you are meeting your goals and are happy with the service you are receiving, then you're likely in the right place.

What you really want is to be comfortable with whoever is running your investments. This is your life savings after all, so having someone you trust in charge is essential. And by this I don't mean your closest friend or family member who happens to work in finance...don't go that route, it can get messy. The financial industry is sort of an 'old boys club' (shocking right?), and this can make finding someone to manage your finances daunting, especially for young investors and us ladies. If you feel like you are getting forced into something then let the person know you need some time to think and continue the search somewhere else. I promise there are great advisors out there, you might just need to kiss a few frogs along the way. 

If you are in need of an advisor or looking to make a change, there are some tips you should follow when seeking someone out. Think of the process like buying a house; you wouldn't walk into the first place you see and throw all your money at it right? Not a chance! You would look at lots of different options, get the place inspected, do some research on the neighbourhood, and figure out how much it's going to cost you both short and long term. Choosing who is going to be in control of your life savings is an equally important decision, and you should take it seriously.

You have options! 
Just because you do all your banking and maybe have your mortgage at your bank it does NOT mean you need to have your investments there as well, no matter how much they pressure you. If you are new to investing and are just starting to build your assets it can be a challenge to find a more experienced advisor to work with. One way around this would be to contact your parent's advisor, often they will be more willing to help because of the family connection. 

Ask your family and friends
Getting a referral from a trusted friend or family member is often the best way to find someone and many advisors will take on referrals even if they aren't technically accepting new clients. Money can be such a taboo subject to talk about but if you are working with someone you think is amazing then share that info! You can also ask other professionals you use; accountants, lawyers, mortgage brokers, etc. often have relationships with advisors and can provide a referral. 

Interview more than one person
Take the process seriously and line up meet and greets with at least a couple of different advisors before making your ultimate decision. Be prepared with some general questions but also questions that relate to your specific situation. For example: 
  • What is your investment philosophy? And can you show me a mock portfolio? 
  • What is your fee structure and how do you get paid? 
  • What do you know about my specific pension plan?
  • What demographic are most of your clients? 
Ask for references
Yes for real! A potential advisor should be able to give you the names and contact information for a few clients who you can get in touch with and see how happy they are with the service. If they're not willing to do this, then there's probably a good reason for it. Obviously, only people with positive things to say will be asked to be references, but it can still provide some degree of comfort knowing that other people out there are happy. 

What services do they provide?
How much an advisor charges isn't the only thing to focus on and going with the cheapest option might not actually give you the best value. Think (and ask) what other services might be provided. Not only can your financial advisor give you guidance on which investments are right for you, but many also offer comprehensive plans and advice on such topics as tax planning, debt repayment, pension plans, budgeting, and buying a home. A detailed financial plan can cost you hundreds of dollars so if your advisor is willing to do that at no charge and keep it updated you should factor that in when it comes to fees.

Bad advice is out there, both floating around the internet and coming from so-called professionals, so you need to prepared to deal with that. Remember, it's your money, and that means you have a certain responsibility to do your homework and make sure you are only taking advice from someone you trust and who knows what they're talking about. You wouldn't buy a house just because somebody told you it was a great deal, so don't make the same mistake with your money!

How to Find a Financial Advisor

Wednesday, 5 April 2017

That Time I Ran into a Parked Car

The Importance of an Emergency Fund

Shit happens...everyone has that mortifying story that they'd rather keep under wraps, right? Feel free to share yours in the comments (anonymously if you prefer) and make us all feel a little better about ourselves. Anyways, last month I was in a minor car accident and not only is that bad enough, but my accident involved me running into a parked car. You might be thinking, how does that even happen? Very good question, but unfortunately I don't have a good answer. I'm not actually a horrible driver, but that doesn't mean I wasn't still (at least partially) to blame. Up here in freezing cold Edmonton, we can find ourselves dealing with some pretty treacherous winter driving conditions, and this was one of those days...

I am a five-minute drive from work, practically nothing, and that fine morning I woke up to a dump of snow and the roads were complete crap (there was something like 180+ accidents just that day in Edmonton). I decided to avoid what I could of the main roads and drive through our neighbourhood, thinking it would be better with less traffic. Oh, how wrong I was! Only a couple of blocks from my house, I was in a single lane going in between parked cars on either side, my car hit a patch of ice and went sideways right into one of those parked cars. I was shocked and felt completely helpless, I've never been in a car that has just lost control like that. Luckily I was going really slow (like 20km/h...seriously!) but it's amazing how much damage can be caused even in a small accident like that. My front bumper had a chunk taken out of it, and the SUV that I hit had a cracked back bumper. It was also a Mercedes (of course) so that wracked up the bill higher than it likely would have been (i.e., my car looked way worse and yet cost less than half to fix). I promise you, there is nothing worse than having to knock on someone's door at 8:30 in the morning and telling them you just ran into their car. Thank goodness the lady was way more understanding than I likely would have been and didn't make me feel any more horrible than I already did. 

