Be careful . . . Look out for fraud!

Catch-for-blog

By Nathalie Brault, CPA, CMA, CIRP, SAI

Recently, we asked our members:

“Have you received fraudulent calls involving the Canada Revenue Agency?”

We were surprised to discover that 84% of our members reported that they had seen this scam, which can be done by email, telephone or text message.

During tax season, be careful not to be fooled by this swindle since this is when these fraudsters are most active. They use two approaches, sometimes passing themselves off as Canada Revenue Agency (CRA) employees but also sometimes as employees of Immigration, Refugees and Citizenship Canada:

  • Individuals receive a message telling them that they qualify for a tax refund but to receive it they must provide their personal information, such as their name, address, social insurance number, credit card number, passport number, etc.
  • Individuals receive a message saying that their taxes have been audited and that they must pay the balance owing to the tax office. The message stresses that they must pay the money owed immediately or they will be fined, and non-payment means that an arrest warrant will be issued.

Remember that the CRA does not threaten or use intimidating language to obtain payment of back taxes.

The CRA is not permitted to ask for personal information related to your passport or driver’s licence.

The CRA does not issue arrest warrants or deportation orders for non-payment of back taxes.

The CRA does not ask you to click on a link to provide your personal or financial information in an online form or to obtain a refund.

The CRA never communicates with taxpayers by text message.

As well, the CRA would not ask you to pay a tax debt with a prepaid credit card, in cryptocurrency such as Bitcoin or through gift cards (iTunes, Amazon or something else).

The Canadian Anti-Fraud Centre received 59,694 complaints of CRA-related fraud between 2016 and 2018. The 8,211 victims who came forward lost a total of $13.4 million.

But the challenge is that it is estimated that only 5% of victims will file a complaint with authorities.

Police recommend the following approach if you believe you are a victim of such a scam:

  • If in doubt: Hang up!
  • Contact the CRA to confirm your tax situation — you can access your file online.
  • If you believe you are a victim of this type of scam, report the incident to the Canadian Anti-Fraud Centre at 1-888-495-8501.
  • If you have made any payment, contact the police.

In February 2019, the RCMP and the Canadian Anti-Fraud Centre issued news releases to advise the population that some illegal call centres in India had been dismantled. This mass marketing fraud had been perpetrated by criminal groups in various places in India. Nonetheless, the RCMP does not have the authority to act as it would like as far as making arrests in India.

As a result, the RMCP has been looking for leads or other information about those responsible for this scam in Canada and abroad. The RCMP needs the public’s help to bring about the arrest of these criminals.

Individuals who fall prey to this scam also risk becoming victims of identity theft, so be on the lookout and notify the proper authorities!

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Planning for maternity / parental leave

Maternity

By Chelsea Taylor, CIRP, LIT

Few things are more exciting than welcoming a new addition to your family. However, all that excitement comes at a price. Growing families often find it difficult to manage the costs a new baby brings – in both supplies and time – and generally benefit from utilizing the full value of available aid and resources. While it is often possible to lean on partners and family to address the time requirements, the financial part can be much harder to work around.

Comprehensive planning is the best way to address any potential financial challenge. But where does that start?

Group Benefits Maternity / Parental Top-Up

Some group benefit plans include a maternity / parental leave top-up. These plans generally pay a portion of your income for a set number of weeks. If this benefit is available to you, it will generally pay more than you will receive through Employment Insurance. It may be worth your while to review your group benefits plan in detail or speak with your employer.

Employment Insurance Maternity and Parental Benefits

Federal Employment Insurance (EI) benefit options are split between maternity benefits and parental benefits.

Maternity benefits are available for the person giving birth and pay up to 15 weeks at 55 percent of insurable earnings (up to $562 per week). Conversely, parental benefits generally follow the same structure and are available to either parent (including adoptive parents or parents of a child born through surrogacy). Families considering parental benefits have two options to choose from:

Standard: Up to 40 weeks (35 weeks if only one parent is claiming the benefit) at 55 percent of insurable earnings (up to $562 per week)

Extended: Up to 69 weeks (61 weeks if only one parent is claiming the benefit) at 33 percent of insurable earnings (up to $337 per week)

The Government of Canada’s website offers more detailed information about these benefit programs and how they could benefit your individual circumstance.

