y Re \ Business TheReview Wednesday, February 26, 1992 = Reading material to be a guide for financial planning Here’s the conclusion of our survey of people’s expenses — to help you see how your spending habits compare with those of others. Tetrad Computer Applications Limited has used census and other Statistics Canada information to analyze how 47 different groups of people spend their money in dozens of different categories. Over the past two weeks, we have looked at groups ranging from Affluence and Achievement to Maturing Singles and Couples with Moderate Incomes. We have chosen nine spending categories (the figures shown below are average annual amount): (A) personal income tax, (b) food from stores, (c) food from restau- rants, (d) operating car/truck, (e) women’s wear, (f) men’s wear, (g) home entertainment equipment and service, (h) alcohol and (i) interest on personal loans. Singles and Couples with Moderate Incomes. Singles (including lone parents) make up half these households, and practi- cally all of this group Tent apart- ments, two-thirds in high-rises. Both partners of the younger child- less couples tend to work, while the other couples are empty nes- ters. These people are active shop- pers and favor convenience goods and services. They make above- average use of credit cards and ABMs (“cash machines’’). They use public transportation and so are not major buyers of new cars. (a)$6,655; (b)$3,045; (c)$1,525; (d) $2,011; (e)$1,021; ($558; (g)$459; (h)$753; (i)$311. Young Professional Cliff Dwel- lers. These singles and couples, more than half of whom now are under 35, are the most likely to become the next generation of “Affluence and Achievement” (described in this column two WeeKS Ag0). About 65 per cent are single without children, 15 per cent sin- gle parents and 20 per cent mar- ried (mostly childless). Most are tenants with 60 per cent living in high-rises. More than 40 per cent have attended college or university. Most of the couples are two- income families. Mobility is high, with 75 per cent moving during a typical five-year period. These people like to buy stylish, contem- porary consumer products. They also like convenience foods and tend to buy quite a few expensive gifts. And they prefer imported cars. (a)$6,557; (b) $2,667; (c)$1,549: (@Q)S E8393 (e)soo 0: ($522; (g)$469; (h)$733; G)311. Some 27 per cent of Canada’s households — like the following two groups — are located in rural areas and small towns. These peo- ple have lower housing costs; how- ever, generally lower incomes and larger families limit spending on discretionary items and postpona- ble consumer durables like cars. Pensioners. (a)$6,383; (b)$4,212; (c)$1,052; (GQ) S283, (eps 9 02: (S950; Ce)se77s (h)$702; (@)$346. Maturing Blue Collar. (a)$6,525; (b)$4,163; (c)$1,048; (d)$2,865; (e)$940; (£)$664; (g)$499; (h)$733; @)$368. The Canadian Personal Tax Planning Guide (1992) Edition by Peat Marwick Thome, Chartered Accountants (Thomson/De Boo, $12.95 — or possibly free if you're a PMT client) has 238 pages of technical yet surprisingly readable information. Each chapter starts with a sum- mary of tax planning tips. The background follows, to help you understand the rules, and then each tip is explained in more detail. For employees: Arrange to get non-taxable benefits. Pay interest on employer loan within 30 days realize tax savings now. tion period. contribution limits. even more advantageous. for retirement planning. . 