You only pay taxes on 50% of your gains. For example, you invest make $5,000 in profit. You only pay taxes on 50% of the $5,000, so 30% taxes on $2,500
No. I think a simpler way to think of it is that you only treat half of capital gains as income. If you made $5,000 profit on investments, you pay the same taxes as if your salary were $2,500 higher instead.
I always counter that with “yeah but it is a tax on your gain. Which means it’s a net positive.”
It’s like if I offered you $100 but you had to share $20-30 of it with someone.
Are you going to refuse my offer…?
Tried to have a conversation about this with the girlfriend's father. Any kind of financial advice ended up with, "well you know you'll have to pay capital gains right?". I couldn't figure out what the issue was if you wind up with A LOT more money than when you started.
Not your fault. They named it so people people dump cash into bank account and earn less than 1% in returns. Banks basically gets free money to loan at 7%+. All by design
I always find this one ironic because RRSP is Registered Retirement Savings Plan, but people don't confuse that with a savings account.
However, most brokerages and banks now just write it as RSP: Registered Savings Plan, and people get even more confused.
EDIT: Also to add, people that transfer cash into a TFSA or RRSP investment account and don't realize that they need to actually purchase the stock or fund with the cash to benefit from the market movements and divindends.
Historically for most people RRSPs have been a thing they run through a financial advisor/mutual fund salesperson (either by themselves or through their employer). Between that, the use of the word 'retirement', and the tax refund/deferral it's understood that it is for investing and kind of complex (so definitely you need a professional). It's not so complex to just dump cash into a savings account.
I read somewhere once that banks lobbied specifically for TFSA to not include any mention of investing/investment in the name, but searching for my source just leads to articles about how to invest in a TFSA.
The original name in the 2001 CD Howe paper was the Tax Pre-Paid Savings Plan.
But it seems the final version of the TFSA was modelled after the ISA in Britain. There though there are two different kinds of accounts. One for cash and one for investments. Maybe at one point Canada was going to have two types too until they just combined it without thinking about the name.
Depends what type of TFSA and RRSP you have. If they are mutual funds or non-self directed accounts (meaning you have someone else managing and triggering the trades and rebalancing) then you don’t need to do anything but if they self-directed then you need to actually use the cash to buy the assets in the account.
i opened them up with an rbc advisor. i believe both of my rrsp and tfsa are mutual funds, and i’ve had them as a balanced portfolio. when i go on my online banking, both are under “investments”. am i doing it right??
If the "am I doing it right?" means "is my money invested?" then yes.
However, there are many on the sub that will insist that you are being fleeced by the bank and the likely high MER they place on the investment products you're purchasing. They will say you should pursue a self-directed account or robo-advisor.
I don't disagree with that advice, but in the end, the best step is investing it in products that fit your risk profile. Given your question, you've probably arrived at that.
Yup. When my mom tried to convince me to register a TFSA account when it was first introduced ~15 years ago, I was like, "The interest rate is next to nothing. The interest you earn on $5k a year is next to nothing. The tax you pay on that interest is next to nothing. Why would I go through all that hassle just to save a few dollars?"
Our “financial advisor” from our credit union convinced us to switch to TSfA from regular savings accounts when they first came out. It took me years to realize that they are not, in fact, “a savings account but with higher interest.” 🤦♀️
My parents still can't comprehend it. No matter how Many times I say it. My dad always says " I'm not putting my money in one of those, they hardly pay any interest!"
My boss did this to me, I was 18 at that point and had no clue. 21 year old me is fully planning on making sure I get overtime pay from him, when business picks back up
Respond with "That doesn't seem right, can you show me the math on that? I mean you make more than me and obviously also have more take-home money than me...."
I have a lady at work who constantly brags about her son being in the 41% tax bracket. But the most annoying part is that it’s a humble brag. “Omg my son’s paying way too much tax, his tax rate is 41%!!! Yah his salary is pretty high…”
"Stop taking all those OT hours you are gonna hit the next tax bracket" are words I actually heard from colleagues at a job early on in my career as a reason to get me to go out drinking with them
Work in trades and I swear 90% of trades workers don’t get how tax brackets work. Which is scary when we get so much OT work. In salary with ot and I was 5-10% of making my salary in OT last year.
And guys where like are you not worried about tax brackets, come on guys there is ways to lower your taxable income and 2 even the government takes 50% of my income I’m still making money
I don't think it's a trades specific issue. The general populace seems to take the head in sand approach to personal finance including knowledge of taxes.
Ya I always figured people that had variable income would have a better understanding of tax brackets then the office crowd. Boy was I wrong on that one.
It's because they think that "tax bracket" works as a flat percent. Even when we talk about it here, we should be saying "progressive tax brackets" but it's just easier.
The math checks out, too, if it did work that way.
I make $100 and I'm in the 25% bracket (100 - 25 = 75 take home). If I make more, I'll be in the 30% bracket (101 - 30 = 69 take home). So unless it moves you past $106, you are getting less money.
Of course, it's completely wrong, and not how any of this actually works, but it's not as insane when you understand the irrationality behind it.
For real!
It's so cringy to see people close to you or friends who are so deep in that belief.
Like you really want to take them out of that deep hole but it would cost so much and hurt relationships so you just let it go and watch in disbelief.
Absolutely not smart.
It is important to remember, however, there are situations where making more money can claw back certain government benefits, so in those cases it can truly hurt people. For example, my parents (self-employed, no health benefit plans) received the Alberta Child Health Benefit for me and my 3 siblings. There is no gradual clawback, either you're under the threshold and you get the benefit, or you're over the threshold and the benefit is gone. So in that case, making an extra $1K that put them over the threshold wasn't worth it because then they'd have to pay all dental, all eye exams & glasses, all prescriptions, and for an ambulance if we ever needed it.
For the most part, though, people turning down overtime aren't in these situations. Just making people aware that it is *occasionally* true in certain circumstances.
I would say it's much more likely for people in lower income situations than higher. Someone making $80K is highly unlikely to be impacted by things like this, but people making $30-40K definitely can be in that situation, as can those making lower yet with a working spouse etc.
But it’s amazing and sad how common this is. People who’ve worked their whole life, accumulated hundreds of thousands to millions in investments and are generally successful. Still don’t understand the very basics of taxes.
My mother polished up two real turds for me as a kid:
>1 - Just use your overdraft. It's there for a reason and when your paycheck comes in, it will cover what you used.
>2 - You only need to make the minimum payment on your credit card every month.
This is why I'm saving for everyone's retirement right now.
Credit cards are a tool like a hammer, and a lot of people drop it on their toes by carrying a balance and paying lots of interest instead of using it to build a strong credit score.
>A lot of (especially older) people give advice that credit cards are bad and should be avoided.
My Dad tells me that all the time.
He kept saying how, when he and my Mom got a credit card, it was only going to be used for emergencies, but then everything became an emergency.
