How to use your Carbon Tax Rebate to lower your taxes (and save the planet!)

Tax season (while extended this year due to COVID-19), is mostly over. I had a lot of questions this year about the Carbon Tax Rebate. Most people have heard of it, but don’t really know how/when they apply for it.

Ok, so it happens at tax time. Your tax preparer should apply for you. Make sure that they did. If you’ve already done your taxes and you didn’t apply, don’t worry, you can still can apply retroactively.

You can check and see if you did by going to your tax return and looking at page 3 of your T1 General. Line 449. That’s your carbon tax rebate (or if you’re booed up, check you and your partners since they may have claimed it for the fam on theirs).

So, what does it mean? The number that is in line 449 is the amount of money you didn’t owe in taxes this year. Aka, if you normally owed $23,000 (line 435) and your carbon rebate was worth $300 (line 449) then you’d owe $22,700 instead. That $300 works like a refund.

It’s amazing. In Ontario, a family of 4 gets $448 this year (2020) and $2061 by 2022! Also amazing. You can figure out what you’d get HERE at this link. This post is a sponsored post by Fair Path Forward (the makers of the calculator) and I think the calculator is super helpful for people to get money back for a good cause.

When we were going over peoples returns this year, many people were surprised they were getting that money back. Some even had the stellar idea to take that refund on line 449 and donate it to a charity that is helping to fight climate change. Also amazing. If you got a carbon tax rebate of $300 and took that refund amount and donated it to a registered charity, you’d get a tax credit for $59 next year. That is most amazing.

Anyways, I thought I’d share this strategy with everyone! Help your bottom line, help the environment? Win-win. Don’t miss out on that money!

 

How to survive a financial emergency: COVID-19 Pandemic

Updated June 16, 2020.  Small business owners at the bottom.

NOTE: This situation is rapidly evolving. We will update this every 24 hours to reflect changes to content so bookmark it. Check out our  twitter feed for more info.

Here’s how to survive through a short-term (hopefully) financial emergency like this one. These aren’t ideal financial planning strategies under normal circumstances. However, these are anything but normal circumstances. The following tips are based on a 3 month emergency savings plan.

A step-by-step EMERGENCY money guide if you’ve lost your income or worried that you will:

  1. Calculate what income will be coming into you through CERB/EI/from employer.

UPDATE JUNE 16 – CANADA EMERGENCY RESPONSE BENEFIT (CERBpays $500 per week of taxable income every 4 weeks for any 24 week period between March 15 – October 3, 2020. It is taxable but they will not be taking money off at the source so you’ll get the full amount now and you’ll pay tax on it in tax season 2021. The idea is that your income is likely low because you only qualify if you’re income is lost due to COVID. So, don’t over worry about the taxes on this while you’re in crisis. You will not get more than $12,000 over the 24 week period. (used to be 4 months. Extension came June 16, 2020).

WHO QUALIFIES?

The benefit will be available to workers living in Canada who are at least 15 years old and who:

  • For your first CERB application:
    • You have stopped or will stop working due to reasons related to COVID-19 for at least 14 days in a row for the 4 week period you are applying for.
    • Also, you for those 14 consecutive days, you cannot receive more than $1000 employment income, self-employment income (unclear what this means for people who subcontract – see below) likely including earnings from a corporation like dividends. This is not confirmed in writing. Stay tuned), or Maternity Leave/Parental Leave.
  • For your subsequent CERB applications:
    • You continue to not work due to reasons related to COVID-19 at any time for the 4 week period.
    • For the 4 week period you are applying for, you will not receive more than $1000 employment income, self-employment income, provincial or federal benefits related to maternity or paternity leave.
    • Have earned $5000 in 2019
    • Are not currently receiving EI or CERB for the same period.

These are 7 reporting periods/payment cycles.

4-week period cycle Period dates
1 March 15, 2020 to April 11, 2020
2 April 12, 2020 to May 9, 2020
3 May 10, 2020 to June 6, 2020
4 June 7, 2020 to July 4, 2020
5 July 5, 2020 to August 1, 2020
6 August 2, 2020 to August 29, 2020
7 August 30, 2020 to September 26, 2020

Can you earn income while on the CERB?

Yes! If you are a seasonal worker who has run out of IE, a student or contractors/owner-operator (I translate this to self-employed)/part-time worker who continues to earn a modest (less than $1000 a month due to reduced work hours) income from part-time work, royalties and honorariums.

CONFIRMED – If you take deposits, it is not considered income to put you over $1000.
CONFIRMED – If you invoiced for work in January, but got paid during the last few weeks,  it does not go into the $1000.
CONFIRMED – you can earn up to $3000 a month ($1000 from work and still get full $2000)

CONFIRMED – you have to pay back THE WHOLE $2000 if you earn even $1 above $1000.

Questions that still remain
1. Is it gross revenue or gross profit (after your COGS – aka, post inputs/subcontractors?) that is counted for the $1000? For example, if you bill a client $500 but pay someone $300 to carry it out on your behalf, you’ve only earned $200. So, is the $500 counted or the $200? Same for people who buy and sell goods. If you purchased something for $50 and sold for $75, you’ve only earned $25. Does that count? My gut is that your revenue after your Cost of Goods Sold (subcontractors or direct costs) would be tallied (this is my gut and not on the website) but no other overhead type of expenses. Stay tuned.
All messaging from the PM has been about helping people who have been impacted by COVID19 and keeping your business/the economy going. I think you would still qualify because you didn’t work and the income was already earned. I get the feeling that it will be about intention and integrity. Stay tuned.

 

What if you mess up and have to PAY IT BACK/Not eligible

All good. You can pay it back! You have to with a cheque and not online yet. They will be asking for proof of income next years taxes. They have been very clear that they aren’t out to penalize, but simply to recover money. They won’t hunt you down, charge you interest and send you to prison (this is a joke… a total joke.)

