The Year End Approacheth
Hello All,
It is hard to believe that we are approaching the end of this year(I was just getting used to writing 2022). It is the time of year (between holiday preparations, Christmas shopping and trying not to overeat) that we tend to take stock of where we are, what we have done over the past year and what we want to do in the new year.
For many it’s been a challenging year. Covid seems to be in the past as routines and processes are mostly back to normal. The effects however continue to be felt and will likely have an impact for years to come. This includes inflation and rising interest rates, working from home and mental health fallout.
Many of you have seen permanent change in your own (or your employer’s) businesses. A client, who runs a coworking space, was never able to reclaim their membership and is being forced to shut down. Another client landed a huge account from a customer who was able to seize a post Covid business opportunity. Several clients have been reexamining their business models and have made some shifts that are more aligned with their values, desires and the change they want to make in the world.
From a personal finance standpoint, Canadians savings rates in 2020 and 2021 were notably higher than in previous years as can be seen in this chart (this also holds true for many of the countries that the OECD tracks). This was a combination of Covid subsidies received and reduced spending (given that most of us were pretty much stuck at home). To counterbalance our extra savings, inflation has been at levels not seen since the 1980s. Stock markets have suffered significant losses and the US dollar has strengthened against virtually every currency. Interest rate increases have led to a reduction in housing prices and higher mortgage payments while also resulting in increase in rates for savings accounts and GICs (fixed investments).
Many of my newsletters focus on what we should do to keep our financial health, as it relates to both our businesses and personal finances, in order. As we approach the end of the year and I recap (i.e. repeat) the past year, I believe it is essential that you have systems in place so that you know your approximate financial health. Note that the system has to make sense to you and customized to way that you process information. Each of us does this differently - for some it is enough to do some rough calculations of the balances in their accounts and how much they owe. For others, having a spreadsheet or a budgeting app can be very useful to ensure that we don’t overlook anything. At a big picture level you should be tracking your revenues (or salary), business expenses, taxes payable, credit card debt, mortgage and loan payments and investment performance. You should also know your RRSPs and TFSAs contribution room and have a plan as to when and how you want to contribute.
Understanding your finances and making small changes (such as minor monthly contributions to a savings account or paying bills on time to avoid late payment penalties) can make a massive difference in your financial situation in the long run. This will get you closer to a more financial secure (and pleasant) future that allows you the freedom and flexibility to do what you would like to be doing.
Blog Post
A couple of (older) blog posts dealing with year end tax and personal finance tips:
9 Year End Tax Planning Tips for Small Business Owners
For numerous people around the world, the end of this year cannot come soon enough. It has been an unprecedented few months, the effects of which will be felt for many years to come. And while it has
Adopt These 9 Money Habits to Increase Your Net Worth
The approach of a new year tends to inspire the best intentions. We indulge over the holidays while resolving to be better, healthier, more financially disciplined etc as soon as the year is over.
Small Business Articles/Tips
All The Queen’s Horses: Looking for a cozy documentary about how a woman from Dixon, Illinois perpetrated the largest municipal fraud in American history? You’re in luck with All the Queen’s Horses (I haven’t yet seen it but it’s on rather large Netflix list)
A Guide to 20 Cognitive Biases: Further to my last newsletter, this guide gives you a brief description of many of the biases that are subconsciously incorporated into our decision making
Performing Arts Grants for Quebeckers: If you are in the performing arts, you might be entitled to a grant from the Fondation Des Artistes. Worth checking out to see if you pre-qualify.
Tax Stuff:
TFSA Limit 2023: The Tax Free Savings Account limit for 2023 iwill be higher at $6,500. Note that since the limit is cumulative, you can contribute total amount allowable for each year since inception less amounts already contributed. To know what this amount is, you can verify your remaining balance at CRA My Account - just make sure that this agrees to your own records (as they have been known, surprisingly, to make mistakes and if you overcontribute there can be significant penalties).
Non Cash Gift Cards: CRA recently changed their administrative policy with respect to gift cards. Under the new policy, these do not have to be reflected as a taxable benefit to the employee as long as they meet certain criteria including being under $500, It comes with money already on it and can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card
Major Canadian Tax Changes in 2023: A summary of some significant tax changes for next year that includes changes to Trust reporting rules and the tax free savings account for new homes
QuickBooks Tip: Which Version to Choose
I was recently asked which version of QBO to choose. While this will be a subject of a blog post, the key decision is with respect to QB Self employed vs QBO Easy Start. The most important difference is that you cannot upgrade from QB Self Employed to any of the other versions (this has to be done manually which is a technical and time consuming process). So, if you believe that your business will grow and that you might require more functionality from your accounting software, it is worth paying a little extra for QBO EasyStart.
Books and Resources:
Small Business Tax Facts(Sole Proprietorships/Registered Businesses/Self Employed Workers)
This book helps you have a better understanding of tax (brackets, tax rates, deductions etc), how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category with special sections on more complex deductions such as home office, vehicle and capital cost allowance.
FastStart Your Corporation(Corporations)
A step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.
QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.
FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (and does not want to incorporate) and wants to know what they need to do or simply has questions.
Small Business and Your Dividends (Corporations)
For incorporated small business owners who want to know more about small business dividends, the differences between salary vs dividends and which is better and step by step instructions on how to file your own dividend declarations (T5s).
Use discount code “special” to save 20% on any (or all) book(s) when you purchase from the website.
Please note that all books on my website are in PDF format.
If you prefer a print version, all books are also available at Amazon . Note that print versions purchased on Amazon include a complimentary PDF - you just need to email me and include proof of purchase.
Free Resources
Business 2022 Tax Deadline Calendar
Starting A Corporation Checklist
Start Your Business Checklist
Dividend Declarations Checklist
Small Business Tax Return Checklist
QBO Set Up Checklist.
Small Business Calculators
Previous newsletters.
Consultations
I also provide consultation services where I can answer your specific questions relating to your small business and/or finances, provide clarity and give you guidance. Additional details can be found here and here.
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
For anyone who has purchased my books through Amazon or directly and found them useful, I would be very grateful for a review on Amazon (to leave a review you only need to have an account with Amazon even if you did not purchase the book from there).
Finally, if you think anyone would benefit from this newsletter, you can send them to my subscribe link.
Hope everyone has a festive and non-stressful lead up to the holidays!
Ronika