Tag Archives: RUBINA AHMED-HAQ

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Tax season – the most dreaded time of the year

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Tax season – the most dreaded time of the year

Now that the holiday season is over, Canadians can now look forward to tax season. For many, it’s often a scramble to get their return completed before the deadline, so that they avoid paying any penalties. This year, that date is April 30, 2019. Take a deep breath and get all your ducks in a row, you still have a few months to file with the Canada Revenue Agency (CRA).

Penalties and fees

If you owe money, the CRA starts charging interest on your balance one day after the deadline passes. Many Canadians now file their return online, a method that the CRA supports, and recommends. To file it online means that it is immediately received and there’s a digital record. The CRA has a list of certified software packages and web applications. If you file by mail, you can have a paper tax return mailed to your home. For Canadians with simple tax situations, you can also file by phone.

Get registered

If you haven’t done so already, open a My Account on the CRA website. It’s a secure service for those who file their taxes. You can also use the autofill function in the CRA certified tax preparation software NETFILE, which automatically fills in part of your return, including your information from your T3, T4, and T5 slips.

File no matter what

Even if you’re not expecting a refund, it’s still a good idea to keep the CRA up to date on your income situation. Otherwise payments, such as the Canada child benefit, may be delayed. This also applies for anyone who has zero income. File a return in order to take advantage of all the government tax credits that you are eligible for.

Important tax credits

The Canada caregiver credit provides tax relief to individuals who are caring for a dependant with a mental or physical impairment. In addition, Canadians can now have their disability tax credit application certified by a nurse practitioner. If you need intervention to help conceive a child, there is also a medical expense tax credit for that.

Self-employed tips

If you are self-employed you have until June 17th to file your return this year. However if you have a balance owing to the CRA, it is due by the April 30th deadline. If your income situation changed dramatically this year, and you have been making income tax instalment payments, figure out the balance that you owe by the deadline. With the new CRA Biz App, you can view transactions and pay balances.

Professional advice

Accountants and tax preparation professionals are all working overtime during tax season. If you have questions, the CRA is also a great resource. For Canadians who need help with their tax return, and can’t afford a professional, they may apply to the Community Volunteer Income Tax Program clinic. To see if you’re eligible and to find a clinic near you, visit cra.gc.ca/volunteer.

Reinvest your return

If you’re expecting a refund this year, you may be dreaming about how to spend it. The best thing that you can do with your tax return, is to reinvest it into your RRSP. By doing so, you’re kick starting your retirement savings for 2019, which helps to reduce your overall income for next year. Another option is to use that money to pay down high interest debt. If you are carrying a balance on your credit card, or a line of credit, this money could help you on your way to becoming debt free. Most importantly, get it in on time.

Rubina Ahmed-Haq

Rubina Ahmed-Haq is a journalist, personal finance expert and HPG’s finance editor. She appears on CBC TV and radio, CTV Your Morning, Global Toronto, and writes for ratesupermarket.ca. Follow her @alwayssavemoney. alwayssavemoney.ca

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Bank of Canada holds interest rate for now, but hikes still to come

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Bank of Canada holds interest rate for now, but hikes still to come

 

Bank of Canada

The Bank of Canada held its target for the overnight rate at 1.75 per cent on Jan. 9, where it has been since October 2018, and is lowering its growth forecast this year for Canada and around the world.

After raising the rate three times last year, some experts expected the Bank would do so again, either in late 2018 or early this year.

So, what does this latest non-action mean, and what can Canadian consumers expect in the coming months?

“The Bank gave several reasons for its decision to keep rates steady,” says Rubina Ahmed-Haq, personal finance guru and Homes Publishing columnist. “This includes lower oil prices, a weaker outlook for the global economy and Canada’s economy slowing more than expected.

Weaker investment

“It was a surprise that market pessimism did not come up,” she adds. “Despite stock market volatility making headlines for the last two months, there was no mention of the wild swings investors have been experiencing. The Bank did talk about weaker consumer spending and housing investment. This could be because of Canadian investors watching their portfolios and not feeling as confident in their spending.”

