Power and Control From Learning

Think of a time when you tried something new.

Do you remember how awkward it felt?  Do you remember feeling intimidated, even afraid you wouldn’t get it?  Working through a math problem. Fixing a lawn mower. Roasting a Thanksgiving turkey. Learning to dance.  Mastering a computer program.

Then there’s the subject of money.  You may have been daunted by opening your first bank account.  Learning the ins and outs of money matters didn’t stop here.  You needed to create a budget, pay for essential expenses, save for the things you wanted, and so much more.

Now you may be at the point where you’ve tried stretching your monthly income and discovered your way isn’t working.  You’re overwhelmed. You’ve stopped learning new ways to make “everything” fit into a neat and tidy worksheet.   

This is probably the ideal time for a new commitment.   Most students return to school in the fall. Whether they attend high school, college, or university, they walk the Halls of Learning in pursuit of a higher education. You, too, can do the same. Managing your money means finding new ways to achieve your financial goals.  

Plenty of information on money management is found at this website and in the Internet world to provide education. The choice is always ours whether to move forward with what we are given.  

As your financial planner, I could suggest you consider spending money on one less thing, invite you to create your dream list of things you want in life, or recommend you set up an emergency savings account for those unwanted and expected life events.

With all sincerity, often the best intended advice can be likened to the proverbial saying, “You can lead a horse to water, you can’t make him drink.”   Can this apply to us?   Let’s reframe the question.  When we know what we should do but choose not to do it, who are we hurting most? Ourselves, of course!

Some advice is common knowledge.  We know we need to exercise and eat well to carry on an active and healthy lifestyle.  The same principle is true for being financially healthy. We need to create a balance between spending and saving to lead an active and healthy financial lifestyle.

I am a firm believer that knowledge is at the heart of power and control.  When you choose to learn new skills, you are in a “control position”.  You are taking charge to make a change in your life.  In other words, it’s the perfect way to get yourself out of a “stuck position”.  Whenever we feel like we are drowning in debt, wanting to purchase a home, or planning to retire, we to learn more.  Seeking information from reputable websites and the advice from a CERTIFIED FINANCIAL PLANNER® professional will broaden your knowledge and deepen your understanding.  

Even though implementing changes can be intimidating, and at its worse, frightening, you don’t have to stay stuck in any situation. 

Typically we ask ourselves, “If there was one thing we could change about our financial circumstances what would that be?” Getting control over one only thing boosts our confidence and lead us to conquer other obstacles.

Putting ourselves in a control position generates a sense of power over our situation.  This happens because we choose to learn.  Not only will our learning lead us to be better money managers, but it can also help us find better jobs which pay better wages and give us the opportunity to achieve the things we set out to do in the first place.

To keep the task simple, let’s try implementing only one “Do” and “Don’t” strategy rather than create an endless list.

If you catch yourself in a stuck position:

“Do” 

Embrace learning new skills as an adventure.  Start where you choose to make the small changes in your life.  Keep the adventure ongoing.  Once you master one skill, move onto the next one.

“Don’t”

Avoid the negative self-talk such as telling yourself you are not smart enough.  You can’t do this because it’s too difficult.  Turn negative statements into positive ones.   

The key message is to never stop learning.  There are a number of quotes written with this thought in mind.  One of my favorite is “The more that you read, the more things you will know.  The more that you learn, the more places you’ll go.” (Dr. Seuss).   With your dream list in hand, you will want to keep this quote in mind. 

As a CERTIFIED FINANCIAL PLANNER® professional, I am steering you to this website, Financial Planning for Canadians. Many less-than-a-minute-to-read articles are written to help you navigate through money matters.  There’s also an exclusive section, Life Happens--Financial Issues in Each Life Stage, to advise on the unexpected. These Life-Happens are real.  This great resource provides information on issues which can apply to your situation.

You have permission to ask for help.  Sometimes the obstacle is not knowing what to ask.  Knowledge can be derived from reading. You can experience a light-bulb moment when you connect the information with your situation. These articles then trigger the question, “Does this apply to me?”  If the answer is “Yes”, you are on the right path to gaining power and control. 

How Do The New Proposed Tax Changes Affect You



Oh Canada! The True North strong and free!

Do you remember writing a research report for a school assignment?  

