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How to budget wisely – top five tips from an accounting firm

S & P Accounting Services is an accounting firm situated in the Greater Toronto Area. A common question that our clients ask us is how could I budget wisely?

Overall, the top five tips that we recommend to our clients are:

1. Spend less than you earn. 

This is easier said than done, yet if you follow through with this, you could be well on your way to paying off debts, saving for your retirement, getting your hands on that next generation Macbook or buying that beautiful home you dreamed of.

2. Create a weekly budget and adhere to it.

In order to know how much money is coming in and out each month, it is essential to devise a budget. There are different smartphone apps that make it easy to track your expenditure such as, Mint.com, YNAB, or Freshbooks. Conversely, you could simply create a monthly budget on excel spreadsheet for free.

Creating a weekly budget could definitely be an eye opener for you.  It will allow you to see how much money you are spending on those sushi outings with friends or daily Starbucks fixes and may propel you to want to change your spending habits.

3. Pay with cash instead of credit cards.

A good way to reduce your spending is to pay your daily expenses with real cash instead of credit cards. Cash offers a real tangible experience. When you run out of cash in your wallet, you no longer have any more money to spend. “You see this and process it.” On the contrary, with credit cards, “it seems like it would be easier for someone to purchase more because a card, while tangible, does not represent actual money. It’s just a piece of plastic, and a shopper does not see the result of their expenditure for almost a month.”1


One well-documented study conducted by Dun & Bradstreet found that people spend 12-18% more when purchasing with credit cards instead of cash. McDonald’s reports that when customers purchase with credit cards, the average ticket is $7 as opposed to $4.50 with cash. Therefore, we advise that it is best to keep cash rather than credit cards in your wallet.2

4. Stick to your grocery list and brown bag your lunch.

Having a grocery list will save you money and time. Have you ever rushed to the grocery store two days in a row simply because you forgot that one important staple on your first trip to the grocery store?  Or have you ever gone to the grocery store wandering aimlessly through the aisles, with little knowledge of what you have in your pantry and fridge and ended up buying multiples of the same product?

Having a grocery list will remind you what you need to buy and will ensure that you are purchasing food you know you will eat. Unfortunately, people throw away too much money on food because they purchase it and never eat it, or it gets moldy or rotten. Purchasing food that you intend to consume because it’s on your grocery list will help minimize wasted food.

A good way to create a grocery list is to first create your meal plan for the week.  After completing your meal plan, write down the necessary ingredients on your grocery list. Make sure to take note of what you already have in your fridge and pantry in order to avoid buying duplicate items.

One meal planning app worth checking is Today’s Parent Mealtime. It could help you create a weekly meal plan from thousands of family-friendly recipes and then create a grocery list that you could email to family members so that you are both on board with what’s needed.

We also recommend that you brown bag your lunch. This will save you hundreds or even thousands of dollars per year and as an added bonus it is usually healthier to eat a homemade meal.

5. Don’t buy on impulse.

Consumer psychologist, Ian Zimmerman, Ph.D., points out that “impulse buying is related to anxiety and unhappiness…The impulse buyer may feel unhappy and may think that being seen with an expensive new purchase will bring respect and happiness. This perceived road to happiness motivates the impulse buyer to go shopping…likes [a] product, and experiences pleasure at the thought of being able to purchase it immediately and go home with it.”3

Therefore, when you are down in the ruts, don’t use shopping as a therapy to give you a quick pick me upper. Instead try to find different avenues to deal with frustrations, boredom, and fatigue such as meditation, exercising, writing, drawing which are all practically free. One technique that could help you avoid impulse shopping is doing deep breathing exercises. You are window shopping with no intention of buying anything and you see those new Nike shoes and want them like now…”Take a breath and try this instead: Tell yourself you can buy it, but not until next month. By then, you’ll either have enough saved up or you’ll decide you don’t like it that much after all. Even better, if you wait it may be on sale! Problem solved.”4

In the same vein, when you go grocery shopping, stick to the items on your grocery list and never shop hungry.

Related: What motivates impulse buying

In conclusion, in order to budget wisely and help achieve your financial goals, it is well worth it to adhere to these five tips: 1. spend less than you earn, 2. create a weekly budget and adhere to it, 3. pay with cash instead of credit cards, 4. stick to your grocery list and brown bag your lunch, and 5. don’t buy on impulse.

Sources:

https://www.nerdwallet.com/blog/credit-cards/credit-cards-make-you-spend-more/

http://www.businessinsider.com/studies-help-explain-why-credit-cards-make-us-spend-more-2014-7

https://www.psychologytoday.com/blog/sold/201207/what-motivates-impulse-buying

https://www.everydollar.com/blog/8-steps-to-help-you-stick-to-your-budget

 


About S & P Accounting Services

S & P Accounting Services is a professional accounting firm situated in North York, Ontario. We are chartered accountants with extensive experience with audit, review, tax and bookkeeping. We strive to operate in accordance with our principles of quality, professionalism, and integrity and are dedicated to excellent service.  We aim to ensure that our clients receive the highest quality of financial, tax and accounting services and advice. We happily serve clients in Toronto, North York, Mississauga, Vaughan, Richmond Hill and in other cities in the GTA.

