On Tuesday, RBC Dominion Securities was granted access to the Federal Budget lock-up in Ottawa to listen in on Federal Minister of Finance Joe Oliver deliver the Conservative government’s budget. The budget is balanced and provides targeted tax relief to seniors, families and small businesses. My team and I have prepared a full summary of the key tax measures that may have a direct impact on you in this handy newsletter (click hereto download the PDF) but for all of you small-chunkers out there, the key highlights are:
- An increase to the Tax-Free Savings Account (TFSA) contribution limit to $10,000 per year beginning in 2015; subsequent years and will no longer be indexed to inflation.
- Reducing the minimum withdrawal requirements for Registered Retirement Income Funds (RRIFs) beginning in 2015;
- A decrease to the federal small business tax rate from 11% to 9%, to be implemented gradually from 2016 to 2019, and a corresponding adjustment to the gross-up factor and dividend tax credit for non-eligible dividends; and
- The elimination of capital gains tax upon the donation of cash from the sale of private corporation shares and real estate
Macro level budgets such as these have an effect on all of us, yet of more significance to your personal situation is your household budget, or what I refer to as your ‘Awesome budget’ - a small, yet critical component to the financial planning we do for our clients.
“How much does it cost you to operate your life and be this awesome?”
Most of us have a general idea regarding how much we spend on food, the mortgage, entertainment, bills, etc but it’s worthwhile to go through the motions of a proper cash flow budget to determine what your disposable surplus (or deficit) is every month so that you can help to grow your wealth even faster by setting up pre-authorized contributions to sock your money away on a consistent basis – allowing for dollar-cost-averaging and more time in the market.
As a general rule of thumb, your portfolio will grow based on a combination of these 5 main elements:
1. Time in the market (capital appreciation)
2. Your continued contributions / savings (maximize this through dollar cost averaging)
3. Re-invested yield and dividends (DRIP) from equity and fixed income holdings
4. Tax efficient investing/planning (sheltering your growth and keeping more by generating tax efficient income)
5. Proper diversification & asset allocation
To be sure that your plan is on the right track, incorporating these 5 main elements will have you feeling awesome about more just your budget.