A common goal for investors, particularly dividend investors, is to build savings to the point where they can replace their salary income with dividend income. I have this goal as well, although I’m happy to generate this income from a combination of dividends, capital gains and interest. A critical factor in determining whether you’ve truly reached your goal is whether your capital is still expected to grow at least as fast as inflation after you take your income each year. Some investors say they don’t care about the amount of capital they have saved as long as they hit their income targets. This is fine if the capital isn’t shrinking, but could be a disaster if the capital can’t keep pace with inflation. An investor with the wrong focus could hit an income target quite easily – just find a few stocks with ultra-high dividend yields. I did a simple screen of Canadian stocks that showed 21 stocks with dividend yields between 10% and 20%, with an average dividend yield of 14%. ...

It’s a good idea to check your credit report occasionally to make sure the information is accurate and that your identity hasn’t been stolen to borrow in your name. Online credit report services with fees are heavily advertised, but you can get your reports for free as well. Free reports are available to Canadians by calling both Equifax (800-465-7166) and TransUnion (800-663-9980 (outside Quebec) or 877-713-3393 (within Quebec)). You have to answer a series of questions to authenticate your identity, which involves a lot of punching in numbers on your keypad or saying the answers. I did this recently and it went quite smoothly. My experience with Equifax was better because it repeats your answers back to you before you confirm that they are right. TransUnion said “if you are satisfied with your entry, press 1” after each piece of information I entered, but didn’t tell me what I had entered. In one case I incorrectly entered a date with only two digits for the year instead o...

For many years now I couldn’t see what benefit I was getting from Aeroplan miles. Every time I tried to use the miles to book a flight I wasn’t offered any decent connections, and I ended up just paying for flights that suited me better. Even having Air Canada elite status doesn’t seem to help. But, I found a way to deal with the problem that involves CostCo. Years ago the situation was different. I was actually able to use Aeroplan miles for free flights. And this was back when the flight was actually free instead of having to pay various taxes and surcharges when redeeming miles. But I haven’t been able to use my miles for a flight for a long time now. I even let over 30,000 miles expire at one point because they seemed worthless. Fortunately, there are options for using Aeroplan miles other than reduced-cost flights. Aeroplan offers a large number of goods and services in exchange for miles. Looking through the selection, I despaired of finding anything I wanted until I...

Vendors of personal income tax software impose various limits on the number of returns you can file. However, CRA imposes a hard limit of 20 returns per computer. Why? The seventh entry in CRA’s NETFILE FAQ answers this question. The explanation begins with “The CRA's primary interest is always to protect the taxpayer.” This gave me a chuckle. I can believe that protecting taxpayers is high on their list, but their primary interest is to suck up giant piles of money. OK, moving on. The rest of the explanation is a little vague, but the concern seems to be identity theft. I guess an identity thief with personal information on many Canadians could cause trouble on a large scale with unauthorized use of NETFILE. So there you have it. Anyone who wants to file more than 20 returns needs to NETFILE with multiple computers or could use EFILE which is intended for tax preparers.

Looking at my first paycheque of the year, I feel the sting of Canada Pension Plan (CPP) and Employment Insurance (EI) deductions starting again. I don’t really mind contributing to my future income in the form of CPP, but calling EI “insurance” always irked me because I thought my income level made it nearly impossible for me to ever collect. There are clawback provisions for any EI benefits you receive over and above paying normal income taxes on the benefits . I had assumed that if my year’s pay was too much above $60,000, any EI benefits would be clawed back anyway. It turns out that there is an exemption for anyone who hasn’t collected any EI benefits in the preceding 10 taxation years. So, while I don’t expect to be involuntarily unemployed, in principle I could collect EI benefits for a while and not have them entirely taxed back. This could only happen once every 11 years, but at least this insurance has modest value to me. So, instead of viewing EI deductions entirely...

The Royal Canadian Mint will no longer distribute pennies as of today . I say good riddance. It’s been decades since a penny was worth enough to matter. It seems that one of the most convincing arguments for getting rid of the penny is that they cost more than a penny to make . I don’t see why this has anything to do with it. If the government could make $1 million worth of pennies for $800,000 in costs, should we say that they have made a $200,000 profit? They could just as easily make $1 million worth of $100 bills for far less than $800,000 in costs. For that matter, they could just create money that only exists in bank computers for next to no cost. Suppose the government could make coins out of a very cheap metal with face value 1/10 of a cent at a cost of 1/20 of a cent each. Should they do this to make a 50% profit? The answer is obviously no. What is the point of a coin worth only 1/10 of a cent? Whether the coin is “profitable” is irrelevant. What matters is th...

MoneyNing has a great infographic illustrating the best and worst company retirement savings plans in the U.S. The difference between the best and worst plans is more than enough for a Virgin Galactic flight to the moon. Canadian Mortgage Trends explains the pros and cons of collateral mortgages. One thing I would add is that because a collateral mortgage is more expensive to transfer to another lender, it allows your existing lender to charge you a higher interest rate when you renew. Potato continues the housing debate arguing that an improving economy will bring both higher wages and higher interest rates, but that mortgage payments will rise faster than wages. The Blunt Bean Counter finds estimates of the cost of owning a dog to be low. I always tell people I have the perfect dog. It costs me nothing, I see as much of it as I want, and it lives the rest of the time next door. (My neighbour might experience higher costs than I do.) Retire Happy Blog explains the ru...