Canadians just love their credit cards. And we’ve been piling on the debt for years. But it appears consumers are beginning to tackle that debt mountain.

There are promising signs that Canadians are heeding the warning about unsustainable debt loads, and are taking advantage of low interest rates to pay down the pile of debt on their personal balance sheets, says Tom Higgins, vice-president with credit trend watcher TransUnion.

TransUnion’s quarterly analysis of Canadian credit trends found that average consumer debt (excluding mortgages) was flat at $25,603 in the second quarter of this year, up only $6 from the first quarter, and down from $25,709 at its peak in the fourth quarter of last year.

While that doesn’t seem like much, it marks the first decrease in Canadians’ credit balances after 26-straight quarterly increases.

“It’s the first time we’ve seen this in many years,” Mr. Higgins says, adding that the big question now is whether Canadians will continue to pare their debt with the Bank of Canada making clear this week it's unlikely to raise interest rates any time soon.

“Over the last year or so we’ve been moving to curb our debt, so hopefully that trend will continue,” he says, although it’s not expected to dip quickly.

“It’s going to be a slow pace, but as long as it's moving in the right direction, I think that’s that the best we can hope for ... and keep the message out there that we need to curb the debt as much as we can.”

Canadians in British Columbia, with an average debt of $36,819, have more debt to pay down than those in Quebec, with $18,268, TransUnion’s second-quarter data show.

TransUnion also says people are being smarter about their borrowing, too, with less being charged to their credit cards, which have higher interest rates, and more being put on lines of credit, which have lower rates.

Mr. Higgins notes though that the low rates we’re enjoying now will eventually give way to higher rates, and Canadians need to be prepared.

“People will see an interest-rate impact and see their costs go up and it will be tougher for them to manage,” he says. “We're still vulnerable if something unexpected does come up in the economy,” and if rates have to rise quickly.

With that in mind, I think I need to go pay a few credit card bills.

With credit abundantly available, getting what you want right away, regardless of whether you have the cash to pay for it, is common practice. There are many rationales for convincing yourself that this behaviour is acceptable: you've had a rough week and you deserve a treat; you'll be able to pay off your credit card as soon as you get your next paycheck; you need a new mp3 player to help you lose weight; or perhaps you feel that you've waited long enough for that new car and you're not willing to wait anymore.

Combine the excuses from those of us who know better with a lack of knowledge from those of us who don't, and you've got a nation of debtors. Whether you need a gentle nudge to get back on the right track or some basic knowledge to keep yourself out of trouble in the first place, we'll give you nine ways to help you talk yourself out of drawing on credit. (To learn more about the pros and cons to credit, check out our Debt Management feature.)

1. Financing your purchases doesn't teach self control.

At best, an unwillingness to exercise self control when it comes to money can rob you of financial security. At worst, an impulsive attitude toward buying can have a negative impact on other areas of your life as well, such as having the self control to maintain a healthy weight or go to bed at a reasonable time every night. Yes, exercising self control can be both difficult and boring, but it actually has many not-so-boring rewards, from staying out of the hospital to being able to afford your own home.

2. Financing your purchases means you aren't sticking to your budget.

What, you don't have a budget? Well, don't despair; it's easier than you think. For many people, budgeting is a great tool for keeping spending under control. It's easy to not realize how much charging a cup of coffee here, and a new book there, can add up over the course of the month and get you in trouble. The solution is to plan your expenses and write everything down. Budgeting can be as simple as making a pen-and-paper list of how much money you earn in a given month, followed by a running total of all your expenses. If you know how much money you have left, then you will know how much you can spend. (To learn more about creating a budget, read our Budgeting 101 feature.)

3. Credit card interest rates are expensive.

The reason self-control is so important when it comes to your finances isn't a moral or spiritual thing: it's a practical thing. Credit card interest rates are high, which can make financing your purchases expensive. If you don't have the money to pay cash for something in the first place, you probably don't want to make it even more expensive by adding interest to the price. If you buy an item for $1,000 using your credit card (with its 18 per cent interest charge) and you only make the minimum payment every month, over one year you will end up paying $175 in interest. And to top it off, you will still owe $946 on your purchase.