TBD: Will they claw back the whole amount or just the overage? Aka, you earned $1200 but collected $2000 in CERB. The max is $1000 and you have to pay back THE WHOLE $2000. (confirmed June 9). Call the CERB hotline for details. 1-833-966-2099

If you realize it now, and you’re well over and realize you’re not eligible, you can pay back ASAP. Write a cheque to the “Receiver General” and indicate that it’s for “repayment of CERB” on the memo with your SIN. Send to

Sudbury Tax Centre. 1050 Notre Dame Avenue Sudbury, ON P3A 0C1.

You should DO YOUR 2019 taxes on time but no rush. It looks like you don’t need it to apply for your first application, or to apply but you’ll likely need proof down the road.

If you were/are EI eligible in the old world (BC19-Before Covid19)

If you applied for EI after March 15, you’ll be put into this program  for 16-weeks and if you’re still unemployed after the 4 months, you go back to regular benefits. CERB  replaces all existing EI applications and benefits.

NOTE: If you’re already on EI for a mat leave or unemployment, you should not apply to CERB. Keep your thing going until October 3, 2020. Then, if you can’t go back to work because of COVID 19, apply for CERB.

Isn’t this more than regular EI?

i.e. you’re on mat leave right now, it ends in July. You’re job is not there for you to return to. Apply then. It’s taxable and monthly. I’m sure a lot of people will say “That’s more than parental leave!” But, it may not be. the $2000 is taxable and monthly. Let’s say you qualified for the max parental leave from EI. That would be $573 a week taxable. If that’s for a year, that’s 52 weeks x $573 = $29,796. If we divide this by 12 months, it’s $2483 per month before tax. So, if you were making more than $54,200 and on parental leave or EI regular benefits, your benefits are more than this.

What if I’m a student?

The government announced a new benefit called the Canada Emergency Student Benefit. $1250 a month to students. In addition, they are creating 76,000 new jobs for students and any student that is volunteering in a sector that is helping to stop COVID 19, you could get the Canada Student Service Grant (between $1000 – $5000!)

 HOW TO APPLY FOR CERB?

HERE. They hope to have money going out within 3-5 days of application if you sign up with direct deposit. You will apply through your MYCRA account. Or this number 1-800-959-2019 or 1-800-959-2041.

You cannot be receiving the 75% wage subsidy and CERB at the same time.

IF YOU ALREADY APPLIED FOR EI – DO NOT REAPPLY.

Interesting – to not overload the system, they’ve done it by birthday. See below. Also at THIS LINK. They didn’t do it by zodiac signs….. Virgos would obviously want to go first and get their sh*t in order…. so maybe that’s why.

Day to apply for the Canada Emergency Response Benefit
If you were born in the month of Apply for CERB on
January, February or March Mondays
April, May, or June Tuesdays
July, August, or September Wednesdays
October, November, or December Thursdays
Any month Fridays, Saturdays and Sundays

Also, Some people have gotten more than $2000. If you have,

TO DO: Get a MyCRA account if you don’t have one. Call 1-800-959-8281 and get one. WORTH THE HOLD MUSIC WAIT.

 

  1. Take a hard look at your current expenses. What do you need to be able to pay your bills and have enough money for groceries and basic spending? Do you have any bills that could be reduced temporarily? Try to get your monthly bills to fit within whatever income is coming in (work or Canada Emergency Response Benefit)
  • INTEREST FREE GOVERNMENT STUDENT LOANS –  If you’re paying back a government student loan, there’s a six-month, interest-free reprieve on government student loan payments.
  • The Bank of Canada has made a second unscheduled cut to its benchmark interest rate, lowering it to 0.25 per cent amid the COVID-19 crisis. If you have a mortgage, talk to your mortgage broker ASAP to see if rolling debt together and consolidating may be worth it to break your mortgage given lower rates.
  • Can you PAUSE YOUR CAR INSURANCE? If you’re not commuting…. maybe you don’t have to pay it for 2-3 months?
  • MORTGAGE DEFERRAL the big 5 banks have offered a 6 month deferral program for mortgages for people depending on their circumstance. READ THIS LINK. Check with your bank to see if that help applies to you. If you have your mortgage elsewhere, contact your lender ASAP to see if they have plans to follow suit.
  • HOW IT WORKS? Now that we see how the banks will start rolling this out, it looks like they will be lending you the money to pay your mortgage and then rolling that into your mortgage. Therefore, you will be charged interest on the interest you’d already pay….that’s compound interest. That sucks. The other thing is that your credit score may take a hit and you’ll likely have to increase the amortization of your mortgage again at refinancing so that the payment doesn’t jump. THIS ARTICLE CAN HELP EXPLAIN. Therefore, taking advantage of a mortgage deferral such as that is only beneficial for those who have lost their income, have no savings/emergency accounts and are facing down high interest debt to make ends meet (like credit card or lines of credit that have higher interest rates. So, if that’s you, this program could still be super helpful for you  (even with all of the above bummers) because you’re going to use debt to make ends meet anyways and at least this way it’s likely cheaper rate because it’s at your mortgage rate and so it should be much lower than all other sources of personal debt. Be sure to ask that question to your broker. Also be sure to run the numbers between how much extra interest you’ll pay on this mortgage deferral loan vs your own line of credit to keep making your monthly payments. This could be a customized advice thing. If you have savings or didn’t lose your income, this isn’t a program you’ll want to take advantage of as it’s borrowed money. For those who may use this program, I think there is something to be said about wellness here. If having your mortgage payments stop for 3-6 months after you’ve just shut down your business makes you feel safe, the additional interest (while a bummer) may be worth it for the mental health aspect of breathing a bit easier until we know what’s what. For the record, we don’t make any money at all from anyone whether they use savings, debt or investments to survive. This is entirely unbiased. Sometimes, a bit of extra interest is worth it’s weight in Virtual Therapy. My two cents.
  •  See if your bank is actually going to charge you the interest. Some, namely National Bank as of April 6, are starting to forgive the deferral interest. Maybe more will follow suit.
  • TO THE LANDLORDS OUT THERE – I know this is hard for many of you too. I see you. But, you can write off this interest on your mortgage. I did the math HERE. If you have an $800,000 mortgage at 2.9% for 25 years, you will pay $323,408 in interest over the life of your mortgage. If you defer your mortgage (appx $4000 a month) for 3 months to give your tenant who may have lost their job a rent break, $12,000 would be added to your mortgage. If you use this site and pop in $812,000, you now would pay $328,259 in interest over the life of your mortgage because of deferral. This is $4851. That’s it. Over 25 years to give someone a fighting chance in this economy. Plus, you can deduct this. Perhaps you seriously debate taking this deferred mortgage and maybe raise rent by only $16 a month to offset the extra interest you’ll pay over the 25 years. We are all in this together. There is no aid for renters. See if you qualify for mortgage and try to help where you can.
  • CHECK IN WITH YOUR BANK – See if your bank is lowering credit card rates. Most are. Any loan payments can be missed?
  • Do you normally pay for any subscriptions or memberships that you won’t need during social distancing that you can temporarily suspend? While it’s important to get things as pared down as possible, be sure to think about what will keep you going during this time and how much it costs. For example, you could cancel your Netflix subscription, but will that extra $15/month saved be worth it? Figure out your total – how much do you need each month to make ends meet? Write this number down.
  • Will daycare/extracurricular costs be suspended during this time?
  • Let’s say you need $2500 a month to crack the nut after paring down all expenses you can during this pandemic.
  1. MORE BENEFITS CCB AND GST to families with new stimulus package. Take a look at any income your household will have coming in over the next little while. Include everything – child tax benefit payments, GST/HST rebates, trillium benefit payments, any income that you may still see from your business. If you haven’t checked your MYCRA account for uncashed cheques definitely do that now!

