Sources of unlimited financial freedom in retirement

Retirement does not always have to be looked at as a time of gloom and doom in one’s lifetime; with increasing dependency and flailing body that has been bitten by poor health and the harsh environments over the years. Equipped with financial literacy and having made proper financial planning before retirement, you can be able to make your retirement period the best you ever had in your entire life. It is during your retired years that you have the time to actually concentrate on the things that make you happy without worrying about a lot of responsibilities such as raising your kids, meeting deadlines for your bosses or even having to look for money to pay school fees for you kids.

If you financially planned your life well from a young age, by the time you are retiring you should ha e finished paying your student loans and the mortgage for your home. In addition, you should have also saved a substantial amount of cash to spend during your sunset years. But as we know, your savings will never be enough in an economy where the cost of living keeps rising every year. You therefore need to come up with better ways to continue growing your wealth even in retirement; so that you can have the peace of mind to concentrate on having fun as you age gracefully. Below are two passive income sources that you can venture into and ride in the wave of unlimited financial freedom in retirement.

Online trading of binary options

Online trading of binary options is a growing investment concept that has been simplified in such a way that anyone can easily learn it and start making money immediately.Lionexo online channels and other binary options trading platformsgive a step by step guide to new traders on the basics of binary options trading.  Later on you are introduced to more advanced trading skills through demo account; and eventually you transition and start trading on your live account.

In binary options trading, you are presented with a situation whereby all you need to do is to decide whether the price of an underlying asset will go up or down.  If you predict that the price of the underlying asset will go up, then that is referred to as a call option. On the other hand, if you predict that due to the prevailing market conditions the price of the underlying asset will fall, then this is referred to as a put option. Whenever you make the right prediction for the stipulated period of time, you gain; while on the other hand you lose if you make the price of the underlying asset moves in the opposite direction from the one you predicted.

The beauty of online binary options trading is that you can do it from anywhere in the world for as long as you have an online trading account and internet connection. In addition, you can make money both when the markets are rising and when the markets are falling; by either placing a call or put option. You do not have to wait until the markets are bullish to return profits in binary options; every market condition, including the worst of bearish trends are opportunities to make money. With some traders reaping returns in the north of 80% their initial capital investment you will be walking into a lucrative venture by investing in binary options trading in your retirement.

Investing in real estate

As a rule of thumb, you want to choose investment options that allow you time to be free and away from them even as they create more wealth for you in retirement. Investing in real estate provides such an opportunity; whereby you just need to buy or construct your rental property and start generating monthly rental income indefinitely in your retirement. To make it even more smoother to run your real estate investment, you can hire a property manager and let them be in charge of the daily operations at the property while you only receive your monthly check into your bank account. To get them to be disciplined, you should pay your property manager on a commission basis; so that they are motivated to work even harder and ensure maximum occupancy so that they optimize their commissions too.

If well implemented, the above two sources of passive income can chart your path to unlimited financial freedom in your old age. Online trading of binary options will allow you the freedom to travel anywhere in the world; while still making money on the go based on changing market trends. On the other hand, real estate investment will be providing you with a regular source of assured income; that you can use to pay all your regular monthly bills whether you are home or abroad travelling.

Ways To Use Money To Show Class and Style

When it comes to using the money that you’ve earned to present style and class to the people around you, there are definitely a few things that you can do to approach that end goal without coming across too strong. You’ll often notice that the people who have the most class and style aren’t the ones who throw it in other people’s faces, but rather use their lives naturally to share what they have.

Some examples of how you can potentially do this are to showcase nice furniture, buy understated jewelry, go to VIP events, stay humble overall with your clothing, and present food at your home in a way that people enjoy it to the max.

Showcasing Furniture

One of the best ways to show people where your style and class meter stands is by having great furniture at your house, including buying awesome chairs and tables. The perfect intersection of presentation is going to be when your furniture is practical, comfortable, and pleasing to look at. Higher quality furniture will tend to be more expensive if it either has some sort of history or is built to last as well.

Understating Jewelry

When you look at women and men to judge their approximate status in life, you’ll often look at their jewelry or accessories. Men will wear understated watches. Women will wear spectacularly beautiful jewelry, but it won’t be huge or gaudy. It will be detailed and perfectly matched to both outfits and situations. The better that you work with understated objects like this, the more people are going to look at you as a high-class person. Use this knowledge to your advantage when choosing your own outfits.

