Maximize Your Tax Refund

April 30th is tomorrow, file your taxes! For those who likes to procrastinate, here are some important points to keep in mind before you do:

• Do you pay property taxes? Are you filing for your parents who pays property taxes? Don't forget to check out form ON-BEN and your Ontario Trillium Benefits form! Low income families/individuals can get tax credits for their rent payments and property taxes paid for in 2012. For more information, visit the Ministry of Finance website: http://www.fin.gov.on.ca/en/credit/oeptc/ 
• Are you taking post-secondary education? Did you know that you can use your prior year tuition carry-forwards first to reduce your taxes payable to zero before using your current year's tuition tax credits? Doing so means you can have more to transfer to your parents/spouse because the rule is that you must use your tuition tax credits to reduce your tax liability to $0 first, and you can only transfer what you have earned during the 2012 tax year. You cannot transfer what is in your carry-forwards to your parents/spouse. However, I wanted to point this out because the CRA isn't exactly clear about whether you have to use current tuition tax credits to reduce your taxes payable first.
• Did you sell any investments during the 2012 tax year? Make sure you report your capital gains & losses from share trading on Schedule 3. Some brokers do not give you any T-slips for capital gains/losses from share trading, so make sure you don't forget to report it because you didn't get a T-slip. They usually will give you one for mutual funds and dividends from shares you own though. Keep in mind by reporting capital losses you can reduce 2012's capital gains or carry it backwards for up to 3 years, reducing your tax liability.
• Actually the above point leads into this one, did you incur "capital losses" with the capital stock in your TFSA stock trading account? You can't use those to offset your capital gains, so don't do it!

-TT

LED Bulbs: Time to Switch?

Brighter, longevity, less heat, and less electricity are usually the claims made to convince you to switch. Those are all true however what it boils down to is cost vs. benefits, and it is not worth it at the moment! (For most of you)

LED bulbs simply cost way too much right now to justify the switch, let's look at some numbers:

A NOMA 13W mini spiral fluorescent bulb puts out the equivalent amount of lumens (a unit to measure light output) as an ordinary 60W incandescent bulb, which is about 850 lumens. A comparable CREE LED 9.5W warm white bulb puts out 800 lumens according to the manufacturer's website.

The NOMA bulb is about $4 if you buy a six-pack from Canadian Tire. Also at Canadian Tire, an ordinary 60W GE incandescent bulb will set you back about $1.50 if you buy a 4-pack. The CREE bulb is priced $16 at Home Depot (only comes in singles). All prices are rounded up slightly to reflect taxes, and obtained on April 28th, 2013.

Note: Off peak hydro price is $0.067 per kWh if you are using Power Stream.

Here were my assumptions, you turn on the light for 4 hours each day during evening off-peak hours (7pm to 11pm), the bulbs each last their stated lifetime hours, and for the sake of simplicity I only calculated it for one bulb (except for the 60W because you need four of them to last four years). So what do these charts tell us? The LED bulb indeed does stand up to its claims, they last longer and they use much less electricity than the other two. However, if you look at the costs of ownership over 4 years, the fluorescent bulb still stands out as the better option. Some of you may now be thinking, "well yeah it costs more upfront but I save down the road over 25,000 hours!" While I agree with that thought, why not just stick with fluorescent for now and make the switch 4 years later? In 4 years, the price of LED bulbs will come down substantially, making it much more feasible to change. In addition, by then there will likely be even brighter LEDs but at a lower price as the LED@home scene matures.

In what situations will switching now be justified? If you're running a restaurant or an office, where you require those lights to be on all day and night. Then it will be worth it because with that much usage, you can actually take advantage of the 25,000 hours rated lifetime and breakeven by not having to replace as many fluorescent bulbs. Anyhow, if you're thinking of switching feel free to use the above figures I've gathered to help you calculate if it's worth it for your scenario. ALSO, this is important so remember this, be cautious when purchasing home LED bulbs online. There are many poorly made ones that puts out blue light that are priced lower, and they also don't last as long. Make sure to buy it from a reputable store! (Preferably brick n' mortar instead of online)

-TT

Say NO to idling! (No, not your car...)

Oh shucks, not another one of those green peace articles! Nope not even close, it is however advisable though because you're wasting fuel and that will cost you over time. Anyway I digressed, this is a financial advisory blog not an environmental one so let's stick to finances. Today we are going to talk about being greedy and maximizing your return because "greed is good", I mean let's be honest financial incentive is a powerful force that leads us.

In times of market uncertainty, many of us like to wait it out and there's nothing wrong with that... sort of. You see there are many low to medium risk investments that you can park your money in, not your savings account. Why earn an abysmal 1% when you can take on a little more risk and get a bond, or even a balanced growth mutual fund? Actually to be honest I don't even think my savings account gives me 1% while the April 2013 Canada Savings Bond (CSB) is in fact exactly 1%. If you want absolute security, get the government ones because they will never default. However if you're not looking to spend your idling cash in the next 4 months or so, I would actually suggest a balanced growth or income mutual fund and for two reasons: 1) unit prices (aka. NAV) are low now due to Cypress and a recent market correction, if you buy-in now you may get a gain shortly in the next few months, and 2) monthly distributions would exceed what your savings account gives you. The mutual fund doesn’t guarantee that it won't go down in value, but a balanced growth one is not likely going to have any major downswings.

The next few months will be rough, hang in there and don't panic! Get too emotional and you will end up selling at the dips and buying when it's high. Though this is more applicable to riskier investments like shares, it applies to mutual funds too. This month is earnings season, so far there have been both positive and negative earnings surprises, you will likely see more volatility but it should be going back up slowly after June as investors start seeing into 2014 to base their decisions.

At this point you may be wondering, wait a minute, where are the GICs in this picture??? They certainly are very safe, but the rates for cashable ones are so terrible that if you're looking for something safe, get a bond or a mutual fund. GICs in general give you a really small return relative to the other options out there because they are GUARANTEED. In most cases however, take on a little bit more risk and you can easily double what a GIC can give you. In fact, the relationship between me and GICs has deteriorated so much that as Taylor Swift puts it, "we are never ever ever getting back together".

Lastly I just want to leave with this note, always reserve a safety net! Don't put all your money into investments, no matter how safe. Not because a government bond or a mutual fund will go bankrupt, but for the reason of liquidity (aka. Ability to take out cash when you need it immediately).

Stay tuned for the next article folks, hopefully within the next two days depending on how busy I get.

-TT