Welcome to some long Easter Weekend Reading folks – thanks for visiting. Earlier this week, the new Liberal government rolled out their spending plans for the next year (and more) and announced they would run a budget deficit of $29 billion to do it. Just like the books of many Canadian households it appears balanced budgets are a thing of the past. Here are some budget highlights:
- Students – education and textbook tax credits will be eliminated in January 2017. Education credits are currently worth 15% of $400 for each month a student is enrolled in full-time school. If that’s the bad news, the upside is graduates won’t have to repay a nickel of borrowed money under the Canada Student Loan program until they are earning at least $25,000 per year.
- Seniors – payments associated with Guaranteed Income Supplement (GIS) will rise by as much as $947 this year; this is great news to support seniors living around the poverty line.
- Families in between – the Liberals kept their promises to help “the middle class”: the new Canada Child Benefit (CCB) program will pay up to $6,400 per child under age six and up to $5,400 per child aged six through 17 for families earning less than $30,000 in net income. The benefits will be scaled back depending upon family net income. The new CCB program will replace the current complexities associated with the Canada Child Tax Benefit, the National Child Benefit and the Universal Child Benefit programs.
Good budget? Bad budget? Overall, I think a fair budget although I am concerned about our growing deficit and how our federal contingency fund / emergency fund has also dropped from about $3 billion to $1 billion. Emergencies can and do happen…
Any big plans for the long Easter weekend? Ours will be with family. I hope you have a great weekend and enjoy these articles from the week that was. See you here next week for more articles and believe it not, more giveaways!
Power Financial increased their dividend this week by 6%.
I shared some Canadians stocks to buy and hold along with some advice to index invest everything else.
If you are struggling to keep your New Year resolutions – here are three reasons why.
Dividend Growth Investor highlighted 24 companies further research.
Don’t forget about this giveaway on my site – your chance to win a copy of The Essential Retirement Guide.
Did you read about Kawhi Leonard of NBA’s San Antonio Spurs? He’s going to make $90-million over the next few years alone but still drives a 1997 Chevy Tahoe. Crazy. I have a post coming up about my 16-year-old car, stay tuned for that.
I provided an update on our 2016 financial goals here. How are your 2016 goals coming along?
Michael James on Money had a good post about his re-balancing spreadsheet.
Big Cajun Man said food prices are on the rise.
John Heinzl’s article was excellent – wrapping your head around the return of capital for your ETFs.
My friend Million Dollar Journey shared an update about his financial freedom journey. Inspiring to me as usual.
I’m still in weekend mode and have an off-topic question: how/where does one vote for best canadian PF blog? Is that even a thing?
There are the Plutus Awards…but that’s all I know.
http://www.theplutusawards.com/
Enjoy that weekend mode for as long as you possibly can SST… 🙂
Re: Students
That link says it’s ok for 2015 but it didn’t talk about future years which is what I was looking for. However, item #5 in the following link says it will still be available in the future. Thankfully that wasn’t eliminated!
http://www.moneysense.ca/save/debt/student-debt/how-the-federal-budget-affects-students/
@Gene: Thanks for chasing that one down. My sons both have significant built up tax credits.
Thanks for sharing Gene. Good news the tax deduction is alive and well.
With all three of my children attending university, I am not pleased with the liberals taking away the deduction allowance for textbooks. One book can be over $200….what were they thinking? Very, very strange.
I think they are trying to save some money and simplify the tax code in the process. I can appreciate this is disappointing though. Looking back though, I had OSAP but didn’t have as much student forgiveness as what the Libs are enacting. I think this is a great thing.
Re: Students
Do you know if prior year unused tuition credits carried forward will still be available for future deductions? My daughter still has some big amounts in her account.
Hey Gene – check this out and let me know if this helps?
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/323/crry-frwrd-eng.html
I believe you can for the 2015 tax year.
Thanks for the inclusion, another week and higher food prices, and no one seems to care? Weird, enjoy the Easter weekend.
Well, I guess in the grand scheme of things, paying a bit more for food is no big deal. I worry about my mortgage that is costing me thousands of dollars per year in interest vs. $10 more per week at the store. That’s just me!
Thank you for highlighting my article Mark. I am glad you are able to maximize usage of those tax deferred savings accounts.
You have probably answered this question before, but can you and your spouse also contribute to your RRSP’s along with the TFSA?
