Holiday Budgeting Tips

Holiday Budgeting Tips  

With the holiday season fast approaching we are bound to hear much about holiday spending. Holiday spending can put a dint into the most prudent of consumers. From gifts, food, drinks, decorations, wrapping, new holiday wear and road trips to see family the list of expenses can seem endless. Spend too much and you could suffer from a spending hangover, in the form of debt, that will last months or maybe even years.

On average we spend about $1,800 each during the holidays and 78 per cent of Canadians plan to cover that cost using credit cards. On average it takes a family six months to clear credit card debt accrued during Christmas. So how best to plan for the upcoming holiday season? Budget. And not just any budget, a budget based on your OWN unique needs, fixed expenses, debt repayment, child care expenses and variable expenses. 

Here to help you with your holiday budget, we at Continuum II have put together a list of tips to help you prepare for seasonal spending. In applying these tips to your financial plan this holiday season you could increase savings, repay and reduce debt, prevent impulse spending, distinguish between a need and a want, and identify expenses that can be reduced.

Note: What everyone can spend on gifts during the holidays is different, so building a unique budget to your own lifestyle is key. 

Tip 1. Make a list of all the people you wish to give a gift to. Divide that list into 3, your primary relationships, secondary and service providers. Then allocate a dollar amount, base on your budget, to each person.

Tip 2. Now that you know how much you can afford to spend on gifts, why not pre-fund your gift budget? The best way to plan for gifts is to set up a sinking fund-that is a special bank account to which you contribute monthly the preset % of your income you can afford and wish to devote to gifts.

Tip 3. Remember, gift giving is not a competitive sport. If your budget is tight, you may wish to provide some on your list with a hand written card, or a unique tree ornament. 

Tip 4. Setting and discussing spending limits with family members, beforehand, provides everyone with the opportunity to weigh in and be clear about their own budgets

Fun tip: Try something different. Many families “draw” names and only buy for the person who’s name is drawn.  This way, each family member receives one nice gift.

Needless to say, going into debt to celebrate the holidays is a poor financial decision.  Best to put the charge cards away unless you are confident you can pay off the balance in full come January.

If you need more help building your holiday budget, call your Continuum II advisor today.

ORPP vs. DC RPP

The Ontario Retirement Pension Plan (ORPP) is a new government plan that is set to begin implementation January, 2017.   Designed to address the gaps in workplace pension coverage while providing a predictable source of retirement income for life, the ORPP aims to provide greater financial security for Ontario workers. More specifically, the ORPP will work towards supplementing those not covered by a Defined Contribution Registered Pension Plan (DC RPP) or a Defined Benefit Registered Pension Plan (DB RPP).  Participation in the ORPP will be mandatory for all employers and employees in Ontario, unless there is a "comparable" workplace plan already in place.

The following chart outlines the differences between the two types of pension plans. IF you don't already have an RPP we encourage you to take note of the benefits outlined below.

Definition of a comparable plan:

• Provides people with a predictable stream of income for life
• Provides people with security (they won't outlive their savings)
• Requires contributions form employers to ensure fairness
• Aims to replace up to 15% of a person's pre-retirement income

Comparable plans

• DB - must match or exceed the benefit being offered through the ORPP
• DB earning-based - must be at least 0.5% to be considered comparable
• DC - most have a minimum total contribution of 8% of base salary earnings, employers required to contribute at least 50% of the total minimum
• Hybrid plans - annual DB accrual rate of 0.5% plus annual DC contribution rate of 8% ≥ 1
• Flat-Dollar/Flat-Benefit plans - will be assessed for comparability by expressing the benefit rate as a percentage of earnings.

Group RRSPs and DPSPs are not comparable plans

Have questions?  Need more clarification just reach out to your Continuum II advisor today and let us help you find the optimal solution for your business. 

For more information you can also visit the Ontario.ca website

What's new at Pallett Valo LLP

A huge congratulations is in order to our friends at Pallett Valo LLP for all of the amazing things happening at their offices-including some very exciting awards! Check it out!

Awards and Accomplishments

Our firm and our lawyers have won some exciting awards over the past year. Thank you to our colleagues and our clients for voting for us.