If you qualify for the GSTC Goods and Services Tax credit (this is that quarterly cheque from the government) you’ll get $300 and $150 per child. It’s coming in April now, not May.

This will double the maximum annual GSTC payment amounts for the 2019-20 benefit year.

For families with children who qualify for the Canada Child Benefit (CCB) (this is the monthly tax free benefit), the Government is proposing to increase the maximum annual  payment amounts by $300 per child from 2019-2020. It comes out in May, 2020. USE THIS LINK TO APPLY for CCB if you’re not already getting it/enrolled.

THIS IS A HELPFUL CALCULATOR from Preet Banerjee.

  1. Also, DO YOUR TAXES!
  • If you are self-employed and still able to earn some money virtually, can you have clients/customers pay you ASAP (no accounts receivable) and by e-transfer or direct deposit rather than cheque? Anything that helps reduce delay on you getting paid is helpful! Tally all of those up and figure out what the shortfall is between the amount of income and the amount of expenses you calculated in step 2. This shortfall is what we’re going to need to make up with emergency sources of cash.
  • Your shortfall is $2500-2062 = $437.50. If this income crunch goes on for 3 months, your overall shortfall is $437.50 x 3 = $1312.50 You’ll need to fund that from savings or lines of credit. Hopefully the government will come up with some programs to help offset the cost of life for people during this time.
  1. If you have money saved: Start pulling money from non-invested cash, high interest savings accounts, and TFSA savings first. Don’t take money from your RRSP if you can help it. Put all of this cash into one savings account. This is like your security HOLDING TANK.
  2. You have money saved but it’s invested/no money saved: You need to decide whether accessing debt (like a line of credit) vs. selling off invested money in your TFSA or non-registered account (don’t take money from RRSP) is a better option.
  • Selling TFSA investments may mean crystallizing an investment loss.
    • For example, you invested $1000, it’s worth $800 now. If you take the $800 out, you’re locking in that $200 loss rather than waiting it out to potentially go up once the stock market recovers. Consider this carefully. If the money you have invested is part of your long-term savings plan (like retirement) and if you have access to low interest debt (like a line of credit) that could be a good SHORT-TERM SOLUTION. Just ensure it’s likely that you will have the cash flow to pay it back once this is all over.
    • If you don’t have access to a line of credit and need to pay your bills, you may need to cash in some of your investments so that you don’t have to live off a credit card. This is not ideal but if you can’t pay your rent or mortgage and you don’t have a line of credit, you need money to come from somewhere. If you have $20,000 invested in a TFSA, take 2-3 months of your shortfall ($1312.50) and move to cash so you can live off of that. Yes, it’s possible the market goes down further and you’ll be happy you took it when you did. It’s also possible the market goes up and you’ll kick yourself for taking it when you did. No one has a crystal ball. No one. All you can do is make the best decision you can with the information you have. The real strategy here is not to panic and sell everything. Take only what you need to keep your head above water.
  1. TAX DEADLINE EXTENDED If you’re self-employed you may have a cash savings account filled with money for your HST/GST and income tax bills. Treat this money the same as you would think about taking on debt from a line of credit – if you need to access these funds, you may do so to make ends meet, but you will need to pay that back later.  CRA has extended deadline to June 1 for personal taxes to be filed and payment owing to the CRA can be deferred until after Aug. 31. If you have access to debt like a line of credit, you can always use this to pay your tax bill down the road and save on interest payments now (and then pay them later).
  • 1. Personal and Corp taxes deadline to pay extended to Aug 31
    2. Gst/hst for your business is now deferred to June 30, 2020.

    • Quarterly filers have to remit amounts collected for the January 1, 2020 through March 31, 2020 reporting period; and
    • Annual filers, whose GST/HST return or installment are due in March, April or May 2020, have to remit amounts collected and owing for their previous fiscal year and installments of GST/HST in respect of the filer’s current fiscal year.

    3.As for source deductions for payroll, still due at the same times but 75% wage subsidy See bottom of post.