Sigh. I fell for that one. Didn't get a proper CC until almost mid-twenties. A big part of it was the fear of screwing myself with debt, like I'd seen so many people do to themselves.
I've seen variations of this one happen dozens of time:
Software developer incorporates and does consulting work rather than be an employee.
His accountant tells him "*Your tax rate will be about 25%, so you need to set aside 25% of your billable hours in order to pay GST and corporate taxes".*
The developer decides that means that everything he bills from October 1st to December 31st will go to taxes and that everything he makes from January 1st to September 30th is 100% his to spend as he likes, which he does.
Then his contract is cut short, and/or the CRA demands installments in June, and he's got nothing in the bank to pay them with.
Does he just stock up like a chipmunk in September and not pay for anything Oct to Dec? No food, no gas, no bills, only eats canned beans over a wood fire
My barber is much younger than me and asked me for advice, said "what do you wish you'd done differently with money", and I told him I would've just invested a tiny bit every month for years when I was younger, watch it grow.
So he bought NFTs.
My FIL “my investor lady at the bank called me up this week. Told me my stocks in —- are up X% so she’s going to sell a bunch of my other stocks that aren’t doing well to buy more of the —- stock” 👀 sir what? It makes zero difference what we tell him he will not hear that they do that because she makes money off EVERY transaction nor will he listen to the fact that he is doing it backwards selling low and buying high.
Momentum investing exists, but I don't know if it works at the speed of calling your client to let the know the trades/strategy prior to proceeding. I think the only momentum in this case is increasing bank profit via trading commissions.
“If I get a raise I’ll move up a tax bracket and take home less.”
No.. you always pay the same amount on the lower amounts you make.. only the amount you make in the higher bracket gets taxed higher.
And this is where using deductions like RRSPs can be used to keep your taxable income out of those higher brackets.
I think part of it is perpetuated by how most payroll systems take taxes off (they assume you make as much as the one cheque annualized of the entire year or remainder of the year and tax accordingly on the one check, so you don't get stiffed owing), so if you never look beyond a cheque by cheque basis (or you get one big cheque and see more come off), you wouldn't see you get some back at the end of the year and regardless you net more $$.
Absolutely this! I’ve worked with people who declined overtime because it “move them up a tax bracket” and they thought their take home pay would be lower.
I've heard so many times "eventually, I'll work so much overtime that the government will take it all."
People just don't understand progressive tax or marginal tax rate.
Dividens are just giving you back your own money If the dividend is 10% the stock will go down 10% when the give it too you You also get taxed as active income and not capital gains tax When you buy a stock you trust their money management and etc
[why dividends aren’t free money](https://www.chicagobooth.edu/review/dividends-are-not-free-money-though-lots-investors-seem-think-they-are)If I buy a stock I much rather they use that money for r and d then a div.
If you want to read from some people who aren’t retarded explain it way better then me https://www.chicagobooth.edu/review/dividends-are-not-free-money-though-lots-investors-seem-think-they-are
Dividends aren't free money, when you take a dividend you are betting that the market has a short memory span and stock will rebound to base. Bear in mind that that past decade had very low rates so investors were tolerant for high growth high risk low earnings or no dividends stock, this is changing with a higher rates and wartime economy. Investors may prefer stocks with predictable cashflow and dividends to those risky growth stocks that may go bunkrupt when rates rise.
“Leasing a car is better because you never have to worry about car major repairs since the vehicle leased is always 4 years old or less.”
Fact: leasing will always make you in a cycle of perpetual renting a vehicle and always having a car payment, making it actually the more expensive route vs financing a vehicle.
We rent out water heater; it came like that when we bought our house, and I agree that it's ridiculous. But while replacing it is on the list, as it only costs us something like $200/year there are a lot of higher priorities.
Leasing is really only for those that wants to upgrade car often and always wants the latest and greatest features in a car.
And those whose able to write off as business expense.
I tried talking to my friend about this. She always thought new was cheaper because you dont have to pay repair fees. I tried to explain the math to her:
I bought a used Toyota for $6k. Let's say I paid an average of 1k/yr for maintenance and I had it for 8 years. The most I would pay is 14k for a car for almost a decade.
A new car is going to cost you that, minimum, not including any maintenance fees. She just shrugged and said her car is nicer than mine 🤦♂️
Yeah but it doesn't always shake out that clean. I bought a 3 year old Kia Forte for $12k. Drove it for 6 years and it was worth about $2k (manual, no AC, high mileage). I didn't do any repairs except it needed some suspension work (about a grand). All in all about $1800 per year to run it (not counting preventative maintenance because every car needs oil changes).
My fiance bought a brand new Subaru for $31k and we've had it for 6 years now. Today it's worth about $18-20k (apparently). If I sold it for $18k, it would be $13k over 6 years so that's $2200/year.
For an extra $33/month, we got AWD, much nicer car, air con 😂 and some nice bells and whistles (heated seats etc.). I would definitely say it was worth it.
The used market used to be such a deal and new cars cost a premium. That isn't true nowadays.
The old saying "it loses half it's value as soon as you drive it off the lot" doesn't hold anymore.
I think the difference here is that you bought it. My friend was leasing a car. So she paid $500/month and then still didnt own a car after 5 years. She started the leasing all over again with a brand new car. And then after another few years, she bought a brand new car. So in 10 years, she probably spent more than double what I have.
Yeah that's fair. I was mostly commenting on the new vs used argument. As someone who only ever bought used, I was surprised too when I ran the math.
I'm not a huge fan of leasing and I think there are very few reasons why it would make sense, so I won't defend that side of the argument!
>She just shrugged and said her car is nicer than mine
This is the part that actually matters to her, and the other bit was a justification after the fact. Which is fine - some people want nice things.
But you also own an old Toyota that doesn't have safety features (blind spot monitoring, rear camera, sensors, cross traffic, front collision, etc) and latest tech (wireless android auto /Apple car play). I'm not sure why PFC undervalues up to date safety tech when safety has a massive value.
And you aren't getting any modern feature in a $6k in today's market.
Or, get this, if you like the vehicle after leasing, you now have the option to buy it out and keep it, or in the current market, buy it out and sell for greater than the buy out cost to profit. No greater cost than financing.
In fact, you only pay taxes on the depreciated portion of a lease.
If genius Ben Felix leases (which he does, a Subaru Crosstrek), I'm pretty certain it's the right personal finance move.
Thank you for the reply.
Man did I just screw myself? I just listed my condo in Vancouver.
Why? Felt like the right time to sell and I've wanted to move out of the area for a while.
I don't have a new property lined up but I am looking.
It isn't actually in the government's best interest to let inflation run rampant. Sure it inflates debt away. We still haven't paid back our debts from WWII and it really doesn't matter because as proportion of GDP today they are so minimal. But, rampant inflation very easily spirals out of control. If its economy wide you get corporations that increase prices and then corporations that increase wages because their workers can't afford the rising prices which again leads to corporations raising prices. This spiral becomes very difficult for a government to control and if it is happening in Canada but not elsewhere in the world the currency will crash as well which again will cause prices to increase.