4. Credit card interest rates increase when you can't pay off your balance in full.

To add insult to injury, that great annual percentage rate (APR) you thought you had on your credit card might have merely been an introductory rate that was subject to increase after a certain period if the balance has not been paid in full. An 8.99 per cent APR can skyrocket to a 29.99 per cent APR in the blink of an eye. "But that will never happen to me," you might say."I'll pay my balance in full as soon as it's payday." You may have the best of intentions, but they can easily get derailed by an unplanned expense like a car repair or an unexpected event like losing your job. (To find out what you are signing up for, see How To Read Loan And Credit Card Agreements.)

5. A poor credit score can affect your insurance rates, being accepted for a job or the ability to finance meaningful purchases like a home.

If your credit card balances go unpaid, your credit score will start to diminish. The next time one of your insurance policies is up for renewal, you may get hit with an unexpected rate increase. Insurance companies that check your credit score when considering your premium seem to assume that if you can't pay your bills, you might be letting your car or home maintenance slide, or you might be an irresponsible person in general, all of which could make you a higher risk by increasing your odds of filing a claim.

Some employers also run credit checks on potential job applicants, and an employer who is concerned enough to check your credit score will probably be concerned enough to not hire you if it's poor. If purchasing or refinancing a home is in your future, your credit score is particularly important, as it will determine the interest rate on your mortgage, or whether you're even eligible for a mortgage at all. (To learn more about how a bad credit score could hurt your job, read Bad Credit Puts The Brakes On Broker Career.)

6. Poor financial habits can jeopardize your relationships.

Money is probably one of the main reasons couples and families fight. It can be an extremely touchy subject, especially when there's not enough of it. Budgeting for expenses should be done with your family and significant other in mind. (Keep reading on this subject in The No.1 Reason Why Couples Fight and You Can't Live On Love.)

7. Financing purchases can lead to higher spending.

Some people spend more money, either by purchasing more items or by purchasing more expensive items, when paying on credit than they would with cash. Purchasing a $1,000 laptop might be easy to accept if you just sign a piece of paper. On the other hand, if you pay with cash, you can physically feel the $100 bills leaving your hand. This will give you a better sense of not only how much that laptop truly costs, but also how much money you have left in your now-lighter wallet.

8. In a worst-case scenario, the habit of financing your purchases can lead to bankruptcy.

If you go on enough spending sprees without a plan for paying them off, or if your plan goes awry because you lose your job, or get hit with massive medical bills, you may find yourself hopelessly in debt. Declaring bankruptcy will scar your credit history for up to 10 years, and even when it finally goes away, you'll still have to slowly build up good credit again. An ounce of prevention is worth a pound of cure. (If you're facing bankruptcy, see What You Need To Know About Bankruptcy and A Lifeline For Those Drowning In Debt.)

9. Avoiding financing can bring peace of mind.

If you don't owe anyone money, you won't have to worry about late fees, interest, annual fees or over-the-limit fees. The best way to treat yourself to something nice is to save up for it and buy it when you can truly afford it. The peace of mind that will come with not financing your purchase will be like treating yourself twice.

The Bottom Line

Remember, not financing your purchases doesn't mean you can't pay with a credit card - you just have to pay your bill in full within a month. The convenience, protection and cash-back rewards offered by credit cards make them a handy tool if you use them wisely.

A mortgage is more than a monthly payment - it is a debt instrument used to finance an asset.

On a household's balance sheet, a mortgage is a liability and, as such, it is subtracted from a household's assets to determine that household's net worth. Too many consumers fall into the trap of refinancing a mortgage in order to lower their monthly payments without considering how that refinancing affects their total net worth. Does refinancing your home ever pay off, or is it just a short-term fix to a bigger problem? Read on to find out.

The Payback Period

The most popular method for determining the economics of mortgage refinancing involves calculating a simple payback period. This equation is made by calculating the sum of the monthly payment savings that can be realized by refinancing into a new mortgage at a lower interest rate and determining the month in which that cumulative sum of monthly payment savings is greater than the costs of refinancing. (Find out more about payback periods in Understanding The Time Value Of Money.)

For example, if that calculation says that it will take 20 months for the cumulative monthly savings to be greater than the costs of refinancing and the homeowner will hold the new mortgage for a minimum of 20 months, then this method would say that refinancing is an economically wise decision.