Now, time for a confession; I didn't have winter tires. I know, I know...who lives in Edmonton with our awful winters and doesn't have winter tires. This girl. In all my 15 years of driving, I have never had them and stubbornly refused to bite the bullet on the expense because I drive so little. The bf has a much better-equipped Jeep, and when the weather is bad, we use that almost exclusively. The only exception is my short drive to work. You are right, though, no excuses. 

I promise, I've learnt my lesson though and have already bought winter rims (yay for Kijiji deals) and will 100% have winter tires before the snow flies in the Fall. Any recommendations? Costco seems to be the way to go, but I've heard horror stories about trying to get in to get them put on or taken off. We are also in the early stages of becoming a one-vehicle family, and it would be the winter-hardy Jeep that got the boot. That would mean my car would need to be decked out as it would get significantly more use. More on that in a later post :) 

Back to my accident, I knew I didn't want to cover the cost of the accident out of pocket and my auto insurance included accident forgiveness so putting through a claim would not raise my rates. I had made it this long without having to put in an insurance claim so here's hoping I can make it another 15 years with no issues! I did, however, have a $1,000 deductible on my coverage, so I had to come up with that money. Here's where my 'Shit Happens' (aka emergency fund) came into play. Not having to reach for my credit card (ok I did, but only for the points) to cover the cost of the accident was a huge relief and made a terrible situation a little less stressful. Going through insurance also made things easier from a logistical perspective. After just one quick phone call to them, they had me booked into a body shop to get the repair dealt with and set-up with a rental car, so I wasn't left car-less. It took a couple of weeks to get my car back, that's what 180+ accidents in a city will do, but I didn't have to worry about not having wheels. 

I can't even imagine how much more stressed out I would have been if I didn't have easy access to that $1,000. Even having to run that balance on my credit card for a few months would have meant additional costs to cover the interest charges. It is shocking to me how many people are in this situation, though. The Federal Reserve Bank of New York recently released the results of a study they completed in February and the most startling stat to me was that 32.8% of Americans couldn't come up with $2,000 if an unexpected expense arose. I realise this is based on data from the US, but I doubt Canadians are doing that much better. Consumer debt is extremely high on both sides of the border, and this is a big reason why people aren't able to save and prepare for the worst. It also explains my constant need to nag you about paying off debt and building your emergency fund ;)

The Importance of an Emergency Fund

Wednesday, 29 March 2017

Financial Education & Money Lessons from my Parents

Money Lessons from my Parents

I get so frustrated talking to people who don't know basic things about handling their finances. Now don't get all defensive if you feel like you are in this situation because I'm not mad at you! What I hate is that we don't give people the tools to handle money when they are young. Really, what could be more important than ensuring children and young adults know that going into debt is bad and that starting to save early is essential? Apparently learning advanced algebra and who fought who in WWII are higher priorities. 

Just last week Ontario was making headlines because they are (finally) launching a pilot project to incorporate financial education into their schools. Their hope is to create a new course that will be implemented in the Fall of 2018. Obviously, it's still a work in progress, and we don't know what the actual curriculum will be, but it's certainly a step in the right direction. Other provinces across Canada have varying levels of financial literacy components included in high school curriculums, but I don't think there are any that couldn't use some improvements. For example, Saskatchewan has no official financial literacy component included in their schools, but BC and Manitoba have both revamped their math programs to include such topics. Here in Alberta (the only province I have experience as a high school student), they currently have a mandatory 'Career and Life Management' course. I took it, and honestly, it was kind of a joke. Everyone tried to take CALM in summer school because it was an easy two weeks of fun and games, seriously. Part of this for sure is that fact that most high school kids don't worry about money the same way they will 10 years later but it doesn't help that the course itself has such a poor reputation. The one thing I actually remember was going to a car dealership to 'learn' how to buy a new car. Cringe! 

So, what can we do? 
Obviously, I believe that high school curriculums should put greater focus on financial education and provide kids with tools that will actually help them succeed in the real world, but it doesn't end there. Parents need to take some responsibility too and pick up the slack. The problem with this is that not all parents have good money skills themselves, and sometimes bad education can be worse than no education. 

I was lucky to have parents who were positive money role models and picked up a lot from them when I was growing up. Both my parents were professionals (my Dad an engineer and my Mom a physiotherapist), and we were comfortably middle class, but that didn't mean they weren't careful with their spending. Both my parents are Scottish, and I still joke that my Mom fits the bill for the stereotypical cheap Scot. 
"Have you heard the rumour that the Grand Canyon was started by a Scotsman who lost a coin in a ditch?"

