By: ACCOUNTING - BOOKKEEPING - TAX (T1 & T2)  09-04-2011
Keywords: financial advisor



You can calculate your debt to income ratio as follows:

Add all your monthly debts, i.e rent, mortgage, loan and credit card payments, car loan or lease, alimony or child support and divide the total with your take home pay after taxes. This will give you your monthly debt obligation ratio to your income.

If the debt obligation is about 25% or less, you are safe. Anything over 25% and upto 35% is a warning signal. However if it gets over 35%, you should really get worried and must make a quick decision to resolve this issue.


Savings can protect you from emergencies like major car repair, loss of job or illness.

Savings can help you for your major purchases like car or home.

You live with financial anxiety if you do not save.

RRSP, TFSA or an independent investment fund can be part of your savings plan.

Financial experts agree that financial securiy and a confrortable returement can be achieved by investing money so that it will grow.

Savings are your key to financial security.

You can save money by joining a savings plan at work or by creating your own savings habit. SAVE SAVE SAVE SAVE. It is important to save today than to regret later.


Good credit can help you make major purchases in absence of cash.

A good credit gives you a sense of security that you can handle an emergency.

Plastic money is light to carry.

Credit cards are accepted globally.

Easily available credit gives you incentive to buy more than you require.

You will affect your credit rating if bills are not paid in time.

Some items bought on credit cost lot more than cash price.

Over aggressive use of credit can increase debt load.


Applying for a charge card at any local departmental store can give you a start.

A parent or a friend can co-sign for a new credit card in your name.

Open a bank account and start using bank cards.

Some banks will offer you a credit card if you put some collateral upfront.


·        Contributing to RRSP reduces your tax liability.

RRSP is a very important part of any financial plan.

It is always easier to contribute every month to avoid last minute rush.

Visit to order free publications about tax planning.

If you have paid a debt, start saving same amount for your self.

is a very good sight to explore. This site is devoted to financial matters.


Savings can protect you from emergencies like major car repair, loss of job or illness.

Savings can help you for your major purchases like car or home.

You live with financial anxiety if you do not save.

RRSP, TFSA or an independent investment fund can be part of your savings plan.

Financial experts agree that financial securiy and a confrortable r...eturement can be achieved by investing money so that it will grow.


A spender will try to finish available cash right away.

A spender will easily get trapped into a sales pitch.

A spender will use credit in absence of cash.

A behavior that available cash is to be spent right away is a big problem.

Stop this attitude and evaluate your needs. Get into habit of saving. This will give you peace of mind and a secure future.

Spend less and save more so that you can enjoy your retirement.

Credit Offers:

Once you have established good credit you will start getting credit card offers from different companies. Don’t be tempted and avoid getting trapped into these offers. Think seriously about the level of credit you want to maintain. Do your home work and double check how much credit you can afford against your income? Remember your personal debt should not be more than 10 to 15% of your income.

Always pay your bills on time. You can usually enjoy a grace period of up to 21 days on your purchase without paying any interest. However, if finance charges are calculated on average daily balance, these charges are added to your bill immediately and are compounded on daily basis. Try paying your bill immediately if your credit card company confirms calculation of finance charges on daily basis.

If you have more than one credit card, compare interest charged by each credit card company. It is suggested not to keep more than two credit cards. Keep the two cards with lowest interest rate and get rid of all other cards..


Exchange traded funds are becoming quite popular these days. They work like regular stocks and can be bought on stock exchange. You can also buy them on margin. All ETF’s are basically index funds and they track performance of a certain category of stock.

ETF’s are low cost, flexible, tax efficient and investors have a better control over their portfolio. There is risk involved in ETF’s investment just like with stocks, bonds or mutual funds.

You have to buy ETF’s through a broker and you have to pay broker’s commission. ETF’s are not feasible for very small investments. For each trade you accumulate broker’s commission. However, if you are investing large amount for an extended period of time it could be a good option. Mutual funds on the other hand are a good choice if you are an occasional investor.


