For young couples starting families, buying their first home and/or other real estate. Covers mortgages, credit cards, interest rates, children’s education savings plans, joint accounts for couples and the like.
One of the biggest challenges in Canada’s rental housing crisis is the lack of new affordable housing units being built.
Despite efforts through the National Housing Strategy’s five programs, only 17,000 units were delivered after four years. This disappointing outcome is only a modest improvement over Ottawa’s track record in the past 30 years. For example, between 1996 and 2013, fewer than 7,000 new units were provided by federal and provincial governments.
In contrast, the United States built 3.5 million subsidized rental units from 1987 to 2021. Adjusted for population, this is equivalent to building 11,000 units per year in Canada. Both countries have tightened the tax benefits of rental real estate, but the U.S. offset this policy shift by introducing the Low-Income Housing Tax Credit (LIHTC) to mitigate the impact of these changes on low- and middle-income renters.
A Canadian LIHTC would offer an alternative method of federal funding by leveraging private-sector expertise in owning, building, and managing low-income rental housing. The LIHTC would provide tax credits to both for-profit and nonprofit owners of rental housing, with nonprofits having the option to sell these tax credits. A key aspect of the program would be its efficient resource allocation, achieved by creating competition among developers for tax credits and using a market-based test for the viability and need for low-income housing.
Complements existing Renter Support Initiatives
The program could be designed to complement existing renter support initiatives, such as local government programs, housing allowances, and rent supplements. It would work by providing tax credits to developers, who would then pass them on to investors to offset their income tax.
Unlike earlier tax credit programs like the Multiple Unit Residential Buildings (MURB) provision, this program would have a cap, with credits allocated annually to each region based on population. The credits would be federally funded and awarded according to provincial objectives. Continue Reading…
Small businesses play a sizeable role in shaping Canada’s economy, contributing significantly to national employment numbers and our country’s gross domestic product (GDP).
According to Statistics Canada, in 2022 businesses with 1 to 99 employees made up 98 per cent of all employer businesses in this country. But today’s economic environment has triggered new financial challenges for this cohort. Canadian entrepreneurs can help offset the cost of rising inflation, rising cost of inputs, and rising interest rates, and keep more money in their pockets, by adopting some or all of these key tax strategies.
Consider employing your immediate family
Income splitting, whereby the higher-earner transfers part of their income to a lower-earning family member, can reduce the tax owed by your household. Consider paying a reasonable salary to your spouse and/or children for the services they provide for your business to reduce your tax obligations.
Incorporate your business
If your business generates more profit than you need to live on, incorporation is a highly effective tax strategy. It could lead to a significant tax deferral by qualifying for the lower small business tax rate for active income – the longer the profits are left in the company, the larger the tax deferral. If shares of the business are ultimately sold and are eligible for the lifetime capital gains exemption, the tax deferral gained through incorporation can create a permanent tax saving.
Other potential advantages of incorporation include having family members own shares (so as to have access to multiple capital gains exemptions) and possibly paying out dividends to actively participating family members who are taxed at a lower rate.
Maximize tax breaks with registered plans
Consider your RRSP contribution room when setting and reporting remuneration for services provided by yourself and family members who also work in the business. Employment income creates RRSP contribution room for the following year which, for 2024, can represent up to $31,560 of room. RRSP contributions are tax deductible, provide tax deferral and allow for business owners to diversify their future retirement income. Contributing to a tax-free savings account (TFSA) can also work in your favor by allowing you to withdraw funds if needed without penalty. Continue Reading…
Becoming debt free is, for many people in the country, virtually a dream. It’s basically impossible if we’re barely living from paycheck to paycheck, and the debts we accumulate aren’t always unavoidable. However, there are definitely a few things that we can do as individuals to reduce our debts and eventually become debt-free.
In fact, it’s a life goal for many people to just get rid of their debts. Once that happens, they can finally enjoy a life of financial security and be more free with their hard-earned money. So without further ado, let’s take a look at some simple life changes you can make to become debt-free.
This all starts by actually looking at your incoming and outgoing money and creating a budget. Start by looking at what you spend your money on, where you can cut down, and also look at how much you’re paying in subscription fees. A lot of people bleed money because they’re not aware of how much they’re actually spending, and this can be an incredibly dangerous habit.
Aim to actually pay off your debt
Lots of people will see the long debt repayment terms and just let it go. They’ll wait several years just to pay off something, and in that time, they’ll have paid a huge amount of interest that could’ve been avoided.