Going To VIP Events

Another way to show off your money in a classy and stylish way is to buy VIP passes to events. By doing this, you get to appreciate the essence of the entertainment, get to potentially go backstage and meet the people behind the show, and get the best food and drink a venue has to offer. You aren’t collecting stuff by spending your money this way, you’re collecting experiences!

Staying Humble With Appearances

Style and class are all about not putting yourself above other people. The best way to do this is to stay humble with your appearance. You can surround yourself with awesome things, but going overkill on your personal image is what turns people off and makes you look low-brow or that you’re trying too hard.

Presenting Food

If you have any sort of event at your home, a good way to use your cash flow to provide class and style is to really pay attention to food and food presentation. High-quality h’orderves on nice dishes go a long way in saying that you know how to treat your guests right.

Factoring in Your Health When Completing Estate Planning

“If you fail to plan, you plan to fail” – Benjamin Franklin

Considering your long-term health care needs is an important element of estate planning that is often overlooked. Factoring in the cost of an enduring illness or multiple illnesses and setting aside enough money for adequate care are only a few of the health-related estate expenses that can incur in old age. Taking the time to carefully think about the quality of life you expect and the directives you would like family and doctors to follow can give you peace of mind today and ensure your wishes are followed – not only that, this kind of preparation makes sense financially.

So, what does it mean to adequately prepare for potential health issues when it comes to estate planning?  And how exactly does one do that?  Hopefully, these points below provide useful guidance.

  

1.  Start Early

Thinking about how your health will be in the future, especially far into the future, can seem counterproductive, after all, who knows how healthy one will be ten or twenty years from now? 

We, of course, all hope to live vibrant lives as we age.  However, the reality is that many of us will have health issues as we grow older.  Some of these may impact our ability to make sound financial decisions.  Consider, for example, that rates of early onset Alzheimer’s and dementia are both on the rise, with more people under the age of 65 being diagnosed each year. It’s estimated that by 2050, more than 16 million Americans aged 65 and over will suffer from Alzheimer’s.  It is also the 6th leading cause of death, attributed to more deaths than breast and prostate cancer combined.

Planning early is especially important when it comes to dementia and Alzheimer’s because both diseases slowly strip a patient of their memory and faculty, two factors that are instrumental in estate planning.

2.  Set Aside Enough

We are all aware that health care can be expensive, especially when considering the cost of medication, nursing homes, care centers and retirement communities.  While most estate plans do cover some of these costs, they often fail to include the cost of inflation and/or increased cost of living.

How much money you’ll need for health-related expenses generally depends on when you retire, how long you live, your state of health, and the cost of medical care in your area. With the cost of health care steadily rising, including enough funds to cover the roughly 5 percent annual inflation rate will prepare you to handle the increased cost of care in the future.

Factoring in variables like cost of living increases, increases in health care costs, and similar factors also highlights just how important it is to work with estate planning professionals who are well versed in addressing these points.

3.  Plan To Live Longer

Here’s the good news: global life expectancy is on the rise and currently is at 71.4 years.  In North America, however, age expectancy is 81 and climbing annually. While living longer is great news for all of us, it does put increased strain on our finances, especially during our golden years.

Setting aside enough funds to last the rest of your life is crucial to maintaining quality of life and being able to afford any health related expenses that arise. This can be achieved by figuring out monthly expenses, projected health costs, life expectancy and the rate of inflation. Don’t forget to leave some cushion room for unforeseeable expenses.

The 4 Most Common Things People Waste Their Money On

When it comes to money, it certainly has a habit of burning a hole in many people’s pockets.  It can seem like the more you have the more you spend without even really knowing where it went.  Studies show that people who suffer the most financial issues are people who don’t regularly check their bank statements.

Without knowing exactly where your money is going it can be nearly impossible to make smarter spending habits.  Here are some of the most common ways people spend their money carelessly, and how to avoid it.

Alcohol

Beer and booze are usually associated with carefree occasions, celebrations, and relaxing.  Because of the effects that alcohol has on the body, the more we drink the less we seem to care how much money we are spending.

With the average drink costing between 7 and 9 dollars, this can start to add up.  Particularly if you are going out to bars several times a week.

Try to limit your intake of alcohol not only because of the costs but also because it can lead to addiction.  Treat it with moderation and you will see a huge difference in your spending habits.

