The Bower Blog

The budget

1. Effective January 1, 2009, it is proposed that the basic personal amount and the two lowest personal income tax brackets will increase by 7.5% above their 2008 levels. As a result of these measures:
   • the basic personal amount, the spousal and common-law partner amount, and the eligible dependent amount increase from $9,600 in 2008 to $10,320 in 2009;
   • the upper limit of the first personal income tax bracket (15% income tax rate) increases from $37,885 in 2008 to $40,726 in 2009;
   • the upper limit of the second personal income tax bracket (22% income tax rate) increases from $75,769 in 2008 to $81,452 in 2009;
   • the increased amounts and bracket thresholds will be indexed to account for inflation in the 2010 and subsequent tax years.

Effect:  Increase in the basic personal amount will account for a tax savings of $66 per year (2 parents, 2 kids, combined income of $150k)

Effect:  Raising the upper limits of the tax brackets will amount to a savings of approx $417 per year under the above scenario if falling into the range of increases.  Positive impact to personal liquidity and spending.

2. A new Home Renovation Tax Credit (HRTC) is being introduced. The HRTC is a 15% non-refundable tax credit for eligible expenditures made in respect of eligible dwellings which would generally be considered to be an individual’s principal residence. Eligible expenditures include labour and building materials for a renovation that is of an enduring nature. The HRTC applies to expenditures, in excess of $1,000 but not more than $10,000, made after January 27, 2009 and before February 1, 2010 pursuant to an agreement entered into after January 27, 2009. 

Renovations (which can be on a condo, second home, cottage etc and applicable to most trades and products) done before Feb 1^st of next year is eligible for up to $1350 in tax credits.  Has to be done by Feb1st next year ,you have to show receipts for all the work, renovations have to be over $1000 and you earn the tax credits over this amount and up to $10000 (which amounts to a max of $1350 in total).  Refi’s for renovations and purchase plus improvements are positively impacted.

3. The withdrawal limit under the Home Buyers’ Plan increases to $25,000 from $20,000 in respect of withdrawals made after January 27, 2009.

Straight increase.  All other conditions remain the same.  This will help first time home buyers jump into the market a little sooner.  The trade off is that first time homebuyers can put more down to purchase a home against potentially withdrawing money from an RRSP and realizing any losses due to recent underperformance of most marketable investments.

4. A new First-Time Home Buyers’ Tax Credit is being introduced which is based on an amount of $5,000 for first time home buyers who acquire a qualifying home after January 27, 2009. The non-refundable tax credit is calculated by reference to the lowest personal income tax rate for the year. The credit will also be available for certain acquisitions of a home by or for the benefit of an individual who is eligible for the disability tax credit

This credit will amount to a maximum of $750 towards closing costs for a home purchase.  This comes off of any income taxes owing but cannot add to any refund (i.e. if you owe $500 in taxes after completing your return, this can reduce that amount owing to $0  and not result in a refund of $250)  Only applicable to first time home buyers.

5. Other initiatives to have positive local impacts:

a)      Government has established a Line of Credit to buy asset backed securities from federally and some provincially regulated lenders, secured by equipment and car loans/leases.  Great news for the auto industry.

b)     Government is buying another $50 billion in Insured Mortgages (adding to the $75 billion already bought).  This can be beneficial if it reduces funding costs for lenders.  The reverse auction process was very costly on the first $75 billion bought.

 

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

Feeling the Pinch? Some helpful hints......

There is economic uncertainty "out there" for sure; it's interesting to note how captivated we've all been on watching Obama impliment sweeping reforms. Today our world will be glued to the television set around 4 p.m. watching the Canadian budget unfold. 

There are some things we can do to cut corners; I've been addressing some of these things for a month now; already I'm ahead about $2,000 over the next year.

1.  Cut your insurance bill-many insurers offer multi-vehicle discounts which can add up to 10 per cent off both cars.  Switch your home policy to the same insurer and save another five percent.  Ask about age, low mileage, anti-theft, occupation and auto club discounts.  Raise your deductibles to $1,000.00 Potential overall savings? About 35% or about $1,260/year.  I just did this:  my savings? $1,100.00/year.

2.  Open up a high interest savings account:  I opened up the ING Tax-Free Savings Account (new this year; means you don't pay a cent in taxable income up to $5,000).  The interest is 3%; most of the banks are only paying 0.5%.  It can net you a couple of hundred a year, depending on how much you have saved.

3.  Pay your mortgage weekly or bi-weekly: On a $300,000 mortgage at 8% amortized over 25 years, your savings would be more than $90,000 over the life of the mortgage.  Do not pay monthly!

4.  Banish bank fees: shop around and save.  Go to a no-fee account and save more than $150/year.

5.  Lower your interest:  Use a line of credit to reduce your interest costs on high interest items like cars or credit cards.  Interest is calculated on a declining balance.

6.  Pay off your credit cards:  get rid of the high interest cards first or consolidate them with a low interest one.  If you can, pay them off monthly; if not, make sure you pay more than the minimum balance.  It will reduce your repayment time.