Consider Sharing Benefits with your Partner

If your partner’s group benefits provide for a parental top-up, it may be worth considering splitting leave to maximize the benefits. In addition, an extra five to eight weeks leave may be available to your partner through parental EI benefits. This can increase the amount of time a parent is at home with your child and save money by delaying the start of childcare.

Child Tax Benefit

Once your child has arrived don’t forget to apply for your Child Tax Benefit, which is calculated based on the following criteria:

  • Number of children who live with you
  • Ages of your children
  • Adjusted family net income
  • Eligibility for the child disability benefit

Your benefit adjusts every July based on income reported on your and (if applicable) your spouse’s filed tax return(s). The Government of Canada has a helpful calculator on its website to assist with estimating your benefit entitlement.

Looking Forward So You Can Look Forward

There’s a lot to consider when planning for a baby. Ideally, you will have had adequate time to get some savings in place to help cover the initial costs, as well as any decrease in income if you plan on taking a leave from work. With some careful planning and sound advice, it is very possible to enjoy your maternity time creating cherished memories with your new family member instead of worrying about how you’re going to afford it.

If you find yourself struggling to maintain your existing budget and worry a new child will add more financial pressure than you can manage, you may want to seek the advice of a professional.  You can find a Licensed Insolvency Trustee near you by visiting CAIRP’s website.

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The Treatment of Personal Income Taxes In A Personal Bankruptcy

taxes

By Mary Plahouras, CFE, L.L.M.

The approach taken by the Canada Revenue Agency (CRA) regarding the collection of personal income tax debt is straightforward: upon issuance of a Notice of Assessment or Reassessment to the taxpayer, all taxes assessed and determined to be owing, are to be paid in full, pursuant to the Income Tax Act (ITA).

When bankruptcy occurs, the taxation year is split into two periods: (1) pre-bankruptcy period; and, (2) post-bankruptcy period. The taxation year of a bankrupt comes to an end on the day before the date of bankruptcy (pre-bankruptcy period) and a new taxation year begins on the date of bankruptcy and ends on December 31st of that year (post-bankruptcy period). For instance, if the date of bankruptcy is April 3, 2019, the taxation year of the bankrupt comes to an end on April 2, 2019, and a new taxation year begins on April 3, 2019, and ends on December 31, 2019.

The significance of the pre and post-bankruptcy period has consequences for the dischargeability of the tax debt. A pre-bankruptcy tax debt is dischargeable in bankruptcy. A post-bankruptcy tax debt is not dischargeable in bankruptcy. Notwithstanding the bankruptcy, the bankrupt remains liable to the CRA for payment of the post-bankruptcy tax debt.

Prior-Bankruptcy Personal Income Tax Return

Pursuant to section 22 of the Bankruptcy and Insolvency Act (BIA), the Licensed Insolvency Trustee (LIT) is not liable to make any return that the bankrupt was required to make more than one year prior to the commencement of the calendar year, or the fiscal year, of the bankrupt, in which the bankrupt became bankrupt. For instance, if the year of the bankruptcy is 2019, the LIT is required to file the bankrupt’s 2018 tax return with the CRA. Notwithstanding the LIT’s obligation to file the one-year prior-bankruptcy tax return, the bankrupt has an obligation under ITA to submit all outstanding tax returns.

If there is a prior-bankruptcy refund, the CRA can claim a set-off to the prior-bankruptcy refund where there is: (1) one or more prior year tax liability owing to the CRA; or, (2) an enforcement maintenance registered with the CRA, such as a maintenance order by Family Responsibility Office for child support. In the absence of any prior-bankruptcy tax liability or enforcement maintenance registered, the CRA will send the prior-bankruptcy refund to the LIT for the general benefit of the bankrupt’s creditors. If there is a tax liability owing to the CRA arising from prior year(s) tax assessment(s), the tax liability is a claim provable in the bankruptcy and dischargeable. The bankrupt will not be liable to the CRA for payment of the prior-bankruptcy tax liability.

Notwithstanding section 22 of the BIA, where the LIT determines that there may be significant refunds for the bankruptcy estate, the LIT may opt to file all the outstanding prior year tax returns for which the bankrupt has not filed in order to capture any income tax refunds or GST/HST tax credits that may become available to the bankruptcy estate.

