Golden Girl Finance
Julie Cazzin
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Home/Real Estate

Why be house-poor when you can be rent-rich?

May 30th, 2017 by

Avoid this common (but poor) financial misstep


We’ve all heard the argument some use to “prove” owning is better than renting—the one that says paying rent is simply throwing your money away. But if you can’t afford a home, then it makes perfect sense to rent. “The fear of missing out is what’s driving a lot of people to buy real estate when they’re not ready and that means they’re making bad financial decisions,” says Julia Chung, a certified financial planner in Vancouver. 

So how do you decide between owning and renting? For starters, when you run the numbers, you can’t just compare the mortgage payment and the rent. 

Take stock

Alex Avery, author of The Wealthy Renter, explains that’s an over-simplification that ignores the fact that the owner of a home has put down a substantial amount of money to own it—money she will not be able to invest in a faster-growing investment like stocks.

 After all, the homeowner still has a form of “rent” to pay in the form of money paid annually on the mortgage, taxes, utilities, maintenance, and other expenses. Avery calls this a “negative dividend” and it averages 1% to 2% of the value of your house per year. 

Room for improvement

All of this leads to the conclusions that renting is often the best option for building wealth as long as you are doing one key thing—saving aggressively in other investments on the side.

That’s because while houses in Canada have been okay investments, with prices rising at a compound annual return of 4.7 per cent over the twenty-five years to Dec. 31, 2015, the S&P/TSX Composite Index has seen its price rise at a compound annual return of 8.2 per cent over that same period.

That means that $100 invested in a house 25 years ago has grown to $318, the $100 stock market investment (including dividends) would have grown to an impressive $728—more than double.

Navigating the rental market

Still, renting isn’t necessarily cheap. In fact, rent in large Canadian cities such as Vancouver and Toronto charge average rent of $2,000 or more monthly in the downtown core. But you can bring down the cost by sharing a place with a friend or renting a place outside the main city centre. And remember, one of the key benefits of renting is that if you have to get out of your rental for a job move or some extended travel, you can do it quickly and cheaply. 

Bringing it home

The bottom line? If you’re paying less than 32 per cent of your income on rent and investing the rest with decent returns and a long term strategy such as a low-fee, well-balanced portfolio made up of 60 per cent equities and 40 per cent bonds, you’ll likely come out ahead of homeowners. Having a forced savings program such as this will insure you build wealth over time and have a secure financial future.

Of course, if you have kids and need the extra space that a single-family home provides, then realize this is a lifestyle choice. What you lose out on long-term investment gains, you will surely make up for with fond family memories that last a lifetime.

Personal Finance

How to spring clean your finances

April 11th, 2017 by

Start planting the seeds


We all do it. We accumulate financial papers all year long, put them aside in a pile in the corner of the kitchen or desk and tell ourselves we’ll deal with it all—one day soon. But I’ve decided to tackle the clean up job this year and you can too. Rona Birenbaum, a certified financial planner with Caring for Clients has an easy plan and she knows the perfect place to start.

Minimize paperwork

“When it comes to day-to-day finances, a lot of people keep much more information than they need so now’s the time to do a shredding purge,” says Birenbaum. “With identify theft rampant, any financial paper documents that aren’t necessary have to go. Keep only your tax returns and one year of bank statements for your records in a folder that’s easy for you to access.”

The key to making shredding work, of course, is to take advantage of all the online services that financial institutions are offering. That means setting yourself up with online banking if you haven’t already, as well as ensuring you have access to online trading accounts. “You should also ensure you are receiving your financial statements remotely for easy access from any computer or cell phone,” says Birenbaum. “It will also cut down on bank statement fees.” 

Keep accounts together

Once you’ve purged the paper and taken a few days to set up your accounts online, it’s on to step two—amalgamating your RRSPs and TFSAs as well as your unregistered accounts to one financial institution that you’re happy to deal with. I did this several years ago and the whole process took about three months so give yourself the entire season to get this done properly.

This is also a good time to have a chat with your financial advisor (or do a bit of research yourself) to ensure you are holding the right investments in the right accounts for maximum tax advantage. Generally, it’s better to hold GICs and fixed income securities inside registered accounts, such as TFSAs and RRSPs since interest is subject to higher taxes. Equities in the form of stocks, mutual funds and ETFs can be held in unregistered accounts, (if you don’t have room in TFSAs or your retirement account), since capital gains and Canadian dividends get more favourable tax treatment. 

