December 2021 Content
Navigating the Financial Road Ahead
By Kurt Rosentreter, CPA, CA, CFP
So much has changed during the pandemic that will affect how we plan for the future.
Work from home and online ordering are here to stay. Valuations of businesses that rely on crowds for sales (e.g. restaurants in malls) may never fully rebound. We will never look at nursing homes the same way. Charities suffered while we bought bikes and skis. The government took on massive new debt while the stock market fell and then recovered. Interest rates are at 100 year lows while real estate is at record highs. Job uncertainty could never be higher for both young professionals and their parents equally. The gap between haves and have nots widened.
You, Your Finances and the Road Ahead
The sheer scope of the pandemic has redefined everyone’s “worst case scenario”. No one was prepared for this magnitude of impact.
Knowing this, we will now plan to be ready for the next pandemic. The goal for everyone should be to build a moat around your finances that can survive a two-year pandemic as the new worst case scenario. Looking at all everything that happened in 2020, along with some trends that were already in play, below is a partial list of thinking points to consider as you revisit all of your financial strategies in this new world.
Plan for a Greater Level of Independence in Your Life
Some of the greatest challenges we saw during the pandemic were in areas that various levels of governments controlled: public school systems, hospitals and healthcare and nursing homes. Governments have a lot of people to deal with, not enough money and disagree on process. Ask yourself, what can you do to insulate yourself from needing these institutions in the future? If you have the financial where-with-all to put your own financial safety net in place, the time has come to explore this for the future. Rely on no one but yourself.
Defense Before Offense
- Keep a $100,000 unused line of credit in place for emergencies until you die.
- If you cannot easily pay the mortgage with one spouse losing their job then your mortgage is too big.
- Keep three months of cash flow on hand for emergencies.
- Save more in general. Very few people can retire on RRSPs alone. Bad signs are living paycheque to paycheque, not paying off monthly credit cards and going years without adding to your savings.
- No one needs to be 100% in the stock market with their savings. Have targets and a plan.
- Do you work in a stable industry that will be around and want you as an employee when you are age 55?
- Almost zero interest rates means you get to pay down almost pure capital with each payment on your mortgage. You can live a long time in a pandemic if you have no debt on your home. Pay it faster!
- Do not work in the same business or industry as your spouse.
- If a pandemic didn’t convince you to get your Will and Powers of Attorney prepared then I don’t know what will.
- Everyone hates insurance. But for working Canadians with kids and debt you need good life and disability insurance – and more than your weak employer provided coverage offers.
- Stay in the workforce in some capacity perhaps until age 70. Besides being mentally healthy to do so, not having to rely on investments for your food money during a stock market decline will let you sleep better at night.
Be A Planner and Think Offense Too
- Write down your goals, quantify them, set deadlines and see if the pandemic has messed up your financial math towards your goals. Adjust accordingly (savings levels, debt paydown pace, assumptions) and re-assess every three years.
- If you are going to have to support your parents in their old age, then plan for it now.
- A food pantry and huge freezer in your home seems so 1960 but if it works for you…
- Understand every investment product in your RRSP and replace anything overly risky or expensive. Get rid of all products that don’t beat the S&P500 over 5 years. And if your goal is to “buy low, sell high” with your investments, did you buy securities in March 2020 when the market was down -25% or more? Why not?
- Know your financial limits on supporting kids. At least charge them rent if they live with you in their late 20s.
- Is your rental real estate love affair over? Your Airbnb renters disappeared quickly, your international students left town for a year and your service industry tenants couldn’t pay the rent. Only government stimulus saved a massive real estate drop in 2020. Were you over-exposed? Re-think your real estate goals long term – for many of us that will mean staying in our main home longer and tying up less money in investment properties that carry demand and supply risks we no longer want to suffer through.
If you go back to the status quo and your old ways in 2022 then you were not paying attention. The pandemic was your wake-up call that you need a financial plan with costed out goals, transparent costs and well thought out strategies and products.
Kurt Rosentreter, CPA, CA, CFP, is a Portfolio Manager with Manulife Securities and an instructor of personal finance topics for more than 15 years in CPA associations across Canada. He has published seven books on money matters with two Canadian best sellers and is a regular go-to expert on money topics in the nation’s newspapers and social media.
On-Demand Ethics Courses Available in December
We understand December is a busy time, and that’s why we offer flexible learning options to help you achieve your learning goals. On-Demand ethics courses are available year-round – register today and learn at your own pace.
