Millions of Canadians found themselves financially distraught amid the COVID-19 pandemic. Fortunately, the Canadian government came through in a big way with the Canadian Emergency Response Benefit.
CERB provided the financial relief consumers needed, but come tax time, you may owe more money than you thought because of the benefit. Depending on your financial situation, you may even have to pay back CERB, or a portion of it.
Tax time can be exciting or overwhelming, depending on whether or not you get a refund. If you get a refund, you feel like you’re on top of the world. If you owe money, it can send your budget into a tailspin.
Relying on a refund is not the right choice. Everyone should be prepared to NOT receive a refund, by planning and budgeting throughout the year.
At Creditaid, we want our clients to be prepared for the tax season financially, rather than letting it derail their finances and cause financial destruction. It’s not as hard as it seems. You just need to budget and plan long before tax season begins.
A proper budget makes room for needs and wants. Sometimes, though, it’s hard to differentiate between the two. It can be subjective, but certain things are clear-cut and easy to determine.
So how do you tell? Let’s look at the basic definition of each.
What are Needs?
Needs are items you must have to survive. Clothes, food, proper healthcare, and transportation – those are needs. You can’t live without them, and these apply to everyone.
Other needs may be more individualized. For example, one person may NEED dental insurance because they have extensive dental issues, while another person may only go to the dentist for routine cleanings twice a year and may not consider dental insurance a need.
Write down the things you NEED in your life. If you didn’t have one, it would make it hard to survive or cause financial destruction.
Does tracking your spending sound about as fun as going to the dentist? We get it. But just like the dentist is important for your oral health, tracking your spending is important for your financial health.
Obviously recording your spending identifies where you overspend, but there are plenty of other reasons too.
You can say you want to save for specific goals all you want, but if you don’t do it, you’ll never reach your goals.
Recording your spending provides visualization of where your money goes. You can see ‘gosh I spent $50 eating out and now I can’t save for my XYZ goal.’ That accountability is HUGE when you’re trying to meet financial goals.
Goodbye, 2020! It was a strange and challenging year for many of us for several reasons.
This 2020 tax year will be unlike any other, with many individuals collecting CERB without any tax withholdings. However, this income is taxable, which means that individuals receiving CERB will owe tax on the funds they received, which can seriously impact your 2020 tax return. Those who typically expect a refund might owe money for tax in the current year or significantly reduce their refund.
At Creditaid we want to ensure our clients are prepared financially to assure continued success in our program and beyond. We have provided several tax tips below, some of which may apply to the current year. These are beneficial tax tips and suggestions that can benefit you and your family for years to come!
If you have any questions or wish to set up a tax planning session, please give us a call at 204 987 6890.
Working From Home Office Expenses Employees who worked from home more than 50% of the time over a period of a least four consecutive weeks in 2020 due to COVID-19 will now be eligible to claim the home office expenses deduction for 2020. The use of a shorter qualifying period will ensure that more employees can claim the deduction than would otherwise have been possible under longstanding practice.
Caregivers who need to care for a child(ren) under 12 years old who is affected by the illness or if their school, regular program, or facility is closed or unavailable due to COVID-19 is eligible for CRB. This also applies to other family members requiring supervised care, who cannot attend regular care facilities because of COVID-19, can apply for CRSB.
There is also assistance for self-employed workers who are not eligible for Employment Insurance (EI) and still require income support. These workers must be available and looking for work and accept work when it is reasonable to do so.
The pandemic made it tough for thousands of Canadians to keep up with their bills, especially the high-interest consumer debt. A debt holiday was put in place on consumer debt and mortgages helping Canadians handle the daily cost of living without worrying about excessive debts.
Now that the country and even the world are coming back together and things are opening up, the debt holiday is nearing its ends. This means many bills will be due again – but how do you prepare for such a change in your finances?
Check out the tips below.
Negotiate a Payment Plan
Before your deferment plans end, contact your creditors. Don’t wait until the plan expires and then try to work something out. At that point it’s too late, your payments will be due and if you don’t pay them, it will hurt your credit.
Call your creditors long before it ends and ask about your options. Let them know your financial situation, whether you’re furloughed, not working, or working but trying to catch up. Most creditors will work with you, helping you figure out an affordable plan. Creditors would rather make a plan and receive the full payment than put you at risk of defaulting altogether.