• What were the lasting effects of World War II? 

• How did the bombing of Hiroshima change the way the world feels about nuclear weapons?

Here’s a new topic we could add:  How do the new proposed tax changes affect you?

 

If you are a shareholder of a small business or farm corporation, you may be affected by the proposed tax changes brought forth by the Liberal government on July 18th. 

The 75-day consultation period, which ended as of October 2nd, permitted Canadians to share their views on the proposed changes. This excerpt from Bill Morneau, the Federal Finance Minister, appeared in an Open Forum letter published in the Western Producer:

“In all of this, let me reiterate that this is a consultation period, and that we are in listening mode.  If you think these proposals inadvertently affect middle class farm families, we want to hear from you.”

Although the Liberal government received countless requests to extend the consultation period on the tax changes, the request fell on deaf ears. This motion was defeated Tuesday, October 3rd.  

The Government of Canada’s 63-page document, Tax Planning Using Private Corporations, specifically addresses three primary issues: income sprinkling, holding passive investments inside a corporation, and converting income into capital gains.     

Today as I composed my report on the proposed tax changes, I had a knot in my stomach.  As I read through news articles and media posts, I witnessed first-hand the controversy created over the Liberal’s proposed tax changes framed in their words as “tax fairness”.  Many across the country beg to differ, calling the changes anything but “fair”.  

The clients who I have worked with are shareholders in private corporations for both personal and business reasons.  Setting up a corporation was in their best interest in order to have more after-tax income to upgrade or purchase additional equipment and land, fund operating expenses, and save for emergencies and unexpected business problems. In some cases, the cash within their corporate accounts was to fund their retirement, the same way a pension plan would serve a salaried employee.

In the future, my clients would pay their share of personal taxes when funds were withdrawn from their corporation into their personal accounts.  The integration between corporation and personal tax filings assures that income earned through a corporation and paid out as dividends is subject to the same income tax as that earned by salary.

 

Kevyn Nightingale, CPA, CA (ON), CPA (IL), TEP is a Partner and Business Advisor at MNP, LLP.  In his two articles, Private Company Income Splitting Part 1 and Part 2, he clearly defines the current tax law and the proposed law regarding the income splitting proposals.  As a tax professional who understands the proposed legislation, Kevyn makes an astounding comment, “The legislation is conceptually simple, but the devil is in the details, and they are exceedingly complex.  There are 27 pages of new legislation.”

The Income Tax Act has always been complicated and complex. When I checked, the document, amended as of July 1^st, 2017, is 3,128 pages.  And the number of pages is about to increase.  Once the new legislation is passed, owners of small business and farm corporations are encouraged to talk with their tax advisors to fully understand how the new changes will impact them.   An expert who understands and interprets tax laws can educate and provide us with wise tax planning advice.

 

Permission to Catch Your Breath

 



“Rest”

Pressure to perform better, accomplish more, work harder, pushes us to the point where we need a time-out.  The time-out allows us to catch our breath.  We are driving ourselves crazy to please others, meet our goals, and fulfill our dreams.  When we run at break-neck pace, we lose sight of “why we’re doing what we’re doing.”  Taking a serious moment to revisit our life choices is both important and necessary.  

Here’s the catch. I look at my blog website and see a wealth of information written for your benefit. Then I realize there’s too much information and too little encouragement.  You need to know you are doing a great job. 

The fact that you are interested in improving your financial circumstances is commendable.  You are reading and at the very least are attempting to understand and implement better money practices into your day-to-day life so you are prepared for retirement, emergencies, and accomplishing your heart’s desires.

 

 

“Review”

Too much information weighs us down.  When we’re advised to do this, that, and the other thing, our heads spin. Examining what is best for us and meets our needs guarantees a successful outcome.  Too much information will spill out of our minds like  an over-filled hopper of barley will spill onto the ground. When we determine our purpose, reason, and desire for wanting to do “things” then we go in search of the information.  Knowing what you want helps you accomplish what you want.  This advice applies to a number of possibilities:  reducing your spending, saving money for your retirement, or effectively transitioning the family business to your children.

“Reflect!”

Maria Robinson so wisely said, “Nobody can go back and start a new beginning, but anyone can start today and make a new ending.”

