Spring is around the corner, and along with the warmer weather comes tax season. This month, we would like to highlight a few changes to be aware of and share some helpful tips for preparing your 2023 taxes.

Getting Started

The deadline to file your 2023 personal income taxes is April 30th, 2024. If you are self-employed or have a spouse or a common-law partner who is self-employed, the deadline to file your taxes is  June 15th (June 17th this year, since the 15th is a Saturday) but all taxes owing must still be paid by April 30th. Filing on time is important, not only to avoid penalties on amounts owing, but also to ensure you receive all the benefits to which you are entitled. The Canada Revenue Agency (CRA) has listed the steps involved in filing your 2023 taxes here.

Our Tax Preparation Checklist also outlines the information you’ll need to gather to file your tax return.

Using Tax Preparation Software

The vast majority of Canadians are now using one of the many CRA-certified tax software programs to prepare and submit their annual tax return. CRA maintains a list of approved software, including some free (or pay-what-you-want) packages. Popular options include TurboTax, Wealthsimple Tax, and UFile.

If your finances are complicated, or if you’re uncomfortable completing your taxes on your own, working with an accountant can be a smart option. This may be particularly true if you are self-employed, own your own business, have experienced a major life change over the past year, or have complex investment income.

New Contribution Limits, a Savings Account for First Time Homebuyers, and Changes to Home Office Expense Claims

The CRA used an inflation rate of 4.7% to index 2024 tax brackets and other key amounts, which is significantly lower than the increase we saw in 2023.

The Tax-Free Savings Account (TFSA) dollar limit for 2024 has increased to $7,000. The cumulative TFSA limit is now $95,000 for someone who has never contributed to a TFSA and has been an adult resident of Canada since 2009.

The Registered Retirement Savings Plan (RRSP) deduction limit for 2024 is the lesser of $31,560 or 18% of your earned income in 2023.

The First Home Savings Account (FHSA) is now available from many investment firms and banks. This new registered plan gives prospective first-time homebuyers the ability to save on a tax-free basis towards the purchase of their first home in Canada. Contributions to a FHSA are tax deductible, similar to a RRSP, and withdrawals to purchase a first home are not taxed, similar to a TFSA. Annual contributions are capped at $8,000, and there is a $40,000 lifetime limit. A maximum of $8,000 of unused participation room can be carried forward to the following year.

If you are an employee who works from home, be aware that the temporary flat rate method for claiming home office expenses (formerly $2 per day) is no longer available. For 2023 and future years, employees need to follow the detailed method to make these claims.

We hope this article helps guide you toward a less stressful and more organized tax season. If you have additional questions regarding how to best manage your cash flow, plan for retirement or improve your overall financial well-being, a Money Coach can help. Our Investment Report Card is also a great option if you’re looking for a second opinion on your investment portfolio.

NOTE: The author is not able to address comments/questions regarding an individual’s specific tax situation. To work with a Money Coach to address your tax planning needs, we encourage you to book a complimentary initial consultation.

The post What You Need To Know About Filing Your 2023 Taxes appeared first on Money Coaches Canada.

Jenny has more than twenty years of experience in the financial services industry and holds the Chartered Investment Manager (CIM) and Certified Financial Planner (CFP) designations.

As our Director of Financial Planning for the past three years, Jenny has been responsible for managing ongoing training for our coaches. She keeps our team up to date on current trends, legislation, and best practices, ensuring our clients receive an exceptional financial planning experience.

In her expanded role as COO, Jenny will oversee all aspects of our daily operations, be a key member of our strategic planning team, and help guide the evolution of Money Coaches Canada as we look towards the future.

Jenny is an enthusiastic advocate for the advice-only financial planning model. We look forward to benefiting from her experience and leadership, and we’re thrilled that she has accepted this new challenge.

Congratulations Jenny!!

The post Congratulations to Jenny Reimer, <br/>our new COO! appeared first on Money Coaches Canada.

Retirement, or financial independence, ranks as one of people’s top financial goals. We’re currently in the midst of “RRSP Season”, and many Canadians are giving at least a passing thought to their eventual retirement.

A January 2024 survey by the National Institute on Ageing revealed that 26% of working Canadians aged 50+ say they are unsure of whether they can afford to retire at their desired time, with another 39% indicating they are not in the financial position to do so. The same survey found that the rising cost of living was by far the most frequently reported financial concern among Canadians 50+ in 2023, with the worry of running out of money in retirement coming in second.