Has the pandemic brought your family down to a single income? With more than a million jobs lost in Canada, many families are in the same boat. Whether you were laid off or were required to stay home with your children who couldn’t go to school or daycare, it’s important to know how to budget your single family income.
Even if you collect unemployment, for now, it may not last. Just in case, consider the following ways to budget your single family income.
It’s not a pleasant thought, but you must cut expenses. Get creative here. For example, if you cut cable, can you afford to replace it with a streaming service? Netflix, for example, costs a fraction of standard cable services. See if you can work it into your budget so you don’t feel like you’re sacrificing too much.
Think of other places you can cut, such as:
· Eating out · Entertainment · Grocery store (shop sales and clip coupons) · Household goods (shop sales or comparison shop online)
Redo your Budget
Take an honest look at your budget. Where do you spend? If you can’t cut in certain categories, where does that leave you each month?
Think about saving for an emergency fund and retirement. Both should remain line items on your budget even when you’ve gone down to one income.
Life is trying to get back to normal. As the COVID-19 numbers drop, more retail stores are reopening, which is a great sign for our economy, but may not be as good for your pocketbook. Try to avoid getting caught up in the excitement of things getting back to ‘normal,’ and be mindful of your spending.
Before you shop, ask yourself the following questions.
Is this an Impulse Buy?
Are you shopping with a list? If you are, is the item you’re holding or that you ‘need to buy’ on your list? If not, it’s an impulse buy. Even if you don’t have a list, but you look at things you don’t need or didn’t intend to buy; it’s an impulse buy.
Rather than buying without thinking, give yourself 48 hours. Leave the store or close your web browser without buying the product. After 48 hours, if you’re still thinking about the item, maybe it’s something worth buying. Chances are though, if it was an impulse buy, you won’t even think about it again.
What do you think about when you hear the word budget? Does it send shivers down your spine? Do you immediately think of sacrifice and feeling restricted?
What if mastering budgeting skills could help you win at life? What if it could help you feel more at ease and have more freedom?
If you’re ready to win at your finances, check out the top budgeting skills you need below.
Record your Spending using a Paper or Electronic Transaction Register
You won’t know how much you have each month unless you track what is coming in and going out. It also helps keep you accountable. You’ll know when bills are due and what you owe. You’ll also know if you’re close to over-drafting your accounts and how much money you can save for emergencies or retirement.
Keep Track of Irregular Expenses
Even if you’re great at tracking your regular monthly expenses – those pesky irregular expenses can get you. Rather than letting them sneak up on you, write out all irregular expenses for the year. Think of expenses like Christmas spending, real estate taxes, annual insurance premiums, and home repairs.
Estimate the total cost of your irregular expenses and divide the total by 12 months. Put away at least this amount each month so that when the expenses come up, you’ll have the funds to pay it.
Get Good at Finding Deals
Shopping is a necessity, but you don’t have to overspend. Know when to buy products that you need, such as linens, clothing, appliances, furniture, mattresses, and cars. Time your purchases during the times these items are priced the lowest.
For example, furniture is usually the cheapest at the end of summer and end of winter; clothing is cheapest at the end of each season, and mattresses go on sale around each major holiday.
Shop with Lists
Shopping without a list, especially grocery shopping can be dangerous. Planning saves you money and stops you from buying things you don’t need.
Before you shop, create a meal plan for the week. Know what you’ll make for all meals and snacks. Plan your meals around the sales and/or coupons you have. If staple items you use often are on sale, stock up on them so you don’t have to pay regular price when you run out.
Avoid Impulse Buying
Impulse buying can send even the most thought out budget out the window. When something catches your eye, walk away from it. Give yourself 48 hours to think about it. If the item is still on your mind after 48 hours, consider the purchase, but do your research. Can you find it cheaper? Will there be a sale? Can you find a coupon?
Mastering these simple budgeting skills will help you stay on track financially. You’ll know when funds are low and you’ll see where you can cut back or make changes. Staying flexible and adaptable throughout the process will help you feel less restricted and even make you feel like you have more freedom to do what you want.