Why do you live frugally? | Page 2 | General financial discussion | Discussion forum

Max said

My parents were middle class stay-at-home mom and my father was upholster in the aeronautic industry so all the friends I have come from middle class and can't understand my situation. Wealth is a good but dangerous thing for social relations. As you say, it's better kept secret in the family and friends. However, I don't mind being envied by jealous people on online forums, this doesn't affect my social life.  

Well said, Max. I've always thought that what other people have makes no difference to my life, I'm just happy to have what I have and to be in a position to be charitable to those in need.

Max said
It is not worth incorporating anymore since the laws are changing on the 31st of December.

You will no longuer be able to give dividends to your kids over 18 years old. That was not my plan since my kids are 4, 2 and 1 years old. But right now it is still possible to give 60 000$ dividends to your kids in charge or any family member that you have in charge that is over 18 years old and pay the low tax bracket on this income.
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That's what the government calls "income sprinkling".

According to Financial Post (July 21, 2017): What the new ‘income sprinkling’ rules mean for tax planning, before 1999, a private corporation could sprinkle income to toddlers:

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When it comes to dividends, however, there is no reasonableness test in that anyone who owns share of the corporation may receive dividends. There is, however, a special tax known as the “kiddie tax” which came into place in 1999, to prevent income splitting with minor children (i.e. kids under the age of 18). Prior to this tax, known formally as “tax on split income” (TOSI), it was quite common for private companies to pay tens of thousands of dollars in dividends to toddlers, which would effectively be received tax-free [to the kids, not to the corporation] as the kids would use their basic personal amount to shelter this income from tax.
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Max may need to move further away than just Alberta for significant savings in income taxes.

No matter where in Canada one resides, the federal marginal tax rate of 33% applies to taxable income over $202,800. Alberta will be asking for an additional 14% or 15%.

I am fine with the govt closing loopholes for self employed incorporated individuals who are not really running a business, not really employing their family members etc. The wealthy should pay their fair share of tax. But it is unfair to put increasingly higher tax burdens on the higher wage earners. And the self employed should be allowed to grow a retirement fund in line with their earnings, not limited to a measly $25K per year in rrsp. That would allow saving for retirement in an honest way. Get rid of the registered designations on accounts, which just make managing money difficult, and allow reporting on tax returns a substantial sum that would be exempt from taxation, eg $100K per year of new money, cumulatively, for 30 years. There's your 3 million dollar retirement fund, plus interest.

$3 million, tax-EXEMPT??

The point of registered retirement plans is that the tax is deferred until the funds are withdrawn.

There is, effectively, a tax exemption, for the first 20K or so of income for seniors in place now. I think that's enough.

Whatever it is, I think it should be the same for everyone. Same with RSP contributions. I've never understood why it had to be a percentage of income. If you can save more for retirement and want to use RSPs, then so be it, but only on a tax-deferred basis.

Sure, $25K savings for someone who works 50 years is 1.25 million, so just increase that to 3 million. Of course I should have said deferred, not exempt, as it would be subject to being taxed when withdrawn, so likely over 50%. And let it be for all, employees as well as self-employed. Incorporated or not. You just have to earn enough and save enough!

Fewer people are and will be eligible for pensions. This is my response to Max's question: I live frugally now to provide myself with comfort down the road.

Loonie, I get what you're saying but I wonder if it's habit or more just the fact our individual true natures don't change. Give kids, even those in the same family, an allowance and right off the bat some are parsimonious, some are profligate, and everything in between - it seems to be set very early to a large degree. And spenders will always be very happy to make quick use of any money bequeathed to them so, like deferred taxes, look at it as deferred spending.

Bill said
Loonie, I get what you're saying but I wonder if it's habit or more just the fact our individual true natures don't change. Give kids, even those in the same family, an allowance and right off the bat some are parsimonious, some are profligate, and everything in between - it seems to be set very early to a large degree. And spenders will always be very happy to make quick use of any money bequeathed to them so, like deferred taxes, look at it as deferred spending.  

Yes, I'm sure there is truth in this. I have no real basis of comparison, but I remember friends at university who seemed to have no concern at all for where the next dollar was coming from even though they did not come from wealthy families. I could not comprehend this.
It's also true that as a child I enjoyed saving (perhaps hoarding would be a better word!) far more than buying. If you kept the money, you got to enjoy it over and over again, as it was always there to admire its potential and imagine various uses for. And the longer you kept it, the more it grew (interest, birthday gifts etc), and the bigger your imagination could be. Eventually, maybe it could take you to university (my biggest goal from an early age). Once you spent it, the fun of possibility was over.

I read about a study a few years ago which apparently showed that kids who could accept delayed gratification had better life outcomes (or something similar). I can't remember the details, but it made sense to me. The person who can wait has more choices.

JustMe2016 said
My dear Max, a better question to ask would be; why do you feel the need to justify the way you live? As clearly, this is what you are doing by asking why are you frugal? Obviously, the answer to your true question is easy to reply to. You feel guilty about your chosen lifestyle. Maybe acquaintances of yours have made remarks or innuendoes?

It is never easy to walk your own path. Not to be a sheep and to not follow the herd around you. But you shouldn't feel the need to justify your lifestyle. You will definitely be happier if you can come to peace with the decisions you made. After all, first and foremost, you are living this life for your own self. It doesn't prevent you to be extremely concerned about others, but it doesn't change the fact that this is your life, you have your lessons to learn, just like your wife and children have their own lessons to learn.

Now to answer the question you were not really asking; true and long-lasting happiness comes from within, not from without. Only fools believe that money brings happiness. Money is both a friend and an enemy.

I don't like labels, I know that they are extremely destructive and this in spite of the fact we use millions of them every single day. So I will not use the word frugal, or thrifty. I will simply say that I find little comfort in material things. After all, love is all there is to have.

You can believe me or not, it is all fine. But in regards to the environment and this planet, here's how things will unfold. First of all, in regards to the environment, it is way too late. The train has left the station more than 100 years ago. Moreover, you can't logically reconcile a materialistic society with the environment.

The bottom line is the planet will survive, but the people on it, won't. Now there is nothing to be overly concerned about. In some hundreds, or thousands of years, there won't be a single human being on this planet, yes, all will be 'dead'. But after a long period of rest, a new race will start. Believe it or not, but it has happened before and will happen again.

Things get a lot easier when people stop believing in lies. This current life of yours is just one of the hundreds, if not thousands of incarnations your soul will have. As Pierre Teilhard de Chardin once wrote, (I paraphrase); we are not physical beings currently having a spiritual experience, but spiritual beings currently having a physical experience.

The bottom line is you are responsible for all your thoughts, words and actions. You are here to learn, to grow. Life, in the end, is nothing more than a school. Whatever you screw up in this life, you will be provided with an infinite number of opportunities until you do it right in future incarnations. Nevertheless, it is highly desirable to do things right as soon as possible since going thru the birth process is not the most pleasant and easy experience. Never do harm to another as anything you give will eventually come back to you. Such is the Law of Cause and Effect.

And in closing, let me tell you a bit more about me; I don't consume caffeine or alcohol. I don't eat meat, fish or crustaceans and I'm not religious. In fact, it baffles me that people need to put Jesus, God, Allah and Muhammad in a box called religion.

Hope it helps.  

Though you wrote this to Max, I felt your words. Beautifully articulated.