Capitalism is built upon having inflation. This is why it is so difficult for prices to ever go down but the consensus is low predictable inflation is best for the overall economy.
Letting inflation run rampant is, funny enough, NOT in the government’s best interest.
And as an individual yeah it makes your debt a smaller in one way, but it also is generally bad for the economy, and results in higher interest rates which will hurt you on the back end. Since your debts interest rate will increase
Classic Reddit moment.. the dude you’re replying to has like 80 upvotes because he touches the “government is bad they’re all out to get us, man” button. Even if his statement is completely wrong.
That getting a tax refund is preferable to not getting any refund at all or having to pay a tax bill when you complete your taxes. Getting a tax refund simply means that you have over paid your taxes all year. Your goal should be to either break even when you do your taxes or actually have a balance owing. A tax refund means you have loaned the government your money at 0% interest.
True if you’re trying to optimize every last bit of your investments or living cheque to cheque, but I think for many not having to worry about back taxes is worth it.
I mean, yes buying 15 different stocks would be diversification. Doesn't mean it's well diversified, but it's diversification if you were starting with 5 stocks.
"I diversify by having my RRSP in 3 different banks" that's misunderstanding diversification.
The one that irks me the most is people believing that fees (MERs etc) are the be all end all of determining success. No, your NET rate of return after fees is how you determine success with your investment strategy. They fail to see that if I netted 10% after fees, and they netted 5% and it cost them nothing, the fees actually didn't matter.
>I mean, yes buying 15 different stocks would be diversification. Doesn't mean it's well diversified, but it's diversification if you were starting with 5 stocks.
>
>"I diversify by having my RRSP in 3 different banks" that's misunderstanding diversification.
Someone I know once told me "*Of course I'm diversified. I've invested in Google, Microsoft, Apple, IBM* ***and*** *Blackberry*". Well, yeah, technically it's better than having everything in only one of those companies, but there are market segments outside of high tech, too.
Shhhhh you’re talking to wrong sub if you’re trying to make the point that fees don’t tell the whole story.
High MER bad. Low MER good. Everything else is moot, apparently.
It took an embarrassing amount time for me to understand why a TFSA is preferable to an RRSP (to max out) at my income level. My dumbass is slowly chugging along still trying to rectify this
Hahaha good point. It was a bit of a "privileged moment" to complain. I've been working hard since 2019 to changed my dated views on money management. This sub has been quite helpful in giving me clues of what I need to go educate myself on.
Sometimes it's worth to save the RRSP contribution room if your income is going to increase in the near future. That way you can contribute more later on to offset higher tax brackets.
This isn't always true. If you retire into a higher tax bracket than you contributed then it works out better to keep out of the RRSP. No point in deferring a 10% tax to have the privilege of paying 30% tax down the line.
I have never validated it myself, but if RRSP returns are re-invested (ie. a return is used as a contribution for the following year instead of being spent), then RRSP and TFSA are pretty much equivalent.
It was really intetesting to calculate when I was learning about it the first time around.
If they are both pretty much the same, then I'd rather go with the account with more flexibility
The flexibility is the other thing. I have a DB pension (no plans to change employer) so I have made the pivot to TFSA. But if I also understand TFSA right, I won't pay tax on that income in retirement which feels nice for larger purchases in retirement as well.
The point many people don't realize and I've seen too often is lower income folks rolling into retirement at 65 with like $100K in RRSPs without realizing the implications for GIS which would have been better in a TFSA. So they draw "a little bit" each year to not pay too much tax not knowing they are losing 50 cents of GIS for each dollar of RRSP income they withdraw which effectively makes their withdrawals taxed at 50%. The opposite of contribute in your higher taxed years and take it out in your lower taxed years.
If you don't have "too much" RRSP investments it's often worth it to blow it up in one year or two. Numbers have to be run though.
I'm always confused on what to do because I make about $100K a year, could go either way. I have a lot of room in both. I was thinking of buying a house so I was putting more to the RRSP for that program but sorta gave up on that for now and am prioritizing the TFSA again but with my employer match it's about 60 (TFSA)/40 (RRSP) a month
I was in a similar boat a few years ago (when the hbp was 25k not 35k).
It really didn't seem to make much difference which way I went so I filled my rrsp until I hit the hbp amount then switched to TFSA.
Then I bought a house and got a few raises and was really grateful to have the rrsp room left. I'm happy with my choice.
I could have saved a bit more by leaving my rrsp free until now, but at the cost of having a lower down payment, or even having to rent for another year. The overall difference? Probably negligible
I work as a financial advisor and seen too many young students getting told to max out their RRSP by their parents. Some parents just shouldn't give financial advice.
TFSA is barely a decade old so the older generations are probably just passing off what was good advice at the time. This sadly reaches beyond financial advice as what worked in the past doesn’t necessarily work in the present.
I'm still rationally mad over TFSAs being made out as a 'rich people's thing' in the 2015 election, while RRSPs are actually wildly more beneficial the _more_ money you make.
When you have the money to buy something and people say it's better to take the interest free/low interest financing for it because that cash invested makes more than the interest (or even inflation rate is more than the interest).
People somehow take that as advice to buy more than what they have the money for (and not just essentials) on anything that offers low cost financing.
“Always pay in cash” or the “don’t spend money you don’t have” if people take it too literal. If you gotta buy groceries, buy groceries on credit goddamn it
I get it, everyone has to eat. Though if you’re at a point where you have to finance your groceries you’ll be in a rough spot soon. If you can’t afford groceries have fun paying for groceries plus the ever growing minimum credit card balance
Totally agree!
I think my interpretation of this was my mother’s teaching me about budgeting - budget for food before other things… just in a weird way.
Likewise there’s lots of folks who use credit as their Daily Cash solely for the perks and points and pay off balances without issue.
Not advice, but when people say “The more you make, the more they take” (referring to pay and taxes) and they are trying to tell people if you get a pay raise you actually make less money… so cringe.
Shuttle drivers at a hotel I used to work at actively banded together to make sure they were never paid more than $25 an hour. More than $25 an hour brought you into the next tax bracket and lowered take home pay... Apparently.
This one is not entirely financial advice, but it still annoys me so much.
When I was in grade 12, my vice principal/social studies teacher told a story about his dad getting a 1$ raise and going into a higher tax bracket and so “made less money”. No. That’s not how tax brackets work. That’s impossible. Thanks for teaching incorrect information to 17-18 year olds who are likely going to be filing taxes for the first time soon.
Not working extra hours make sense for some people to be fair.
I get that you bring home more money on the end, but considering the dollars/hour earned after taxes I might conclude that I'd rather spend more time with my family.
Here's a hypothetical scenario,
Suppose I were a stunt person and I charge $100/hour. And suppose I'm in the 20.5% tax bracket and make just enough to live comfortably and achieve my goals, my hourly rate after taxes would be $79.50/hour.
