Membership Advantages: Video

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What does your VantageOne membership get you? Kristine will tell you!

Fraud Flags: Video

Have you or someone you know been a victim of fraud?

It can happen in an instant, and no one is immune.

Learn to quickly identify some of the common scams going around from VantageOne’s very own Financial Ability Liason Kristine L.

The first step to fraud protection is by educating yourself!

 

For Richer or Poorer: Video

Getting Married?
Kristine explains why and your spouse should know about each others past financial history, the good and the bad.

 

What you need to know about applying for a mortgage or re-mortgaging in 2018

New Mortgage Qualifying Stress Test Rules
You may have heard of recent changes in the mortgage lending market. The Office of the Superintendent of Financial Institutions or OSFI has set a new minimum qualifying rate, or “stress test,” for new mortgage applications. Previously these rules applied only to high ratio mortgages (less than 20% down) which required mortgage insurance through CMHC or another private insurance provider. These new rules now require all mortgages, regardless of the down payment amount to qualify not only for the applied rate, but also to qualify at the greater of the five-year published rate by the Bank of Canada (BOC) which is currently 5.14% or a full 2% above the borrower’s applied for mortgage rate, whichever is higher. These rules will apply to any new mortgage application, or a renewal application through a different federally regulated financial institution (Provincially regulated financial institutions are OFSI exempt; however in B.C. our regulators are the Financial Institutions Commission, known as FICOM) and does not apply to those that stay with their current provider.

Credit Unions Are Exempt From The New Rules
Unlike traditional financial institutions, Credit Unions are not regulated by OSFI as they are provincially legislated. Therefore credit unions are not subject to the new stress test rules. While some Credit Unions may voluntarily apply these rules many do not, some may choose to apply their own set of qualifying requirements therefore it’s best to check with your Account Manager or Mortgage Specialist. This can be a great option for those looking to switch from their current provider as they will not have to re-qualify under the new rules, although they will need to qualify under the new lenders current rules.

What does this mean for me?
To give you an example of the maximum amount that you may potentially qualify for, please see the illustrated example below:

Scenario 1
What a home buyer could qualify for under the new rules:

With a household income of $90,000, applying for a new mortgage under the new rules with a 20% down payment, 25 year amortization period and a contractual mortgage rate at or under 3.14%, a borrower with no other debt could qualify to purchase as high as $477,542 as they are forced to qualify not at 3.14%, but at the Bank of Canada 5 year rate of 5.14%.

Scenario 2
What a homebuyer could qualify for at a credit union that doesn’t voluntarily employ the OFSI stress test rules:

Again with a household income of $90,000, applying for a mortgage at your local credit union, with the same rate of 3.14%, 20% down payment, and 25 year amortization, a potential borrower with no other debt could qualify to purchase as high as $586,022. This means a potential increase of $108,480 or an increase of 22%.

Disclaimer: The above scenarios are simply an example of how the new OFSI rules affect qualifying ability and in no way reflect a guarantee of qualification or rate. Each borrower’s application is unique and must be administered through a company Account Manager or Mortgage Specialist. For more information or to book an appointment with a member of our lending team to see how much you could qualify for, please click here.

 

 

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Tips on how to stick to a set budget

  1. Pack a brown bag lunch

The single best way to save money is to pack and plan out your lunches on a weekly basis. Try keeping track and total up your spending for a week, you’ll soon realize that those lunches out are costing you huge. To illustrate, if you eat lunches out 5 days a week, you could be spending hundreds on these meals when you could easily plan and bring food from home. The same also applies to your morning coffee, a product that made at home literally costs pennies while those morning coffee trips could be costing you as much as $5-$10 a day which is upwards of $2,600 a year. Still think you can’t afford that trip abroad?

  1. Keep your receipts and review your actual expenses every month

Studies have proven that when we’re held accountable for our purchases we’re less likely to spend frivolously. Tracking your expenses doesn’t have to be overcomplicated as there are plenty of smartphone apps out there that can assist you for this. The main idea is to actually use them every time you make a purchase. Once you do this it can be eye opening to total up in a month just how much you may be spending on entertainment, food out, taxi rides, clothing, etc. This is important because you can’t change your spending habits if you don’t identify them in the first place. The first thing you’ll probably notice is that your actual spending is higher then what you’ve budgeted for. If this happens to you frequently, try to be realistic and adjust your budgeting goal by trying to meet in the middle. For example, if you budget $200 for entertainment but consistently spend double that, then try raising your budgeted amount to $300 and also try to reduce your spending a little in the next month. This should make your goal more attainable and therefore more likely that you’ll stick to your plan.