  1. Once you’ve identified your sources of emergency cash, you’ll do what we call a “controlled burn”. A controlled burn means that you take exactly what you need – no more – each month and move it into your chequing account to pay for your life. We limit it this way to create the illusion of a steady pay cheque and budget within that, so that we don’t fall into the trap of taking on more debt or blowing through more cash than absolutely necessary.
  • From a LOC, you’d take $437.50 a month to your chequing account
  • From your cash savings account, you’d take $437.50 a month to your chequing account
  • From your TFSA, you’d move the whole thing to a cash savings account and take $437.50 a month to your chequing account. You feel me?
  1. Make a plan to repay! If you’ve had to borrow from a form of debt, or from your tax savings, we will need to pay that back when all of this is over. It’s a good idea to try and ballpark a plan now, before you take on this debt – so that you have an idea of what you’re looking at in terms of a payback plan.
  2. If you don’t have any savings and no access to a line of credit, you’ll need to get extra creative to try to bring in money if you’re self-employed and/or ruthlessly cut back expenses to see if you can live solely off of any EI money coming in. The goal is to try to use credit cards as little as possible and avoid pay-day loans at all costs. If you need to use credit cards to make ends meet, so be it. These are unprecedented times. Extraordinary circumstances often require extraordinary measures. My tip to you is avoid if you can and if you must, as little as possible so that when things return to normal, you have a manageable debt load. This means a credit card bill that you can realistically pay back in 6-12 months. I know people will think I’m promoting debt. I’m not. I’m promoting a Debt Harm Reduction plan for those who don’t have any other option.
  3. If you need to talk this out with someone, get an UNBIASED, FEE-ONLY/ADVICE-ONLY financial planner to work out your plan. There are many of us. We are currently offering 30 minute emergency calls for anyone. You do not need to be a current client. These power-calls are $100 + HST and you can book here.

For SMALL BUSINESS – BOOKMARK THIS PAGE

If you’re Self-employed without payroll account – CERB is there for you. Read above. Also read the CEBA below

If you’re a large institution (Payroll over $1M) – check out LEEFF HERE.

Canada Emergency Business Account (CEBA). Banks will offer $40,000 interest free loans guaranteed by the government for small business (incorporated, partnerships and sole-props). If you repay it by Dec 31, 2022,  25 per cent (up to $10,000), will be forgiven.

UPDATED May 19 – For businesses whose payroll/income between $20,000 to $1.5 million of payroll in 2019.biz you qualify.

UPDATED MAY 19 – For Self-Employed (sole-props) people or people who pay themselves from a corp on a T5 (dividends)  you now qualify too with some specific rules:

  • You need to have a business operating account at a bank (personal chequing account may not cut it),
  • Registered for an HST/GST or payroll number with CRA
  • Have filed a 2018 or 2019 business tax return
  • Your expenses (eligible, non-deferralable expenses) which is rent, property taxes, sub-contractors, utilities insurance. Basically, things you can’t say “I’m not gonna buy this rn because… pandemic.” Essential bills you MUST pay are between $40,000 – $1.5M a year.

Details to follow on applications. Stay tuned. This link helpful

75% Canada Emergency Wage subsidy and will cover up to 75% of your wages up to  $58,700 per employee (Up to $847 a week – this is more than EI or CERB. See below) for 24 weeks. This money will be backdated to March 15 – August 29, 2020.

 How to qualify:

Eligible employers: individuals (self-employed sole-props with payroll accounts for employees) and corporations. It’s for employees

You must see a drop of at least 15% of their revenue in March 2020 and 30% for the following months during the Eligible Periods. In applying for the subsidy, employers would be required to attest to the decline in revenue. The PM warned that anyone trying to game the system/falsely use these emergency programs will face consequences. I assume heavy sanctions/penalties etc. So… only use this if you need it is the name of the game. Don’t be a jerk, basically.

What is considered Revenue?

  • Calculated using your normal accounting method, and would exclude revenues from extraordinary items. For example, if you had a one-time massive influx, that doesn’t necessarily disqualify you.
  • You can chose accrual method or cash method of accounting but cannot use both. You have to pick one from the start and stick with it. Accrual method is where you calculate revenue based on invoices. Cash method is where you calculate revenue based on what cash has actually dropped into your business chequing account.
Eligible Periods
Claiming period Required reduction in revenue Reference period for eligibility
Period 1 March 15
to
April 11
15% March 2020 over:

  • March 2019 or
  • Average of January and February 2020
Period 2 April 12
to
May 9
30% April 2020 over:

  • April 2019 or
  • Average of January and February 2020
Period 3 May 10
to
June 6
30% May 2020 over:

  • May 2019 or
  • Average of January and February 2020

How to apply?

You would be able to access the Canada Emergency Wage Subsidy by applying through a Canada Revenue Agency online portal. More details regarding how to apply for the program will follow. If you do not qualify for the Canada Emergency Wage Subsidy may continue to qualify for the previously announced wage subsidy of 10% of remuneration paid from March 18 to before August 29, up to a maximum subsidy of $1,375 per employee and $25,000 per employer.

How it logistically works – you will keep your employees on payroll and they will send you money (even backdated) to help pay for it. It seems like the idea is that you have access immediately to the Canadian Emergency Business Account (the $40,000 interest free loan). Use this to keep payroll going as usual and then repay the loan when the subsidy comes in.

What if you employ yourself and you’re on payroll? Can you use the subsidy?

It looks like it! There’s a special rule for employees (you) that do not deal at arms length with employer (aka you). You’re not at arms length from yourself. You are yourself. It looks like you are eligible for the subsidy for payroll between March 15 – June 6 up to the max $847 per week.

Refund of payroll remittances

There’s talk For greater certainty, employers would be required to continue to collect and remit employer and employee contributions to each program as usual. Eligible employers would apply for a refund, as described above, at the same time that they apply for the CEWS.

 

COMMERCIAL RENT RELIEF, Canada Emergency Commercial Rent Assistance program will lower rent 75% for April, May and June that have been hard hit by COVID19 if your rent is less than $50,000 a month, you have ceased operations or taken a 70% decrease in revenue from pre-COVID19 revenue. The government (CHMC) covering 50%, your landlord 25% and you 25%!  It says “small business tenants” So… that’s great.

i.e. if your commercial lease was $4000 a month. You’d pay $1000, the government would pay $2000 and your landlord would take a $1000 hit. They would collect $3000.

For April, you’ll get back 75% retroactively from your landlord once they get their loan.