In the face of so many immediate financial pressures, it’s easy to avoid thinking about the future and doing proper retirement planning. You may think you’re too young to be thinking about retirement or you’ve waited too long to plan for retirement, but it’s never too soon or too late to give yourself choices.

As a Money Coach based in West Vancouver, BC, everyday I help clients begin the journey of determining just how much they need to retire.

So where to start?

Step 1: What does retirement mean to me?

Just as it is important to dream and set goals for your current life, it’s important to do the same for your retirement so that you can build a financial plan accordingly. Imagine what retirement will look like for you.

Start with your dreams. Will you travel? Work part time? Is a winter retreat in Whistler, BC something that you envision for you and your family?

Next, set clear, attainable and true retirement goals, and then prioritize them.

Step 2: How much money will I need to live on in retirement?

The next step is to figure out how much money you will need. There is no magic number that works for everyone. Just as visions are unique, the amount you need for retirement is unique.

The easiest way to estimate your retirement spending is to start with what you are spending right now and then think about what might change in retirement. Many of my clients see themselves moving from West Vancouver and living out their retirement years in a lower-cost location. Now is the time to starting thinking about what your life will look like in retirement.

Use the Money Coaches Canada Retirement Lifestyle Expenses worksheet  to help understand your anticipated monthly and annual expenses in retirement.

Step 3: Where will my income come from?

Look at your potential sources of retirement income. Consider employer pensions, government pensions such as the Canada Pension Plan (CPP) and Old Age Security (OAS), registered savings (RRSPs and TFSAs), non-registered savings and other income.

Perhaps you see yourself working in a part-time or reduced capacity as you transition into full retirement. What does that look like, and what steps do you need to take now to make that a reality?

Step 4: How much do I have to save now? (otherwise known as Gap Management)

To get an idea of how much you need to save for retirement, download and complete the Money Coaches Canada Financial Freedom Calculator. You will need your estimated annual expenses figures and some of your income and investment information from Steps 2 and 3. The calculator will factor in: inflation, the estimated rate of return on your investments, when you expect to retire, and how long you expect your savings will have to last. It is a good idea to run retirement numbers to at least age 95 to ensure that you don’t outlive your money. Using the calculator, you can see what happens to the numbers when you change one of the many factors.

It is possible that there will be a shortfall or gap between your expected retirement income and your desired retirement lifestyle. Don’t be discouraged if there is a gap in your current plan. For most Canadians, there usually is!

The important thing is that now that you know about it, you need to plan for it and act on your plan. Don’t worry needlessly – get the facts about how much you will need to retire comfortably. Maybe you will need more money than you think. Maybe less! The only way to know for sure is to get clear about your goals and to start crunching some numbers. Get financial advice from someone you trust if you don’t want to go it alone. A financial coach, like a Money Coach from Money Coaches Canada, may just be the right choice. But make a plan today—so you can enjoy tomorrow.

Based in West Vancouver, Steve Bridge is part of the Money Coaches Canada national network of Money Coaches. A Money Coach is a financial professional that helps clients develop a clear understanding of their current financial situation and create a plan that helps them reach their goals. Money Coaches Canada is the nation’s leading, independent provider of advice-only financial planning. Money Coaches do not sell investment or financial products.

This post first appeared in 2016. It has been updated with current data and/or information and republished.

The post How Much Do You Need to Retire? appeared first on Money Coaches Canada.

The new year is a great time to reflect on the past and look forward to the future, both personally and financially.

Here are five tips for kicking off 2024 with a financial fresh start:

1. Revisit your Goals

At Money Coaches Canada, we always like to start with your goals. After all, your money is really just a tool to help you achieve them. What were you hoping to work towards last year? What did you achieve and what are you still working on? What new goals would you like to set for yourself and what do you need to do to reach them? Some goals might be specific, like ‘Contribute $5,000 to my RRSP before February 29th.’ Other goals might be more subtle, but just as important, such as ‘Feel more in control of my finances in 2024.’ In either case, being clear on your objectives is a good place to start.

2. Update your Cash Flow

Once you’ve determined your financial priorities for 2024, you’ll want to get a sense of how much money you have available to put towards these goals. If you’ve worked with us in the past, you could update your Spending and Savings plan to reflect any changes to your income and to your fixed and variable expenses. This step is especially valuable this year, as high inflation has increased the cost of almost everything. Even families with higher incomes may need to allocate more to essentials like groceries and gas and save more for big ticket items like travel and home renovations.