Either way, keep plugging at it. Slow and steady wins the race…
Yes, we contribute to TFSAs (tax-free accounts) and RRSPs (tax-deferred accounts). Both of these accounts are maxed out for me – no more contribution room. My wife has both accounts; her TFSA is maxed, and we’re trying to max out her RRSP in the coming years.
@DGI: Everyone over 18 can contribute to TFSA, but only those with Earned Income can contribute to RRSP.
The problem with RRSP is once one turns 70 they must begin withdrawing a minimum amount (% based which increases each yr till 95 when its 20%). The withdrawals are taxed at ones highest rate which means if you have a lot of money in your RRIF and have to withdraw $30k, 40k, 50k or more you quickly are in the higher tax bracket. That’s why one should max out TFSA before the RRSP. Pay a bit more tax now but you save later.
Thank you for the explanations. I am not eligible for TFSA or RRSP but I like to see the alphabet soup of tax-deferred accounts from a Canadian perspective. I have found that investing through tax-deferred accounts could be potentially more lucrative than investing in taxable accounts. So knowing all about those accounts, and their pros and cons could be beneficial.
I can provide an overview of that in a future post DGI. RRSPs are equivalent to your 401(k).
Similarities = money considered pre-tax which means that you are taxed at marginal rates upon withdrawal; growth inside account tax free; no taxation for capital gains, dividends, interest etc. Has annual contribution limits.
Differences = 401(k) is setup with your employer plan whereas an RRSP can be setup with any financial institution. I think?? 401(k) contributions can only be made through payroll deductions whereas RRSP contributions can be made through payroll deductions (commonly through employer-sponsored group RRSP plans) as well as cash (after tax) contributions which then generate a tax rebate.
I can provide more details later 🙂
Thanks for sharing these articles 🙂
Have a nice weekend
Same to you!
Good articles on Kawhi Leonard and from John Heinzl.
Michael James, that’s quite a re-balancing system. Unfortunately it’s hard to teach old dogs new tricks or I’d be something as exacting as that myself.
Looking forward to hearing about the Mazda and whatever else it relates to.
I’ll stay away from budget comments on your site!
@RBull: Fortunately, I only had to be exacting once. Now that it’s all coded into my spreadsheet, I just have to do what I’m told without much thinking.
Understood. The exacting once part would be the impediment for me since my spreadsheet skills would be…. lets say slightly deficient!
You are welcome to comment about the budget anytime 🙂 Yes, more posts and giveaways to come next week.
Without getting into rationale and nuts and bolts, I’ll simply say I am strongly opposed to long term projected deficits, with no balance forecast, especially during non recessionary periods.
I’ve read the government is also undertaking an extensive income tax review soon- the first comprehensive one since 1966 apparently. We’ll have to see how this plays out, but I suspect some seniors with reasonable incomes are going to pay more freight given the large share of program spending allocated to this group. Maybe pension income splitting will be on the blocks…. Given what we’ve seen so far I would also be concerned if I were a higher earner. This may however have the affect of lowering taxes for many and may be a good idea, depending on your personal situation.
I’m not a fan of government deficits or debts in general because it forces you/them to make some difficult decisions on what to fund, what to cut and invariably people/the public lose out. The Libs seems adamant to tax the rich but most the wealthy in Canada have also created wealth as entrepreneurs – so I’d be VERY cautious about taxing the rich too much. I say lower corporate/business taxes as much as possible and raise consumption taxes (GST). That would be better I think.
Simplifying the tax code would help save hundreds of millions as well (less government jobs needed to do this work, audit, etc.).
I agree with being cautious about taxing the so called “rich”. Many of these people are wealth creators and now most combined prov/fed brackets are well over 50% and one of highest in the G7. Politically popular but dumb in practice.
Simplifying the tax code would be very welcome probably to everyone.
I think its a good idea for government to live within their revenue base and not add to debt unless a plebiscite allows it, and even then only with a strict adherence to balance in specified # of future years. Otherwise taxes should be raised to cover the deficit as a real test for the value to the public of spending money the government does not have. If people had to pay for overspending within say 5 years they might pressure government to be wiser with their money. In fact we should have a plan to pay down debt during growth years and build a large rainy day fund.
I don’t expect many people to agree with my approach.
Yes, we agree with the avoid taxing the rich too much.
Absolutely – simplifying the tax code would be very welcome probably to everyone!! We should all have a plan to pay down debt during the growth years. We’re doing that somewhat right now – we have no idea what the future holds in terms of jobs and health so we don’t want to take our incomes for granted.
