Thursday, April 28, 2011

Love and Money

Have you ever wondered what life is like when a thrill-seeking "High Roller" marries a risk-averse "Security Seeker" or when a sweat-pant-wearing "Dawdler" starts dating a research-crazy "Systematic Striver"? The five Vancouver women who make up the Smart Cookies financial self-help team have considered these and many other questions about love and money in their new personal finance book for couples. It's worth the cover price...especially if the idea of talking to the one you love about money makes you want to throw up or call off the wedding.

Overall, I really enjoyed reading the book. It was straightforward without being boring and had some good old fashioned you-can-do-it encouragement along with some solid money management advice that can help you get control over your finances even if you are currently flying solo or just dating.

My favourite parts are the two introductory chapters and the "Perfect Day" exercise on page 46. The first chapter was great because the Cookies spent some time talking about why money is so hard to talk about in the first place. There are some interesting statistics and insights to be found there. Chapter Two I liked as well because it got me thinking about how we learn about money from our parents, mostly by observation, and how what we see and hear about money growing up shapes the financial baggage we bring with us into relationships.

In the third chapter, which outlines some suggestions for personal and financial compatibility, there is an exercise called "Picturing Your Perfect Day Together." You and your partner are asked to imagine your life five years from now on a weekday and then use the Cookies' eleven questions to ignite a conversation about the financial reality that those fantasies entail. It's a fun exercise, well worth doing over a glass of wine or a cup of tea after you've both had a long hard day.

While these were my favourite parts of the book, the rest of the book does not disappoint. Whether you are planning to pay for your wedding or pay off debt, are buying your first home, starting a family, or learning to invest, you will find a lot of practical advice...and it's written for Canadians. Yay!

At $19.95 CDN, this book gets 5 out of 5 dollar signs for value and 5 out of 5 stars for readability. It's all about love and money, but you won't find any intimidating vocabulary on any of its 220 pages.

Moms and dads, if your son or daughter is old enough to fall in love but still has no idea what a RRSP or mortgage is, you may want to pick up this book and read it together as a family, which would be a great way for you (Mom and Dad) to talk to your grown up kids about how you handle love and money in your own intertwined lives.

Copyright 2011. Laura Thomas. All Rights Reserved.
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Thursday, April 21, 2011

Kevin O'Leary's Tough-Love Approach to Kids and Money

Twice now I've heard Kevin O'Leary talk about about how he makes his kids fly coach while he enjoys the softer seats and sumptuous service of first class. He tells them that they can't sit up front because they don't have any money. If you're familiar with Kevin's work on Dragons' Den, Shark Tank or on The Lang & O'Leary Exchange you won't be surprised because you'll know that with Kevin "it's always about the money," even with his kids it seems! Let's call it O'Leary's tough-love approach to financial education.

BC HRMA Conference April 2011
While I don't agree with every aspect of Kevin's "business is war" philosophy, I do admire his realistic approach to talking to kids about money, which is why on April 13th I took my seven-year-old daughter to see him do a presentation called "Up Close and All Business with Kevin O'Leary" hosted by the BC Human Resources Association  at the Vancouver Trade and Convention Centre. Actually, I didn't really take my daughter to the presentation, she had to take herself.

One Tough Mom Equals One Tough Kid
When we first heard about Kevin's talk, my daughter was anxious to go. She's a big fan of Kevin's sense of humour, especially when he is being tough on pitchers in the Den. I thought it might be fun to go, too. I've been hoping to interview Kevin for this blog for quite a while. But when I saw the ticket price was $57 plus HST I decided against it (parking would be another $25!).

My daughter persisted so I told her that if she paid for her own ticket, we could go. The funny thing is that even though she is a shareholder and has a healthy pile of cash in her ING kids account, she said that she didn't want to spend her savings. That left us with figuring out how she could earn $57 plus HST.

Ella-Rose's Tip #2
To make a long story short, she spent the second week of March break providing money-saving tips to a group of subscribers (which included David Chilton, author of The Wealthy Barber, family, friends and a few of my blog followers) at the rate of $2 a day for 5 days.

I helped her choose her money-saving tips and did the uploading and emailing (some of the tips were images, some were videos) but the creative piece was hers alone. There were days when she came home from art camp and did not want to "work" but she did it anyways and ended up raising $80, which was more than she needed.