Pre-Bankruptcy Personal Income Tax Return

If the year of the bankruptcy is 2019, then, in the year 2020, the LIT must file the 2019 pre-bankruptcy tax return with the CRA. If there is a pre-bankruptcy refund, the CRA can claim a set-off to the refund where there is: (1) prior year(s) tax liability owing to the CRA; or, (2) enforcement maintenance registered with the CRA.

If there is no prior-bankruptcy or pre-bankruptcy tax liability or enforcement maintenance registered, the CRA will send the pre-bankruptcy refund to the LIT for the general benefit of the bankrupt’s creditors. If there is a tax liability owing to the CRA arising from the pre-bankruptcy return, the tax liability is a claim provable in the bankruptcy and dischargeable. The bankrupt will not be liable to the CRA for payment of the pre-bankruptcy tax liability.

Post- Bankruptcy Personal Income Tax Return

If the year of the bankruptcy is 2019, then, in the year 2020, the bankrupt must file the 2019 post-bankruptcy tax return with the CRA. Notwithstanding that the LIT is not obligated to file the post-bankruptcy tax return with the CRA, as a matter of practice, the LIT will typically file the return on behalf of the bankrupt.

If there is a post-bankruptcy refund, the CRA can claim a set-off to the refund where there is enforcement maintenance registered with the CRA. If there is no post-bankruptcy tax liability or enforcement maintenance recorded, the CRA will send the post-bankruptcy refund to the LIT for the general benefit of the bankrupt’s creditors.

If there is a tax liability owing to the CRA arising from the post-bankruptcy tax return, the tax liability is not a claim by the bankruptcy estate. The CRA will send the Notice of Assessment or Reassessment to the bankrupt. The bankrupt will be liable to the CRA for payment of the post-bankruptcy tax liability.

High-Tax Debtor Status *

Section 172.1 of the BIA deals with high-tax debtors. It is aimed at ensuring that bankrupts with:

(1) personal income tax debt of $200,000.00 or more; and, whose:

(2) personal income tax debt represents 75% or more of the total unsecured proven claims;

do not become eligible for an automatic discharge from bankruptcy. The LIT will bring the matter of the bankrupt’s application for discharge before the court for a hearing. The bankrupt will be required to attend the hearing. The types of discharge orders that the court may impose and the factors that the court will take into consideration in deciding the bankrupt’s discharge application differ from that of bankruptcy where the bankrupt is not a high-tax debtor.

To avoid the necessity for a court hearing and the consequences that may flow therefrom, a high-tax debtor would be well advised to consider a proposal to the creditor under the BIA as opposed to an assignment in bankruptcy.

* GST/HST payable is not included in the calculation of high-tax debtor.
* Taxes on additional income arising from a shareholder loan, draw or dividend, is included in the calculation of high-tax debtor.

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Tax Compliance for the Self-Employed

Tax-agenda

By Debora Kwasnicky, CIRP, LIT

It is that time of year when all self-employed persons should be preparing to meet with their accountants or reviewing their tax requirements.  Failure to comply with tax deadlines may result in the assessment of penalties and interest.  Some key points to consider are:

  1. My Business Account: It is recommended that you register for My Business Account with CRA.  You can contact CRA at 1-800-959-5525 to register by telephone or register online using your online banking access.  My Business Account will allow you access to various CRA business accounts including income tax, GST, payroll, T5018, etc., and will enable you to manage your address, direct deposit, registering a representative such as an accountant and online mail.
  2. GST: You generally must register for a GST account if at any 3-month period in the year or in total for any 12-month period your income is $30,000 or more.  The deadline for registering is 29 days after you hit this threshold.  CRA will advise when your reporting period starts (your reporting period is the last day of the month following).
  3. Payroll: You must register for a payroll account if you have employees and deduct withholdings on their behalf.  Your remittance must be made by the 15th of the month following your filing period.  CRA will advise what your reporting period is.  For example.
    1. Quarterly – average monthly withholding amount of $0 to $2,999.
    2. Monthly – average monthly withholding amount to $25,000.
  4. Income Tax: Although your deadline for filing your self-employed tax return is not until June 15th, you must remit any taxes owing for the current tax year by April 30th.   This amount is in addition to any required instalment payments you were advised payable on your prior year income tax assessment notice.
  5. T5018 Statement of Contract Payments: If your business is primarily in the construction industry and you pay subcontractors, you must issue a T5018 slip for every subcontractor reporting to CRA all amounts of $500 or more paid from all sources (cash, cheque, barter, etc.) during the year.
  6. Record keeping: Good record keeping is critical for your business.  Your supporting documents for your business income and expenses are to be retained for six years after the end of your tax year.  The benefit of good record keeping is to reduce accounting costs and allow you to readily provide documents for any routine information request or audit by CRA.