1. Income earned in an R.R.S-P. is not taxed during the accumula- 2. R.R.S.P. contributions are deductible for tax purposes subject to The result of combining these two benefits is a retirement-savings fund that will be significantly greater compared to that which would | have been realized if a non-RRSP savings plan had been used. REGISTERED vs NON-REGISTERED Income earned in an R.R.S.P. is not taxed during the accumula- tion period. Consequently, the accumulation of funds in an R.R.S.P. will be significantly greater than accumulation in non-R.R.S.P. investments. As the tax reform amendments have eliminated the $1,000 investment from tax by placing your savings in an R.R.S.P. is The chart illustrates the accumulation of funds in an R.R.S.P. over a 35 year period, assuming you contribute $5,000 of pre-tax income at the beginning of each year to an R.R.S.P., your annual rate of return is 9% and your marginal tax rate is 45%. It should be noted that, if the $5,000 is not invested in an R.R.S.P, only $2,750 (after tax) is available to invest. At the end of 35 years, you would accumulate $1,175,263 (pre-tax) in your R.R.S.P., compared to savings of only $257,991 outside your R.R.S.P. . Even though the R.R.S.P. funds will be subject to tax on withdrawal from the plan, the ability to defer tax will leave you with more after-tax funds on retirement. For example, if, at the end of the 35th year, the R.R.S.P is collapsed without taking advantage of any further tax-deferral opportunities, you still have $646,395 after tax, | approximately $388,404 more than had you not used an R.R.S.P. of year-end. Transfer retiring allowance to an RRSP. Avoid employer-owned cars costing more than $24,000. Arrange for it to be required to have a home office. Tax Planning for Success, by Deloitte and Touche, another CA firm (Key Porter, $16.95 — or, again, possibly free if you are a D and T client) is an equally techni- cal-yet-readable guide for people with any self-employment activi- ties, whether part or full time. And to get children off on the right financial foot, The Money Book — A Smart Kid's Guide to Savyy Saving and Spending, by Elaine Wyatt and Stan Hinden (Somerville House, $15.95) includes a piggy bank disguised as a book. Mike Grenby is a Vancouver- based columnist and independent financial adviser who works with individuals; he will answer your questions as space allows — write to him clo The Review, 9726-First Street, Sidney, B.C. V8L 3C7. TAX TIPS: & RRSP* WHY INVEST IN AN R.R.S.P.? (written by Ron Gurney Financial Services Ltd., Sidney, B.C.) To provide financial security for you during retirement, and to Taxpayer A Taxpayer B Starts contributing After 10 years Now Contributes for 10 Years 20 Years Annual contribution $5,000 Interest Rate 9% 9%. RRSP value yearend 1 $5,450 $0 41,002 0 90.253 5,450 138,866 41,002 213,663 95,703 328,747 179,868 464,053 Difference 185;231 Total contribution $50,000 $100,000 ‘It is an equally technical-yet- readable guide for people with any self-employment activities, whether part or full time’ e ISLAND ‘AA’ PEEWEE REP HOCKEY PLAYOFFS AT PANORAMA ARENA ~ Friday, Feb. 28th at 5:00 p.m. Saturday, Feb. 29th at 2:40 p.m. Sunday, March 1st at 7:00 a.m. (third game only if necessary) * Winners go to the Provincial Championships ~ * Support your association, cheer for your team ~* * Good, exciting hockey ~ '!! GO EAGLES GO!!! Investors RRSP RRSP smart smarter Its smart to invest in an gee RRSP, but choosing the right one can be confusing. I'll help & you find the RRSP that best &§ fits your needs. ; investors Group Ye Call Your. Professional Advertising Representative Today! CORRIE MOROZOFF 656-1151 The | “Review LE Gittine CHARTERED ACCOUNTANTS ° The Tax Return Professionals 9768 THIRD STREET, SIDNEY 656-3991 ; R.R.S.P.’s Let Us Shop the Market and Find the Best R.R.S.P. Rates for You *FAST *UNBIASED *SECURE For Personalized Service Call 656-9393 RON GURNEY FINANCIAL SERVICES LTD. 10A — 9843 2nd St., SIDNEY, B.C. DON’T GET CAUGHT IN THE COLD THIS YEAR... Your ROYAL BANK RSP SPECIALIST is extending your available hours for 1991 RSP contributions! DATE: February 27th and 28th TIME: 5:00 p.m. - 7:30 p.m. WHERE: Royal Bank Brentwood Bay and Sidney 5 ROYAL BANK Call 652-1173 or S 3 656-3947 today!