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How much do you know about financial independence?

Dec. 31, 2016, 7:02 p.m.
Posts: 429
Joined: Feb. 28, 2005

so, how's your badassity?

64% net savings rate for us this past year. The 10 year plan is turning into an 8 year plan.

This is impressive but hard to quantify without knowing your household income. That kind of savings rate would be a lot easier to do if you were bringing in say 200k vs 50k.

Maybe a better comparison would be how much of an improvement was this year over last year? What would you say we're the three biggest contributing factors to your success?

You're obviously a MMM fan, but how far have you taken it? Are you getting groceries on your bike or just cutting down on meals out?

Either way, good work. I like reading this thread whenever it pops up.

Dec. 31, 2016, 7:36 p.m.
Posts: 17772
Joined: Oct. 28, 2003

30% two years ago and 8% four years ago (plus a big mortgage payment thats been killed Feb 2016). Every penny has been earned and taxes paid (no inheritance or casino).

We've cut back on driving out of town every weekend and really cut back on eating out. Haven't had a haircut in a year, don't have cable and I ride my bike to work not nearly often enough. She rides every day. Still eat and drink well, but I haven't bought new clothes in a year.

Although we could easily afford a BMW or an electric supercar, we stick with our ten year old simple cars and have a 35 year old van as our vacation property. (Yes, three paid off cars - MMM would facepunch kick me in the head)

The one biggest factor of success was making an aggressive plan and sticking to it.

Dec. 31, 2016, 7:49 p.m.
Posts: 17772
Joined: Oct. 28, 2003

And I still have a PS3 and only a 40" screen.

Dec. 31, 2016, 9:48 p.m.
Posts: 11045
Joined: June 4, 2008

Focus. Dog knees.

Dec. 31, 2016, 10:07 p.m.
Posts: 17772
Joined: Oct. 28, 2003

You really want an opinion?

Jan. 1, 2017, 8:35 a.m.
Posts: 17772
Joined: Oct. 28, 2003

New rules about how your mutual funds must report fees and performance. Please read and understand your reports. I know ten years ago I simply skimmed over them and said thanks. Cost us several thousand in DSCs we didn't know were avoidable. You dont want to discover about DSCs when you've grown your stash to have tens of thousands like this guy!

http://www.cbc.ca/beta/news/business/investment-fees-crm2-1.3908932

http://www.getsmarteraboutmoney.ca/en/managing-your-money/investing/investor-protection/Pages/Cost-and-performance-rules.aspx#.WGkuA4Y77CQ

Jan. 22, 2017, 1:04 p.m.
Posts: 1072
Joined: May 4, 2006

Ok, newb question here regading CRA [HTML_REMOVED] tax on savings income.
Let's keep this really simple to start…
Say I have 10,000 siting in a bank account earning interest @ 5%. It's not in an RSP or TFSA.

I'd earn 500 in interest. Let's assume I pay 20% tax. So CRA would take 100 of that 500 interest I earned. Agreed?

So what happens if that 10000 is actually in mutual funds and the value varies thru the year. Say it went up from 10k to 15k from start to end of year.
Now, I'm not cashing in, and that 15k rolls over to next year so I don't have any income as such.
Would I pay any tax now, or would tax only be due when I cash in?

If I pay tax now, what happens in the scenario when the value of mutual funds drops over the year?

(For now, assume Im just a regular joe with a regular job paying regular taxes without any additional complications and im not actually trying to minimise my tax. Im just trying to figure out basic methodogy without RSP/TFSA complications)

Jan. 22, 2017, 1:24 p.m.
Posts: 13932
Joined: Feb. 19, 2003

^^ tax is due when you sell the mutual fund and realize the gain.

Jan. 22, 2017, 1:25 p.m.
Posts: 393
Joined: Nov. 28, 2002

You don't pay taxes on your mutual funds until you actually sell. And capital is taxed at a more favourable rate than interest. So in your hypothetical situation, if you buy your fund at 10k and sell for 15k, you have a gain of 5k. But you only pay tax on half that. So you pay $2500 times your tax rate.

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Jan. 22, 2017, 1:39 p.m.
Posts: 1072
Joined: May 4, 2006

Hmm, interesting!
Does that mean they don't need to be declared to CRA until sold? Or does CRA need to be kept informed that you own mutual funds? If so, anyone know which form to use?

Jan. 22, 2017, 2:02 p.m.
Posts: 393
Joined: Nov. 28, 2002

Hmm, interesting!
Does that mean they don't need to be declared to CRA until sold? Or does CRA need to be kept informed that you own mutual funds? If so, anyone know which form to use?

You don't have to declare your holdings. But you'll most likely receive a T-slip with some information you are required to report.

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Jan. 22, 2017, 4:52 p.m.
Posts: 1072
Joined: May 4, 2006

You don't have to declare your holdings. But you'll most likely receive a T-slip with some information you are required to report.

Ah, now this is where it gets more complicated…are the rules the same when the mutual funds are held and managed off-shore (UK, in my hypothetical case)?
In the UK, they would be held tax free in an ISA (equivalent to a TFSA…) but I'm not sure whether they would be subject to Canadian tax

Jan. 22, 2017, 7:29 p.m.
Posts: 17772
Joined: Oct. 28, 2003

http://www.finiki.org/wiki/Tax-efficient_investing

Interest is taxed at your income tax rate.

Qualified Canadian Dividends are taxed at a preferred rate, even negative rates in some cases.

http://www.finiki.org/wiki/Dividend

Capital gains are taxed when you sell.

http://www.taxtips.ca/personaltax/investing/taxtreatment.htm

All of this is irrelevant in your TFSA - theoretically, no Canadian resident over 18 should be invested in a taxable savings or investing account before thier TFSA limit is maxed.

Jan. 26, 2017, 2:36 p.m.
Posts: 1506
Joined: July 11, 2014

Ah, now this is where it gets more complicated…are the rules the same when the mutual funds are held and managed off-shore (UK, in my hypothetical case)?
In the UK, they would be held tax free in an ISA (equivalent to a TFSA…) but I'm not sure whether they would be subject to Canadian tax

Not a tax guy, and you need to talk to an accountant if you have international tax needs, especially investments. But I believe international personal tax shelters are not usable in Canada, i.e. those investments would be treated as any other non-registered investment and you will pay capital gains tax when you sell the funds. The other thing to keep in mind is funds may kick off annual income (dividends, interest, return of capital) which all have current year implications if held in non-registered accounts.

Jan. 29, 2017, 9:17 p.m.
Posts: 1072
Joined: May 4, 2006

Not a tax guy, and you need to talk to an accountant if you have international tax needs, especially investments. But I believe international personal tax shelters are not usable in Canada, i.e. those investments would be treated as any other non-registered investment and you will pay capital gains tax when you sell the funds. The other thing to keep in mind is funds may kick off annual income (dividends, interest, return of capital) which all have current year implications if held in non-registered accounts.

I've being doing a bit more research and it appears that there is a reporting requirement if the value of foreign held "property" exceeds $100,000 (mine is currently around $27k, so nowhere near that amount!)

http://www.cra-arc.gc.ca/tx/nnrsdnts/cmmn/frgn/1135_fq-eng.html#h1

I'm reluctant to shell out for specific advice on this, as it seems pretty straight-forward to me but maybe you guys can see something I can't? If so, I'll look into getting some specific tax advice….

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