My Dad was definitely the money guy in the family, in fact, I still remember him spending every Monday night sitting at the dining room table paying bills, balancing the checkbook, working out a budget, etc. Apparently, this left a lasting impression on me, and although I don't balance a checkbook (who uses cheques anymore!), I do keep a detailed account of my budget. He was old school and used the antique pen and paper method, but with all the advances in technology, it is easier than ever to keep on top of your finances. Now you can get everything done through an app on your phone; more efficient...absolutely! But you do still need to put in a bit of time/effort to keep things updated. 

Even though I was an only child, I didn't (still don't) consider myself overly spoiled. My parents taught me that I couldn't always get what I wanted and that sometimes they just couldn't afford to spend the money. Was I scarred for life about never getting that pony I always wanted? Hardly (it's still on my Christmas list, though, hi mom). Instead, I learned that I had to work to afford the things I wanted and considering how many hours you have to work to earn 'X' amount of dollars really puts purchases in perspective. My 5-cent candy buying days were sure cut down when I had to spend my own babysitting money. I also remember a very long lecture conversation before I got my first credit card about the negative impact debt could have and the importance of always paying your credit card off in full. At the time, I was an 18-year-old high school student working a part-time job and hardly in need of a credit card, but my parents also understood the value of building credit. I think that first card had a limit of $500 (maybe even $250), but it still felt like a big deal, and I never abused it. 

Where do you start? 
Maybe you are a parent and are wondering how you can instill in your kids a sound basis of financial knowledge. Now, remember, I'm no parenting expert and am only speaking from my experiences growing up, but there are some guidelines you can use to set your kids on the right track. 

1. Educate Yourself
You're not going to have much credibility with your kids if your own finances are a mess, so step one is always to get yourself in order. Your good or bad habits will rub off on your children no matter what you do, so make it a good impression. 

2. Start Early
Obviously, children have the capability to learn different skills at different ages, and you'll have to hold off on complex subjects to later days. You can, however, incorporate money matters even at a young age. Consider role playing a supermarket transaction or playing monopoly. Anytime they have to give up money for goods will get them thinking about spending. 

3. Allowances
There's no better way to learn about your priorities in regards to money than to have to spend money you actually earned. This is where an allowance would come in. Younger kids don't have any way to make money (except maybe through Birthday or Christmas gifts), so an allowance can give them that access. I also like the idea of taking them to the bank to set up a bank account. There's no minimum age to set-up a bank account in Canada, and the requirements will depend on your bank, but most of the big banks offer accounts for kids. This way they will have a place to deposit money and watch their savings grow, you can even get them online access to help learn the ins and outs of the banking system. 

4. Encourage Working
Nobody likes laziness, so build up a good work ethic in your kids by encouraging them to take on a part-time job. I worked at my Mom's physio clinic from the time I was 14 all the way up until University. Working taught me to be more responsible, how to deal with a variety of people, and gave me an income that let me be more independent. 

How did you learn about money? Was it through school or from your parents? And, what the best money tip you ever learned? 

Money Lessons from my Parents

Tuesday, 21 March 2017

So, you Got a Tax Refund...

What to do with your Tax Refund

We're right in the swing of tax season, and I'm sure many of you who are expecting a hefty refund have already submitted your taxes there's likely a bunch of us there who owe money and are holding off to the last possible second. If you are still holding out, you still have a bit of time. The deadline for Canadians to have their personal taxes filed is April 30th.  I know when I was still a student and had all those education credits in my pocket I was getting things sent in as soon as my T4 arrived in my mailbox. Those were the days! 

Or were they...

Getting a big refund might feel like the best thing ever, but it's really not. What it actually means is that you have provided the government with an interest-free loan for the past year, and are just now getting your hard earned dollars back. On the other hand, if you actually owe money it means that interest-free loan came your way and the government was lending you money. I know it can be a tough pill to swallow to owe a chunk at tax time, but it helps a little to think of it this way. The best thing you can do is attempt to level out your taxes, so you come out neutral every year...easier said than done though. 

If you are in a position where you are getting a refund, then consider what to do with that money. Because it can often feel like found money, you might be tempted to splurge on something you couldn't normally afford or take a hot vacation to escape the endless winter. However, your tax refund isn't actually the windfall you might think, it's actually money you should have received over the past 12 months as earned income. Say you're getting $900 back from the government, that's not life-changing money, but it sure could go a long way in refreshing your wardrobe. What that actually means, though, is that your income should have been $75 higher each month. Doesn't sound like such a big deal anymore right? 

How would you have allotted that money into your monthly budget? That really depends on what your primary objectives are, but here are a few suggestions that might not be the most fun but would make the most financial sense. 

Pay Down Debt
This is always the top priority for when you have excess cash available. High-interest debt (like credit cards) are a killer when it comes to your finances, and you always want to get rid of them as soon as you can. Putting a lump sum on your most expensive debt will decrease the amount of interest you spend over time and free up additional money in your budget down the road. Eliminating those high-interest debts first is your best bet, but you're all caught up on that front you can also use your refund to make a lump sum deposit against your mortgage. 

