It was a productive visit, helping me to complete both a few short-term and lifetime goals:

1. Read one financial book per week. Obvious one first. I put the following books on hold: Work Less, Live More and The Complete Idiot’s Guide to Retiring Early. Hope to find some good nuggets.
2. Visit a Foreclosure auction. In most areas, listing notices are required to be in the newspaper. I don’t have a subscription anymore, but I was able to look through the last 3 days of papers at the library for free. Looks like there will be one on September 9th at Noon at the county courthouse. Also, I found an announcement that a local self-storage place is also auctioning off the contents of the lockers that have been abandoned and unpaid. That might be interesting to go to as well.
3. Learn more about financial analysis of potential rental property. Also found the Landlord’s Survival Guide and The complete guide to your first rental property. To judge the quality of books I’ve never heard of, I consider both Amazon.com review (if any) and also the number of copies in the city-wide system. I simply assume (right or wrong) that the better books will have more copies.
4. Plan international travel. The in-branch pickings were slim, but I found a nice book on Spain. I should be able to find many more online. I’ve actually brought library travel books with me on international trips. (Well taken care of and returned on time, of course!)
5. Learn a Foreign Language. Borrowed a few Pimsleur language audio CDs (intro to Cantonese and Spanish). The full sets of these often cost over $200. These will go great in the car and in my iPod while jogging.

Of course, not all goals can be done at the library. I also recently signed up for a 3-day PADI scuba diving certification course over Labor Day weekend that will cost around $400 altogether. I’m really looking forward to it.

Money is a far more emotional topic than many people would believe. What causes the most arguments between couples? What do people long for, and work very hard for? What do we often blame our unhappiness on? (“If I only had the money, I could take that cruise, buy that house, vacation in….”) How do we feel when we don’t have money? For many of us, it’s very painful not to have money, and for a few of us, it’s also painful to have money.  Just think of the fear that can come up when one thinks, “What if I lose it all?”

Money is really a symbol. It’s used as a universal exchange, and it certainly has simplified things since the days of barter. Our feelings about money are often about survival and fear. What if we secretly fear that we don’t deserve to have money? Think that thought would unconsciously sabotage our success? You’re right – whatever we believe about ourselves, we will find (often unconscious) ways to prove that we are right. Perhaps you took on a really risky investment and now wonder why you did it? It might have been your unconscious mind directing you to an investment that will sure that you don’t have the money – because, after all, reasons your unconscious mind, you don’t deserve it.

What about the thought that rich people are mean and miserable? You’d be surprised how many people think rich people are dishonest and unhappy – remember the saying, “Money can’t buy happiness”? This is an example of a conflicting belief – most of us feel we would be much happier with money, as we could buy all that we needed or wanted, but if at the same time, you are feeling that rich people are miserable and mean, who really wants to be miserable and mean? Imagine what this unconscious inner conflict does to your good judgment when choosing stocks for your portfolio!

Think about it - money is so necessary for survival and for having a wonderful life - so widely handled and so woven into our lives - that it is easy to use money to punish yourself, to prove that you are “not worth much”; and more. It can be used to prove that you really are ‘too stupid to ever succeed’ or to put yourself into a state of self-loathing (think ‘compulsive spender’ suffering the torments of guilt). Think about the person who burns through everything they have and is always one step away from bankruptcy no matter how much they make - this person is probably using money so that they can express the same feelings they had as a child. It’s the old feelings that account for the sometimes crazy ways people deal with money.

Perhaps the feelings might be ‘always under pressure’ or ‘never going to be good enough’ or some other self-defeating set of feelings. What negative feelings do you have about money? In what ways could those feelings be holding you back from financial success?

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Scenario 1: Say that Jim from Newfoundland had a private incorporated business that made $10k/yr. Jim also makes $65k/yr in his regular job.

If the money was kept as a sole proprietorship, Jim would have to pay 38% on his business income.

If held in a corporation, he would only have to pay 16.0% on the business income. However, if he wanted to withdraw the money for personal use, there would be additional tax on his personal income tax.

• If the $10k business income is distributed to Jim via salary, the corporation would get a tax deduction, but the income would be added to Jim’s existing $65k job income. This would result in net tax of 38% on business income.
• If the $10k is distributed to Jim via dividends, the money would be distributed to Jim with corporate after tax dollars, but Jim would get the dividend tax credit for private Canadian corporations (25% gross up). The personal dividend would be taxed 24.58%, but that’s after the money has already been taxed 16% via the corporation. This scenario would actually result in net tax of 41.58% on the business income.