Filing business income taxes can be complicated and missing something could have a major impact on your bottom line. It makes sense to do your research and/or engage the services of a professional to ensure everything is filed properly and on time.

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Birthday Parties Reconceived.

birthday party

It’s a new year and it’s time for a new round of birthday parties.  For those of you who have school-aged kids, it’s most weekends.  Talk about expensive, even if you have a budget for gift purchases, and for families that are low income, it can be a lot of stress and worry, especially if you have multiple children.

I have a child in Grade 2 and starting in Kindergarten the invites came fast and furious.  The pressure to invite the whole class is real and even if you don’t invite the whole class it seems that most parties have at least 10 kids.  Does my child need 10 birthday presents outside of what he gets from family? Absolutely not, although I’m sure he’d argue that he certainly does need them.

A trend that is becoming more and more popular as part of a cultural shift toward sustainable living and reducing excess in our homes is the toonie, fiver or the 50/50 birthday party.  The idea behind these parties is the birthday child gets to save or spend half of what they receive and donate the other half to a charity of their choice.  I’ve also heard that the funds can get split three ways; spend, save and donate.  I think this is a fantastic idea and one I’m going to be trying out this year when my son turns 8.

Not only does the child get to pick out a larger gift for themselves but they also learn about giving to a charity of their choice.  It’s an opportunity to discuss with your child different charities and it allows them to explore what is important to them and why. It also takes away the stress of what to buy, removes the cost barrier for a low-income family, and let’s not forget about cutting back on clutter!  Another bonus is teaching your child budgeting and the value of a dollar.

I see this trend as a win-win-win, for the birthday child, the parents and the gift givers all around.

I hope to see this trend grow, for so many reasons and I hope you do too.

 

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New Year Financial Goals

By Shelley Koehli, CIRP, LIT

There has been a lot of articles in the news lately talking about tackling debt.  It is the New Year after all and it should be top of mind. According to a poll done by CIBC, 26% of Canadians say paying down debt is their top financial priority for 2019.

Statistics Canada keeps a close look at Canada’s debt to disposable income ratio and in the third quarter of 2018, stats showed that Canadians owed almost $1.74 for every dollar of disposable income. These numbers are near record breaking and are causing many Canadians to worry about their financial position.

Tackling debt repaying on your own is a great option if you have sufficient cash flow to deal with it in a reasonable time or with a few tweaks to your budget. But what do you do if you don’t have the cash flow even after you’ve tweaked your budget?

Licensed Insolvency Trustees administer options legislated by the Bankruptcy and Insolvency Act (BIA). One of the most effective options to get out of debt is by the filing of a consumer proposal.

A consumer proposal is an option that allows a person to make a settlement offer to their creditors to settle the debt, often for much less than what you owe. The benefits of this option and how it can help you realize your financial goals are:

  1. Negotiate and repay a portion of your debt in one monthly payment
  2. Fixed monthly payment without interest for the term (up to 5 years)
  3. Keep your assets
  4. Stop garnishments or collection activity
  5. Fees included in your negotiated payment
  6. Cash flow is freed up, allowing you to consider other financial goals such as long-term savings
  7. Personal goals are more likely to be achieved when you have less worry and stress in your life

If you are interested in finding out more about this option, please contact an LIT in your area for a free consultation.

Shelley Koehli is a Licensed Insolvency Trustee and Vice President of Smythe Insolvency Inc. based in North Vancouver, British Columbia

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Three things you can do to get your financial house in order this year.

By Mary Ann Marriott, CIRP, LIT

financial house

Happy 2019! With the New Year comes new intentions…a reflection on the past year and a setting of intentions (resolutions) for the year ahead. I’m sure by now you have your financial intentions set and in place.  Yes? Maybe? No? Well, for those who do not, or might need a boost or tweaking, the following are three things you can do to help prepare your finances for a bit of housekeeping this year.

  • Reflect on the past year.