Food

Eating out is something that costs as much as quadruple the price as it would have been had you just made something at home.  Going to restaurants is something that should be treated as a special treat for occasions when you want to have a dining experience.

When you begin to become accustomed to eating out for every meal simply because you don’t feel like cooking, this can start to create extremely high charges over time.  With each meal costing an average of $15 on the low end, imagine what this adds up to over the course of the month.

Late Charges

Many people pay things later than the deadline and start to accrue late fees which they wouldn’t have otherwise been charged had they simply organized their calendar better in order to accommodate the payment due date.

Late charges are basically the same as lighting your money on fire and throwing it out of the window.  Instead of throwing your money away, simply set up auto pay or mark your calendar so you anticipate the payment which is due.

Impulse Miscellaneous Purchases

Many people are guilty of seeing something at the store or online which is amusing to them.  They don’t stop to think about how much use they will get out of it or whether or not it will be amusing to them in a months time.

They simply have a direct response from their brain to their wallet.  Before they know it they are purchasing something that is only temporarily entertaining.  Instead of making these impulse purchases try to evaluate how much you’ll actually use something.

Tips For Staying On Top Of Your Bills

Staying on top of your bills is something that not everyone is so good at doing. Not everyone is born with the natural ability to be responsible with their finances. Most people will admit that they weren’t so responsible with their finances in their younger years and have trained themselves to be more financially stable and responsible in their later years.

Studies show that people who are more on top of their bills have more room in their budget for leisure, luxury, and have lower stress levels. Being in control of your bills means being in control of your finances. Here are some of the best tips for making sure that you stay ahead when it comes to paying your bills.

Set Up Auto Pay

A lot of people can’t seem to remember their upcoming bills and end up piling on late fee after late fee simply out of poor organization and memory.  Therefore, consider setting up auto-billing on your accounts so that you don’t get yourself into trouble.

A lot of people find this much more convenient than manually paying each month.  Of course, this means that you will have to have the money in your account.  Otherwise you run the risk of becoming overdrawn and facing a late fee on top of an insufficient funds fee.

Set Reminders In Your Calendar

Try to set reminders in your calendar which recur each month so that you have an idea of when your bills will be coming out.  These calendar alerts will serve as a little reminder that you should remember that you have a certain bill coming out during this time so therefore should spend less.

With Smartphones and Google Calendar reminders have never been easier.  All it takes is simply entering the information once and choosing the option to repeat monthly on the same day.  Once upon a time people had to manually write in their payment reminders into a paper calendar, and there was no magical sound and notification that came up.  You simply had to hope you remembered to look at your agenda that day.

Create a Budget

Consider creating a budget for yourself which breaks down all of your expenses and costs for the month so that you know exactly how much extra spending money you have outside of your bills.

By having a firm understanding of exactly what your parameters are outside of what you have to save for your bills, you will be less inclined to spend carelessly.

Budgets are very easy to create with simple Excel formulas. If you aren’t familiar with how to use excel, try doing a search online for a pre-made budget spreadsheet or download an app.

Simple Ways To Make A Little Extra Money Online

Everyone loves a little extra cash in his or her pocket at the end of the day.  The internet and other technological advances have made it much easier over the past decade to earn money in our spare time.  There is always something that needs to be done and someone willing to employ another to complete it.

Learning to take advantage of the opportunities allowed by technology will benefit those with finances that lack a bit of flexibility.  Take some of that extra free time and turn it into cash.  Shop for all the high-tech recreational gear, and skip the shame of spending.  Here is a quick overview of a few of the most legit ways to earn money online.

Freelance/Content Writing

The possibilities are endless if a person can write.  Freelance and content writing positions are almost always easy to find, and they do not require a set schedule, typically.  Work as much or as little as is possible.

Of course, to earn a respectable amount of money, a person will have to put in some time and a whole lot of effort.  It may be simple to obtain a side position as an online writer, but it takes talent and dependability to build a career.

Watching YouTube videos

A little site called InboxDollars pays folks to do what they do on a regular day and get paid.  The company will pay to watch YouTube videos.  Businesses need all the watchful eyes they can grab, so it behooves them to offer some sort of incentive for watching.

Every time a user watches a video, InboxDollars will credit their account with points.  Once a person reaches 100 points, they can cash them in for a $10 gift card.  Of course, users can wait and save their points for a larger cashout, but $10 is the minimum balance to collect.

