A Money Coach in Canada

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One of my favourite personal finance bloggers, Money Relations, posted an interesting comment about foodbanks, and poverty. I responded with some of my perspectives, living in gastown (adjacent to downtown eastside, Canada’s poorest neighbourhood) and having done a few money 101 seminars for people on income assistance. Mariam in turn replied with her experience. It’s incredibly inspiring! Here it is:

Hi Nancy,

Thanks for your perspective. I do not have your experience with working with the disadvantaged. Here’s what I know from my experience.

Like I said, I’m an immigrant so I know a lot of other immigrants who worked their way up. A friend of mine as a kid used to live in one small room along with his parents and another brother. I didn’t explore it that much with him as I didn’t want to embarrass him but from what I learned, they had a chamber pot in that room.

After school, he used to go help his mom who was a cleaning lady at a hotel finish up (she was always slow). After that, he used to come home to cook dinner.

Both he and his brother now make over 6 figures.

Compare this to my programmer friend who I had mentioned earlier before. He grew up in the projects of Toronto and he always said his mother had no money management skills. He said that one time after her social assistance cheque came through, she bought curtains instead of buying groceries. Obviously, he was pissed. I don’t know if she had psychological issues but he always described her as an unfit mother.

Then again, he also said that he used to play “Olympics” at home and would use broom handles to throw as a javelin into the wall… so it was just pure chaos.

Another less fortunate friend also said that as a kid, she would break her glasses because she didn’t like them so her parents would have to buy her a new pair.

I am absolutely appalled by this behavior as I would NEVER burden my mom unnecessarily. Instead of helping out, two of my friends chose to be destructive. I can turn this into “when I was young” stories but seriously, with my paper route at 12 (I might have started younger with flyers), I bought my own clothes, bike, glasses, bus passes. My brothers and I did what we could to help out. My mom left early in the morning (6 am and came home late at night 10 pm). No one ever babysat us (my brothers are 4 and 5 years older than me). The first friend I described also had the same self-reliance.

If you ask my mom, I’m positive she will say she can live on $150/mo.

My point is that it takes effort on everyone’s part. If you’re a kid, then you BETTER mature fast. It’s about how much you can endure and what your expectations are. We didn’t expect much. This means no new curtains and air conditioner (as reported by said social worker). Should we have lived that way as a kid? Probably not, but it built character.

Granted, I come from a family with no issues. However, as plonkee mentioned, even with high paid individuals, you get into debt issues. Is it that hard to imagine lower income families won’t have money management issues as well? You describe the extreme cases, I describe the abusers and those are the ones I have fault with.

I swear, Canada is a land of opportunity.

If you are resident in Canada and receive an inheritance, you do not have to include it in your taxable income for the year. Canada has not had an inheritance tax since Mulroney’s government. The rationale behind this exclusion is that tax was paid on the income in the hands of the deceased.

Be aware, though, that the disposition of a deceased person’s assets can give rise to tax consequences for the estate. Death triggers a deemed disposition of all assets at market value (i.e. they are treated as if they have been sold), which is then subject to capital gains tax.

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This accounting nugget brought to you by Mindy Abramowitz.  She’s very smart about all accounting matters, and other stuff too, plus, she’s terrific to work with  (trust me.  I’m a money coach.  You think I’m an easy client for her??)  If you want her contact info, ask me!

The wildly popular ZenHabits blog recently featured a Canadian professor (U. Guelph), Ian Newby-Clark an expert on habit change.

Habit change re: money is what my company, Your Money by Design, is all about … leaving us all with fatter wallets as a result, of course!

Here are his 5 tips, with my comments pertaining to money.

money-tree.jpg1. Work on 1 habit at a time. I couldn’t agree more. Many clients come to see me initially in a state of high anxiety, and are determined to do it all. At once. Get rid of their debt – now! fast! Start an ambition RRSP plan – I don’t want to be a bag lady, and I’m sure I don’t have enough! Oh, and go on a trip to Mexico in three months too! I desperately need a break! My role is to ‘hold the horses’ so to speak, and help

2. Create a plan and write it down. The plan needs to be sane, and it needs to be sustainable over the long haul. It starts with identifying where your net worth is at right now, and leads into where you want to be, financially.

3. Refine your plan. OK. So quickly getting rid of your debt while aggressively saving for your retirement and flying to Mexico next month may not be realistic. But you could go to Mexico, and move your debt to low-interest credit vehicles and set up your RRPSs with a reasonable monthly payment, and see how that works for a while.

4. Make mini-plans. How much will Mexico cost? What is your budget? Let’s open a high-interest savings account at Citizens Bank and start setting money aside.