Sill, Ahmed-Haq says, the Bank remains very rosy on Canada’s economy, noting it has performing well overall. In its statement, the Bank says, “Growth has been running close to potential, employment growth has been strong and unemployment is at a 40-year low.” But still not enough to raise rates at this time.

Energy sector a concern

“The energy sector has been a concern for the Bank for some time now, but there seems to be a new focus on the housing sector, especially on the impact of mortgage guidelines changes and the five rate increases that have happened in the past 18 months,” James Laird, co-founder of Ratehub Inc. and President of CanWise Financial mortgage brokerage, told Homes Publishing.

Ahmed-Haq and Laird agree we should still expect higher rates in the coming months.

“The policy interest rate will need to rise over time into a neutral range to achieve the inflation target,” says Ahmed-Haq.

Rate hikes to come

Forecasters are now predicting two rate hikes this year, is down from earlier predictions of as many as three rates hikes in 2019.

“The Bank’s moderated outlook in the last two announcements has caused bond yields in Canada to drop lower than any point in 2018,” says Laird. “However, we are yet to see a corresponding decrease in mortgage rates. We would advise consumers to keep a close eye on mortgage rates in coming weeks.”

 

Highlights from the Bank’s announcement

  • Bank of Canada maintains target for overnight rate at 1.75 per cent
  • Canadian economy performing well overall
  • Employment growth strong
  • Unemployment rate at 40-year low
  • Canadian consumption spending and housing investment weaker than expected
  • Housing markets adjusting to municipal and provincial measures, new mortgage guidelines and higher interest rates
  • Household spending to be dampened by slow growth in oil-producing provinces
  • Real GDP growth forecast at 1.7 per cent for 2019
  • Growth of 2.1 per cent forecast for 2020

 

RELATED READING

Where are interest rates headed in 2019?

Homebuyers undeterred by changes in mortgage landscape

Interest rate hikes may not cost you as much as you think

 

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Where are interest rates headed in 2019?

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Where are interest rates headed in 2019?

The Bank of Canada has raised interest rates five times since July 2017. As of the Oct. 24 announcement, the overnight lending rate is 1.75 per cent and prime at commercial banks is 3.95 per cent.

Higher rates means money is getting more expensive to borrow and if you have a variable mortgage rate your monthly payments have gone up.

In its latest announcement the Bank of Canada indicated the various reasons they raised rates. This included the finalized trade agreement that replaces NAFTA called the United States Mexico Canada Agreement or USMCA.

In its press release after the announcement the Bank states that the USMCA agreement will help “reduce trade policy uncertainty in North America, which has been an important curb on business confidence and investment.” The trade agreement was the biggest roadblock for the Bank to raise rates. This was evident when they held rates steady for the several past announcements while the U.S. Federal Reserve continued to hike its benchmark rate. Although not always the case, in most instances, if the Fed raises rates, Canada does as well.

The Bank also points to a solid global economic outlook as a reason to hike rates. Here at home it says “The Canadian economy continues to operate close to its potential and the composition of growth is more balanced… Real GDP is projected to grow by 2.1 per cent this year and next before slowing to 1.9 per cent in 2020.”

After the announcement, Bank of Montreal economist Benjamin Reitzes noted that the BoC statement shows, “Policymakers are clearly upbeat on the outlook, and assuming the economy doesn’t face any big speed bumps, expect rates to continue to push higher at least through early 2019.”

BMO economics predicts three rates hikes in 2019. In January, April and July.

So as rates are expected to rise, what costs can Canadians expect to go up?

Mortgages

Anyone with a variable mortgage rate or any loan with a floating rate, like a line of credit, is already seeing their costs rise. Commercial banks usually hike rates as soon as the Central Bank does. If you have a variable rate mortgage on your condominium, you may want to inquire about fixing your rate today. If you’re worried about your affordability, by fixing your rate you will know how much your payments will be for the remainder of the term.

Savings rates

One of the positives of a higher rates is we get better return on the money we’re putting away. This includes money we have in our savings account. Fixed income rates will rise as well and banks are able to offer a higher rate of return on any money you invest with them.

