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Saturday, May 30, 2015

Book Review: The Life Changing Magic of Tidying Up

Posted by Tim Stobbs on May 7, 2015

So after hearing about The Life Changing Magic of Tidying Up by Marie Kondo a fair bit in the media I borrowed a copy from my library and started to read.  After all I’ve had passing flirting with minimalism over the years so I figured it couldn’t hurt.  But to be honest, I didn’t expect to learn much from the book. Damn I was wrong.

For for being a fairly short book Marie manages to pack in a lot of insightful comments on people’s behaviour to our stuff.  The first one to struck me as being hugely helpful is the average person is never taught how to purge or organize anything except in a haphazard way from family or perhaps friends.  So what happens is our homes (no matter how large or small) tend to build up WAY to much stuff.  Now how messy you are will determine how obvious the problem is, but volume still often exceeds what we can reasonably store in our homes.

Then people try to deal with this huge backlog of things but often try to do it just a little at a time which is like trying to swim up a river a foot at a time.  You might make some progress but you are going to feel exhausted from it all the time and likely give up.  So Marie’s solution is simple…do one monster size purge in your life and then you are done (it may take months to finish).  This isn’t to say you don’t need to do a little purging once and a while afterward, but organizing your stuff if pointless until you get rid of a huge amount of it.

Marie’s method is interesting because she doesn’t focus on what to purge, but rather what to keep.  Her criteria of it must ‘spark joy’  as you handle each item sounded weird to me until I stumbled on the idea of  that means: do you love the item?  So by default there is no maybe pile…you either love and keep it or it gets purged.  It’s a somewhat brutal method, but given the amount of crap people own it is surprising effective criteria.

Then to hone your decision making skills she points out a method of doing it by category of object for the entire house instead of by room.  That way you get practice on the easier decision items and work down to the hard decisions like sentimental items.  Her suggested list is clothes, books, papers, komono (miscellany) and lastly mementos.   Komono is further broken down into CDs/DVDs, skin care, makeup, accessories, valuables (passports, credit cards…), electronics and cords, household equipment (stationary, pens, sewing kits…), household supplies (expendables like tissue, detergents, medicine…), kitchen goods/food supplies and other.  Your stop point for purge is when you feel comfortable with what is left.

After you do your monster purge then you start to organize things .  At which point most storage solutions are not really required since you actually have like 25 to 80% less stuff.  Then the trick to preventing clutter from all from coming back is to keep everything in its place.  Assign a home for EVERYTHING and put it back when you are done using it.  She cautions not to try and organize as you purge as you will lose focus and then stop.

Overall I’m done clothes, books, DVDs and still working on papers…I got side tracked by having to finish my taxes.  I have to agree with the idea of the monster purge idea as once you get going you hit a sort of momentum that makes the effort of keeping going easier.  My motivation for this is the dream of waking up in  house where I love everything that is there…my neglected items are gone and I can FIND things easily.  She rightly points out without some kind of goal in mind the process really won’t work.

This isn’t to say that some of her ideas are a bit odd like unpacking your purse or bag completely at the end of each day after you get back home from work.   Umm, no thanks. Too much work for no real point. Or that she treats objects like they have personality and you should thank them for their service.  So feel free to ignore the really odd ideas in the book…I am.

In the end, I have to say I was pleasantly surprised by the book and I am finding it useful so far.  It remains to be seen if I can complete the process, but I’m enjoying the results so far.  So have you read the book yet?  Do you think Marie is nuts or brilliant…or perhaps in between?

The Tax Payoff

Posted by Tim Stobbs on April 29, 2015

So I managed to do a very good job of procrastinating on finishing my taxes this year and I only finished up during the weekend (but apparently due to an error by CRA you get until May 5 to get it in).  But now it is all done I’m just waiting for my over sized tax refund which pushed past $6000, which is good because my wife owed over a $1000.

