Once you achieve Financial Independence, you may choose to leave salaried employment but with decades of vibrant life ahead, it’s too soon to do nothing. The new stage of life between traditional employment and Full Retirement we call Victory Lap, or Victory Lap Retirement (also the title of a new book to be published in August 2016. You can pre-order now at VictoryLapRetirement.com). You may choose to start a business, go back to school or launch an Encore Act or Legacy Career. Perhaps you become a free agent, consultant, freelance writer or to change careers and re-enter the corporate world or government.
With economic uncertainty looming, taking control of your household finances is more important than ever. Preparing for potential downturns doesn’t mean drastic lifestyle changes: it means implementing smart, practical strategies that safeguard your financial well-being. By making a few savvy adjustments, you can create a solid buffer that shields your household from the effects of a recession while keeping your long-term financial goals on track.
Launch a Side Business
Starting a side business can be a powerful way to add extra income and recession-proof your finances. Whether you’re leveraging a hobby, tapping into a specialized skill set, or exploring new opportunities, a small business can provide a flexible, low-risk way to diversify your income. Consider ventures that align with your interests, such as freelancing, consulting, or offering home services, which tend to remain in demand even during tough times. By starting small and focusing on industries that offer consistent value, you can gradually build a side income that provides financial stability when it’s most needed.
Pay Down your Debt
Paying down debt is one of the most effective ways to strengthen your financial position ahead of a recession. High-interest debt, such as credit-card balances or personal loans, can quickly eat into your budget, making it harder to manage everyday expenses when the economy tightens. Focus on prioritizing payments to reduce or eliminate this kind of debt, starting with the highest interest rates. This not only frees up more of your income but also reduces financial stress. By becoming less reliant on borrowed money, you can better weather potential income fluctuations and maintain greater control over your finances.
Organize your Financial Records
Organizing your financial records can have many benefits, such as improved efficiency, better decision-making, and easier access to important information. Digitizing your documents can help you keep track of them more easily, save space, and add an extra layer of security to protect against theft or damage. After digitizing your records, try the process of splitting PDF content to break a document into smaller, more manageable files. Continue Reading…
The following is an edited transcript of an interview conducted by financial advisor Darren Coleman of the Two Way Traffic podcast with tax lawyer Anna Malazhavaya of Advotax Law.
It appeared on September 6th under the title ‘What you need to know about recent tax changes in Canada.’ Advotax is a team of lawyers and tax professionals that serves individuals, businesses and real property owners with tax planning and tax-dispute resolutions involving the Canada Revenue Agency. The discussion explored everything from the capital gains inclusion rate to expanded powers of the CRA to clients asking about moving to the US.
“It’s emotional but for some the increase in the capital gains inclusion rate was the last straw as they choose to leave Canada,” said Anna who added that over four million Canadians hold more than one property which means the government’s claim that this affects only 0.13% of the population isn’t true. “People are calling me every week. The wealthiest, the most talented entrepreneurs, are leaving Canada. It’s very sad to see.”
Anna and Darren talked about this phenomenon and how the June 25th deadline made it more expensive to leave the country with what can be a hefty departure tax. They also got into RRSPs, RIFs, and bare trusts which involve putting your property in someone else’s name. Anna said while the bare trust may have been designed to catch those who are less than scrupulous, it also captures honest people and gave examples.
I want your perspective and what your clients are thinking about the capital gains change we saw recently, and the deadline for people making changes. Now we’re in the new environment where the inclusion rate, or the amount of money you have to pay tax on, has gone up. And the government told us this was only going to affect 0.13% of taxpayers. Do you think their math was right?
Anna Malazhavaya
I have doubts. I’m not an economist and don’t have access to all the government stats, but I can share some stats. Capital gain may apply on the sale of your property that is not your principal residence. This includes your cottage, and your investment in rental properties.
4 million Canadians hold more than one property
Darren Coleman
More than four million Canadians hold more than one property. So four million Canadians, potentially, may be subject to that new increase capital gain rate. So that’s not 0.13%. That’s more.