Stronger dollar

A rate hike almost always means our currency gets stronger. This can be great for Canadians travelling abroad as you get more money during currency exchange. But a stronger dollar can spell trouble for companies trying to export their goods and services. The stronger dollar makes it more expensive for any foreign buyer.

Life could cost thousands more

A report by Environics Analytics released after the October rate hike reveals in the long run the interest rate hike could cost Canadians thousands. They say, so far, the effects of higher rates has been limited to short-term debt and variable rate debt. But when fixed rate debt starts to catch up life will get more expensive. They say “the true long-term effect of these interest rate hikes will be approximately $2,516 a year per household or 5.0 per cent of discretionary income.”

The sense from economists is interest rates are expected to rise going into 2019. If you’re concerned you need to stress test your finances, calculate how much your debt would cost if rates were 2 or 3 percentage points higher. If you find that might be unaffordable make the changes now to prepare for what seems to be inevitable.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney

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The financial pitfalls of downsizing

Higher rates and new rules cooling the condo market

 

 

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How to host Christmas dinner in your condo – for cheap!

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How to host Christmas dinner in your condo – for cheap!

One of the biggest challenges condo owners face is lack of space. Many who choose condo living do so to minimize maintenance costs and live close to where they work and play. That often means a smaller unit where every single square inch has a purpose. For day-to-day living this is an excellent solution, but for hosting a large gathering it can be challenging. With Christmas coming up condo owners might feel like their only choice is to attend a party at a larger home, but with some careful planning, you too you can host a great party in your home and not break the bank.

Book the party room

The easiest and most obvious choice is to book your condominium party room. Most of these spaces come with food prep rooms, a lounge area and of course a spacious place to seat all your guests. With only a few weeks before the holidays the best dates may be gone already, but inquire about Christmas 2019. Maybe you can book now for the year ahead and let guests know that next year the holiday meal will be hosted by you. As a courtesy let your doorman know your plans to minimize delays of your dinner guests getting in. Go a step further and make signs that lead to the room, as some condo buildings are difficult to navigate.

Rent it

Most condo owners don’t have a table that will seat eight to ten guests. If you’re hosting in your unit look into renting a dining table with chairs. Turn your condo into a restaurant like feel. Move all the unnecessary furniture out of your main space into your bedroom. Leave only the long table and chairs and a few seats for guests to lounge. Keep the focus on the table and encourage guests to claim their seats as they arrive. This way, like a restaurant, they can stand during cocktail time and know there is a seat available right way if they need it. In some cases you can rent a dining set for as low as $200 and this includes set up. Some companies will provide the china and flatware, too.

Pot luck

The easiest way to keep costs (and efforts low) is to make your holiday dinner a potluck. After all if you’re spending money on renting furniture or a party room to accommodate your guests you may already be looking at a few hundred dollars to put on your party. As host commit to making the main dish. Ask your guests to bring dessert and the fixings. Also, for a big Turkey dinner skip the appetizers. When guests arrive already having your first course on the go, like a soup or salad. This will keep guests occupied and save you the hassle and money of making extra appetizers.

Prep

Having a small space means there is little room to do any work once guests arrive. After all you should be talking to them and not stuck in the kitchen. Make all you dishes ahead. In fact, except for dressing the salad, don’t leave anything to the last minute. The joy of holiday cooking is that casseroles and can be cooked ahead and kept warming in the oven.

Saving money

Planning ahead will make sure you don’t blow your budget. Make a list early of what you want to buy, search the flyers to get food ahead of time on sale. Make conscious choices to not cook meals that have complicated ingredients that you’ll have to go out and buy; use what you have at home first. Christmas is about getting together and enjoying a great meal with family and friends. A small space and small budget should not sway you from hosting.

Rubina ahmed-haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Finance: More Transparency Coming To Toronto Real Estate Market

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Finance: More Transparency Coming To Toronto Real Estate Market

Canadians will now have greater access to real estate sold prices in Toronto. In August the Supreme Court of Canada refused to hear the Toronto Real Estate Board’s (TREB’s) appeal to an earlier federal court decision that accused them of anti-competitive practices by the Competition Bureau.

