The Perks of Being Self-Employed

The Perks of Being Self-Employed

by | Dec 20, 2017 | Finances

It’s December 19th

Today, I had planned to go Christmas shopping – it’s getting close to the wire! But it started to slush (you know what this is if you live in Vancouver), and after going for a short walk and getting soaked and cold, I decided to leave Christmas shopping until tomorrow, when it’s supposed to be sunny.

I can go shopping during the workday because I’m self-employed: one of the perks of being self-employed.

When I sat back down at my desk after deciding to skip the slushy shopping, I thought, “I can do anything I want right now,” as I had already booked the time off in my head.

What have I wanted to do but put off because of more pressing work deadlines?

My own bookkeeping

Yes, I am one of my worst clients. I throw all my receipts in the drawer next to my desk or leave them in my inbox (where most are these days). Ok – I didn’t want to do my bookkeeping if truth be told, but I needed to do this.

I started my business a few years ago, and as that tends to go, it was a slow start, and I only made a little money. I had a business loss during the first year, technically only four months of work as I had started in September.

As a sole proprietor, I hadn’t paid any taxes during the year (no employer to withhold and remit taxes on my behalf), so when it came to filing my taxes, I had to report my pitiful non-earnings, and that was it. I didn’t owe any tax because I hadn’t made any money, and I didn’t get any back because I hadn’t remitted any money. It was slightly anti-climatic.

In my second year of business, I made a profit! Again – I hadn’t remitted any taxes throughout the year as the Canada Revenue Agency only requires self-employed individuals to make tax instalments if they had a balance owing in the previous year of more than $3,000, and I hadn’t.

For the second year, I scraped together some savings to throw into an RRSP, reducing my taxable income, and in the end, I had enough in my savings to pay my tax bill. Phew!

Not quite 9-to-5

I’m in my third full year of business, which has become a full-time job. My hours aren’t nine-to-five, but at least 40 hours weekly.

I’ve been paying enough attention to my billings to know that the “savings” I have accumulated are not savings. It’s my tax bill for 2017. But I still look at the balance in my savings account and get this little happy feeling inside.

Danger…

Sometimes, I start thinking of everything I can spend my savings on, and then you know what that leads to? Yup, spending.

So today, as it is close to the end of the tax year, I decided to see how much of those savings are savings and how much are just taxes I still need to pay.

And what did I discover? Yes, it is tax (I think I’m an excellent accountant – I know intuitively what the tax rates are as I saved the perfect amount).
I saved the perfect amount for my tax bill.

Sigh.

All the little happy feelings I’d been having about my savings drifted away, and all these negative thoughts came crashing in. The main one being:

what’s the point of working harder? I’m no further ahead.”

This led to further negative thoughts about everything I had to sacrifice this year and all the hard work I had done to get me to exactly nowhere.

Yikes!

I really am my own worst client. After wallowing in self-pity for about ten minutes I turned it around.

Grateful

I spent the year precisely doing what I wanted to do.

I had a fantastic year where I saw my business grow to a point where it can support my family and me as we need it this year.

I had a fantastic year where I had time to do what I wanted when I wanted to do it.

I had a fantastic year that gave me more “proof” that I can keep living my life as I want. 

Based on experience, my business will continue to grow to support my increasing needs (two sons entering their teen years, then university years!).

Today’s exercise also gave me further evidence that the thoughts you choose to pay attention to profoundly impact your life.

So yes, pay attention to your finances, as it is essential to have clarity about your situation to help you make choices and decisions, but also to what thoughts are going on in your head.

 Are your thoughts giving you hope to help you move forward? If not, what can you do about that to change things up to get to that point? Is it time for a year-end check-in? 

And perhaps, don’t leave your bookkeeping to December. 

The 2016 Budget and Families with Kids

by | Mar 23, 2016 | Tools & Tips

photo-1443110189928-4448af4a2bc5My life just got a bit easier with the new 2016 Federal budget that was announced on March 22, 2016.

Under the previous government I had three different calculators to figure out how much people would receive as tax credits and benefits related to their children but this has all disappeared with the new Liberal budget.

Previously, families received the Universal Child Care Benefit (“UCCB”) of $160 per month per child under the age of 6 and $60 per month per child aged 6 to 17.  These amounts were taxable and included in the income of the lower earning spouse.

Families received the tax-free Canadian Child Tax Credit of $1,471 per year per child in 2015/2016 that was clawed back completely if your family income exceeded $118,251 (if you had one or two children) or $157,601 if you had three or more children.

There was also a National Child Benefit Supplement of $2,279 per year for the first child, $2,016 per year for the second child that was also clawed back if family income exceeded $26,021.

Finally, each family was eligible for the Children’s Refundable Fitness Tax Credit of $150 per year and Children’s Non-Refundable Arts Credit of $75 per year. These are each being cut in half for 2016 and will be gone by 2017.

To further complicate things, I was usually trying to figure out these amounts so that divorcing couples could figure out how to split these amounts that the government was going to be giving them for their children. These would then need to be outlined in their separation agreements.

Under the new Liberal government, this has all changed and I have to say hooray.

The budget states that families will receive $6,400 per year per child under the age of 6 and $5,400 per year per child aged 6 to 17. These amounts will slowly get clawed back based on adjusted family net income and will disappear completely for families with income exceeding $140,000.

Here is a link to the Liberal’s calculator.

So while I’m happy about the simplicity of the new Liberal Canadian Child Benefit, most families will be happy because they will be receiving more money with this new benefit. The fact that the entire benefit is tied to a family’s income makes it more fair than the system under the old regime where everyone got the UCCB and Fitness and Arts Credits regardless of how low or high their family income was.