First and foremost, take a look at last year. Simply spend some time reflecting on what worked well and what did not. Did you incur debt? Pay debt off? Increase your Net Worth? Reduce it? Have no idea what a Net Worth is? Do you feel like you had a handle on your spending? Or did the year just disappear in a blur with very little control over where your money went? Do you have enough insurance? Savings? Investments? Did your money go towards necessities last year or did you invest in yourself? Your family? Did your money create stress in your life or bring you joy?

Get an overall sense of last year. Celebrate your accomplishments and choose one or two areas that you feel didn’t quite live up to your expectations.

  • Set your intention for this year

Here are some examples of intentions that you might set based on your reflection of the last year:

  • Reduce your outstanding debt (notice I didn’t say ‘eliminate’ it) –  Although that may be a wonderful resolution or intention, it may not be realistic. Reducing your debt, however, is very realistic. You can go deeper and set a specific target if you would like or simply leave it open.
  • Become more aware of my spending habits – This could involve starting each month with a plan or tracking your expenses on a daily, weekly, monthly or yearly basis. You may want to utilize a tracking app. Your bank may provide an in-house program or you could use a free app such as Mint to do the work for you. Simply review where you spent your money on a monthly basis. I promise the rest falls into place with this one simple process.
  • Invest in myself – This is a wonderful intention that sets the stage to spend your money in a way that brings you joy. So, for every money action (purchases, savings) you ask yourself, “Will this bring me joy?” It helps cut back on frivolous, meaningless spending and focuses on directing your money to more meaningful places.
  • Put in place a system to monitor your progress or, at the very least remind you of your intention throughout the year

The most common challenge when setting up your plans for the New Year is keeping on track. With today’s technology it is so easy to set up a system to remind you of your objectives.

  • Set a reminder on your phone or computer with a daily repeat. It pops up, you see it, mark it complete for the day and it pops back up the next day.
  • Look for pictures that represent what you want to accomplish. Save them on your computer as the backdrop (or screen saver) and/or your phone’s wallpaper. It’s the current version of a vision board.
  • Or, create a vision board. Perhaps as a family if it is a family intention. Put it somewhere where you will see it regularly. As you accomplish something, note it on your vision board.
  • Start a 2019 journal. On one side record your “celebrations” and on the other side your action wish list. Check in daily or weekly or monthly. Whatever works with your schedule.
  • Create a buddy system where you work on your intentions together and check in regularly, maybe over coffee one a month. Make it fun!
  • Join a group of like-minded people and create a 2019 Intentions Mastermind group to keep you focused and on track. Set regular meetings, review your progress, share your challenges, motivate and learn from each other.

Whatever you do, it starts with that one first step. Take that one step today and be kind to yourself. “You don’t have to accomplish everything, you just have to accomplish something.”

Wishing you all happy healthy finances

 

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Ideas that may help you think outside of the box to relieve your financial stress during the holidays.

December

By Debora Kwasnicky, CIRP, LIT

With the busy lives we lead, December can be a stressful time with additional work deadlines, social commitments, decorating your home, incessant sales and spending.  It is easy to get overwhelmed, whether your financial circumstances are such that you have no money beyond your basic living expenses, have over extended early to take advantage of the continuous sales or have other commitments.  Perhaps we can learn from the Grinch’s quote “Maybe Christmas, the Grinch thought, doesn’t come from a store.”  Below are ideas that may help you think outside of the box to relieve your financial stress during the hectic season.

  1. Gifts not from the store.
    If you think back, some of the nicest gifts that you received may not have come for a store. It may have been a family heirloom or decoration, homemade craft, gift card for a cooked meal or even an offer to help around the home.  One of the nicest gifts I received was a recipe book prepared by my mother with handwritten family recipes filed in a photo album.  The costs of these gifts are nominal in comparison to the store-bought gifts yet have a personalized touch that is priceless.
  2. Turn down the lights.
    BC Hydro indicated in a recent Vancouver Sun article that hydro usage rates have gone up 7.5% in the past seven years, despite the switch to the more energy efficient LED lights and after adjustment for the population increase.  Reducing the size of the outdoor light display or restricting the time the lights are shown will reduce your overall utility bill.
  3. Name drawing or price limits for gifts.
    You might try to suggest that your family draw names or set price limits if this is not already something you practice. Trying to purchase gifts for the entire family and friends can be daunting, particularly if you are in a blended family after a  marital separation.  Although most people prefer to purchase for the younger family members, you may find that suggesting a draw to purchase a gift for a single family member or even a price limit for the gifts is often welcomed.   Others may be feeling the same financial pressure but afraid to speak up.
  4. Pot luck meals or altering locations.
    If you are planning the family dinners at your home, the family and friends can be asked to bring a dish or beverage. Most people will be happy to help if they have not already offered.  It is also nice if you set a tradition to alter who hosts the event each year.
  5. Take control of your expenses. The holiday season can be a time of excess eating, entertainment and spending.  Many people recognize the need to exercise or cut back on their diets after the season.  This same philosophy should extend to your budget.  Interest rates have been rising.  If you have over extended on your spending, take the first step to take control by reviewing your budget and setting a goal to pay off any balances owing as soon as possible.

