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Stopping to smell the roses

A short break from freelance, fashion and auntiehood to smell the roses. [Read more…]

Don’t need money for a good time

An outdoor concert in Kincardine as part of their Summer Music Festival

Many years ago I was an editor at Toronto.com. It was a listings site where people could list their events for free.

There were some costs associated with some events but a number of those events were free to everyone. I was amazed by how many free or pay-what-you-can events were available if I was just willing to look for them and then go.

When you move to a new neighbourhood, you might feel that you can’t afford to go out. After all, you just bought a new home or may have done some renovations. You can still have a great social life and discover someone or something new by just doing a little digging. [Read more…]

Home ownership means living within your means

I was in one of my favourite consignment stores the other weekend and was trying on some designer label dresses (Dolce and Gabbana! Cynthia Rowley!) when I slipped on a gorgeous maxi-dress. It was beautiful, it would be perfect for the stinking hot summer months; it would be great on a patio.

It was also $300. Not bad for a silk designer dress but the first thought that popped into my head after, “Oh my God, I love this dress!” was “That’s a property tax payment.” Welcome to the world of first-time homeownership.

A friend of mine bought her home two years before I did and once told me that it takes a few month to get used to the rhythm of home expenditures and she was right. For the first three months I was afraid I wouldn’t have enough money in my account to cover my bills and I’d be hit with an in-sufficient funds charge. Suddenly $25 becomes a large sum of money when you own a place. Prior to buying my home I had a decent disposable income. I contributed to my RRSPs and I could also drop $300 on a dress I didn’t need and not feel the pinch.

These days I can do that once in a rare while but even when I can, I find myself thinking, “This could go towards my mortgage payment.” I have to remind myself that owning a home means many things but it shouldn’t mean being unable to enjoy yourself – just being careful to live within your new means.

Renee Sylvestre-Williams is a writer, new homeowner and savvy consumer who hates paying full price for anything. You can email her at renee.sylvestrewilliams@gmail.com and also follow her on Twitter @reneeswilliams.

Time running out to take advantage of the Home Renovation Tax Credit

By Renee Sylvestre-Williams (with updates from Darcy Keith)

If home renovations are still on your to-do list, and you wouldn’t mind a little extra help from the taxman to help pay for it, you better act fast: Ottawa’s home renovation tax credit expires at the end of this month.

Despite appeals from a number of retailers to extend the tax credit (their recent sales have received a nice boost from the program), Finance Minister Jim Flaherty told reporters last week that he plans to let it expire as planned on Jan. 31.

Homeowners are able to claim a tax credit of 15 percent of renovation expenses conducted up until Jan. 31 that cost between $1,000 and $10,000. The maximum credit is $1,350, based on $9,000 in renovations.

Financial advisor Suzanne Schultz, host of HGTV’s “House Poor”, recently took some time to answer questions about this tax credit, as well as how to plan, budget and manage renovations.

Renee: What renovations are covered under the tax credit (For example, drapes aren’t but blinds are.)

Suzanne: Basically, the renovations need to be long term and a permanent part of the home. So, fixtures such as blinds that are attached to the window frame would qualify, but drapes that could be removed and used in another home would not.

Some common renovation expenses that would qualify include: new flooring, windows, doors, major renos like a kitchen, bathroom or basement, new roof or painting (amongst many others). Ineligible expenses include removable items like furniture, household appliances or home entertainment systems. Financing costs are also not eligible.

As another tip, certain renovations such as putting in more energy efficient furnaces or air conditioners, and new windows and doors, may qualify for a federal grant of up to $5,000 under the ecoENERGY retrofit program administered by Natural Resources Canada. Some of the provinces match the grant.

Renee: Can you explain the difference between a tax credit and a tax refund? Do you think this will affect the decision to renovate?

Suzanne: A tax credit, like the home renovation tax credit, can provide you a tax refund if you have paid federal tax (or will owe tax) in the year. But it will not provide you with a tax refund if there’s no tax liability.

For example, say you had taxable income of $10,000 this year. On that amount of income you would not pay any tax because you have a basic personal tax credit that wipes out any tax obligations. If you spend money on a renovation in hopes of claiming the home renovation tax credit, you won’t actually get a refund. I don’t think for most families this will affect the decision to renovate because you wouldn’t normally incur the costs of renovating when you have very little income. But it would be something to keep in mind where maybe you’ve lost your job and have savings that you want to use for renovating, but no actual taxable income this year.

The other situation where the credit might be lost is where you have a lot of other non-refundable tax credits that have already wiped out your federal income tax. Some examples would be the disability credit, or very large medical expenses. The main lesson is that if the total of your non-refundable tax credits (including the home renovation tax credit) is more than your federal income tax, you will not receive a tax refund for the difference.

