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Thursday, April 24, 2014

Goodbye Jim

Posted by Tim Stobbs on April 14, 2014

Out of all the characters in the federal government as the federal Finance minister I spent the most time following what Jim Flaherty did since it was most relevant to this blog.  So I was a bit shocked to find out he was dead after just a few short weeks from leaving his job.

On the whole I have to say from my personal point of view his record on the job was a mixed bag.  On the one hand he created the 40 year mortgage and created the huge surge in housing prices in this country, which has totally screwed over anyone who didn’t already own a home.  Yet later on this was undone and we reverted back towards 25 year mortgages as he did the hardest thing to do in life and admit you were wrong and fix something after the fact.   Yet for the average person his biggest legacy is the creation of the Tax Free Savings Account (TFSA) which allows all Canadians to save money in an account that doesn’t trigger tax on investments.  While it hasn’t been well used by the average person (since the majority of people just keep their money in a savings account, sigh), it was a good step in the right direction to help encourage saving.

Yet Jim’s last lesson is likely the most notable to me.  Life is short, so don’t spend all your time working.  It doesn’t do you any good to spend you life building a retirement fund if you drop dead shortly after leaving your job.  Stress can be a killer and you have to take care of yourself now and in the future.  So I will try to recall this lesson and not spend all my time working in life.  You have to sit back and enjoy life as well.

So goodbye Jim.  Thanks for trying to make life better for people, while I don’t always agree with what you did I do appreciate you tried.  My condolences to his family in their time of grief, while I didn’t know him personally I respected his actions.

Standing Up, Again

Posted by Tim Stobbs on April 10, 2014

Yesterday I had a second opportunity to vote  for myself in an election, which trust me that doesn’t get any less weird doing it more than once.  This time I was picked by our local engineering association (APEGS)’s nomination committee to be nominated for their council.  The council is the governing body for the association and it would be for a three year term.

I really don’t even know how my name came up to that committee, but never the less I understand that our engineering association exist because we are self governing body.  So in my mind that means some members have to help run it or we end up with getting run directly by the provincial government which could be unpleasant.  So I agreed to let my name stand for this year’s election and I will serve if elected.

Besides I’m hardly a shoe in for the job.  Actually the other nomination ironically taught me when I took my engineering degree.  So yes I’m running against my old professor, which I think provides a nice contrast in choices.

It might seem odd that I’m volunteering for more work , when I fully admit I’m obsessed with not having a day job.  Yet the reality is I want more time to do other things like this, I enjoy contributing my time and skills to organizations which I believe can help improve people’s lives.  Being free from having to work for salary doesn’t mean I want to stop being involved.  Instead it means choosing the work I do based on interest and not the salary.

Do you stand up to support organizations you believe in?  If so, how do you contribute?  If you had more time to get involved, would you do more?

Maxed Out

Posted by Tim Stobbs on April 9, 2014

While I was having coffee the other day with some co-workers it came out that I was maxed out…no, not on credit cards, but rather RRSP contribution room and last year my wife and I maxed out of TFSA contribution room.

Until that moment I had forgotten how unusual that state of being is for most people.  The older people around the table all had unused RRSP contribution room of $30,000 to $50,000 and all of them make an healthy salary.  So it wasn’t the fact they couldn’t save, but rather they had chosen not to.

In total Canadian’s have $600 billion in unused RRSP contribution room, which is a lot of tax savings people are leaving on the table. Put it another way, if everyone used that up in a single year at a mere 26% tax rate the government would be out $156 billion in revenue.  That doesn’t even touch the used TFSA contribution room out there as well.

So why is saving such a difficult thing to do?  After all the amounts aren’t huge in the case of RRSPs it is 18% of your previous year income (less pension adjustments).  So if you had a defined contribution pension you could likely get 5 to 10% there, which leaves anywhere from 13 to 8% left to be saved.  Yet you get a tax refund on that money, so as long as you keep putting your refund back into RRSPs you really only have to save around 10% or less.  Can you not live on 90% of your income?

Granted if you don’t have a pension plan this takes a bit more planning to really pull off.  18% of your income can seem a big difficult, but that is why you need to get the tax refund at once rather than waiting until tax season.  How? You can use that handy tax form T1213 Request to Reduce Tax Deductions at Source.  By having a regular contribution plan setup, you can fill this out and send it in then a few weeks later you can start getting your refund on each paycheck rather than waiting the full year.  This helps keep your cash flow up while saving.  The downside of this trick is you do have to file it every year (in most cases).

I should also point out I also had extra RRSP contribution room for a number of years (~$30k).  It was only between some planning and adding extra money for years that we managed to catch up.  Yet it can be done and when you put your mind to it.

So have you ever maxed out some contribution room?  If so, how did you do it?  If not, what is preventing you?