Tax Freedom Day

With Tax Freedom day just having been passed - it's interesting to see that the average Canadian will be paying 37.7k in taxes this year.

If you're not familiar with the term - here's the link in wikipedia Tax Freedom Day
Canada's Tax Freedom day is calculated by the Fraser Institute.

It's a shame that many of the Canadians that don't know the rules of the money game are still overspending in taxes that they can be mitigating, reducing, or avoiding (not evading). Simple tax savings strategies can be implemented by just taking a closer look at your mortgage practices, or consulting with your accountant on the benefits of having a small home based business with legitimate expenses.

When it comes to dealing with the tax man, it's what you know, or what you don't know that makes the difference between being able to be a success. Some of you might remember when Tax Shelters were a major portion of my business (they're not anymore) but proper utilization of a Tax shelter would still allow you to come out ahead if you're smart with your money.

If you're really interested in taking the first step here are the basics:
1) Take a look at your current mortgage - is it tax deductible? If not, talk to a trusted financial planner or adviser on methods how to make it such. Be sure to get some different opinions as not all tax deductible mortgage strategies are equal.

2) Talk to your accountant as to what types of expenses are allowed or disallowed and calculate what your average savings would be if you were to open your own home based business. In terms of the home based business, make sure it's something that you actually do enjoy and would like to work on to build the business as it's not just for the tax savings, but a vehicle to produce more income for you over the long term.

Those two steps alone will save the average Canadian 3 to 5 thousand dollars a year. It's not all 37k, but it's a start.

Thanks for reading,
Earl Flormata

Earl Flormata - Your Tax System Fails yet again

Ok - back to that common sense not so common thread, an antiquated rule in taxation strikes Canadians who tried to create some profits in purchasing stock through their employee stock programs.

Imagine - if you purchase stock valued at $1, but you get a discount at say 50 cents. Now one share doesn't hurt so much, but let's say we work at $100,000 for a nice round number. $50,000 is what you've got to put up on the block, to realize $50,000 of capital gains.

Now with the financial downturn, let's put the value of the stock for those that held on to say... 10 cents on the dollar. In simple terms, you bought an asset worth 100k for 50k, which was a great deal up until the asset lost value to a net value of 10k. To add insult to injury - the tax payer, our peer is still liable for 50k in capital gains tax.

Waaait a minute - that doesn't seem fair now does it? - I'm thinking at least if it's within the same calendar year in terms of taxation - or perhaps even within the tax filing period, there should be a net result equation. In this case, there should be a claimable capital loss of 40k against any winning investments, or even against income.

What's worse, we're the only G7 country to not implement a law that protects our citizens against such financial downturns such as this... what's the procedure to get something like this moving? I think I'll call my local MP to find out what we can do to make this change happen. With people losing their jobs as a final kick while they're down - something has to be done to stop the bleeding.

Here's a link to another article on the same topic: Phantom Income

Thanks for Reading,
Earl Flormata

Earl Flormata - Another potential hidden tax emerges.

Not all of the MER is a profit that goes to the mutual fund company.

CI Financial Corp. president Stephen MacPhail, whose firm is an outspoken opponent of sales taxes on investment funds, notes that the HST would be a hidden tax because of securities rules. The regulations governing the reporting of management-expense ratios require fund companies to report a single MER that includes all taxes.

Let me get this straight - because a firm is operating out of Ontario, all of its investors would be charged the 13% HST regardless of what province they lived in? And to boot, they're going to hide it from the taxpayers within the MER?

With the current state of the world economy, and everyone still pretty jumpy from the constant negative news (aka CNN) - the sheer audacity to charge a provincial sales tax on people not from the province would have me looking to other funds that weren't affected by this ruling. We're already taxed when we spend, taxed when we save, taxed when we save, taxed at death, and now a hidden investment tax? No wonder Kiyosaki is saying stay away from mutual funds, and it's getting more and more difficult for mutual fund sales people to get sales these days. Ontario is already the most difficult jurisdiction in the country to deal with - and now they're coming down and killing their own investment industry?

It's news like this that makes me glad to live in B.C. I've recently had one of my partners working directly with the BC Securities Commission (BCSC) - and from what he's told me it's been very helpful dealing with them, and they've actually saved him thousands on legal fees. Watch out Canada, because if another hidden tax hinders investments based in the East, then we may see a resurgence everywhere else across the country making offers into places other than Ontario. Alberta and their zero provincial taxes looks like an even better stomping ground for the financial corporations these days.

Thanks for reading,
Earl Flormata

Earl Flormata - Canada Pensions down 30B

Hoo boy... down 30 Billion...

I remember reading from Kiyosaki's work that there's not enough pension to go round in the U.S. so when I saw the headline that Canada's pensions are down 30B since last year, I thought I'd do a little bit of digging in comparison.

