Don’t fall for this small business tax trap – and tips on how to avoid it

April 8, 2015April 8, 2015Leave a comment

There are many benefits to owning your own business – you are the boss, your hours are more flexible (though on average, small business owner work more than regular employees) and you can often make more money.

The reason you can make more money or at least, running your small business can be positive financially, is because of the things that you can expense (read: reduce your profit and pay less tax) through your business that you can also use outside of your business.

However, some people take it too far and end up expensing way too much – and get caught with serious consequences.

It can be exhilarating to know that as a small business owner you can legitimately expense things you need and use everyday anyway – things like your car, your cell phone and – if you work from home – even a portion of your mortgage interest. As these are things that you often need to run your business, they can be written off as a business expense.

But some people cross the line from grey to black. One friend, a successful small business owner, admitted to me that he and his two business partners had a very good year and realized that their company will need to pay a lot of tax. So they decided to buy some extremely expensive designer suits (at a cost of $10,000 a pop!) and expense them as “uniforms” to reduce the total profit to bump them down into a lower tax bracket. Sounds like a great idea, right? Except that the tax authority caught on right away and not only did they have to pay the tax, they were slapped with a fine – and they weren’t able to return the suits!

This is a trap that many small business owners fall for, and I think the worst offenders are people who run small businesses that are closer to hobbies or are part of a multi-level-marketing type business because they often don’t understand what is reasonable to expense and what isn’t.

Here are some expensing tips to avoid being audited and potentially hit with major fines.

1. Expense reasonable things.

Even if you don’t always or only use the items for your business, there are many expenses that we have that are considered reasonable to expense through a business.

These are things that a person would reasonably use for their business. For example, if you are a physiotherapist that does house calls, expensing your car payments and gas is reasonable even if you also use that car for personal reasons. Bought a bunch of stamps that you mostly used to mail Christmas cards to your family and friends? That’s ok too as having postage is a reasonable thing for any business to need (even if you mostly communicate with your clients via email). Expensing flights to Hawaii as a travel expense? Not reasonable because why would a physiotherapist need to go to Hawaii (unless maybe it was for a conference related to your field of work)?

2. Make sure the expense amount is reasonable. If you are a part-time real estate agent that sells two or three houses per year, its reasonable to expense four or five $200 bottle of champagne (even if you ended up drinking some of those yourself) as a marketing expense. It would not be reasonable to expense 50 bottles worth. Why? Because its reasonable for an agent to give a thank you gift to her clients and buying four or five bottles seems like a reasonable amount (you might want to give awesome clients two bottles for example). But if you only sell about two or three house it might be difficult to make the argument for why you needed so many bottles of champagne that year.

This also applies to how much of an expense you allocate to your business. Things like car payments, cell phones, home office expenses etc are reasonable to expense in full only if you use them mostly for your business. But if you sell Arbonne cosmetics on the side and do a couple shows per month, its not reasonable for you to expense 100% of your cell phone bill or your entire internet bill.

Look at your bills and try and gauge how much you use for your business. It doesn’t have to be exact (no one is going to throw you into jail if only 8% of your cell phone minutes were used calling customers but you expensed 10% of your cell phone bill). Another good way to determine reasonable allocation is based on the time you spend on your business. If you spend about 20% of your time working on your business (cold calling customers, following up on appointments, administration etc), then expensing everything that would be reasonable to spend on your business at 20% is fair.

3. Keep receipts for everything. In my books, if you don’t have the receipt, don’t claim the expense. If its a major expense (say you bought a new computer) and lost the receipt you can get away with potentially using a credit card statement as evidence (so a $1,500 charge on your credit card from the Apple store might be sufficient) if you are audited, but I would fall back on this as exception rather than a rule.

But keep receipts for the small ticket purchases too – people often get caught up in the big ticket items and forget that small legitimate expenses add up. For example, did you take a potential client out for coffee? Buy a thank you gift for that couple that recommended your services? These are legitimate expenses (though remember, food and entertainment can only be claimed at 50%) even if they are only $5 or $10 each.

4. Remember that there is an expectation of profit. Look, the government is aware that most small business owners will expense things that they will use personally and they will turn a blind eye if its reasonable because its not worth their time (or money) to verify, for example, that every cell phone conversation is related to your business and every item purchased at Staples is in your office cupboard. But you, as a small business owner, have to show that its worthwhile for you being in business and that you are making (or are close to making) a profit from your business. Generally, if you don’t start showing a profit after two or three years of business, you will be at much higher risk of being audited and having your expenses declined – even if they are legitimate.

Remember a good rule of thumb to follow is one that my dad (a CA and business owner) gave me.

It is that you can be a pig – but not a hog.

Why? Because pigs get fat and hogs get slaughtered 🙂

Top 6 money wasters that parents are guilty of

February 9, 2015February 9, 2015Leave a comment

We ALL waste money – we all buy things we don’t really need (just want), buy things for ourselves and our kids purely because they make us happy or make our lives easier.

And you know what? To me those things are often justified IF people can afford them, so this isn’t going to be a list of the typical money wasters you read about, like a daily Starbucks, designer kids clothing, eating out or gym memberships.