  1. Take out cash for grocery shopping and plan your meals

A lot of industry budgeting gurus will tell you that if you’re on a tight budget, take out cash for your weekly grocery shop. If you take your grocery budget amount out in cash once a week, you’ll physically see exactly how much you have to spend for the week and if you stick to cash, will prevent you from spending over budget. This strategy doesn’t just apply to those on a tight budget, if you’re looking to “stick” to your budget this can be a valuable tool for you as well no matter the budget size. Another great way to ensure you’re not wasting money in the supermarket by buying unneeded items is by planning your meals and creating a shopping list before you head to the store and avoiding buying items that aren’t on your list.

  1. Pay yourself first

When it comes to saving money, many people make the classic mistake of saving whatever is leftover at the end of the month, which can often be nothing. It’s critically important to pay yourself first. You can do this easily by setting up an automatic transfer into a savings account, and then budgeting with what’s left over. This ensures that you’re building and saving for goals as much as possible without forgoing it to the rest of your budgeted items.

  1. There’s a reason it’s called spending “habits”

Spending habits don’t develop overnight, which means they also won’t change that quickly either. If you truly are looking to change your spending habits and cut down expenses to save for that big purchase such as a house down payment, education, trip abroad, etc. it will take a bit of time and effort. 66 days on average to be exact according to a recent study conducted out of University College London. This means that if you’re looking to change or modify your spending habits, it’ll take at least two months before these new habits become automatic. The trick here is to acknowledge that these habits will take a period of at least two months to stick and really start to work for you, therefore make sure to make an honest effort in implementing some of these strategies it will pay off for you in the long term!

  1. If you come under budget, save it!

If you take anything away from this article try to remember this, if you happen to come in under budget for the month don’t spend it, save it! There is no written rule anywhere that dictates that you must spend your whole budget. Throw it in your savings account, or use it to pay off lump sum debt and you’ll be that much closer to your goal. The same goes for any additional windfalls in income that you receive such as an income tax return, bonus at work, etc. you’ll thank yourself in the future for it!

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5 Things You Need To Know About Tax-Free Savings Accounts

  1. Your TFSA doesn’t need to be previously setup to earn annual contribution amounts.

You’re eligible for TFSA contributions when you turn 18. You do not need to file a tax-return, or have earned income. They automatically start accumulating the year you turn 18 years old. This means, that anyone born in or before 1991, will have an unused contribution amount of $57,500 as of 2018. If you were born after 1991 you will have to calculate the amount of contribution room you have, a list of amounts are listed on the CRA’s website here.

 

  1. A TFSA can be more than just a savings account.

Although named a “Tax-Free Savings Account” you can invest inside a TFSA in more than just a high-interest savings account. In fact, a TFSA can hold a broad range of investments such as, guaranteed investment certificates (GICs), bonds, stocks, ETF’s, and mutual funds. However it’s important to note that when investing in foreign equites that pay dividends, any dividend paid to your TFSA won’t be tax exempt like it is when paid to an RRSP or RRIF.

 

  1. Your investments grow inside the TFSA tax-free

Unlike an RRSP, a TFSA does not provide an income tax reduction meaning any income invested will be after-tax income. However like many registered accounts, any gains made in your TFSA are not subject to capital gains. This makes a TFSA an attractive account for growth-based investments over the long term. For example, if you invested $10,000 for 5 years and earned an annual rate of return of 5.5%, without any further contributions you would have earned $3,609 in additional savings that are completely tax-free.

 

  1. You can withdraw from your TFSA whenever you want, no matter the reason, tax-free.

One of the best features with a TFSA is you are able to withdraw any amount from your account whenever you want, for whatever reason. Also since the income put into the account has already been taxed when it was originally earned, any withdrawals are completely tax-free. If you decide to re-contribute the amount you withdrew, the only stipulation is you must wait until the next calendar year to put the money back and you can do so on top of your annual contribution amount maximums.

 

  1. Your contribution amount is periodically adjusted for inflation.

In order to keep up with changing income and price inflation, the Canadian government adjusted the TFSA contribution amount periodically for inflation. Historically the increments have been in $500 amounts, with exclusion of the previous Conservative government that allowed a one year maximum amount of $10,000 in 2015

 

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7 Personal Tax Tips For 2018

Invest in RRSP’s

One of the best dollar for dollar ways to reduce your personal income amounts, and thus your income tax is by investing into Registered Retirement Savings Plans. With RRSP’s you can invest a maximum of $26,230 or up to 18% of your annual personal income. The idea of RRSP’s is to defer the income tax you would pay this year and grow your investment tax free. To find out more about these, see our article from last week to help you get started.