From the Canadian Encyclopedia it states that from 1940 - 1960, there was an increase of 18% in the birth rate, or in numbers - an extra 1.5 million births that added to the population. With the baby boomers hitting the retirement age (around 8.6 MM) in that timeframe - let's do some simple quick math to find out how much they need to make it happen.

3.1 Percent average growth over 5 years, with 95.4B to work with averages around 2.9B to work with annually (suggesting also that it doesn't take another major hit or three). With 8.6 million people retiring, and say an average pension payment of around say $1000 a month - that adds up to 8.6 B to figure out. Now I know these are just arbitrary numbers and not an exact science, but last I checked, 8.6 - 2.9 = 5.7. A 5 Billion dollar shortfall even give or take a billion or two with my rough numbers is still somewhat worrisome. Being 28, and having the "proper retirement age" around 65-70 means that unless I do something for myself - I seriously doubt that the problem will solve itself by the time 40 years have passed.

This is one of the main reasons why I continue to read at a breakneck pace, and try to increase my financial IQ as much as possible, as quickly as possible so that I understand and can exercise as many options and start down the paths I need to run before time runs out.

With the current state of the economy, I've also been looking at more tangible solutions such as real estate with cash flow, and the idea of purchasing gold wholesale. I'm still pretty tax-centric in my research, but every little piece of the puzzle is what makes it whole.

Thanks for reading,
Earl Flormata


...now off to find that 5 Billion ;)

Earl Flormata - FU Money book report: Dan "the man" Lok

I just finished reading Dan “The Man” Lok's soon to be New York times best selling book that hasn't even launched yet, and it's been one hell of a ride. The three things behavioural changes that I will either choose to strengthen and keep in my life, or change for the BETTER are as follows.

1) I resolve to NEVER chase after talent again, but instead become a talent magnet. I vow to create such a powerful team, and fantastic atmosphere that instead of me begging others to follow my lead, I will just show up and people will come from all around who want to work with me.

I know I've just recently used this quote in a previous post, but damned if it isn't a good one!

Never try to teach a pig to sing; it wastes your time and it annoys the pig.
- Robert Heinlein


2) Before the springtime comes, I resolve to make more money than I know what to do with so that I never EVER EVER!! have to mow the lawn ever again. Either that, or make so much stinking money that I will landscape everything to make mowing the lawn easier than breathing. (I'd actually enjoy it if the damn thing was level). I will stop trying to learn skillsets that I will never ever master - or enjoy for that matter, and instead choose to focus on what I am good at, and what I enjoy doing.

3) Mentors Mentors Mentors. Learn what I need to strengthen as FAST as possible by continuing to leverage masters that have already been where I want to go.

If Internet Marketing is something that could be or should be an interest of yours in the near future, I URGE you to take a look at this book for the "ready fire fire fire aim a little fire again" kick in the pants you need to get your ass off the couch and into profit. Hell, if you ever need a slap in the face for the truth about making your millions in ANY category – this book lights the fire that’ll get you started.

Earl Flormata - The 5 Classes of Entrepreneurs

This was an interesting article that I came across, and funny enough - the words that struck home the hardest were last few in the article.

"Stay Hungry, Stay Foolish."
-Steve Jobs

Up until a bunch of my product vendors fell through, I had thought that I was a Class 5 Entrepreneur. A Game Changer - raising 26MM in one year for a single cause. The issue is that I was a Class 5 in a Class 3's mindset, and body.

As a problem solver at heart, I enjoy breaking the system. In breaking the system - I feel that I expose the flaws with the current world, and leave it a better place once I've shown people how to make things more efficient. The biggest issue however was being a one man band. I'll admit - I got used to hearing the sound of my own voice - and that was a major downfall.

As I build my new company - and this time with a team - I have to wrap my mind around scalability, and duplication. Without these two things in mind, I cannot graduate to a Class 4, and eventually earn a spot in the Class 5 ranks once again. I'm looking forward to the next three months, where I must count on my team to deliver alongside me, the pieces of the puzzle to solve the problem - teach myself and learn how to share the greater vision with the team so that we're all moving in the same direction, and finally - to change the game in a way I know that's completely possible.

There's more than one way to the Infiniti Point. And I intend to find and share every path that I can to get there. Here's to me staying hungry, and staying foolish :)

Thanks for Reading,
Earl Flormata

Earl Flormata - Even the sharks are starving

In a recession - even the sharks are starving.

Think about it - in a bad economy, people don't go on vacation as much I suppose. If that's the case, then there's fewer people in the resorts, fewer people at the beach, and fewer people in shark infested waters.

That's not to say that there still aren't some sharks out there - but at least their victims are fewer and further between. What are your thoughts on the upcoming economic times, and our multi-toothed friends?

Thanks for Reading,
Earl Flormata