If you owe money to CRA (Canada Revenue Agency), you’re not a happy camper but if you have a tax refund coming to you…you are likely smiling! 

Essentially it’s money you’ve paid to the government in one form or another but after reconciling your 2014 income and deductions with what you truly owe, you didn’t need to pay quite so much. It’s very similar to forced savings and can be a tidy sum that lands in your pocket. The trick is not to let it trickle away…..

What will you do with your tax refund? If you were expecting a refund, perhaps you have a plan (savings or repay debt) and if so, allocate the funds as you intended. If you didn’t, it only takes a moment to make the most of it. Depending on the amount you expect to receive, you could consider splitting it 3 ways between savings (retirement or other), debt repayment and something fun for yourself and/or family. Alternatively and if you’re committed to reaching your financial goals sooner rather than later, a 2 way split between debt and savings will see you to the finish line faster.

Either way, don’t delay – deploy the money as soon as it arrives in your account.

Quite a lot – I think. No one likes them and neither one is the ticket to success.

That’s the first question – How are you defining success? The key is to define your goal using SMART elements (specific, measurable, achievable, realistic and timely). You may begin by saying that you want to lose 10 pounds however if you are more thoughtful about this goal, you may be able to make it easier for yourself and ensure that the results are sustainable J Taking a closer look at this goal in the context of SMART goal setting will allow you to consider supporting plans and specific actions you can take to achieve it.

The goal is a new (10 pounds lighter!) stable weight:

Is this realistic? Have you done the math in terms of increased calorie burn by exercise and reduced calorie intake? How many calories do you take in now (assuming your weight is stable)? If 1 pound = 3,000 calories, what changes will you make to remove or burn below your ‘stable’ calorie level over the period of 1 week? What milestones will you set? 1 pound per week or ? Can you do it? How will you do it (specifically)? Will you reduce what you eat? Eat differently? Or a combination of both? Will you increase exercise and if so, what type and how often? A diet without a supporting plan has a low probability of success but a diet with a well thought plan of action will see you achieving your goal.

How is a diet similar to a budget? A budget is a tool that can be used to help you achieve your financial goals but other important components must be incorporated in order to ensure success. What do you want? Do these objectives align with your values and lifestyle? Have you done the math to understand whether you have the income to meet your expenses and have enough left over to put towards your plan? Have you translated this knowledge into action such as developing a budget that supports your plan? Have you set up systems to help such as monthly automatic savings or increased monthly debt repayments?

A budget alone will not ensure that you realize your dreams but if used properly, it can be a useful tool that increases the likelihood of achieving your objectives.

It’s like taking your car in for a scheduled service in that you dread the phone call if they find anything to fix. But isn’t that better than being stuck on the side of the road in the pouring rain with a broken car? Or worse, in an accident caused by a mechanical failure? The cost of a service is often $150 to $200 including an oil change which you would typically do a couple times a year anyway compared with an unplanned break down and repair. The only thing that dulls the edge of that kind of inconvenience is Automobile Association coverage that ensures a safe, friendly and knowledgeable mechanic will come to help you…you may wait awhile though depending on the time of day, weather and location.

The reason I bring this up is because some dental surgery I’ve had was no fun and not covered by insurance. The initial consult was but not the subsequent surgery. Go figure…the theory was that one particular area needed some attention now in order to avoid exposing bone to potential erosion and a much more costly repair in the future. Having the work done now versus more expensive and invasive work later seems like a wise decision to me which is why we ‘invested’ in my teeth. 

How do you and your family make these decisions? Insurance companies base their decisions and premiums on risk factors and the likelihood of occurrence.

I suppose it’s a bit like the value of planning. I don’t believe that planning for something that could be perceived as negative (i.e. contingency or emergency planning) will make it come true but I do believe that planning for something positive leads to a greater likelihood of it coming true. Practically, if you have a plan and take action, you will achieve part, most or all of your goal.

If a client asked me that question, how would I respond? That’s easy – I’d suggest they check their plan!