What may have been devised as the best plan in the past might no longer be the best plan going forward into the future.  When we take a time-out to breathe, we have an opportunity to reflect and ask whether our goals and dreams will serve our needs going forward.  Your family dynamics may have changes; your health may have declined; or your job may be different.  Any alterations in your life are reasons to reflect on whether your present financial plan needs to be altered.

“Recharge!”

 

 

Reflection also serves as an opportunity to recharge your enthusiasm for pursuing your commitments to your goals and dreams.  When you recognize and celebrate your accomplishments to-date, you are fueling your motivation for the future.

Charles Duhigg, in his book Smarter, Faster, Better, offers two ground-breaking facts about motivation.

q Motivation becomes easier when we transform a chore into a choice.  Doing so gives us a sense of control. 

q Self-motivation becomes easier when we see our choices as affirmations of our deeper values and goals.

Charles’ fact-finding discovery came from his research of General Charles Krulak’s Marine Corp. Charles applied this new found knowledge to motivate him to write his book.  He simply said, “Motivation is triggered by making choices that demonstrate (to ourselves) that we are in control – and that we are moving toward goals that are meaningful.  It’s that feeling of self-determination that gets us going.”

So if you are the slightest bit demotivated about accomplishing your goals and dreams, ask yourself, “Why are you doing what you are doing?”  The Marine Corps recruits did just that.

“Why are you climbing this mountain?”  “Why are you missing the birth of your daughter?” “Why are you cleaning a mess hall, or doing push-ups, or running onto a battlefield when there are safe easier ways to live?” Forcing ourselves to explain why we are doing some thing helps us remember that this chore is a step along a longer path, and that by choosing to take that journey, we are getting closer to more meaningful objectives.

“Refresh”

When you walk through the steps: Rest, Review, Reflect and Recharge, you will feel Refreshed.  A short-lived time-out can be amazing without be extravagant. 
Simple things like playing your favorite song, making a list of the important people/things in your life, having a telephone conversation with a friend, setting aside prayer time, or relaxing with a cup of coffee in your favorite chair can rejuvenate you.  These mini-holidays clear your mind of clutter to help you think more clearly about your life choices.  Make that appointment with yourself the first chance you have.  You have permission to catch your breath.

There’s No Easy Answer

When your vehicle’s odometer sneaks closer to the “No Warranty” number, how do you feel?    For me, this is a race I don’t like winning.  I know when the number changes to 100,000 kilometers (or 60,000 miles), time’s up.  Any repair costs will now be at our expense unless we have opted for extended warranty.

When I think the repairs are about to happen, they generally do.  Not minor repairs, but costly ones. One month it’s $1,000; the following month $500. Even though regular oil changes and service checks have been done, breakdowns are destined to occur.  

Purchasing, maintaining, and repairing vehicles are major expenses for owners.  In addition there are the registration fees, insurance, fuel and oil costs. To get from Point A to Point B, when there are no other options for transportation, our vehicles become a necessity, not a luxury item.   Our challenge is to ensure we budget for the costs associated with driving and replacing them.  This is literally where the rubber meets the road. 

The basic questions are:

• What can we afford to drive? 

• What is a practical vehicle to drive for our needs?   

Many conversations have been had with family and friends about the search for “the one” that answers our basic questions.  The concern which always surfaces is “Are we making the right decision?” Taking our time is better than rushing through the buying process. There’s nothing worse than a wrong choice. You can’t turn back the clock expecting the dealership to refund your money when you return the vehicle.  I know someone who tried.  The mistake was costly. Doing your homework is important.   Sleep on your decision more than one night.  Take as long as you like until you are comfortable with your pending purchase. 

