Tax Saving Tips

Filing returns and paying taxes keep playing on your mind throughout the year. And along with this, the ways to save a little from here and there is another concern expressed by majority of the tax payers. There would be no one who would not like to know a few tips to make a little saving on the taxes.

Some of the tips have been mentioned below:

Contribute to tax savings accounts: there are options available o you like registered Retirement Savings Plan or even Tax Free Savings Account wherein if you make contributions regularly you will enjoy a deduction. This not only reduces your tax burden but it also secures your future. These accounts yield you considerable benefit at the time of maturity and also these benefits are tax free. So, it is actually a scope for you to make double profit.

Distribute the income: if you are in an age group wherein you are imparted pension by the government which is precisely known as Registered Retirement Income Fund (RRIF), then you can always split this between you and your spouse. This will reduce your taxable income and hence lower the burden at the same time. Government allows you to share Canada Pension plan earnings too, between you and your spouse. With all this you would be able to reduce your TX burdens effectively.

Filing Income tax returns on time: You must file returns within the due date. If you forget or get delayed for whatever reason, be prepared for paying a huge penalty on the taxable income. Any ending payment will attract a huge interest and may be a conviction too. So, you may have some plan of saving money by not paying the taxes, but, you may land up in a deep soup wherein you might have to pay higher than what you would have actually paid.

Enjoy tax deductions from your employment: If you are employed then you can always explore the possibility of saving some taxes by making contributions in RRSP or other pension plans. Even the cost on education or day care services or even in-house fitness also makes you eligible to get some tax deductions.

Savings taxes by renovating house: if you have made any renovations in your house after January 27, 2009 then you will be enjoying a at deduction equal to 15% of the cost met by you to renovate your house. However, you must note that the first $1,000 spent for this purpose would not attract any deduction. And also the maximum amount eligible for deduction is $10,000.

Savings Taxes calls for a little research and planning because, you need to be clear about the kind of deductions you may enjoy and the limits set for the same. So, before you assume of a deduction or an exemption you must do your research well to be on the safe side. Else, you may land up making expenditure with an impression of getting deduction but you may not get one.

Mutual funds and ETFs

Mutual funds and ETFs have always been a hot favorite for investors in the last few years. And the reason for this snip the fluctuations in the global economy which has left the investors with little or no faith in most of the investment plans.

There are case studies and examples wherein people have lost huge amount of money when caught in these fluctuations. There have been losses in assets, and even otherwise due to the uncertain trend of the market. Real estate too has left people with quite a large magnitude of fluctuations.

Amid all this, mutual funds have shown better performance and less of fluctuations and along with these even ETFs have also gained momentum.

Now, sometimes, the investor gets confused if he should buy more of mutual funds or ETF.

We will take a look at the comparative picture of the two:

• When it comes to managing ETFs (Exchange Traded Funds) an investor may find it to be a little more expensive than mutual funds because an investor is expected to pay a little more for ETFs advice than one does for mutual funds.
• When you compare the transparency status of both these options you will find that ETFs share more transparency with investors in compared to mutual funds. The policy on ETF is more customers friendly and an investor comes to know of the changes sooner than he does about mutual funds.
• When you compare the returns too, you will see that an investor earns more profit on ETFs than mutual funds over a given period of time. In fact, the security is more in mutual funds and this is actually due to the slow progress of monetary growth. So, it has its own advantage that your money is not exposed to too much of fluctuations in mutual funds.
• Mutual funds have been into existence for years now, hence if you want to know the performance of a company even decades back, you will get a clear picture on the trends. On contrary, ETFs are not white old in existence and hence you will not be able to track the past performance of the same. Hence long term analysis is almost impossible in an ETF.
• If you buy an ETF through an adviser, there is an extra percentage which you have to pay. This added to the cost of buying an ETF, your effective cost goes up. In case of mutual funds you are saved of this cost.

Mutual funds have always been a safe option for those who are not aggressive investors. ETFs have joined the group of “safe investment options”. However, both have been a preferred choice by the people who earn hard and cannot see their money losing its sheen. Hence, an investor can make up his mind according to his requirement and reliability and can choose either of the two. In any case there is always a grey side and a brighter aspect of any investment you make.

Not saved enough for retirement

There are many who feel that they haven’t saved enough for their retirement. If this is the case, then you need to first make an evaluation of your thought process. Because sometimes, you may have saved enough but, you are neither too sure nor too confident about the same. And if that is the case then first of all you must introspect before concluding your financial status.

Consider the following:

Relax: There is no point getting panicky even if your haven’t saved enough for the retirement. You may have been a regular contributor to registered retirement Savings Plan or Tax Free Savings Account or any such plan which will certainly yield you a good amount when gets matured. However, as because the money has not come to your hand and this could be reason for you to feel unsecured.