3. Start or Maintain your Emergency Fund

It’s always a good idea to have adequate funds set aside for a rainy day, but that might be particularly true this year. Canada is hoping to avoid a recession in 2024, but interest rates likely won’t start coming down until the second quarter of this year, at the earliest.

An emergency fund can provide a financial cushion if you experience any disruption to your income. It can also help you avoid the need to sell investments in a down market. A general rule-of-thumb is to keep three to six months’ worth of living expenses in a safe, accessible account, such as a high interest savings account.

4. Review your Debts and Investments

This is also a good time to review any debts you’re carrying. Interest rates have risen quickly over the past two years, which may require you to adjust your payments on variable rate mortgages or Home Equity Lines of Credit (HELOCs).

Also watch out for statements from your investment firm showing your accounts’ asset mix, performance, and fees. Changes to the values of your various investments over the past year may mean you’ll want to rebalance your accounts back to your target asset mix. We also recommend comparing your portfolio’s performance against an appropriate benchmark and understanding all the fees you are paying for your investments. If you work with an advisor, be sure to reach out if you have questions. Money Coaches Canada can also provide a second opinion on your portfolio through our Investment Report Card.

5. Prioritize Your Wellness

Many of us have To Do lists that seem to go on forever. Sometimes managing our careers, families and other demands can make us feel overwhelmingly busy, but not overly fulfilled. In 2024, try making time for yourself a priority. Put some thought into which activities bring you peace and joy and then schedule them in as firmly as you commit to your other obligations.

Also keep in mind that taking care of your finances can benefit many other aspects of your life. When you’re not worried about your cash flow or wondering if your retirement plan is on track, you have more time and energy for the people and things that matter most to you.

If you need help navigating your personal path to financial wellness, a Money Coach may be the answer. Contact us for a free consultation.

The post Five Tips for a Financial Fresh Start in 2024 appeared first on Money Coaches Canada.

Christmas can be like a runaway sleigh. You’re bundled up and warm, enjoying the dips and turns of holiday fun, when you realize that your budget bounced off the sleigh into a snowbank and you’re careening out of control into a ditch of debt. You wake up January 1st with an empty wallet and a massive holiday headache.

Heavy-handed metaphor? Maybe, but if you’re like many Canadians, I bet you can relate.

According to a new study from the Chartered Professionals Accountants of Canada (CPA Canada), Canadians are expected to spend an average of $645 on holiday gifts in 2023, a significant increase from the $589 spent in the previous holiday season. However 74 per cent of those surveyed expressed concerns that inflation would make holiday purchases more difficult and 30% said they may need to use debt to cover their expenditures.

But let’s not forget all the hidden expenses that often aren’t part of those predictions. Holiday clothes for everyone (often even the family dog), hostess gifts, office potlucks, more frequent take-out dinners (because there isn’t time to cook), school Christmas concerts, extra charitable donations­ (school food drives, point-of-sale requests for donations while shopping), baking supplies, and more money spent on gas as your bustle around town. Even hosting a holiday party for friends, in addition to Christmas and New Year’s celebrations, can quickly up-swing your December expenses significantly.

With Christmas just around the corner, I have some ideas and strategies that can help you stay in control of your holiday “sleigh ride.”

Truly Experience Gratitude

Most people are grateful for what they have. They appreciate that they have a career, health, family, friends, and a home with all the “stuff” to make life comfortable. But at the same time, so many of us don’t take the time to really feel that gratitude.

Being truly grateful has been shown in studies, time and time again, to make us feel more positive towards our lives. It can improve emotional and physical health and even impact our careers. And while the spirit of Christmas encourages us to be grateful for all that we have, culturally we have turned Christmas into an event that we have to pull off with great panache and expense. Holiday stress is becoming normalized—if we aren’t frantic for time and stressed over money, we mustn’t be putting the right effort into the holiday.

Taking time for gratitude may well become something that you enjoy all year long. Here’s what to do:

Make it a daily habit: Couple a few minutes of gratitude with something you already do each day. You can practice gratitude on your daily commute, during your exercise routine, while you walk your dog or as you brush your teeth. Think of one or two things you are grateful for and why. They don’t have to be big things; in fact noticing all the small things in your life makes you more attentive to all the good surrounding you. Try to come up with new things every day.