Top-Up your Emergency Fund
Next, on the list would be ensuring you don't go back into debt when the unexpected happens, and the best way to do that is to have a fully funded emergency fund. You want this to be readily available so keep it out of the market and just in a high-interest savings account. An emergency fund will keep you on track if you get in a car accident (those deductibles though!), your furnace breaks down, or your dog needs surgery. 

Save for Retirement
There's never a bad time to increase your savings rate so why not add your tax refund to your RRSP. This has the added benefit of putting you in a better position when you retire but will also help you get another tax return next year. We all know that the earlier you start saving for retirement, the better off you'll be because of the wonder that is compounding interest, so take advantage of time and put that money to work. Instead of an RRSP, you can also invest in your TFSA, if you're unsure of which option would be best for you right now then check out this post on that very subject. 

Invest in Yourself
One thing that people don't always think of is spending money on something to improve yourself. And no...I don't mean go and get yourself some plastic surgery! Depending on what your career path is, getting more education is often a sure way to getting a raise. Is there a course you need to take or a conference you could attend to get you to the next level in your job? Increasing your income is one of the biggest factors when it comes to your finances, so having to outlay money at the start is can quickly pay itself off and then some. Pro tip, make sure your boss thinks your plan is as brilliant as you do. The last thing you want is to spend all the money and not get the raise! 

Treat Yourself
I'm all about balance, so if you have yourself all set up in each of the above categories, then I don't see anything wrong with spoiling yourself. There's no fun in always saving your money for a rainy day, but you do need to make sure that you've already got an umbrella stored away ;) Let's make a deal though and not blow your entire refund on something silly, how about half? Doing something smart with a portion of that money will make you feel better about spending the balance on something more entertaining. Maybe you already have a big purchase that you are saving for (new car, kitchen renovation?), this money could get you closer to that goal.

So tell me, have you done your taxes already this year or are you still procrastinating like me? And if you got a refund, what are you going to spend it on? 

What to do with your Tax Refund

Wednesday, 15 March 2017

7 Steps to a Better Resume

Resume Tips

If you are currently on the job hunt in Alberta, you are likely VERY aware that the job market is really tight and there is a lot of competition for jobs. Recent reports have our unemployment rate hovering around 8.3%. This is down slightly compared to late 2016 when it peaked (hopefully!) around 9% but still very high when compared to two years ago when it sat at 4.6%.
I've been lucky to have had stable employment since I graduated University almost a decade (yikes!) ago. I'm only on my second job in that time period, and the one move I made came out of connection in my industry. I know networking isn't everyone's favourite thing (personally, I hate it), but having an in can be the exact thing you need to set yourself ahead of the crowd. 

While you're working on meeting the right person, you will also want to make sure you're resume is looking good and is actually going to get you and interview. I've had to look in my share of resumes and let me tell you, resume writing is not a skill everyone has! Particular things drive me nuts when I'm browsing through a stack of resumes and other things that will get you moved to the keep pile almost instantly, and the most frustrating thing is that it is SO easy to avoid simple mistakes. Let's talk about that, what can you do to improve your resume and what do you need to make sure you avoid at all costs. 

1. No Pictures
Nothing catches me off guard more than someone who includes a head-shot on their resume. I realize that in some places this is the norm, but here in Canada it most certainly is not. The only reason it might not be a hard pass is if you're applying for a modeling position, but if that's not the case then just don't do it...ever. 

2. Spelling and Grammar
You would be shocked how many resumes that I have read that have spelling or grammatical errors in them. Come on people! This is the easiest of easy fixes. Use the built in spell check on your computer and take advantage of free grammar programs to catch the most obvious errors (I like Grammarly). Then get someone to proofread your resume to make sure there is nothing you've missed or maybe a more efficient way to say something. Not taking simple steps like this makes you look lazy and nobody will want to hire you. It might sound harsh, but if I'm going to through a bunch of resumes, any with spelling or grammar errors will instantly be put in the 'no' pile. #sorrynotsorry

3. Short and Sweet
Keep things concise, so the person looking at your resume actually takes the time to read through it. I highly recommend keeping it all on one page if possible. You don't necessarily have to put every single position you've held on your resume. If there are jobs that don't apply to the job you're applying to then feel free to leave it off. It's more important that you show your potential employer that you have the skills they are looking for. Basically, if you are applying for a job as an architect, you don't need to include your job history as a line cook. I'm also not a fan of the 'Objective' section that is included in most resume templates. It just feels so fake and unnecessary. 