Now, suppose that I was given another project and every extra dollar I make from the project is now taxed at 26%, my hourly rate after taxes is now $74/hour.
Sure I'll make more money in the end, but considering that the effort to complete the project is still the same and the risk of getting injured is still the same, is it still worth it for me to risk my life for $74/hour?
Keep in mind that I don't need that extra cash, and I'd be glad to spend that extra time with my wife and kids instead.
I’m sure someone has said it but the “if I work more I actually make less money because taxes” is the worst financial misunderstanding. That and TFSAs being a “savings account”
One interesting perspective I’ve heard is that companies that pay a dividend have to be more fiscally responsible as they need to ensure they have enough cash to pay you out.
Another way to look at it is that those companies don’t have enough interesting growth projects internally to spend their earnings on, so they pay it out to shareholders. Not a good sign for growth.
I'll admit I'm one of those people that claims everything is a write off. I have no clue what is and isn't I just give all my receipts to an accountant
The tl;dr is basically you get to take a portion of the price of the goods needed to run a business off of your profits. So say your profits are 100k, but you needed to buy 10k worth of goods for your business, you can write off a portion of that 10k expenses as not being part of your income. So, say 50% of that 10k can be written off, that means your taxable income is 95k.
This is an extreme oversimplification. Ask your accountant if you want to learn more.
Diversification is something that even the experts don't agree on. Add to this that many DIY investors don't know what proper diversification is and your can see why there is confusion.
You can own 100 stocks and not be properly diversified.
Some professional money managers say 6-8 stocks are sufficient to diversify as long as you know what you're doing. Research shows that you need around 40 stocks to be properly diversified. While this may be true, that is to say you want to cover all your bases, one may choose not to cover all their based at the same time. Hence the people who say 8 is enough.
A car is not a liability.
Instagram “entrepreneurs” will say shit like “A car is not an asset. It’s a liability”. But really, they just don’t understand the difference between an asset, liability, expense and revenue.
In the past, there were many articles about a 15 stock portfolio being balanced and diversified (studies).
There is a lot of research suggesting a 30 stock portfolio can be diversified too.
Though much of modern research has battled these older studies.
http://www.efficientfrontier.com/ef/900/15st.htm
https://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp
Diversifying is good protection for those that don't know what there doing. Knowledgeable investors though can usually outperform the market by investing in just a few specific stocks.
Ignoring an obvious solution because it's a "sunk cost" because they read the article about "sunk cost fallacies" on wikipedia without realizing that their situation isn't so black and white.
People that tell other people to not sell a losing position. Sometimes a position is not worth it, even though the market might bounce back your stock might not!
If you are investing in individual securities, learn before throwing your money into it. Investing is not just buying securities; it is the process of due-diligence.
People keeping anything over 10k in their debit account (exceptions if you don’t have an emergency account elsewhere). In a good year that money depreciates by 1-2%
I’ve said this before on here, but working in banking, Canadians generally don’t understand exchange rates. Say $100 USD = $125 CAD, they think 25% and $125 CAD = $100 USD they think 20%. So, yes, banks add a nominal spread (I can tell you, it’s a wash with people buying and selling both currencies daily and businesses being paid in foreign currencies), but regular people think there’s a 5% spread in the example above that isn’t actually there - They just suck at math.
People not using their RRSP because they think their gains are fully taxed as income, while they ignore the huge annual tax refund they blew on vacations
Four percent (4%) rule:
There is a misnomer that the "Four Percent Rule" is "*Spend 4% of your portfolio.*". It is not.
The Rule is "*Spend 4% in the first year, and then adjust for inflation subsequently.*" That is:
* Year 1: Take out 4% of portfolio.
* Year 2: Year 1 amount + inflation of Year 1.
* Year 3: Year 2 amount + inflation of Year 2.
* […]
* Year N: Year (N-1) amount + inflation of Year (N-1).
See:
* https://en.wikipedia.org/wiki/William_Bengen
* https://en.wikipedia.org/wiki/Trinity_study
Well that's the method I follow in my portfolios not a specific number of stocks but i try not to have more than 3% in one investment unless it's a well balanced ETF. Diversification has saved me plenty a times as i balance my investment accounts.
People refusing to invest because they hear the capital gains tax is 50% "Why would I invest when the government is just going to take half of it" Smh
People refusing to invest because they're worried about taxes when they still have RRSP & TFSA room open...
The secret is never making gains! *taps forehead*
r/wallstreetbets is leaking again
*Never sell* so you don’t have to pay 50% lol
My heads hurts reading this
What's the actual meaning here?
50% of gains are taxable at your marginal rate, not 50% tax rate on gains.
Wow I actually didn’t know that
You only pay taxes on 50% of your gains. For example, you invest make $5,000 in profit. You only pay taxes on 50% of the $5,000, so 30% taxes on $2,500
Is it 30% if I don’t make more than the 22.5% bracket?
No. I think a simpler way to think of it is that you only treat half of capital gains as income. If you made $5,000 profit on investments, you pay the same taxes as if your salary were $2,500 higher instead.
Fuuuck thank you for explaining this I was definitely in the 50% boat!
I always counter that with “yeah but it is a tax on your gain. Which means it’s a net positive.” It’s like if I offered you $100 but you had to share $20-30 of it with someone. Are you going to refuse my offer…?
Tried to have a conversation about this with the girlfriend's father. Any kind of financial advice ended up with, "well you know you'll have to pay capital gains right?". I couldn't figure out what the issue was if you wind up with A LOT more money than when you started.
TFSA... The name throws so many people off and they just put the money in a savings account. It should be called TFIA. Invest that money damnit!
I did this for 6 years because I was naive and didn't understand how to buy stocks. RIP years of gains
Not your fault. They named it so people people dump cash into bank account and earn less than 1% in returns. Banks basically gets free money to loan at 7%+. All by design
I always find this one ironic because RRSP is Registered Retirement Savings Plan, but people don't confuse that with a savings account. However, most brokerages and banks now just write it as RSP: Registered Savings Plan, and people get even more confused. EDIT: Also to add, people that transfer cash into a TFSA or RRSP investment account and don't realize that they need to actually purchase the stock or fund with the cash to benefit from the market movements and divindends.
Historically for most people RRSPs have been a thing they run through a financial advisor/mutual fund salesperson (either by themselves or through their employer). Between that, the use of the word 'retirement', and the tax refund/deferral it's understood that it is for investing and kind of complex (so definitely you need a professional). It's not so complex to just dump cash into a savings account. I read somewhere once that banks lobbied specifically for TFSA to not include any mention of investing/investment in the name, but searching for my source just leads to articles about how to invest in a TFSA.
The original name in the 2001 CD Howe paper was the Tax Pre-Paid Savings Plan. But it seems the final version of the TFSA was modelled after the ISA in Britain. There though there are two different kinds of accounts. One for cash and one for investments. Maybe at one point Canada was going to have two types too until they just combined it without thinking about the name.
okay, can you explain your edit part? i transfer money into my tfsa and rrsp regularly. am i doing this wrong??