Our plan has 4 key objectives:

• RSP and RESP Savings
• Extra Mortgage Payments
• Big Trip Savings
• Other Big Item Savings

The majority of RSP and RESP savings is achieved through regular monthly savings incorporated into our budget. Funds towards the other items come from tax refunds, employment bonus, ‘extra’ pay cheques (I am paid 26 times per year but we align our budget to 24 pays per year) and the difference in pay cheques once CPP and EI premiums are maxed. I estimate how much we might receive from these sources and invariably they won’t be enough to meet our targets but depending on the year, they may be close. By having a plan, we don’t have to think very long how to best deploy the money and the less chance there is of it trickling out of our account!

What is the highest priority? I can be a challenge to prioritize your financial plan objectives and the trick is that they’re not necessarily time sensitive or mutually exclusive. For example, we can split our tax refund between 2 or 3 of the goals above and add to them as we go through the year and have a better idea of what other funds may be forthcoming. The other point to consider is that if we invest in RSP’s, we will likely receive a greater tax refund next year and it can be used towards any of the goals above as they are all medium to long term objectives.

We’ve decided to split the refund between RSP’s, RESP’s and our summer trip savings. We made the ‘sensible’ decision with respect to RSP and RESP savings but balanced it with our planned trip (we must pay for the plane tickets this month!).

We went grocery shopping a couple weeks ago and came away with what looked like a medium sized turkey. It was ‘free’ because we spent more than $250 at the store – not hard to do when it’s a big shop day. I’ve made only 1 roast turkey before so I pulled out my battered copy of the ‘Joy of Cooking’ and called the family Turkey Expert.

We invited friends for Sunday dinner and 6 of us ate Meal #1 which included potatoes, gravy and roast vegetables. We carved off the majority of the meat and put it in the freezer and our friends took the rest of the turkey home planning to make turkey soup. They had enough to make turkey pot pie, turkey soup and turkey stock. They gave us some soup and stock. I’m not sure how you count that but I think that’s another 3 meals.

I used the frozen turkey meat to make a huge turkey pot pie – my first ever. I put in vegetables, potatoes, turkey stock and the left over gravy and baked it all in homemade pastry and that was Sunday dinner. It was also lunch today and there’s enough to go in the freezer for another meal for 4. I think that takes us up to about Meal #7.

This turkey was tagged at a $30 value and with some vegetables and effort thrown in 1 turkey has produced 7 meals for between 2 and 6 people at each meal. Not bad!

It’s not even the end of March and already I find myself making summer camp plans for the kids! It seems early to me but the upside is that I’ll have it organized sooner. It also leads me to take a look at our summer budget and since child care is such a large component of that, now is a great time to review it.

Oddly enough, I find that coordinating schedules is the trickiest part. Weeks spent with grandparents, holiday time, various camps and supplemental child minders for camps that are not full day make for a complex process to align a myriad of schedules.

Our typical budget includes $800 per month for child care however this summer is 10 weeks long! At approximately $200 per child per week we would quickly blow through the budgeted $1,600 and edge towards $4,000. Along with summer child care, our holiday budget takes a beating and our home and vehicle insurances are due.

The good news is that we save for our big holiday, summer extra travel and insurances through monthly budget allocations and by planning our big holiday over the summer weeks we won’t need child care for those weeks. All in all I think we can come in slightly under budget for summer child care which is a good thing because I think our summer travel and holiday will be a little over budget! Fingers crossed for kind exchange rates.

Spring Break is 2 whole weeks!! We have 2 children and so we have a few options (the estimated cost is beside each option):

• Take vacation time and take a vacation ($5,000)
• Take vacation and plan a ‘staycation’ ($300)
• Find Spring Break camps ($1,000)
• A combination of the above (??)

We opted for the combination option and our combination plan looks something like this:

• We’ve teamed up with another family and each family is taking 2 days per week (I work .8 so switched my days and we each took a vacation day).
• 1 day per week the kids are going to camp.
• They participated in a soccer camp for a couple mornings (drop in).