But there are some things that parents spend money on that are a waste of money even if they can afford them – why? Because they are being bought on false information and do not deliver on their promises or they are inherently just a waste of money. Here are the six top contenders for the biggest money wasters that parents are guilty of:

1. Organic food

People who buy organic foods are usually doing so because they think that this food is better or safer for their families and accept this comes at a premium. This was a big concern for me personally and I’ll admit, I totally bought into it. But then I looked into it more and discovered that the evidence shows that organic foods are not any more nutritious, organic farmers also use fertilizers and pesticides (which vary widely in terms of how eco-friendly and safe they are for humans), don’t taste better and also need to use more land because their yields aren’t as good as conventional farming yields (and given our growing world populations, I really think we need to be more efficient with the land we already farm).

That being said, I still buy certain organic food brands (because they are tasty though, not because they are organic) and I will usually opt to buy organic eggs if I can’t find any conventional ones that are free-run or free range because that is important to me.

2. Anything homoeopathic

Not to be confused with naturopathy (which has some legitimate alternative remedies proven to work), homoeopathy was invented by Samuel Hahnemann in 1796 who theorized that, according to him, “a substance that causes the symptoms of a disease in healthy people will cure similar symptoms in sick people” (ok, this is similar to vaccines, so on the right track). But here is the kicker – the main premise of homoeopathy is that the more dilute the active ingredient, the more potent it is and more effective it is at curing people because the water has “memory” of the ingredient. Um ok.

Too bad that it goes against all the rules of biochemistry, physics and pharmacology (its like saying vodka will get you more drunk the more more water you add to it). Not surprisingly, it has not been proven to effectively treat any condition and no homoeopathic remedy has even been proven more effective than a placebo (which isn’t shocking, given that the main ingredients are sugar, water or alcohol – the same things placebos are made of). Yet in the US people spent $3 Billion in 2007 alone on these ~~homoeopathic remedies~~ sugar pills (because lets call them what they really are) and that number is growing steadily every year.

Also, because these “medicines” are not regulated by entities like the FDA, or are only loosely regulated in Canada, we really don’t know what we are getting and if its even safe. Recently a scientist tested a homoeopathic pet calming medicine that turned out to be 13% alcohol – it wasn’t “calming” the pets – it was getting them drunk!

3.Supplements

While there are some supplements that are truly beneficial, many dieticians and nutritionists insist that most of the supplements people are taking are not necessary. And given that they are also expensive to add to your daily routine, why waste the money if you don’t need to?

But one thing that many people fail to keep in mind that just because they come from natural sources like plants, that it doesn’t mean they are safe by default. A great example is St. John’s wort – a plant based supplement that is often used as a “natural” treatment for depression. Not only does it come with a list of serious potential side effects when used on its own, it can pose additional risks when mixed with certain pharmaceuticals (like reducing the effectiveness of the birth control pill).

But the main reason its a money waster? Because of recent studies that have shown that up to 80% of all supplements sold don’t contain any DNA of the plant that the bottle states the pills inside are supposedly made of and are instead full of fillers. Yikes!

4. Kids’ vitamins

I’m sure many parents struggle with making sure that their kids eat a balanced, nutritious diet. And I’m sure many of them thought that “oh well, at least they take a multivitamin” when their 3 year old only agrees eat plain white pasta with butter for the 4th day in a row (or was that just me?).

But according to registered dietician, Sarah Remmer, unless your kids is “an extremely picky eater, failing to thrive or has several food restrictions” they really don’t need them. There are some exceptions like Vitamin D and Omega-3 supplements, however even the need for these should be discussed with your child’s doctor and not just thrown into the grocery cart and given to your kid “just in case.” Not only that, but vitamins just aren’t absorbed as well by the body when they come in pill form as compared to when they come from food and there is even the risk over overdosing on vitamins when taken in pill/gummy form, which can be very dangerous.

So take that $10-$15 a month that you are spending on vitamins and instead, invest it in an RESP.

5. Products that claim to reverse damage

Motherhood can do a number on you – stretch marks, weight gain, cellulite, damaged skin, damaged hair…to just not having the time (or energy) to properly care for yourself, many of us moms just feel very frumpy a lot of the time. So when products promise to take those things away or reserve the damage caused by pregnancy, sleepless nights and not having enough time to visit the hair dresser/gym/spa, many of us jump on it.

But in reality, there is no evidence that any of them work. Stretch marks? Well, thank your mom for those. Evidence shows that whether or not a woman will get stretch marks depends on genetics and how much weight she gains during pregnancy. Any cream that promised to help prevent or diminish the appearance of them is 100% lying to you. The most those creams do is provide some relief from itching.

Similarly with creams, lotions, serums or whatever that promise to get rid of cellulite, “reverse” signs of aging or fix split ends. You cannot undo that damage any more than you can unscramble an egg, according to this industry insider. What you CAN do is exercise more, eat healthier food, wear sunscreen to prevent skin damage and, for the split ends, get regular haircuts etc (sigh – admit it, you knew this already).

6. Credit card interest

Credit card interest is the definition of wasting money. I don’t care how rich you are – any time you don’t pay your full credit card balance off or don’t pay it in time, you are charged interest as high as 30%. Even if you CAN afford it, wouldn’t that money be better spent on saving for retirement, a charitable donation or heck, even lighting it on fire (watching it burn would at least provide you with entertainment)?

Credit cards can be a useful tool however, but its important to treat them with respect – something which I discuss in more detail in a past post.

Think I missed something? Leave me a comment!

