Archive for April, 2010

Taxes done- insert BIG sigh of relief here!

Yesterday I was very thankful for a decision I made about 16 months ago.  That decision was to try and determine how much taxes I will owe through self-employment income and put that amount of money away every month in a high-interest savings account.

In Canada, we pay federal tax, provincial tax and Canada Pension. Each month I took a chunk of money and dutifully transferred it into an account that I only use for parking taxes and savings. This isn’t even in the same bank that I use for my day-to-day banking. When I log into my normal bank accounts, I don’t see it.  I know it’s there, but it’s not a temptation for me. I mentioned the other day, I’ve come to accept that it is not my money, I’m merely parking it for the taxman.

Yesterday we poured over the numbers and came up with an amount owing. We also determined an amount to pay in instalments for this year, for which Canada Revenue Agency will come calling for the first one right away. Then there was the bill to the nice fella who helped do the math.

There is just enough money in this parking lot account to cover off all of my obligations.

I feel so relieved. I can’t express how relieved.

For 16 months I only hoped I was putting away a proper amount of money. I’m not a tax expert. I’m not even good at filling out the form. That’s a long time to be doing something just on faith, and hoping to heck it works out. Did I mention I’m relieved?

What I also learned is that the amount I put away is almost exactly the right amount, and for the year ahead, I’ll simply stay the course.  That’s also good news. It means no budget modification based on yesterday’s assessment. The only thing I actually did adjust was anticipated interest revenue.  Although they call it “high-interest” you know “high” is a relative term these days. The money I collected on the larger balance in that account will basically disappear come April 30th, and it’ll build slowly again from quarter to quarter.  That’s fine – it’s only a few bucks anyway.

Over the last couple of weeks I was secretly hoping I may have tucked away a bit too much money so I could put a few extra bucks toward debt retirement or replace the kitchen floor I’ve come to loathe. But there isn’t enough for either of those things. When I told my daughter that the floor would have to stick around for a while, she said “there’s always next year!”  She’s exactly right! It’s a reasonably small expense, and next year when the debt is gone, I can plan that expense and save for it.

There is a bit more good news from yesterday’s session too. I had forgotten the government would be providing taxpayers with a $1000 cheque for the Harmonized Sales Tax to be introduced in July.  So in July, a month when I pay the mortgage three times instead of two – a month that the mortgage just cripples my budget, I’ll get a little relief thanks to the HST pay out. Most of it will go to debt retirement.

My taxes have been a little black raincloud following me around for the past few months. It’s good to see the clouds clear, see the sun shine and hear the birds sing again! How are things with your taxes this year?

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The CBC thinks Home Insurance is a Hot Topic too!

Imagine my shock when the CBC’s anchor, Peter Mansbridge, led last night’s news with a story about skyrocketing home insurance rates. If you’re a Canadian homeowner, you may want to tune in to Marketplace tonight with Wendy Mesley, or set the PVR if you’ve got one.

Here’s the skinny: according to the news report last night, and the trailer on the CBCs website, some insurance companies are not only looking at your home’s replacement value, the location, age, etc, they’re also checking out your credit score. Why? According to the segment aired on The National last night, the insurance companies are suggesting that those with poor credit, are less likely to do necessary home repairs and maintenance, which spell greater risk for insurance companies.

One gentleman was featured who had remarked that his home insurance had almost doubled in the last year. What had chanaged? He’d claimed bankruptcy.

If this is indeed the case, this will certainly have an impact on new immigrants, single parents, the unemployed and underemployed. If you go to the link above and check out the video, you may want to check out the comments. Some of the comments, likely from those familiar or involved with the insurance company, are noting that most of us likely sign a waiver that allows the insurance company to collect information for the purposes of assessing the application, including credit information.

This has me wondering if my increase is really due to that increased storm activity I was told about. You can be assured I’ll be calling my insurance company again today. Although I’ve already sent them a cheque for that increase. I’ve also already shopped around and found that my existing insurance company still offered me the best rate.

Maybe the thing to do is check my credit score. It’s been over two years since I checked myself out. Honestly, I really don’t think my credit score is bad. The bills are always paid on time. There’s no co-applicant on my home insurance though, so perhaps they think I’m a high risk. They don’t know that I’m totally committed to keeping my home in good repair and building up a home maintenance fund and an emergency fund.

This news is even more incentive to get out and stay out of debt. Debt costs are much higher than just the interest that accumulates. Perhaps I should thank the insurance companies for making me a bit cranky this morning, and making me even more convicted to stay on this course I’ve planned for my family. Game on.

