Thank Goodness I’m Canadian…when it comes to taxes

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With tax season winding down for 2015, it’s time for a little reflection. This year I had an increase in the number of new clients that required both Canadian and American returns prepared. If you reference my site, you’ll notice I don’t actively post prices for my U.S returns. This is because many times I need to explain that because of the various individual circumstances it may be impossible to quote how much work is needed. Many states require filing of annual state taxes as well as federal. Also there is a variety of avenues to take to obtain the taxable income. There is a choice of AMT (alternative minimum tax) or Tax based on where you fall in the IRS Tax Tables. There is also a choice between itemized deductions and taking the standard deduction. And finally, lets not even talk about how many different forms and ways there are to calculate depreciation that are available.

The bottom line is that the U.S system has more tax advantages on many deductible items that cannot be claimed in Canada. This has the impact of lowering the individual tax rate. The trick is spending time and money to research, apply and weigh your outcomes. On a pro rata basis fewer U.S citizens prepare their own taxes than do Canadians. This is because of the complexity involved.  This is also why Warren Buffet and other High Income earners wind up paying lower taxes on a % basis than someone earning 40k.

Taking a balanced approach, I am biased towards our tax system. Our simple and straightforward Tax Code along with our tax credit system provides a more even approach to taxation and shares the public burden more broadly. This means a slightly higher personal income tax but lower aggravation when it comes to tax time. Our Corporate rates are now lower than many combined Federal/State rates in the US, and with the advent of a higher TFSA limit, we are closing the gap on personal rates.

Rick Barbosa

Really Smart People “Buy” when the “Smart” money is selling

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If you’ve ever gone to my “Rick’s Picks” tab you probably have noticed that my picks rarely change. That’s not laziness on my part. That’s just me doing my homework. I like to lump myself into the “Investor” group rather than be labelled a “trader”.  Investors know that market volatility is part of the landscape, especially these days. What gets people into trouble is following the crowd and panicking when numbers start to move. Those who sold their investments after 9/11 , Black Monday and as recently as last week are those that will miss the inevitable rebound once the “Smart Money” moves back in.

Investing is simply putting your capital to work in a trusted company or institution, and letting them run their business. If they have done, are doing, or will do a good job, you will be rewarded with dividends, yield and capital appreciation. It’s that easy. The hard part is doing the homework to find out which companies have a good management team and a good business model that will stand the test of time. Once you or your advisor find those companies then invest and be patient. If you are not that type then consider yourself a trader.

So when you hear what the “Smart Money” is doing, think about what Steve Jobs once said.  “Everything around you that you call life was made up by people that were no smarter than you.”

Till Next time,

Rick Barbosa

Why Multi-tasking should be discouraged-Period

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Back in the late 90’s and throughout the first decade in the new millennium, the workplace changed dramatically. The shop floor and offices were being automated with desktops and software at an alarming rate. With the newfound productivity a new buzzword was coined that still floats around today. Multi-tasking was used to describe performing several tasks at once. This was possible because simultaneous tasks could be performed by computers that were once done by individuals. At the time we did not think about how this increase in productivity would impact our work-life balance or the quality of work we were producing. Many early adopters were plagued with GIGO errors (garbage in, garbage out) as reports seemed inconsistent or unrealistic. The very promise of the computer was a paperless office with no errors as the “human factor” was minimized. Well, I don’t know about you but I produce more paper today than I ever did when I first started working. That’s because  today we are expected to handle increasingly larger workloads and more tasks in our modern and efficient workplaces. If you sit back and think of the definition of productivity as measuring the increase in production/service capacity of a business we are far more productive than our grandparents. But when you peel back the layers of the productivity onion to include re-work, quality concerns, recalls, order checkers, and forensic audits, have we really come any further?  Productivity and efficiency are two different beasts. One measures singular output, while the other measures lack of errors.

Yes we can all do many different tasks, but the key to efficiency is choosing when and how to perform them. Take the example of sitting in line at Tim Horton’s . I guarantee you that when Tim’s was serving just coffee and donuts you were served quicker and the donuts were fresher because they were baked by the local store and not shipped in like they are now for re-baking. Tim’s like many other quick serve restaurants has lost focus in trying to be everything to everybody. This has added multiple items to the menu. How good can you do your job if you need to know how to make 50 different menu items instead of focusing your attention on your primary products?

The law has started to catch on to the dangers of multi-tasking by banning cell phone use and other non-essential tasks while driving. The decision was obviously needed to ensure public safety, but did not come right away, nor is it still banned in every state or country under the “multi-tasking” mentality.  So I’ll leave you with this thought. How good is your work when you are handling multiple projects at the same time. Is your attention focused equally on each task or do your lower your standards on some work to get more work done?  Would  you want your surgeon playing chess and operating at the same time? (FedEx Commercial). Just how productive are you?

Take care,

Rick Barbosa

My Netflix Changeover

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I wanted to share my recent Netflix conversion experience with you so that you could see if it’s worth it for you and your family. Firstly, I held off even thinking about Netflix until their recent run in with the CRTC. I was convinced that the CRTC was going to regulate and destroy the concept in the name of Canadian content. When I like many others saw the refusal of Netflix to cooperate with the CRTC and the lack of follow-up on their part, I started to look into it further.