Stay mindful as you shop: Before you purchase anything, think about why you are buying it. Are you buying it to make yourself feel better about something? You know it won’t really help, and may in fact make you feel worse. If it’s a gift for someone else, is it something they really need? Could you do some activity together instead?

Share your gratitude: If during your daily gratitude ritual you find yourself being grateful for something that a family member, friend, or co-worker did, let them know that their actions are appreciated. Again it can be little things. You could mention to a neighbour how much you appreciate their Christmas lights.

When you truly experience gratitude, you can take a breath, and know that your life, just as it is, is enough. And most importantly, that, that warm fuzzy holiday feeling we’re after, comes from being together, not from what we’ve wrapped up in a box with a bow. It’s from the laughter at the party, not the new outfit we’re wearing.

Have a Plan and Be Creative

Decide how much you can afford to spend in total and then divide it up into categories like groceries, gifts and entertainment. Track your spending daily so you know if you’re on budget or not.

If you realize you got caught up in the season and went overboard on some of your gifts, take a breath and see if you can return some things before the regrets set in come January. Maybe you can find something less expensive, and include a heartfelt note that will likely resonate with the recipient long after the holidays.

Perhaps those rewards points you’ve been collecting all year can help keep your expenses in check. Depending on what loyalty cards you use, you may be able to use points for gifts and groceries.

Some of the best gifts don’t come from a store at all. If you can sew or knit, you can make wonderfully personal gifts. If time is short, you could bake cookies or breads. What about all those photos on your phone? There could be a great memory with a friend in all those files. Print it out and put it in a frame and you’ll have a gift you’d never find at a mall.

Ask for Help

It can be great fun to have house guests at Christmas, but not if you get weighed down with all the work and expense. Let house guests know in advance that you would appreciate a contribution to the food budget. It can become a fun part of the visit if guests are responsible for at least one of the dinners.

Even if people are coming just for the holiday meal, asking them to contribute a side dish or dessert is not out of line.

Don’t Try to Do It All

Holiday movies, visits to Santa, parties, concerts, more parties, craft shows, brunches, lunches and still more parties. No one can do it all. Don’t let “Cheer” pressure make you attend every event and activity, especially if they are going to leave you with a spending hangover.

Do the things that mean something to you and to your family. Making a snowman in the backyard, or cutting out paper snowflakes at the kitchen table, can be a lot more fun than an event that requires kids to dress up and sit still for hours.

Despite all the holiday frenzy, Christmas doesn’t have to be a runaway sleigh. With mindfulness, gratitude and creativity, you can bring that sleigh to a gentle stop, and head indoors for hot chocolate by the fire.

The post How to Enjoy the Holiday Season without Paying for It in January appeared first on Money Coaches Canada.

Financial Literacy month is here again. You can tell by all the financial stories in our news feeds. Some warn you to watch out for hidden investment fees. Others explain the benefits of RRSPs and TFSAs. And what about that new First Home Savings Account? There’s always something to learn (or be reminded of) when it comes to managing our money.

Turning Plans into Action

At Money Coaches Canada, we’re happy to help educate you on the technical aspects of personal finance. But what we find even more effective is teaching the financial skills and behaviours that, when combined with the technical knowledge, help you live the life you want – a life with reduced stress, increased clarity, and more meaning.

At some point in our financial journeys, we have probably all wanted to cut back on unnecessary expenses, set a savings goal for a home renovation or a new car, or start planning for our children’s education and our own retirement. But sometimes it’s not clear how to put our plans into action. It’s one thing to know about RRSPs and TFSAs, and another thing to understand which is your best choice right now, given your own particular circumstances and priorities, and how to make the best use of each account.

This is where our Money Coaches can help. We get to know you and what is truly important to you. We listen to your hopes and worries, work with you to define your goals, and then create a plan to help you achieve them. Instead of just recommending particular accounts or products, our plans reflect your personal preferences and objectives, take into account all the complexities of your own life, and provide clear and practical action steps to help you reach your goals.

Perhaps you want to take a year long sabbatical to fulfill a lifelong dream, and need to understand how this will affect your long-term finances. Or maybe you have diligently saved throughout your working life, and now want to know how much you can afford to spend, or donate to your favourite charity, in retirement. It might even be something simpler that provides a big benefit, like setting up a Spending and Savings plan which, in addition to making sure all your bills are paid and you’re saving for the future, sets aside money each month for you and your spouse to spend as you like. This is the kind of financial literacy that we focus on providing – customized plans and action steps to move you towards your goals with confidence and clarity.

