The Free Press, January 10, 2013

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THE FREE PRESS Thursday, January 10, 2013

www.thefreepress.ca

Get meticulous about tax time

Keeping your finances under control

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iving from one paycheque to another, never knowing the extent of your debt, and excessive use of credit cards are all situations that can cause serious problems. In other words, learning how to control your money is an absolutely essential step in getting out of financial difficulty.

There is only one real solution to taking control of your financial situation and knowing exactly where you’re headed: a budget. That’s right, this good old method is still the only way to get yourself out of the red and into the black. Knowing how much money is coming in and how much money is going out every month allows you to make wiser decisions regarding your expenses. And when you know your limits, it is much easier to avoid falling further into debt.

A sheet of paper and a pencil is all you need in order to figure out the

overall state of your income and expenses. On one side note all your sources of income: salary, bonuses, tips, government allowances, etc. On the other side, mark down all your expenses. This will include both the unavoidable (such as rent, heat, telephone, and transportation) and avoidable ones (cable TV, clothes, movie rentals, newspapers, gym membership). Subtract your expenses from your income, and now you know what you have left at the end of the month. Think about saving if you have a surplus. If there is a deficit, ask yourself what expenses you can cut.

The Internet is full of sites offering useful budgeting tools for free. Worksheets, calculation sheets, and other tools can help you create a balanced budget.

Just remember, though, that in order to gain control of a risky financial situation you will have to be honest — no lying to yourself!

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re you the type of person who leaves documents and receipts lying around in a kitchen drawer or on top of a bookshelf? If so, you might appreciate a few tips that will help you get organized as tax time approaches, usually much faster than we’d like.

The end of the calendar year is a great occasion to sort and file all those statements and bits of paper. Don’t forget that the management of personal documents is an essential precursor to the management of personal finances. The documents that you need to stay on top of include last year’s statement of income and investment incomes, receipts for charitable donations, prescriptions, health care consultations, professional services, expenses related to your work, documents concerning public transportation, and the like. When it’s time to file your return in the spring, you won’t lose time searching for all these things.

Store these papers in a box or legal size file that you can give to your accountant, if you have one. If you don’t have one, or would like to hire a tax-return service this year, start looking for one right now.

A friend or family member who you trust might be able to refer you to one.

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You know what they say about death and taxes, so you’d better be prepared!

Stay motivated: set small financial goals

ost people find it very difficult to stick to the financial resolutions they’ve made. Here are a few tips to help you stay on track.

1-Remind yourself of your financial goals If you started off the New Year with a plan to reduce your debt load in order to save on interest payments, now’s the time to take stock. Be objective. Don’t let yourself doubt your financial goals. It’s much easier to stay motivated if you set yourself small goals and reach them one at a time.

2-Take control of your credit card One of the most important steps in improving the state of your finances is to

take advantage of your credit or improve it by better understanding your monthly credit card statements. Make the most of your credit cards by paying off the balance and using them as a form of borrowing free money. That will only work, however, if you pay off your entire balance every month in order to avoid paying interest.

3-Anticipate your future financial situation Consult your financial planner so you can adapt your strategies to new fiscal laws. This includes income tax, investment returns, retirement, estate planning, trust funds, and emergency funds. You will be able to enhance the value of your assets by being far-sighted and knowledgeable.

4-Automize your system Once you have established a realistic financial plan, take advantage of available technological tools to keep your finances on the right track. Budgeting and bookkeeping software can also alert you to any problems.

Zonya Knooihuizen Mortgage Broker

Dominion Lending Centres – East Kootenay Mortgage 462 2 Avenue, Fernie BC Independently owned and operated (250) 423-1864 Fax (250) 423-6761 Zonya@shaw.ca

When calling around to accountancy firms or tax filing services, be prepared to ask how much they charge and whether they charge by the hour or a fixed amount. Find out what their credentials are and whether they have experience with individual tax returns. Ask, too, if their knowledge of tax law, tax exemptions, and deductions at source are up to date.

It’s much easier to stay motivated by setting yourself small goals and reaching them one at a time

5-Stay focused Keep your goals at the centre of your attention at all times. Remember that building your financial independence will allow you to avoid being financially reliant on someone else.