On my days with the 4 kids we’ve gone to the aquarium (thank you grandparents for the pass!), park tour on scooters, Granville Island tour on scooters and UBC Endowment Lands via transit. With a few treats thrown in at about $10 per day we’re all having fun and not breaking our budget – plus we’re still working most of our regular hours! 

This worked out to be the best option for us because we’re planning a big trip later in the year and need to save our vacation time. With childcare over school holidays being an ‘extra’ to their regular before and after school care, it can really throw the budget not to mention that it can be a little routine if it’s the same childcare and friends as the rest of the school year. 

How do you do it?

The March 2^nd deadline is fast approaching – have you saved for your retirement? The March 2^nd deadline only applies to those wanting to use their RSP contribution towards their 2014 tax year however it does serve to light a fire under those who procrastinate year round! If you plan to complete a 2014 RSP contribution, sooner rather than the last minute will save you time.

As for retirement savings year round, here are some tips to make it easy on yourself:

• Know your contribution limit (look on your most recent tax assessment)
• Set up monthly automatic savings contributions
• Top up your RSP with any extra savings when you can (work bonus, tax refund)
• If you’ve withdrawn from your RSP’s under the Homebuyer’s or Lifelong Learning Plans, know what you must re-contribute to comply with the program and to avoid tax consequences

Happy saving!

The weather in Vancouver was gorgeous today and spring flowers have been popping up everywhere. You may wonder what on earth that has to do with money – in fact working on your finances might be the last thing you thought of dealing with today!

The parallel is this – planting seeds today means beautiful flowers or yummy food in a few months and planting bulbs can mean beautiful plants each year. They may require a little tending but in the grand scheme of things, not much of your time and the benefit out-weighs the effort.   Saving your money to reach a goal can work the same way.

Financial goals can seem large and virtually impossible to attain when day to day life demands our attention but whether it’s retirement, your children’s education or a first home you want to save for there are one thing to do – start now! It doesn’t have to be a lot but start with what you can afford each month and increase it when you get a raise or fewer expenses.

TIPS:

• Make your monthly savings via an automatic contribution
• Add to your savings with ‘found money’ such as tax refunds, gifts or overtime

Your savings will grow each month and you won’t have to do a thing!

A Registered Education Savings Plan (RESP) is a program under which you can save for your child’s education. As parents we try very hard to give our children every opportunity and one of the foundational bricks of many paths in life is education. The cost of post-secondary education increases each year and who knows what our little ones will decide upon for their future but at least there can be something saved to give them a good start.

Why a RESP? A RESP has benefits such as tax sheltered earnings and the Canadian Education Savings Grant (CESG). Although there are rules and criteria, the general concept is that CESG grant will be deposited into the RESP each year amounting to 20% of your annual contributions to a maximum grant of $500 per year. This is a really good thing! While the funds are in the plan, earnings and grant received are not taxed until they are withdrawn from the RESP and at that time they are taxed by the beneficiary – hopefully your child as a student!

Rather than focussing on how much education will cost and how to afford it, I find it easier to concentrate on what we can do and how to do it. In order to obtain the maximum grant, you must contribute $2,500 per year to a RESP. You may wonder how you’ll carve $200+ each month from your budget. I decided to use the $100 per month Universal Child Care Benefit (UCCB), any money I received from relatives and the rest came from our budget. I set aside the money every month via a monthly savings plan. Here are the steps:

• Open a RESP (you’ll need a Social Insurance Number, SIN and Birth Certificate for your child)
• Set up automatic monthly savings contributions

It’s amazing how quickly the savings grow and although I don’t know what they’ll choose to study or if the RESP will cover the total cost of their education, it will be a really good start and a summer or part-time job never hurt anyone! In fact, it’s just the thing to get some life experience and start off their resume.

TIPS:

• Check out the government site for information: Canadian Government RESP Information
• Consider carefully where you set up your RESP – it’s best if it’s with a bank or credit union you already work with.
• Check if there are any restrictions with respect to making changes, transferring the RESP to another institution etc. If there are penalties or fees, go elsewhere.