UPDATED MAY 20 – THE CATCH? Your landlord has to sign an agreement. Have that convo ASAP. Loans were JUST MADE (May 20) forgiveable. So that’s a WAY better deal for your landlord. It’s only forgivable if they reduce rent.

I have had many people reporting that their landlord doesn’t want to or won’t participate. That sucks. I was so excited to hear about this program and I’m so disappointed that this has the experience of so many small business owners. Write your MP and MPP and tell them about it. We have seen again and again that the programs roll out and then are tweaked to include more people. Hopefully we see more action on this front as well. 

In Ontario – THIS IS HELPFUL

If none of these help you – GO HERE and see if you can get regional support!

CALL TO ACTION: ASK FOR HELP/OFFER HELP

Some of you may not have any available debt to pull from, or any emergency savings – if that’s the case for you, is there anyone you can ask for help? Can you offer any type of online service or gift cards for your business to bring in some income during this time? Are there family or friends who can help? If you’re someone whose income is unaffected by COVID-19, are you able to offer financial support to someone right now? We’re all in this together, and the only way we’ll get through this is by helping each other in any way we can. <3

 

 

 

 

 

 

 

Spend Your Spending Money In A Safe and Happy Way

Oh hey! So, this is my (Shannon Lee Simmons) first ever sponsored blog post on the website. As an advice-only, unbiased financial planner, I’m careful about what information I share or promote. I was always afraid that working with a financial institution could come across as biased, and as a financial planner, I knew I could only comfortably work with a company that shares my mantra of supporting people getting their finances on track.

But then, I was asked to work with Interac and got excited because I genuinely support using debit as the go-to spending method over credit or cash (It’s in my book again and again and again). So, if paying with debit is now easier for people, I think that’s great.

So, here we are!

In my book, Worry-Free Money, I talk about something called the Spending Vortex. It’s that moment when you feel like your paycheque comes in and it’s already spent before you even get to debate ordering a pizza. Poof! Usually, you’re left feeling broke, like you’ve overspent – and that makes most people feel frustrated.

A lot of times, this happens as a result of how you spend money. Sometimes you pay with debit, sometimes you pay with credit, sometimes cash. Maybe all your rent is due with one paycheque and then you feel like a baller on the next. But, with no spending strategy, you’re never really sure if you can actually afford something. This leads to a lot of money anxiety. But, it doesn’t need to be that way! Here’s how.

Step 1: Stop budgeting with 50+ spending categories.

Coffee shops, takeout, clothes, pet, housing, bills – the list goes on. Budgeting like this sets most people up for failure. You forecast your spending goals in these very restrictive categories than do you best to live within the confines of the rigid budget. It’s so unrealistic! What if one weekend your family comes over and you need to buy a lot of cheese? What if the next week you need to buy a new shirt for work? Enough already. There are only 4 types of money that you need in your budget: Fixed Expenses, Meaningful Savings, Short-Term Savings and Spending Money.

Fixed Expenses are expenses like bills, housing, insurance, minimum debt payments, etc. The bills you must pay each month whether you like it or not.

Meaningful Savings is money that is being put aside to improve your net worth by increasing your assets or decreasing your debts.

Short-Term Savings is money you should be stashing away for emergencies and spikes in spending.

Once you calculate this, everything left over is Spending Money. That’s the money that you have to blow to zero every pay period for your life – groceries, gas, takeout, clothes, fun, and entertainment – cheese (real and vegan)!

For example,

  • After-Tax Income: $3,000
  • Fixed Expenses: $1,700
  • Meaningful Savings: $400
  • Short-Term Savings: $200

Money You Cannot Spend = $2,300 ($1,700 + $400 + $200)

Money You Can Spend = $700 ($3,000 – $2,300)

Step 2: Calculate how much you have to spend each pay period.

Once you’ve calculated how much money you can spend each month, separate it by how often you get paid. For example, if you’re paid twice a month and your Spending Money is $700, each paycheque you can spend $350 ($700 divided by 2). You don’t have to budget this $350. It’s yours to spend each payday however you wish, as long as it’s within your limit!

Step 3: Separate the Spending Money from the rest of your money.

In the book, in my practice and to my friends and family, I always suggest having a separate chequing account for your Spending Money. It’s also good to stick one payment method. This helps you set an actual limit to your spending and keep tabs on it so you don’t have to worry about receiving a bill that you can’t pay off at the end of the month.

If you’ve separated your Spending Money into a separate chequing account, you can easily see if you can afford things. If it’s the day before payday and you have $50 left in there, the question “Can I afford takeout tonight?” is easy to answer. It becomes “Is there money in my spending account?” Yes? Great. And now you know to keep it under $50.

I also suggest spending out of this account using debit. Why? Because this way you’re actually spending your own money.  If you spend using debit, your bank balance will be an indication of how much money you actually have left to spend until the next pay period. In addition, it beats cash because there’s an electronic log of your transactions. You can see where you spent your money in case you ever need to go back and use that information.

If you like the convenience of contactless payments you can do that now with debit! When you think about paying with debit card, you’re likely used to using a PIN number to pay, but now there are options like Interac® Flash which gives you the convenience of contactless payment.  This means you can pay by just holding your Interac Flash-enabled debit card in front of the reader at checkout and you’re good to go – no PIN required. If you like to use your phone to pay, there’s also the option of using Interac® Debit on mobile so you can use your phone to pay with your own money. Since you’re using debit, you don’t have to worry about going over your budget because it’s all tracked in real-time, from your Spending Money account, and with a mobile banking app you can check your balances whenever you want.

Step 4: Spend safely and securely

A spending strategy is one thing, but you also need to know the payment method you use is safe. Contactless payment technologies make it easy to flash your debit card or mobile device quickly and securely to pay for everyday items like groceries, gas or your morning coffee using your own money.  Interac Flash is one of the safest forms of payment because your debit card number can’t be used to make a purchase on its own in store, and it has built-in spending limits that are set by your financial institution. For example, a transaction limit of around $100 means you can’t spend over that limit by flashing your card, as you’d have to insert your card and use your PIN to verify the payment.  There are also cumulative limits and once you reach that limit, you need your PIN to proceed. That’s great from a budgeting perspective but more importantly, it protects you if you lose your card. Also, the Interac Zero Liability Policy means you don’t have to worry about what happens if you lose your card because you are not responsible for losses beyond your reasonable control.