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Are debit cards getting us into debt?

ccording to statistics that date from last June, the level of debt in Canadian households reached almost 150 percent of available income. Your available income is your gross income, from which both federal and provincial income taxes have been deducted. If you are one such indebted household, here are a few reflections that might help you regulate your spending.

People often point fingers at credit cards as the major cause of their debt woes. But did you know that debit cards can also be instruments of debt? Practical and easy to use, debit cards allow us to pay with “cash” practically everywhere we go without having to carry around large sums of money. But there is a flipside to this coin: unlike when we have the visual of a quickly reducing stack of bills, debit card money flies out of our

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bank accounts with barely any notice.

Debit cards can trick us into thinking that we’re smart enough to dodge the high interest charges of credit cards, but they don’t protect us from the impulse to splurge on things we can’t cover with the bill-fold.

If you are a diehard fan of debit cards, try this experiment the next time you purchase an expensive item: prepare to pay with cash. Seeing all those bills leaving your wallet with your own eyes will give you a much clearer idea of the amount you’re about to spend.

This simple experiment can be very convincing, especially for compulsive — or impulsive — buyers. Of course, debit cards can be indispensable tools on occasions when you don’t want to carry large amounts of cash. It all depends on how they are used.

A good credit rating makes for a better insurance deal

on’t be surprised if your insurer asks your permission to check your credit rating. More and more insurance companies use credit ratings to establish the amount of the premium you’ll have to pay.

You are not obligated to agree to this request. You won’t be refused insurance just because you don’t allow your insurer to consult your credit score.

However, if you are in good standing and you agree to let them consult your file, there’s a good chance that you’ll benefit from a rebate on your insurance premium.

Why? Because studies have shown that people who have a good credit rating are less likely to make insurance claims. The

reasoning is simple: if you manage your finances competently there’s a good chance that you’ll be just as meticulous in looking after your belongings and thus less at risk of making a claim.

Where damage insurance is concerned, lower risk translates into a considerable reduction in the premium to be paid.

Before taking out or renewing an insurance policy, it would probably be a good idea to check your credit score with a credit rating agency. Even though you can have your credit file mailed free of charge, you will still have to submit your request by Internet and pay a set amount in order to obtain your credit score. Consulting your credit file will not affect your rating, and who knows, it could help you save some money.

Be our guest

You deserve an enjoyable retirement, but is your plan up to par?

Join us to learn about how you can meet your retirement goals.

Retirement Planning Seminar Hosted by CIBC in Partnership with the Fernie Chamber of Commerce Thursday, January 24th, 2013 6:00pm to 8:00pm Park Place Lodge

Presenters to include: Daryl Skogstad, CFP CIBC Asset Specialist Darrell MacKay, CFP, RRC CIBC Financial Planning Consultant Financial Advisors-Amy Pagliaro, Tanya Utenda and Sean Moore in attendance

Please RVSP by Monday, January 21st to: Tanya Utenda, Financial Advisor, CIBC Fernie/Sparwood 250 423-4426 ext 234 OR Rachel Bone, Membership Services, Chamber of Commerce 250 423-6868

THE FREE PRESS Thursday, January 10, 2013 17

Don’t throw them out!

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eople should keep all pertinent financial documents, receipts, and statements for as long as there is a possibility that tax authorities could propose an audit. Unless you want the federal or provincial tax bureaus to do their own re-assessments without any substantiating documents from your files, you should be able to supply all documentation immediately upon request.

the first notice of assessment for a given year. There is no time limit if a declaration was never filed or if there is suspicion of fraud. Self-employed people are required to keep all their documents and records for a period of six years. This time period also applies to all taxpayers who wish to submit a request for supplementary deductions following the initial filing of an income tax return.

If these documents are digitalized, you must be able to print them at any time. If you can’t supply the required receipts or supporting documents, you could end up with a refusal of credit, changes to deductions that you had earlier claimed, or delay in the treatment of your current tax return.

It is a grave mistake to not keep all the pertinent documents and receipts in your files under the pretext that you filed your returns electronically. Documents that need to be kept include T4s, which are proof of employment income, medical expenses, contributions to registered retirement savings plans (RRSPs), alimony and child support statements, childcare costs, moving costs, charitable donations, and the like.

Governments can issue an adjusted assessment to individuals in the threeyear period following the date of

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