Category Archives for "Personal Finances"

What does your CRA Notice of Assessment Mean?

By Randall Orser | Personal Finances , Personal Income Tax

You can look at your CRA Notice of Assessment as a receipt for filing your tax return and an annual statement that tells you how much income tax you owe, how much you can expect for a tax refund, what income tax you already paid and any tax credits that you are eligible for. 

The NOA is calculated from the information that you submit on your tax return and contains a lot of information that you may need to make future financial decisions.  If you have a RRSP then the NOA is particularly helpful as it tells you the maximum contribution that you can make to your RRSP in the following year.  It is important to know how much room you have so that you do not over contribute and have to pay penalties.  If you participated in the Home Buyer's Plan or the Lifelong Learning Plan and withdrew from your RRSP for those purposes then your NOA will tell you when future payments are due and how much you need to pay. 

You should always keep your notice of assessment in a file along with your receipts for that tax year.  If you see anything in your Notice of Assessment that does not seem correct to you, you have 90 days to formally object or make amendments to any of the information on the document.  A NOA will also inform you if you happen to be the subject of an audit from the CRA.  If you do not agree with the reasons for an audit you have 90 days to make a formal objection.

You can get your NOA in two ways, in the mail from the CRA or when the CRA notifies you that your assessment is available for you to view via CRA Online Mail.  You can register for CRA Online Mail through your CRA MyAccount.  If you lose your paper copy you can use MyAccount to view and print your notices of assessment or reassessment, this includes any notices issued since Feb 9th 2015, and summaries of notices issued after 2004.  If you filed your taxes using NETFILE it can take up two weeks to see your Notice of Assessment. 

From an article by Wealth Simple

What you Should do with your 2019 Tax Refund

By Randall Orser | Personal Finances , Personal Income Tax

Around 19 million Canadians can expect a tax refund in 2020, the average refund is $1400.  In a normal year you might be tempted to go out and splurge with your refund but this year during the pandemic you might want to consider doing something else with your refund.

  • Spend some of it – this might be the last thing that many people might be thinking of doing with their refund as they are out of work or struggling financially.  If this is the case with you, you might consider spending part of it especially in small businesses which are struggling to survive. If you are still working, have a stable income, your debt load is under control and your retirement savings are on track then you might consider spending some or all of your refund.  Consumer spending is necessary to help businesses get back on their feet and help us to get out of the current recession.
  • Use your refund to pay down your debt – especially on those high interest credit cards.  If your bank is allowing you to defer your mortgage payments take advantage of that if you can and redirect your payments to your credit cards or other high interest debt along with your tax refund.
  • Invest for the future – some good financial planning advice is to have at least three months of spending available as an emergency fund.  If you have done this in the past you are probably very thankful for that nest egg right now.  If you have never done this, now might be the time to start your emergency fund, start saving for retirement or add some extra money to your RRSP.  If you are not at your limit investing extra this year should help your tax situation for 2020.  As the investment market has taken a hit this year, you might consider saving your refund to invest in the market when securities may be “on-sale”.
  • Give some away – Charities are hurting as much as if not more than businesses at this time.  Canadians are not donating their money or time as much to help with the important services that charities provide.  If you don’t need all your refund, consider giving some to your favorite charity.
  • Upgrade your skills – if you have lost your job due to Covid-19, think about upgrading your skills to make yourself more marketable when looking for a new job.  This is a good time to consider how you can upgrade your skills and you can use your tax refund to help pay for that training.
  • Finally, many things have changed in 2020 due to Covid-19.  Millions of people have received government support most of which is taxable, but no tax has been withheld from payments such as the Canada Emergency Response Benefit.   You might be surprised next year to find that you owe taxes on your 2020 return so it would be a good idea to put your refund in a savings account so that you have some money set aside if instead of getting a refund you have to pay. 
  • From an article by Tim Cestnick in the Globe and Mail 

What you Need to Know About Filing Coupled Tax Returns

By Randall Orser | Personal Finances , Personal Income Tax

The Canada Revenue Agency has specific requirements in place for married and common-law Canadians as they file their personal tax returns.