If you have any questions or inquiries about our accounting services, please contact S & P Accounting Services.

S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
www.spaccountingservices.ca

Disclaimer: We strive to ensure all information on our site is accurate and up to date. However, the contents of the site are naturally subject to change from time to time. That means, we can’t always guarantee the accuracy of all information on the site. YOU ARE RESPONSIBLE FOR CHECKING THE ACCURACY OF RELEVANT FACTS AND OPINIONS GIVEN ON THE SITE BEFORE ENTERING INTO ANY COMMITMENT BASED UPON THEM.

This post was written by Biz Source, a content creation company and is for illustration purposes only. For professional advice, please contact S & P Accounting Services.

Five income tax tips for small business tax preparation

Five key tips for reporting your income tax

Are you a small business owner? Congratulations! It takes a lot of passion and dedication to get to where you are. There are many standard challenges that businesses face today. These hurdles include hiring the right people, getting and attaining customers, work fatigue, increasing cash flow and profitability, etc.

One challenge that I will cover in this article is managing your business finances. As an accountant, I notice that individuals are sometimes hesitant to start a business because of fear that they won’t know how to properly prepare and file their taxes. Below I complied five key small business tax preparation tips that will hopefully give you the knowledge and confidence to run your business more smoothly and help you know that you’ve covered some essential tax preparation basics.

1.Report your income from any business you or your partner run

As a small business owner, you are obligated to report income from any business you run yourself or with a partner. Business income is defined as money you earn from a:

  • Profession
  • Trade
  • Manufacture or
  • an undertaking of any sort, an adventure or interest in the nature of trade, or any other enterprise you engage in for profit and there is proof to support that intention.

Please note that if you have a service business such as a restaurant, income from a service business is considered business income. However, business income does not include employment income, such as wages or salaries received from an employer.

2. Neglecting to report income may result in a penalty

Here is another important small business tax preparation tip. To calculate income for tax purposes, you must document and report all amounts of income. If you neglect to report all your income, you may be fined a penalty of 10% of the amount of income that you did not report.

3. It is crucial to keep your records detailed and complete

If you are a small business owner or are engaged in a commercial activity, it is crucial that your records are detailed enough and complete in order to calculate the tax you owe and to support any deduction or credit you are claiming. They also must be supported by original documents.

4. It is your responsibility to keep your supporting documents for six years

You must keep the supporting documents for six years after the end of the tax year to which they relate. Even if you are filing your return online or don’t have to affix specific supporting documents to your return, you must still keep the documents in case CRA reviews your return or audits your business. CRA may ask you to confirm your claims for deductions or credits with documents other than official receipts, like canceled cheques or bank statements.

5. Paying your income tax by installments

Here is a final small business tax preparation tip.  If you get income that has no tax withheld, or does not have enough tax withheld for more than one year, you may have to pay tax by installments. Some cases where this may occur are if you have rental, investment, or self-employment income, certain pension payments, or income from more than one job.

If you have any small business tax preparation questions or any other accounting related inquiries, we would be happy to assist you.

Polina Presman, CPA, CA

T- 416-371- 6017
F- 416-667-0404

Shani Marzin, CPA, CA

T- 416-731-9031
F- 416-667-0404

S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
www.spaccountingservices.ca

 

Disclaimer:
We strive to ensure all information on our site is accurate and up to date. However, the contents of the site are naturally subject to change from time to time. That means, we can’t always guarantee the accuracy of all information on the site. YOU ARE RESPONSIBLE FOR CHECKING THE ACCURACY OF RELEVANT FACTS AND OPINIONS GIVEN ON THE SITE BEFORE ENTERING INTO ANY COMMITMENT BASED UPON THEM.

A Chartered Accountant shares important news about tax evasion scams

Important news from a Chartered Accountant: “Canadians be wary of tax evasion scams”

The O.P.P. and Canada Revenue Agency (CRA) are warning Canadians of fraudulent tax evasion emails and phone calls. Some residents of Tiny Township, Tay Township, and Penetanguishene have been victims of these emails and phone scams purporting to be from the CRA.

A young 18-year-old Chilliwack woman, Sasha Tuttle,  has also fallen prey to the CRA scam and lost $2,000 of her savings. Another Chilliwack resident, 86 year old, Norman Schott received the same phone call as Tuttle. The person on the other end of the phone claimed to be the CRA and told the senior that he has a warrant out for his arrest for tax evasion. Schott knew “something fishy going on” and immediately reported the incident to the police.

