Category: Finance

These days, it seems the essentials all come with a high price tag: education, living expenses, food, transportation, and more. This is especially true when you live in a major city like Calgary, Vancouver, or Toronto. Expect to shell out tons of money on groceries, meals, rent, and gas (if travelling via personal car).

It’s incredibly stressful when an unexpected expense comes, like your laptop crashing and needing replacement equipment, or your landlord increasing the monthly rent without notice. While such situations are likely to put a downer on your mood, know that these types of setbacks are only temporary. With the right attitude and effort, you’ll be able to handle this adversity and be in a stable financial position in no time.

1. Apply for a loan.

Taking out a loan does mean that you’ll have debt, and that has, in itself, its drawbacks. However, there are different types of loans, and it’s merely a matter of taking your time to decide on the right one that best fits your needs. For larger expenses, obtaining a loan from a bank is the best way to go, though you’d need to have a good credit score to get approved. Meanwhile, you can also try your hand at a payday loan, which is an option if you want something quick and easy. The amount of payday loans is typically equivalent to a paycheck, thus the name, so it may not be ideal when you have a high-ticket item in mind.

2. Ask your employer for a pay-in-advance.

If you have a good working relationship with your employer and you consider yourself a valuable employee, this option can be a good one for you. It doesn’t hurt to ask. Most employers will be familiar with this concept when employees ask to be paid in advance for the future hours they’re scheduled to work, but only a few may be agreeable to it. Some employers fear that employees will up and leave and not fulfill their part of the deal once they receive the advanced pay. Thus, it helps to have a stellar record with your employer.

3. Defer from school or enroll at a community college.

Tuition fees most likely make up the bulk of your expenses, and it will be extremely difficult to entertain the thought of putting your studies on pause until your finances become steadier. An alternative to putting your education on hold is to enroll at a community college instead to get transferable credits or fulfill the requirements for general education classes. While this may be a bit of a detour to your educational path, it’s definitely a smarter option than putting your studies to a full stop.

4. Look ahead and apply for scholarships and bursaries.

Scholarship or bursary applications take time, and thus, this may not be the option you need at the moment. However, it helps in long-term budget planning. In case a similar situation crops up again, you’ll be better prepared. Take time to carefully go through each requirement for the scholarship or bursary. Reach out to your teachers and give them a heads up about writing recommendation letters for you. Being approved for these applications can go a long way in keeping your educational expenses to a minimum.

5. Be smarter with your money.

Take a step back and do a self-assessment to know how you can better prevent being in a similar predicament in the future. You may be able to get the funds you need to cover the emergency expense now, but you’ll need to start thinking about how to be better equipped in a similar scenario. Apart from having a working budget that covers your daily spending needs, have an emergency fund. Commit yourself to starting a savings plan by cutting unnecessary expenses as much as you can and limit your spending by going for economical options.

Handling an emergency expense gracefully is admirable, but going forward, it’s better to make an effort to avoid falling into the same trap again.

 

Sources

Bright. “How to deal with unexpected expenses.” https://www.brightmoney.co/learn/unexpected-expenses-and-how-to-deal-with-it.

Honestmoney.ca. “Real Talk: How to deal with unexpected expenses.” https://honestmoney.ca/stories/how-to-deal-with-unexpected-expenses.

Vohwinkle, Jeremy. “How to Deal With a Financial Emergency.” The Balance. https://www.thebalance.com/coping-financial-emergency-1289712.

For most people, the start of the new year means fulfilling new year’s resolutions. However, for the tax-savvy population, it means getting started on your tax preparation. Though Canada has a deadline of April 30 for filing taxes, there is a good percentage of people who do their best to get a head start. This is a smart move since you don’t want to be doing taxes at the last minute, as being under pressure can lead you to make calculation errors or overestimate tax reliefs, which in turn can lead to inaccuracies or costly penalties.

What’s more, if one’s employment status has been affected for one reason or another, they should pay attention to how they file taxes as well. There are differences between filing taxes as an employee and filing as self-employed. Let’s see below.

Employee or Self-Employed?

For some people, their employment status is readily apparent. For example, chances are you’re an employee if you go to work (physically or remotely) at the same place every day, you have a boss that reminds you of your tasks and deadlines, and you get paid regularly (weekly or every two weeks). For some, it isn’t readily apparent, but chances are, if someone works at different places every day and you have control over your deadlines and you get paid irregularly (once a month), then chances are, you’re self-employed.

The Canada Revenue Agency (CRA) has more formal distinctions between the two, and the important points are noted below.

If one is an employee:

• They will often be directed and scrutinized, and many elements are effectively controlled regarding how and when the work is carried out.
• The results of the work and the method used to do the work are controlled.
• The method and amount of pay are controlled.

If one is self-employed:

• They usually work independently.
• They don’t have anyone supervising their activities.
• They are usually free to work when and for whom they choose and may provide their services to different payers at the same time.

Now comes the fun part: Filing taxes!

If you’re an employee, it doesn’t mean you can merely sit back and relax. You have to check your pay stubs regularly to see if your Employment Insurance (EI), Canada Pension Plan (CPP) and income tax payroll deductions are remitted to the Canada Revenue Agency as scheduled, along with your employer contributions. Your pay stubs also show your income tax deductions, which are based on the TD1 forms you filled out when you were hired, plus the tax tables provided by the CRA.

All of this information will also be detailed in the T4 or Statement of Remuneration Paid, which is normally handed to employees at the beginning of the year (Quebec, on the other hand, will have its own tax table). Once you have your T4 in hand, you’re ready to file your taxes.

If you’re self-employed, the steps to filing your taxes are more extensive. Note that it doesn’t matter if your business is registered or not; if you’re invoicing and getting paid under your name or the business name, you’ll need to file your taxes.

The general rule when you’re self-employed is to set aside 25% of your income for taxes, which will fall on line 104 on your tax return where it says “employment income not on a T4 slip.” You’ll also need to fill out the T2125 form to indicate business activities that relate to your income and expenses, such as advertising costs, office supplies, travel, cellphone, and internet, among others. Be careful not to claim personal use of any expenses. For example, if you use your internet for streaming movies or TV shows, you can’t claim 100% of your internet costs as a business expense.

If your self-employment income is more than $30,000 annually, you must register for a GST or HST number so you can charge clients within Canada with the appropriate amount. For example, if you’re based in Vancouver, BC, but you’re developing a website for a client based in Toronto, ON, your invoice should say your fee plus 13% HST, which is the percentage for Ontario.

The deadline for paying taxes for self-employed individuals is April 30, just like everyone else, but you have until June 15 to file your taxes.

So what are you waiting for? Time to get started on those taxes!

 

SOURCES

https://financialpost.com/personal-finance/taxes/paying-your-taxes-in-the-age-of-covid-19-heres-what-every-canadian-needs-to-know

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4110/employee-self-employed.html#mpl_slf_mpld_wrkr

https://turbotax.intuit.ca/tips/ei-cpp-payroll-contributions-taxes-for-an-employer-in-canada-374#:~:text=As%20an%20employer%20in%20Canada,along%20with%20your%20employer%20contributions.

https://www.canadianliving.com/life-and-relationships/money-and-career/article/taxes-101-how-to-file-if-you-re-self-employed