4. Reliable References
You can hold off and not put your references directly on your resume, but I don't think it's a bad idea to include them. The chances of a potential employer contacting them before you go in for an interview is slim (checking up on references sucks). Keep the number of references limited to 2-3 and make sure they are good ones. The last thing you want is to have a successful interview and then have one of your references not give you a glowing review. This is why you always, always need to check with people before you list them. If you are having trouble coming up with references, then think outside the box. It doesn't always have to be an old boss, you can use a co-worker or a family friend that can speak to your personal attributes. A good reference from a not so great source is still better than a bad reference from a more credible source. 

5. Qualifications are there for a Reason
It might seem like a good idea to apply for ALL the jobs, but it really isn't. There is nothing more frustrating than reading a resume and wondering why the heck someone applied to the job. On just about every job posting you look at there will be a list of qualifications or required skills, make sure you fit the bill. If not, sorry, but keep on searching. If you are dead set on getting a particular type of job that you consistently don't have the qualifications for then it might be worth your while to work on that. Maybe there's a course you can take or some other job you can get to build your experience. It might not be ideal, but it's better than doing nothing. Sometimes you have to spend a bit of money to better your education because getting your dream job. 

6. Employment Gaps
There's not much that scares away a hiring manager more than an unexplained hole in your work history. If you have lots of short term jobs and gaps between them all, it makes it look like you aren't able to hold down a job and that no one else wants to hire you. Be aware of this and try to cover yourself. Obviously lying on your resume is not the way to go, but leaving out a few details can help you get your foot in the door. Instead of putting down exact employment dates maybe just organize it by year, so it doesn't look like you've been off work for as long. Details like this are always easier to explain in a person so make sure your resume highlights only the positive. 

7. The Dreaded Cover Letter
I hate cover letters, I hate writing them, and I hate reading....but, you know what? Write one anyways! This goes back to the laziness factor. Taking the time to introduce yourself through your cover letter makes it look like you are more serious about getting the job. It might not even get a second glance from a prospective employer, but it's not going to hurt your chances. You'll want to follow many of the same tips we've talked about for your cover letter; proofread, keep it concise and highlight your qualifications. Make sure you personalize at least a portion of it to the company you are applying to so it doesn't look like you just have a generic letter for everyone. 

Hopefully, these resume tips will help you on the job hunt, and if you've got other tips, please feel free to post them in the comments. 

Resume Tips

Wednesday, 8 March 2017

Healthy Amount of Stress

Is there such a thing as a healthy amount of stress?

I was recently listening to the audiobook version of '#Girlboss' (worst title ever) by Sophie Amoruso, and there was a section in the book that talked about stress that stuck with me. The rest of the book was just ok. I liked Sophie's no-nonsense attitude, but listened to it as an audiobook and found the narrator to be a bit annoying. It was also the very first audiobook I've every listened to (I talk about that here), so maybe my lack experience was a factor. Is that a your audiobook listening skills improve with practice? The quote that got me thinking was actually from a section written by Leandra Medine (an author and fashion blogger over at Man Repeller):
"I also think you age a lot quicker if you can't keep yourself busy and under the right, healthy dose of stress. Too much of anything obviously isn't a good, but as my dad always said: Overwhelmingly busy is a much better state to be in than overwhelmingly bored."
I could not agree more with this statement. People always complain about how much stress they are under and while too much stress is definitely a thing, the right amount keeps you motivated and efficient. Have you ever had a job where there's just not much going on, and you find yourself browsing the internet to keep yourself entertained? I sure have! And I find when that happens, even the smallest of tasks feels like such a drag, and I end up pushing off everything just to do one more (four more) stupid Buzzfeed quizzes. On the other hand, when I have a job where I am consistently busy and have a (not too huge) pile of files on my desk to get through, I work harder, better and faster (your welcome for getting that Daft Punk song stuck in your head). It's way too easy to fall into a non-productive rut when you don't have a bit of stress nipping at your heels. 

Different people have varying levels of tolerance to stress; a level that might result in peak performance for one person could cause another to buckle under the pressure. You just need to figure out how much stuff you can take on to keep yourself in that target zone, without overloading yourself. How exactly are you supposed to find that sweet spot, though? Well, trial and error I guess. Think back to times where you felt like you were thriving under pressure and then compare them to times where you were under too much stress and just wanted to cry. What was the difference? It also depends on what area of your life you are dealing with, let's talk about that a bit more. 

Money Stress
Since this is a blog about finance, we're going to start there. If you are feeling overwhelmed by your finances, then there are a few things you can do to get things in order and running more smoothly. Debt tends to be the biggest money stressor but even living with high levels of debt can be bearable if you have a solid plan to pay it off. 
  • Budget, budget, budget!: The number one thing you can do to feel in control of your finances is to create a monthly budget for yourself. This does not need to be complicated (money in, money out) but knowing where your money is going and how much you can spend on what is essential. 
  • Emergency fund: An unexpected expense can often throw a financial plan off track, so it is critical to have an emergency fund to cover your butt. I like to have about 3 months of expenses saved in my emergency fund but if job security is something you are concerned about it may make sense to bump that up. I wouldn't go overboard, though. An emergency fund needs to be readily available and should not be invested, and you don't want to have too much of your assets sitting on the sidelines.
If you're living the good, no money stress life then it might be time to up the ante. As we discussed above, stress can be a motivating factor and might be the push you need to better your financial position. I don't recommend going on a spree, so you have debt to pay off but maybe set yourself a goal to save a percentage of your income.