Scenario 2: Say that Jim’s business income has grown to $65k/yr but decides to quit his day job to pursue growing his business full time. Jim needs to withdraw $30k/yr to cover his personal expenses.

• If the business was held as a sole proprietorship the $65k/yr would be taxed at an average rate of 30.30%.
• If the small business was under a corporation, and only $30k was withdrawn as salary, $35k of the business income would be taxed 16%, and $30k of the salary would be taxed 21.61% including CPP/EI. The net taxation on the annual income would be: 18.5%
• What if the money was withdrawn as dividends? In that case, the whole $65k would face the 16% corporate tax, with the $30k personal dividend facing 4.35% in tax. The net taxation on the annual income would be: $11706/$65000= ~18%

Conclusions

As you can see from the scenarios above, whether you withdraw from your corporation in the form of salary or dividends, it works out to be approximately the same taxation.

If going with the private corporation full time, it may be preferred to take a salary as it will provide RRSP contribution room. In terms of taxation, the biggest benefit of holding a private corporation is for the tax deferral and the capital gains exemption if the company is sold.

Please note that i’m not an accountant or tax professional. Use the information above at your own risk.

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Costs

There is the obvious upfront cost of the freezer, monthly electricity costs to run it, hopefully minimal maintenance costs, and I suppose we’ll lose the space in the garage. Here is the rough breakdown for various sizes of chest freezers (Energy Star rated, name brand):

7 ft³: $210 + $25/year in electricity. Assuming 10-year life, that’s $3.83/month. For a 20-year life, that’s $2.96/month.

15 ft³: $410 + ~$38/year in electricity. 10-year life: $6.58/month. 20-year life: $4.88/month.

25 ft³: $710 + ~$52/year in electricity. 10-year life: $10.25/month. 20-year life: $7.29/month.

Potential Benefits

Less Eating Out
To be honest, I really just want to stock up on a large variety of frozen foods so that there is less of the daily question… “What am I going to cook for dinner?”. Too often, the answer ends up as “let’s get take-out”. I want staples like frozen chicken breasts and veggies, as well as having a few Trader Joe’s pizzas and burritos tucked away.

Ability To Stock Up During Sales
If there is a sale on something like frozen vegetables, now I can buy in bulk instead of waiting around for the next sales cycle. You can also freeze everything from bread to milk.

Storing Fresh Fruit
You can do some fun (and cheap) U-Pick at local farms during the summer and not have to eat it all at once. Blueberries, strawberries, peaches, yum. Home gardeners can do the same.

Less Shopping = Less Driving = Less Gas
I try to grocery shop in conjunction with commuting or other errands, but living in suburbia has still definitely increased my fuel usage.

Buying Half A Cow
Although I’ve never done so, it might be cool to buy a whole cow. I guess I’d need one of the bigger freezers for such an undertaking.

Cooking In Bulk
I have tried a few times to cook an entire week’s food ahead of time, but I’d often run out of freezer space. Also, this way one can make their own soups or stocks in large batches. My mom always used to freeze her homemade chicken stock into “pucks” using old margarine tubs.

In addition, there are also the make-your-own-takeout places like Dream Dinners and Super Suppers, which I have never tried before because I never had that kind of freezer space.

I would imagine that I should be able to make up the $5-$10 a month in costs, especially if I can cut down on the dining out. Everyone I know with a chest freezer likes it. Anyone out there disagree?

1. Litigation protection.
2. Lower business income tax.
3. The ability to sell your business up to $750k tax free ($1.5 million tax free if joint ownership with spouse)
4. The added ease of selling/transferring your business if/when the time comes.

The above benefits are explained in detail in the post about whether or not you should incorporate your business.

Lets talk more about number 2, the lower business income tax. As a side business, many people believe that incorporating will result in a big tax break. This is true for the business income only. Once the money is withdrawn in the form of salary or dividends, it works out to be about the same as if the income was earned in your personal hands. As a side business though, the largest benefit of corporations with regards to taxation is tax deferral and the ability to keep more of business income out of the government hands initially so that it can grow over time.

How low is the small business private corporation tax rate? According to Ernst and Young, here are the 2008 private corporate tax rates sorted by province (federal and provincial combined):

As mentioned above, these low income tax rates are great if company earnings are kept within the business accounts and not withdrawn. It allows low taxation and the money can be invested in the markets.

Tomorrow we’ll go through a couple of scenarios to see if there is a tax efficient way to withdraw corporate income.

Please note that i’m not an accountant or tax professional. Use the information above at your own risk.