I was proud of her and pleased that she was willing to work so hard to earn money to do something that she wanted to do. She didn't complain. She didn't argue with me about why I was making her pay for her own ticket. She was able to deal with this "tough-love" money lesson with a tremendous amount of fortitude. I imagine that Kevin's kids can do the same.

Up Close & All Business with Kevin O'Leary
It wasn't until Kevin mentioned the "I make my kids fly coach" story again at the presentation that I realized that I have been using O'Leary's tough-love approach to financial education without being aware of it. One of my parenting catch phrases is, "Sorry. Mom's job is to buy the stuff you need,  not the stuff you want."

It seems to be working.

The cool thing about the tough-love approach to financial education is that it doesn't matter how wealthy your family is. Whether it's a first class plane ticket worth thousands of dollars or a front row seat at a Kevin O'Leary talk for $57 plus HST, the point is that you make your kids hungry to get there...and then you step back, do a little coaching and watch them go.

Copyright 2011. Laura Tomas. All Rights Reserved.
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Wednesday, April 13, 2011

Moola Lingo: Corporate Tax

Watching the leadership debate last night made me realize that politics is really just about about money. The May 2nd federal election isn't about ideas, it's about who has the power to decide how we earn, spend, grow and share our collective cash. And that was very evident when the word "corporate tax" was brought up last night. Should the corporate tax go up? Should it go down? Should it stay the same?

Which is why I thought to myself, hey, if this is such a pain-in-the-budget topic, I should probably take a minute to understand exactly what the word means before I cast my vote.

What is corporate tax?
Just as we the people have to pay tax on our income, companies have to pay tax on the money they earn as well. They pay tax on "profit income" and on capital (cash or goods used to generate income).  And, just like us, corporations have to file a tax return, a T2. If you've ever wondered what a T2 looks like you can check it out here.

Who has to file a T2? Any corporation with a Canadian address (except registered charities) has to file a T2 every year even if there is no tax due. This includes non-profits, tax-exempt corporations and inactive corporations.

And, in case you wanted a history lesson, it seems that corporate tax has been around longer than individual income tax in Canada. Corporate tax was introduced at the end of the nineteenth century while income tax was introduced in 1917 as a "temporary" way of funding World War 1.

Corporate tax rates, by the way, are:
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012

Individual tax rates in Canada for 2011 are:
15% on the first $41,544 of taxable income
22% on the next $41,544
26% on the next 45,712
29% on taxable income over $128,800

Our Parities & Our Pain-in-the-Budget
The Liberals vow to keep the corporate tax rate at the 2010 level of 18%. The NDP promises to keep the combined federal/provincial corporate tax rate (which is about 26%) below the U.S. federal corporate tax rate of 35%. This means that the NDP will boost the federal corporate tax rate to 19.5%. The Conservatives will keep lowering the rate to 15% in 2012. The Bloc Quebecois and Green Party do not have explicit plans to either raise or lower the corporate tax rate.

There is some additional vocabulary that comes up when individual and corporate tax obligations collide including: dividends, shareholders, tax credit, double taxation, capital gain, capital cost allowance and income trust. But I am not going to touch on any of that moola lingo today. The point of this post is to clarify what corporate tax is so that we can better decide which party's earning-spending-growing-sharing plan we want to support on May 2nd. Happy voting!

Copyright 2011. Laura Thomas. All Rights Reserved.
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Tuesday, April 5, 2011

5 Tips for a Chubbier Savings Account

Preet Banerjee wrote a piece for the Globe and Mail today about ways of saving that include voluntarily increasing your income tax deductions so that Revenue Canada acts as your banker by holding on to your money until refund time. He also suggested setting up an automatic savings plan at a real bank that pays interest while your money grows.

Though, as Preet also pointed out, there is something awfully tempting about both a growing savings account and a lump sum tax refund. Something that stops many people from letting their savings get chubby.

Last night after swim practice, I treated myself to a hot tub with some of the other moms. As we enjoyed the jets, bubbles and the soothing absence of children, one mom lamented that stores "around here" never seem to close. "In some European cities," she said, "it's almost impossible to shop on a Sunday. You can't even get groceries. I wish it was like that here." Her comment made me wonder how we can afford all this 24/7 shopping.