This means all homes and condos listed on the MLS and sold in Toronto will be readily available without the need of a password or engaging an agent.

TREB’s major argument was concern around copyright and privacy. They said putting all this data online publicly would be problematic.

In a statement released after the Supreme Court refusal, TREB CEO John DiMichele said “TREB believes personal financial information of homebuyers and sellers must continue to be safely used and disclosed in a manner that respects privacy interests and will be studying the required next steps to ensure such information will be protected in compliance with the Tribunal Order once that comes into effect.”

This is a first for a major real estate board in Canada, but has been going on in the U.S. for more than 10 years. Here’s what to expect.

Better Informed Client

When working with a real estate agent, sellers and buyers will no longer have to ask them for comparative sales in the area. This is the best way to understand what a home’s market value is. When putting their house on the market, sellers can arm themselves with the latest data. Buyers as well can make offers with confidence as they will have been able to research the area they are looking to buy in on their own.

Agents Can Provide Better Service

Realtors serve a key role in the real estate transaction. They serve their client and make sure they get the best deal and guide clients through the process. For sellers they can help determine fair market value for your home, they arrange open houses and find potential buyers. Often, they have a roster of potential buyers they can show the house too as well.

For buyers, agents are often subject matter experts in the areas they service — knowing the history of the area and what streets are most sought after. When negotiating they ensure all the checks are done to make sure the home you are buying is being fairly represented.

What Changes Can We Expect?

With data now readily available, consumers can expect to see an increase in websites focused on this information. It’s not just active sellers and buyers interested, but any homeowner wants to know what their biggest investment (their home) is worth. Making data available in a user friendly way could be challenging, especially if a home has seen a number of transactions in a few years. Also making sure data is accurate and up to date is important. Expect to see a number of sites pop up dedicated to providing this information.

No Concern for Realtor’s Role

Those agents with a large client base and established reputation should not worry about their business being affected. The need for a knowledgeable agent, willing to work hard for their clients, will still exist. For those agents who may not have the same level of expertise, they may have to work harder to get up to speed on how they can provide a service to their client, other than regurgitated sold numbers. For those agents there may be a steep learning curve as the market in Toronto becomes more transparent. Looking further this could have an effect on other markets in Canada, especially those next door to Toronto, whose clients will demand the same level of access to sold prices.

Rubina Ahmed-haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Finance: To Move or Not To Move?

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Finance: To Move or Not To Move?

To Move or Not To Move? That is the question

An overwhelming number of Canadians over the age of 65 want to stay in their family home. A survey, commissioned by Home Equity Bank and conducted by Iposos, revealed that 93 per cent wanted to stay in their current home throughout their retirement.

While this may be the preferred choice for many, smaller retirement nest eggs, as well as rising health care costs and maintenance on a larger property, often make it impossible to do so.

Take the time to figure out what it actually costs you to carry your home.

Do the math

When you have several people living in a house during the child rearing years, you expect expenses to be higher. As the children move out, those higher costs don’t add up – especially if you’re only using a portion of the the house. If you still have a mortgage, add that to what it costs to maintain the property, as well as utilities, repairs and property taxes. If, when totalled, that number represents the same portion of your retirement income as a mortgage did when you were working, then it might be a sign that you need to move. Retirement income is often lower, so it doesn’t make financial sense to pay the same costs as when you were working.

It’s a wonderful idea to preserve the family home for when children and grandkids come to visit. But, in reality, how many times do they actually spend the night? If you moved, would an extra bedroom be sufficient? Or, maybe, there’s a guest suite in your condo building. There are lots of options for visitors.

Lifestyle changes

Where you live may have been, partly, determined by where you worked. If retired, living in a specific place is no longer a requirement. If you’re helping with grandchildren, or find that much of your social life is outside the area in which you live, it might make sense to move closer. If you’re a traveller, having a smaller living space, like a condo, makes economical sense and it’s a great no-worry option when you’re away.

Make staying more affordable

If, after weighing all the pros and cons, you decide to stay in your home, there are still ways to save money. Consider renting an extra bedroom to a student or to a person who’s on a temporary contract in your area. Another great option is Airbnb. Or, go a step further and create an income suite in your basement for long-term tenants.