Take the stress out of your spending money! Once you know what you can safely spend to zero each pay period without jeopardizing your bills and savings, your work is done. I give you permission to spend your Spending Money without guilt, or a budget.

 

Birth of a Cyber Baby – Freak out/Zen Out

Tomorrow I give birth to a giant cyber baby – Canada’s First Personal Finance School. It’s the biggest thing I’ve ever done. (pees pants a bit).

Who knows what tomorrow will bring? Right now, on the eve of the launch, I can still be optimistic. The programs aren’t online yet and I can still believe that anything is possible and that this school will help more people than I’ve been able to reach before.

Once launched, I have to face reality. It’s possible that I was right. It’s also terrifyingly possible that I was wrong. Any entrepreneurs/budding entrepreneurs out there probably know all about this launch-fear.

But, if you don’t believe that what you’re doing is going to make waves or change your life in a HUGE way, why would you stay in Friday nights while all your friends are together, weekend after weekend? (#fomo) Why would you set alarms for 6am on Sunday mornings while everyone else is asleep? How could you end up crying, alone, at the office until 11pm a week before launch-day and only realize that you’re NOT OK when the wonderful maintenance staff offers you a Werthers Original, and tells you “it’s time to go home”.

When you push this hard, you have to naively believe… you have to be so stupidly optimistic or else, you’ll just give up.

I’ve cried almost every day over the past 6 months. Sometimes, from joy. Most times, sheer frustration and exhaustion.

So, I just want to sit and revel in this moment.

Everything is done. It’s all out of my control. There is literally nothing for me to do but take a deep breath in and wait to see if the world believes in this school as much as I do.

This is a rare, magical moment in life. It’s like being in free-fall. It’s silent, but loud. It’s peaceful, but manic. It’s terrifying, but exhilarating.

I know I’ve packed the parachute the best I can. I’ve done all the work. I’ve made the leap and now there’s nothing left to do as I fall but trust, and wait for the parachute to open at the right time.

I think this is why I became an entrepreneur. I’m addicted to the free-fall. This, to me, is living. I feel truly alive because of the entire spectrum of emotions that comes with building, planning, obsessing, and believing in something you’ve created from nothing. I am fully self-expressed and so f*cking appreciative for that.

I’m usually pretty light-hearted in my writing/videos, but I wanted to give this moment the earnestness it deserves. This is a big one for me and I wanted to write this post from a place of gratitude and to be a letter to my future self.

Dear Future Self,

You are about to launch the biggest project you’ve ever taken on. Good on ya.

If things don’t pan out the way that you planned, that’s okay – you are not a giant failure.

No matter what happens, you have so much to be proud of. Be proud of what you’ve created, it’s amazing. Be proud that you are not afraid to work your ass off for something you believe in. You have put your WHOLE SELF into something that you will put out there for anyone in the world to judge. Being vulnerable like this is a really scary thing, you are brave. Lastly, celebrate the fact that you are facing your fear of failure like a boss. Please don’t stop being stupidly optimistic…. Ever. It’s your special skill in life. Remember, that no matter what happens, it’s the journey that defines you in the end and this journey has been truly epic.

One love,
Present Self

Thank you for being one of my fierce supporters. I couldn’t have done any of this without you. Stay tuned with me tomorrow as I continue to free-fall and we’ll find out if the chute opens.

Xo

Shannon Lee Simmons

Almost-Official Founder of The New School of Finance

Leverage the budget – like a boss

THE 2015 BUDGET IS HERE… dun dun dunnnnn

So, like, what does that even mean and why should you care? The budget affects you in SO MANY WAYS but often people don’t even know about it!

The 2015 Federal Budget outlines your tax rates, tax breaks, changes to your savings and how much money is going back into your wallet each year. It’s a BFD.

Rob Carrick nailed it in his recent article by noting that this budget definitely favours seniors and that GenY/Millenials didn’t get much attention.

But, here are some things in the budget that will affect GenY/Millenials/GenX

1)   TFSA or Tax Free Savings Account Increased Contribution Limit

The TFSA is the bomb. It’s an amazing savings account for everyone and for both long and short-term savings. The money that grows inside the TFSA is NOT taxed when you pull it out.  I repeat – NOT TAXED. This is key. When you pull your money out of an RRSP account you must include it in that year’s income and be taxed on it (iccccky).

NEW BUDGET THANG: The TFSA contribution limit has been raised from $5,500 to $10,000 effective immediately. Hella yes. More room for tax-free savings? YES PLEASE!

2)   Benefits for Post-Secondary Students

The budget assists university students starting in 2016. Usually, to be eligible for Canada Student Loan Programs, it’s dependent on what your parents are forking over/their incomes. i.e. if you’re parents made a certain level, you wouldn’t qualify. In addition, for every dollar YOU earned in school over $100 a week, that amount was deducted from your loans.

NEW BUDGET THANG:  If the parental units are forking over for your education whether the total amount or in part, your parents aren’t expected to pony up as much as before to make you eligible for the Canada Student Loans Program. Also, you can now earn money while a student without the amount you earn effectively becoming a drag factor on your student loan. WOOT!

3) Help for Parents with the UCCB and Children’s Fitness Tax Credit

While you may be sleep-deprived, there is a small token of appreciation for your current condition in the budget. The UCCB or Universal Child Care Benefit has been increased from $100 per month up to $160 per month for each child in your family under the age of 6.

The UCCB is taxable money from the gov that parents get REGARDLESS OF THEIR INCOME.

NEW BUDGET THANG: Effective from the beginning of this year, the cheques are in the mail as of July 2015 – PARTY!! Also, the budget has doubled the children’s fitness tax credit to $1,000 starting in 2015. Kid’s activities are so friggen expensive, amirite? Now, at least you get back 15% up to $1000.  Little Billy can go to swimming – hurray!