Married and common-law spouses do not file "joint" tax returns as is an option in the USA.  Each Canadian files their own return and indicates their marital status on it, and the identity of that person.  You do not get to decide whether not you claim your marital status on your tax return.  Once you are married you must include your spouse.  Once you are common-law which means you have been living together in a conjugal relationship for 12 months or immediately if you have a child then you must file as common-law you do not have a choice.

The CRA knows your true marital status based on information that you file, credits and deductions that you apply for and other information sent to them which relates to you. Since your marital status has a significant impact on your return - family incomes are combined for calculating income-tested benefits  such as the GST/HST credit or the Canada Child Benefit.  Couples also benefit from combining charitable donations and medical expenses.   If you have received benefits that you are not entitled to you will be asked to repay them with a penalty and interest and failing to indicate your correct marital status is fraud.

If you were married in the tax for which you are filing, you must note your status as married in the "information about you" section of your return, including information about your spouse including their name, social insurance number, net income and employment status.  If your spouse claims credits such as the CCB or GST/HST or if they owe any payments you must report that as well.  This is the same for common-law couples.  

Advantages and Disadvantages of Filing as Married

1.  If you both sold homes to buy tone together only one of the sold properties may be immune from taxes.  You may have to pay capital gains on one of the sales.

2.  If you are a married student with extra tuition to deduct, you may transfer your unused deductions to your spouse.  If your partner's income is below a certain threshold you may be able to claim an additional tax credit.  You can pool your medical expenses and apply the deduction to the partner who can use it best to pay down their taxes similarly with donations.

Filing Coupled Returns

Filing your spouse or partner's information on your return is pretty simple, however when it comes to deciding which expenses or credits to claim on each return it is more difficult and confusing.  It might be in the best interest of both you to have your returns done by a professional who knows all the ins and outs of filing tax returns for couples, so as to avoid mistakes resulting in extra charges and penalties.

Breaking Up

You also need to inform the CRA if your relationship ends as it may change the benefits due to you or the payments that you owe.  If you receive the CCB or GST/HST benefit payments, notify the CRA the month after your relationship has ended.  If you separate, you do not have to inform the CRA until the separation has lasted 90 days.   You can inform the CRA by logging into your MyAccount and completing CRA form RC65, Marital Status Change, or by contacting the CRA directly by phone.

If you live apart for reasons other than the ending of your relationship you still have to file as married for example if you live apart for work, education or medical reasons you are still considered to be married by the CRA.  Once you are married or divorced you will never be able to file again as single.

From an article by Turbo Tax November 2019

4 Tricks Wealthy People use to Reduce Taxes – you can try them too!

By Randall Orser | Investments , Personal Finances , Personal Income Tax

The more money you have the more tax planning you can do with it, but you don’t have to be in the top 1% of income earners to incorporate these tried and true tax strategies into your own planning.  

You might think that the wealthy have all the answers to making more money while reducing their tax bill.  From using offshore tax shelters to trust funds it seems the opportunities for them dodge the tax man are endless.  Tax lawyer Dale Barrett says  "There are numerous legal ways for the average tax payer to reduce their taxes depending upon the amount of money that they have to work with and their present and future employment status.  If you are a wealthy person or corporation you can take advantage of different tax structures and levels, but even if you are not part of the 1% you can still incorporate some of the tried and true tax strategies in to your own planning."

Sheltering Investment Income

For any Canadian with the ability to save money, the government makes available two main ways to shelter income - Registered Retirement Savings Plans (RRSP's) and Tax Free Savings Plans (TFSA's).

Contributions to a RRSP are tax free so that you don't have to pay any tax on them in the year that you contributed so it is a good idea to put away the maximum that you can into your RRSP.  There is no tax on your gains until the age of 71, at which point the taxpayer must start to withdraw their funds, which is treated as taxable income, but for many people their income will be much lower than when they were working meaning that they will pay less tax.