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Take Control of Your Finances

5-steps-take-control-personal-finances

“Rarely in our life is money a place of genuine freedom, joy, or clarity, yet we routinely allow it to dictate the terms of our lives and often to be the single most important factor in the decisions we make about work, love, family, and friendship.”
Lynne Twist, The Soul of Money: Transforming Your Relationship with Money and Life

Everyone has a money story, a set of beliefs which either limit us and keep us in a constant state of fear about money or help us to live in abundance with it. Many of the stories that we tell ourselves about money are centered on our upbringing and our parents’ relationship with it. If you ask yourself the question “what is my first memory of money?” you will be astounded at what you come up with. Chances are your first memory of money shapes how you feel about it today. I once asked a client this question and she told me that when she was young she was given an allowance for doing chores around her house. In her mind, the list of chores was very long and the money she received was not equal to the work. She has carried that money story with her into adulthood, always working hard for others and never expecting to be paid what she is worth.

The second influence on your relationship with money is how your brain works.  To put it simply, your brain is made up of two parts; one controls emotions and the other rational thought. The emotional part of your brain wants the new shoes, even though you know you can’t afford them and you have several pairs at home already. The rational part of your brain justifies the purchase because they were on sale. Money does not equal math; if it did, then we would all do the right things with it, like save. Money is emotional. Your brain and your heart are always in a constant battle over it.

The third influencer on how you spend your money is your life and particularly those you surround yourself with. We have all heard the saying “keeping up with the Jones” In this day and age of social media bombardment, we are keeping up with the Jones on steroids! All the carefully curated photos we post of ourselves on Facebook and Instagram are having an effect on us and our spending behaviours. When you see your neighbour post a picture on Facebook of their spring break trip to Hawaii you start to ask yourself, “Why can’t I take a trip like that?” and off you go booking a trip on Expedia. I am here to tell you that chances are your neighbour can not afford their trip either and that the whole thing is being financed by Visa or MasterCard.

So how do we take control of our finances? The first step is to change your mind set about money. Be aware of your spending habits. Try tracking your spending for a month to see where your traps are. Typically behavioural spending happens in: retail purchases, convenience foods, restaurants, alcohol, personal grooming and entertainment. Next accept where you are. There is absolutely no use in feeling shame and guilt around what you have done so far with your finances. Accept where you are and be willing to change. If old habits have put you in a place where you do not feel in control of your finances then be open and willing to look for new ways.  Once you have a plan in place you must take action. By changing your mindset about your money you are on your way to better financial health.

The secound step is to improve your financial literacy. We are not taught about money at school and chances are your parents did not teach you about it either. There are several great books on financial literacy and money mindset, as well as podcasts, ted talks and online courses. Seek out a money coach or financial advisor that specializes in money mindset. Self education is always the best education.

Third, take a holistic approach to your finances and financial plan. Start with your cash flow and spending behaviours. Have a strategy as to how you are going to tackle your spending. Next get unwanted debt under control by smoothing out payments to your lines of credit, loans and credit cards. Put a safety net in place in case life doesn’t go according to plan and finally start funding for your future. Again a financial coach or advisor that specializes in holistic planning can help.

Finally start talking about money with your partner, your children and your friends. We need to end the taboo around talking about money. Out of control finances are affecting our mental and physical health as well as our relationships. In fact according to the 2018 Manubank survey on Canadian debt 40% of mental health issues are tied to money stress and fighting over money is the top reason for divorce in this country. We need to end the stigma around talking about money.