7.  Get a better cell phone plan:  I did this before Christmas: I was paying about $130 with tax for my blackberry, which has phone and data email capabilities.  Got the I-phone, was already on the City Fido Plan for phone $45.00 and got a data plan for $25.00.  Savings with tax?  About $40/month.

8.  Finally, if you use long distance (I don't), get a better plan.  Many people are using VOIP-Voice Over Internet Protocol-it can save a bundle and it's easy.  Find the right provider, and they do all the work for you.

Cheryl Bower

www.CherylBower.com

RE/MAX Hallmark Realty Ltd.

Does Customer Service Exist Anywhere?

I'm of the mind that what goes around, comes around.  I remember reading once that just because a waitress or grocery store clerk is rude, look at it as they are just having a bad day and be extra polite to them.  I've found that this strategy often works and the people turn around in an instance.  You never know what is going on in someone elses' life, do you? 

So why am I on a rant this morning?  Specifically I am perplexed with my bank.  Scotiabank to be exact.  If you go into all of their branches, it states "we were voted Number 1 in customer service".  Bull...

Here's what I have been addressing for a month now.  On May 9, I noticed a company called Priority Billing Solutions had withdrawn $45.20 from my bank account.  For a few days, I thought it was just a bill I hadn't entered into my mostly organized cheque book.  Around May 15, I called on-line banking and asked them to look into it.  They said I had to go to my branch.  I took time out of my daily routine and went to the branch.  A lady took a photocopy of my statement, assured me she would look into it and call me within a few days and I promptly forgot about it.  Of course, they did not call me either. 

So, June 2nd comes around and there is another withdrawal of $19.08 from this company.  Since I've never heard of them and again, it's not in my cheque book, I believe now my account has been compromised.  I call on-line banking again, again they suggest calling my branch.  I have now contacted my branch on 3 occasions and not once has anyone gotten back to me.

You know, it's not the amount.  Obviously 64 bucks or so is not going to break me, but it's unsettling that a company has been into my bank account.  Today I am going to the branch AGAIN, and am going to sit there until this is addressed.  Here's the solution:

1.  Reverse the amounts back into my account

2.  Do an investigation as to why this company is withdrawing from my account without authorization

3.  Put an alert on the account so this doesn't happen again

Writer's Note:  Problems solved; found some great service once I was in the branch (again. 

Retirement Information

Last December, I started to read about Money, retirement options and anything to do with my future as I enter my near retirement years. As a Real Estate professional, I am self-employed so as a result, there is no set retirement age BUT, I do want to slow down at some point.  The one area that I am disappointed in myself is that I didn't listen to my good pal Laura, a financial planner, years ago and save a little bit every month.  I would have been sitting on a tidy nest egg by now.  Oh, well.  With the help of books like Start Late, Finish Rich, I am on my way to a slow-down by my early 60's.  That's okay. 

This month's MoneySense Magazine tackles just that.  The heading is "Catch up at Any Age".  The average retirement age in Canada is 62 for men and 61 for women.  I hope, health-willing, that I will be like my mom and still vibrantly enjoying life well into my 70's.  My main goal is to be comfortable and travel. 

If you are a neophyte in financial planning like me, I would like to quote an article in MoneySense this month.  Duncan Hood started with MoneySense with no clear sense of personal finance four years ago.  Consequently, he chatted with people, took courses and immersed himself in reading about money.  He is off on a new adventure with another job, but he gave some lessons before his departure.

1. pick one goal at a time: this simplifies your financial life and gives you the satisfaction of making rapid progres towards a goal.  If the goal is reduce or eliminate credit card debt, do that...mortgage reduction, do that.....one at a time.

2.  Take small steps on your money journey.  Reduce spending, analyze your investments and consolidate...you got the picture.

3.  Make savings automatic: this was huge for me.  I opened 3 ING accounts; one for my beloved Skyler, one for household and travel and one for gifts and charity.  I put a bit away every month-kind of like paying myself first and then because it's ING, I get decent interest.  At this writing it's only 3%, but when I started it was 4.75%.  There are no fees, either, something I dislike about the big banks.

4.  Keep it simple, stupid...or KISS.  I have my friend Laura as a financial planner so I leave managing RRSP's and savings to her.  There are great options through the banks and Life Insurance Companies, key being find someone you trust.  Laura treats my money as hers, that's why she nags me about things!!

5.  Duncan Hood suggested your home is not an investment; I disagree on this front because as a realtor, I have seen good returns on real estate.  A word of caution though; markets can turn and if you are stretched to the eyeballs on a mortgage, perhaps a downsize would be better and pocket some of the money.  Just a thought.

6.  Not everyone is great at investing; some people watch the stockmarket like a hawk and could have done just as well if they KISS and did something like the Couch Potato Portfolio (www.moneysense.ca for details)

7.  MONEY is not happiness.  Material Possession don't deliver a happiness pill on their own-once you make more you spend more so it can become a treadmill.  Hood's advice? Spend time with family and friends, a partner you love, good meals, lots of sleep, exercise and healthy sex....you don't have to be a millionaire to afford these things.