Resources used:

Scientific American – Fact or Fiction? Vitamin Supplements Improve Your Health

Sarah Remmer – Registered Dietitian

A System review of systemic reviews of homoeopathy in the British Journal of Clinical Pharmacology

Are the clinical effects of homoepathy placebo effects? Comparative study of placebo-controlled trials of homoeopathy and allopathy in The Lancet

Are you REALLY getting a deal?

January 21, 2015January 21, 20152 Comments

One thing that you learn when you become a parent is that the cost of “stuff” for babies and kids can add up pretty quickly. As a result, many of us are always trying to get deals on these things to help keep costs in check.

But how do we know we are REALLY getting a good deal? I remember once talking to a mom friend about how much I love Costco because the savings on the diapers alone make the membership worth while. She said “nah, I always just buy the diapers on sale at the grocery store.”

And here was her mistake. I find that stores are always tricking us into thinking that because we are getting something “on sale” that its a deal and that we are saving money or if the price is lower. And what makes it even more confusing is that the package of one brand often doesn’t contain the same amount of product as a comparable product.

This is why you can’t look at how much the price is “on sale” and compare that to the original price or even the price of another brand, but how much the price is PER UNIT at that location as compared to the price PER UNIT at another location or the price PER UNIT of a comparable brand (say, Pampers vs Huggies).

So to really know if you are getting a “deal” or paying the lowest amount is to look at the unit cost. And the kicker is, that many store actually post the unit price on the price label on the shelf! So the diapers that are “on sale” may still be more expensive than a comparable brand at the regular price or the same brand of diapers at the regular price in a different location.

Here is an example of 3 stores selling the same brand and size of diapers (all prices taken from the store websites or store visits). At first glance, Costco seems the most expensive because the price in total is $48.99. But because there are more diapers in the package they sell, the unit cost (i.e the cost per diaper) is actually the lowest.

You may think to yourself, ok but is $0.02 or $0.09 really worth the hassle? Well consider it this way – what is the cost difference per month? Say a 20 month old uses on average 5 diapers a day. That is 150 diapers a month. This is what the difference per month would be:

So that is almost $15 per month difference for the cost of the exact same product. Imagine doing this with just a handful of products that you buy regularly and the impact on your budget.

That being said, I’m not saying that Costco is the solution. There are things even at Costco that aren’t always the cheapest option. Plus, even if something MAY be cheaper because it is bought in bulk, it doesn’t always make sense – if you only eat quinoa once in a blue moon, there is no point to buying a 2KG bag of it just because you save $0.05 per gram or whatever.

But next time you go shopping, remember, all you do is just take the total price and divide by the number of items/weight (grams/oz) in the package to get your unit cost – and use THAT as your basis for comparison to see if you are REALLY getting a deal and saving the most money.

Happy saving!

30 Day Shred – Level 1 – First 10 Days

January 11, 2015January 26, 20153 Comments

2014 was a great year for me. We did a lot of travelling (New Zealand to visit Jordan’s family, Poland for a friend’s wedding and a road-trip to the East Coast of Canada ), my youngest son finally started sleeping (thank you Good Night Sleep Site!), I got a makeover on the Marilyn Denis show (watch it here) and I turned 30.

But 2014 was also the year that I realized that its been awhile since I was really in shape and looked it. Sure, I was fairly active (its hard to be sedentary when your toddler learns how to walk!) and I even did the Toronto 1/2 Marathon in under 2 hours, but I just couldn’t shake that last 15 lbs that stubbornly refused to budge after the birth of my second son.

It was frustrating because after my first son was born, I lost the weight very quickly – within 8 months I was in my best shape ever, even though I gained over 50 lbs during my pregnancy.

Pregnancy #1: I lost almost 50 lbs thanks to Weight Watchers, breastfeeding and running.

I wanted to feel good and look good. But with two kids and a husband that works very long hours, I knew that a gym wouldn’t be a realistic option for me. I’m not a big fan of the gym either. I much prefer the classes, but the ones I actually want to take never seem to be at a convenient time for me. Plus, gyms are EXPENSIVE and I’ve never been able to make them worth the cost (and you know me – things have to make sense financially for me to pursue them, haha).

I needed to figure out a way to do what I needed to do at home. Running was great in the warmer weather, but any fitness expert will tell you that strength training is equally, if not more, important as cardio.

So when I came across Nurse Loves Farmer’s post in December on how she got into shape doing Jillian Michaels’ 30 Day Shred, I was inspired – and bonus? I actually already HAD the DVD (I bought it at a discount store a few years ago for something like $5 and promptly forgot about it) and some hand weights, so there would be NO financial outlay!

I decided that I’ll start 2015 with a challenge to complete the 30 Day Shred by early February (I wanted to give myself a couple days buffer for rest days and illness).

30 Day Shred – Overview

The 30 Day Shred is made up of 20 minute exercises that comprise of strength training, cardio and ab work (with a warm up at the beginning and cool-down at the end). However, I’d budget about 30 minutes to factor in getting changed into workout gear, setting up the DVD etc. There are 3 levels, with level 1 being the easiest, so I decided to do 10 days at each level. All I needed were some hand weights (weight is not specified) and a mat.

Level 1

Even though this is the “easiest” level, its still a good work out, even for someone who is in moderately good shape already. I was very sore after my first session and even after the 10th session I was still doing the modified push-ups and sweating a lot.