Teaching our Kids a Different Kind of Financial Literacy

You can plant the seed for this form of financial literacy, which focuses on goal setting, prioritizing, and taking action, early on. In addition to talking to the young people in your life about the types of investments or savings accounts you use, you can also discuss why you’re saving, what you’re choosing not to buy, and what actions you take that make you feel more financially secure.

Gary Rabbior, the President of the Canadian Foundation for Economic Education, beautifully describes the forms of financial literacy that he thinks we should be teaching in his article, Should we give up on financial literacy? Are you kidding me?

“We can teach our kids how to differentiate needs and wants. We can teach them about the influencers in their lives that will try and make them believe a want is a need and they really have to buy a certain item. We can teach them that every financial decision entails a trade-off – giving up something else today or in the future for what they buy today. They can learn that, through deferred gratification, they can build up savings to acquire things that are really important to them – and that will help them achieve their goals. We can teach them the importance of staying in control of your finances – setting your own limits – and not letting others tell you how much you can borrow or spend, which can push you beyond your comfortable stress limit.

We can teach them the importance of assigning value to non-material things – friendships, relationships and simply feeling happy. We can teach them about the importance of compassion and why some are better off than others and how, if they wish, to be able to help others in need.

In short, we can teach these outcomes, and others, which, if taught well, can be life-changing.”

Helping you with the details, while keeping the big picture in mind

Our Money Coaches work with you to build customized financial plans that are clear, understandable, and make your dreams achievable. We can help you with the details, while making sure the big picture reflects the life you’ve always wanted to live.

So, dream big! And let one of our Money Coaches help you get there.

The post A Different Kind of Financial Literacy: Turning Plans into Action appeared first on Money Coaches Canada.

Waiting for an inheritance is not a solid financial plan, but the fact is in the most recent available Survey of Financial Security (2019) Statistics Canada reported that the total net worth of Canadians 65 or older was about $3.67 trillion, and much of that legacy will be passed on. Those on the receiving end of a generous bequest can make a real impact on their financial well-being, but only if they make the right choices in the short and long term.

There are many ways to use a large inheritance, and we’ll look at several of them in this article. But, whenever you receive any kind of financial windfall, the first thing you need to do is catch your breath.

Take a Deep Breath and Park Your Money

The gift of an inheritance is often bound to the sadness of loss. Allow yourself time to grieve. Don’t make important decisions for at least three or four months. Park the assets in a high interest savings account – which actually pay decent interest these days – until the emotional fog begins to lift. In fact, parking your money is good advice for any sudden financial windfall. The shock needs to normalize before you make decisions.

When you are ready to make some decisions, they should be made within the parameters of a comprehensive financial plan.

Here are some of the options to consider.

Pay Down Debt

Freedom from debt has so many payoffs it’s always an excellent option. Not only are you free from the weight of what you owe, the amount saved in interest often makes debt repayment a better (and safer) return on investment than the investment market. Paying off a $10,000 credit balance that charges 19.99% interest can save you up to $1,999 a year, about triple what you could hope to earn on a $10,000 investment in stocks and bonds in one year. Start by paying your highest interest credit card debts and then move to car loans, personal loans and lines of credit, and mortgages.

Freedom from debt goes beyond your financial well-being to your emotional well-being as well. Eliminating debt lifts an emotional weight off your mind. Debt stress affects self-esteem and creates tension in relationships. Using your inheritance to eliminate this burden is a smart choice.

Establish an Emergency Fund

Three to six months of living expenses is the typical recommendation for an emergency fund. There should be enough to keep you and your family afloat in the case of a job loss, illness or other unforeseen impact on your income. But how many people are able to actually put this amount aside? It can be challenging. A substantial inheritance allows you to create or top-up this important financial buffer.

Fund Your Retirement

Take time to review your retirement plan. Is there a shortfall between your projected income vs. expenses? An inheritance is a good opportunity to fill in the gaps, especially if you have room in your Registered Retirement Savings Account (RRSP) or Tax Free Savings Account (TFSA). Or maybe this windfall is an opportunity to expand your lifestyle goals for retirement. Working with a financial planner to maximize this endowment is key.