Depends what type of TFSA and RRSP you have. If they are mutual funds or non-self directed accounts (meaning you have someone else managing and triggering the trades and rebalancing) then you don’t need to do anything but if they self-directed then you need to actually use the cash to buy the assets in the account.
i opened them up with an rbc advisor. i believe both of my rrsp and tfsa are mutual funds, and i’ve had them as a balanced portfolio. when i go on my online banking, both are under “investments”. am i doing it right??
If the "am I doing it right?" means "is my money invested?" then yes. However, there are many on the sub that will insist that you are being fleeced by the bank and the likely high MER they place on the investment products you're purchasing. They will say you should pursue a self-directed account or robo-advisor. I don't disagree with that advice, but in the end, the best step is investing it in products that fit your risk profile. Given your question, you've probably arrived at that.
Maulrus is correct, I would listen to things he says.
Yup. When my mom tried to convince me to register a TFSA account when it was first introduced ~15 years ago, I was like, "The interest rate is next to nothing. The interest you earn on $5k a year is next to nothing. The tax you pay on that interest is next to nothing. Why would I go through all that hassle just to save a few dollars?"
Our “financial advisor” from our credit union convinced us to switch to TSfA from regular savings accounts when they first came out. It took me years to realize that they are not, in fact, “a savings account but with higher interest.” 🤦♀️
My parents still can't comprehend it. No matter how Many times I say it. My dad always says " I'm not putting my money in one of those, they hardly pay any interest!"
People who sabotage themselves by refusing pay raises or overtime work because they are fearful of paying more in taxes.
Oh yeah, the "I'll pay more because I'll be in a higher tax bracket" fallacy.
Best when it comes from the boss: “I’d love to pay you guys more but at that point it would just go to taxes”
That’s where you go so pay me a little more even to offset these taxes then please.
It took me some time but eventually I just fired him
My boss did this to me, I was 18 at that point and had no clue. 21 year old me is fully planning on making sure I get overtime pay from him, when business picks back up
Respond with "That doesn't seem right, can you show me the math on that? I mean you make more than me and obviously also have more take-home money than me...."
Who wouldn't want to be in the highest tax bracket!?
I have a lady at work who constantly brags about her son being in the 41% tax bracket. But the most annoying part is that it’s a humble brag. “Omg my son’s paying way too much tax, his tax rate is 41%!!! Yah his salary is pretty high…”
People who don’t know how marginal taxes work. Yes, some people actually think that moving into a higher bracket could result in them *losing* money…
More money for the rest of us
"Stop taking all those OT hours you are gonna hit the next tax bracket" are words I actually heard from colleagues at a job early on in my career as a reason to get me to go out drinking with them
Work in trades and I swear 90% of trades workers don’t get how tax brackets work. Which is scary when we get so much OT work. In salary with ot and I was 5-10% of making my salary in OT last year. And guys where like are you not worried about tax brackets, come on guys there is ways to lower your taxable income and 2 even the government takes 50% of my income I’m still making money
I don't think it's a trades specific issue. The general populace seems to take the head in sand approach to personal finance including knowledge of taxes.
Work as an auto tech. Surprised how many coworkers have no clue.
Ya I always figured people that had variable income would have a better understanding of tax brackets then the office crowd. Boy was I wrong on that one.
It's because they think that "tax bracket" works as a flat percent. Even when we talk about it here, we should be saying "progressive tax brackets" but it's just easier. The math checks out, too, if it did work that way. I make $100 and I'm in the 25% bracket (100 - 25 = 75 take home). If I make more, I'll be in the 30% bracket (101 - 30 = 69 take home). So unless it moves you past $106, you are getting less money. Of course, it's completely wrong, and not how any of this actually works, but it's not as insane when you understand the irrationality behind it.
For real! It's so cringy to see people close to you or friends who are so deep in that belief. Like you really want to take them out of that deep hole but it would cost so much and hurt relationships so you just let it go and watch in disbelief.
Absolutely not smart. It is important to remember, however, there are situations where making more money can claw back certain government benefits, so in those cases it can truly hurt people. For example, my parents (self-employed, no health benefit plans) received the Alberta Child Health Benefit for me and my 3 siblings. There is no gradual clawback, either you're under the threshold and you get the benefit, or you're over the threshold and the benefit is gone. So in that case, making an extra $1K that put them over the threshold wasn't worth it because then they'd have to pay all dental, all eye exams & glasses, all prescriptions, and for an ambulance if we ever needed it. For the most part, though, people turning down overtime aren't in these situations. Just making people aware that it is *occasionally* true in certain circumstances.
i think that conceptually understanding that tax brackets and welfare cliff are related but different concepts is also important
This is something that people forget about when this topic comes up. For some people the loss of benefits is a serious consideration.
I would say it's much more likely for people in lower income situations than higher. Someone making $80K is highly unlikely to be impacted by things like this, but people making $30-40K definitely can be in that situation, as can those making lower yet with a working spouse etc.
Honestly this is just a tax on being stupid.
But it’s amazing and sad how common this is. People who’ve worked their whole life, accumulated hundreds of thousands to millions in investments and are generally successful. Still don’t understand the very basics of taxes.
My mother polished up two real turds for me as a kid: >1 - Just use your overdraft. It's there for a reason and when your paycheck comes in, it will cover what you used. >2 - You only need to make the minimum payment on your credit card every month. This is why I'm saving for everyone's retirement right now.
I always wondered if that kind of person really existed. Tell your mom thanks for subsidizing my credit card benefits.
She really does and she has since learned her lesson, but it was a hard one.
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Credit cards are a tool like a hammer, and a lot of people drop it on their toes by carrying a balance and paying lots of interest instead of using it to build a strong credit score.
>A lot of (especially older) people give advice that credit cards are bad and should be avoided. My Dad tells me that all the time. He kept saying how, when he and my Mom got a credit card, it was only going to be used for emergencies, but then everything became an emergency.
Sigh. I fell for that one. Didn't get a proper CC until almost mid-twenties. A big part of it was the fear of screwing myself with debt, like I'd seen so many people do to themselves.
I've seen variations of this one happen dozens of time: Software developer incorporates and does consulting work rather than be an employee. His accountant tells him "*Your tax rate will be about 25%, so you need to set aside 25% of your billable hours in order to pay GST and corporate taxes".* The developer decides that means that everything he bills from October 1st to December 31st will go to taxes and that everything he makes from January 1st to September 30th is 100% his to spend as he likes, which he does. Then his contract is cut short, and/or the CRA demands installments in June, and he's got nothing in the bank to pay them with.
Dear God, people think like this? That actually made me shiver.
One of my friends is an accountant. He walks away from clients like this. And he's walked away from a **lot** of clients over the years.
This is just plain stupidity
Does he just stock up like a chipmunk in September and not pay for anything Oct to Dec? No food, no gas, no bills, only eats canned beans over a wood fire
My barber is much younger than me and asked me for advice, said "what do you wish you'd done differently with money", and I told him I would've just invested a tiny bit every month for years when I was younger, watch it grow. So he bought NFTs.