Accommodation subsidized by employer is considered as income.

Insurance premiums paid by employer are part of income.

Payments received under disability plan, accident or sickness plan are part of income if premiums are paid by employer.

If an automobile is purchased from an employer at less than its fair market value, the difference between the price and fair market value is considered part of income.

Tips and gratuities should be reported on your income.

If something is purchased against a gift certificate issued by an employer its fair market value should be reported as income.

Non Taxable Benefits:

Employer sponsored counseling services in respect of mental or physical health.

Employer sponsored travel where the trip is for business reasons.

Employer sponsored training costs that relate to work.

Tuitions paid by employer if course is required for employment.

A reasonable amount paid as automobile allowance.

Costs of special uniform, footwear, protective clothing required to be to be worn during employment and related laundry expenses.

Moving expenses reimbursed after relocation or after termination of employment.

Subsidized meals are given to all employees at a reasonable cost.

If the overtime is occasional and infrequent, an overtime meal allowance of up to $17 is not taxable.

Non cash gifts up to $ 500.00 and non cash awards up to $ 500.00including taxes.

Use of employer’s recreational facilities or employer sponsored membership in a club provided such membership is beneficial to employer.

Cost of medical examination if such an examination is requirement of employment.

Employer paid Cellular phone or other hand held devices. These devices must be used for business purposed related to employment.

A reasonable allowance provided to an employee’s child to live and attend a nearest suitable school, if one is not close to where the parent resides for employment.

Employer’s contribution to private health plan, registered retirement plan and deferred profit sharing plans.

Education and Tuition Credits:

Post secondary students are generally entitled to a credit for the cost of courses and certain school fees they pay.

Students should be going to school taking courses of at least 3 consecutive weeks involving 10 hours of study per week for the duration of course at a designated institute. Courses taken at international universities that lead to a degree can also qualify.

To qualify students must be enrolled as full time students.

If a student lives near the U.S border and is registered in a designated educational institute in the U.S and commutes to that institute, he can claim or transfer a tuition credit.

Students taking career-related courses at their own expense can also get benefit of tuition and education credit. These courses must be taken at designated institutions.

Canadian designated institutes should issue T2202 or T2202A forms for tuition. Designated institutes outside Canada should issue TL11A, TL11C or TL11D forms for tuition.

Business Start up Costs:

New businesses usually have startup costs and Capital expenses. Money is required for following fixed and operating costs:

Product Development

Market Research

Advertisement and Promotion

Legal Fees

Equipment Purchase

Salaries and Wages

Lease or Mortgage payments




Other general and administrative expenses

Financing your business:

You can use following sources to finance your business.

Personal assets

Money borrowed from family or friends

Credit card, commercial loan or mortgage

Credit from customers and suppliers

Government loans

Factoring or selling your accounts receivable

Credit Cards

Some credit card companies charge an annual fee which can range from $25 to $ 100. However, there are other credit card companies also that do not charge an annual fee. Try looking for such companies.

Always compare interest rates. Interest rates can vary from 5% to 28%. Always shop around and find cards with lowest interest rate. Do not get into trap of gold or platinum card offers unless you need the extra benefits offered by such cards.

Many credit card companies offer air miles when you sign up for a credit card. Always compare their interest rate before signing up for a card.

Some credit card companies will start charging interest from date of purchase; others will charge interest from date of expected payment. Try looking for cards that allow longer grace period for charging interest.

Partial payments will reduce your debt very slowly. Try not to make partial payments. Always review your bill and pay the entire bill every month.

Aggressive use of credit cards can put you in trouble in the long run. This way you can mismanage your cash, skip few bills here and there, and start making partial payments on your bills. Be disciplined and use your credit cards for necessary purchases only.

Don’t be looking for new cards if you have already maxed out your old cards. Debt consolidation is a good idea if you cannot manage different credit cards.