Consider Your Own Legacy

If you have inherited a significant amount of money, it is wise to update your own estate plan to take it into account. Perhaps, instead of it becoming part of your general assets, you might like to earmark it in a special way. You could use a portion of the funds to set up a trust for your children or make a bequest to a cause that is important to you.

Help Your Own Kids Out

If your own needs are adequately taken care of, perhaps you want to use your inheritance to help your own children now. If you have young or teenaged children, you may want to add money to their Registered Education Savings Plan (RESP) accounts to ensure they have the money they will need in a few years for their post-secondary studies.

The added bonus is that the Canada Education Savings Grant (CESG) will match at least 20% of your contributions (up to a $500 grant, with potential for an additional income-tested grant of up to $100) on an annual basis to a maximum lifetime grant of $7,200 per child.

Treat Yourself and Honour Your Benefactor

Impulsively spending an inheritance under the guise of “found money” may sound fun, but if you miss the opportunity to improve your financial well-being, you will probably have regrets.

That said, using some of the money for a special purchase or experience has merit. For example, if the money is from a parent, perhaps mom or dad would have been happy for you and your children to visit the country of your parent’s birth.

Another option is to donate to a cause that was important to your benefactor in their honour.

Make the Most of This Opportunity

You have been given an incredible opportunity to improve your financial well-being. Make the most of it by considering all your options. But don’t make decisions while you are grieving.

You need a plan. Consider working with an advice-only financial planner, that is one who doesn’t sell investments and specializes in advice that is free from any conflict of interest — an advisor that sells investments is likely to default to suggesting that you invest your new wealth. An advice-only planner will help you consider a broad range of options that support your personal goals.

Ultimately, the decisions you make can change your financial future and perhaps even the financial future of your children. An inheritance is a loving gift that needs to be handled with care.

We hope this article has been helpful and provided some practical advice on how you can improve your financial well-being. If you need additional support, please contact one of our Money Coaches today.

This post first appeared in 2017. It has been updated with current data and/or information and republished.

The post How to Make the Most of Your Inheritance appeared first on Money Coaches Canada.

It has often been said that “Cash is King”, but when it comes to personal finance it wouldn’t be a stretch to say that it’s all about CASH FLOW.

Cash flow planning is a key aspect of financial planning that involves monitoring, analyzing, and managing the inflows and outflows of cash over a specific period. Effective cash flow planning is crucial for achieving financial stability, regardless of your age or income. It will help you manage your day-to-day finances, achieve your longer-term financial goals, and live a comfortable life free from money-related stress.

Let’s take a look at how cash flow planning plays a key role at various stages of life:

Early Adulthood

For a young adult just starting out on their own, cash flow planning will help establish a solid financial foundation and good money management habits. You create a cash flow plan, monitor your income and expenses, and manage and reduce your debt consistently.

Cash flow planning will also help you prioritize your financial goals, such as building an emergency fund, saving for a down payment on a home, or investing in your education or career.

You also need to consider disability and life insurance, which at their core are meant to ensure continued stable cash flow for you or your survivors if you are no longer able to generate cash flow to pay your bills by working.

Take Rachel, a new associate at a law firm. She’s managed to land an excellent job with long-term career potential, but life is BUSY! Despite a good income, money is tight. Rachel needs to figure out how much she can reasonably afford to spend on rent, ensure her income is protected if she can’t work due to illness or injury, invest in her career growth, and plan for personal goals which include purchasing a home in a few years… while enjoying what little spare time she has! It’s a lot to juggle, but a cash flow plan will help her map this all out, so she doesn’t overspend in any one area to the detriment of the others.

Middle Age

As one progresses into middle age, financial responsibilities may increase and get significantly more complicated. Cash flow planning will help you navigate these changes and make informed financial decisions.

You will likely need to plan for major expenses, such as post-secondary education for your children, home renovations, vehicle replacements, and of course retirement. By analyzing your cash flow, you can identify areas where you may need to reduce expenses, increase savings, or adjust your investment strategy. It can also help you pay less tax as you optimize your cash flow to minimize the size and frequency of taxable events.

Walter and Skyler are in their early 50’s, married with 2 teenage children. He has a good job and is trucking along according to plan in his career, but boy does the recent spike in inflation hurt. His cash flow seemed to be all good – covering the monthly bills, paying down his mortgage, contributing to his RRSP, putting money aside for his kids’ education – but his variable rate mortgage payments have jumped by almost $1,000 per month, and food, gas… well EVERYTHING is more expensive. Walter also is facing some possible health issues which could impact his ability to work. To avoid having to do something drastic, Walter and Skyler need to adapt their cash flow plan to work with the new environment they find themselves in.