Courses with 4 hours of ethics content
Ethics at Our Core (On-Demand)
This seminar helps participants to develop skills for dealing with ethical dilemmas and using appropriate decision making in their workplaces. Read more
Mastering Your Ethical Intelligence (On-Demand)
This course will raise your awareness of ethical situations that are around you today that you aren't even thinking about. It will change the way you make decisions and take actions. Read more
Principles of Ethical Leadership (On-Demand)
In this course, you will learn the principles of ethical leadership. You will learn first hand how ethical leaders out perform all others by a wide margin by following these principles. Read more
Courses with 2 hours of ethics content
Ethics: The Ethics of Change – Keeping Your Balance in Risky Times (On-Demand)
We may love change or hate it. But try as we might to resist it in our life, our profession, our career and our world, change is inevitable. How can we change — and help others change — effectively and ethically? Read more
Lies, Alternative Facts and Professional Skepticism (On-Demand)
Professional skepticism is one of the key underlying competencies supporting our ability to meet our ethical requirements. In this session, we'll examine and de-bunk common examples of ways to present questionable or misleading messages. Read more
Money Laundering Awareness (On-Demand)
Discover key resources and tools available for effective detection and deterrence. Explore the impact of money laundering on ethical decision-making, and how examiners and auditors can assist criminal investigators in countering money laundering. Read more
Professional Ethics: Critical Thinking (On-Demand)
In this course, we will examine specific areas of the CPA code of professional conduct (“code”) and use case studies to highlight key learning objectives. Read more
Professional Ethics: Improving Psychological Safety in the Workplace (On-Demand)
This course will examine current research to better understand psychological safety for organizations and teams and introduce ways to assess and improve psychological safety for both organizations and teams. Read more
Prepare for Tax Season
Tax season is not far away – why wait to receive your tax updates? The following webinars taking place in December and on-demand courses will address topics applicable to practitioners working in areas of personal, corporate, and commodity tax.
Providing a high level summary of tax law changes in the past year, Income Tax – Update 2021 examines current changes and relevant issues in taxation that affect individuals and most businesses in the private sector. As the course focuses only on recent developments, it is best suited for members who take the course annually. Those looking for an update of more than one year would benefit from this seminar to quickly become familiar with crucial tax updates over the last five years.
The Income Tax Act contains several measures related to income splitting; and while some are permissive, most are restrictive. The expanded Tax on Split Income (TOSI) rules - became effective in 2018, and their implications are far-reaching and punitive. CPAs who advise individuals, professionals or business owners on matters related to income splitting, would benefit from a detailed review of relevant income tax legislation, including the expanded TOSI rules, and explore opportunities to accomplish income splitting.
A wide variety of issues are encountered in the preparation of Canadian personal income tax returns. Professionals looking for a refresher on personal tax preparation matters will benefit from this seminar to gain an overall understanding of tax compliance issues, enhancing their ability to prepare complete and accurate tax returns, and to identify and address planning opportunities which arise in the preparation of personal income tax returns.
Although not as common as corporations, partnerships are commonly used business vehicles/structures. The taxation of partnerships and their partners is quite different from that of corporations and their shareholders. Accountants who regularly advise business owners should be aware of how these taxation rules differ from their clients in corporate structures in order to advise clients with, or considering, partnership structures.
Professionals involved in tax planning for privately held companies and their shareholders are confronted with a multitude of tax accounts that need to be considered in conjunction with each other, including eligible and ineligible dividends, eligible RDTOH accounts, and more. Learn more about a common framework for considering GRIP, the three RDTOH pools, LRIP and CDA, and apply an understanding of these pools for effective tax planning.
The anti-avoidance rules in Section 55 of the Income Tax Act (ITA) now apply to a greater number of private corporations. Practitioners and other tax professionals must now consider Section 55 for all intercorporate dividends to avoid unexpected tax.
Those involved with reorganizing private corporations need to consider a wide range of technical rules, develop a plan that meets the client’s objectives, navigate the practical challenges of implementing the plan, and communicate the plan to other professionals.
Whether for performance reasons, planning reasons, or just because of the evolution of the life-cycle of a corporation (or its shareholders), CPAs who assist in the “shutting down” of a corporation will need to understand the tax issues that arise, from a compliance and planning perspective, when shutting down a corporation.
The application of Canada’s federal sales tax, the GST/HST is often far more complex than practitioners or businesses realize as the principles involved are often quite different from those applied to income tax. GST/HST - The Fundamentals provides an overview a variety of important concepts related to the application and the recovery of the GST/HST.
Accounting professionals with at least one year of exposure or experience with GST/HST matters should review the changes related to GST/HST in the last year to ensure they haven’t missed anything of practical importance to them, their client(s) or their organization.
And those involved in the accounting for non-profit organizations, including practitioners who provide advice to such organizations, should be aware of the application of GST/HST and exempting provisions applicable to the non-profit sector, including common pitfalls and errors.
Tax Dispute Resolution
Practitioners who deal with the CRA, whether on an infrequent or regular basis would benefit from understanding the CRA dispute resolution process, and the importance of taking the appropriate steps as a means of obtaining cost effective and efficient resolution to potential tax litigation matters.
Further reading: The 5 most important tax slips you need to know about for tax season
Newly Added On-Demand Nexus Days
Keep up with new developments in the ever-changing business environment. Several PD Nexus Days that took place earlier in the year are now available on-demand as an alternative to members who were not able to participate at the live event.