Never let your debt to net income ratio increase more than 20%.

Information about Credit Cards and Loans:

is a very good government site that provides information about credit cards. You can find out which credit cards offer the lowest rates. Go to consumer information section to find this information.

Different credit unions also offer loans. If you have been a member of a credit union and have a good standing, credit unions can offer you loan at a rate lower than that of a bank would offer.

Mortgage refinance is also an option available to home owners. You can talk to your bank for a mortgage refinance or you can check out personal finance websites. If a mortgage refinance can free up enough cash to pay your high interest debts, do not go for a home equity loan. If you think that home equity loan is also needed, go for first option of mortgage refinancing before getting a home equity loan.

Information for a monthly Budget:

Following chart can help you set up a monthly budget. Once you have developed this budget try sticking to it and manage it regularly. To set up a budget, you can put expenses in any category that suits you. Important is to realize that you need a budget and you need information to make a budget. Don’t forget to add little bit for savings every month.


Following are possible different ways you can take money out of corporation.

Director’s Loan

If you have invested money into corporation that is accounted for as director’s loan, you can take this out from your corporation.


Dividends can be paid out of retained earnings.

Salaries, Bonuses, Commissions:

Corporation can pay you salaries, bonuses or commissions just like another employee. Income taxes are withheld. Income is taxable to you and deductible by corporation.

Director’s Fee

You can pay yourself or any other member of the family for director’s fee. This fee will be deductible by the corporation as an expense and taxable to recipient.

Family Members on Payroll

You can put your family members on payroll just like other employees. Payments to these family members are an expense to corporation. Recipients will get taxed on the amount they are paid.

Rental Income

If corporation uses any part of your property for business purposes, you can charge rent to corporation. You can also charge portion of other expenses related to this business use e.g utilities, insurance, repairs and maintenance etc.


Following are some checks for choosing a good Financial Advisor:

Members of Advocis:

Advocis is the largest Canadian Association of Financial Advisors. Their website =

Members of this association have to follow a strict code of conduct, have to keep up with education requirements and they are committed to work for client’s interest.


Registered Financial Planner or Certified Financial Planners are recognized designations. An advisor with one of the above designations is a good choice.


Certified General Accountants, Certified Management Accountant or Chartered Accountants are well qualified financial management professional. All above qualified professional are aggressively trained, are required to abide by code of conduct and required to participate in continuing education programs.


One has to establish his/her creditworthiness to establish credit. An ability to repay your loan is called creditworthiness. It is determined based on following:

Your capacity/ability to pay, the value of what you own like property, investments etc. and credit history.

A credit history will include your repayment patterns, name of your employer, income, mortgage, outstanding bills, legal problems, available credit etc.

Credit is not a convenience, it is a legal binding that you will pay for your Owings, failing which you are betraying your trust. If you do not pay your bills, you are breaking the law.

You can always purchase a copy of your credit history from any major credit bureau like Equifax or Trans union.


Expense to income ratio is more than 60%.

Several years of continuous losses in business.

Under reported income from tips and cash sales.

Cash industries like taxi, child care, construction are always high risk.

Huge deductions for home office expense.

Large amounts paid in charitable donations.

CRA will conduct a lifestyle audit to find out unreported income. This is a comparison of your personal expenditure work sheet against Stats Can figures. Accounts compared under this are FOOD, SHELTER, HOSEHOLD OPERATIONS, CLOTHING, TRANSPORTATION, HEALTH CARE, PERSONAL CARE, READING MATERIALS, EDUCATION, TOBACCO AND ALCOHOL, SECURITY, GIFTS AND MISCELLANEOUS.

CRA conducts routine reviews of T4 slips from various industries to find proper reporting of income. For self employed individuals a statistical scoring system is used for comparison. Remember, too many discrepancies will always create an audit flag.

Keywords: financial advisor



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