The money that you contribute to your TFSA is post-tax income and any interest, dividends or capital gains in it are tax free for life so you do not have to pay tax not your withdrawals.  Wealthy Canadians also use these ways to shelter money but they usually max out the amounts that they contribute every year.  However they go further by using TFSA's to fund for their children once they reach the age of 18 for them to put into their own TFSA's thereby transferring wealth intergenerational and keeping all the investment income tax free.

Incorporating

Many wealthy Canadians run a business to take advantage of lower tax rates, business write-offs and tax deductible individual pension plans.  If you are self employed or doing freelance or contract work it is worth considering incorporation depending upon your income.  If you are using all the money that you are bringing in then incorporation is not ideal for you.   However if that income even from a small side business is extra for you then incorporation is worth thinking about for the benefits.  In 2019 the small business tax deduction rate was 9% after the federal tax abatement meaning that you would have been taxed at the lower corporate  rate on your income.  The downside to incorporation is the amount of money that it costs to incorporate, and the accounting costs to do financial statements and tax returns which can run into the thousands of dollars.  So you have to decide if spending that is worth it for the tax benefits you will receive.

Income Splitting 

This is a an effective strategy for wealthier Canadians in the highest tax bracket, but there are benefits for the average Canadian.  If one spouse is in a higher tax bracket they can transfer some of that taxable income to another family member including children in a lower tax bracket.  

Permanent Life Insurance

Most people are familiar with term life insurance which covers you for a set time.  Permanent life insurance, on the other hand, lasts for life. This life insurance comes with an investment component that grows free of annual taxation.  Unfortunately most people are not able to afford this as it is sometimes 6 to 10 times the cost of term life insurance.  It is however an additional investment option for those who have already maxed out their RRSP's and TFSA's.  

Whatever your income if you have done a good job of your tax planning you will acquire some savings that will be beneficial to you even if it is not the thousands and millions that the wealthy have earned from their investments.

From an article by Julia Mastroianni Financial Post

Reasons why you Should (or Shouldn’t) do your own Taxes

By Randall Orser | Personal Finances , Personal Income Tax

For many people their tax situation changes every year, marriage, children, buying a house, starting a business are examples of life changes that affect your tax return.  So every year people have to solve the dilemma of doing their own taxes or hiring a professional to prepare their return.  As things change, the question is are you sure that you have all the knowledge to complete your return to your best advantage?

When you might be able to file your own taxes

1.  If you have confidence in your abilities as a numbers person, you keep track of all your receipts and transactions and you know all the ins and outs of your situation.

2.  If your tax situation is simple, you only have one T4, no dependants, no other investments or sources of income then you can easily file your tax return yourself.  

3.  If you don't own property or investments - once you acquire property, investments or retirement accounts then it can become difficult for you to up to date on all the deductions and credits that can be beneficial to your taxes.  In this case then it is probably best to let a professional do your return.

4.  Though the Canada Revenue Agency has a website it can sometimes be difficult to understand their jargon and the changing tax laws.

When it is best to hire a professional

1.  If you are not very good of keeping a track on your money, doing the books and tracking all the numbers is not for you then you should get in above your head and risk making a costly mistake.  You should hire a tax professional who can do the job correctly from the start and can save you the headache and even save you money in the long run.

2. If you have started a new business during the year hiring a tax expert will help you find deductions and prevent you from getting into trouble with the CRA so it is good idea to pay for their guidance, it will be worth it.

3. If your circumstances have changed during the year, you got married or divorced, had a child, or lost your spouse you may need help to file your return correctly.  This can also apply as your children get older and the tax credits and deduction that you usually claim expire.  If your child goes to college then  you can probably still claim them and their education expenses but a tax professional is the best person to know what is the best way to go in your situation.  

Benefits of doing your own taxes 

  • Less expensive
  • Takes less time
  • You know all the details of your situation

Benefits of hiring a professional to do your taxes

  • They are knowledgeable and up to date on the latest tax laws
  • You will get expert and experienced advice
  • They are an extra set of eyes that can catch mistakes
  • They become your advocate
  • They can find little known tax deductions for you
  • They can give you tax guidance throughout the year

So the bottom line is that it is up to you to decide what to do when it is tax time.  If you are not able to keep up then having a trustworthy tax professional to help you will make all the difference.