Thanks for sharing these great set of reads, Mark. Have a great long weekend
R2R
Same to you!
thanks for the reading list mark and i’m looking forward to the new post on your 14/15/16 year old car. happy easter!
Ha, thanks Gary 🙂 Best wishes to you.
Lots of opinion on the budget, esp. on two of your points — student loans and child payments. Opinions best left off your site. 😉
NBA star frugality…I read many moons ago that when Steve Nash went to Dallas earning $6 million a year, he lived in a house with just a bed and maybe a couch. He’s maybe more eccentric than frugal.
Happy Easter egg hunting!
Well, I’m sure you can be respectful with those comments SST 🙂
I didn’t know that about Nash. Both Nash and the NBA star I highlighted have nothing on Daniel Norris:
http://nesn.com/2015/03/millionaire-blue-jays-pitcher-daniel-norris-lives-in-a-van-behind-wal-mart-video/
Older story but still wild all the same.
I’ll try…
Student loans: eliminate government sourced student loans and the price of post-secondary education will plummet. All this stuff like tying repayment to minimum income levels is total band-aidism.
CCB: another fine example of short thinking by the government. If their end goal is to buoy the strength of the country across the board, then do NOT give the families cash payments. All this does is stimulate the economy in the very short-term (but by how much? The source of payment is still tax revenue, after all), and there is nothing holding the parents to spend this money on anything child-related. Put the payments (or a portion thereof) into an RESP or similar for the child (think food stamps without the social stigma). The unfortunate reality is that there is a high correlation between income, education, and health (and perhaps fertility rate). Nearly doubling the “income” of a poverty-level family of five will merely create more of the same. The cycle needs to be broken with the fostering of strong socio-economic mobility, and education is the key. My guess is that this “new” payment structure will provide very little of the desired effect. (There’s also an increased detriment of creating more Derek Foster types who abuse the system.)
BCM on food prices: it has been said that the return on a home garden is 400%, but I’d say it’s much more, and continually rising. I grow veggies all year round where I live and it pays off tremendously, mostly because I can harvest selectively, e.g. two years of bounty from one seed. I also selectively grow, planting expensive crops and buying cheap produce (carrots etc.). I also grow items which are not sold commercially, thus the return is priceless. Without rambling on about vastly superior taste and quality, if you have the ability, I highly recommend growing your own. The downside is going through the grocery store check-out with always only meat in my basket — don’t judge me! 🙂
re: students – I agree with that to a point, although kids should have access to credit still somehow for school.
re: CCB – I applaud them for killing a bunch of overlapping programs. Where I struggle is the cash payment so I think if the goal is to provide for the children’s future, make the government payment into a TFSA or RESP or similar registered plan.
Yeah, I commented to BCM about food prices. No biggie. We have a garden. It’s full of snow. 😉
SLs: credit would rarely be required to attend university et al if the publicly-funded loans ceased. It’s supply-demand. The schools only charge that much because they know there’s a ton of willing gov’t money (trace the history). A person could work a normal job and save for expenses. They could also approach banks for a loan. That reminds me, where’s my gov’t issued credit card and mortgage?
CCB: the gov’t is truly acting as a nanny in this instance. Another alternative would be to administer all the payments to the school boards across the country. And then there’s the politically incorrect elephant in the room…
Food: big snow crop, eh? Don’t eat the yellow stuff.
You know I’m laughing about the government issued credit card and mortgage 🙂
I never eat yellow snow!
It would cost me more in water bills than I would ever save in vegetabls costs….but my parsley is growing like mad right now. If you have plenty of rain , yeah its nice, fresh green beans can’t be beat. Locally grown fruits and vegetables are very cheap here, because the farmers don’t pay for water like homeowners do.
We have a small irrigation system but we’re very conscious of our well water use. We like growing our own food as long as the rabbits don’t eat any first.
It’s good to see a pro athlete not pissing away his money. Maybe Leonard will still be wealthy a decade after he retires. Thanks for the mention.
I had the same reaction when I read the article. If he’s even somewhat good with money, his family is set up for generations. Have a great weekend.
If you watch that documentary 30 for 30: Broke, you can see that a frugal athlete is indeed a rare thing.
It makes sense that if you come from modest means, and all of a sudden you start getting hundreds of thousand dollar paychecks in your 20s, it may be difficult to hold on to the money. Keeping up with the Joneses is tough in this situation…
Most of these athletes are coming from modest means with nothing and yes, when piles of money show up at your door, it’s easy to see how impulses take over.