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Tag: self-employment income

  • Don’t be afraid to ask for an advance: Suzanne Bowness on budgeting for freelancers – MoneySense

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    Since 2002, Sue has provided content creation, editing, and consulting services to corporate clients through her business CodeWord Communications. Here, she talks about her formative experiences along the road to becoming a self-employment expert—and the right way to use debt.

    Who are your money/finance/investing heroes?

    As a freelance writer, I had an early gig reviewing business books, several of which were financial. That gave me insight into the fact that people actually wrote books about money that helped demystify elements like the stock market and other terms. I wish money management had been taught in high school; I would have preferred that class over other math that I never use as an adult. Suze Orman was one of my favourites from those early reads for her practical advice and encouragement that anyone could understand and manage their finances.

    How do you like to spend your free time?

    I like walking—both in nature and cities—travelling, and seeing new places. I like reading and listening to podcasts and audio books. I also like writing fiction and poetry, although it’s sometimes exhausting to make time for creative writing after a full day as a professional writer.  

    If money were no object, what would you be doing right now?

    I’ve always wanted to be a writer, but when I became an adult, I realized that I also needed to make a living. So I started working as a journalist and content writer. While I enjoy any kind of writing, I still like writing fiction, so I’d probably flip the time so that I’m writing my creative work during the day instead of after hours.

    What was your earliest memory about money?

    My earliest money memory was being given a dollar allowance from my parents for chores. (I was dusting and cleaning bathrooms; my younger brother was vacuuming. To this day these are our favourite chores. I love the quick fix of a good bathroom polish.) We would walk to our local depanneur in the Montreal suburbs and my brother would buy a big item, like a can of Coke or a chocolate bar, and I would stuff as much penny candy as I could into a little brown bag to last the week.

    I think math became important for that transaction as I made the money stretch as far as possible (was it better to buy five gummy bears at two cents each or a 10-cent lollipop?). I also learned that different people want and value different things, as I never brought my brother over to my way of thinking nor converted to his.

    What’s the first thing you remember buying with your own money?

    Besides penny candy, I think a cassette tape of the soundtrack to the movie Cocktail. Also books from Scholastic.

    What was your first job?

    After babysitting, my first real job was as a cashier at K-mart, where I also worked in the garden centre when I was 15. I still remember the stress when your cash register tape jammed, and I can still tell the difference between impatiens and petunias. 

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    I’m not sure what I did with my first paycheque, although probably saved some for a band camp later that summer, which is when I had to quit because my manager wouldn’t give me the week off. 

    What was the biggest money lesson you learned as an adult? What would you do differently today? 

    Probably saving earlier. I recall a bank having an ad in the subway about the difference in results between the person who started saving at 23 years old and the person who started saving at 30. The problem is that I think I saw that ad at 28 so I felt already behind. Also, I hated that nerd who had the wherewithal to start saving at 23. 

    A related lesson as a freelancer was to save my money for income taxes and HST in a separate place so you have it when it comes to tax time. It’s very easy to spend if it isn’t in a separate account.

    What’s the best money advice you’ve ever received?

    Paying off debt with the highest interest rates first (i.e. credit cards). But also, I learned myself the advantage of having credit available (and saying yes to a lower-interest line of credit) as a way to balance out my freelance business since mostly I’m paid 30 days after I submit an invoice. I’ve also learned to proactively ask for a percentage up front if I’m working on a larger project—say 30% to 50%.

    What’s the worst money advice you’ve ever received?

    I haven’t received this advice directly, but I find all-or-nothing money advice annoying. Especially the one about how much you can save by avoiding fancy coffees. I’m not a fancy coffee regular but if that’s the spend that earns you an hour of work at a table in a coffee shop or picks up your day, then it’s fine. Treats are okay in moderation and money is also for buying a nice life today, not just saving for the future.

    Would you rather receive a large sum of money all at once or a smaller amount of money every week/month for life?

    As a freelancer, I regularly receive large sums of money at the middle and end of projects and then nothing for a few weeks, so I am curious what it would be like to have regular deposit every week. 

    What do you think is the most underrated financial advice, tip, or strategy?

