The Frugal Canadian

A frugal spender seeks to find new ways to save money and increase her net worth.

Thursday, March 22, 2007

Mortgage and House Update

A while ago I wrote about whether or not or not we would prepay a mortgage and how much our downpayment would be. We decided on putting 25% down, under a 5 fixed rate mortgage with bi-weekly payments. As new homebuyers, we weren't really sure what we were getting into. The house that we purchased is an older home and we knew that we could have have some unforeseen repair bills. We ended up putting half of our net worth into the house and have kept the the other have invested in a diversified portfolio including RRSPs. Keeping some cash outside the mortgage ensured we would not be cash poor and have some flexibility. We plan to make aggressive prepayments every year. Our goal is to be mortgage free on this property in 7 to 10 years.

Wednesday, March 21, 2007

Fighting the urge to spend money

I desperately want a new computer. My existing PC is extremely slow and increasingly becoming less reliable as I see the blue screen of death more and more these days. I've decided to make the switch to a Mac and am looking at a model which retails for $1699($1937 including tax).

Maybe I've been completely swayed by Apple's clever ads. The "restarting" ad is a personal favourite at the moment. Although it is more expensive than a comparable PC, most of my computer time is spent on multimedia activities and after checking out Macs failry extensively I decided to make the switch. Still, I'm not going to rush out and buy one. I've set a goal of raising enough money from sources of income other than employment. I've been working hard since January 2006 and I'm getting pretty close.

Poker winnings - 890US ~$1000CDN
BestBuy gift card - $100 CDN - from a poker bonus
Focus Group Stipends - $200 - for attending marketing research group sessions
Side Business Income - $335
Pending Business Income - $250

Total - $1,885

I'm so close but still short $50. I should reach my goal by the time Leopard comes out.

Monday, March 19, 2007

2007 Federal Budget

Here's a quick highlight on the 2007 Federal Budget relating to personal income tax matters. Other than the new child tax credit, there are not many significant changes. See here for full details. While there are many corporate tax measures, I've limited my summary to individual taxpayers.

  • Working Tax Benefit - A 20% refundable tax on income over $3000 to a maximum credit of $500/individual or $1,000/family as an incentive to get into the workforce and get off welfare
  • New Child Tax Credit - $2000 tax credit per child under the age of 18. Amounts to a $310 tax savings per child.
  • RESP limit upped to $50,000 lifetime with the Federal Grant raising to $500 from $400 per year. Keeping the grant rate at 20% this means you'll need an annual contribution of $2,500 to maximize your federal grant. In addition, part-time will be eligible provided that 12 hours a month are spent on studies.
  • Personal credits - The 2007 basic exemption is $8,929 with an increase to the spousal credit to match the basic exemption. 2008 basic exemption will be indexed plus a $200 increase and 2009 will be indexed with a $600 increase.
  • Increasing the age limit to 71 for RRSP and RPPs. Currently the age limit is 69 before it requires to be transferred to a RRIF to be withdrawn as an annuity.
  • The age credit is increasing by $1000. Low to mid income level seniors will save $155 per year. In addition, pension income splitting will allow for lower taxes for seniors.
  • Registered Disability Savings Plan - It will be based on the RESP structure where contributions are eligible for a federal grant and earnings are tax deferred. To me this one doesn't make a lot of sense. The feds are recognizing the financial hardship that many families are faced with when dealing with a disability. Most of these families don't have the savings to participate in such a program in the first place.
  • Transit Passes - Weekly passes will be eligible for the credit
  • Lifetime Capital Gains Exemption - increase to $750,000. Unfortunately this does not apply for publicly listed shares. This applies to qualified small business corp. shares.