Invest Using a TFSA

Using a Tax-Free Savings Account to store your investments in is a great tax-free way to save for the short term, or long term. Unlike an RRSP, a TFSA won’t reduce the amount of income you pay on your annual personal income amounts however your investments will grow inside the account tax-free. Therefore it’s wise to hold any of your eligible investments in a TFSA to avoid paying capital gains on the investment. Contribution limits begin when you turn 18, and carry forward indefinitely without cumulative limit year after year. This means that anyone born in 1991 or earlier who have never opened or utilized a TFSA could have an upward contribution amount available of $57,500 as of 2018. To see the corresponding limits for each year visit the Canada Revenue Agency’s website here.

Medical Expenses

Another item to be aware of to reduce your tax payable is to claim medical expenses for yourself and your family. This can be in the form of payments towards a child’s braces, medical prescriptions, or prescription contacts or glasses. While these items can alter your monthly budget, you may be eligible for some tax relief towards these payments. Each year the maximum amount differs, currently in 2018 the maximum claim amount is the lower amount of 3% of your income, or $2,302.

Setup and Contribute to RESP’s

For those of you with eligible dependents, setting up a Registered Education Savings Plan (RESP) is a great method to put money aside for your children’s post-secondary education. While there is no longer an annual contribution limit, it is limited to a lifetime contribution limit of $50,000 per beneficiary. While like the TFSA, the deposits made are not tax-deferred they do grow inside the account tax free and qualify for the Canada Education Savings Grant (CESG). The CESG is a grant that the government gives out to match 20% of the first $2,500 contributed annually to the RESP, with a yearly limit of $500 and a lifetime limit of $7,200 per beneficiary. Any unused CESG amounts can be carried forward to the next year. It’s worth noting that withdrawals from the RESP are not tax free. Withdrawals are attributed towards the student beneficiary however and will be subject to their income tax. The benefit here is the student will likely be at a very low income tax rate and may end up paying little to no tax at all on the payments.

Tax Loss Selling

If you own any investments that are going to end up in a capital loss position, consider offloading these to realize a capital loss that will help you offset any capital gains you may have also made this year. Any realized capital losses may be attributed back by up to three years, or carried forward indefinitely. One consideration to note here is if you claim a loss be aware of the “superficial loss period” a rule stating that once an investment is sold and claimed as a loss, it cannot be purchased back within a 30 day period. If this does happen your capital loss claimed will most likely be denied.

Student Loan Interest Payments

Any interest paid on student loans can be claimed within the current tax year. The stipulation to this is that only the student can claim the interest payment credits, a parent, relative, or spouse can make the payments on their behalf.  This is a non-refundable tax-credit meaning you won’t get any cash back for claiming the interest payments but it will lower the amount of tax owing at the end of the year.

Charitable Donations

Making charitable donations is a great way to grab a tax break and support a worthy cause of your choice. These donations are immediately tax deductible at the allotted rate both federally and provincially. There is no upper limit to what you can donate for a tax credit, as long as the charity is listed with the CRA and is a qualified charity.  Depending on the amount of the contribution, you could see a total tax credit equal to anywhere from 15% to 50% of your donation. To see a full list of charitable donation tax credit rates check out the CRA’s website here.

 

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8 important things to know when starting your RRSP investments

1. Your maximum contribution amount

Money going in to an RSP account is tax deductible in the year it is deposited so this can be a great strategy to save money on your income tax bill.  To prevent too many dollars taken out of the tax base, the government puts limits on how much we can contribute each year.  This year you can deposit anywhere from 0 to 18% of your annual earnings to a maximum of $26,010. Keep in mind money withdrawn is also taxable in the year it is received, so be sure to only deposit what you plan to leave in to retirement to take maximum advantage of this program.

2. Yearly limits carry forward year over year

The yearly maximum deposit of 18% of earnings has existed for many years.  This allowable amount accumulates each year and can grow to a considerable sum over the years.  To find out your limit today, check on the Service Canada website or look at your most recent Notice of Assessment (mailed to you from Revenue Canada when they confirm income tax amounts each year).  There is a bonus, the Service Canada website will also tell you about your CPP contributions made and project pension earnings at retirement.

3. RRSP contribution = tax refund

An RRSP is used as a tax shelter from income tax.  Every deposit made can be deducted from your earned income and reduce the tax payable.  If your employer already deducted as they paid you, you can receive a refund at tax time.  The more you make, the higher you pay and the more you can save.