Anna Malazhavaya
It’s way more. Of course, if I argued for the other side, I would say, Well, you don’t know how much money these people made on the property, and the first $250,000 of capital gain is still subject to the old rate, and that’s true. But at the same time, something tells me if these people held the property for more than 10 years that gain will be substantial. Look at how the real estate market performed in the last 20 years.
Darren Coleman
A lot of these people will be subject to the new rules. And not only that, think about people who only have one property, and let’s say, live on a farm property, and they have their house. When they sell their property, not the entire sale price will be sheltered by the principal residence exemption, but only the portion that’s required for the maintenance of their farm property. Everything in excess will be subject to capital gain and can potentially be subject to these new higher rates. Do you know how the government arrived at their number? A reasonable solution would have been to look at past taxpayer data and say, if we look at the last five or 10 years, how many taxpayers had a capital gain over $250,000? Let’s average it out over a bunch of years. But that’s not what they did. They looked at one year, 2022, and said only 0.13% of taxpayers had a capital gain of over $250,000. But that was also a negative year for stock markets globally, and a bit of a negative year for real estate equity markets everywhere. Tell me a little more about how your clients are experiencing this change.
Anna Malazhavaya
Until 2022 I probably had five people consulting me about leaving Canada. Normally, it was the other way around. We had all those talented people who wanted to bring their money, settle their life in Canada, educate their children here, build their future, build businesses, hire people. Pay taxes at 54% mind you. But this year alone, I have over a dozen new clients who plan to leave Canada and for my practice it’s a big change. People calling me practically every week, saying, I’m done. You know what? This capital gain game change. It did not affect me today. It probably won’t affect me tomorrow, but it’s the straw that broke the camel’s back.
More Canadians want to leave the country
Darren Coleman
The people who used to hire people, who used to come up with brilliant solutions, making everyone’s life better, they’re leaving Canada. Very sad to see and you’re not alone in experiencing that. I had a conversation this morning with a cross-border tax accountant and he said he’s had a surge of people looking to leave Canada, and he blames it on the tax policies which are making it less attractive for them to be here. Is it easy to just pack up and go to places like Florida?
Anna Malazhavaya
Leaving Canada became a lot more expensive. If you want to leave Canada, you are treated by Canadian law as if you sold all of your assets, even though you’re not selling anything. You keep all your assets. But the government says, Okay, fine, you want to leave Canada, but we want all the tax on the gain that you accrued to date. Some call it a departure tax, although this isn’t an official name, but it can hit you hard if you decide to leave Canada. So you have to declare all the gain you had from all your assets. Continue Reading…
We recently conducted a “Value of Advice” survey of Canadian investors that reinforced to us how important financial advice really is. We found that while advisors enjoy high levels of client satisfaction and loyalty, younger investors are increasingly opting to manage their assets themselves through online discount brokerages and digital services.
Among Canadian investors, 44% feel their advisor provides high value, and 74% believe their financial advisor is worth every dollar they pay. Additionally, 71% say they plan to remain with their current advisor, with that figure rising to 80% among those aged 55 and over.
While these results were not surprising, the level of trust that financial advisors enjoy is changing with a cohort of younger investors. Among those aged 18-34, 40% use online platforms for investment management, while only 38% rely on financial advisors. By contrast, 70% of those over the age of 55 use a financial advisor, with only 17% turning to online platforms.
A Tale of 2 Investors
It’s clear that Canadian investors highly value financial advisors and the guidance they provide. However, there is a tale of two investors split by age in terms of the duration, method and frequency of financial advice they receive.
This presents both a challenge and opportunity for financial advisors to provide more holistic wealth management services and relationship-oriented advice to younger investors.
While younger investors are more inclined to go digital with investing, they also show a significant level of hesitation. Among younger investors, 35% report not fully trusting their financial advisor. When asked whether they can manage their own investments, many admitted to lacking the time (47%), knowledge (39%), or confidence (42%) to do so effectively.
The study highlighted that financial advisors remain the preferred source of advice for most Canadians, regardless of age. In fact, 89% of investors report that their go-to source for financial information and advice is their financial advisor or bank. Moreover, human advisors are perceived to deliver better investment returns, with 44% of respondents believing that human advisors generate higher returns, compared to only 9% who hold the same view of robo-advisors.