Renee: Do you find more people are renovating since the announcement of the tax credit?

Suzanne: I definitely think they are. There was an article in the Globe and Mail that estimated that there have been about $500 million in sales at home retailers that can be tied to the tax credit. That’s huge, and that was the point of the credit. The government wanted to give an incentive to Canadians to spend money on their home to help get the economy moving. In addition to actual purchases at stores, contractors are in demand and working hard, so yes, I think that people are spending money on their homes right now.

Renee: What is the number one problem people face when deciding to renovate?

Suzanne: Renovating can be an overwhelming experience, and that is something we see first hand on “House Poor.” There are so many families out there who want and need to renovate and so they jump in head first without any sort of plan. This obviously leads to financial issues because more often than not they will end up going over budget, or simply running out of money so the project remains unfinished. Planning is so important; you need to plan for your budget, and you also have to plan for your wants and needs in the space to make sure you have all your bases covered.

Renee: Why don’t more people stop to plan out the renovation?

Suzanne: So many families don’t plan in any other area of their life, so why bother when renovating? The one thing in common on “House Poor” with all the families, no matter what the income level, is that none of them have budgeted before, and none of them knew where there money was going. Sometimes I think a lot of us are just not hardwired to plan. It takes work, it takes time, and when it comes to renovating I think its easy to get carried away with the “I wants” without any regard to how much all of the little extras add up. That’s why so many of our challenges on the show have to do with creating budgets for different areas of the couples’ lives. I’ve asked couples to budget for a wedding, or a future renovation, or for the loss of a job. This is totally foreign to most people and I’ve been so impressed with the results. People really rise to the challenge and learn some new skills that they can carry forward to their day to day finances. The lesson is that you may not be hardwired to plan, but you can learn the skill. And given the high costs of renovating…especially if something goes wrong…planning is a must.

Renee: What is the first thing people should do before they start renovating? Are there certain steps they should take before even hiring a contractor? Should they actually talk to a financial expert to help budget?

Suzanne: You have to start by at least knowing, ballpark, what a renovation for your particular space might cost. We had a couple on the show who wanted to renovate their basement and wanted to spend $8,000. Well you can guess that they quickly ran out of money and ended up with an unfinished and dangerous space. You can get this information by talking to contractors, home renovation stores, friends or on the internet. From this you can at least get a feel for whether or not the renovation is feasible.

Next, you need to come up with what you can afford. You have to decide how you are going to pay for the reno. Cash is always king and if you can save enough to pay for at least part of the renovation outright, you will be so much better off in the long run since there are no interest costs to factor in.

Of course, renovations can be expensive and not everyone will have enough savings for this. In that case, you need to finance some of the costs. I think it’s a good idea to go through your household budget to see where you can cut back and free up some cash. That can go towards financing costs. With a monthly figure of what you think you can afford to spend in mind, go to the bank and see what amount of loan you can get for those monthly payments. If you have equity in your house you will probably qualify for a home equity line of credit, which usually will provide you with the lowest interest rates.

Just because the bank offers you more money does not mean you have to take it. You should know your monthly expenses and what is important for your family to spend money on more than anyone. You should always do some of your own number crunching to feel comfortable that the final loan amount is affordable for your family and will not change your lifestyle too much. From there, do your research and work with your contractor to cost out the needs for the space, and in a contingency and then allocate any leftover funds to your wants.

Renee: What are ways to help cut cost without sacrificing too many wants? (Say, the granite on the kitchen counter)

Suzanne: Absolutely. If you can do some of the work yourself (such as painting), you can cut back on the costs of some of the needs. You might have friends who can help too. If you have to bring in a specialized trades person (plumber, electrician), then that’s a need. Don’t tackle this kind of thing on your own. But if you have a friend who can do those types of jobs, you can save a bundle. Next, there are so many new products out on the market now, its really important to go to the stores and see for yourself what you like. You might love slate floors, but not the cost. You would be surprised to see some of the slate-look tiles out there for a fraction of the cost. I am confident you can get the look of your “wants” by shopping around and taking a look at alternatives.

Renee: Are there ways to get bargains to reduce costs?

Suzanne: For sure, and its interesting to see on the show how crafty people can get when faced with the situation where they might go over budget and lose out on some reward money. They really pull out all the stops. Some things I’ve seen are: look in the “as is” section of stores. A slight scratch or missing piece might get you huge discounts. There can also be huge sales on discontinued lines and last items in stock. Take your time and look around! You can find great deals online, whether it be on eBay or Craigslist etc, or even from retailers who will ship to you. There are second hand stores around where you can get appliances, building supplies, cabinets etc. And don’t forget the old tactic of negotiation. It doesn’t hurt to ask for a discount, and you’ll be surprised that more often than not, you will succeed!