It may be possible to refinance your home. In this case, it means that you will have to make mortgage payments, and when the home is passed onto your beneficiaries, that loan will be settled first by your estate. There is also the option of a reverse mortgage. Read the fine print carefully, as the rates on such loans are often much higher, which means it’ll cost you more.

Selling the family home, and downsizing, can be an emotionally difficult period of time. By looking at it from a financial perspective, it could prove to be a responsible decision, so that you have the money to do what you want to do during your retirement.

Rubina Ahmed-Haq is a journalist, personal finance expert and HPG’s finance editor. She appears on CBC TV and radio, CTV Your Morning, Global Toronto, and writes for ratesupermarket.ca. Follow her @alwayssavemoney. AlwaysSaveMoney.ca

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Higher Rates and New Rules Cooling the Condo Market

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Higher Rates and New Rules Cooling the Condo Market

Higher Rates and New Rules Cooling the Condo Market: But It’s Not Bad News

After remaining at a record low for close to a decade, the Bank of Canada has started to raise its benchmark interest rate. A strong economy and positive job growth are some of the reasons behind the hike. This increase means anyone with a variable rate mortgage is now paying more for the same loan. Money is getting more expensive to borrow.

More Cooling Effects

Added to this, new mortgage rules brought in at the beginning of 2018 are making it harder for borrowers to qualify for more. The lender is now required to stress test all mortgages, regardless of the down payment or the amount being borrowed. These new rules mean borrowers have to show they could pay their mortgage if rates were two percentage points higher than their contract rate, or the Bank of Canada posted fixed rate, whichever is more. Overall this is keeping homebuyers away and has had a cooling effect on the housing market, including condos. One report by the Mortgage Professional of Canada claims 18 per cent of home buyers can’t pass the stress test, even though they can afford the mortgage payments.

What Industry Critics Are Saying?

No surprise mortgage brokers, and the association that represents them, are concerned homebuyers will no longer be able to borrow enough for the home they want. The recent report by the Mortgage Professionals of Canada found that, “New government policies are causing consumers to have a more negative outlook for housing and real estate in Canada.” The Report on the Housing and Mortgage Market in Canada says most consumer still see real estate as a good investment but “overall strength of consumer sentiment has been weakened by increasing interest rates and the new rules making it harder for homebuyers to secure mortgage financing.”

One Solution

The report argues that the stress test, albeit important, is too strict (or maybe too stressful), for first time homebuyers in particular. Paul Taylor is the president and CEO of Mortgage Professionals Canada. He says, “We support a stress test, albeit at a reduced rate of 0.75 per cent, as it is a useful tool to test a borrower’s ability to make future payments. However, the cumulative impact of rising rates, a two percentage or greater stress test, provincial government rules in Ontario and British Columbia, and further lending restrictions are negatively supressing housing activity not just in Toronto and Vancouver, but throughout the country.”

Managing Expectations

The Bank of Canada is hinting rates are poised to go higher. Before the end of 2018 the Bank could raise rates again, making money even more expensive. They are warning debt seeking homebuyers to pull the reigns on the amount they agree to borrow, because it will cost more when rates rise. The stress test represents where rates could be by the end of the mortgage term. They are realistic and frankly, in my opinion, they are needed. Canadians are close to a record level of debt. Statistics Canada data shows in June 2018 Canadians owed $1.68 cent for every dollar of disposable income. That is actually down slightly from the beginning of the year, indicating the new mortgage rules are already working.

Canadians shopping for a home need to be realistic about what they can now afford. Looking in the rear view mirror is not helpful. Where prices were and what you could afford then is not the reality now. Crunch your numbers based on this new reality, higher rates and stricter rules, and see how much you can afford. Even then, you don’t have to borrow the whole amount the bank offers. By borrowing less, you will automatically save yourself thousands in interest payments. Mange your expectations of the house you are buying. Maybe a smaller home, or a condo in a different area is the solution. Keep your options open.