It takes more than willpower to change any habit including money mindset but with the right tools, the desire and willingness to change you can take control of your finances.

April Stroink is a money coach and works with people who are ready to transform their relationship with their money. Her proprietary One Number Solution program helps guide people on their money journey from fear to freedom. She can be reached at april@blackstar.group www.onenumbersolutions.com

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How A Consumer Proposal Can Help Set Your Financial Goals

By Mary Plahouras, CFE, L.L.M

week 5

What is a Consumer Proposal?

The Bankruptcy and Insolvency Act (the “BIA”), defines a Consumer Proposal as:

  1. A plan to settle your debts with your unsecured creditors on a percentage of the total amount owing to your unsecured creditors; or,
  2. A plan for an extension of time for payment; or,
  3. Both

Payments to the Consumer Proposal are made to the Licensed Insolvency Trustee (LIT).  The LIT will distribute the funds on a pro-rata basis to all your unsecured creditors.

What terms are included in a Consumer Proposal?

Pursuant to the BIA, a Consumer Proposal must provide that its performance is to be completed within 5 years.  The Consumer Proposal must provide for payment in priority of all claims of preferred creditors and for payment of all prescribed fees and expenses of the LIT.   The terms of the Consumer Proposal must also state the manner in which the LIT will distribute the available funds to the creditors in accordance with the terms of the Consumer Proposal.

How flexible is a Consumer Proposal?

Flexibility is one of the major advantages of filing a Consumer Proposal.  A Consumer Proposal can provide you with the flexibility of repaying your settled unsecured debts with monthly payments based on your income and your particular circumstances.  Interest stops accruing on the date your Consumer Proposal is filed with the Office of the Superintendent of Bankruptcy (OSB).  The repayment period is flexible and may be up to, but cannot exceed, 5 years.

What important steps should you take after filing a Consumer Proposal?

Get a fresh start by making a new commitment to yourself.  Develop new habits and goals by developing a financial plan and making budgeting and savings a part of your everyday life.  Aside from helping reduce financial stress, creating a monthly budget can help you visualize where you are spending your income and how much you are spending.  There are many budgeting tools available on the internet to help you create a budget.

Think of ways to pay yourself first.  Incorporating a savings plan into your monthly budget can help you set and reach your financial goals.  If you are coming up short on your savings, adjust your budget so that you can reach your savings goals.  If you are part of a group plan at work that matches employee contributions, maximize your employer match.  Employee-employer contributions to a group plan will help your money grow faster. For example, an employer may offer a match on RRSP contributions where you can contribute a percentage of your pay and they will match your contribution either at 100% of what you contribute or at a lower percentage.  Another idea would be to include any tax refunds into your financial plan.  The tax refunds may then be used to pay down the Consumer proposal or alternatively, the refunds may be invested for short-term or long-term goals.

Ways to rebuild your credit after filing a Consumer Proposal?

In the province of Ontario, Equifax will keep a record of a Consumer Proposal for a period of 3 years from the date of full performance of the Consumer Proposal.  TransUnion will keep a record for a period of 6 years from the date of filing the Consumer Proposal with the OSB or 3 years from the date of full performance of the Consumer Proposal.  You do not need to wait for the expiry of the above time periods before being able to rebuild your credit.

One good way to rebuild your credit after a Consumer Proposal is to apply for an unsecured credit card, use the credit card for purchases you would have normally paid for in cash or by debit, and upon receipt of your monthly credit card statement, make payment to credit card on time and preferably in full.  You should not be paying less than the required minimum as per the credit card statement.  If you cannot obtain an unsecured credit card, consider applying for a secured credit card by providing the issuer with a security deposit equal to the credit limit on the card.  If you opt for a secured credit card, you should confirm with the issuer that the card will be reported at the credit bureau(s) in the same way as an unsecured credit card.

Other ways to rebuild your credit include: avoid maxing out on your credit card(s), use open account(s) from time to time to keep them active, avoid late or missed payments, avoid withholding payments to a lender due to a dispute (i.e. pay the debt first and dispute the matter later), and limit the number of times you apply for credit and the number of inquiries you allow on your credit file.

week 5Budget Calculator from Financial Consumer Agency of Canada:

http://itools-ioutils.fcac-acfc.gc.ca/BC-CB/NetInc-RevNet-eng.aspx

 

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