Almost half in regular touch with advisors feel optimistic about their financial future
The data revealed that frequent communication with clients is shown to make a significant difference in client satisfaction and optimism. Among those who communicate with their advisor monthly or more, 46% feel optimistic about their financial future, compared to just 18% of those who communicate only once a year. Additionally, 40% of those who have a financial plan created by an advisor express a high level of optimism about their financial future, compared to only 22% of those without a formal plan.
We have been looking at the impact of financial advice for more than 25 years and the utility and benefits are the same.
As the investment landscape evolves, financial advisors will need to focus on building trust, maintaining regular communication, and emphasizing the value they provide in an increasingly digital world. Doing so will enable them to serve both traditional and younger investors more effectively, today and in the future.
Mario Cianfarani is head of distribution for Vanguard Canada. Most recently, Mario was head of national accounts & institutional sales and was previously head of ETF capital markets. Before joining Vanguard in June 2015, he was a portfolio manager at First Asset Investment Management, responsible for domestic and global equity ETFs and sector-based, North American covered call ETFs. Mario has held senior sales and trading positions with a number of Canadian capital markets teams. His experience includes trading equity derivatives and marketing derivative-related risk management solutions to a broad range of clients.
Mario earned a BA in applied mathematics from York University and is a CFA® charterholder.
I have been saving since I arrived in Canada 25 years ago. During my first year I saved as little as $10 month, but in general I saved about $25 during the first 10 years, then I increased the amount I was saving to about $500 per month and during the past 5 years I was saving as much as $1,000 per month.
Finally this year, I stopped contributing to my retirement accounts. Instead, I started taking out whatever I get as a dividend distribution from my non-registered account.
I have to tell you. It feels good!
I have accumulated over $500,000. According to the 4% rule, I can withdraw the equivalent of $20,000 per year, which is more or less my cost of living.
At this moment I am only withdrawing from 1% to 2% of my capital per year. I am withdrawing the dividend distributions from my non-registered accounts.
I see some cash siting on my broker’s account and I just transfer it to my checking account and I invite myself for dinner.
At the beginning of the year, I transfer the maximum allowed from my non-registered account to my TFSA. I have a feeling that the maximum allowed for 2024 will be $7,000. I will be ready.
Transferring capital from non-registered account to TFSA will allow to earn more and pay less taxes.
I am in the fortunate position where I don’t even need my retirement money right now. My part time job, which I love, provides me enough to live.
I think that I will use my retirement money to pay for some luxuries that I haven’t paid for myself before, like… instead of taking one vacation per year, I will take two vacations per year, one to my home country, and another to any other random country. Continue Reading…
Over the last few years, discussions around personal finance have been louder – and more confusing – than ever.
Market volatility, rising interest rates, the high cost of living and global unrest have dominated headlines and made life increasingly complicated for most Canadians.
Today (October 9) is World Financial Planning Day, a time to dim the noise and focus on the basics: a financial plan, what it is and how it can help you feel financially prepared for your future. More importantly, it’s an occasion to recognize that working with a financial advisor on a personal plan has many benefits, including greater financial confidence and a higher quality of life.
A financial plan is not just an investment plan: in fact, it’s much more. An investment portfolio is certainly a component of a financial plan, but your investments don’t provide a clear direction for any life plans in the coming years. Your investments can indicate financial returns, but their value is not guaranteed at any point in time and investments alone cannot prepare you for the future.
A financial plan is a goals-based document that provides a road map for what you would like to achieve in the short- and long-term. The goals are not necessarily financial, but they need monetary support (like investment income) to be reached.
Goals within your financial plan may include:
When you want to retire, and the lifestyle you want in your golden years.
Affording major expenditures, including a home, vacations or post-secondary education for dependents.
Preparedness for untimely events, such as premature death, disability or critical illness.
Plans for your estate and the legacy you’d like to leave for your family and charities.
These goals are personal and involve answers to questions that address significant, and sometimes difficult, situations. It can be challenging to determine these responses on your own, so working with a financial planner can help you answer these questions, define your goals and create a strategy to achieve them. Your financial planner will get to know you on a personal level. Then, based on your aspirations, project what needs to happen and create a financial plan for your future. Continue Reading…
Posted By 