Refinancing Affects Your Household's Net Worth

However, this simple payback period method ignores the household's balance sheet and the total net worth equation.

Two primary things are unaccounted for:

• The principal balance of the existing mortgage versus the new mortgage is ignored. Refinancing is not free. The costs of refinancing must be paid out of pocket or, in most cases, are rolled into the new mortgage's principal balance. When a mortgage balance increases through a refinance transaction, the liability side of the household balance sheet increases, and all other things being constant, the household net worth immediately decreases by an amount equal to the cost of refinancing.
• Refinancing a 30-year mortgage with 25 years left until it is paid off into a new, 30-year mortgage means that you might end up paying more total interest over the life of the new mortgage, even though the interest rate on the new mortgage is lower than you would pay over the remaining 25 years of the existing mortgage.

Look at the True Costs of Refinancing

A more financially sound way to determine the economics of refinancing that incorporates the true costs of refinancing into the household net worth equation is to compare the remaining amortization schedule of the existing mortgage against the amortization schedule of the new mortgage. (Find out more about amortization in Understanding The Mortgage Payment Structure.)

The amortization schedule of the new mortgage will include the costs of refinancing in the principal balance. (If the costs of refinancing will be paid out of pocket, then the same dollar amount should be subtracted from the existing mortgage's principal balance based on the assumption that if the refinance transaction does not take place, that money could be used to pay down the principal balance of the existing loan.)

Then, subtract the monthly payment savings between the two mortgages from the new mortgage's principal balance. (This is done because, in theory, you could use the monthly savings generated from refinancing to reduce the principal balance of the new mortgage.)

The month in which the modified principal balance of the new mortgage is less than the principal balance of the existing mortgage is the month in which a truly economical refinancing payback period based on household net worth has been reached.

Note: Amortization calculators can be found on most mortgage-related websites. You can copy and paste the results into a spreadsheet program and then perform the additional calculation of subtracting the monthly payment differences from the new mortgage's principal balance.

For example, using the above described calculations, a refinance analysis of an existing fixed-rate mortgage with an interest rate of 7 per cent, 25 years remaining until repayment and a principal balance of $200,000, into a new 30-year mortgage with an interest rate of 6.25 per cent and refinancing costs of $3,000 (which will be rolled into the new mortgage's principal balance), gives the following results:

If a simple payback period analysis is used to determine the economics of refinancing in the above example, the cumulative monthly payment savings are greater than the $3,000 costs to refinance beginning in month 19. In other words, the simple payback period method tells us that if the homeowner expects to have the new mortgage for 19 or more months, refinancing makes sense.

However, if the net worth approach is used, the refinancing decision would not become economical until month 29, when the principal balance of the new mortgage minus the cumulative monthly payment savings is less than the principal balance of the existing mortgage. The net worth approach tells us that it takes 10 months longer than the simple payback period approach before the refinancing is economical.

The Bottom Line

By calculating the true economics of refinancing your mortgage, you can accurately determine what real payback period you have to contend with if you choose to do this. Crunching the numbers takes a bit of work, but it's entirely possible for everyone to do. Especially if you are planning on moving in the near future, taking a few minutes to calculate the true economics of refinancing your mortgage may very well help you avoid damaging your net worth by thousands of dollars.

Question: What do you think of real estate investment trusts? The yields look enticing, but are REITs safe?

Before we address the safety question, let’s brush up on the REIT basics.

What’s a REIT?

REITs are trusts that invest in a wide range of real estate assets – shopping centres, office buildings, industrial properties and apartments, for example. Some REITs focus on a particular type of real estate, while others diversify across several property classes.

Some of the largest REITs in Canada include RioCan REIT (REI.UN-T25.090.100.40%) and Calloway REIT (CWT.UN-T24.79-0.06-0.24%) (shopping centres), Canadian REIT (REF.UN-T34.40-0.12-0.35%) and H&R REIT (HR.UN-T20.73-0.22-1.05%) (office, industrial and retail) and Boardwalk REIT (BEI.UN-T50.700.671.34%) (apartments).

If you like the idea of owning investment real estate, but don’t want the hassle of dealing with problem tenants or broken toilets, REITs have several advantages: They provide diversification and professional management, and they can be bought and sold quickly on a stock exchange, making them much more liquid than an investment property.