That's easy. It's called credit. Our economy says to us, "Don't worry about it, Mom! You can get whatever you want, whenever you want and you don't even need to have any money in the bank!" No wonder it's so hard to build a chubby savings account when it's so easy to keep letting the money pour out.

So if you are one of those people who struggles to keep the financial weight on, here are few tips from an avid (dare I say obsessive?) saver.

5 Ways to Bulk Up

ONE Change your way of thinking. Fat is good when it comes to money. The more you amass in your savings account the more you can potentially earn in interest or in investment income. Seriously, passive income (that's when your money earns money) is totally where it's at.

TWO Respect free money. I'm 42 and I still get money in cards from family at Christmas and for my birthday. You didn't earn it so don't spend it. Put any free money (refund, gift, etc.) that comes your way directly into your savings account.

THREE If you suddenly decide that you want something, don't dip into your savings to buy it and don't use credit either. Figure out a fresh, temporary way to earn the required cash. Do an odd job for a neighbour. Do some childminding. Sell something that's been sitting around taking up space. Be creative.

FOUR Do a cost analysis of your favourite forms of entertainment and drop the expensive stuff. What do you do for fun? Create a list and beside each activity write down how much it costs, how many hours of entertainment you get and then figure out what your cost per hour is.

Example: A 3D movie night in the theatre for my daughter and I costs $28 (just for the movie, not including snacks and transportation) which works out to $14 per hour for a two-hour outing. On the other hand, a 500-piece puzzle costs us about $20 and give us more than 10 hours of fun at $2 per hour. For every 3D movie we decide not to see in the theatre, I put $28 into my savings account.

FIVE Passive income rules! I know this was tip number one but if there was ever a carrot for saving money it's this. The more money you have working for you, the more money you will have down the road. I hate to admit it but Kevin O'Leary's goal of going to bed richer at night than he was in the morning is smart. Every dollar that grows in your savings account makes you richer every day.

If however, you don't think that any of these tips are going to help and you are interested in the "Revenue Canada tax-refund savings strategy" or in setting up an automatic deposit, check out Preet's Globe and Mail article by following this link.

Copyright 2011. Laura Thomas. All Rights Reserved.
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Saturday, April 2, 2011

Moola Lingo: Disposable Income

What do unicorns and disposable income have in common? Like most things, the answer to that question depends on language.

What is a unicorn? A unicorn is an imaginary creature that is usually depicted as a horse with a spiral horn growing out of its forehead.

What is disposable income? Good question. Here are a few definitions of "disposable income" that I found on the Web:
"The amount of income left to an individual after taxes have been paid, available for spending and saving" (

"Gross income of an individual from which direct taxes have been deducted." (

"The amount of money that households have available for spending and saving after income taxes have been accounted for" (
In money-speak, disposable income is a term that refers to your after-tax income. It's what you have left to spend on essentials and non-essentials (and to save, if you're lucky) after you pay your taxes. But getting back to our original question about what unicorns and disposable income have in common, let's break down the language a little bit further to find out why this misnomer, "disposable income," is so very annoying.

Money You Throw Away?
Disposable means that something has been designed to be thrown out after being used, such as a "disposable" diaper. You use it once, you throw it in the diaper genie. Income is money that comes into your life in any way, be it earned actively or a gift or some other passive form of positive cash flow. Literally, then, the term disposable income seems to mean: money that you throw away. Like unicorns, disposable income understood in this way is truly imaginary. Who, after all, has money to throw away?

But that's not what disposable income means in money-speak, as you can see from the above definitions.

Given the confusion created by the word "disposable" and the irritating specter of tossing cash into the diaper genie or other trash bin (which I have done accidentally), perhaps our after-tax money should simply be called "net income." But the term net income is already taken.

Net income is the amount of income we pay taxes on (gross income minus deductions and credits) so disposable income is what's left after you pay tax on your net income. We need another term.

Another option may be to call our disposable income, simply "my money." Once I pay income tax, the money that is left over is truly mine and that's an empowering thought, which is not imaginary at all.

So the next time you're talking to your accountant or financial advisor, and the term "disposable income" rears its irritating head, just remember that disposable income is not meant to be's simply your money and you can do whatever you want with it. You can even throw it away!

Copyright 2011. Laura Thomas. All Rights Reserved.
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