Here are some articles from TheMoneyWriters this week that has caught my attention:

My Dollar Plan has a timely post on 12 Ways the Olympics Can Impact Your Finances.

Lazy Man and Money explains How to Start Getting Wealthy Right Now.

Digerati Life gives us insight into Make Money Blogging: Top Bloggers And How Much They Earn.

Sun’s Financial Diary tell us about Creating a Virtual All-EFT Portfolio.

Brip Blap has an interesting view on how your education and lifestyle keep you from changing.

Generation X Finance gives some sound advice in his article “Reduce Your Holiday Stress by Saving and Planning Today“.

Frugal Dad has a great article on How to Live More Simply, and Why It Is So Important.

Money Smart Life lists 5 inexpensive ways to have fun in college.

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In short, the cashback system is currently offering 25% off any item purchased on eBay, provided it is bought using the “Buy It Now” feature and using PayPal for payment. There is a limit to $200 in cashback per purchase, with a maximum of 6 purchases. Fine print is here. A quick and dirty walkthrough:

1. First read up on the general idea of Live.com cashback. You’ll need to wait 60 days to withdraw the cashback. If interested, sign up for an account.

2. Click on this link, this link, or this link. Look for the following:

3. Click on the circled link, which will send you to eBay. Find an item that you want with the Buy It Now option and that accepts PayPal. Click on “Buy It Now”. You should see this icon on the next screen:

4. Check out and pay with PayPal. You should get an e-mail or message from eBay with confirmation afterwards.

Clever people have been buying highly liquid items like gold, silver, and popular gift cards at 25% off. However, supply and demand has driven many prices up, making it harder to find profitable opportunities. Isn’t economics neat?

This week I renewed my Costco Membership. As I have a hard time paying full price for anything, I found the latest online coupon code (GSWEB24) for a $25 gift card with a new Costco membership. The great thing about getting the membership online is that you can get the discount AND start shopping right away by simply printing the email receipt and bringing it to the warehouse. As far as I know, this coupon applies to Canadian Costco’s only!

Weekend Reading

Consumerism Commentary gives us advice on the right size for your emergency fund. What do you guys think?

Wall Street Fighter gives us the top 5 most expensive streets in the world!

The Restaurant Blogger gives us 10 steps to running a profitable buffet.

Living Almost Large hosted this weeks edition of the Carnival of Debt Reduction with an Olympic twist. We submitted our story of how to get out of debt.

Special thanks to Rob Carrick for mentioning us in his Globe and Mail article on buying and selling real estate.

More links tomorrow!

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• started out as an Emergency Medicine doctor in her native country of Russia,
• went on to be a body double for Cindy Crawford,
• is a former public relations executive,
• has been reading my blog for nearly a year ,
• … and now spends her time twisting latex balloons.

Irina Patterson is a balloon artist, usually working at upscale events like cocktail hours, galas, art dinners, or yacht events. She is a great example of how following your passions and having an open mind can lead to a fun and flexible self-employed business. Although she admits that it is not passive income, she has managed to build what she terms a “money printing press” since she has all the work she can handle.

I wanted to learn more, so below is an e-mail interview that I recently conducted with Irina:

How did you get started as the “Balloon Lady”?

Believe it or not, I have never seen balloon animals until about 4 years ago. I don’t have kids and I don’t go to the malls. I saw balloon animals for the first
time at a private party and totally fell in love with the process. I love bright colors. It just made me happy. I guess it makes happy many other people too. Otherwise, how can you explain the demand for balloon art entertainment even now, when people cut down on everything.

How long did you practice making balloons before you started to earn money doing it? Did you worry about not making enough money at it?

I practiced at home for about a week. Then I went to a strip mall. Paid them $75. That was their monthly fee for allowing me to make balloon art
for tips. I made that $75 in tips right back on the first day. At the time, I didn’t know better at the time. I only paid fees like that for about 2 months.

You can find places where you can make balloon animals without rental fees. You can find restaurants that will PAY you to entertain their customers. In Miami restaurants usually pay $50-100 per 3-4 hours on a weekend + most customers will usually give a tip. You can expect to make about $ 150 for about 4 hours as a restaurant balloon artist.

But the best part is this. While you are entertaining at a restaurant, you are also marketing your private party entertainment. Private parties will always give you better return on your time. In Miami, on average, a balloon artist can earn $100-200 per hour at a private event. And you are usually booked for more than one hour.

I didn’t have to worry about making money as a balloon artist. At the time I was full time employed as a PR executive. But I couldn’t believe how easy it was to make money as a balloon artist.