I used 8 lbs weights, which I think is much heavier than most people use from what I’ve read but its all I had (a relic from a 6AM bootcamp I did a few years ago) so I decided to suck it up. I was able to use them for all the strength exercises except the lateral lunge and arm raise – for that I used these 1 lb ball weights that I got as part of a fitness package at some point (and let me tell you, even by day 10, those light weights were killing my arms!).

I quite liked this first level. The session just wizzes by as Jillian varies the exercises a lot and I always feel like I’m done in no time. It made it that much easier to be motivated to do them. I was able to do this level 10 days in a row but I’ll admit I felt a bit tired on day 7 and probably should have taken that day off. I’ll be taking a day off before starting Level 2 and will definitely take one mid-way through it.

My results so far

At the start of the program I weighed in at 160 lbs on the dot and weighed in at 158 lbs exactly 10 days later. I can feel my muscles developing and can especially see more definition in my arms and abs, though I’m not sure the pictures really reflect that. I still have some muffin top left (that is my #1 thing I want to get rid of!) but have high hopes that this will greatly diminish after the 30 days (in Sarah from Nurse Loves Farmer’s post I mentioned before, the last 5 days made the biggest impact).

I combined this program with a modified version of the Atkins diet (and have lost around 9 lbs since starting it in early December). I haven’t cut carbs completely but have, for now, cut bread, pasta, potatoes, rice and any type of baked good or junk food (well, with the occasional “cheat”). I’m actually eating much healthier over all since am eating way more veggies, some fruit but continue to drink a glass or two of wine 4-5 times a week. I’ll have to figure out how to add back some of those more “carby” carbs once I reach my goal weight, but I’ve realized that there will need to be a LOT more moderation involved than in the past. I just don’t have the metabolism to be able to eat those foods too often.

Anyway, without further a-do (is that how you spell that?), here are my before & after pictures from Day 1, Day 5 and Day 10!

1/3 of the way there! I can see a little more definition in the abs – can you?

* I do want to mention that my Day 1 full body profile was taken some time in November when I weighed more than 160 (probably 167 or so). I didn’t think to do a full body pic until Day 5 but found that one which I took prior to starting my lower carb diet in December.

Is organic food worth it?

January 8, 2015January 16, 201516 Comments

For most families, food is arguabley one of their most important (and often largest) budget categories. We need to eat to live, yes, but food is also a source of pleasure and has direct links to our health.

Since being on my “extended mat leave” (as I like to call my current stint as a stay-at-home-mom), one of the things that I’ve been reading a LOT about is food. And I’m not the only one – food seems to be a major topic of conversation and focus of a lot of media and social media these days. As a mom and conscientious person, I wanted to find out what kind of food is the best for my family, the environment, the economy. And there is a TON of information, both good and bad, out there.

One of the main food topics out there now is organic food. Now, I’ll admit – I TOTALLY bought into the whole “organic is better” thing for a long time. I would almost always choose the organic option when I could, I had a green basket of organic fruits and veggies delivered to my house…I honestly thought that I was doing the best for my family. I thought – hey, if I can afford it, why wouldn’t I buy organic? Isn’t my family’s health the most important thing? Because one thing that organic food most definitely is, is more expensive.

But when I started to look into it more and learning more about food in general (organic, conventional, GMO, farming methods etc) I started to realize that maybe its not that cut and dry. So I started looking into the reasons that I and others started buying organic to see if they were actually supported by real, scientific evidence.

Reason 1: Organic food doesn’t have pesticides (and we all know that pesticides are bad right? They KILL pests!).

Since I’m Canadian, I went right to the source – the Canadian Food Inspection Agency. Here is what is considered organic by them: “An organic product is an agricultural product that has been certified as organic. A product can be certified if it is produced using the methods outlined by the Canadian Organic Standards.”

Hmm…so what IS permitted for food to still be considered organic? Here is what the CFIA says:

CAN/CGSB-32.311, Organic Production Systems – Permitted Substances Lists, includes the following substances lists:

Crop production including fertilizers, plant foods, soil amendments, crop production aids and materials, and weed management
Livestock production including feed, feed additives and feed supplements, health care products and production aids
Processing and sanitation including organic ingredients, non-organic ingredients and with organic ingredients, processing aids, cleaners, disinfectants and sanitizers, and pest control substances.

Oh – so organic farming also allows for pesticides, fertilizers, feed additives, health care products and disinfectants? How is that any different from conventional farming? The fact that they are organic or natural pesticides doesn’t change the fact that they still kill pests. Natural or organic pesticides aren’t safe by default just because they aren’t synthetic.

From my reading I did learn that conventionally farmed food does have higher pesticide residuals than organic (a large study showed that about 38% of conventional foods had pesticide residue vs 7% of organic foods). However, in most cases for both conventional and organic, the residue was negligible.

That said, I decided to look at is how harmful are pesticides in general to people? Yes, they kill pests, but what affect do they have on humans? I came across this pesticide residue calculator which will show you how much you can safely consume. For example, a child could to consume 154 servings of apple in one day without any effect even if the apples have the highest pesticide residue recorded for apples by the USDA (I haven’t been able to find anything similar for organic pesticides so I can’t comment on their relative safety). Even still – there is currently no evidence that people who eat conventional foods have a higher risk of diseases like cancer or that organic foods can prevent it.