From an article in Careful Cents





Does the Canada Revenue Agency Have Your Current Information?

By Randall Orser | Personal Finances , Personal Income Tax

Yes, it’s only January but the end of April comes quickly so now is a good time to think about tax-related issues. One of those is, does the Canada Revenue Agency (CRA), have your current information. That could be a new address, marital status, and more. What has happened in your life this year, that the CRA may need to know about.

Moved? - If you’ve moved in the year, then you should’ve informed CRA as soon as you were at your new address. Even if you signed up for online mail, you should let them know about your new address; you can do this through My Account where you get your online mail.

Why is this important? Keeping your information up to date will ensure that you keep receiving benefit payments to which you may be entitled and important correspondence from the CRA. Otherwise, your payments may stop or you may not receive important correspondence, such as your notice of assessment.

CRA will not forward your new information to other government departments, except Elections Canada if you authorized such on your tax return. Contact other departments or organizations directly to give them your new address.

Marital Status?  During the year you may have gotten married, or lived with someone for 12 consecutive months during some point in the year. In either case, you need to inform CRA as soon as your marital status changes.

This also goes for getting divorced. If your marital status changes during the year and you are entitled to any Canada child benefit (CCTB) payments, GST/HST credit, or working income tax benefit (WITB) advance payments, you must let CRA know by the end of the month after the month of your divorce. In the case of separation, do not tell CRA until you have been separated for more than 90 consecutive days.

If you changed your name, let CRA know as soon as possible. Call them at 1-800-959-8281 to update our records. CRA does not accept changes of name by email or over the Internet.

Birth of a Child?

You’ve had a big event this year having a child, and you may be eligible for some tax credits from the government. The first one being the Child Tax Benefit (CTB).

To be eligible for the CCB, you have to meet all of the following conditions:

  • You must live with the child, and the child must be under 18 years of age.
  • You must be primarily responsible for the care and upbringing of the child.
  • You must be a resident of Canada for tax purposes.
  • You or your spouse or common-law partner must be:
    • a Canadian citizen
    • a permanent resident
    • a protected person
    • a temporary resident who has lived in Canada for the previous 18 months, and who has a valid permit in the 19th month
    • an Indian within the meaning of the Indian Act, if you are not a Canadian citizen

The Automated Benefits Application is a partnership between the Canada Revenue Agency (CRA) and the Vital Statistics Agency of the participating province. The CRA will use the information from the child's birth registration to determine your eligibility for benefits and credits.

You can use the Automated Benefits Application if all of these situations apply:

  • you are the birth mother of a newborn
  • your child is born in a participating province
  • you did not already apply using My Account or Form RC66, Canada Child Benefits Application

What you need to do 

After your baby is born:

  1. Complete your child’s provincial birth registration form.
  2. Give your consent to the Vital Statistics Agency to securely share the information from your birth registration form with the CRA.
  3. Provide your social insurance number (SIN) to avoid delays.
  4. Submit your form.

We recommend that you sign up for direct deposit before your baby is born to get your payments faster.

If you use the Automated Benefits Application, do not apply any other way.

Disability

If during the year you’ve become disabled, there are tax credits you can apply for to reduce your tax burden.

Disability Tax Credit

What is the disability tax credit?

The disability tax credit (DTC) is a non-refundable tax credit that helps persons with disabilities or their supporting persons reduce the amount of income tax they may have to pay. An individual may claim the disability amount once they are eligible for the DTC. This amount includes a supplement for persons under 18 years of age at the end of the year.

The purpose of the DTC is to provide for greater tax equity by allowing some relief for disability costs, since these are unavoidable additional expenses that other taxpayers don’t have to face.

Being eligible for the DTC can open the door to other federal, provincial, or territorial programs such as the registered disability savings plan, the working income tax benefit, and the child disability benefit.

Who is eligible for the DTC?