Tax efficiency

One of the main attractions of REITs is that they provide a steady flow of income, with yields that are often higher than those available from dividend stocks. REITs are generally not required to pay income tax as long as they distribute 90 per cent of their profit to unitholders.

The above-mentioned REITs, for example, yield anywhere from 3.6 per cent (Boardwalk) to 6.2 per cent (Calloway).

Although REIT distributions don’t qualify for the dividend tax credit, a portion of the distribution is usually classified as return of capital (ROC). This benefits investors because ROC is not taxed in the current year. Instead, it is deducted from the adjusted cost base of the units, giving rise to a larger capital gain (or smaller capital loss) when the units are ultimately sold.

What’s an appropriate weighting of REITs?

Dennis Mitchell, who manages the Sentry REIT Fund – Canada’s largest real estate mutual fund – said the largest pension funds in Canada have, on average, about 9 per cent of their assets in real estate. This is a “reasonable” allocation for individual investors, excluding their principal residence, he said.

What REITs are his favourites? Based on current valuations, he likes Chartwell Seniors Housing REIT (CSH.UN-T6.90-0.15-2.13%) and Dundee REIT. (D.UN-T31.71-0.09-0.28%) He’s also a big fan of Canadian REIT, which he called “the best REIT in the country. The reason I say that is that they have a great management team, a tremendous portfolio, they have almost the lowest leverage in the space and one of the lowest payout ratios.”

Generally, the lower the payout ratio – the proportion of cash flow paid to unitholders – the safer the distribution. Canadian REIT also has a long track record of raising its distribution annually. (Full disclosure: I own units of Canadian REIT.)

What are the risks?

Many people believe that a potential increase in interest rates is the biggest threat to REITs. It’s not, Mr. Mitchell said.

“The biggest risk to REITs right now is the economy as a whole,” he said.

During the financial crisis of 2008 and 2009, the prices of some REITs fell by more than 50 per cent as investors worried that tenants would go bankrupt and REITs would be unable to roll over their debts. Prices have since rebounded sharply.

Many REITs are insulated to an extent from the impact of rising interest rates, because they have locked in the current low rates for long periods. “So if rates rise next year by 200 basis points [two percentage points], if I’ve already termed out all of my mortgages until 2020, I don’t care,” he said.

That’s not to say higher rates won’t hurt REITs. They will. But all interest-sensitive stocks – banks, pipelines and utilities – would be affected.

The outlook

In a recent report, CIBC World Markets analysts laid out a bullish case for REITs.

The “low-interest-rate environment … could continue for an extended period of time, perhaps several years,” said the report by Alex Avery, Brad Sturges, Troy MacLean and Chris Girard.

At the same time, “new property development remains very limited for office, industrial, residential, retirement and hotel property, and with long lead times for development, new supply appears unlikely to have any effect on property markets for the next few years.”

Those factors together could support “double-digit total returns” for REITs over the next two to three years, the report said.

Being prudent

Forecasts don’t always come true, of course. It’s also possible to imagine a scenario where the economy tanks and REIT prices tumble.

So, if you’re going to invest in REITs, make sure your asset allocation fits your goals and risk tolerance, and be sure to diversify your exposure to REITs as part of a well-balanced portfolio. You can get instant diversification through a mutual fund or exchange-traded fund such as the iShares S&P/TSX Capped REIT Index Fund (XRE-T14.50----%) or the BMO Equal Weight REITs Index ETF. (ZRE-T17.44-0.04-0.23%)

Just remember that, although you won’t have to fix a leaky toilet in the middle of the night, you will have to live with market volatility and the possibility that, should things get really bad, some REITs could cut their distributions.

Turning the key in a lock that no landlord has access to, reading in a hammock in your own backyard and painting your dining room bright red - what could be more exciting than making the leap from renter to first-time homeowner? Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn.

Don't be one of those people; take a few moments to ponder these seven practical concerns that will help ensure that your first home becomes the place of luxury and financial freedom you've anticipated.

1. Don't Overspend on Furniture and Remodelling

You've just handed over a large portion of your life savings for a down payment, closing costs and moving expenses. Money is tight for most first-time homeowners - not only are their savings depleted, their monthly expenses are often higher as well, thanks to the new expenses that come with home ownership, such as water and trash bills, and extra insurance.

Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as important as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. Give yourself time to adjust to the expenses of home ownership and rebuild your savings - the cabinets will still be waiting for you when you can more comfortably afford them. (For further reading, see To Rent Or Buy? The Financial Issues.)

2. Don't Ignore Important Maintenance Items

One of the new expenses that accompanies home ownership is making repairs. There is no landlord to call if your roof is leaking or your toilet is clogged (on the plus side, there is also no rent increase notice taped to your door on a random Friday afternoon when you were looking forward to a nice weekend). While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could get worse over time, turning a relatively small problem into a much larger and costlier one. (For tips on how to spot problems with a potential home before you buy it, see Do You Need A Home Inspector?)

3. Hire Qualified Contractors

Don't try to save money by making improvements and repairs yourself that you aren't qualified to make. This may seem to contradict the first point slightly, but it really doesn't. Your home is both the place where you live and an investment, and it deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric opener in your garage, don't cut a hole in the wall and start playing with copper. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring - or even killing - yourself. (For tips on finding qualified workers, read The Better Business Bureau's Tool Belt For Saving Cash. For home improvement projects most homeowners can tackle themselves, read Do-It-Yourself Projects To Boost Home Value.)

4. Get Help with Your Tax Return

Even if you hate the thought of spending money on an accountant when you normally do your returns yourself, and even if you're already feeling broke from buying that house, hiring an accountant to make sure you complete your return correctly and maximize your refund is a good idea. Home ownership significantly changes most people's tax situations and the deductions they are eligible to claim. Just getting your taxes professionally done for one year can give you a template to use in future years if you want to continue doing your taxes yourself. (For more insight, see Crunch Numbers To Find The Ideal Accountant and Give Your Taxes Some Credit.)

5. Keep Receipts for Home Improvements

When you sell your home, you can use these costs to increase your home's basis, which can help you to maximize your tax-free earnings on the sale of your home. In 2008, you could have earned up to $250,000 tax free from the sale of your home if it was your primary residence and you had lived there for at least two of five years before you sold it. This assumes that you owned the home alone - if you owned it jointly with a spouse, you could each have gotten the $250,000 exemption.

Let's say you purchased your home for $150,000 and were able to sell it for $450,000. You've also made $20,000 in home improvements over the years you've lived in the home. If you haven't saved your receipts, your basis in the home, or the amount you originally paid for your investment, is $150,000. You take your $250,000 exemption on the proceeds and are left with $50,000 of taxable income on the sale of your home. However, if you saved all $20,000 of your receipts, your basis would be $170,000 and you would only pay taxes on $30,000. That's a huge savings: in this case, it would be $5,000 if your marginal tax rate is 25 per cent.

6. Don't Confuse a Repair with an Improvement

Unfortunately, not all home expenses are treated equally for the purpose of determining your home's basis. For example, if you bought a foreclosure and had to fix a lot of broken stuff, the home is obviously worth more after you fix those items, but the Canadian Revenue Agency doesn't care - you did get a discount on the purchase price because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home.

And on a non-tax-related note, don't trick yourself into thinking it's OK to spend money on something because it's a necessary “repair” when in truth it's really a fun improvement. That isn't good for your finances. (To find out which improvements can add the most value to your home, read Add Value To Real Estate Investments.)

7. Get Properly Insured

Your mortgage lender requires you not only to purchase homeowners insurance, but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to help pay the mortgage, whether it's a girlfriend or a child, you'll need life insurance with that person named as a beneficiary so he or she won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work. (For ideas on how to save money on your home insurance, read Insurance Tips For Homeowners.)

Also, once you own a home, you have more to lose in the event of a lawsuit, so you'll want to make sure you have excellent car insurance coverage. If you are self-employed as a sole proprietor, you may want to consider forming a corporation for greater legal protection of your assets. You may also want to purchase an umbrella policy that picks up where your other policies leave off. If you are found at fault in a car accident with a judgment of $1 million against you and your car insurance only covers the first $250,000, an umbrella policy can pick up the rest of the slack. These policies are usually issued in the millions. (For more on car insurance, see Shopping For Car Insurance.)

Bottom Line

With the great freedom of owning your own home comes great responsibilities. You must manage your finances well enough to keep the home and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.