And lets not forget that organic foods aren’t without risk – like e.coli poisoning (due to use of cow manure as opposed to synthetic fertilizers) which can – and does – cause death (like for the 5 people who died from eating organic spinach). To be fair, you can get e.coli poisoning from conventional foods as well – I just wanted to point out that just because its organic doesn’t mean it is automatically risk free.

Reason 2: Organic food is more nutritious

Now I always had my doubts about this one, though I guess I can see why some people may think this. But while there have been some studies to suggest that some organic fruits and veggies are marginally more nutritious, the main study that supports this has been criticized for being funded by a group that supports the promotion of organic farming and focused on only the positive results (where they found foods that were more nutritious) and not the negative results of the study (where they found foods to be less nutritious). In fact, most studies (such as this one done by researchers at Stanford University) show that there is very little nutritional difference between organic and conventional produce and meat (though studies have shown that organic chickens have higher levels of Omega-3 than conventionally raised ones).

At the end of the day, most experts agree that just eating fruits and veggies is important and that even if some organic foods are a bit more nutritious, their cost doesn’t make up for that tiny benefit.

Reason 3: Organic food tastes better

This is an argument I hear all the time and I was always a bit sceptical because in general fruits and veggies have a high range of tastes. Some seasons a particular fruit or veggie could be amazing and some poor. Plus taste is subjective.

But people certainly seem to think that food tastes better if they are told its organic (in a Swedish study, almost 50% of people given the same coffee, one labelled organic and the other not, said the organic labelled coffee tasted better). However, no study has been able to definitively prove that organic actually tastes better nor can people tell if they are eating organic or non-organic food.

Reason 4: Organic farming is better for the environment

This was one of my main reasons for supporting organic – hey, if there are no fertilizers, no pesticides, then DUH, it MUST be better for the environment, right?

Except we’ve already established that fertilizers and pesticides (even some with non-organic ingredients) ARE allowed. Now, its true that many are more eco-friendly than conventional. However, organic also doesn’t allow for GMO crops – and one of the whole points of GMO is to use less pesticides, fertilizers, water etc.

What made me question the eco-friendliness of organic was this point: organic farms have lower yields (anywhere between 20-50% depending on the type of crop!) and this means more of our forests, nature reserves and rainforests are being mowed down to meet the demand. And to me that is awful (though it was pointed out to me, which I verified, that the main culprit of rainforest destruction is due to palm oil production). Combine that with growing world populations and overall growing food demand, shouldn’t we be trying to make the most of the farm land we already farm? And this is where I think conventional farming is doing its part.

*** One thing I wanted to add to this section is that organic standards prohibit the use of antibiotics and added hormones to their meat. While this remains the most valid reason for me to buy organic meats (especially the antibiotics which are contributing to our current crisis of antibiotic resistant super bugs), its worth mentioning that in Canada, only beef farmers are allowed to use hormones (and many choose not to) and many conventional meat/poultry farmers opt out of using antibiotics. This is usually clearly labelled. So while this is guaranteed with organic meat, its not the only option.

Look, I’m not saying that conventional farming is amazing for the planet – but when I realized that organic is no better for the most part – and can actually be worse – for the environment due to shunning of GM technology and requiring more land to produce the same yield, it lost a lot of its appeal for me.

Reason 5: Organic farmers treat their animals better

This is also a real reason I would choose organic eggs or meat. For example, I was under the impression that all organic eggs came from free-range chickens (meaning they can run freely inside AND have access to outside), but learned that its actually not a requirement (it really depends on which certification they receive). Yes, some organic eggs come from free-range farms. But most that I’ve seen are only free-run (means they are in one large pen and not locked in cages) and you can buy conventional eggs that are free run or free range anyway. So the only difference is the feed that they get (organic eggs hens are fed organic grains). In general I have found that the whole system of certifying eggs organic, free-range, free-run etc to be very confusing because there are different certifiers and all have different standards. The best advice regarding eggs choice would be to find a brand that meets the criteria you are comfortable with (and can afford) and buy that.

As for meat farming, I think its very unfair to assume that just because an animal comes from a conventional farm they are badly treated. Organic meat requirements are that animals are treated “humanely” – and the requirements are quite strict. However, this doesn’t mean that by default conventional ones don’t treat them that way – their standards are also very strict. Of course there will always be a few “bad apples” and farms exposed for inhumane treatment. With regards to this, the only way to know is by visiting the farms themselves and educating yourself on what humane really means.

Reason 6: Organic food is GMO free

Ok, this wasn’t really a reason for me, but it is a reason I see cited by many people. This is true – organic food is GMO free – but the question is, does it matter? I’ll admit “genetically modified” does sound scary and Frankensteinish, but what does the science say, is it ACTUALLY bad for us to consume?

And the answer is that that there is no documented evidence that genetically modified foods are in anyway harmful to human health. NONE. At most some anti-GMO bloggers (because they are rarely actual scientists, farmers, researchers or doctors – you know, the people who understand and know what they are talking about) make claims that GM foods “might be harmful” or “potentially cause health problems” but aren’t able to show any proof of this. They use the “evil doings” of Monsanto, a company that produces GM seeds and develops the technology, as a reason to avoid GM foods. But whatever their business practices are (and I’m sure they have some questionable/immoral ones) this doesn’t a) mean that the technology behind GM foods is bad nor b) does it in anyway prove that organic is better.