Budget like you mean it

Finally, sit down and set some financial goals for the next one to three years.

“It can be as simple as making a commitment to reduce debt, or simply open and contribute to a TFSA this year,” says Birenbaum. “Decide where you want to be financially, spend an afternoon doing some budgeting, and then take the necessary steps towards making it happen.”

Follow-through is key and keeping your money goals on track can be as simple as cutting back on expenses to free up some extra cash for saving and investing, or getting some extra income coming in to your household through a part-time job or by renting out a room or garage that’s not being used. 

In all cases, Birenbaum suggests you write down your goals.

“If you write them down, you are more likely to achieve them,” says Birenbaum. “And if you tell someone what your goals are, then you have even more propensity to follow through, the psychology being that you don’t want to let the person down. It works.”

Final touches

Finally, don’t forget the little things. Check beneficiaries on your bank accounts and in your will. Review your insurance. And just in case the unexpected happens, keep a record of all your accounts and other important documents in a binder where your close family members or a dear friend have access to everything. It ensures that your finances will run smoothly, even if you have a setback along the way.


These 5 tax tips could save you thousands at tax time

February 21st, 2017 by

This year... and every year


If you’re like most Canadians, you don’t really start thinking about tax season until, well, right around tax filing time. That’s too bad because a little bit of extra planning could mean hundreds if not thousands of extra dollars in your pocket. Here are five things to start doing this year to get every tax break that’s coming to you—each and every year. 

5 tax tips to keep more money in your pocket

  1. Give a little thought early in the year to what types of tax deductions you want to claim and the types of savings vehicles you want to use.  For instance, if you’re making less than $50,000 annually, then a TFSA contribution annually may be enough since your tax bracket is low and an RRSP contribution may be more valuable to you when you’re in a higher tax bracket. But if you’re earning more than $50,000, then an RRSP contribution is likely worthwhile.  “Decide on what your budget can handle and set up an automated monthly contribution plan where on the first of every month, a set amount—say $200—is taken right out of your chequing account and deposited in your TFSA or RRSP,” says Gerry Vittoratos, a tax specialist with UFile in Montreal. “An RRSP contribution could become a budget buster if you leave it until the last minute every year and discover you don’t have the money to pay for it.”
  2. Keep track of expenses that you can use as tax credits, specifically medical expenses, transit passes, and charitable donations.  Archive these receipts so you have them handy when you need them. As they come in, simply take a photo or screenshot of these receipts and store them on your desktop in a specifically allocated folder.  “These receipts add up quickly and archiving them as you go ensures you don’t lose out on any cash back at tax time,” says Vittoratos. 
  3. Make a point to check out the Canada Revenue Agency website a few times a year and see what announcements the government has made regarding tax changes.  It pays to keep up to date. For instance, in March of 2016, the federal budget announcement included a new refundable tax credit calculated at 15% of up to $1,000 in eligible expenses per year for supplies bought by an eligible teacher or childhood educator. This was a new credit and by going to the CRA website you can ensure you get all the details early enough in the year to start keeping receipts for the upcoming tax season.
  4. If you’re an investor, keep track of your non-registered investment account(s) to tax plan year around.  “You can do tax loss selling throughout the year, taking a capital loss on a stock and using that loss to offset a capital gain later on in the year on a different investment,” says Vittoratos. “This lowers your tax owing and allows you to keep more of your capital gains.” 
  5. If you’re self-employed and run a sole-proprietorship, don’t forget to set aside money throughout the year for tax payable, as well as for CPP contributions you will have to make.  “I always recommend that the self-employed set aside 30% to 40% of any income and place it into a designated savings account so these lump sums of tax money owing are ready and accessible,” says Cleo Hamel, a senior tax specialist with American Expat Taxes in Calgary.  As well, keep a log of all your business mileage year round.  “The CRA is taking a close look at mileage deductions now,” says Vittoratos. “They’re doing regular checks and its common to get audited on this.” Consider tracking your mileage with a GPS to make it effortless. But a well-kept log book, or app for tracking mileage can also make the task simple and comprehensive.