So aim to actively pay off your debt. Reduce expenses from other places (such as entertainment costs) and put all of that into your debt. Continue Reading…
In the quest for financial stability amidst major life milestones, we gathered wisdom from Finance Experts to CEOs, compiling twelve diverse strategies.
From establishing a safety net to applying the 50-30-20 budgeting rule, these professionals share how they’ve successfully built and maintained emergency funds while pursuing family formation and homeownership.
Establish a Safety Net
Adopt Frugal Living Practices
Set Achievable Saving Goals
Automate Savings Allocation
Implement Disciplined Saving
Live Below Your Means
Reduce the Temptation to Spend
Diversify Income with Side Hustles
Maintain Emergency Fund While Home Owning
Strategize with Automatic Transfers
Manage Spending, Build Runway
Apply the 50-30-20 Budgeting Rule
Establish a Safety Net
As a seasoned finance expert, I understand the critical importance of establishing and maintaining emergency funds, especially when navigating major life milestones like family formation and homeownership. Here are some strategies I recommend for achieving financial security while pursuing these goals:
Building the Safety Net: We suggest a reserve that equals three to six months’ worth of living costs, which acts as a buffer for matters like falling sick, fixing a car, or losing employment. You can begin by making small deposits into a high-interest savings account and then building on it gradually. Save everything!
Goal-Oriented Saving: After setting up an emergency fund, the next step is to save towards your dream house. Consider putting money into Fixed Deposits or Recurring Deposits, as they have guaranteed returns and help inculcate discipline, too. Remember to stay consistent! — Arifful Islam, Finance Expert, Sterlinx Global LTD
Adopt Frugal Living Practices
My husband and I have built and maintained emergency funds by continuing to employ financial tactics we had to use early on in the pandemic, when COVID-19 lockdown-related issues resulted in his salary being temporarily reduced and my hours being cut back.
We were adamant about the need to continue adding even a small amount to our emergency fund since we had purchased a home only the year before. Thanks to friends’ and family’s experiences, we were well aware of the ever-present chance of a home-related emergency.
We decided on a two-pronged approach: We lived beneath our means by greatly curtailing our travel, cultural, and dining-out budget, finding free and low-cost alternatives to enjoy closer to home, as well as cooking new items at home.
We also became savvy consumers. We started comparison shopping for budget items, both big and small. Our biggest savings came from comparing car and home insurance companies: When we switched to a new company, we saved over $700 a year.
The strategy I followed for building my emergency fund took a decent amount of time. My plan was to cover three to six months of living costs. I was well aware that saving that much money would take time. So, I started with simple goals like saving $10 a day.
I somewhat understood that the savings goal depends on income and expenses. So, I tried to cover essential expenses first, rather than transferring all my income to savings. I paid off costs such as housing, utilities, transportation, food, and credit-card/loan payments before anything else. Then, I added up my monthly spending and multiplied it by six months. I got the estimated total amount I need to save as an emergency fund.
I decided to keep my funds in a high-yield savings account. These types of accounts are convenient to access and offer good interest rates. As a result, your funds will grow gradually. However, I suggest choosing banks and credit unions insured by the National Credit Union Administration (NCUA) or the Federal Deposit Insurance Corporation (FDIC).
Last but not least, it is better to use a direct deposit service to transfer your money into your bank or savings account. Contact your bank and activate the direct deposit service. It would be wise to split direct deposits and put a certain amount in your emergency fund and the rest in your checking account. — Loretta Kilday, DebtCC Spokesperson, Debt Consolidation Care
Automate Savings Allocation
I’ve always prioritized building an emergency fund because it’s crucial for my family’s financial security and peace of mind. Early in my career, I adopted a simple yet effective strategy: automate and allocate.
I set up automatic transfers from my business income to a separate high-yield savings account every month. Initially, I aimed to save at least six months of living expenses, which I gradually expanded to cover an entire year.
Treating this fund as untouchable for everyday expenses became a safety net that allowed my wife and me to comfortably pursue family goals like buying a home. To balance this security with growth, I also invested in low-risk, highly liquid bonds and money market funds for a portion of the emergency fund. — Michael Sena, CEO and Lead Analytics Consultant, Senacea Ltd.
Implement Disciplined Saving
Building and maintaining an emergency fund has been a cornerstone of ensuring my family’s financial security, especially as we pursued significant goals like family formation and homeownership. From my experience, the key has been a disciplined, proactive approach to saving, paired with a clear understanding of our financial priorities and potential emergencies.