Not only that, but GM technology is helping farmers be more efficient, use less pesticides/herbicides and have their crops less vulnerable to the effects of climate change. To me, this is a huge plus for supporting conventional farming.

So WHY?

So WHY are organic foods sales soaring? How is it that is has become a $30+ billion industry in the US alone? The answer: marketing. Here is an excellent breakdown of how good its been. ~~Whole Paycheck,~~ Whole Foods alone made $13 billion in sales in 2013. I think that because people are much more concerned about the environment and their health now then they have been in the past, there is a huge appeal in all things natural and the organic idea definitely caters to that.

Also, I feel like there is a lot of food shaming happening – people, especially moms I think, are guilted into thinking that they are being selfish for NOT buying organic for their families and that is ridiculous. .

Conclusion

So what do I think (if you can’t tell already)? Since this is a personal finance blog and I try to encourage people to be smart about and mindful of how they spend their money, I think that at the end of the day, for me, organic foods just aren’t worth it. When all things are considered, I still don’t think that the benefits from organic foods or farming methods justify the premium that they cost, especially since in Canada conventional foods are just as healthy and the industry is constantly working to improve its standards of quality and eco-friendliness.

That said, I’m not suggesting people shouldn’t buy organic. People should have the right to spend their money on whatever they like. I spend a lot of money on designer shoes and handbags compared to some people – but I budget for them and I can afford them. So I’m not going to judge someone for paying $0.87Ib for organic bananas when the conventional are $0.57lb if they can afford to do so. Nor will I judge someone for choosing organic chicken/beef/pork because they like the certain extra effort made to make the animals comfortable. Everyone has different priorities and they should make the choice that best aligns them with those priorities.

Also, while now I do avoid organic (because why pay more?) as a rule, there are some organic food brands I really like and I will continue to buy them. And I will continue to read and learn about both types of farming and will constantly be re-evaluating my choice.

So I hope that who ever reads this, their guilt about not buying organic will subside and those who have been straining to afford to buy organic realize that they don’t have to and that it doesn’t make them bad parents.

***Updated to discuss a point that I forgot to mention before.

Bon apetit!

Want to learn more? Here are some fantastic resources!

Canadian Food Inspection Agency –> great for learning about Canadian food standards, what they really are and what they mean.

Nurse Loves Farmer -> excellent blog by a farmer’s wife who explains farming processes and has a ton of knowledge about GMOs, pesticides and general farming issue.

Scientific American article on conventional vs. organic farming

Genetic Literacy Project –> great resource for science based health news and current issues

Science Babe –> a blog by a scientist who busts common science and health myths

BC-SPCA –> Good document that shows requirements for SPCA certification of animal treatment in British Columbia and is very similar to Canada Organic standards (for all of Canada – BC is has the strictest requirements compared to the other provinces). I couldn’t find a direct link to Canada Organic.

A Smart Mommy’s guide to Budgeting for Christmas

September 18, 2014September 18, 2014Leave a comment

It’s officially 97 days left until Christmas but I know that Christmas shopping and all that hoopla is still far from anyone’s mind. Heck, we just had the first day of school and most of us are focusing on Thanksgiving and making it through Halloween.

But I want you to start thinking about it NOW to make sure that Christmas is what it SHOULD be. And what it should be is about spending quality time with family and other loved ones and for Christians especially, about celebrating the birth of Jesus. It should be a time of peace, gratitude and fun, not stress, disappointment and exhaustion.

So, here is my step guide to planning and budgeting for a stress-free Christmas.

1. Make a list of your Christmas expenses.

Christmas expenses should include everything that you extra you incur because of the Christmas season. Be it taxis from your work holiday party, to tipping your daycare provider, to decorations, to gifts, you need sit down and list it all out. From there you will have to prioritize and decide what is a must expense (presents for your kids) to what you don’t need (a new dress for your work Christmas party).

2. Set a budget for your Christmas spending

Next you figure out what your budget for Christmas should be and how to allocate it.

To determine what your budget for Christmas should be, you need to determine what you can afford to save/spend over the next 4 months without it affecting your overall budget. The best way to determine this is by looking at your Life category and see what you can realistically set aside for Christmas. If what you can realistically save is $100 per month, THAT should be your budget.

You should absolutely NOT go into debt or cut into your debt repayment or savings categories just to satisfy a Christmas expense. Did half of your Christmas lights get destroyed by a flood in your garage? Oh well – be creative with what you have or even hit up your neighbours to see if they have any spares.

3. Set a budget for each child.

Once you’ve determined what you will be spending on presents, I would further set a budget for each child. I believe older children should have more because what they want is usually more expensive, and lets face it, the younger they are, the more entertained they are by the wrapping paper than by the actual presents anyway. Plus, I would rather get one or two nice gifts that will be used a long time (like a game console) over a bunch of little things that will be discarded before the day is over.

However, I do like to get even the youngest of babies SOMETHING – I know my oldest would have asked a LOT of questions about why Santa didn’t get the baby anything. This is a great time to buy some “needs” for younger babies and mask them as Christmas presents.