Drugs in my Pocket Book

There are three people in my home. Me and my two daughters.

There is only one person in my house that is covered for any health care expense, including prescriptions, that’s my youngest.  My youngest has Lupus. If you’re not sure what Lupus is, or you’ve never heard of it, you can check out the Lupus Foundation of Canada’s website here.

She has a mild case. I’ve seen many kids who don’t have it as easy as she does. She’s enjoying particularly good health over the last number of months.  We’ve certainly endured a number of particularly bad spells in the past.

Yesterday, she had a routine visit with her specialist. Lupus can affect people very differently. One of the symptoms that my daughter suffers with is joint pain and swelling, like arthritis. This isn’t entirely under control yet.

This means that somedays she can’t pick up her pen at school to take notes, because her hand won’t close around the pen. It may mean that it’s difficult to open the jar of peanut butter, or even grab it off the shelf. Somedays, she can’t tie her own shoes or do up her own coat. There’s been days on end when I’ve had to carry her down the stairs because she’s unable to walk.

Her specialist has suggested a new drug to try, which he hopes will keep her joint pain at a minimum and make her more comfortable. This new wonder drug is $700 a month!  That’s an additional $700 on top of the four other prescription drugs that she takes daily, as well as supplements like folic acid, vitamin d and calcium.

The day before yesterday, I’d already dropped $300 in prescriptions for my eldest daughter, who is a type 1 diabetic.

I’m particularly thankful that the daughter with the heaviest prescription costs has some coverage. Still, we have outstanding needs that aren’t covered. One of my new goals this month will be to look into prescription coverage for my eldest daughter. Anything I’ve looked into requires a health questionnaire. I would imagine as soon as any insurance company realizes she’s on two different types of insulin, they’ll make the rates high enough that could make any benefit a wash.

With only one week of April under our belts, we’ve spent $1300 in total on medical needs this month. That’s likely it for the month (knock on wood). Of that, $700 will be reimbursed. I certainly need to revisit my medical budget, and jack it up a bit.

Our medical needs are now officially bigger than our grocery budget.  We took a bad card on the genetic poker game. Still, because I spend a fair bit of time in major health care institutions, I see an awful lot of families with far bigger issues than we deal with. The diseases in my house are under control and my kids are happy and totally functional in their day-to-day life.

We’ll just always have a particularly good relationship with our local pharmacist.

House Insurance: I lost the negotiations

A couple weeks ago, my home insurance company sent my renewal notice for the next six months of coverage. For those of you who read my rant then, you may recall they were asking for a whopping 35% more than they did six months ago.

I vowed to shop around. (I have “My Mamma told me” in my head now). Since that time I’ve chatted with two other insurance companies, and they’ve both weighed in.

To my absolute shock, I’m already getting the best deal. The next best quote was another $20 a year.

Honestly, a 35% increase? Cripes. Just when you think you have a handle on a month, somebody throws a monkey wrench into it. Isn’t it just always the way?

No wonder a budget has to be fluid. If I didn’t have debt, I’d have room to dart and dodge these things. But alas – I do have debt, and it seems very little room with the fancy footwork.

I’ve sent the renewal notice back to my original insurance company, complete with my cheque for the full payment. With a heavy sigh I walked it to the post box and sent it off. That’s what I get for living in a neighbourhood where the real estate value is going up. You can’t have it both ways, an increased house value and a flat-lined home insurance policy. The world just doesn’t work that way!

With Easter still on my mind, I will just count my blessings. I have a home. I have a home that’s increasing in value. I live in a neighbourhood that has a reputation for some crazy wind storms and big, old trees fall on cars and sheds and homes. I live in a home that allows me to live a normal life without a car. I live in a reasonably safe city. I will accept that it will cost me about $1100 a year to insure this nice home. Small price to pay for peace of mind. I’ve spent $1100 on things that have given me nothing in return, so I’ll stop complaining, adjust the budget and move on!

Death and Taxes

Both have been on my mind.

Tax season is here. The deadline to file personal tax returns is April 30th. This is a very weird tax year for me. I didn’t pay any taxes through payroll deductions last year (2009) because I’ve been contracting my services out. In simpler terms, I’m self employed.

Knowing that I have to pay taxes, I have put a sum of money away every month in a high-interest savings account, and just forgot about it. I have truly learned to look at the balance, which looks pretty nice right now, and understand fully that it’s not mine, it belongs to the taxman. Now, somebody is working diligently on my tax obligations and soon he’ll tell me what I owe.