You are eligible for the DTC only if we approve Form T2201. A medical practitioner has to fill out and certify that you have a severe and prolonged impairment and must describe its effects. Answer a few questions to find out if the person with the disability may be eligible.

If we have already told you that you are eligible, do not send another form unless the previous period of approval has ended or if we tell you that we need one. You must tell us immediately if your medical condition improves.

Disability supports deduction

Individuals who have an impairment in physical or mental functions and have paid for certain medical expenses can claim the disability supports deduction under certain conditions.

Who is eligible?

If you have an impairment in physical or mental functions, you can claim a disability supports deduction if you paid expenses that no one has claimed as medical expenses. You must have paid them so you could:

  • be employed or carry on a business (either alone or as an active partner)
  • do research or similar work for which you received a grant
  • attend a designated educational institution or a secondary school where you were enrolled in an educational program

Only the person with the impairment in physical or mental functions can claim expenses for this deduction.

Home Accessibility Expenses

If you became disabled and had to make adjustments to your home for your mobility and use of the home, you may be entitled to claim expenses for doing so. What renovations or expenses are eligible and ineligible?

A qualifying renovation is a renovation or alteration that is of an enduring nature and is integral to the eligible dwelling (including the land that forms part of the eligible dwelling). The renovation must:

  • allow the qualifying individual to gain access to, or to be mobile or functional within, the dwelling; or
  • reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling.

An item you buy that will not become a permanent part of your dwelling is generally not eligible.

Eligible Expenses

These expenses are outlays or expenses made or incurred during the year that are directly attributable to a qualifying renovation of an eligible dwelling. The expenses must be for work performed and/or goods acquired in the tax year.

Work performed by yourself

If you do the work yourself, the eligible expenses include expenses for :

  • building materials;
  • fixtures;
  • equipment rentals;
  • building plans; and
  • permits.

However, the value of your own labour or tools cannot be claimed as eligible expenses. This includes someone who is related to you, unless they have a contracting business and are registered to GST/HST.

If you have had any changes in relation to the above, it’s best to inform the CRA as soon as possible. If you don’t and later changes are made to any credits you were receiving, then CRA will claw back any overpayments, and charge penalties and interest.  At the same time we always appreciate knowing about any changes so that we can keep your file up to date.

Personal Finance New Year’s Resolutions

By Randall Orser | Budget , Investments , Personal Finances , Personal Income Tax , Retirement

The start of a new year is the perfect time to take stock of your financial situation and see how you can make changes to improve it.   You need to make firm resolutions to help you get closer to your financial goals whether it be saving for retirement, a down payment for a house or starting a business.  Here are some considerations that you might want to add to your resolutions list. 

RESOLVE TO DO BETTER IN 2020 – Identify the financial mistakes that you made in 2019 and how you could have avoided them so that you are armed with that knowledge to help you avoid making the same mistakes in 2020.

Prioritize Your Debts – Make a list of all your debts and organize them according to the annual interest rate.  Plan to pay off those with the highest interest rate first, these will probably be your credit cards.  It makes no sense to save money in an account with a low interest rate when you are paying high rates of interest on your credit cards. You might want to also think about selling any assets that you might have such as matured savings bonds and using the money to pay off high interest debts. 

Open a Registered Retirement Savings Plan – It’s never too late to start saving for retirement.  Meet with a financial planner and let them advise you about the right plan for you.  Even if you only contribute $50 a month it soon starts to add up and any contributions will help to lower to your income tax bill. 

Rebalance Your Investment Portfolio -  Meet with your financial advisor to ensure that your investments are still working for you, and that once attractive investments are still that way or no longer appropriate.  If your financial goals have changed then you may need to rebalance your investment portfolio.  

Set up an Automated Savings Plan – If your willpower to save money is not too great then consider setting up an automated savings plan with your bank.  “Paying Yourself First” is one of the most effective ways to save money.  With an ASP a specific amount of money will automatically be transferred to your savings account at regular intervals before you have the chance to get your hands on it.  With regular deposits like this earning compound interest your savings will grow faster.