Make a report: You can prepare a report on your own or even take help of a financial consultant who will give you advice on making a report about your holdings in terms of finances. There are examples when people consider their savings to be negligent but when the same is written down on a paper then it amounts to be a good lump sum.

Consult an expert: you an always take help of an expert and look for advice on how to begin n investment even at this ripe age which will provide you with at least a little support in your post retirement days.

For those who haven’t begun to save for the retirement and still have enough time in hand to do so, the following tips would probably be helpful:

• When you calculate your requirement post retirement you must understand that your need would be almost 80% of the current ones. And here you should not forget to keep inflation in mind. So, your savings and investment should cover all the cost by then.
• You can give yourself a breather merely thinking that your needs would be cut upon when you are sitting at home. They might seem to be, rather they would get diverted. Now, that you have to spend on your child’s education or other family needs, and then you may have to spend more on your health and such issues.
• The capacity with which you can earn now is certainly much higher than what it would be years later. So, this is one factor which has to be kept in mind while making investments and planning savings.

Retirement planning is one which does not only need a “present consideration” rather a “futuristic approach” is needed for a healthier and safer “golden period”. Those who have not started planning for this period should not get scared of it if they are heading for one. There are options open even much later in life though they might be a little expensive and demanding but, at least they would protect the old days without asking for any help in terms of money from others.

We will discuss some basic rules for writing a check to make your transaction hassle-free. Let us see what to do and what not to do for writing a check.

Some do’s for writing a check—

• Write in a legible and a clear writing and make use of permanent ink pen for writing a check.
• Any overwriting or erasure on the check will be rejected by the authorities. Make sure the check is written with correct information.
• Write the date in the upper(right hand) corner on the line while filling out the check.
• While writing the amount payable, make sure to end it with the word ‘only’.
• Always destroy any of the spoiled check/checks.
• Checks must be kept in a locked place and must not be left signed.
• If you find your check book missing or any errors in your bank statement, immediately report the matter to the bank authorities.
• Write the name of the recipient on the line saying ‘Pay to the Order of’. In case the recipient is an individual, mention the first and the last name. Write full name in case its an organization.
• Write the check amount in numeral form in the box to the right side of the ‘Pay to the Order of’ line.
• While writing a check, your bank account must have sufficient amount.
• If you are going to send a check by mail, use a good quality window envelope to protect it.
• Mention the right date on your check.
• Sign your name on the check properly, that is in the same manner as always signed by you.
• The check amount must be written to the left.

Don’ts—

• Never write any check/checks for the amount more than your account currently has. If you write a check exceeding the amount in your saving account, your check will bounce due to non-sufficient funds.
• Don’t allow others to use your check and don’t use other’s checks.
• Don’t use any pencil while writing a check.
• Don’t commit the mistake of sign a blank check/checks.
• Don’t use any eraser to rub the errors or mistakes on a check.
• Don’t staple, pin or fold written checks.
• Don’t issue payments in any foreign currency by using RM denominated checks.

Well, it is a common predicament for a large number of people wanting to make investments.

Investing your money ought to be an vital decision in your life.

So, let’s see what is right for you, bank or a credit union—

Aim and purpose—While banks tend to be business-minded and do not have neither any involvement nor any interest in the community. Their aim is profit. . Private investors(or entities) are the owners and controllers of the bank and aim to maximize profits of the banks.

Local Credit unions, on the other hand, are not for profit since they are run by members of the community. Thus credit unions aim to benefit their members.

Accessibility—In terms of accessibility, banks, especially big banks, have higher accessibility. Bank branches remain open even on the weekends. There are several online and mobile facilities offered by the banks. And the best part is a large number of ATMs.

Credit unions are limited to being accessible in the particular area only since they serve local people. So, no ATMs by credit unions for customers. However, many credit unions do provide the facility of reimbursement of ATM fees to customers in case they need to move out of the network.

Interest rate—Banks interest rates keep on moving up and down from time to time. Credit unions offer high interest rates but majority of them don’t pay any interest on checking accounts.

Credit cards—Banks offer higher rates on credit cards as compared to lower rates offered by credit unions. Credit unions require an annual fee while banks do not have any annual fee. In case of credit unions, median late and over-limit fee is higher than banks. A balance transfer fee is charged by credit unions but banks don’t charge any such fee.

Customer service—Banks offer 24-hour customer service lines and have websites as well to facilitate those with tight schedules. In case of credit unions, service offered is more personalized since there are lesser customers as well as lesser employees. Moreover, many credit unions also have websites to provide services to their customers.

Which is the right pick—banks or credit union—So, after reviewing all the above factors, we must be dying to know which is the perfect pick? Banks or credit unions? Since both have their own peculiar features and services, one needs to choose according to one’s requirements.