Initially, I established a strict budgeting process where setting aside money for an emergency fund became a non-negotiable monthly expense, similar to mortgage or utility bills. I targeted saving at least three to six months’ worth of living expenses, a common benchmark that provided a safety net capable of covering unexpected events such as medical emergencies or job loss.
To stay disciplined, I automated the transfer of funds from our checking account to a high-yield savings account specifically designated for emergencies. This automation ensured that the savings occurred without requiring active management on my part each month, reducing the temptation to skip or divert these funds toward other uses. Choosing a high-yield account also helped the fund grow faster through interest, maximizing the efficiency of our savings.
As our family grew and our financial situation evolved with goals like buying a home, we reassessed our emergency fund needs regularly. For example, when planning for homeownership, we increased our emergency savings target to account for potential home repairs and maintenance, which are typically more costly than many renters anticipate. This adjustment was crucial in maintaining our financial security after transitioning to homeownership.
Throughout these phases, maintaining open communication about our financial goals and progress has been vital. Regular discussions with my spouse ensured that we were both aligned on our savings goals, understood the reasons behind them, and could track our progress together. — Michael Dion, Chief Finance Nerd, F9 Finance
Live below your Means
The secret to building wealth is living below your means. You need to be clear on the income coming in and the expenses going out. Pay yourself fi rst. The results of compound interest are powerful.
As your income increases, lifestyle inflation creeps in. Lifestyle creep occurs when an individual’s standard of living improves as their discretionary income rises and former luxuries become new necessities.
Avoid the urge to spend more as you make more. Instead, save more. Invest the difference. As you get a raise, give yourself a raise. Increase your 401(k) contribution. Add to your emergency fund. Your future self will thank you. — Melissa Pavone, Director, Investments CFP, and CDFA, Oppenheimer & Co. Inc. Continue Reading…
The initial excitement of suddenly receiving an inheritance, lottery win or large bonus is palpable, presenting what seems like endless possibilities. However, this euphoria gives way to the daunting reality of managing significant amounts of money.
You face complex decisions that involve managing your new wealth responsibly and planning for your future in ways you might not have considered before. This transformative moment calls for careful consideration and strategic financial planning to ensure your sudden wealth leads to long-term security and success.
The Reality of Sudden Wealth
Many people believe sudden wealth is a one-way ticket to lifelong happiness, but the reality is far more complex. Despite the number of U.S. adults in the upper-income tier rising from 14% in 1971 to 20% in 2019, managing significant financial resources introduces many new challenges.
You might think money will solve all your problems, but it often brings issues, including increased responsibility, potential isolation and the need for meticulous financial planning. Instead of viewing wealth as a simple solution, recognize it as a valuable tool requiring savvy management to benefit your life. This approach ensures you handle your finances wisely, considering the intricate balance between enjoying your wealth and maintaining it for the future.
Understanding the Psychological Impacts
When you receive a sudden windfall, confusion and stress quickly cloud the initial rush of joy as you face unexpected financial decisions. People sometimes refer to this whirlwind of emotions as “sudden wealth syndrome” — a phenomenon that can lead to anxiety, poor judgment and hasty financial decisions.
Taking deliberate steps is crucial to maintaining emotional stability. They include the following:
Pause and allow yourself time to adjust
Consult with a financial advisor and tax expert
Seek support from professionals or support groups
These help you manage your new circumstances wisely and guarantee you make the most of your windfall without emotional turmoil.
Practical steps to manage a Windfall
Create a budget tailored to your new financial situation to manage a sudden windfall adeptly. Start by calculating your net worth to gain a clear understanding of where you stand money-wise. Before making any major decisions, place your funds in a temporary, safe location like a high-yield savings account to ensure they remain secure while you explore your options.
Additionally, take the time to educate yourself on financial management and investment strategies. Enhancing your knowledge in these areas will empower you to make informed decisions that align with your long-term financial goals. This proactive approach will help you maximize the benefits of your newfound wealth.
The Importance of a Structured Financial Plan
A comprehensive financial plan is essential to manage and sustain your wealth effectively. Harness the power of technological advancements like AI and machine learning, which can predict upcoming financial trends and assess investment risks precisely. Moreover, seek the expertise of professional financial advisors who can tailor a plan specifically suited to your unique needs and goals. Continue Reading…
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