Depending on where you live and the local climate, the summer months can be an ideal time to do home renovations, especially if outdoor work is involved. (Make sure you know what your real estate investment is worth before you sign the ownership papers. See Valuing A Real Estate Investment Property.) There are several reasons to consider summer renovations: • Contractors often are more willing to work during the summer • Greater availability of less-expensive labour • You may be able to negotiate a better deal • Many other people won’t schedule renovations while kids are out of school • Many others won't schedule renovations due to conflicts with vacations and family trips • Many others schedule renovations in the fall to beat the winter weather and holidays. Here are ideas for projects that can be completed more efficiently in the summer and may save you time and money along the way: Driveway Paving If you have an asphalt driveway that’s loaded with patches of grass growing through the cracks, summer is the best season to have it redone. The main reason is that asphalt is much easier to work with in higher temperatures, so you can avoid problems and additional costs by doing it right the first time. Creating a smooth asphalt surface requires time and high temperatures to prevent the material from prematurely hardening. The lower the temperature dips, the less time the contractor will have to evenly spread the asphalt to form a level surface. Otherwise, you may be left with an irregular surface with bumps and valleys. Kitchen If you plan to gut your kitchen and do a complete remodel, you may be faced with eating in restaurants until the work is finished. Since that can get expensive, another alternative is to cook outdoors. If you have a grill and burner, you’ve already got what you need to cook a majority of your meals. Move your refrigerator to another room or into the garage. Use paper or plastic plates and utensils if you don’t have access to your kitchen sink or dishwasher. If you’ve ever considered adding an outdoor kitchen, this would be the time to do it. It will add to your enjoyment of the outdoors once your inside kitchen is completed. Prepare for your kitchen remodel early in the year, after the holidays. Once you have a plan, purchase the materials that you will need. Many retailers conduct some of their best sales in January and February to clear out their unsold Christmas inventories. It’s a good time to buy appliances, tile, fixtures, lighting and new cabinetry. If any of your items require special ordering, this will ensure that everything arrives in time for the work to begin on schedule. You’ll also get more attention from design consultants who can help you put your kitchen layout together. Home Addition Adding a room or an upper floor will require you to open up your home to the elements. Doing this during the summer will likely minimize the exposure and allow the work to be completed more quickly. It will also probably save you money in the process. Finish the design work and find a contractor several months before the work will start. You don’t want to be held up because materials aren’t available or the permit process hasn’t been completed. Landscaping The summer months are also a good time to upgrade your landscaping and home exterior. If you’re thinking about saving time and money maintaining your yard, consider a landscape design that incorporates native plants that don’t require much water or fertilizer. It’s also a good time to install an automatic sprinkler system that is timed to turn on and off at the best times of day. Start in the spring by creating a design and selecting the types of plants, shrubs and trees you want to include. Incorporate a wide variety of flora that will enhance the look and texture of your landscape. If you enjoy wildlife, consider plants that attract the types of birds and other animals that you’d like to see. You might add some solar-powered lights to accentuate walkways and decks. You can also save money and add colour and diversity by planting your own garden. Initially, you may incur some cost to create the right soil conditions, but the long-term payoff is enjoying your own fresh fruits, vegetables and flowers. In-Ground Pool and Deck If you live in a climate where the ground freezes, you have to wait for the thaw before you can do any serious digging in your yard. Start this project during spring and finish it in time to enjoy for most of the summer. Warmer temperatures are also needed for properly installing and curing the materials used to construct the pool. These include gunite, plaster, cement and certain polymer compounds. One way to save on a pool is to find one or more neighbors who want to install a pool similar to yours. Since pools are constructed in stages, it’s more efficient and less costly to a contractor to simultaneously build more than one. The savings could be applied to installing a new deck area around the pool. Beyond the enjoyment value, it will add to your home's resale potential. The Bottom Line Planning can go a long way in helping to save money on home renovations. A firm plan avoids the cost of changes and increases the chances of finishing on schedule. It also gives you the time to research the best deals on materials that will be needed. Perhaps most importantly, you will be able to interview and select the right contractor for your job. Summer is a good time to get things done outside, when your neighbors are on vacation and some contractors may be looking for work. Accomplish common maintenance items such as caulking windows, applying weather stripping, cleaning gutters, washing windows, repairing fences, treating wooden decks, painting the exterior or adding siding. Do your homework and get multiple estimates before you commit to anything. (For further reading, check out Four Key Factors That Drive The Real Estate Market.)