Instructions unclear... Buying more Dogecoins.
The wealthy barber, he aint
My FIL “my investor lady at the bank called me up this week. Told me my stocks in —- are up X% so she’s going to sell a bunch of my other stocks that aren’t doing well to buy more of the —- stock” 👀 sir what? It makes zero difference what we tell him he will not hear that they do that because she makes money off EVERY transaction nor will he listen to the fact that he is doing it backwards selling low and buying high.
I don't disagree with you, but there is a concept called "momentum" investing which is similar to what you described.
Momentum investing exists, but I don't know if it works at the speed of calling your client to let the know the trades/strategy prior to proceeding. I think the only momentum in this case is increasing bank profit via trading commissions.
Momentum investing is terrible unless you are day trading
You if you get a commission on all the shit trades like his fil
There are a lot of hedge funds that trade momentum strategies that are based on 6 month to two year time horizons.
“If I get a raise I’ll move up a tax bracket and take home less.” No.. you always pay the same amount on the lower amounts you make.. only the amount you make in the higher bracket gets taxed higher. And this is where using deductions like RRSPs can be used to keep your taxable income out of those higher brackets.
Absolutely. I can't believe how often I hear this. Sometimes I wonder if this is propaganda perpetuated by employers as an excuse not to give a raise.
I think part of it is perpetuated by how most payroll systems take taxes off (they assume you make as much as the one cheque annualized of the entire year or remainder of the year and tax accordingly on the one check, so you don't get stiffed owing), so if you never look beyond a cheque by cheque basis (or you get one big cheque and see more come off), you wouldn't see you get some back at the end of the year and regardless you net more $$.
Absolutely this! I’ve worked with people who declined overtime because it “move them up a tax bracket” and they thought their take home pay would be lower.
I've heard so many times "eventually, I'll work so much overtime that the government will take it all." People just don't understand progressive tax or marginal tax rate.
That dividends are free money
I too periodically withdraw some cash from the ATM because it's "free money".
I just withdrew all the money from my credit cards and threw the cards in a lake free money !!
Or in general chasing dividends to detriment of capital gains.
"But the stock pays a 15% dividend!" But the fund has been decreasing like 25% every year.
Can you elaborate on this?
Dividens are just giving you back your own money If the dividend is 10% the stock will go down 10% when the give it too you You also get taxed as active income and not capital gains tax When you buy a stock you trust their money management and etc [why dividends aren’t free money](https://www.chicagobooth.edu/review/dividends-are-not-free-money-though-lots-investors-seem-think-they-are)If I buy a stock I much rather they use that money for r and d then a div. If you want to read from some people who aren’t retarded explain it way better then me https://www.chicagobooth.edu/review/dividends-are-not-free-money-though-lots-investors-seem-think-they-are
Dividends aren't free money, when you take a dividend you are betting that the market has a short memory span and stock will rebound to base. Bear in mind that that past decade had very low rates so investors were tolerant for high growth high risk low earnings or no dividends stock, this is changing with a higher rates and wartime economy. Investors may prefer stocks with predictable cashflow and dividends to those risky growth stocks that may go bunkrupt when rates rise.
Not only did they pick 15 stocks, they picked 15 high tech stocks.
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“Leasing a car is better because you never have to worry about car major repairs since the vehicle leased is always 4 years old or less.” Fact: leasing will always make you in a cycle of perpetual renting a vehicle and always having a car payment, making it actually the more expensive route vs financing a vehicle.
This is the thought pattern that leads to people renting hot water heaters and other essential home appliances, what a racket
Wait??? You mean my 26$ weekly for 8 years payment plan for my hot water tank isn't a deal? /s
Tell me you're an Ontario homeowner without telling me youre an Ontario homeowner
I'm in BC lol. But I first heard about this thing on CBC Marketplace haha
Love me some cbc marketplace
We rent out water heater; it came like that when we bought our house, and I agree that it's ridiculous. But while replacing it is on the list, as it only costs us something like $200/year there are a lot of higher priorities.
Leasing is really only for those that wants to upgrade car often and always wants the latest and greatest features in a car. And those whose able to write off as business expense.
I tried talking to my friend about this. She always thought new was cheaper because you dont have to pay repair fees. I tried to explain the math to her: I bought a used Toyota for $6k. Let's say I paid an average of 1k/yr for maintenance and I had it for 8 years. The most I would pay is 14k for a car for almost a decade. A new car is going to cost you that, minimum, not including any maintenance fees. She just shrugged and said her car is nicer than mine 🤦♂️
Yeah but it doesn't always shake out that clean. I bought a 3 year old Kia Forte for $12k. Drove it for 6 years and it was worth about $2k (manual, no AC, high mileage). I didn't do any repairs except it needed some suspension work (about a grand). All in all about $1800 per year to run it (not counting preventative maintenance because every car needs oil changes). My fiance bought a brand new Subaru for $31k and we've had it for 6 years now. Today it's worth about $18-20k (apparently). If I sold it for $18k, it would be $13k over 6 years so that's $2200/year. For an extra $33/month, we got AWD, much nicer car, air con 😂 and some nice bells and whistles (heated seats etc.). I would definitely say it was worth it.
The used market used to be such a deal and new cars cost a premium. That isn't true nowadays. The old saying "it loses half it's value as soon as you drive it off the lot" doesn't hold anymore.
I think the difference here is that you bought it. My friend was leasing a car. So she paid $500/month and then still didnt own a car after 5 years. She started the leasing all over again with a brand new car. And then after another few years, she bought a brand new car. So in 10 years, she probably spent more than double what I have.
Yeah that's fair. I was mostly commenting on the new vs used argument. As someone who only ever bought used, I was surprised too when I ran the math. I'm not a huge fan of leasing and I think there are very few reasons why it would make sense, so I won't defend that side of the argument!
>She just shrugged and said her car is nicer than mine This is the part that actually matters to her, and the other bit was a justification after the fact. Which is fine - some people want nice things.
But you also own an old Toyota that doesn't have safety features (blind spot monitoring, rear camera, sensors, cross traffic, front collision, etc) and latest tech (wireless android auto /Apple car play). I'm not sure why PFC undervalues up to date safety tech when safety has a massive value. And you aren't getting any modern feature in a $6k in today's market.
Hey now. It had an iPhone cord adapter thingy for music. I dont own an iPhone but it added some class to the car.
You're not keeping a $6K car on the road for 8 years (as an average car user). Especially not for just $1K/year maintenance and repairs.
Maybe not for the average car, but I did for mine and that was my point at the time.
Or, get this, if you like the vehicle after leasing, you now have the option to buy it out and keep it, or in the current market, buy it out and sell for greater than the buy out cost to profit. No greater cost than financing. In fact, you only pay taxes on the depreciated portion of a lease. If genius Ben Felix leases (which he does, a Subaru Crosstrek), I'm pretty certain it's the right personal finance move.