4. The early you start the easier it is

While RRSP’s benefit those in the higher income tax brackets, it’s better to take advantage of them earlier rather than later to take advantage of compound interest. To illustrate this point see below:

Notice that the contribution amounts are the same, but John has managed to accumulate an additional $62,675 in compound interest over the 40 year period. The amount that each person puts into their RRSP each year will vary, but this demonstrates the value of starting your investment early. Even if you are investing in small amounts, they will grow over the entire period of your RRSP. To further this example, if you invested only $1,000 and never made any further contributions, at a 5% rate of return that amount would grow to $7,358 over the 40 year period.

These examples are only illustrations of the investing power of compound interest, the actual results may vary.

5. Set-up automatic transfers to save for you

Remembering to put money aside or into your RRSP every month is not all that time consuming by itself, however it can be made much easier by simply automating the process. Set an automatic transfer with your financial institution to transfer the amount you wish to set aside each month or paycheck and transfer it into a separate account that you can use to make your annual contribution at year end. Depending on the type of RRSP account you hold, you may even be able to have the money automatically deposited into your RRSP account, saving you a step at the end of the year and further taking advantage of compound interest.

6. RRSP’s aren’t limited to savings accounts

Not all RRSP’s are created equal, in terms of risk and return that is. There are several different types of investments that can be held in an RRSP, the most popular being mutual funds among Canadians. Some of the other types of investments that can be held in an RRSP are:

  • Guaranteed Investment Certificates (GICs and sometimes also called Term Deposits)
  • Bonds
  • Exchange Traded Funds (ETFs)
  • Stocks
  • Segregated Funds
  • Mortgage Loans within certain conditions and more

It is important to keep in mind that you can mix and match these investments in your RRSP Portfolio you aren’t limited to picking just one. Which investment type is right for you? That’s a discussion best saved for your Financial Advisor as each type of investment will carry a different associated risk or benefit.

7. Your investments grow tax free

Probably one of the largest benefits of holding an RRSP is that your investments grow inside the portfolio completely tax free. This means you don’t pay taxes for capital gains, dividends or interest on the money earned off of the investment unlike non-registered investments.  You will however still pay your current tax rate on the money when you take it out as discussed in section 3.

8. Can I take my money out of my RRSP’s without penalty?

There is two ways to withdraw money without penalty.  One is with the Home Buyer’s Plan, allowing you to withdraw up to $25,000 from your RRSPs without paying tax. The stipulation here is it is just a loan from your RRSP and, you still need to pay it back in full within 15 years or you will incur penalties. Another option is to withdraw towards your education, called the Lifelong Learning plan where you can withdraw up to $10,000 each year – this also has to be paid back or there are penalties. Note that withdrawals must be made more than 90 days after deposits.  Be tax smart and check with your financial advisor for your best options.

 

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Debt Management Advice:
7 Tips on how to manage debt of any size

Almost everyone at some point in their life will have to learn to manage their debt load. Whether it’s credit cards, mortgages, student loans, or other loan sources, debt is likely going to be a reality for most of us at some point. This can be simple to manage in small amounts, but what can be done when it involves multiple large sources of debt? Good news, virtually almost all debt is manageable with the right approach.

1.)  Make a list of what and who you owe

The first step to managing your personal debt is to identify who you owe, and how much you are in debt to them. It is especially important to identify what your monthly payments are so you can budget accordingly for them. This will help you see the bigger picture of how much you need to put aside each month just to make your minimum payments. Make sure to update this list every three to six months so you can stay on top of your debt load and to ensure that your debt reduction is moving in the right direction.

2.)  Make your minimum monthly payments on time

If you can’t afford to pay off your debt, at least make an effort to pay the minimum payment. It won’t make you much progress for eliminating your debt load, but it will stop it from damaging your credit and having your loans go into default. Paying your minimum monthly payments on time is important as well, if you put it off for a month in order to pay for something else it may become more difficult for you to catch up next month. Continuously having debt in a 30 day late payment cycle can also be detrimental to your credit over the long term.

3.)  Create a bill-payment calendar

Track when your bill payments are set to come out of your account by using a bill-payment calendar. By doing this it will allow you to budget your paycheques more effectively by deciding which pay period you will pay which bills. Identifying your disposable income that you have remaining for each pay period is very beneficial to managing your debt load as it will also help you to budget your other expenses such as food and entertainment. This ultimately should help reduce or stop overspending and going further into debt.

4.)  Consider consolidating high interest loans

Consolidating high interest loans can be a good fit for you if you are someone that holds several high interest loans, typically some credit cards and department store credit cards fall into this category. Last year department store cards had an average interest rate of 24.99% with some of these cards reaching as high as 30.49% according to an annual survey done by creditcards.com. By consolidating these cards into a personal loan, it will help drastically reduce the amount of money that is racked up by interest alone. It will also make payment schedules considerably easier by being able to pay the debt all in one place with one single payment vs paying several creditors with multiple payments on different schedules.