4. Plan ahead

I like to start my shopping early – like NOW early – for one, there is a much better selection of things and it makes it easier to stick to my budget. Try to suss out what your children would like – chances are that what they want now vs 3 months from now will not change too much – and start looking for deals. Go on-line, look up retailers and see if any of them have sales coming up. Plus, when you know a) how much you are going to spend and b) what you are looking to get you can keep your eyes open for those items when doing other errands. I got a cheap video game for my older son at Costco the other day when I was doing grocery shopping.

I’m usually done by November and it lets me focus on just enjoying the season and having fun without the stress.

5. Get creative!

I’ll be honest – I prefer to spend my Christmas budget on family more than on other things. If I can cut corners on other expenses, I will. Here are some good ways to do this.

Do you collect Air Miles or other rewards? If so, check your balance – I’ve redeemed points for gift cards to use as teacher/daycare provider gifts.

If you like baking, consider doing a baked-goods gift basket – you can get cute Christmas themed tins and boxes at the dollar store. Perfect for gifts for your neighbour or as a hostess gift for a party you are attending. If you don’t like baking, you can still do this almost as cheaply by buying treats in bulk and dividing them up, or even buying the ingredients in bulk and layering them in mason jars like this.

Encourage a Secret Santa for gift exchange with your extended family. Buying gifts for everyone from grandma to Aunt Jane can get pricey, even if you don’t spend a lot. Trust me, everyone will appreciate this!

Avoid getting hair cuts, facials or anything else that requires excessive tipping around the holidays (extra tipping over the holidays is a pet peeve of mine).

Make a list of gift ideas for your kids and have it ready if you get asked by other family members for ideas or if they would want to pool together for a special gift.

Consider doing Lay-by purchases – this is when you can set aside an item in a store (but not take it home) by putting down a deposit and then paying off the balance weekly for a specified amount of time – this could be a good way of spreading the cash outlay.

“Pad” the amount of presents for your kids with cheap stuff they love but you like to limit. Someone once mentioned that they would only ever get their favourite sugary cereal at Christmas and I loved that idea. My son LOVES Lucky Charms, but I think its total garbage and rarely buy it. So buying him a box at Christmas will take care of a gift AND I know he’ll love it.

Sometimes effort and thought over a gift can be much more meaningful and appreciated than an expensive gift. I remember reading about one mom, who was strapped for cash, got some inexpensive wooden boxes at a craft store and filled one for each of her teenage children with items from their childhood – things like their old report cards, photos, items of favourite clothing etc that she had kept over the years but had just been sitting in her attic. They apparently loved them, and now as adults still have those boxes and continue to add special items to them.

Do you have other ideas? Leave them in the comments section below!

Credit Card Do’s and Don’ts

September 1, 2014August 29, 20141 Comment

Credit cards have a bad rap. On the TV show “Till Debt Do Us Part,” (which I totally love) the host Gail Vaz-Oxlade often starts the show by having the participants cut up their credit cards. Indeed, having a credit card can be dangerous to those who don’t use it responsibly. Many people see credit cards as “free money” or think that they are on top of their credit card debt just by paying the minimum payment, when really they are just getting into debt faster.

But I’ve always been taught (and still believe) that credit cards are a useful tool. And if you use credits cards responsibly, they are a great way to keep track of your purchases (excellent for budgeting), can earn you great rewards and many have added benefits, such as travel insurance and can help you establish a good credit history.

DO:

Have one credit card available for emergencies.

Even if you are uncomfortable having one, I think that having access to one for emergencies (say your car breaks down somewhere and you need a tow, or your suitcase gets lost when you go on holiday and you need to buy some essentials etc). Make sure you have clear rules about what constitutes an emergency and stick to them.

Research the different cards available.

Make sure that you are aware of any additional fees or costs to the card that you may incur. Some cards have a promotional low interest rate to start, but it might sky rocket after a few months or even by just one late payment.

Pay your balance off IN FULL every month.

This is extremely important, as you will be charged interest on your ENTIRE original balance, not just the unpaid part. So say you have a balance of $1,000. You decide to pay $900 off and leave a $100 balance. You will be charged interest on the FULL $1,000.

Pay your balance ON TIME.

Not only will you be charged interest on your full balance, but your credit score will take a hit.

Check your statement every month for errors or fraudulent charges.

I’ve had my credit card compromised twice and each time I was able to get a full refund because I alerted the company right away. Make sure you do this, because most companies will assume the charge is legitimate if you don’t address it within 30 days of the statement date.

Fight your interest or other fee charges whenever you can.

I once paid my balance a day late due to submitting the payment online after banking hours and was charged interest. I called the company and told them that I always pay my balance off in full and on time, and that I shouldn’t be punished for a timing error. They waived the entire amount of interest and all it took was a quick call. Another friend never pays his annual fee because he calls the company a month before it is due and threatens to cancel his card if they don’t waive it.

DON’T

Take cash advances on your credit card.

They will charge you interest from the MOMENT you take the cash out. I don’t even give myself the option to do this – I rip up the PIN the moment it arrives.

Only pay the minimum the payment.

Not only does paying the minimum amount usually so small that it doesn’t make a dent in the debt you owe, but it will trigger interest charges.

Own too many credit cards

Specifically store credit cards. It seem like every store nowadays has their own credit card. But unless you really shop at a particular store regularly, there is no point. Also you want to make sure you are on top of all the bills you have to pay, and it gets hard the more cards you have to remember.

Max out your credit card.

