Federal budgets are a good opportunity to take a fresh look at your personal finances.
Whether they contain tax or investing-related measures or not, budgets reflect the current financial environment as seen by the federal government. Today, economic growth is slowing in the United States and Canada is bound to be affected sooner or later.
At the same time, demand for commodities remains strong, which is a positive for the Canadian economy and stock market.
So where are we headed, and what does it mean to your personal financial situation?
Personal Finance columnist Rob Carrick
Related Articles
Internet Links
- Full coverage: The 2008 Conservative budget
- Interactive: The Budget 2008: The priorities
- Interactive: Highlights
- RRSP 2008: A special report from The Globe and Mail
Globe and Mail personal finance columnist Rob Carrick was online earlier to discuss the implications of the new federal budget. Your questions and his answers appear at the bottom of this page.
Mr. Carrick has been writing about personal finance, business and economics for more than 12 years.
He joined The Globe and Mail in late 1996 as an investment reporter and has been personal finance columnist since November 1998.
After starting his career at The Canadian Press in Toronto covering general news and business, Rob moved to CP's Ottawa bureau, where he served as senior economics writer and covered the Department of Finance.
He holds a Bachelor of Arts in political science from York University, an Honours Bachelor of Journalism from Carleton and is a graduate of the Canadian Securities Course.
As personal finance columnist, Rob writes a widely read annual rating of online brokers.
Online investing is an area of particular interest for Rob, who has co-written a book called E-Investing: How to Choose and Use a Discount Broker.
Rob lives in Ottawa with his wife, Theresa Humphrys, and two sons, Will and Jamie.
Editor's Note: globeandmail.com editors will read and allow or reject each question. Questions may be edited for length, clarity or relevance. HTML is not allowed. We will not publish questions that include personal attacks on participants in these discussions, that make false or unsubstantiated allegations, that purport to quote people or reports where the purported quote or fact cannot be easily verified, or questions that include vulgar language or libellous statements. Preference will be given to readers who submit questions/comments using their full name and home town, rather than a pseudonym.
Virginia Galt, globeandmail.com: Good afternoon, Rob. Thanks for joining us today.
The tax-free savings account was the centrepiece of the new federal budget, to the surprise of many. We have a lot of questions from readers wondering how this will affect them.
Who will be the primary beneficiaries of this new plan? Do you expect that the initiative will have fairly broad appeal?
Rob Carrick: Ginny, this could be the most broadly based measure I've ever seen in a budget, if you put aside those broad-based income tax decreases that sound good but never seem to make any discernable difference in your taxes.
Here's a simple question to ask if you're wondering if the TFSA will benefit you: do you save any money, whether it be in a bank savings account, a high-interest account or GICs, or do you invest money outside your RRSP?
If the answers are yes, then I can't imagine you won't have at least a TFSA account or two once these plans kick in next year.
Intuitively, I'd imagine that people in their prime savings and spending years — let's say 20s through 40s — would be big users, but the feds expect seniors to account for 50 per cent of the benefit paid out of TFSAs. Couple this with the fact that you can start contributing at age 18 to a TFSA and you have the definition of a universal program.
Ice Rider, Edmonton: Hi Rob. Is the very oddly crafted savings plan merely a way of taking money out of an overheated economy to ward off inflation?
Seems to me I can (and do) save $5,000 in my rainy day account, regularly transfer $$ in and out as needed and put the annual leftovers into my RRSP. How is that any different from what the Conservatives are proposing?
Mr. Carrick: Yo, Ice. Interesting theory, but I don't think so. My take on the new Tax-Free Savings Account is that it's a way for the Conservative government to get out from under its awkward, rashly made promise for tax exemption on re-invested capital gains with something that is far less costly to the federal treasury in terms of lost taxes but also has solid appeal.
The TFSA is going to benefit a lot more people than a capital gains exemption, although the dollar amount of the tax savings will be vastly smaller. But so what? The democratic aspect of the TFSA is commendable.
As for practical use, I would imagine you'll convert your rainy day account into a TFSA and make your usual deposits and withdrawals. The big difference with a TFSA: no tax slip at the end of the year telling you how much income tax you owe on the interest you received. Anyone going to miss the good 'ole T5 slip? Didn't think so.
12