Ways to protect yourself against tax evasion scams

As a Chartered Accountant, these are some important precautions I share with my clients:

  1. If someone calls you saying that they are from the CRA and asks you for personal or financial information, really question the caller and ask yourself is the requester asking for information I would not provide in my tax return? (such as my passport number, health card, or driver’s licence) Is the requester asking for information I know the CRA already has on file for me? (such as my social insurance number).
  2. When in doubt, hang up and call the CRA through the official phone number to verify if you owe back taxes or are eligible for a refund. You could also check your online CRA Account to make sure that there is no problem with your tax account. Here are some examples of fraudulent scam stories.
  3. The CRA will never ask you for credit card information or for prepayments by prepaid credit cards or your personal information by email or text message. So if you receive mail, an email or a text message requesting personal information, know that these are fraudulent and never respond to them.  
  4. The CRA will never email a link to you and ask you to divulge personal or financial information. However, the one exception is if you call the CRA to request a form or a link for specific information. In this case, a CRA agent will forward the information you are requesting to your email during the telephone call. This is the only circumstance in which the CRA will send an email containing links.
  5. If you are a responsible citizen that pays your taxes on time and correctly, then it would not make sense for the CRA to claim that you committed a tax evasion. If in fact there are tax evasion allegations against you, then CRA will do so formally in writing.  And even in this case call the CRA through the official phone number to verify if you owe back taxes. You should also check your online CRA Account to check the status of your tax account.
  6. CRA will never use coercive or nasty language to threaten you. Cases of fraudulent communication could include using intimidation or coercive language to frighten taxpayers into paying a fictitious debt to the CRA.  The scammers may threaten to arrest you if don’t pay your fine. Yet, in reality, the CRA will never threaten to arrest you.
  7. Fraudulent communication could play out more subtly as well. The scammers could insist that personal information is needed to process a refund or benefit payment. Yet, in reality, the CRA will never request money or demand credit card information over the phone.
  8. The CRA never shares your taxpayer information with another person, unless you have given the appropriate authorization.
  9. The CRA never leaves personal information on your answering machine or requests you to leave a message containing your personal information on an answering machine.
  10. If you feel that you’ve been a victim of fraud or have received deceptive telemarketing, you should call 1-888-495-8501 or visit CRA fraud website. Follow these steps if you’ve been defrauded.

If you are unsure if the phone call, email or text message is legitimate or a fraudulent message, ask your Chartered Accountant. Your Chartered Accountant should know how the CRA communicates with taxpayers and your chartered accountant should be able to distinguish between fraudulent communication and legitimate communication from the CRA.

If you require consultation or a have any accounting inquires, please do not hesitate to contact us. We serve clients in Toronto, North York, Vaughan, Thornhill, Richmond Hill, and all other GTA cities.

Polina Presman, CPA, CA

T- 416-371- 6017
F- 416-667-0404

Shani Marzin, CPA, CA

T- 416-731-9031
F- 416-667-0404

S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
www.spaccountingservices.ca

Professional accounting services in North York and Toronto

What kind of professional accounting services do we provide?

We provide a full range of professional accounting services which include, accounting, tax returns, bookkeeping, and payroll.  We serve individuals and business clients in the Greater Toronto Area, which includes Toronto, Vaughan, North York, Richmond Hill, Mississauga, and Thornhill.

Why choose our professional accounting services?

Our professional accounting services offer many benefits to our clients:

  • You will have the opportunity to work with chartered accountants who are experts in their field.
  • You will be able to leverage on our extensive experience with audit, review, tax and bookkeeping.
  • We will help you understand how to be more successful. For instance, we will help you understand how your finances work to your benefit and how to grow your wealth in the smartest way possible. Financial literacy is key to becoming a successful business owner.
  • We will simplify your accounting and business needs. For instance, one major advantage of our payroll services is our ability to create a variety of reports that simplify accounting procedures and help your company ensure they are in compliance with legal and tax filing requirements.
  • Our professional accounting services help ensure that your accounting is accurate, complete and filed on time – this way you could focus on what’s important, helping your business succeed.

How are we committed to proving excellent professional accounting services?

  • We will give you the most current information, so you can make informed decisions for your business
  • We will maintain your books up to date to ensure you have a real-time picture of how your business is doing.
  • We will ensure that you file your taxes on time in order to avoid any late penalty fees.
  • We will respond to any of your questions and/or requests within 24 hours.
  • We will always work to improve, enhance and make your core business more efficient by providing you with innovative, sustainable and creative business solutions that are tax efficient and catered to your specific needs.
  • Our unique approach enables us to find specific tax breaks and deductions for most of our clients.

If you require additional consultation or want to learn more about our professional accounting services, please do not hesitate to contact us.

Polina Presman, CPA, CA

T- 416-371-6017
F- 416-667-0404

Shani Marzin, CPA, CA

T- 416-731-9031
F- 416-667-0404

S&P Accounting Services LLP
2727 Steeles Ave. W. Suite 300
North York, ON, M3J 3G9
www.spaccountingservices.ca