4)   Tax Rate Decrease for Small Businesses

NEW BUDGET THANG: The tax rate for small businesses will be reduced from 11% to 9% in 2019. (Now why would you give someone a gift that is so far off in the future? Oh yeah – it’s election time again). Note that this is only for CORPORATIONS – not sole-props or freelancers.

If you are curious about any of the four points above or of finding out in plain language how any of this applies to you, it may be time to book a financial planning sesh to flush out how you can leverage this 2015 budget like a boss.

What Does “Fee-Only Financial Planner” Really Mean?

There are so many different words floating around out there to convey someone who helps you with your money. Here are some – by no means all – that you may be familiar with: financial planner, financial advisor, investment advisor, money coach, fund representative, portfolio manager, stockbroker, and on and on…

That alone is confusing enough to the layperson (who exactly are you supposed to tap for help with your particular financial situation?) – but now on top of the various words used, an extra layer of complexity is added! This layer has to do with how that person is compensated for helping you with your money.

Here’s another list, by no means exhaustive: commission-based, transaction-based, fee-based, fee-only, advice-only, fee-for-service. One might start to wonder if there is a raison d’etre for the proliferation of so many descriptors.

And hey, what about accreditation? You should probably use someone who is accredited so they know whereof they speak and there is a whole list of designations for this, which will not be produced here.

Let’s just go with the fact that it’s a better bet to use someone who has a designation. Here’s an acronym for you: FPSC or Financial Planning Standards Council. This is a body that oversees approximately 17,000 Certified Financial Planners (CFPs). Out of these, the stats are that fewer than 1,000 are true “fee-only” planners.

That’s an interesting thing. Why would that be? Some say that there just isn’t that much demand for fee-only planners. I suggest that education comes before demand. If people knew the difference, would the demand grow?

FEE-ONLY FINANCIAL PLANNERS

So what is a fee-only financial planner? It is someone who receives a fee from you for delivering unbiased financial planning and advice to you for your benefit. They sell you nothing but their own expertise applied to your particular situation. This fee could be set at an hourly rate or it could be a flat fee established ahead of time for a certain service that you are seeking, e.g. retirement planning or entrepreneurial planning.

COMMISSION-BASED FINANCIAL PLANNERS

Compare that to commission-based financial planners who get paid not by you but by companies who make the financial products that they sell to you. Who would you rather get your advice from: someone you are paying or someone another entity is paying? That’s a rhetorical question.

FEE-BASED FINANCIAL PLANNERS

Compare that to fee-based financial planners who get paid a percentage of assets under management. This feels better, doesn’t it? Definitely there is more transparency here. At least you are playing on the same team in that if your assets increase in value, the fee-based financial planner stands to make more money. But let’s look at it from the other side. If your assets decrease in value, you lose money but they continue to make money as they always get paid whether your assets grow or shrink. Yes, to be sure, they make less if your assets shrink but they still make something whereas you lose. Also, fee-based does not negate commissions being paid to the advisor and you know only if commissions are paid to them if they are forthcoming with this information and I’m sure some of them are.

It is your money and definitely your choice.

The New School Team

 

EU VAT January 2015 Changes – NON-EU SELLERS

READ THIS IF: You are selling goods to people in the EU and you are afraid that those goods are considered “Electronically Supplied Services”.

DISCLAIMER: EVERYONE IS DIFFERENT. THIS IS NOT ADVICE. PLEASE SPEAK TO YOUR TAX PROFESSIONAL. MORE INFO IS COMING EVERY DAY. STAY TUNED.
WATCH WEBINAR: HERE

QUESTION 1: What is EU VAT?

It’s a sales tax – like HST/GST/PST in the EU. Each Member State (country ) in the EU has a different rate that they charge. Like Canada, where each province can either be a HST/GST/PST combo at a certain rate, each Member State sets it’s own rate. This rate is charged ON TOP of the price of goods/services sold, just like HST/GST/PST.

New law as of January 2015 – DOES THIS AFFECT YOU?

From 1 January 2015, EU VAT will be charged in the country where products are bought (where your customer lives) as opposed to the country where they are sold (where you live). The legislation applies to electronically supplied services.

QUESTION 2: Are you selling electronically supplied services?

DEFINITION: “‘Electronically supplied services’ shall include services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.”

TRANSLATION: Where there is automated delivery following the sale, it’s a e-service.

  • Basically, it all depends on whether the seller is manually involved or not at some level of delivery and confirmation after sale
  • POTENTIAL WORKAROUND: If you MANUALLY email and MANUALLY ATTACH CONTENT then it may not be considered an e-service. HMRC stated this in an online discussion on Nov 27, 2014. YOU MUST HAVE A PERSON MANUALLY ATTACH AND EMAIL CONTENT TO CUSTOMERS IN EU (This could change)
  • NOTE: E-books, courses and downloads that automatically send to customer and email them automatically ARE CONSIDERED ELECTRONICALLY SUPPLIED SERVICES. CDs, floppy disks, potentially USBs are NOT… this may be a work around – ship your content in another way than auto-download.

TAKE ACTION: Are you able to manually email and attach content for any customers in the EU? If so, you may not have to worry about this because you’re not considered to be selling electronically supplied services. How manual/human interaction can you get?

QUESTION 3: Who Are You Selling To?

For non-EU businesses selling to the EU

If your customer is a business in the EU, they should be registered for their own VAT number and as a business, they are responsible for collecting and remitting VAT. You don’t have to.

Take Action: Go through your EU clients, who are businesses (B2B) and who are consumers (B2C). Write down which Member State (which country) they live in and how much money you made from each Member State (country) so you know where the important ones are.

You sell to Business: (B2B) If you sell to businesses, you will need to collect their VAT number and confirm that they are responsible for paying VAT on their own revenue and expenses. THIS IS IMPERATIVE. Without their VAT number, you cannot escape the EU VAT. This may be something you require on your site. Maybe customers from the EU need to enter in their VAT number and agree to a waiver or something to accept responsibility. Please wait for more details on this.

You sell to Consumers: (B2C) They don’t have a VAT number and you ARE selling Electronically Supplied Services. This affects you.