Canadian Lawyer Top 10 Ontario Regional Law Firm

Pallett Valo LLP was selected as one of Ontario’s top 10 regional law firms by the readers of Canadian Lawyer Magazine for the 3rd consecutive time: 2011, 2013 & 2015. Canadian Lawyer asked its readers, mostly lawyers and in-house counsel from across Canada, to vote on Ontario’s top full-service regional firms. Rankings were based on firms’ regional service coverage, client base, notable mandates, service excellence, and legal expertise. Pallett Valo LLP is honoured to have obtained a 4th place ranking in the magazine’s September 2015 issue.

Mississauga Business Times Readers’ Choice Top Performers 2015

Pallett Valo LLP was voted the Platinum Award Winner for the Lawyers category in the Mississauga Business Times Readers’ Choice Top Performers 2015 awards. Since 2007, Pallett Valo LLP has been voted the Platinum Award Winner seven times and the Gold Award Winner twice.

Best Lawyers in Canada®

For the 10th consecutive year, Anna Esposito, certified by the Law Society of Upper Canada as a Specialist in Construction Law, has been selected by her peers for inclusion in The Best Lawyers in Canada in the field of Construction Litigation.

Craig Ross has been selected by his peers for inclusion in The Best Lawyers in Canada® in the field of Trusts and Estates. Craig heads up Pallett Valo’s Wills, Estates & Trusts Group and has established himself as one of the leading lawyers in his field of expertise.

Introducing the Newest Members of Our Team

As the largest law firm in Peel Region, Pallett Valo LLP continues to focus on our growth in order to serve our clients. We are pleased to announce the addition of our newest colleagues:

New Construction Lawyer

Vivian Awad has become a member of our Construction Practice. Vivian provides advice and representation with respect to collections, construction liens, breach of trust, contract disputes and other matters typically encountered by those in the construction industry.

New Commercial Litigation Lawyer

Manpreet Brar summered and articled with us, and now returns as a member of the Commercial Litigation Practice and the Employment & Labour Practice.

For more on Pallett Valo LLP or to view the PDF of their recent accomplishments click here.

Estate Administration Tax (E.A.T)

Did you know that as of January 1^st 2015 the Ontario Liberals put into effect a new tax called the Estate Administration Tax (E.A.T). The following outlines points on an article written by GuelphSpeaks on E.A.T. (For the full article, click the link at the bottom of this blog).

E.A.T is essentially a tax that is imposed on the estate of a deceased person. After death, your survivors and executors have exactly 90 days to report the value of all your belongings. Everything from valuables, cars and trucks, second homes, boats, RV’s, right down to the exercise bicycle in the basement. And depending on the size of the given estate, your fees owing could run into the thousands.

To give you a better idea, here are the current E.A.T tax rates.

•    $5 for each $1,000, or part thereof, of the first $50,000 of the value of the estate, 

           and

•    $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000.

Note: There is no estate administration tax payable if the value of the estate is $1,000 or less.

The estate administration tax is calculated on the total value of the estate. For example, for an estate valued at $240,000 the tax would be calculated as follows:

•    $5 per thousand for the first $50,000 of the estate
•    $50,000 ÷ $1,000 = $50
•    $50 X $5 = $250

Plus

•    $15 per thousand for the remaining $190,000 of the estate
•    $240,000 – $50,000 = $190,000
•    $190,000 ÷ $1,000 = $190 
•    $190 X $15 = $2,850

This means you would owe a total of $3,100 ($250 + $2,850) payable to the Minister of Finance. The E.A.T act states that the executors or appointed representatives must complete the E.A.T return within 90 days.

Want to know more? To read the full article, click the link below.

https://guelphspeaks.wordpress.com/2015/09/03/ontario-liberals-now-tax-your-stuff-after-you-die/

The Scoop On Investment Fees

 Investment Fees FAQ's

What are the different kinds of fees involved? 
There are two main categories of fees, investment management fees and sales charges.

For investment management, also known as a Management Expense Ratio (MER), fees vary depending on the size of your portfolio, the investment company and the product selection. As independent Investment Advisors we are able to find the right investment at the right fee level to fit your needs. A typical MER for an investment we would recommend ranges from 1.2% to 2.5%. There are four main types of sales charge loads

Deferred Sales Charge (DSC): When depositing your money into a DSC investment there is no upfront charge to you, the client, but on withdrawal or transfer out there is a declining scale based on the amount of time the money has been invested. For example: 5-6% in year 1, declining to 0% in years 6-7.