Here’s a “Are-You-Sure-This-Is-The-Right-One” checklist:

q Whether your vehicle is driven for personal or business purposes, consider how many kilometers (or miles) you drive each year.  This information provides a clear indication of the length of time the warranty will cover major repairs. This is also key in determining the number of years you will own this vehicle before it will be replaced.  Kilometers are more speedily accumulated when you live in rural areas.  Medical appointments, entertainment events, and shopping trips to the city can rack up kilometres quickly in a year.  Knowing your annual mileage will provide information for the following points. 

q When a vehicle is used to earn business income, Canada Revenue Agency (CRA) allows any related expenses to be deducted as an eligible business expense.  Maintenance expenses, tire replacement, registration, insurance costs, loan interest, and depreciation reduce your taxable business income.  In turn, these costs can reduce your overall tax bill.  When a vehicle is used for both business and personal purposes, the expenses are pro-rated based on the number of kilometers driven only for business.

q Be cautious about believing that a loan financed at 0% is great deal.  For your benefit, ask for two comparisons:  one if you were financing the vehicle at 0% and the other, if you were financing at a low interest rate.   You might be forfeiting a price discount on the purchase when you choose 0%.  Investigating and evaluating your options is the best way to be certain you’re getting the best deal.

q When financing is required, always work the new payment into your budget before leaping into a vehicle purchase. Without crunching the numbers, you are only assuming you can afford the bi-weekly payments. Knowing for certain is better than assuming.  Then take the next step. Include the cost of the registration and insurance so you are not surprised by these expenses. A severe change in any costs can be a disaster to your spending plan.

q If you are looking for a different vehicle but are hesitant to pay the “new price”, you might consider an upgrade to a newer model with reduced miles and remaining warranty.  A slightly-used “new vehicle” rather than a “brand-new” one has a trimmed-down price.  Another option may be to snatch up a new vehicle at a reduced price late in the year when the next year’s models are available and the dealers want to get rid of their existing inventory. 

q “Own a newer vehicle” may be only one thing on your long list of goals and dreams. Before you determine the make and model of your new purchase, pre-plan the amount you are willing to spend.  In Suze Orman’s book, The Courage to Be Rich, she makes a valid point, “…it’s certainly a component of our collective consumer machismo: You are what you drive, for as long as your drive it.  Cars are our ultimate symbol of success, and they display the level of success we’ve achieved ~~ or the level of success we want others to think we’ve achieved:  This is who I am, because this is the make and model I drive…I am asking you here not to let what you drive today drive your destiny tomorrow.”  I believe her point is well-made.  Look at your dream list and do the math. Putting all your money into the new purchase at the expense of your other dreams might be less than ideal.     

      

q Where we live certainly plays a part in deciding what we drive. Living in rural areas, you may factor your road conditions for all the seasons.  Are the roads and highways passable if you need to travel in the winter months?  A SUV (Sport Utility Vehicle) may not be seen as a luxury but rather a necessity. Health and mobility reasons may factor into your decision. It’s essential that you find a vehicle to meet both your needs and budget.

q There’s a fine line between a dealership wanting your trade and not caring whether you trade.  Simply said, your vehicle might not be worth as much as you think it is because it is either too old, has too many kilometers, or both.  An older vehicle with more mileage equals less trade value. Certain makes and models depreciate more rapidly than others.  Being conscious of the fine line is worth noting on your next purchase.  If you are not sure, you may ask a salesperson who knows.    

q To trade (or not trade) your present vehicle towards the new purchase should be examined.   The value of the trade reduces the amount of GST (Goods and Services Tax) and PST (Provincial Sales Taxes) added into the final sale price.  When you have an opportunity to sell yours privately and receive a higher value than the dealership is offering for a trade, then this is a better option, especially if you can also recoup the taxes from the sale.

   

q If you are financing your purchase and are looking for ways to reduce your payments, consider putting some cash into the deal. Doing so will keep your loan payments in line with your budget.  If the extra cash means stripping your emergency savings, then this is not advisable.  Ensure all the pieces of the puzzle fit your purchase.

  

q When choosing the amortization period for your loan, pick a term equal to the length of time you plan to own the vehicle.   The plan is to ensure when you are ready to sell or trade that the loan is paid in full.  By doing so, you avoid consolidating the remaining loan balance with a new one.  Continually trading and purchasing vehicles over a period time will compound into a problem whereby the loan balance will be higher than its value.

q If you are certain you will purchase another vehicle in your lifetime, the best strategy is to save for it.  For most people, this request seems impossible because their budget may be tight already. However, when you know the purchase is likely to occur, being realistic and planning is better than doing nothing.  Saving some money while financing the balance is an appropriate strategy. Loan payments are usually looked upon as “forced savings”.  People are more committed to making a loan payment than actually setting money aside in advance towards their purchase.  However, extreme caution will need to be implemented as one approaches retirement.  Managing loan payments on a fixed retirement income may be challenging. 

q Make time for comparison shopping.  Whether you conduct your shopping online, in person, or by phone, you are collecting information to help with the final decision.  Because you are investing a large sum of money into a vehicle, you should look at this as an investment.  Falling in love with the first one you see and leaping ahead with the purchase could be a potential mistake. You don’t want any regrets.      