Rubina ahmed-haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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Finance: Getting Ready to Manage Your Money in Retirement

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Finance: Getting Ready to Manage Your Money in Retirement

For anyone getting close to retirement the anticipation can be incredible. This is the time your focus shifts to enjoying life to its fullest, rather than how we are going to make enough to pay all the bills. If you organize your finances, retirement can be wonderful. If you’re lucky enough to have a work pension and enough money saved in your RRSP this is the time to start making some real plans about your retirement. But starting the process to manage your nest egg can be tough. Here’s how to get started.

Calculate Your Income

At this stage you should have a good idea of what you’re retirement income will look like. Based on what you will be getting each month, start planning a retirement that you can afford. If you’re feeling stretched, think of ways you can cut back to enjoy all the things you want to do. Consider downsizing your home or moving to a less expensive town. Also consider getting rid of one car if you’re a two-car couple.

Talk to Your Older (Wiser) Friends

One of you best resources are your slightly older friends, the ones who are going through right now what you will be experience in five to ten years’ time. Ask them about what you should do with your finances, whether there are any mistakes you can easily avoid? This helps you plan better for the unexpected. Make sure you talk to people who are living a lifestyle you admire and can afford. Don’t talk to seniors with more wealth than you, as you will be setting yourself up for a financial let down.

Move Money to Safety

The time to start spending your retirement savings is here. Make sure you have at least five years of expenses saved in the safest of investments. Remember retirement will hopefully last for many decades so leaving some money in higher risk investments is okay, as long as you don’t plan to use it for at least 20 years. The key at this age is having the best asset mix — enough money in safe investments to spend now, and the rest in slightly riskier investments that you don’t need until later.

Decide When to Retire

Not everyone retires at age 65. Some wait to retire later, others take early retirement. By taking a look at your work pension, see what your monthly income would be if you decided to leave work early. How much more would you get if you waited until 65 or even 70 to retire. It’s important to know that Old Age Security (OAS) and Canada Pension Plan (unless you take that early) don’t start until you turn 65, so make sure you are calculating your income carefully.

Be Tax Efficient

Government benefits like OAS start to get clawed back after a certain income threshold. For 2018 it’s $75,910. Once your income starts to go over that your benefits start to decline and is completely gone when your income is more than $123,019. Make sure you’re setting up a withdrawal plan that will keep as much OAS in your pocket as possible. If you’re still saving, use your Tax Free Saving Account. Also, you can voluntarily defer OAS for up to five years. This will result in higher benefits when you do start to receive it.

Finally, this could be the most relaxing time in your life. Now you can start to enjoy your savings. Feel proud of getting to this point and start planning for the most enjoyable retirement possible.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney

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Finance: Easy Ways to Keep Summer Spending in Check

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Finance: Easy Ways to Keep Summer Spending in Check

When we think about the most expensive time of year, the Holidays often come to mind. After all, Christmas gifts, holiday entertaining and travel to see family can be very costly. But what the average Canadian spends during the holidays is only a fraction of the average summer spending.

This makes sense as the holidays are a few weeks long, whereas summer can go on for months. According to the latest BMO Summer Spending Survey, Canadians plan to spend an average of $5,605 during the summer months. Compare that to holiday spending. A PWC survey found Canadian consumers were planning to spend an average of $1,507 each during the 2017 Holiday season.

As we head closer to summer here are a few ways to keep that summer spending under control.

Keep Travel Close to Home

The BMO summer spending survey finds Canadians expect to spend more than $2,000 on longer vacations and weekend trips this summer. You can bring this cost down significantly by simply taking trips that are closer to home. Wherever you live in Canada there are often amazing vacations spots only a few hours drive away. Start by drawing a radius around your home that shows all the places that are within 500 km of you. You can easily figure this out by using a site like freemaptools.ca. Road trips are much more cost effective than flying.

Plan, Plan, Plan

Benjamin Franklin famously said, “If you fail to plan, you are planning to fail! You should apply this to your summer spending plans as well. Map out now all social events you already have planned. Summer wedding, family vacation, dinner dates. Big and small, write all the events down, then attach a guesstimate of how much you believe each event will cost. The BMO survey shows Canadians spend more than $2700 on social outings, entertaining friends and family and general summer activities and entertainment. By mapping out your social calendar you can easily see where you might be over spending.You can tweak your spending now to keeps costs down, and maybe decline any invites early that might be out of your budget.