President Obama’s proposal to increase taxes on those earning more than $1-million may help him persuade U.S. voters that his government is trying to do something to attenuate the increasing trend to which incomes have been concentrated among a very small group of high earners. But as the article notes, this measure is not expected to be an important source of government revenues.

This is also the case for Canada. Even though incomes are increasingly concentrated among high earners, a ‘tax on millionaires’ is unlikely to generate much new revenue. What follows is very much a back-of-the envelope exercise, but it should provide a rough order of magnitude for the sort of revenues we could expect from a similar proposal in Canada.

According to the most recent data from 2007, the top 0.1 per cent of the distribution earned at least $620,000 a year and received 5.5 per cent of all income. Checking this against data from the Canadian Revenue Agency, this means that 23,549 people earned $52.2-billion -- an average of $2.2-million. In 2007, the threshold above which the top federal tax rate of 29 per cent applied was $121,000.

So let’s think of what we could expect from -- say -- increasing the marginal tax rates on incomes above $500,000 a year. Let’s also make the assumption that everyone in the top 0.1 per cent would be affected by this measure, and make the -- simplifying, conservative and heroic -- assumption that these taxpayers would claim no deductions from total income.

23,549 people times $500,000 equals $11.8-billion, so the tax would be applied on a base of $52.2 billion – $11.8-billion = $40.4-billion. This means that each percentage point applied to incomes above $500,000 per year would bring in at most $400-million. (Recall that this number assumes that these high earners would claim no deductions).

According to the OECD, the top marginal tax rate in Canada was 46.4 per cent -- this includes a weighted average of the various provincial rates. An additional 10 per cent on high incomes would have given Canada one of the highest top marginal tax rates in the OECD, behind only Denmark and Sweden (although it should be noted that the top rates in these countries kicks in at a lower threshold).

Even if we made another simplifying, conservative and heroic assumption to the effect that high earners would do nothing in the face of these higher tax rates beyond swallowing hard and writing bigger numbers on the cheques they sent to the Receiver-General, this sort of measure would have produced something like an additional $4-billion.

To put this number in context, GST revenues for the fiscal year 2007-08 -- when the GST rate was 6 per cent -- were $30-billion. In other words, one GST point brought in $5-billion.

It may be a good idea to introduce another tax bracket on high earners on the grounds of fairness and equity. But we should be under few illusions about just how effective these measures would be in terms of generating more revenues.

A new CIBC poll says that if experience is any guide, most Canadians will likely find themselves in debt years longer than they expect.

The poll, conducted for CIBC (CM-T71.20-0.94-1.30%) by Harris-Decima reveals that, on average, Canadians holding some form of debt today feel they will be debt-free by age 55.

But the poll also found that the reality is that only about 35 per cent of Canadians in the 55-to-64 age group — or just over a third — are actually debt free.

And the findings appeared to hold true for all age groups.

For example, Canadians 25 to 34, on average, told the pollsters they expected to be debt-free by age 44. But the poll found that only 18 per cent of Canadians now in the 45-to-54 age group are, in fact, debt free.

The telephone survey of 2,008 Canadians conducted between June 30 and July 10 is considered to have a margin of error of plus or minus 2.2 percentage points 19 times out of 20.

Saving for retirement is a function that is often put on hold by those who feel they have sufficient time to start planning and saving later. While it is never too soon to start saving for retirement for any age group, those who fall within the age range of 55 to 64 are more acutely aware of its importance, as retirement is imminent. As such, age 55 to 64 is a critical period to get a realistic assessment of how financially prepared you are for retirement.

1. Assess Whether You're Financially Ready for Retirement

Assessing your financial readiness will help you to determine whether you have a projected shortfall and whether you need to modify your retirement strategies, goals and objectives. To do so, you will need to gather a few things, which include the balances of all of your accounts, your income tax rate, the average rate of return on your savings and information about your current income, as well as the amount of income you project you will need during your retirement period. (To find out how much you'll need to retire, see Determining Your Post-Work Income and Retirement Planning Basics.)

If you participate in a defined-benefit plan, your plan administrator or employer should be able to provide you with your projected income from your pension. (To learn more about defined benefit plans see, The Demise Of The Defined-Benefit Plan.)

