Category Archives: Moneytalk

Talk about business and investments in general.

The New American Dollar

Check out the US Dollar's New Look!

As funny as this is, it really isn't too far from the truth. The US is having a really bad time and the markets are going south (no pun intended). As someone that makes his money in US dollars, this really sucks. On one hand, I can get stuff cheaper in the US. On the other hand, I'm making less per dollar. Granted, it isn't as bad as it was when the Loonie eclipsed the greenback not too long ago, but when both our economies are tied together in many ways, there's a lot more at stake than a few cents on the dollar. I've never seen my portfolio take such a bad beating. But on the other hand, it's like Boxing Day in the markets right now.

Hopefully the results of the US election (*cough*...Obama...) has a positive effect on the economy in the near future or I might have to ride my scooter in Taiwan and work on my asian squat. Thanks Kelly!

Offshore Accounts For the Rest Of Us?

When you hear the term "OffShore Accounts" you might immediately think of things like drug lords, gangs, global terrorism and unsavoury black market enterprises; things that are far more evil than even what John Chow has come up with...and the Panda Slaying too. However, at the root of the usage of offshore accounts is the ability to funnel funds outside of the country, protecting them from the tax man. While offshore accounts do provide this sort of protection, the shady nature and the fees associated with keeping such funds offshore tends to make it a tool for only the wealthiest of individuals or for those with the most to lose in case those funds are discovered.

In a somewhat surprising move, the Canadian Government, in their recent budget, has announced an initiative that will allow Canadians to save up to $5000 a year in an account that is sheltered from taxes on the gains within this account. That means that any interest or capital gains earned in this account are exempt from taxation and are not considered part of your yearly income unlike traditional un-registered vehicles.

Compared to an RRSP, however, the initial $5000 savings limit does not have any tax advantages, just the proceeds gained from the initial principal investment. So if you have an opportunity to reduce your taxes through the purchase of RRSP's, you're better off doing that first. However, if you don't owe anything, this method could give you a place to stuff those funds from under the counter jobs, or money made online from your blog into a place where the tax man can't touch it, like an offshore account.

This new initiative, which will be available in 2009, will have banks jumping for joy as it provides yet another way for institutions to sell products to help individuals put this new savings vehicle to work. Although it seems like a great program, it really doesn't hold much benefit for most people.

For starters, the program may only benefit those with above average incomes, who need a place to sock a part of their funds away in case of a rainy day. Also, for those of you that are into monetary policy, having Canadians each take an extra $5000 out of the economy will have an adverse affect for industries that export their goods to other countries as this will increase the value of the CDN dollar due to the scarcity of dollars in the marketplace. Speaking as someone who makes US dollars, this is actually bad for me because the US dollar will be worth even less than it already is.

So before you get all excited about your pseudo $5000 a year offshore account, it's worth considering if this is anything that will even benefit you at all. With other non-tax bearing products such as Universal Life Insurance Policies available, it really is only good if you've maxed out every other possibility to shelter your money, and for most Canadians, that's not happening anytime soon. I guess the rich do keep getting richer.

Letters To Stephen - Are You A Drug Dealer?

In and amongst the many emails that solicit Viagra or ask in my assistance to help a deposed Prince from Abu Dhabi get his money out of a foreign account, I sometimes get questions worth answering. Although a lot of them, I just fire back an answer on the spot, sometimes I decide to answer them here on my little piece of the InterWeb. This time, our question comes from Henry, a concerned netizen on the topic of credit worthiness for online money makers...

Henry Writes...

Dear Stephen 

Does working online affect your credit? Yes I am not sure about this but does working online change your credit details because technically it is not a real job. It is just like drug dealing ( just an example!) its a private business , but I am not sure well anyways does it affect your credit?



Well, Henry, making money from the Internet is definitely not drug dealing. Despite the fact that I have a hard time explaining to people what I do for a living, I certainly can while I doubt that drug dealers go around telling people that they are drug dealers. Let's use a better example...

Say that you and a friend both own yard work businesses.  Both of you are enjoying record profits and of course, you like to buy things with your money. Last year, you declared a profit of $60,000 and paid taxes on it. Your buddy, we'll call him Jim, declared $40,000. 

You like to buy things, but you have a hard time paying your bills on time. Jim also likes to buy a lot of things too, but he always pays his bills on time. One day, you both have decided to buy houses next to eachother. You both go to the same mortgage broker, but you are turned down due to your excessive late payments in the past. Jim is able to secure a mortgage the same day at a great rate due to his excellent payment history. So why did you get snubbed, even though you make more money than Jim?

Well, the bank loans on a number of factors, but most importantly, they look at your ability to pay off the loan or your credit worthiness. Despite the fact that you make more money, you are a scatterbrain when it comes to keeping your accounts up to date. As a result, you have a consistently lower credit score than Jim. So the lesson here is that your credit worthiness not only has a bearing on how much you make, but it is also heavily weighted on how well you manage to keep those credit accounts up to date. Think of it logically: If I borrow money from you and never pay at agreed intervals or amounts, would you lend money to me even though I make a lot of it?

So what does this have to do with your credit worthiness whether you make money online or do yard work? Again, your credit worthiness is dictated by your payment history and to an extent, your notice of assessment which is how much you declared for taxation purposes. Basically its an official statement of what you make each year. There should be something similar in the US and other countries.

My business is a corporation and I pay myself a salary. At the end of the year, my corporation files a tax return and I file a personal return. I filed a personal return when I had a job and I filed a personal return when I made money online. I keep my accounts up to date and pay my bills on time. So does making money online have any bearing on credit worthiness, all else being the same? The answer is no.

So go ahead and make money online, but just make sure that the government gets their fare share, and always pay your bills on time.