Before knowing how to have a happy retirement, we need to know what actually a comfortable retirement requires. It is not a wild guess work. Rather, it requires an analysis of our spending as well as savings we need to make.

A successful retirement requires getting advice from financial advisers or making use of online retirement calculators for best financial planning. At least, it does prepare a person better for having a successful retirement. And there is no room for guessing about the expenditure since it is only going to jeopardize their preparation for retirement.

Let’s see steps for a successful retirement—

• Reviewing expenses—Its time you begin reviewing your expenditure and then do the changes by including the items that are going to change once you retire.

• List—List all of your financial assets to calculate the maximum income that could be earned in the retirement period.

• Investment goals—We need to know how much money we actually need to retire. This can be ascertained by beginning with your gross income (before taxes). From this amount, deduct the annual savings to arrive at the figure of annual spending. Deduct annual (estimated) Social Security and Pension benefits from this figure to arrive at your net number. This net number needs to be multiplied by 20 and to be adjusted for any inflation.

• Allocate your assets—A balanced asset allocation plan is needed for a successful retirement. For this, you need to find out the percentage of fixed income investments and equities required in your portfolio. Use investments likely offering the opportunity to diversify.

• Pay off your debts—Pay off all your debts (whether its low-rate mortgage or anything like this) before you reach the retirement period.

• Maximum savings—Make sure to maximize your savings for a satisfied retirement. Go for a defined benefit plan or just make regular contributions to a good investment vehicle.

• Tax plans for retirement—Best tax strategies for retirement must include using tax-deferral, tax-advantaged and tax efficient. This means using retirement accounts, going for tax-free bonds and making tax-efficient investments.

• Retirement job—If you consider yourself a little bit less stable financially for retirement, you can opt for taking up a retirement job or continue working part-time in your present job. Such a decision will increase your financial stability.

Investing in Registered Education Savings Plan

With the deadline of April 30, many of the Canadians are now in a “relaxing mode”, at least on the front of taxes and filing returns. Most of the responsible families have already filed their returns, some have started looking forward to a “refund”, and some have started planning further on “finances”.

In fact, there are people who can’t hold their excitement back thinking about the refund they are likely to receive from the “Tax Department”.

The Tax Refund and its fate

Many people must be planning to spend a vacation with the money they would be getting as tax refund; there is yet another who wants to make it a part of buying a “new car”, which probably must have been waiting for some time now. You may also find others who would like to use the refund in paying the mortgage whereas there would be some hot don’t mind is using the money for making a “mutual fund investment”. The decision certainly is of the person who gets a refund though, there the same money can use for securing your child’s education too. After all, CRA has made an announcement that the average refund is going to be somewhere around $1700. And this is certainly not a small amount of money.

The best possible utilization

Many of the experts suggest that the best possible way to use your refund is to invest it into “registered Education Savings Plan (RESP).” This will secure the future of your child and will help you to grow your money better too.

A little about Registered Education Savings Plan

This scheme was introduced by Canadian Scholarship trust Foundation almost five decades back. Presently there are almost 300,000 families relying on this plan for securing their child’s future education. The aim of this program is to encourage post-secondary education and higher education amongst the youth which sometimes they are not able to pursue due to lack of funds. The parents can possibly gift it to their children without allowing it to become a burden on their financial planning, because, refund may be regarded as an unexpected gift from the government.

The working of RESP

If the average refund is saved into this kind of a plan right when a child is born, by the time he or she turns 18, one can expect this amount of money to grow up to $53,000. And this amount can be readily available for the child when he or she intends to take up pots secondary education at the age of 18 or above.

This clearly indicates that even if the cost of education gets expensive with time and inflation is taken into account, the growth is certainly a good one, and for this one is not having to take out any thing from the plannings he has.

Hence this time when you get a refund think of Registered Education Savings Plan and secure the future of your child by gifting him an assured higher education as per his desire.

Investing in Real Estate

Over the last few years, the investment in real estate market is a much debated topic. The sole reason being the “dropping prices” which has created an unsecured feeling amongst the investors.

The story of falling prices

The story of falling prices in Canada has been quite a prominent feature and it has followed the “price fall” in its counterparts like USA. The associated events are “foreclosures and desperate sales” wherein the houses have been sold at a lower price than they could have bee. In fact, it won’t be an exaggeration, if it is said that home owners had to sell a property at a huge loss. They did it to save themselves from facing further losses. The decrease was felt mostly in Ontario and such places.

The debate on investment

Even there stands a debate on this issue whether or not the investors should pour in their money; the bottom line is “real estate” is always a better “investment option” than many others. The biggest support to this statement is the news that country has already come out of the clutches of “recession”. And experts comment is that after such a phase this is one sector which grows quite brightly.