Note: Within the DSC environment, we are often able to switch between investments within the same investment company without incurring a DSC charge. Only for accounts help at Continuum II with less than $100,000 in investments, your funds will likely be purchased on a DSC basis, but with your consent in advance.

Low Load (LL): Low load fund charges operate similar to a DSC but offer a lower sales charge (For example: 2.5% to 3%) and have a much shorter schedule, often 3 years, rather than the DSC schedule of 6 to 7 years. The Low Load schedule is used for accounts held at Continuum II between $100,000 and $250,000 in investments.

No Load (NL): A No Load fund doesn't charge a fee when units or shares are bought and sold.  For accounts between $250,000 and $500,000 in investments, Continuum II is able to offer a no load schedule.

Reduced Fee (F Class): F Class differs from the above examples as it unbundles the advisor commission from the MER and there is no LL or DSC sales charges. For $1 Million + in investments, an example of F Class would work like this: The Advisor compensation of 0.75%, plus the management fee of 0.80%, for a totally cost before tax of 1.55%.

Are F class fees tax deductible? Typically, yes, with certain limitations. Registered accounts (RRSPs/RESPs/TFSAs) F class fees are not tax deductible. For non-registered accounts, investment advice fees may be tax deductible. The fee needs to be in relation to investment advice, and should always be confirmed by your accountant.

Lessons in Frugality

As we welcome a new school year and prepare for the upcoming holidays, now is a good time to take a look around and see if you can find a few ways your family can save money. Helping you to kickstart your savings, the following outlines 5 frugal tips that can help you start saving money today!

1. Credit Cards. Use credit cards wisely. Pay off the balance each and every month. Before the due date. Paying late or leaving even a few dollars of unpaid balance could mean interest charges on the entire unpaid balance. On the other hand, credit cards used wisely can pay big dividends. If you are the type of person who pays off their credit cards in full each month then you are in luck. Anytime you plan to make a large purchase, it may make sense to use a credit card offering the highest points. Consumer protection is another advantage of paying by credit card, as some offer built in travel or car rental insurance. 

2. Season of the Sale. Plan your purchases in advance to take advantage of seasonal sales. Need bedding or towels? Traditionally these items are on sale in January. February is the best time to shop for big screen TV’s . February is also the best time to shop for next Christmas, as last year’s winter items hit the clearance racks. Further, try buying a new car on the last few days of the month or year, when your dealer hopes to maximize his monthly or annual bonus; he just might be in a good enough mood to negotiate a great deal with you.

3. Never Pay Full Price. Instead of waiting for household basics to run out, buy them in bulk when on sale. That way you are ready when the Kleenex box is empty or you need shampoo.  Everything goes on sale eventually; a little patience can go a long way to saving dollars. Also do not be afraid to negotiate a better price. It never hurts to ask  “ Is this your best price?”

4. Retailer’s Store Policy. It pays to know your retailers store policies. What are their return policies if you are not satisfied?  How long do you have to return an item? Will they provide you with a cash refund (best) or a store credit?  Will they price match and what proof do they require to do so? Will they price adjust if an item that goes on sale shortly after you purchased it? Savvy retailers want your repeat business and to earn that, they need to keep you happy. Shop where you receive the most respect for your hard earned dollars.

5. Coupons. Love them or hate them, they are here to stay, and many a diligent shopper has learned how to save hundreds of dollars a year by clipping and using coupons. Thankfully using coupons is a lot simpler in the age of the smart phone.  See an item you need?  Search the web for a coupon or a better price offered by a competitor. A few minutes of research can uncover some great savings, worth the time surfing the net.

By creating and following a few saving habits you too can be a smart shopper. The dollars you save can be used to help you achieve important savings goals. You may even be able to convince your children how the little savings they make each week can be allocated to an important family goal, like that family holiday.  For the adults in your family, saving dollars on charge cards and at the stores can be put towards your long term goals of paying down the mortgage on your home, RRSP, TFSA or RESP’s bringing you one step closer to financial independence.

Feel free to share your favourite saving tips with us, we will collect the best of them and share them with our readers in a future edition of the Continuum II blog.