PD Nexus: Business and Leadership Insights
This fast paced day will introduce you to new ideas, expand your knowledge and sharpen your skills as a business leader. Obtain new skills and knowledge from a wide variety of presentations, including the ever-popular Economic Outlook. Read more
PD Nexus: Estate Planning Insights
This Nexus Day offers CPAs who are estate planning practitioners practical, leading-edge estate planning information and access to highly-regarded speakers covering current estate planning issues. Presented by the Society of Trust and Estate Practitioners (STEP) Vancouver branch and CPABC. Read more
PD Nexus: Information Technology Insights
This Nexus Day will benefit accounting professionals who need to keep current with the latest technologies, as well as determine what applications are worth implementing. It will offer practical technology topics designed to help alleviate heavy workloads of today’s busy professionals. Read more
PD Nexus: Information Technology Insights (Mini Package)
This Mini Package will provide a technology update in the accounting profession, as well as solutions designed to help alleviate heavy workloads of today’s busy professionals. Read more
PD Nexus: Work Life Balance Insights
Explore strategies and tools you can use to achieve better work life integration and manage your physical, emotional, and mental health as well as your productivity and organization skills. Read more
Retirement Planning Tips to Keep in Mind for 2022
As 2021 is coming to a close, there’s no better time than now to start planning about what you can do to set yourself up for financial success in the new year. Here are three quick tips to help you jump start on a financially healthy 2022.
1. It's not too late!
It is possible to start getting serious about planning for retirement later in life. In fact, if you play your cards right, you can build a significant nest-egg in as little as ten years or less.
2. Don't solely rely on the net worth statement to show an accurate snapshot of your financial affairs
You should be aware of the dangers that exist with a net worth focus. The typical net worth statement can be a misleading measure of wealth that leads to major problems. Delve into a much better strategy – The Cash Cow Strategy – that focuses on the cash flow implications of everything you acquire from now on rather than where they go on a net worth statement.
3. It is possible to retire well without investing in the stock market
The stock market crash of 2008 has proven one thing: traditional retirement planning advice is way too risky. Trusting the stock market is like gambling with your family’s future. But how does one plan for retirement without the possibility of losing up to 50 per cent of your investment value within a matter of months? The simple truth is that it is possible to retire well using guaranteed, safe fixed-income products like GICs that can never decline in value combined with government defined benefit pension plans including CPP and OAS.
Additional resources: 2021 Post COVID-19 Financial Planning for CPAs (free on-demand), How emotions can impact our financial decisions, Busting 7 common money myths, and Millennials, Gen X, and Boomers: How your generation can save for retirement
This CPA is passionate about education and enabling practitioners with technical competencies
Named one of Practice Ignition’s Top 50 Women in Accounting, Bridget Noonan, CPA, CA, helps small to mid-size firms meet regulatory compliance requirements including annual monitoring, cyclical monitoring, engagement quality control reviews and practice review action plans.
Bridget is an assurance partner at Clearline CPA and co-founder of Clearline Consulting and she has consulted with over 150 small firms in Western Canada assisting in areas of accounting, assurance, practice management, internal training, and succession planning.
Together with Tom Gillespie, CPA, CA, Bridget empowers CPA firms and practitioners with technical competencies, professional development, regulatory compliance, and practice management matters.
Bridget continues to be actively involved in the profession as a consultant for CPABC, a member of various CPA Canada taskforces and committees and a facilitator of professional development courses.
See what past attendees say about their seminar experience with Bridget:
“Perhaps one of the best deliveries (of assurance courses) I have seen. Real world, common sense approach to the topic is much appreciated...”
“Very good presenter! The best part is her willingness to share her experience in her practice to the group. This really adds value to the seminar.”
Hear from Bridget at the upcoming live webinar, Quality Management – Overview of CSQM 1 and 2 for Providers of Assurance Services (New Standards), where she will review the requirements of the newly issued Canadian Standard for Quality Management (CSQM1 and CSQM2) and related amendments to Canadian Auditing Standards (CAS 220) and its impact on the quality control processes for assurance practitioners.
Taking More Online Webinars?
While in-person seminars are making a comeback in the Fall/Winter PD program, online webinars are still a convenient alternative for a majority of members. If remote courses are your preferred method of learning, check out these five quick tips that will help you stay engaged to get the most out of your session.
1. Pre-seminar prep
Take a moment your audio (mic + speakers) and download the course material prior to the webinar. Some seminars have pre-work or pre-readings – make sure you complete the pre-work before the webinar. If you use a Zoom Desktop Client, it’s also a great idea to check if there have been any recent updates.
2. Join the webinar 10-15 minutes early
Join the webinar a few minutes early and use this time to connect with the seminar leader and your peers, and address any unexpected technical issues that you may experience.
3. Create a distraction free zone for yourself
Many of us may be tempted to check emails or multi-task during a webinar. Eliminate distractions such as cellphones, notifications and applications that compete for your attention.
4. Actively participate
By offering your input or asking questions throughout the webinar, you will experience a more immersive experience and contribute to a positive learning community. Some webinars also use breakout rooms for discussions or exercises, and it is especially helpful to turn on your video or audio to collaborate with your peers.
5. Take a break
Really, take a break. Pausing for a moment to relax and reboot can help to maintain focus and achieve productivity.