The benefits of investing in real estate

• The biggest benefit of investing in real estate is that is recommended to be one of the best ways to “make investment of borrowed money”.
• It gives you an opportunity to save for your future generation as the property prices would certainly be much higher in the years to come than it is now.
• If you hold on to the property for a longer period of time, you would be able to reap larger benefits than any other sector.

Real estate investment or a debt

When you intend to buy a property, you certainly take a big loan, but this loan saves you from paying taxes. Secondly, this is one category of debt which cannot be compared with others. When you take a debt for buying a car or going out for a vacation, it is retrogressive in nature, but, a debt for buying a home is certainly progressive in nature. For the very reason that it is an “asset backed debt”. It gives value to your financial planning by making it stringer and stronger.

Some of the ways to earn money from real estate

• This is one investment which keeps on growing except for a few instances when the economy of the country is hit due to “slowdown of global economy”. However, when the “turbulence” is over, you can be assured that your property is appreciating in value.
• When you own a property, you are saved from renting a house for yourself and this saves you a lot of money. On one hand you would have paid a rent and yet would not have enjoyed the ownership. On the other hand, you are paying a loan, but also enjoying the ownership of the property.
• In case you down want to stay in the house, you can always put it on rent. The money which you receive out of it can be used for repaying the loan.

So, an expert wills always advice you to buy a property at any given point of time.

Well, you are not alone. Many of the aspirants of a new car find it hard to make a decision in this regard.

One thing is for sure, that whether we decide to buy a new car or lease it, we must weigh the pros and cons of both these prospective to arrive at a good decision.

Leasing is becoming increasingly popular these days due to certain benefits involved in it.

Buying versus leasing a car—consider the following—

Lease payments are, undoubtedly, quite less expensive as compared to finance payments. And this certainly means that one may prefer leasing a car than buying it. How? Consider this. While buying a new car, one is likely to finance it. And this means making a down payment of nearly 10 percent of the total vehicle price(along with sales tax). One needs to pay, on an average, between $5,000 and $10,000 as upfront payments.

Leasing, on the other hand, is quite less costly affair since you need to pay not more than $2,000 as fee (along with payment for the first month and a security deposit). And lease payments to be made each month are also quite lesser than the finance payments each month. This gives an edge to leasing (over buying a car provided you are considering to keep for a short period of time).

 Should you lease a new car?—following are the advantages and the pitfalls of leasing a new car—

First, lets see the benefits(in nutshell)—

1. Lease is always less costly than buying a car’
2. No worries about huge down payments;
3. No worries about selling the vehicle if and when you don’t feel the need to keep it with you.

Disadvantages of leasing a car–

1. You never become the owner of a car;
2. You don’t get the authority to either customize the car or make any modifications to it.
3. You need to be ready to shell out additional expenditure for excessive mileage along with any damage to the vehicle.
4. You will have to be ready for having maximum insurance coverage limits.
5. You need to take a decision about purchasing the car immediately after the end of the lease(while in case of owning a car, you are at liberty to sell it as and when you like to do so).

If yes, then you need to read the following to get a solution to your problem.

Home loans- making the house buying affordable–Becoming an owner of a home is a dream come true for majority of individuals. After all, it is one of the most sought-after investment in our lives these days. And getting a home loan for buying a home is not a new concept these days. An increasing number of people are becoming home owners thanks to the availability of home loans.

Mortgage loan or home loan is for buying property. It is secured on the property to be purchased and needs to be repayed in monthly instalments.

Problem in paying loan instalment?—Getting a home loan seems to be the easiest thing for anyone not able to afford buying a home. However, the problem arises only when we find it difficult to get aside the fixed amount every month to be paid as an instalment for the home loan. Its commonly called as as EMI(equated monthly instalment).

Missing EMIs?—When any home buyer(having taken a loan for buying a house) fails to make the EMI once, he or she will be sent reminders by the bank for being late for making the monthly payment on due date.  And a legal notice is forwarded to the home loan defaulter if he keeps on missing the EMIs for three months in a row.

Home loan affordability—You need to know how much home loan you can afford. Only then can you be assured of making monthly payments within due date. For this, there are two factors considered by banks—

1. Financial commitment-to-income ratio—Its based on the total loan obligations to the total monthly income for arriving at the exact repayment ability figure.
2. LTV(Loan-to-value ratio)—Its the loan amount taken on any property with regard to its percentage value.

Contact bank for restructuring home loan–If you are finding it difficult or almost impossible to pay the monthly instalments, then you must contact the bank as soon as possible. You will be helped in restructuring the loan.

Restructuring means repricing or refinancing by switching over to a new plan for home loan having a lesser interest rate. It can be either with your current lender(that is current bank) or any other lender.