Become an Uber driver

So driving for Uber is not exactly an online money-maker, but the sign-up, payment, and application all work from the power of the internet.  Not only is Uber a less expensive equivalent to a taxi cab, but it is also easy to sign up as a driver and start earning money today.

Driving for Uber is entirely voluntary.  If a person does not feel like working, then they have no obligation to hit the roads.  It is an excellent way to meet people and develop a honed feel of the surrounding environment.

Install a Digital Reflection Panel

Get paid to surf the net.  Digital Reflection Panel pays over $200 per year to users in exchange for data.  The host company works to gather from a broad range of internet users their personal searching habits in order to improve the overall online experience.

All users have to do is connect their simple device to the wireless router and apply updates every once in awhile.  There is a $25 bonus for installing the device, $60 after the first two months, and $10 for each additional month.

Finding Ways To Finance Your Personal Hobbies

Hobbies are a great way to stay busy and keep you out of trouble, Hobbies can help you when it comes to addiction and depression. They give you something to help you take your mind off of certain things.

However, hobbies usually aren’t free. Some hobbies are more costly than others. Even if reading is your hobby, you need to buy books and even books through digital media still cost money. No matter how cheap or expensive your hobby is, here are some ways you can finance yours.

Save Up Your Change

You could start a fund for your hobby. Have a big glass jar or a piggy bank where you can drop change in or dollar bills and save them up. Once a month you pull out what you’ve stashed, roll the coins and use the money to buy some new books or some art/crafting supplies that you need.

If you don’t need anything new yet, let it sit and gain more money until you do. Get into a habit of putting all the change you come home with in there, and even any dollar bills. That money can add up quickly if you tend to use cash more than credit/debit cards.

Start Selling Your Crafts

If your hobby is some sort of crafting, you could make money by selling some of your crafts online. There are different websites that are selling platforms created strictly for artists and crafters. People that shop on these sites know what work goes into creating handmade items and they are usually willing to pay a little more than someone showing up on eBay.

You could also sell at local craft shows if you have the time. It’s another outlet to make some money with your crafts and to share them with people.

Have A Rummage Sale

Maybe you’ve noticed that the clutter in your home has been distracting you from enjoying your hobbies lately. Why not clean up some of that clutter and have a yard sale? You can use the money you make to invest in your hobbies.

Price your items as low as you can and you’ll be sure to sell a ton. People go to these types of sales to look for bargains, and if you aren’t offering them that then they may just walk away and you’ll be left with all the clutter.

Use Your Returnables Income

If you live in an area that has refunds on soda and beer bottles/cans, you can save them up and use that money for your hobbies. If you drink a lot of either of these items, that money can add up fast.

If you live somewhere without bottle deposits, do some research to find out if you have any recycling places nearby that pay for the stuff you have to recycle. Or, come up with a craft idea to use those items (like using old newspapers for paper mache projects).

Best Asset Mix Depends on Your Time Horizon

“Time in the market is more important than timing the market.”
– Unknown

Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

 

One of the key decisions investors must make is choosing their “Asset Mix”: the percentage of investment assets they hold in the major “asset classes” – Equities and Fixed Income.  For most people, this decision will have the greatest impact on their portfolio’s return… and its risk (or volatility).

Conventional wisdom holds that equities are “riskier” than fixed income investments and that the more equities you hold, the riskier your portfolio becomes.  However, conventional wisdom fails to take into account some key real world factors: the impact of inflation and your investment time horizon.  Let’s take a look at this and then see how we can invest better!

 

Volatility of Stocks where Investor Time Horizon Increases

Chart 1 below shows the annual total return, after-inflation, for a U.S. Large Company Stock Index from 1926 to 2015.  Notice that there are several periods where the real returns are negative.

best-asset-mix-pic-1

Now let’s increase the holding period (Chart 2 for 5 year holding period; Chart 3 for 10 year holding period and Chart 4 for 15 year holding period) and observe the drop in the number of negative holding periods.

best-asset-mix-pic-2

best-asset-mix-pic-3

best-asset-mix-pic-4

For those math people out there who want to see numbers, Chart 5 summarizes Charts 1 through 4 by showing the percentage of holding periods where the returns were negative.

best-asset-mix-pic-5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

So if we hold the U.S. Large Company Stock Index, 31.1% of the time, we would have lost money over a 1 year holding period.  But if our holding period increases to 20 years, we would not have lost money!  One conclusion we can draw from this is that if we are going to invest in U.S. Large Company Stock Index and we don’t want to lose money, our holding period should be at least 20 years.