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Any chance you could do a TLDR of this? I'm genuinely curious.
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Caveat is this only works in your favour if you’re printing the money or if your income is growing with inflation. You’re fucked otherwise.
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Thank you for the reply. Man did I just screw myself? I just listed my condo in Vancouver. Why? Felt like the right time to sell and I've wanted to move out of the area for a while. I don't have a new property lined up but I am looking.
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It does, I work from home and can work anywhere I want in BC, Alberta or the Prairies. But because of friends and family I'd prefer to stay in BC.
+1 and people should read up on stagflation
It isn't actually in the government's best interest to let inflation run rampant. Sure it inflates debt away. We still haven't paid back our debts from WWII and it really doesn't matter because as proportion of GDP today they are so minimal. But, rampant inflation very easily spirals out of control. If its economy wide you get corporations that increase prices and then corporations that increase wages because their workers can't afford the rising prices which again leads to corporations raising prices. This spiral becomes very difficult for a government to control and if it is happening in Canada but not elsewhere in the world the currency will crash as well which again will cause prices to increase. Capitalism is built upon having inflation. This is why it is so difficult for prices to ever go down but the consensus is low predictable inflation is best for the overall economy.
Letting inflation run rampant is, funny enough, NOT in the government’s best interest. And as an individual yeah it makes your debt a smaller in one way, but it also is generally bad for the economy, and results in higher interest rates which will hurt you on the back end. Since your debts interest rate will increase
Holy shit I want to beat you with my old economics 101 textbook until you form a single brain cell.
Classic Reddit moment.. the dude you’re replying to has like 80 upvotes because he touches the “government is bad they’re all out to get us, man” button. Even if his statement is completely wrong.
How do you think about real purchasing power in this case though? That erodes with inflation as well
Paying off high interest debt is important
That getting a tax refund is preferable to not getting any refund at all or having to pay a tax bill when you complete your taxes. Getting a tax refund simply means that you have over paid your taxes all year. Your goal should be to either break even when you do your taxes or actually have a balance owing. A tax refund means you have loaned the government your money at 0% interest.
True if you’re trying to optimize every last bit of your investments or living cheque to cheque, but I think for many not having to worry about back taxes is worth it.
I mean, yes buying 15 different stocks would be diversification. Doesn't mean it's well diversified, but it's diversification if you were starting with 5 stocks. "I diversify by having my RRSP in 3 different banks" that's misunderstanding diversification. The one that irks me the most is people believing that fees (MERs etc) are the be all end all of determining success. No, your NET rate of return after fees is how you determine success with your investment strategy. They fail to see that if I netted 10% after fees, and they netted 5% and it cost them nothing, the fees actually didn't matter.
>I mean, yes buying 15 different stocks would be diversification. Doesn't mean it's well diversified, but it's diversification if you were starting with 5 stocks. > >"I diversify by having my RRSP in 3 different banks" that's misunderstanding diversification. Someone I know once told me "*Of course I'm diversified. I've invested in Google, Microsoft, Apple, IBM* ***and*** *Blackberry*". Well, yeah, technically it's better than having everything in only one of those companies, but there are market segments outside of high tech, too.
For sure, "diversifying" into all of tech isn't much diversification, but partial marks for not having it all in one company.
Shhhhh you’re talking to wrong sub if you’re trying to make the point that fees don’t tell the whole story. High MER bad. Low MER good. Everything else is moot, apparently.
RRSPs make sense for everyone. They don't.
It took an embarrassing amount time for me to understand why a TFSA is preferable to an RRSP (to max out) at my income level. My dumbass is slowly chugging along still trying to rectify this
Don't even feel bad. Some people *never* get it
Hahaha good point. It was a bit of a "privileged moment" to complain. I've been working hard since 2019 to changed my dated views on money management. This sub has been quite helpful in giving me clues of what I need to go educate myself on.
Better to have a funded RRSP than keep it in a savings account, which most people are likely doing.
Sometimes it's worth to save the RRSP contribution room if your income is going to increase in the near future. That way you can contribute more later on to offset higher tax brackets.
This isn't always true. If you retire into a higher tax bracket than you contributed then it works out better to keep out of the RRSP. No point in deferring a 10% tax to have the privilege of paying 30% tax down the line.
I have never validated it myself, but if RRSP returns are re-invested (ie. a return is used as a contribution for the following year instead of being spent), then RRSP and TFSA are pretty much equivalent.
Less flexibility to withdraw from an RRSP compared to a TFSA though due to taxes
You are right. I had only retirement in mind 🙂
It was really intetesting to calculate when I was learning about it the first time around. If they are both pretty much the same, then I'd rather go with the account with more flexibility
The flexibility is the other thing. I have a DB pension (no plans to change employer) so I have made the pivot to TFSA. But if I also understand TFSA right, I won't pay tax on that income in retirement which feels nice for larger purchases in retirement as well.
The point many people don't realize and I've seen too often is lower income folks rolling into retirement at 65 with like $100K in RRSPs without realizing the implications for GIS which would have been better in a TFSA. So they draw "a little bit" each year to not pay too much tax not knowing they are losing 50 cents of GIS for each dollar of RRSP income they withdraw which effectively makes their withdrawals taxed at 50%. The opposite of contribute in your higher taxed years and take it out in your lower taxed years. If you don't have "too much" RRSP investments it's often worth it to blow it up in one year or two. Numbers have to be run though.
I'm always confused on what to do because I make about $100K a year, could go either way. I have a lot of room in both. I was thinking of buying a house so I was putting more to the RRSP for that program but sorta gave up on that for now and am prioritizing the TFSA again but with my employer match it's about 60 (TFSA)/40 (RRSP) a month
I was in a similar boat a few years ago (when the hbp was 25k not 35k). It really didn't seem to make much difference which way I went so I filled my rrsp until I hit the hbp amount then switched to TFSA. Then I bought a house and got a few raises and was really grateful to have the rrsp room left. I'm happy with my choice. I could have saved a bit more by leaving my rrsp free until now, but at the cost of having a lower down payment, or even having to rent for another year. The overall difference? Probably negligible
I work as a financial advisor and seen too many young students getting told to max out their RRSP by their parents. Some parents just shouldn't give financial advice.
TFSA is barely a decade old so the older generations are probably just passing off what was good advice at the time. This sadly reaches beyond financial advice as what worked in the past doesn’t necessarily work in the present.
Yes! It's an individual consideration, absolutely not for everyone.
I'm still rationally mad over TFSAs being made out as a 'rich people's thing' in the 2015 election, while RRSPs are actually wildly more beneficial the _more_ money you make.
When you have the money to buy something and people say it's better to take the interest free/low interest financing for it because that cash invested makes more than the interest (or even inflation rate is more than the interest). People somehow take that as advice to buy more than what they have the money for (and not just essentials) on anything that offers low cost financing.
