Money123: Need a vacation? (Same.) How to fit it in the budget

Vacationing this summer, ‘budget be damned’

Hoping to get away this summer? So are a growing number of Canadians, according to new polling released this week. But what those vacations look like might differ in the ongoing financial crunch.

Ipsos polling conducted exclusively for Global News released on Friday shows that 62 per cent of respondents are at least somewhat likely to take a vacation this summer, up six percentage points from similar polling done in April 2023.

Some 79 per cent of respondents said they “really need” a vacation this year, up eight points from last year.

Younger Canadians were more likely than older generations to say they were likely to take a vacation this summer.

Sean Simpson, senior vice-president of Ipsos Global Affairs, says Canadians are in need of a break, and are willing to save extra hard or turn to credit to make a vacation work.

“They’re going to find a way. They’re going to scrimp and save. They’re going to cut back a little bit,” he told Global News. “Budget be damned.”

But experts say you don’t have to break the bank to get away. Read more for some tips on how to cut back while planning and on the trip itself.

Inflation is easing, but the money stress is not

Statistics Canada’s latest inflation reading for April this week showed that annual price pressures are continuing to cool, coming in at 2.7 per cent annually, down from 2.9 per cent in March.

Easing at the grocery store led the way, with prices up just 1.4 per cent annually in April, StatCan said. But compare that with the wider three-year measure of 21.4 per cent from April 2021.

That might help to explain why the latest Financial Stress Index from FP Canada released this week showed more Canadians are citing money problems as their top stressor even as the overall headline inflation rate cools.

Some 44 per cent of respondents said money is their leading source of stress, rising six percentage points from similar polling two years ago. Asked what was driving this anxiety, Canadians point to higher grocery prices (up 69 per cent), inflation broadly (60 per cent) and housing costs (52 per cent.)

Three years ago – when pandemic-fuelled price increases picked up steam – is still “recent memory” for most consumers, says Rubina Ahmed-Haq, personal finance expert and host of For What It’s Worth on the Corus Entertainment radio network.

But that doesn’t mean financial stress will last forever – “there’s always hope,” Ahmed-Haq says.

Read more for tips on how to start taking back control over financial anxiety.

Minister wades into landlord-tenant confusion

The national revenue minister has attempted to clear up confusion swirling online about whether a renter can be held liable for their foreign landlord’s unpaid taxes.

Assertions that renters could be responsible for their landlords’ unpaid taxes, or that a tenant should withhold 25 per cent of their rent upfront and remit the taxes directly to the Canada Revenue Agency, came in response to a Tax Court of Canada ruling last year.

But Minister Marie-Claude Bibeau called that ruling “an extremely rare case” in a statement.

“I want to reassure Canadians that the Canada Revenue Agency does not intend to collect any portion of any non-resident landlords’ unpaid taxes from individual tenants,” she said.

Bibeau went on to say that she would work with Finance Minister Chrystia Freeland “to provide absolute clarity on the law and to ensure that tenants have the certainty they need and deserve.”

Read more on how the controversial case and statements unfolded.

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– THE QUESTION –

“Do I make enough money to start investing in my own RRSP? I make around $55,000 before tax living in B.C., so I’m only able to save about $1,000 a month. My TFSA and FHSA are maxed out, and my work offers an RRSP with three per cent matching contributions from my paycheque. Is there any reason to put more into an RRSP at this stage or should I just get a regular HISA? Anywhere else you recommend stashing extra cash?”

— A Money123 reader 

“Wow, you are a true saver if you have already maxed out your TFSA and fully funded your FHSA. The annual commitment to these two things alone – $7,000 + $8,000 – totals more than your professed savings target of $1,000 a month. I’m sure you’ve signed onto your employer’s RRSP matching program. It’s a tax neutral gift, that is only taking $1,650 out of your cash flow.

From a tax management perspective, the FHSA contribution reduces your income just like the RRSP. Both will ease the strain of a future house purchase. However, if you don’t have at least $40,000 in your RRSP at the time, you will not be able to take full advantage of the Home Buyer Plan (HBP). A case can be made for maxing out RRSP contributions to the extent cash flow allows – it will build up to the HBP maximum.

If you are asking about opening another RRSP account (“my own RRSP”) it really depends on what the investment options are in the employer plan. In my experience, there should be some good options there that might not be open to you at another institution. And I’m not a big fan of having too many identical accounts. You can simply add extra money to the employer plan by writing a cheque or increasing payroll withholding.

Note that you can defer taking the tax deduction for both FHSA and RRSP for many years to make sure you get the best tax treatment. Right now, you are at the top of the 22.7 per cent marginal tax rate for B.C. If you think your salary will go over $55,867, the deferred deduction will operate at the next marginal rate of 28.2 per cent.

But the big question relates to what I call your need for liquidity – in other words, do you have any other source of emergency funds? In most cases, people will keep the investment in the TFSA fairly liquid because the FHSA and RRSP have negative consequences if you had to draw from them. This could indeed include a HISA.

Keep up the good work!!”

–  Lenore Davis, financial planner, CFP, RFP

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