The implication then might be for holding periods less than 20 years, if we don’t want to lose money, you might think that we should then hold 100% in Fixed Income.  So let’s look at the percentage of down years for 100% in Fixed Income:

best-asset-mix-pic-6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To me, this was the stunning chart.  What this tells us is that when we take inflation into account or rises in interest rates, we’ll lose purchasing power of our Fixed Income investment about 30% of the time regardless of how long we hold bonds.

I thought maybe having 60% U.S. Long Term Corporate Bonds (and 40% U.S. Government TBills) was skewing the results.  So I then tried different combinations of U.S. Government Long Term, Intermediate Term and TBills and found the percentage of down years didn’t improve.

I felt why should we invest in bonds at all when they are so risky?  It took me some time to figure out how to deal with this issue.

I focused on the nature of bonds being loans for a fixed return over a fixed time period.  I like fixed returns, but we need to reduce risk for inflation or rising interest rates.  So to reduce those risks, we might need to add some amount in stocks.  And as the time horizon increases, those risks are greater, so we might have to add a greater amount in stocks.

 

Minimum Risk

To help address how much should be in stocks for a particular holding period, I had to consider how bad can a return be?  And if we knew that the worst could happen, let’s choose the asset mix between stocks and bonds that gives us the greatest of the “Worst Returns”.

I also acknowledged that the absolute worst return could be an outlier result that might not be likely to repeat.  So I defined the average of the worst 5 returns as the “Worst Return”.

Table 1 is a simplified summary that looks at asset mixes from 0% equities to 100% equities at 10% increments for different holding periods (1 year, 3 years, 5 years, 10 years, 20 years and 30 years).  I’ve highlighted in yellow the asset mix that gives us the highest of the Worst Returns for each holding period.

best-asset-mix-pic-7

So, with this table, it suggests that for cash needs one year from now, 100% should be invested in Fixed Income.  For needs that are 5 years away, we should invest 30% in Equities and 70% in Fixed Income.  Ok, but does this help really produce the results of reducing risk or improving returns?

 

Minimum Risk and Average Returns Through Time

Table 2 and its summarized graphs shows for each holding period the Minimum Risk Equity Percentage, the Worst Returns for 100% Bonds, 100% Stocks and Minimum Risk Returns under both the Worst Returns and Under the Average Returns scenarios.

Under the Worst Returns scenario, for each holding period, we find that the Minimum Risk Equity Percent gives the highest returns.

Under the Average Returns scenario, for each holding period, we find that for holding periods less than 14 years, the Minimum Risk Percentage gives better returns than 100% Bonds.  For Years 15 and higher the Minimum Risk Percentage is 100% equities.

In conclusion, Minimum Risk percentages for each holding period gives us better returns than bonds and does so with less risk.

best-asset-mix-pic-8

 

 

 

 

 

How to Apply the Results

To experience the results, we need to figure out your cash needs through time.  Then for each need, we discount that amount to today and invest that amount to grow to meet that need.  Of that amount, we invest the Minimum Risk Percentage for that holding period in stocks.

Table 3 below shows how much, per $100 of future need at a particular time in the future, we have to invest today and of that amount how much in equities.

best-asset-mix-pic-9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Next Step

A knowledgeable investment advisor who spends time to determine your cash needs through your lifetime is able to calculate your percentage of your portfolio that should be invested in Stocks – like the S&P 500 Index to achieve a portfolio that gives you good returns with less risk.

In other words, you should have a custom tailored portfolio as your needs through time and your risk tolerance is unique to you.  You shouldn’t be pigeonholed into one of a small number of pooled portfolio profiles!  You can do better than that.

If you are interested in working with an investment adviser that can help you find the right asset mix that’s geared toward the returns you need and do so with a level of risk that you may be able to tolerate, please call me, Steve Nyvik, at (604) 288-2083 Extension 2 or email me at: Steve@lycosasset.com.

Managing Company Income

“You must pay taxes. But there’s no law that says you gotta leave a tip.”

–Morgan Stanley advertisement

 

Written by Steve Nyvik, BBA, MBA, CIM, CFP, R.F.P.
Financial Planner and Portfolio Manager, Lycos Asset Management Inc.