You might be wondering why on earth I got such a big refund when I tend to avoid such things?  Simple a few minor shifts in the status quo of our taxes occurred:

  • The income splitting tax credit kicked in and we took full advantage of it.
  • I made a LOT of spousal RRSP contributions last year and now it is refund time.
  • My small business had a crappy year so I had very low profit to pay taxes on.
  • My wife on the other hand had a great year and so paid a bit more than usual.

Overall I tend to think all these minor tax credits and deductions are a bit of a pain in the butt.  I would much prefer a stripped down tax system which I could file on a double sided piece of paper.  Ironically, I found out I’m not alone in that thought according to a recent study.  We haven’t had a major overhaul in the system since 1987 and with all these minor credits you have to determine which of the 120 of them apply to you.  No wonder we buy software to do taxes now!

Ironically I think my procrastination had less to do with the taxes, but more to do with having to now deal with cleaning up all my files afterwards.  I normally use the end of my taxes as my trigger to do the annual clean up.  I just pull out old records and scan them where possible, shred old files that are no longer required and assess if I can make any improvements to my file system.  It’s not particularly fun work so I, like most people, tend to avoid it.

How are you doing with your taxes?  Are you planning to use the extra time or just get it over with?

The Game Changer – Expanded TFSA

Posted by Tim Stobbs on April 22, 2015

With the cat finally out of the bag we now know a few details of the much rumoured expansion of the TFSA contribution limits from yesterday’s Federal budget (page 232 if you want to read the official text). First off it isn’t a actual doubling of the limit rather it is rising up from the current $5500 per person per year to $10,000.  Still that is a huge increase in room, and it takes effect this year.  The only downside of the announcement was the fact that they stripped out the inflation adjustment on the accounts contribution room.  So enjoy that increase because we are likely not going to see another one for a VERY long time.

Of course a change in Federal government leadership might also trigger this to be a single year event with a roll back in the plan down the road.  But for now it is going to happen this year, so let’s look at the potential implications for this in your retirement plan.

To say this is a game changer for some people is a bit of an understatement.  A couple can now put away $20,000 per year in TFSA and never pay a dime of tax on growth in those accounts.  So the holy grail of retirement planning just got a bit easier: the zero income tax retirement. I’m not sure if you realize this is about your life, but your single biggest bill is likely not your mortgage, but rather your tax bill.  Your income tax portion of it can often be a big chunk of change so if you can reduce that in your retirement years you can often speed up your retirement date.

The trick has often been that while the TFSA’s are great ways to invest they don’t often have enough contribution room to make them your sole retirement investment account.  For example, if you made $75,000/year as a family your RRSP limit is 18% of your previous year’s income or $13,500.  So while the old TFSA limit was close at $11,000 for a couple, now it becomes possible to skip the RRSP entirely for most people and pour everything into a TFSA.  (For those with math inclined minds, if your family makes $111,000 per year you can shelter the same amount in your TFSA as your RRSP now).

But what about the RRSP tax refund?  Well while that is a nice thing to get you do still have to pay tax on your growth of your RRSP at the other end when you take the money out.  While a TFSA you can shelter all the growth from getting taxed.  So imagine you have saved well in your life and have a cool $1 million in retirement savings and a paid off house.  Now imagine never having to pay a dime of tax on that and not having it reduce your Old Age Security benefits.  Cool eh?

So to compare you take our $40,000 a year of income from that in an RRSP you would have to pay tax on that money.  The final amount will vary by province but if only one of you take the money out you would lose anywhere from $5800 to $7700 in income tax for 2015.  Leaving you with a net spending amount of $32,300 to $34,200.  Or you could have put it all in a TFSA and got $40,000 to spend.

In our particular case this means I will likely skip putting money in taxable investing accounts and instead just shelter everything in RRSP and TFSA accounts.  While I might need to keep some contributions aside for the last year or two I can then stuff it all in get caught up in no time (ie: likely two years after retirement).

All in all, there is a fair amount of potential in this announcement for your retirement plans.  Of course, you should still do some numbers for your particular case to ensure it would be worth it to you.  So are you making any changes your plan because of this change?  Or you don’t think it will last?