Collect Your Change – You may think that this is not a great way to save money, but you could be surprised!  Whenever you pay with cash save the change or take the money that you get back from recycling bottles and cans at the store and put it into a jar. At the end of the year take the change you have accumulated and use it to pay down debt.  

Commit to No Spend Days – Plan on taking regular no spend days or weekends, eat at home, find free entertainment and skip shopping.  This is probably best done during cold and rainy weather that makes you want to stay indoors.  Maintain the habit throughout the year to get the best financial benefit.

Get Healthy Without Joining a Gym – Save money on expensive gym memberships by doing free exercise videos on-line, working out at the park or taking winter hikes.  There are a number of free apps such as Fitbit Coach and Nike Training Club that you can use to do workouts at home.

Cut Back on Your Bad Money Habits – these usually include eating out too much and buying too many clothes. Identify what makes you want to indulge in your bad habits and try a different activity to replace it.  If you eat out too much try prepping your meals for the week on Sunday and ask friends and family to help you. 

Start Using Personal Finance Software -  This will enable you to keep track of where your money goes.  If you don’t know how much you spend on coffee, haircuts, movie tickets or eating out how can you start to cut your spending?

Read a Financial Book Regularly -  Some books recommended for Canadians are:

Personal Finance for Canadians for Dummies (2018) Eric Tyson

Millionaire Teacher (2nd ed 2017) by Andrew Hallam

Wealthing Like Rabbits by Robert R Brown

Worry Free Money (2017) by Shannon Lee Simmons

Happy Go Money (2019) by Melissa Leong

The Value of Simple (2018) – John A Robertson

The Latte Factor (2019) David Bach

Retirement Income for Life (2018) Frederick Vettes

How Stores Get You to Spend More Money During the Holiday Season

By Randall Orser | holiday season , Personal Finances , Retail

The Christmas Holidays are the most expensive time of the year for most of us.  After buying gifts for family, friends, clients, Secret Santa exchanges and others, we are left with huge credit card bills or empty bank accounts.  Although this is the season of buying retailers make it even harder on our wallets by employing a number of tricks and techniques to get us to part with even more of our money.

 1.   Deceptive Pricing and Clearance Pricing - Our minds are focused on saving money so if we see an item priced at $19.99 but reads was $39.99, it seems like a great deal and we are more likely to buy it because our brains are wired to feel that we are getting something for nothing.   An identical item priced at $19.99 will not sell as well because it is not seen as a deal.  In 2016 some American stores were sued over the deceptive practice of marking up the price of merchandise just to mark it down again so don’t always believe what you see, there is a good chance that the item is $19.99 all year.

2.   Designing the Store Layout to Maximize Profit - Retailers spend a lot of money researching and planning the best layouts for their stores to encourage you to put the most profitable items in your shopping cart.  Items placed at eye level are most likely to earn the most profit margin for the store as opposed to those on the bottom shelf.

As most people are right-handed and will reach for an item with their right hand so stores will put eye catching displays to the right of the entrance to their store.  These will either be high margin items or items that they want to move quickly.  A good shopping strategy is to veer left when you go into a store and check out the top and bottom shelves where you might find better deals.

3.   Ending Almost Every Price with a 9 - This is a psychological trick that most of us fall for.  $199.99 is a lot more attractive price than $200 even though there is only a cent difference.  People focus on the first digit in the price, 1 being less than 2.  Once the price jumps to $200 it is seen as being between $200 and $300 even though again it is only a cent difference.  We need to train ourselves to see $199.99 as over $200 as that is what it will be once taxes are added.  

4.   Helping Customers get into the Mood to Spend - You may already have Christmas overload with all the smells, sights and sounds that get you into the festive spirit.  Retailers want to make sure that you stay in the mood to give gifts and set up their stores with bright red and green, cheerful colours and lights, holiday music and even offer mulled wine.   When restaurants are busy, they want you to leave quickly, so one trick is to switch up the festive music for something more aggressive and increase the volume.  Tip – ignore the sensory overload, make a list and keep to it, get in and get out!