Maxing out your card (when you hit your limit or go over it) will cause your interest rates to sky-rocket and could affect your credit rating. This is why it’s a good idea to have a high limit. I always ask for as high a limit as I can get not so I can spend a lot but so I have a lot of buffer room. I like to keep within 30% of my limit.

Buy something that you can’t afford to pay off right away.

It’s always a good idea to save money in cash for big ticket purchases, like say a couch. You can still use your credit card to pay for it in the store (I always do) because you can get some great points but then just use the cash to pay it off right away.

The Family Car – How to make the smart choice

May 26, 2014May 26, 20141 Comment

When you have kids, you NEED a car. Having a car is probably second to only the washing machine as a possession that I would find it very hard to live without.

However, it can be very confusing to decide how to go about getting a car. Should you get a used car? New car? Buy it? Lease it? Take the one with a rebate or lower interest? And unfortunately, you can’t ask a dealer because they will tell you that you should do what will make them the most money at that time. All “free gas for a year!” promotions and “0%!!!!” have a profit margin built in to them so don’t be fooled that you are getting a “deal”.

At the end of the day you need to remember that a car is a depreciable asset and prior to getting a car you need to consider the following:

1) What kind of monthly payment can you afford?

This should include the cost of the car AND the insurance (and insurance will be different depending on the type of car you get). Most financial experts would recommend that a car should be paid off within 3 years, so it is a good bench mark to use when considering the price range of the car.

The best way to figure out what kind of car you can afford you should do the following:

Step 1 – Take the price of the car and add all the applicable fees and taxes

Step 2 – Divide that amount by 3 to see how much you should be spending per year

Step 3 – Next, divide that amount by 12 to see what your monthly cost would be. Add the insurance premium you would expect to pay for that car.

Step 4 – Compare that to what you have allocated for your monthly car budget or stick it into the budget template and see what percentage of your overall budget it comes out to be. If the amount is higher, you most likely CANNOT AFFORD IT. Pick a cheaper car.

2. Should you buy or lease?

From a responsible financial standpoint, the general consensus is that buying is always a better choice than leasing in the long-run. The reason is that buying results in ownership and presumably you will have an asset at a time when you aren’t making a payment. If the average life of a car is 10 years and you pay your car off in 3, you will have 7 years of no car payments. That could be a HUGE savings, even if you factor in the higher maintenance costs associated with an older car.

Leasing means you will always have a car payment and nothing to show for it. Insurance is usually higher on a leased car, most leases still require a down payment (which you will have to come up with every time you get a new lease), your payment has an amount for depreciation worked into the monthly cost AND when you return the car you can be hit with extra fees for going over your allowed mileage and “above normal” wear and tear on the car (and “above normal” is determined by the dealer). I had a friend who had to pay a $2,000 fee for above normal wear and tear on a leased Audi (apparently the rims were more scratched up then they should have been).

I think leasing makes sense if you relocate often and moving a car around would be inefficient/expensive. Also, leasing can sometimes be a better choice for those who are strapped for cash because monthly payments are often lower because they are often done over a longer-term. You also don’t have to worry about reselling it later on since the dealer takes that risk. Lastly, I guess if you are the type of person who always wants to have a new car than leasing is a good option but to me its in the same category as leasing a fridge or a TV and I think is just silly when you have kids.

3. Should you buy/lease the car with the rebate or the low-interest?

Again, its all about the math and the best choice is the one that has the lowest overall cost at the end of the loan. I recently read that zero interest, or a number close to zero, is “the crack cocaine of consumer financing, and automaker ads stress this to make the purchase of vehicles guilt-free”. And I know plenty of smart people who totally fell for this. “This car is ONLY 0.9% interest!” and then justify spending MORE money on a car because they think they are getting a better “deal”.

For example, say you are comparing two cars, each with a base price of $30,000.

Car 1 has a 0.9% financing rate for 5 years and Car 2 has a $5,000 rebate at 3.99% for 5 years – what is the better deal?

In this case, the car with the higher interest rate (but with a rebate) is actually the better deal.

But if you are buying and find that the two deals result in the same overall cost —say, choosing between a large rebate with a higher interest or no rebate but with a zero percent interest for five years—taking the rebate is the better strategy.This is because you get the savings right away via discount on the purchase price, whereas the interest savings on the 0% (or whatever the low interest rate is) are earned over the life of the loan. If the car is written off early or you want to sell it before financing is paid off, the customer with the rebate will be ahead.

4. Should I buy new or used?

This one isn’t as obvious. I’ve personally done both. My current car was purchased new. The one before was used.

Yes, used cars are often much cheaper (and have cheaper insurance) and if you get a good one, can save your family a lot of money. But they are also cheaper the older they are and older cars need more repairs AND you can never be sure that they were well maintained before you bought it. As a parent, this was very important to me – I wanted to make sure that the car I was putting my kids into was safe above all else.

The reason we ended up selling our used car (that we bought when it was 3 years old) was because we no longer felt it was safe (lots of trouble with the brakes and the engine spontaneously turning off) and the extended warranty that we had purchased (thank goodness, because a lot of the repairs would have been extremely expensive) was about to expire. I was disappointed because I actually really liked the car overall.

The reason we decided to buy new was that we just didn’t want to deal with that worry again and figured that the premium of driving a new car off the lot (that we would ensure was properly maintained) was worth it.

Happy car shopping!

A modern mommy's guide to managing money

Mommies & Cents

Category: Purchases