    Focusing individually on whether each purchase is a good idea. Just because something fits in your budget doesn’t mean it’s a reasonable splurge. I don’t think I’ve ever paid over $100 for a handbag, so if I see one priced at $500, that’s just not for me. Also knowing the current cost of items that you buy regularly so you’re not tricked by marketing or “sales” to think you’re getting a great deal. I know when the toilet paper really is a good sale.

    What is the biggest misconception people have about growing money?

    That there’s a magic age past which it’s too late. I started saving more in my 30s and I think it’s never too late. It just means I have a lot more room in my RRSP to continue filling up. 

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    MoneySense Editors

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  • Insurance for self-employed Canadians: What coverage do you need? – MoneySense

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    If you are self-employed, the onus for insurance coverage is squarely on you. If you are considering self-employment or are already self-employed, consider whether the following types of insurance apply to you. 

    Life insurance

    If you have a spouse and/or children who rely on your income, you should probably have life insurance. It could replace that income if you were to die, protecting your family from financial hardship. 

    How much life insurance do you need? 

    You need enough life insurance to cover your financial obligations—such as a mortgage and personal debt—and provide sufficient care for your dependents.

    Although a family’s expenses could decrease if someone died, most households have lots of fixed expenses like rent, mortgage payments, property taxes, insurance, utilities, children’s expenses, and other costs that do not change if there is one less family member. In some cases, a family’s expenses could even increase to account for additional help like a nanny for little ones or other help around the house.

    A business owner may also consider life insurance to provide cash for their business to keep operating. If the business’s value could be impaired by their death, a life insurance policy paid for and owned by the business could provide the funds to hire a replacement or shore up cash flow.

    Some business partners agree to have life insurance on each other. This coverage can provide funds for the survivor(s) to buy the deceased partner’s share of the business from their family. 

    When you buy life insurance, you can buy term life insurance that covers you for a certain number of years, or you can get permanent life insurance that is notionally meant to keep forever. Permanent insurance contains an investment component, whether it’s whole life or universal life insurance. Premiums tend to be higher for permanent coverage since the risk of death rises with age. But term insurance generally has a renewal feature, whereby you can renew at progressively higher premiums for subsequent terms.

    Business owners with corporations are often pitched life insurance as a tax and investment strategy, especially whole life and universal life insurance. These policies generally have high monthly premiums and are meant to provide future retirement income or a larger estate value.

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    Corporately owned life insurance definitely reduces tax because you are putting money into a life insurance policy instead of into corporate investments, which generally produce taxable income. But the trade-off may be higher fees than comparable investment options. As a result, you may not be further ahead.

    It is also important for business owners to consider other tax-efficient saving options like registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). If RRSP and TFSA accounts are not maxed out already with a reasonable expectation that maximum contributions can continue, a corporate life insurance policy for any reason beyond risk management—that is, for tax and investment reasons—should be considered with caution.

    Corporately owned life insurance can be a great opportunity for someone who has more money in a corporation than they are ever going to spend during their own lifetime. It can provide a larger after-tax estate for their beneficiaries than other corporately held assets, since the proceeds can come out of the corporation tax-free, unlike the withdrawal of other corporate assets by the beneficiaries. Just be careful about overcommitting to too large a policy.

    Compare life insurance quotes and save

    Request a personalized quote and consult with an expert about your coverage needs. Get the protection you need at the right price.

    Disability insurance

    A disability can hurt a family’s financial well-being and progress. Like life insurance, it is important to have if you have beneficiaries. But even if you don’t have family members depending on your income, you should have disability insurance for as long as you are still working out of necessity rather than by choice.

    What does disability insurance cover?

    Disability insurance provides a monthly payment to you if you cannot work due to an illness or injury. Some policies last for a certain period like 24 months after disability, while others last until a certain age, like 65.

    Some policies will pay your monthly benefit if you cannot work your current job (called “own occupation”), while others (called “any occupation”) may not pay out if you can work another job in another field.

    The risk of disability for most working Canadians is higher than the risk of dying. That’s why the monthly premiums tend to be more expensive than those for a life insurance policy. This is often a deterrent from purchasing disability insurance.

    Most insurance agents focus primarily on life insurance over disability insurance. As a result, life insurance tends to be sold more often than disability insurance. But a savvy business owner looking to reduce their financial risks should be buying disability insurance to protect themselves and, if applicable, their family.

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    Jason Heath, CFP

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