5. Repeat! Repeat! Repeat! Welcome back from Mexico! You’re relaxed, refreshed and good to revisit your overall networth plan. Let’s start tackling the debt a little more aggressively…

you get the idea!

alexanderstreet2.JPGNone, assuming the property was your principal residence during the year. In other words, a property that was owned and occupied by you at any time in the year can be sold on a tax-exempt basis. The property can be a house, an apartment, a cottage, a mobile home, a trailer or a houseboat, and it can be located anywhere in the world.

Things can get a little more complicated if you own more than one residential property or if you decide to rent out your home.

In the first case, you should bear in mind that you can designate only one home as your principal residence each year. The most common scenario is that a taxpayer buys a new residence before the previous one can be sold. For tax purposes the taxpayer’s former home is considered the principal residence in the year it is sold and does not give rise to a taxable capital gain.

If you move out and choose to rent out your home, it can remain your principal residence for up to four years (and longer under specific circumstances) as long as you make an election to that effect in the year you start renting it out, you continue live in Canada and you do not designate any other property as your principal residence during this period. However, you still are required to report any rental income on your tax returns each year.

If you are contemplating selling more than one residential property, thinking about renting out your home or re-occupying a rental property, ask your accountant or tax advisor to help you navigate your options.

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This post was donated by the inimitable Mindy Abramowitz, YMbD’s very cool accountant.  If you have a question about this post, or another accounting question, just ask!  We’ll respond in next Wednesday’s “ask an accountant” post.

I have a counterpart in the States, currently residing in the UK. (actually, I’m flattering myself by referring to him as a counterpart. He’s years further into this privileged business of helping people take charge of their money than I am.) Steve Rhode recently posted a thoughtful blog post. He asks the question: are you functionally poor, even though you have plenty of money? Are you debting yourself out of the life you could have, if you paid more attention to your money?

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debtsucksshirt.jpgHave you ever noticed that society seems to define people with money troubles as only those that can’t make the monthly payment? What about the functionally poor. Those people that make enough money to pay their bills but pay so little attention to their spending or finances that they are never late, but never ahead either.

A person can be a debtor without making friends with the collection people. It is possible to do so horribly with your finances that you rob yourself of life opportunities and fun and after all isn’t that the major consequence of debt, lost opportunity?

It is interesting that people see no problem with hiring live-in caregivers to raise their children, personal chefs to cook meals, gardeners to manicure the lawn and housekeepers to help keep things tidy. But when it comes to our finances; who keeps those neat and clean for us?

People of wealth have financial professionals that watch over the books for them and keep things headed in the right direction but people in the rest of society feel that professional money management is unnecessary and an expense not worth paying for. I wonder if that belief is why they can’t make their money go further and have to work harder for it?

In the past, the daily money management in the U.S. or the AllPaid approach in the U.K. has worked best for busy professionals and attorneys, doctors and police officers. The lawyers and medical doctors often worked long hours and just wanted their finances managed well. They also understand the value of a professional service. Police officers on the other hand, I guess it is just a stress elimination thing for them. Coming home after a hard shift dealing with bad people, who wants to deal with the bills after that?

So what shall we call this concept of debting without poverty? Anyone got a good name for it? I’m open to suggestions.

The major problem with debt is not that you get collection calls and a bad credit report. Nope, the big problem is that debt robs you of life. When you go into debt or spend recklessly, you have to earn more and all you are doing is sacrificing future labor to make up for your financial management inefficiencies. At the end of the day all that is lost is the opportunities and possibilities that you would have had if you kept a grip on money that need not have been spent.

Now I’m not talking about labeling expenses like cut flowers as a ridiculous expense, in fact, quite the contrary. If you can use money to bring joy into your life then that’s a great use of money. But in my belief, unconscious and self-medicated shopping does not fall into the same category.

When we overspend in an effort to hide or medicate ourselves from the underlying issues, that just becomes like yet another bottle to crawl in to. It’s an escape and a numbing agent and not a bringer of joy and happiness. As one client told me once, “Shopping is my heroin and the credit card is the needle.” Oh so true.

Another example of this concept of debting without poverty is the therapist that was so busy with her practice that when I examined her bills in detail I found out that she was paying double for a home alarm service, paying for satellite television she was not receiving, was on a high rate long distance plan and was spending way too much for her mobile phone because she was using additional minutes.

When I pointed out all of this to her she kept saying that she had not paid attention to these issues or even looked at her bills because she was so busy earning money to make ends meet. The amount of money she wasted was huge, but she was not delinquent on her bills.

So let’s stop thinking about debt as delinquency and instead focus on debt as a sacrifice of future life energy. If you could, wouldn’t you rather work less so you can take longer vacations or have more time to do the things you want? I would.

You can be a debtor without poverty. Are you?

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