Work Stress
This can be a tough one and more of a challenge to solve. Unless you're the boss, you don't always have control over what tasks are assigned to you and how fast they need to be completed. There are some things you can do to make sure you are working efficiently and hopefully lower your stress level. 
  • Prioritize: When I get overwhelmed at work I find that it helps to take a second, stop whatever it is you are doing and make a priority list. It might feel like everything has to be done right this second, but I promise you, it doesn't. Once you figure out an order to do things you will be able to focus on checking things off your list instead of freaking out over everything at once. 
  • Plan ahead: Most jobs have busy times and slow times, so take advantage of breaks to get a step up on the busy season. Keeping your stress level at that healthy amount consistently by staying productive even during slow periods will mean fewer freak outs when things get crazy. 
  • Ask for help: Maybe your boss doesn't think you're doing the job of two people, but if you are always feeling stressed out and overworked then it might be time to discuss this. You might just be so good at hiding your stress that no one has any idea you are suffering. It might not even be a matter of hiring a new staff member, but just re-assigning some tasks internally. 
If it's boredom you are dealing with at work, then there are also things you can do to boost your motivation. Perhaps there's a project that no one wants to do, but that would make things run more smoothly. It's never a bad idea to take on extra work, you can use it to your advantage when performance review time comes around. If there's nothing available, then consider doing something that might not be directly work related but will improve your skillset. There might be an online course you can complete or a book you can read that will make you a more productive employee.

Home Stress
I'm no expert on relationships or parenting (no kids here), but I do have a few tactics for dealing with stress when life gets in the way. 
  • Just say no!: I think everyone is guilty of agreeing to do something they don't really want to do, so stop doing that. You are allowed to say no! Taking on too much is going to result in you doing things poorly, and nobody wants that, so don't feel bad for passing on an event or refusing to take on another task. 
  • Me time: Schedule time to 'treat yo self'! And if you've never watched Parks & Recreation then you should start there, such a good show. There's plenty of ways to be kind to yourself that don't even involve spending money. Take a nice hot bath with lots of bubbles and a good book, go for a long walk with your dog or do a little at-home yoga. 

I always seem to have a hard time finding middle ground at home, I always either have way too much on the go or nothing at all. Not ideal! I'm also not the best at getting myself motivated to do things. One of my New Year's Resolutions was to build up a bit of an archive of blog posts so that I never have to scramble. Let's just say that is still a work in progress...I've been better about sticking to a schedule but am still writing most of my posts the same week they go up. I need to figure out some way of rewarding myself, that seems to work for getting me to the gym! I always see that quote that talks about not rewarding yourself with food because you're not a dog...but hey, if it works ;) 

How do you guys keep yourselves motivated during slow periods and from losing your minds when you get stressed out? 

Is there such a thing as a healthy amount of stress?

Wednesday, 1 March 2017

The Fear of Missing Out

Are you suffering from #FOMO?

The last couple of weeks in Edmonton have been all Garth Brooks, all the time as he completed his epic 9 concerts at Roger's Place. Am I a Garth Brooks fan, nope? Did I almost convince myself I should buy tickets to the show just because EVERYONE else was going? Absolutely, but I was talked off the Ticketmaster ledge by my more rational minded (aka. more country music hating) friend. Is everyone currently raving about how incredibly awesome every single show was...heck yes. Am I sad I didn't get to experience it? Not so much. I find that more often than not, you aren't really that disappointed when you don't get suckered into missing out on something you didn't have much desire to do anyways. If you desperately want something, then yes, do everything you can to make it happen but if you're feeling indifferent to something that's a sure sign it doesn't deserve your hard-earned dollars. 

Fear of missing out is a thing, it has its own acronym (FOMO) and search #FOMO anywhere on social media, and you'll get inundated with results. RateHub actually completed a study just last year and discovered some pretty staggering results: 

  • 26% of Canadians have experienced FOMO (and that jumps to 48% when you focus just on millennials)
  • 70% of Canadians believe 25% of their debt is because of FOMO
  • 50% of millennials feel FOMO when on social media

But Why?
Humans are competitive, that shouldn't come as a surprise to anyone given our mild obsession with handing out awards (I'm watching the Oscars as I write this...go La La Land!) and playing (or watching) professional sports. Being the best used to be a matter of life or death (way, way back when) but those survival instincts have stuck with us even though the stakes aren't so high. Now it's almost the opposite...we push ourselves so hard to live up to the ideals set forth by people we might not even know that it affects us emotionally, physically and financially. 