Understanding how different types of income are taxed is the starting point to learning how to manage tax on your income and reduce overall family taxes.  In this article we’re going to look at personal and corporate income tax rates and then make some observations which you might discuss with your tax accountant to see if there are opportunities to improve your tax planning.

Income Earned Personally

Generally speaking, as an individual, your income and dividends from a private corporation are taxed in one of the four categories below:

  • Dividends from public corporations (such income is considered as Eligible Income for the preferred dividend gross-up and tax credit),
  • Dividends from a Canadian private corporation (such income is considered as Non-Eligible Income subject to a different gross-up and dividend tax credit resulting in a higher amount of taxes),
  • Ordinary income (this includes wages net of CPP and EI, interest income and foreign dividends although any tax withheld may be partially offset by a foreign tax credit), and
  • Capital Gains (where only one-half the gain is included in your income which is taxed as Ordinary Income; the other half is a tax-free gain)

exhibit-1

 

 

Income Earned through a Canadian Private Corporation (a “CCPC”)

Income earned in a private corporate is typically classified as being either: (i) Active Income, or (ii) Passive Income – this generally being your portfolio income.

Active Income is then characterized based on whether it qualifies for the Small Business Deduction (the first $500,000 of taxable income) or not.

Passive income is divided into:

  • dividends from Canadian corporations,
  • interest income, and
  • capital gains (where only one-half the gain is included in your income; the other half is added to your Capital Dividend Account where an election can be made to pay out to your personally a non-taxed capital dividend)

exhibit-2

 

 

Observations

Number 1:          For all passive income, the corporate tax rates are higher than the highest personal tax rate for each type of income.

This higher tax on passive income is punitive, so we need to either:

  • find a deduction against such income and avoid that high tax, or
  • pay out a dividend of the after-tax income assuming that the company tax less any dividend tax refund plus personal tax becomes competitive to the personal tax rates.

Number 2:          Active Business Income that qualifies for the Small Business Deduction is taxed at a lower rate than all personal marginal rates of income if earned personally (see Exhibit 3 below as to the Ordinary Income compared to the 13% corporate tax rate on Active Income).

The difference in tax ranges from 7.06% to 34.7% (see Exhibit 2 as to the 13% tax rate on active income qualifying for the Small Business Deduction and Exhibit 3 as to the tax rate on Ordinary Income – which includes business income earned personally).  This is a tax deferral as we have to pay tax when we take that after-tax income out of the company.

Company Active Income is taxed preferentially to incentivize people to create and grow small businesses which are responsible for most of our country’s jobs.

Once we take out this income, the tax deferral ends.  If we pay a dividend out equal to the after-tax income, our total income tax burden (personal tax plus corporate tax) is slightly more than if we had earned the income personally (see Exhibit 4 and compare to Exhibit 3).

 

exhibit-3

 

exhibit-4

 

 

Offsetting Income

If a company earns both passive income and active income, any bonuses or employment income taken goes first to offset active income.  Once our active income is used up, then the remaining salary is offset against our passive income.  This is exactly the opposite of what we desire.  So, if we have both active and passive income in the same company, a bonus doesn’t achieve our goal to minimize tax.

But what if we dividended out the after-tax passive income?  Exhibit 5 shows that the result is a marginal tax rate ranging from 12.70% to 47.79%.  In effect, the marginal tax rate difference varies with taxable income.  In the lower tax rates, dividending out passive income results in lower tax (eg. 12.70% versus 20.06% for taxable income to $38210) and at the high tax rate results in slightly higher tax (48.33% versus 47.70% for income over $200,000).  So one corporation can serve your needs.

exhibit-5

 

Having two corporations – one for active income and one for passive

An alternative way of doing things is where all after-tax passive income is dividended out to an investment holding company.

The key reasons for this include:

  • To segregate your investment assets and any insurance from potential creditors of your business;
  • To maintain your corporation as a Qualifying Small Business Corporation. The principal advantage of this is access to the Small Business Capital Gains Exemption through time.
  • It makes it easier for a banker or investor to gauge the performance of the active business through time (and you then have financial statements and tax returns to back this up). And if you take on a partner in your active business, they don’t inadvertently become partners in your other assets.