Above is my Baker’s Dozen, thirteen points to help answer the “Are-You-Sure” question.  I personally am not a fan of vehicle shopping because the analysis seems to take the fun out of the experience.  However, the analysis is the important stuff which ensures you have made the right decision.  You will appreciate your purchase more if you don’t have to live with any regrets. The secret is to strike a balance between the analysis and the experience. Create an adventure for yourself. You are hunting for a treasure you’ll appreciate.  Be patient with the search. Sooner than you realize, your hands will on the steering wheel of your ideal dream.   

The Respectful Way

Conflict Resolution

In the ever-popular TV comedy, The Big Bang Theory, Sheldon Cooper is a mastermind at creating agreements.  His Relationship Agreement and Roommate Agreement contain many clauses and cohabitation riders. As far-fetched as Sheldon’s agreements appear, they validate their importance when things go off course. 

Conflict resolution skills are just as important in a family business as they are for any workplace environment.  When people work together in close proximity, their personalities and temperaments are bound to clash over both general and specific issues. 

The notion of creating a Standard Operating Procedure (SOP) to resolve conflicts within a family business may sound odd but think for a second of the benefits.  A Conflict Resolution SOP can provide clarity when confusion and chaos break out as a result of disagreement.

This excerpt from the book, Farming’s In-Law Factor, says, “Conflict can be a good thing.  It all depends on the situation and how we deal with it.”

Dr. Megan McKenzie goes on to clarify,

“Conflict is as much a part of life as rain.  Though not always visible or discussed, it is a normal aspect of our lives as human and is present in all families.”

Learning how to deal with conflicts should be on our how-to-do list. Conflict will undoubtedly occur in both our personal and business affairs.

The Standard Operating Procedure (SOP)

When the combine or tractor breaks down, an operating manual shows us how to fix the problem.  When communication breaks down over an important issue, the SOP can provide a similar fix.    

Consider the following when creating your family business’ Conflict Resolution Standard Operating Policy:

1.  The best way to devise a “Conflict Resolution Policy” is to include every member of the family business into its creation. Begin with an attitude and vision that all family members will understand and accept this document as an important guide for settling conflicts. 

 

2.  Record the events as they occurred to determine the conflict issues that triggered either the positive or negative results.   You are building a framework for action steps to deal effectively with future conflicts.

3. The wording in your document should include strong positive language that addresses appropriate and acceptable behavior.  The notion of being respectful at all times and attacking the problem not the person may need to be included.

4.  The time limit for resolving issues should be pre-determined.  Some issues may need to wait to allow for tempers to cool down; other issues may require an immediate response.

5.  The guidelines should specify acceptable practices such as: deal directly with the person involved in the issue; vow to keep the issue private among concerned individuals rather than publicize the problem; and be vigilant to uncover the “real” issue. 

6.  The protocol for involving an outside mediator should be detailed with respect to the circumstances and timelines. 

The Way

It’s easy to get stuck in the routine of always doing things a certain way.  Unknowingly, this certain way can evolve into “the only way”. 

I was put in this situation with my father-in-law.  He was determined that my husband’s way was not the way he would do things.  In no uncertain terms he was out to prove a point.  Our relationship was put through a stress-test as we battled through how the cattle would be fed.  I will always remember the lesson about “The Way”.  

Small petty disagreements can erupt over the way things should be or could be handled, fixed, repaired, built, marketed, delegated, managed, improved, planted, harvested, or sprayed.   All these discussions and decisions need to be worked through in a respectful way.  That’s the only way.   

Conflict Resolution Skills

If you are interesting in learning more about conflict resolution skills, I recommend checking Achieve Training Centre’s website.  Click here to see their list of manuals created and intended for personal use.

The Conflict Resolution Skills manual provides pointers for being “Tenants of a Respectful Workplace”, a list every family business may wish to adopt.