5.   Specially Packaged Gift Sets and Bundles can Cost More - Stores love to put together gift packs and sets which makes it easier for shoppers.  Beware! you are not always getting the best value for your money.  The cost of these bundles can be greater than buying the items individually, so make sure you are getting a deal before buying a gift set.

6.   Placing Lower-Priced items Next to Expensive Items – this will get you to compare items that appear similar but are different.  By putting a less expensive item next to an expensive one it looks like a steal, but the store could actually be charging more than their competitors.

7.   Offering Double-up Deals that You Don’t Need but Find Hard to Resist – “Buy One Get One Free” is something that is difficult to resist but sometimes taking that deal is false economy.  You may think that you are getting something for nothing, but you need to be aware of the price of the item in other stores.  You may not have to take the deal to get a good price on the item that you originally wanted.

8.   Providing Easy Credit Options -  Retailers know that customers cannot always pay for big ticket items so they offer you credit so that you can spread the payment over time without interest, but you can be sure that their profit margin is built into this.  Customers need to be sure that they are able to pay within the interest free period because the debt will eventually become due and all the interest accrued will be added.

9.   Making Clearance Items Harder to Find – Most stores have an aisle or “end cap” for their sale and clearance items.  In December these clearance items become harder to find meaning that customers have to search for them.  Retailers know that in the frantic rush to get gifts most people will be willing to pay full price.

10.  Offering Customer Incentives – Many stores offer free gifts with purchase you will see many of these at the cosmetic counter.  If you spend a certain amount of money you will get a free gift which encourages those who would not normally buy to put their money down.  Other incentives include coupons and discounts.

Despite using these techniques to encourage you to part ways with your money, stores are not trying to be dishonest.   They are just trying to get you to spend more, thereby increasing sales and keeping their staff employed.   Just be aware of these tricks and you will be able to do your holiday shopping without spending too much.

Tips to Avoid Holiday Spending Mistakes

By Randall Orser | Budget , holiday season , Personal Finances

It is very difficult not to overspend when buying Christmas gifts, we all do it!  This year Canadians will spend an average of about $1593.00 up slightly from $1563 in 2018.   Although 41% of this is spent while shopping on-line, the remainder 59% is spent in brick and mortar stores.  As overspending at Christmas can adversely affect our finances going into the New Year it is important to make and stick to a budget when buying gifts.  Here are five ways you can save money on Christmas Gifts.

1.   Make a Holiday Budget and Stick to it

  • Allocate money out of your monthly budget to a gift fund
  • Make it a creative challenge to give carefully thought out gifts which have more meaning than expensive ones, think about giving something home-made.
  • Consider expectations set by family and social situations when making up your budget.  Your family might decide to only give gifts to the children but if not ask them to consider a lower spending limit especially if you have a large family.
  • Start shopping early, shop sales and purchase items throughout the year, this will make holiday gift buying less stressful.
  • Don’t forget to include travel, Christmas Cards, Wrapping, Decorations in your budget.

2.  Don’t Use Credit – if you charge everything to your credit card you will be paying for Christmas well into the New Year or even for years afterwards.  When people are shopping at Christmas, they tend to use their credit card instead of cash.  Use your debit card instead of your credit card, if you have planned carefully all year you will have the extra money in your bank account to do just that.

3. Plan Your Christmas List Well in Advance - This will help you to buy gifts throughout the year at sales such as Black Friday, Cyber Monday and if you are really organized even Boxing Day.  Make sure you keep a list of who you have bought gifts for to make sure that you do not buy for a person more than once or miss anyone out. 

  • Keep a running list of things to buy and watch out for the best price.
  • Planning ahead takes the worry out of finding the perfect gift and the last-minute gift buying panic.

4. Don’t forget to shop around – To save money take time to comparison shop. You should check prices on-line at two or three stores before you go shopping to make sure that you are getting the best price.

5.   Don’t leave gift buying to the last minute – Panic buying will more than likely mean that you will spend more as your choices will be more limited.   Plan to get all your shopping done before the holiday season begins.