• Cut back on everyday expenses where possible. For instance, reducing the number of times you eat out, entertain and feed your vices. For instance, if you reduce your expenses by $50 per week (approximately $217 per month) and add that to your monthly savings, it would accumulate to approximately $79,914 over a 20-year-period, assuming a daily compounded interest rate of 4 per cent. If you add the monthly savings to an account for which you are receiving an 8 per cent rate of return, the savings would accumulate to $129,086 after 20 years.
• Get a second job. If you have a skill that could be used to generate income, consider establishing your own business, in addition to continuing with your regular job. If you are able to generate enough income to add $20,000 a year to a retirement plan for your business, the savings could be significant. Over a 10-year period, that would accumulate to approximately $313,000 (or $988,000 over a 20-year period) - assuming an 8 per cent rate of return.
• Increase the amount that you add to your nest egg each year. Adding $10,000 per year to your retirement savings would produce approximately $495,000 over a 20-year period.
• If your employer offers a matching contribution under a salary deferral program, try to contribute as much as is necessary to receive the maximum matching contribution.
• Consider whether you will need to modify the lifestyle you planned to live during retirement. This may include living in an area where the cost of living is lower, travelling less than you planned to, selling your home and moving to a house that is less expensive to maintain and/or having a working retirement instead of a full retirement. (To find out how to save money by changing your lifestyle, see Life Planning - More Than Just Money.)
• Revise your budget to weed out some of the nice-to-haves and leave only the must-haves. Of course, a need for one family may be a want for another, but when deciding what to keep, consider your family's true necessities.

It may seem challenging to do without the things that make life more pleasant, but consider the opportunity cost of giving up a little now to help secure the finances for your retirement.

Procrastination Increases Challenges to Saving

Although it is never too late to start saving for retirement, the longer you wait, the harder it becomes to meet your goal. For instance, if your goal is to save $1-million for retirement and you start twenty years before you retire, you will need to save $27,184 each year, assuming a rate of return of 5.5%. If you wait until five years later to start and you plan to retire within 15 years, you will need to save $42,299 per year, assuming the same rate of return. (To find out how long it will take you to become a millionaire, see our Millionaire Calculator.)

2. Re-Assess Your Portfolio

With the possibility of receiving large returns on your investment, the stock market can be attractive, especially if you are starting late. However, along with the possibility of a high return comes the possibility of losing most - if not all - of your initial investment. As such, the closer you get to retirement, the more conservative you will want to be with your investments because there is less time to recuperate losses. Consider, however, that your asset allocation model can include a mixture of investments with varying level of risks- you want to be cautious, but not to the point of losing out on opportunities that could help you to reach your financial goal sooner. Working with a competent financial planner becomes even more important at this stage, as you need to minimize risk and maximize returns more than you would if you had started earlier. (For more on portfolio rebalancing, see Rebalance Your Portfolio To Stay On Track.)

3. Pay Off High Interest Debts

High interest debts can have a negative impact on your ability to save; the amount you pay in interest reduces the amount you have available to save for retirement. Consider whether it makes sense to transfer high interest loan balances, including credit cards, to an account with lower interest rates. If you decide to pay off high interest revolving loan balances, take care not to fall into the trap of recreating outstanding balances under those accounts. This may mean closing those accounts. Before closing accounts, talk to your financial planner to determine whether this could adversely affect your credit rating.

Conclusion

Having your retirement savings on track can provide great satisfaction; however, it is important to continue on that path and increase your savings where you can. Saving more than you are projected to need will help to cover any unexpected expenses. If your savings are behind schedule, don't lose heart. Instead, play catch-up where you can and consider revising the lifestyle you planned to live during retirement.

There is another option that is less talked about. A major Bank is offering a 180 day rate hold on a 5 year fixed rate for 3.73%… this may not be for everyone, but it’s an option for anyone looking to buy but hasn’t found a house… or for those with a long closing…

Interesting, CMHC released their 4th quarter forecast and were calling for moderate activity in 2011… but they also said low mortgage rates will help to drive the housing market….This latest increase shouldn’t cause panic…these are still record low interest rates… But we’ll have to follow the trend and see if CMHC makes any adjustment in their forecast…