The stat from the above survey results that really stands out to me is that 70% of Canadians can attribute 25% of their debt to FOMO! Going into debt just to keep up with your friends, neighbours, internet acquaintances, whoever, is not ok. Let's all make a deal right now that we're not going to do that anymore ok? Spending money that you should be saving is one thing, but charging a FOMO experience to your credit card is bad news. Not only will it cost you the upfront charge but factor in the 18%+ interest rate you pay and what you're paying is going to increase each month you can't catch up. It's not worth it, and I can promise that you're going to regret it in the long run. 

It's not just about money either, people (myself included) are hooked on social media and being up to date on all the latest news. FOMO can lead to unrealistic expectations of what your life should be. Everyone knows that no one's life is as perfect or exciting as it seems to be on Instagram and yet we still compare ourselves to all those edited posts of other people's daily lives. Just take a gander at your own posts, is it an authentic portrayal of how you live or what you do? Or is it more likely a recap of the highlights with none of the lows? I have no problem with people posting those pictures, but I just have to remind myself that everyone is in the same boat and only let you see what they want you to stop comparing! 

How to overcome FOMO
Turning off your fear of missing out and keeping your focus inwards is no easy task, but there are a few things you can do to keep yourself on track. 

Set Goals
Specific savings goals are a saviour for me when it comes to sticking to a plan. I need something to look forward to and something to put my money towards otherwise I end up spending it on random things or experiences I don't even really want (Garth Brooks tickets). If I can say to myself, no Sarah, if you spend your money on this stupid thing you won't be able to do this super awesome thing in the future, I'm way more likely to stay strong. 

Having a stable budget can also help dissuade you from spontaneous spending. If you know you have a set amount of money to spend on entertainment, clothing, food, etc. then you'll know when you can and can't afford to splurge a little. 

Take a Social Media Vacation
Being flooded with people talking about an upcoming concert or wearing an article of clothing you just HAVE to have is not going to help you convince yourself to go without. Give yourself a break and do something to distract yourself (that doesn't involve spending money). Take your dog for a walk, have a nice long bath, or read a book, binge watch a new TV show...distracting yourself is key. And turn off your phone, even if it's just for a few hours. Not seeing the notifications going off will make it easier to stay checked out. 

Read for Inspiration
Have you ever read a book on personal finance and been suddenly inspired to cut your spending and start saving for retirement? My hands up! This happens to me all the time and not even just for personal finance. I've read 'Born to Run' by Christopher McDougall and had dreams of becoming a marathon runner (ok, not entirely, but I did run way more than my norm) and 'The Life-Changing Art of Tidying Up' by Marie Kondo had me cleaning out my closet before I finished the first chapter. Sometimes a little push from a good book is all you need to change your mindset. 

Like-Minded Friends
The biggest influence on your spending habits is often your friends, and this is particularly the case for millennials. Frugal friends will almost always mean you spend less. Now I'm not suggesting you banish all your friends and attempt to make new, less spendy ones, but maybe try and come up with different things you can do together that cost less. Instead of always going out for dinner, how about hosting a girls night in? 

Do you guys find that the fear of missing out impacts what you do? Or have you figured out ways to cope with it?

Are you suffering from #FOMO?

Wednesday, 22 February 2017

What You Need to Know About RRSP's

The Ins and Outs of Using an RRSP

We've been having some really mild weather in Edmonton recently which makes it feel like Spring is already here, but it's still February. For us Edmontonians that means we could very well be faced with another bout of winter...please no. March can be such a sketchy month, it can be beautiful and warm with hardly any snow, or it can be freezing cold and blizzarding. It's also the month of my birthday, and my mom still complains about trying to plan parties when I was a kid because of how unpredictable it was. I would have dreams of going skating or tobogganing, and it would end up pouring rain. Seasons...who needs them!? Uh, nevermind...I totally like seasons. Green Christmases are the worst. 

Anyways, February doesn't just mean surprise weather conditions, it also means that you still have time to make your annual RRSP contribution to lower your 2016 taxes. The RRSP deadline doesn't actually follow the calendar year, and to make it even more confusing, it's not always even on the same date. Usually, it lands on March 1st, but the actual rule is that you have the first 60 days of the year to contribute to your RRSP for the previous tax year. This means that every four years a leap year comes along, and the deadline gets bumped up to February 29th...just to keep us all on our toes! And all you leap year birthday babies actually get to celebrate ;) 

Automate It
One way to get around the confusion and never forget the deadline is to STOP making annual, lump-sum contributions to your RRSP. No, I don't mean skip your contribution...I mean make it an automatic monthly (or weekly, bi-weekly, semi-monthly...whatever) payment and never have to think about it again. The only thing to remember here is that pesky little 1st of the month. If you have your automatic contribution set to run on the first, every four years that March 1st payment won't count for the previous year. Maybe save yourself that headache and set it to run on the 15th or even the 5th. 