6.    Buy one or two Extra Gifts – You may be invited to last minute parties and need to take a gift which can throw off your budget.  Buy a couple of generic gifts during the year so that you have them on hand if you need them.  A bottle of wine is always a good choice to take to a Christmas get together.  

  • Think about buying gifts that you would enjoy in case you do not use it.
  • Remember you can always return unused gifts.

7.   Encourage Christmas Gift Exchanges – Secret Santa gifts or draws are a great way to save money.  

  • You will only have to shop for one person instead of many which works very well in a work or large family situation.  
  • You may also be able to purchase a nicer gift for the one person than you would buy for several people. 
  • People love Secret Santa as it makes their shopping simpler.

8.   Give a Christmas Gift to Someone in Need - Instead of giving gifts to family and friends who do not really need anything, consider donating to a charity in their name.  You can also purchase an extra gift while out shopping and drop it off right away.  Doing good by giving gifts to those in need instead of family members will help to get you into the holiday spirit and it can also save you money.  

Cyber Monday or Green Monday – Will you be Shopping On-line?

By Randall Orser | Budget , holiday season , marketing strategy , Personal Finances , Retail

Most of us have heard about Cyber Monday, the first Monday after American Thanksgiving when retailers offer many deals for us to buy on-line, but what is Green Monday?  

Green Monday falls on the second Monday in December, the name is thought to originate from the green colour of the American dollar.  The term was originally coined by Ebay in 2007 to describe the best sales day on their website in December.  Green Monday marks the 10-day shipping period before Christmas and is so successful because people realize that their time is running out to buy and ship gifts to arrive for Christmas.

As other retailers also adopted this day to offer their own seasonal deals (some call it Cyber Monday 2) Green Monday became the third largest shopping day of the season with sales in the U.S. of over $1.6 billion in 2016.  The retailers that usually participate in Green Monday are Walmart, Amazon and Best Buy and though popular in the U.S. the day is not as important on the calendar of Canadian shoppers, but it will probably grow in popularity in the future. 

The first Monday after American Thanksgiving was named Cyber Monday by Shop.org in 2005, although at that time as not many people had high speed internet connections they did not participate.  However, as connections speeds have increased so has the spending on Cyber Monday.  It was the biggest shopping day of the year both in 2017 and 2018 surpassing Black Friday.  Nearly a third of shoppers in the U.S. begin on the day before Cyber Monday and top stores such as Amazon and Walmart start cyber week sales on Thanksgiving Day.

Why Cyber Monday is so Popular

  • According to Adobe Digital Insights 40% of shoppers like the 24-hour shopping convenience.
  • The same number of shoppers wanted to avoid the Black Friday crowds.
  • 30% of shoppers enjoyed the ability to easily compare prices on-line.
  • Almost 90% of retailers offer Cyber Monday sales with 45% offering coupons or a percentage discount.
  • Over a third of retailers offered free shipping and 36% of shoppers said they would increase their on-line shopping if shipping was free.

A few on-line shoppers surveyed said that they would not buy on-line due to expensive shipping charges, or they didn’t like that they could not see or handle their purchase, or thirdly did not like to wait for their items to be delivered.

Mobile Technology and Social Media

Over a third of shoppers said that they would go to social media to get information about Cyber Monday deals usually on a company’s Facebook page and two thirds check out reviews on the company website before making a purchase.   More than half of on-line retailers make sure that they promote their sales on social media and that their websites are optimized for mobile devices.  

Impact on Brick and Mortar Stores

On-line retailing is growing by almost 10% annually and in 2020 is expected to reach $523 billion(USD).  In 2017 over 60% of people in 16 countries said that their everyday transactions were on-line rather than in-store.    This growth in on-line sales is having an impact on brick and mortar stores with more and more declaring bankruptcy every year.  It has been predicted that 75% of shopping malls will close in the U.S. in the next five years and those that do survive will cater only to high income consumers.  We can see from the number of closed stores in our malls that the same pattern is being repeated in Canada.

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