 

Summary

This article has explored the tax rates of various types of income to help give you some insight to how you might manage income and whether to incorporate an investment holding company.  Your next step might be to talk with your tax accountant to see if you are managing your company income tax efficiently.  It also makes sense to review with your financial planner and portfolio manager so that they understand the tax planning in place, tax carryforward info (unusued contribution room, capital losses carryforward), and taxation of your income (like your marginal tax rates) so they can help you create a tax efficient portfolio.

If you are interested in having an investment adviser knowledgeable about taxes, then please call Steve Nyvik at (604) 288-2083 Extension 2 or email him at: Steve@lycosasset.com.

4 Unusual but Sure Ways to Make Some Extra Money

Human wants are unlimited but the means to satisfy those wants are limited. You might have observed that financial responsibilities and expenses tend to increase at a faster rate than your income. This is especially true if you are an employee who trades time for money. However, the Internet is awash with thousands of tips on how you can make some extra money on the side.

The problem is that those tips are often ridiculous and the money you stand to make won’t make any difference in your finances. Desperate times call for desperate measures but you don’t have to do anything illegal to make money. If you are tired of all those tips on how you should babysit or walk some cute dogs, read on to uncover four unusual ways to make some decent money on the side.

1. Sell your body parts

If you don’t mind selling your hair, plasma, or being a sperm donor you can make some money on the side. You can fetch decent money by selling your hair, plasma or sperm and you’ll be doing someone a great favor. The hair is often made into wigs and hair extensions, your plasma can save a life, and your  sperm can make babies. The wigs are sold to people undergoing chemotherapy or people suffering from hair loss conditions.  A quick search on craigslist or Gumtree will reveal a gold mine on potential buyers.

If you don’t mind having less than perfect hair styling, you can also approach hair salons to offer them your services as a hair model for practicing new hairstyles. However, being a sperm donor doesn’t come with free sex, you’ll most likely be left with a cup and an uninspiring porn DVD to help you do your business.

While on the subject of selling body parts, you should note that the internal organs such as kidneys are illegal. In fact, you could have a visit from the cops if you start asking around about where to sell your kidney.

2. Take part in clinical trials

Many people had dreams of becoming doctors or nurses when they were young but we can’t all be in the field of medicine. Irrespective of your job (or joblessness), you can still take an important part in the development of science, and get paid for your troubles. Many pharmaceutical firms are in short supply of people brave enough to take part in clinical trials.

What are clinical trials? Clinical trials are simply research studies used to find out the safety and efficiency of new medical products or strategy on humans. If you are brave enough to be a human guinea pig, you can actually make good money from clinical trials.

By the way, not all clinical trials are in search of patients with specific health conditions. Sometimes, clinical trials might need the participation of people with a clean bill of health. In fact, NASA once had an experiment in which it would pay people $18,000 to lie in bed for 70 straight days.

3. Make speculative bets on events

If you don’t want to sell your body parts and you are not comfortable with being a guinea pig for science, you can still make some cool money on the side with a bit of startup capital. If you have a couple dollars to spare, spread betting could be smart way to make money on the side.

What is Spread Betting? Spread betting is a fast-paced trading system in which a trader places a bet on the possible outcome of an underlying event, trade, or market news. For instance, you can place a bet on whether gold prices will rise or fall without buying an ounce of gold. You can also place a bet on whether Trump or Hillary will emerge as the next president.

Spread betting should not be mistaken for gambling, you’ll need to understand the factors that could affect the underlying event so that you can place an educated bet. If you want to gamble; go to Vegas, at least, you’ll get “free” booze even if you lose all your money.

4. Get paid to recycle metals and save the earth

If you are passionate about saving the earth and you make eco-conscious decisions, you can also make money by rounding up scrap metal. Old/discarded metal items could fetch you some good money at your local scrap yard. Of course, you might need to brush up your knowledge on metals and run some inquiries to know the metals that you can scrap and where you can find them.

In some locations, you can take empty drink cans to Wal-Mart or Tesco stores to be redeemed for gift card points. When next there’s a beer-fest, you can offer to get rid of the cans so that you can earn some bonus points towards a gift card. The points won’t make you rich but it could buy some groceries for you.

If you are willing to devote more time to the art of scrapping metals, there’s decent money to be made by recovering gold in electronic scrap. Minute amounts of gold are available in the circuit board of electronics such as laptops and smartphones. With a working knowledge of chemistry, the right tools, and deft hands, you could actually be mining gold right there in your basement.