QUESTION 4: What do you need to do?

  1. You can register for MOSS (apparently you have 10 days if you sell to someone in EU after Jan 1 until you register. First quarter filing is March 2015). This is a “Mini-one-stop-shop” in the EU. Instead of registering in each 28 Member States in the EU, you can do it in one place.
  2. Choose which countries you want to continue selling to and know the laws there (invoicing rules, VAT rates etc.)
  3. YOU GOTTA KNOW YOUR STUFF
    • You are required to monitor WHICH country your client is from
    • You are required to monitor WHAT RATE to charge depending on what country they reside in (each country has it’s OWN rates)
    • You are required to know what INVOICING RULES for EACH COUNTRY. Invoicing is MANDATORY. E-Invoices are allowed, E-invoices may be sent using two methods (e-signatures and EDI) as long as each invoice fulfills two main conditions:
  • the customer must accept receipt of invoices by electronic means (e-signatures and EDI)
  • guarantees need to be provided for:

o   the authenticity of the invoice’s origin; and

o   the integrity of the invoice’s contents.

4. You are required to get TWO (non-conflicting) PIECES of evidence (it’s been suggested to ask for THREE) of where that customer normally resides. (There is a movement to get micro businesses exempt from this since most of the payment systems cannot provide that information – stay tuned)

i.     i.e

IP ADDRESS
BILLING ADDRESS

5. Filing for MOSS is quarterly (20 days after quarter end) online and payment made (this hasn’t been fully flushed out for non EU businesses)

6. Keep the evidence for 10 years

7. Make Your Web-store VAT friendly.

                                              i.     Get the billing info

                                            ii.     Get the IP address

                                          iii.     Show different currency

                                           iv.     Show different VAT rates applied

                                             v.     Allow for electronic invoicing and e-signature

SOME OPTIONS: No matter what, find a way to TRACK WHERE YOUR CUSTOMER IS. When dealing with EU customers, keep it manual (manual email, manual attachment, manual manual, manual). Maybe try to change your services so they don’t fall under an Electronically Supplied Service. SEE WEBINAR ABOVE. Have your administrative team on board for the additional work. You need to put some sort of notice on your sales page for customers from the EU. If they are from the EU, they email you directly, they DO NOT fill out your regular online shop/marketplace inputs form where they would receive an automatic email or download. (STAY TUNED FOR ANY CHANGES)

If you choose to register for MOSS and go forward, you may want to select only a few number of countries where most of your clients are to sell in. Know the rules inside and out for each of these places, register for MOSS, follow the rules and find an online market place that will help you collect your TWO NON-CONFLICTING PIECES OF RESIDENCE DATA. More on this to come. It is onerous.

Question 5: Is there hope?

Yes. The last person in the supply chain to the customer is responsible for the VAT. If you sell on an online shop/marketplace, things could change.

You are responsible for paying and remitting the EU VAT if the online store/marketplace is ‘acting as an agent’ only – AKA, you are selling directly to the customer. This is likely to be true if, for example, you’re the one processing card payments for your sales like PAYPAL. PAYPAL WON’T HELP YOU HERE

The online store/marketplace needs to do the following in order to be considered the FINAL stop, selling directly to the customer and responsible for EU VAT.

  1. Authorizing payment
  2. Authorizing delivery
  3. Setting terms and condition of sale

AKA, the online store is ‘acting in their own name’. You sell your services to the online store and then they sell to the customer.

You should check with the company you’re working with. CONFIRM THEIR ROLE.

Amazon and Apple currently pay the VAT for their sellers and Google Marketplace is said to be changing their terms from the first of January 2015.

Also – hopefully micro biz is exempt from the onerous two pieces of evidence and can just go by what the customer puts as their billing address.

 

EU VAT

Hi everyone.

This is a quick note regarding the new rules from the EU VAT.

This directly affects those who sell digital products (like e-books, e-courses, etc) to customers in the EU as of January 1, 2015.

CLICK HERE

There’s a lot of panic out there, but everyone just remain calm until we have all the facts. I’m working on figuring out best practices, who needs to register, where to register and how to reduce administration for you, the entrepreneur, so you can keep selling internationally. I’m looking into the One-Stop Shop EU VAT implications and the online tools that may be able to help you out.

If you’re interested in keeping abreast of the situation, I’ll likely be hosting a spreecast/webinar on it shortly to get the word out fast/effectively.

Sign up below and I’ll keep you posted.

Sign up BELOW

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Make Money From Your Home

4 ways for house to earn you money

Your home is a haven, but it can also be a cash cow if you know how to milk it. Today I’m going to give you the 4 best ways to make extra money from your house.

Method 1 – Use Air BnB

Who: Air bnb is a website that allows you to rent out your home like a hotel.

What you need: All you need room for someone to sleep in.
Risk: Letting someone unknown into your house.
Payout: Slightly below market rent. For a weekend in a major urban center, you could charge anywhere from $80 – $150/night! You don’t need to provide any amenities except a bathroom and a bed.
When to use: If you spend your weekends at the cottage or away, rent out your space to travelers and earn some money!

 

Method 2: Parking Spot

Who: You.
What you need: An unused parking space.
Risk: You probably have to shovel.
Payout: Glorious. Most parking spots go for $80 – $250/month in the GTA depending on location.
When to use: Year round if you are sans car.

 

3. Garden Rental

Who: You.
What you need: An unused garden space with optimal growing sunlight.
Risk: Someone comes into your backyard.
Payout: Renting garden space can go from $40 – $200/month depending on size and demand.
When to use: Spring/Summer.

 

4. Workshop Host

Who: You.
What you need: A big enough room that could seat 10 people at least.
Risk: People coming to your home for workshop.
Payout: Small businesses in the GTA are desperate for locations to host small workshops all the time. Most places in the GTA are expensive. If you’ve got a big living room/family room/kitchen, offer it up on craigslist. The average workshop would pay between $20 – $150 depending on how much they were charging guests to come. Alternatively, you could ask to take 20% of all the ticket sales for the use of your home.
When to use: Whenever you don’t need access to your space!