Tenants of a Respectful Workplace

• Be respectful of each other.
• Be positive in interactions with others.
• Be thoughtful about how you communicate and the words you use.
• Become aware of how your actions and words are being perceived.
• Remember that what offends one person may not offend another.

Urgent Versus Important

Do you make the best use of your time?  

I believe if we were honest, our answer would be “No”.  We all are guilty of squandering some time on tasks of less importance.   Certain items on our to-do lists which desperately need our attention are continually pushed to the bottom of the list for a variety of reasons. We vow we are not procrastinators simply because we’re always busy. So what’s up with that?    

Urgent versus Important

This excerpt from Carl Richard’s book, The Behavior Gap, is long-winded but worth the read.  His explanation offers answers for why we have a tendency to complete less important tasks.

Carl Richards writes:

“Some tasks are both urgent and important. They belong at the top of your list.  Some tasks are urgent but not so important; still others are important but not so urgent.  Typically, the ones that are urgent but not important get done.  The phone gets answered.  So does reading the Facebook posting from your high school classmate. 

Meanwhile, the tasks that are important but not urgent drop to the bottom of the list and stay there.  This can cause big problems.  Dreams are awfully important. But they often don’t seem urgent.  And so our dreams fall to the bottom of our list.

You might need to fix the car – that’s probably urgent, and might be pretty important.  Shopping for a new surfboard?  Probably feels urgent, but it’s not as important as some of the non-urgent stuff that will affect your family’s long-term security.  (My surfer friends may disagree.)  Clarifying who will take custody of your children if you die?  Might not feel so urgent, but it can be awfully important.

On a day-to-day basis it’s easier to focus on the urgent stuff, leaving non-urgent but important stuff to wait.  Which would you do first: get the car washed or update your will?  The car is really dirty!  The will? What’s the rush?

What’s more, updating your will – like buying life insurance or setting up college savings account – is a complicated process.  Washing the car is easy. 

We also enjoy the sense of checking urgent (not always important) things off a list.  Some urgent tasks (shopping for that surfboard!) are even fun.  By comparison, sitting down and working through the details of your personal and financial lives may not seem to offer the same sense of excitement and immediate gratification (though it can). 

Of course, the important eventually becomes truly urgent.  But by then it may be too late to do much about it.”

Did you discover why we have a tendency to complete less important tasks?  Tasks which are fun, easy to do, or provide instant gratification are likely to get done before tasks which have a steep learning curve and are time consuming.

So now what?

Understanding Time Management

 

While you need to have a to-do list to check off tasks, you also need to determine the order in which your tasks can be completed so you can make wise use of your time.

Carl Richard’s reference resembles the time management concept presented in Stephen Covey’s book, The 7 Habits of Highly Effective People.  When we examine our activities, we can break each into one of four quadrants, as illustrated in the above diagram. 

·       Important and not urgent (Important Goals)

·       Important and urgent (Critical Activities)

·       Not important and urgent (Interruptions)

·       Not important and not urgent. (Distractions)

It is helpful to designate tasks as either “urgent” or “important”.  Stephen Covey defines “urgent” as the things which require your immediate attention and “important” as things having to do with results related to your mission, values, and high priority goals.  Ideally, we want to be proactively working on the issues that are “important but not urgent” in order to prevent events from escalating to issues that will become both “important and urgent”.  

What’s the next step? 

Let’s Get It Done

I would venture to guess that we know which tasks provide an everlasting effect on our personal and business financial health.  What may slow us down is deciding which tasks should be completed first.  I am in favor of finding the right tools (or worksheets) which can help get the job done.  It’s helpful to have a visual picture like this worksheet to rank the goals in order of priority.  It also allows everyone to complete their individual worksheet and then arrange a joint meeting to discuss the order of goals in urgency and importance.       

Now You Know

We look at the calendar, see another day slip by, and quickly say “Good-bye” to another month.   We know we’ve been busy but we’re never entirely sure what we’ve accomplished.  Surely, one task or goal requiring our attention was left untouched.  We have a fleeting thought that one day it will get done.  The challenge is to stop and make a sincere effort to begin the process of tackling that goal. It may be one of your important goals.  

Stephen Covey’s wisdom rests in these words, “The key is not to prioritize what’s on your schedule, but to schedule your priorities.”