Retirement

In retirement, cash flow planning becomes even more critical. You will rely on your retirement savings – along with government and employer pensions, if applicable – to cover your expenses for the rest of your life, which means you need to manage your cash flow carefully.

By creating a solid inflation-adjusted retirement cash flow plan, you will ensure that your income sources are sufficient to cover your needs, not just on Day 1 or Year 1 of retirement but as your needs change over time. This will have implications for your investment strategy because the focus now is likely on generating a stable, reliable cash flow rather than on long-term growth of your portfolio – though with a hopefully long and healthy retirement, you’ll still need some growth too!

Din and Bo have had an exciting life together, with frequent travel to exotic places and adventures to last a lifetime. They worked hard and played hard, and money was never foremost on their minds – they knew they could always get another contract to earn more – but they are slowing down now and looking to retire. They are concerned that their savings may not last them through retirement which might force them to return to work later in life when they are less physically capable. They also have a sizable portion of their wealth in precious metals and need to turn their nest egg into a reliable income stream. Din and Bo recognize that developing a thoughtful cash flow plan that supports the kind of retirement they want is The Way.

As Money Coaches and advice-only financial planners, our specialty is helping our clients master their cash flow regardless of which stage of financial well-being they find themselves. From working with hundreds of clients, we know the challenges they can face due to an unstable or misallocated cash flow, or the anxiety they often feel when faced with turning a retirement portfolio into a tax-efficient income stream to last a lifetime. It’s cold comfort to have a healthy net worth on paper, but not have access to the cash flow you need when YOU need it.

Ultimately, everything in personal finance is related to cash flow, because without a reliable, consistent cash flow, life becomes stressful and uncertain. While large investment returns and “interesting” tax planning schemes get the limelight, remember that it all ultimately comes down to generating and maintaining the cash flow needed to support the life you have been working so hard to achieve.

The post Cash Flow is EVERYTHING appeared first on Money Coaches Canada.

The answer is CPP (Canada Pension Plan) and EI (Employment Insurance) contributions.

CPP

As Canadians, anyone who earns employment income is required to contribute to the CPP program.

If you are an employee, your CPP contributions are deducted at source from your payroll until the maximum annual amount is reached. Once this maximum is reached, the deductions stop and your take-home pay will increase.

For 2023 the ‘maximum annual pensionable earnings’ is $66,600.00, less a basic exemption of $3,500. The CPP contribution rate for 2023 is 5.95% or a maximum of $3,754.45.

If you are self-employed, you must contribute both the employee portion (5.95%) and the employer portion (5.95%) to a maximum of $7,508.90 per year.

EI

The ‘maximum annual insurable earnings’ for EI is $61,500 and the EI rate is 1.63% or a maximum of $1,002.45 in contributions per year.

When CPP/EI contributions reset every January, you will see your take-home pay once again reduced until you have paid the current year’s annual premiums for CPP & EI. The more you earn, the sooner you reach your maximum annual amount and the sooner your pay increases.

For example: If your annual salary is $110,000 you will reach your maximum contributions for CPP & EI in July. This means you will have an extra $312/month available from August to December.

At an annual salary of $150,000 your contributions will be maximized by May, and you will enjoy an extra $429/month from June to December.

Extra Cash! What’s the Plan?

At Money Coaches Canada, we generally recommend that you learn to live on your lower income all year and treat the extra money as a welcome “bonus” to pay off debt or to save for something you really want.

In the $150,000 income example, you could put the $429/month extra that you’ll receive for 7 months towards repaying consumer debt (i.e. credit card or line of credit). This will bring you over $3,000 closer to being debt free!

Or how about making extra contributions to your mortgage? With the massive mortgages many of us have and higher interest rates these days, making pre-payments towards mortgage principal (to the extent that your mortgage agreement permits) can help pay your mortgage off years early and save you thousands in interest!

RSP contributions are another good option, helping you prepare for an earlier (or more fabulous!) retirement while saving you tax now.