I was paying 111.78 per month. This was made up of (Before)

  • VIP Cable                      71.99
  • Digital Services Fee    2.99
  • TMN                                16.95
  • Learning Pack              6.99
  • HST                                 12.86

Total                                           111.78

You’ll notice that I didn’t have any rental boxes on there as I believed in owning instead of renting. I was tired of paying so much for the 10-15 channels I was actually watching. We also have 3 T.V’s in our house.

I choose the Netflix 2 TV package which is 8.99 per month. We got rid of VIP, TMN and Learning. Now I bet you’re saying that’s a huge savings already but it actually wound up to be more like this.

We kept basic cable and (After)

  • Basic Cable (Rogers) 36.49  (Digital TV package)
  • Digital Services Fee     2.99
  • Extra Outlet                    7.49 (Once you drop VIP there is a per outlet charge after 2 TV’s
  • Nickelodeon                   2.79 (Advertised on-line but not included in Digital TV package listing)
  • Credit                             -10.00 (for Nickelodeon advertised but not listed and 5.00 credit to defer extra outlet) We had to fight for this
  • Unlimited Data             30.00 (We increased our data to cover usage with Bell Fibe)
  • Netflix                                 8.99
  • HST                                   10.24

Total                                                88.99  Savings of 22.79/mth or 273.48 per year.

Now there is also a Rogers Digital Lite package that’s never advertised which only gives you one box and basic networks for 14.99 per month. We found this to be too extreme but it may be right for you.

Since using Netflix for the past 4 days we have enjoyed the selection and freedom to watch TV without commercials. Now please be advised that your current internet speeds should be 15+mbps download to really work properly and you’ll definitely need unlimited data as we quickly discovered.

Bottom line is you will save money so long as it doesn’t get “regulated” and you will enjoy it. Hope this helped.

 

Your Friend

Rick Barbosa

 

 

 

 

Unfortunately, the trend is not our friend-The awful truth

Many potential clients start a conversation with me  like this, ” My last accountant/bookkeeper didn’t know a damn thing and was never available.” My first question usually is where did you find them? 9 times out of 10 it was a referral from a family friend or someone they knew. The other question is how much are you paying them? This is where the conversation takes an awkward turn. When they realize they never took the time or effort to look at what they needed and skill set required , coupled with their unwillingness to pay more than a basic wage, then they usually get what they pay for.

Most small business bookkeepers tend to be glorified data entry clerks that know how to work a program. Accountants are professionals who dig deeper, prepare adequate and detailed documentation, and make sure the books are balanced and make sense. Many times the awful truth is that business owners don’t want someone who knows or is willing to enforce  ASPE/US GAAP/IFRS and CRA rulings. So they hire a bookkeeper who doesn’t ask questions. Little does that bookkeeper know that any information that is not in compliance with CRA policy gets linked to them and recorded in CRA’s database for follow up.

The moral of the story is, make sure you find the right accountant. They may cost more, but in the end they will do a better job and let you sleep at night.

 

Your Friend,

Rick Barbosa

 

 

The Road to Prosperity : Step 5 Celebrate Success

You’ve done the hard work of taking responsibility for your own success, tracked everything, learned to pay yourself and finally started living below your means.  At this point you should have had some traction at paying off debt or accumulating some savings or both. It is equally as important to mark these wins as to achieve them. Celebrating milestones keeps you motivated and gives you something to look forward to. Enjoy a night out, nice meal or a weekend away with the family. You’ve earned it. Keep at it and you will start to celebrate more often and enjoy life rather than just living it.

Thanks for staying with me on the Road to Prosperity.

Rick Barbosa

 

The Road to Prosperity: Step 4 Live Below your Means

Like my other posts, the 4th step on the “Road to Prosperity” is not new or a “Quick Fix” but instead is time-tested and wisdom from generations of prosperous families and individuals throughout the ages. All of us have heard stories of celebrities and lottery winners that have wound up broke and worse off from lack of proper money and lifestyle management. To a lessor extent, our neighbours that try to “keep up with the Jones” often find themselves up to their eyeballs in debt and stressed out.  A prime example here in Canada are those hoards of Hockey parents spending thousands of dollars each year on their children for fees, equipment and travel. Many say they are doing it for the kids, but if you’ve ever hung out with Hockey parents its more often than not about the social aspect of the group. Many parents don’t know what to do with themselves once the kids choose not to play sports anymore or simply outgrow or don’t make the cut any longer. Parents often come to me with stories of how they blew 50k or more on organized sports with nothing to show for it but a burnt out mini van and a large line of credit.

To truly build wealth we must look at not just what we are doing or making in our careers, but how we are living our lives. It’s easy for governments to print money because there is no individual accountability to pay it back. They just tack it on to future generations’ tax bill and carry on. You and I live in the real world where we have to balance what comes in with what goes out. If we’re spending more than we’re making trouble is not far behind. In these situations the main culprit is “Lifestyle”. Keeping up appearances and a façade can only go on so long. Better to have a smaller house, older car and better family cohesion than to worry about maintaining all of the above.

Learn to live well. Don’t worry about what everyone else has. Appreciate what you have.  Think about what you need versus what you want and watch your wealth grow.

Take care and till next Step,

Rick Barbosa