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Monday, December 22, 2014

Goodbye Paper Files

Posted by Tim Stobbs on December 15, 2014

Perhaps the most obvious downside of taking an active interest in your finances is the fact you tend to have to read a fair bit of paperwork and then figure out what do with that paperwork.  While my file system is fairly good at the moment I rather dislike the amount of paper files I have in the house.  So I decided to move to more digital files where possible.

To do this with all seven years of previous history is a bit of a pain.  So we decided to invest in a new all in one laser printer that also had a document feeder attached to the scanner.  The ability to load in 26 pages at once and then scan them all at once was worth every nickel I paid for the new printer.

So while I expected this project to take a long time I am already about 80% complete and I only started working on this last Thursday.  So all in I figure I have put in about 10 hours of my time loading documents into the scanner and then shredding them after the fact.  And I also immediately backup the files after I finish scanning for the day to an external hard drive.

Some key points to keep in mind if you were interested in doing this yourself:

  • Decide on your digital file structure in advance.  This makes finding things easier if you need to retrieve a document.
  • Keep in mind not everything can be digital.  Your paper T4′s from your employer and your T3′s from your bank may still need a copy in the event the CRA decides you would look good in an audit.
  • You need to embrace the limits of your technology.  For example, while my printer can print in duplex (both sides of the paper), the scanner can not.  So rather than try to keep the digital file in the exact same order I just split them into two files: front and back.  Yes this means more work if you need a particular document in some cases, but given I rarely look at these documents that is fine.
  • Don’t scan in something you really don’t even need to keep.  In my case I realized we had a few years of documents that were past the seven year cut off from CRA so we skipped scanning those and went straight to shred.
  • Work on stemming the inflow of paper where possible.  Sign up for digital statements where you feel comfortable and skip the paper copy entirely.

While I’m still working out a few issues with this process I find that I will likely keep about 80% less paper going forward.  Also the fact my digital files are much better organized and searchable by title means I can actual find a file much quicker than before.

Are you going more digital as times goes on?  Any advice from you pros out there with very little paperwork on how to handle the paper hoard?

What is Middle Class?

Posted by Tim Stobbs on October 6, 2014

So while reading a book the other day, it noted that despite the common usage of the term ‘middle class’ there is no definition.  So of course I did a little Google of that fact and the author was entirely correct.  I came across many definitions of income ranges trying to lock down what exact is middle class.

Then I came across one idea that I liked.  Take the median family income in a given country and +/- 40% that is the middle class.  In Canada for 2012, the median family income was $74,540 per year.  Adding our range of +/- 40% results in a the middle class being from a family income of $44,724 to $104,356 per year.  That is a broad range that covers a huge number of families in Canada so I think it could easily work as a passing definition.

Yet what stuck me the most about those numbers was despite considering myself middle class for the majority of my life I in fact likely never been a part of it.  Growing up I always knew we weren’t poor by any stretch of the imagination, but at the same time we never had expensive cars, overly nice houses or only bought a run down tiny cabin as a vacation property when I was in university.  So I never felt very well off either.  Yet looking at those values and doing a bit of an inflation adjustment, I was forced to conclude I grew up above the middle class.  Now that I’ve grown up and I have my own family that has largely continued.  Ironically other than a few of the early years of my career, our family income was also above that upper end of the middle class range.

Of course the problem of making a definition dependent on income is it ignores the fact I don’t spend the majority of my income.  Instead we save the majority of it and we spend on average a little under $30,000 per year, which of course is under the lower end of that range.  So which is it – am I’m under the middle class or over it?

In the end, the answer doesn’t matter.  Middle class is a way of referring to the majority of the people, not the upper class or even the poor.  It’s merely the bulk of the people who are trying to get through life.  It’s somewhat of a fiction which becomes useful to the political class since they can refer to the majority and allow even those on the edges to include themselves if they want.  Sort of like I have for most of my life.

Yet as we continue to save for early retirement I also become more aware that I have less and less in common with the middle class.  I don’t kiss ass or cower to those in a higher position than me at work.  I don’t fear losing my job since I have a decade of spending cash saved up.  I don’t try to blend in with my neighbours and I certainly don’t try to keep up with the Joneses.  In short,  I do what I want because I want to…nothing more and nothing less.

So I’m not middle class, but I’m not sure what label to us anymore and I’m not sure I even really care.  Labels are at best a crude picture of a person…a stick figure that lacks any meaningful detail.  So perhaps the answer is just be myself and let others call me what they will.

Do you ever worry what class you are?  Why or why not?

10% Less Pay, But $8 Less on My Paycheque

Posted by Tim Stobbs on July 28, 2014

I got my first pay cheque after I’ve reduced my working hours by 10%, so I’m also getting paid 10% less.  Yet after looking back at my previous pay stub I’m only making $8 less in take home pay.  How the hell is that possible?

Well the answer lies in a little bit of math that most people don’t really consider.  First off I make roughly $100,000/year at full time hours.  So at 90% time my salary drops to $90,000.  So $10,000 year less or $417 per pay cheque, yet that is on a gross basis.  You have to consider that $10,000 is getting taxed at my highest marginal tax rate or roughly 40% income tax.  So in fact if you reduce that $416 by 40% you would expect a $250 reduction on my take home pay instead of $417.  Yet my reduction was only $8, so we are closer but not there yet.

The answer was in the fact I had just max out my CPP/EI payments for the year on the previous pay cheque.  The 2014 contribution rates are 4.95% for CPP while EI is 1.88%, so all total you lose 6.83% of your pay cheque to these until you max them out for a given year.

So it may seem sort of obvious by now that out of my 10% less pay, I lose 4% approximately to income tax normally and the rest to CPP/EI, thus once I maxed out those my tax home pay is nearly identical for the last half of the year.  Of course the real drop in pay kicks in next year when I start paying CPP/EI again, but in the interim it does mean the rest of the year is fairly easy to live with the salary reduction.

Yet for now, life is easy and I don’t even really notice that I’m making less money.  It’s sort of a nice way to break myself in to the change in salary.  So have you ever got a weird pay stub?  Did you figure out what the issue was?