Contribution Limits
Each year you are allowed to contribute 18% of the previous years earned income, up to a maximum amount set by CRA. For 2016 that maximum was $25,370. You don't lose your RRSP room, so if you have missed contributions from past years, you can catch-up at any time. The easiest way to check your current room is by looking at your 'Notice of Assessment,' it will be listed there. There are penalties to pay if you happen to go over your RRSP contribution limit. You do have a little leeway; CRA gives you a cushion of $2,000, but if you go over that then you'll have to pay a tax of 1% per month on the excess amount. This will keep accumulating until you either withdraw the over-contribution or earn more room. Trust me, it's a pain to fix so just don't do it. 

If you contribute to a group RRSP through your employer, then those contributions also count towards your annual limit. This also applies if you are contributing to a pension plan. You will see a 'pension adjustment' listed on your NOA that lowers the amount you can contribute. 

Why an RRSP?
I've talked about the benefits to an RRSP before (find that here) but I'll give you a quick recap. You might think that the biggest advantage of an RRSP is the refund it can give you when you file your taxes, but that's not entirely true because you still have to pay tax when you withdraw the money down the road. The main benefit is that you can make a deposit to your RRSP when you are in a high tax bracket and then withdraw the funds in retirement when you are hopefully in a lower tax bracket. This is why it doesn't always make sense to contribute to an RRSP, especially if your income is low at this point of your life. You'll get the biggest advantage by contributing the most to your RRSP when you are earning at your highest level and then withdraw those funds when your income is at it's the lowest level. Make sense? The money in your RRSP is also sheltered from tax until you take it out, so you won't get any tax slips for earned interest or capital gains every year like for non-registered accounts. 

One exception to the contribute during high income and withdraw during low income is if you are planning to take advantage of the Home Buyer's Plan. This is a program that allows first-time home buyers to withdraw up to $25,000 tax-free from their RRSP to help them buy a house. I like the idea of saving your down payment (at least the $25,000 of it) in your RRSP because then you can use the tax refund to get you closer to your savings goal. You do eventually have to pay the money back into your RRSP over the next 15 years (and there's no additional refund on the repayment amounts), but I know from my own experience saving up to buy a house that every single penny counts. If you're buying your first home with someone else you can use the HBP for each person. 

How much will you get back?
The refund you will get on your RRSP contribution is based on your income and marginal tax bracket. How it works is that your income for the tax year will be reduced by the amount you contribute, therefore lowering the amount of earned money you have to pay tax on. Take a look at the table below to figure out which tax bracket you fit into (these are Alberta rates but you can find other provinces here, and you're looking for the federal/provincial combined rates).

Let's say your income is $94,000 and you want to make an RRSP contribution of $5,000. Because you are in the 36% tax bracket, you would get a refund on the contribution of $1,800 (or lower the amount of tax you owe by that much). If you want to do a quick estimate on what you may owe (or get back) on your taxes and see the impact an RRSP contribution would have, you can check out the calculator from TurboTax. 

Spousal RRSP's 
You may have heard of income splitting and making use of a Spousal RRSP for that purpose. For a Spousal RRSP plan to make sense for you, you first need to have a spouse (obviously), and then one of you needs to have a higher income than the other. Sound like you? If so then keep on reading...How it works is a Spousal RRSP will be opened in the lower income earners name, and the higher earner will make the contributions to the account. The higher earner will get to use the contribution on their taxes (hello refund), but then when the money is withdrawn in retirement, it will be in the name of the account holder (the lower income earner). This helps with income splitting by evening out the amount of money that ends up in each person's name. If all contributions were deposited into the higher income earners RRSP, they could end up with a large account and have to pay more tax because of the more significant withdrawals. Taking advantage of Spousal RRSP's and pension splitting can even out a couple's retirement income and lower the overall tax bill they will have. 

The contribution room for a Spousal RRSP comes from the spouse who is making the contributions (the higher income earner), and it's the same limit that counts for their personal RRSP. If their notice of assessment shows $16,000 it would apply to contributions into a regular old RRSP or a Spousal; they could do the full $16,000 in either or split it up between the two. 

One important rule to remember is about three-year attribution. You have to leave the money in the account for at least three years from the contribution date otherwise, the withdrawals will be charged back to the contributor's name...defeating all purpose of the Spousal RRSP. If you are getting close to retirement (and needing the funds), you might want to halt Spousal contributions and stick with your regular RRSP. 

As always, let me know if you have any questions in the comments. Happy RRSP season :)

The Ins and Outs of Using an RRSP