A fun way to use the extra cash is to start saving for a specific goal, like next year’s vacation or holiday season. Open up a free savings account and “nickname” it with the goal you have in mind to stay focused on what you are saving for. Next, set up an automated transfer to move the extra cash into the savings account each payday till the end of the calendar year. Then sit back and enjoy the great feeling watching your savings grow.

Or you can mix it up and use some of the extra cash to pay down debt and some to put towards a goal. Either way, make sure you have a plan and a system in place so the extra money doesn’t just disappear into day-to-day spending!

Readers are invited to share their comments; however, the author is not able to address questions regarding an individual’s specific financial situation. If you have a technical question regarding your CPP, please contact Service Canada or your H.R. Department. If you would like to discuss cash flow or retirement planning needs, we encourage you to book a complimentary initial consultation with one of our Money Coaches.

This post first appeared in 2012. It has been updated with current data and/or new information and republished.

The post “Maxed Out” – CPP & EI appeared first on Money Coaches Canada.

“You cannot escape the responsibility of tomorrow by evading it today.”
― Abraham Lincoln

We live busy lives. We’re pulled in so many different directions, sometimes it’s a wonder how we manage to get anything done.

Thankfully, we humans are highly efficient, rational beings. We prioritize our important goals and diligently and consistently allocate our precious time to focus on only the most important activities to achieve those goals.

Right.

In truth, we know there are things we should have taken care of a long time ago, important tasks or projects that REALLY need to get done, yet somehow, they still sit on our mental To-Do list. And those are just the things we know we need to do… there’s probably a list of things we need to tackle that we aren’t yet aware of.

Instead, we spend our days focused on what seems to be urgent, rather than what’s truly important.

When it comes to our finances, the pull of the urgent is all too familiar. Managing endless bills, paying off debt, dealing with unexpected expenses, filing our taxes… there are a host of time sensitive activities that scream for our attention.

But what about those things that aren’t urgent, but are vitally important for our financial well-being?

Things like putting life or disability insurance in place, so that your family isn’t financially devastated if something were to happen to you.

Well, that can wait… I’m pretty careful, I’m not planning on dying or getting injured anytime soon…

Perhaps making (or updating) your Will and Powers of Attorney, so that your affairs can be administered smoothly when you can’t manage them yourself.

But I’m pretty young and in good health. I won’t have to deal with mental or physical decline or death for decades, so no rush there…

How about saving for retirement in 20 or 30 years?

Well… that’s 20 or 30 YEARS away! Plenty of time! I’ve got too much going on NOW, and besides I love my job and don’t see myself retiring.

I think you see where this is going. Things are fine, until they aren’t. There’s lots of time to take care of the To-Do list, until there isn’t.

As advice-only financial planners and Money Coaches, we see these situations with our clients all the time.

So why focus on important financial matters, and not just the urgent ones?

1. Neglecting important financial matters can lead to financial hardship and regret

When we neglect important financial matters, we’re paving the path to greater financial hardship in the future. We can turn small financial issues into big ones or find it’s too late to protect ourselves against unlikely but potentially catastrophic risks. On our 7 Stages of Financial Well-Being, you’ll find the first three stages typically involve some level of neglect of important financial matters.

2. Urgent financial matters can distract us from what’s truly important

It’s easy to get caught up in the urgency of day-to-day financial tasks and lose sight of our long-term financial goals and priorities. By prioritizing important financial matters, we can avoid getting sidetracked by the urgent and focus on what truly matters for our financial well-being.

3. Prioritizing important financial matters leads to long-term financial stability

On the flip side, by dedicating time and effort to important financial matters, we can make progress towards our financial goals, such as paying off debt, building an emergency fund, saving for retirement, and investing. Here’s where clients graduate to the middle stages (Financial Stability and Financial Security) in their lifelong journey.

4. Prioritizing important financial matters leads to better financial decision-making and gives us more options

When we prioritize what’s important, we’re able to make better financial decisions, which leads to better outcomes and increased financial well-being. With greater financial well-being, our options for the future really open up, not to mention the amazing peace of mind it brings. Looking to reach the highest stages of Financial Well-Being? This is the way.

Making the transition from managing urgent issues to planning for important ones can be challenging. Fortunately, helping our clients tackle their financial To-Do list is precisely what we do, not only in terms of highlighting the neglected items and bringing them to the forefront, but working closely with our clients to help and motivate them to take action so we can steadily chip away at that “Important, but not Urgent” list.

Getting around to it someday just isn’t good enough. Contact us today for a complimentary consultation.

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