5.)  Pay off high interest debt first

If consolidating isn’t an option, the same results can be achieved also by paying off your highest interest rate debt first. Again, these will likely be department store credit cards or other high interest cards. By paying these off first you will save more in the long run on interest payments freeing up more excess income to help pay down other debts as needed afterwards. Paying these off will also help improve your credit score by eventually closing down multiple open credit sources which will make obtaining a low interest loan in the future much easier.

6.)  Consider working an additional part-time job

If cutting down on expenses isn’t freeing up enough extra income to help pay down portions of debt, consider taking on an additional part-time job. Even marginal amounts of added income can be huge when it comes to paying off debt. By working an additional 4-8 hours a week you may be able to easily net $100 to $200 extra a month which will make a large difference in paying off lump sums of debt. Freelance work is another option that’s available depending on your field of work and can vary from cleaning houses, dog walking, professional services, and much more the opportunities here are almost endless and you’ll be able to set your own schedule for what works for you.

7.)  If all else fails, seek professional help

If all of the above fails, or it’s difficult to keep up with payments that are over and above your income every month you may need to reach out for help. There are many types of professionals that specialize in this field and people everywhere end up facing this same problem. If you’re facing this type of problem, we may be able to help by reviewing potential options with you, contact us and book an appointment with one of our Account Managers to see what’s available to you.

 

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How to pick a credit card that will work for you

Do you have difficulty determining which credit card is going to suit you best? Well you’re not alone. In fact a recent survey has indicated that 61% of searching customers find the number of available choices overwhelming, and 57% indicate that they can’t determine what the best fit is for them.  With more Credit Card options out there than Instagram has filters, how can you be so sure you’ve picked the right one for yourself? We’re about to help you through this.

 

Rewards & Perk Cards
First question, do you pay off your balance at the end of every month? If so, then these types of cards can be of great benefit to you. Typically, rewards and perk cards have a set annual fee and come with higher interest rates than their no-fee, low interest counterparts. In exchange for this however, they provide you with a variety of cardholder benefits such as improved warranty protection, additional reward points earned at specific locations, auto rental insurance, travel insurance, and much more. Some of the elite rewards cards even offer concierge service to assist their cardholders with administrative tasks such as travel & party planning, dinner reservations, hotel bookings, and more. The most important point to consider when seeking a rewards card is if you intend to keep a balance on your card. If so, you will end up paying higher interest rates than you would on other options. Your best bet here is to pay your balance each month if possible and benefit from the perks, while avoiding the higher costs potentially associated with them.

Cashback Cards
Cashback cards are gaining huge momentum in the credit card industry. Ranging from immediate 0.5% to 2.0% cashback on ALL your purchases made with the card, it’s easy to see why these types of cards are becoming hugely popular. If you’re the type of person who doesn’t care much for the extra perks and rewards of your card, or won’t make much use out of them then consider what the cashback cards have to offer. Typically, these cards also offer higher interest rates, so it’s not recommended for those who tend to carry a large balance since the cashback percentage will be quickly eaten up by the extra interest you will pay vs a low rate card. These types of cards can also be rewards and perk cards as well, but keep in mind you’ll likely pay an annual fee to take advantage of these benefits.

Low Interest & Balance Transfer Cards
Almost all providers have a line of low interest or Flex-rate cards that will give you a lower rate depending on your credit score. These types of cards typically come with little to no additional perks or benefits outside of reward points and standard provider services. These are the best cards however for those that tend to run a higher balance on their cards. In fact, by switching to a low interest card cardholders can save over 50% on their interest payments each month. For someone who holds a $5,000 to $10,000 balance, that’s potentially $40 to $80+ each month that could be saved that’s going directly to unnecessary interest payments. Some providers will also offer promotional incentives as well for balance transfers that will grant their cardholders a limited time offer of exceptionally low interest rates for a set period of time.

Travel Cards
Another type of benefit card that is popular among cardholders is the Travel Reward Card. These types of cards typically allow the user to accumulate points through their purchases and redeem at a later date towards flights, hotels, cruises, etc. These types of cards usually involve an annual fee on the higher side, and can vary in terms of interest rates. Some travel cards do come with extra benefits above and beyond traditional benefit perk cards such as emergency health insurance, or trip cancellation and interruption insurance, lost baggage insurance, and so on. This type of card is going to suit a cardholder that uses it while travelling to really make use of the benefits offered by the provider.

 

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