The big question is – will it be enough? If it’s not enough, I have a problem. I’ll have to add to my debt load in order to satisfy my obligations. If it’s just enough, that’s fine.  If it’s more than enough, I can amp up my debt repayment, and perhaps add a bit more to emergency savings. This will all shake down this month. I’m really not sure what to prepare for. I don’t pretend to be a tax expert.

Over the Easter weekend, I visited with family. My father passed away last year, and my step-mother is still trying to figure out her finances without his income. While I thought she’d probably be okay, and still think she’ll be okay in the longer run, now she has to file his tax return. Yes, when you’re dead, the government still wants you to settle up with them.

Since he was sick for a long period of time (Leukemia), he was obviously not capable of working. He collected Employment Insurance for a number of months. What’s really weird is that no taxes are taken off your Employment Insurance benefits. My stepmom and father, who were dealing with hospitals, chemotherapy, radiation, were happy to just let the cheques be automatically deposited in their account and move on. Now, there’s a tax bill due. Just when my stepmom figured that things were mostly all dealt with eight months after my father’s death, there’s a tax bill. For her, just like me, it’s a question of how big is the bill.

Unlike me, my stepmom is a senior citizen, she does not work and will never likely work. She lives on her government pension, a small rental income from a basement apartment, and a portion of my father’s pension. The house is paid for, but there are still municipal taxes, utility bills, etc. Oh, and a person has to eat! Dad had life insurance, but it wasn’t enough to cover his obligations. It was enough to cover his funeral, but not the money owing on the boat, or the camper, or the hardware store credit card. I’m sure he never once thought about his tax bill after he was gone. Who does? If it’s a big tax bill, how will she pay it? It’s not like she can ask for extra shifts at work or take on a part-time job.

While I’m nervous about seeing my own tax bill soon, I’ll be glad to get this little piece of my financial puzzle out of the way and move on with it – whatever the outcome is. Meanwhile, at some point soon, I’ll have to review my own life insurance coverage and make certain that it’s enough to cover all my obligations, even that final tax bill.

March’s budget report card: D

Yesterday, I thought for sure I would have to give myself an F, a failing grade.

Why? Because for the last 10 days, I was confident that I’d spent more than I earned in March. Not a lot, but even one dollar is too much. The plan is to not overspend. If I did, it means I’d used credit from somewhere in order to make things work.

Although I was optimistic last week that I’d be .76 in the black, I received an unexpected (and quite minor) bill from my retirement savings investment company for a fee of $8.72.  That made the budget dip into the red. Crap.

This morning, as I checked my bank account, I realize that I actually earned more interest on one of my savings accounts than I anticipated. Because I also started an emergency savings, and put that in a high-interest account, I also got a few cents there.  Turns out saving money really is better than debt! Eureka!

Bottom line: I’m in the black by $2.05. Not bad considering I had projected my bottom line to be $2.45 this month. Pretty damned close.

Okay, so why the low grade? If you’ve been reading my posts, you’ll know that I neglected to budget for a couple of big ticket items which caused me to re-jig my budget in March. Namely a few visa charges from December, as well as an annual fee for a credit card. This put me into crisis management in early March.

My failure to acknowledge my visa charges, and my forgetfulness over my annual fees for another credit card have cost me high marks for March. There are no excuses for ignoring bills. None.

However, since those dope-head moves, I’m happy with my March performance, and would have been even if I had to report a failing grade this month.

Here’s the highlights:

  • underspent by $30 on home maintenance
  • underspent by $17 on a budget I had given myself to go to a used book sale
  • had to deposit less than planned into emergency savings to balance the books (not good, but still managed to tuck away $100)
  • overspent in veterinary care (I had nothing budgeted, and the 15 year old cat had a few rough days)
  • overspent in medical expenses (again…perhaps I need to adjust upward for future)
  • underspent in groceries
  • earned an extra $113 in my part-time gig (in fact, went looking for a few extra shifts because I knew things were going to be tight)
  • rewarded a good samaritan $40 for finding a bracelet my daughter had lost at school

March ends my third month getting serious about my money management. Yesterday I blogged about some of my key learnings. There has been a lot that I’ve absorbed this month.

I can’t describe how good it feels to be rock-solid sure that I didn’t spend more than I earned for three months in a row. It feels fantastic! My line of credit is now under $10,000 owing, way under. It’s great not to see two numbers before that first comma.

This isn’t easy, but it can be done. Game on!