Quality Over Quantity

Focus on events that are most important to you. Summer spending can often get out of control when you start accepting every single invitation. What might end up happening is you find yourself spending money (and time) on people and things you don’t even enjoy. Now that is a total waste of money. Avoid all that by picking events that really mean something to you and your family and friends.

Find it Free First

Summers in Canada are synonymous with outdoor festivals. Many of them are free to attend. By visiting your town or city’s website you can find out all the events happening all summer. Find free fun first. Especially with smaller kids, the free events can work out better, as without a ticket there is no obligation to stay all day with a cranky toddler to get your “money’s worth.”

Plan for Extra Childcare

Parent’s often find themselves scrambling to get childcare for the summer months. Camps and short term child care options can be expensive. The best option is to take your own holiday during the summer months to bridge that gap. For the weeks when you need childcare, find city- run camps for the best value. Also check on your own condo message board to see what other families are doing for childcare over the summer.

Summer is supposed to fun and spontaneous, but you don’t want it to leave you in debt by the end of the season. With some careful planning you can enjoy the entire summer without putting yourself in financial distress.

Rubina Ahmed-Haq is a/journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate/journalism diploma from Humber College and has completed the CSC.

Follow her on Twitter @alwayssavemoney.

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Finance: Rethinking Car Ownership

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Finance: Rethinking Car Ownership

Longer term auto loans are a risk to Canada’s economy. That’s the finding of a recent Moody’s Investor Service report that says rising interest rates along with strong job growth is leading to more uninsured mortgages and longer term car loans. The report says these factors are putting a strain on the lending quality of Canadian banks.

Major banks are now offering auto loans as long as eight years. The problem is a car depreciates faster in the first few years. With longer term loans you may owe more money than what your car is worth. The risk is if interest rates rise, those fixed car payments may be difficult to make.

In the report analyst Jason Mercer writes, “Almost half of outstanding mortgages will have an interest rate reset within the year, which will increase the strain on households’ debt servicing capacity.”

If you’re in the market to buy a new or used car, there are many factors to consider before you make that purchase. Many condo owners that live in the core are car free, but many travelling longer distances might be looking to buy.

Real Cost of Owning and Operating a Vehicle
According to the Canadian Automobile Association (CAA) four in five Canadians under-estimate the cost of owning and operating a vehicle. Six in ten under-estimated the cost by $4,000 or more. The CAA says the yearly ownership costs for an average compact car are about $9,500. This includes the cost of the car, maintenance, gas and insurance.

If these costs work with your budget the other considerations are to lease or finance your purchase.

Financing
When financing a car payment you’re amortizing the cost of that car over the term. If you’re borrowing the entire cost of the car and staying on your payment schedule, you will pay off the car and own it outright at the end of the term. When you own the car entirely, after the warranty expires, you’re responsible for all of the maintenance and repairs. According to Consumer Reports magazine, an authority on consumer products and their value, “expenses can skyrocket when warranty and free-maintenance periods are over.”

Leasing
When leasing a car you will hear the term residual value; this is how much the car is worth at the end of your term. The lease holder is responsible to make payments equal to the car’s ticket price, minus the residual value. Since cars tend to depreciate quickly in the first few years, you will be making the highest payments the car will ever warrant during that time. Also note, lease rates are often higher than traditional financing as well.

Lastly, when considering leasing vs financing, calculate how much you drive. Lease agreements often come with a yearly limit on kilometres you can drive. That’s not the case with financing.

The bottom line is car ownership is expensive. If you’re already worried about interest rates rising, the best advice would be steer clear of auto loans, especially those loans extended over more than five years.

Rubina Ahmed-Haq is a journalist and personal finance expert. She is HPG’s Finance Editor. She regularly appears on CBC Radio and TV. She is a contributor on CTV Your Morning and Global Toronto. She has a BA from York University, received her post graduate journalism diploma from Humber College and has completed the CSC. Follow her on Twitter @alwayssavemoney.

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