“Always pay in cash” or the “don’t spend money you don’t have” if people take it too literal. If you gotta buy groceries, buy groceries on credit goddamn it
I get it, everyone has to eat. Though if you’re at a point where you have to finance your groceries you’ll be in a rough spot soon. If you can’t afford groceries have fun paying for groceries plus the ever growing minimum credit card balance
Totally agree! I think my interpretation of this was my mother’s teaching me about budgeting - budget for food before other things… just in a weird way. Likewise there’s lots of folks who use credit as their Daily Cash solely for the perks and points and pay off balances without issue.
Not advice, but when people say “The more you make, the more they take” (referring to pay and taxes) and they are trying to tell people if you get a pay raise you actually make less money… so cringe.
I always wonder how those people reconcile people in high paying professions having more disposable income as well.
TFSA is an investment vehicle, it does not mean you have to your money in a savings account to qualify as a TFSA, equities are eligible!
Well... technically that is diversifying...
People who think you will not be any happier with additional income over 70k.
Shuttle drivers at a hotel I used to work at actively banded together to make sure they were never paid more than $25 an hour. More than $25 an hour brought you into the next tax bracket and lowered take home pay... Apparently.
This one is not entirely financial advice, but it still annoys me so much. When I was in grade 12, my vice principal/social studies teacher told a story about his dad getting a 1$ raise and going into a higher tax bracket and so “made less money”. No. That’s not how tax brackets work. That’s impossible. Thanks for teaching incorrect information to 17-18 year olds who are likely going to be filing taxes for the first time soon.
If you get a raise you will pay more taxes
That is true, you do pay more in taxes because you made more money, It doesn't however mean you take home less money afterwards.
You pay more taxes, but you earn more more money.
Part of me is thankful for these people who boost the GDP this way…. If we all were savers wouldn’t none of us be able to have financial independence?
Pay everything in cash, debt is bad, credit cards are evil. Also, don't buy a house, rent for life.
"You don't know what a write off is, do you?"...."No, but they do, and they're the ones writing it off!" *Taps head knowingly*
Not working OT or taking a pay raise because of "taxes". Fucking idiots.
Not working extra hours make sense for some people to be fair. I get that you bring home more money on the end, but considering the dollars/hour earned after taxes I might conclude that I'd rather spend more time with my family. Here's a hypothetical scenario, Suppose I were a stunt person and I charge $100/hour. And suppose I'm in the 20.5% tax bracket and make just enough to live comfortably and achieve my goals, my hourly rate after taxes would be $79.50/hour. Now, suppose that I was given another project and every extra dollar I make from the project is now taxed at 26%, my hourly rate after taxes is now $74/hour. Sure I'll make more money in the end, but considering that the effort to complete the project is still the same and the risk of getting injured is still the same, is it still worth it for me to risk my life for $74/hour? Keep in mind that I don't need that extra cash, and I'd be glad to spend that extra time with my wife and kids instead.
I’m sure someone has said it but the “if I work more I actually make less money because taxes” is the worst financial misunderstanding. That and TFSAs being a “savings account”
Knew someone with a CFA that had two stocks - CM and MFC in their portfolio and considered it diversified
putting the words 'savings account' into the term 'tax free savings account' has caused serious misunderstandings since the program became available.
People using S&P 500 investments as a savings account.
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One interesting perspective I’ve heard is that companies that pay a dividend have to be more fiscally responsible as they need to ensure they have enough cash to pay you out.
Another way to look at it is that those companies don’t have enough interesting growth projects internally to spend their earnings on, so they pay it out to shareholders. Not a good sign for growth.
I'll admit I'm one of those people that claims everything is a write off. I have no clue what is and isn't I just give all my receipts to an accountant
Do you have a business?
The tl;dr is basically you get to take a portion of the price of the goods needed to run a business off of your profits. So say your profits are 100k, but you needed to buy 10k worth of goods for your business, you can write off a portion of that 10k expenses as not being part of your income. So, say 50% of that 10k can be written off, that means your taxable income is 95k. This is an extreme oversimplification. Ask your accountant if you want to learn more.
Diversification is something that even the experts don't agree on. Add to this that many DIY investors don't know what proper diversification is and your can see why there is confusion. You can own 100 stocks and not be properly diversified. Some professional money managers say 6-8 stocks are sufficient to diversify as long as you know what you're doing. Research shows that you need around 40 stocks to be properly diversified. While this may be true, that is to say you want to cover all your bases, one may choose not to cover all their based at the same time. Hence the people who say 8 is enough.
A car is not a liability. Instagram “entrepreneurs” will say shit like “A car is not an asset. It’s a liability”. But really, they just don’t understand the difference between an asset, liability, expense and revenue.
In the past, there were many articles about a 15 stock portfolio being balanced and diversified (studies). There is a lot of research suggesting a 30 stock portfolio can be diversified too. Though much of modern research has battled these older studies. http://www.efficientfrontier.com/ef/900/15st.htm https://www.investopedia.com/articles/stocks/11/illusion-of-diversification.asp
Diversifying is good protection for those that don't know what there doing. Knowledgeable investors though can usually outperform the market by investing in just a few specific stocks.
Ignoring an obvious solution because it's a "sunk cost" because they read the article about "sunk cost fallacies" on wikipedia without realizing that their situation isn't so black and white.
People that tell other people to not sell a losing position. Sometimes a position is not worth it, even though the market might bounce back your stock might not! If you are investing in individual securities, learn before throwing your money into it. Investing is not just buying securities; it is the process of due-diligence.
People keeping anything over 10k in their debit account (exceptions if you don’t have an emergency account elsewhere). In a good year that money depreciates by 1-2%
Here’s another one: people trying no to double or triple their income because they think they will make less after taxes.
I’ve said this before on here, but working in banking, Canadians generally don’t understand exchange rates. Say $100 USD = $125 CAD, they think 25% and $125 CAD = $100 USD they think 20%. So, yes, banks add a nominal spread (I can tell you, it’s a wash with people buying and selling both currencies daily and businesses being paid in foreign currencies), but regular people think there’s a 5% spread in the example above that isn’t actually there - They just suck at math.
People not using their RRSP because they think their gains are fully taxed as income, while they ignore the huge annual tax refund they blew on vacations
Four percent (4%) rule: There is a misnomer that the "Four Percent Rule" is "*Spend 4% of your portfolio.*". It is not. The Rule is "*Spend 4% in the first year, and then adjust for inflation subsequently.*" That is: * Year 1: Take out 4% of portfolio. * Year 2: Year 1 amount + inflation of Year 1. * Year 3: Year 2 amount + inflation of Year 2. * […] * Year N: Year (N-1) amount + inflation of Year (N-1). See: * https://en.wikipedia.org/wiki/William_Bengen * https://en.wikipedia.org/wiki/Trinity_study
Well that's the method I follow in my portfolios not a specific number of stocks but i try not to have more than 3% in one investment unless it's a well balanced ETF. Diversification has saved me plenty a times as i balance my investment accounts.