How much time do you spend working on average as an artist? Do you work elsewhere as well?

Right now, I work only as a self-employed balloon artist. I don’t have any other job. I mostly work on weekends, about 10 hours a week, on average. I can hold a full time job, if I want to.

How do you advertise your services? Newspapers, online, flyers, radio? Word of mouth?

Word of mouth, period. Once in a while, craigs list. But, word of mouth really keeps me busy. As a solo artist, I can only do so much. Once I am booked.
I am booked and can’t be booked some place else. Over the years, I forged relationships with event entertainment agencies. They also send me business. I no longer work restaurants. But people who got my business card from those days, still call me for private events.

How much to do your charge (approximately) per hour for an event?

I charge from $100-300 per hour. A beginner can expect to charge from $50 to $100 for a private event.

What is the most elaborate piece you’ve ever made? How much did it cost?

I made balloon sculptures of Darth Veida, Shaquille O’Neil, Borat (all full size). Big sculptures cost about $100-200. When I made Borat (at the time of Borat movie release), I tried to sell the sculpture on eBay for $20,000. I didn’t sell it, but it brought a lot of publicity. LOL The news got picked up on many blogs and I was profiled in The Miami Herald. t was 4th time The Miami Herald interviewed me. One thing about balloon art, you can get a lot of media coverage out of it. It is always an attention getter.

What is the best part of your job?

The best part of this job is I get paid to do what I enjoy doing. I also get my what I called “color fix”. I just need some color in my
life. It is just how I am. An artist would understand. Colors for an artist like breathing.. LOL..

I also can stop and start at any time I want. I don’t have to be any specific place at 9 am every day. If I don’t want to work this week, I don’t have
to. I can work more next week to catch up. If I would travel to different countries, I could work there too, if necessary. I also feel very confident about
my retirement years. I always can make money with little effort if I have to.

What advice would you give to someone who wants to start a side job or career as a event entertainer?

First, find out if you like it. It makes all the difference. Volunteer at events with entertainment. Take a class, if there is one in your area.
If not, make friends with someone who is already established entertainer. They are usually very friendly. You can find an entertainer in your area here (Do search by your zip code).

Any other tips?

The key secret is this. Most people think that to be an event entertainer you need to go to a circus school or have some other elaborate training.
Then you need to have a business plan, operating and marketing budget and establish a company.

But I can tell you this. All you have to do is want to do it. That’s all. The cost of minimum supplies is $15 or so. You can learn the basics in 2 hours.
Most people don’t know the different between basic and advanced balloon art. And you can make them happy either way.

If you want to learn advanced art, all the power to you. But if you have bills to pay and need money now, grab a bag of balloons and a pump and call a local restaurant to offer your entertainment for tips now.

– end of interview –

Recap
I want to thank Irina for the enlightening interview. Here are some quick take-aways for me:

1. Had an idea come out of the blue, but went for it. I believe that most people, even if they had the idea, would still not have showed up at the park that day.
2. The start-up costs were minimal - and she made a profit on the first day!
3. Was working full-time in PR at the time, so in reality the risk was low.
4. Steadily built up a business of recurring clients gradually through word-of-mouth.
5. Now works when she wants, where she wants, at $100 per hour!

You can find more information about Irina and her business at her website, My Life and Art. If you’re an entrepreneur with a unique story and would like to be interviewed here as well, please feel free to contact me.

Past Entrepreneur Interviews:

• Dennis, sells custom Greek apparel online and locally
• Dan, sells titanium money clips online

As an avid follower of Frugal Trader’s Million Dollar Journey, and subsequent to some discussion on the topic, I began to wonder about where a Defined Benefit Pension (DBP) puts me on my personal MDJ.

The following is based on the Defined Benefit Pension Plan in which I am enrolled; most Canadian based government plans should be similar.

A recent article in Moneysense, indicated that about 50% of younger workers have a pension plan. An astounding 60% of Canadians over 55 have a pension plan, worth, on average $260,000. In most DBP, only member contributions and interest are reported to the member; the employer contributions are not reported in the annual valuation.

Many of these DBP, will pay up to 70% of the member’s then current income (or best 5 years income), and usually include a joint benefit to the spouse. This makes the actual value of the DBP much greater than the annual report would suggest. Since none of us know with certainty our lifespan, we all wish to ensure a large enough nest egg to provide us a comfortable living until death. We may also wish to leave an estate for children or other purposes. However, if the first goal of accumulating wealth is to provide for retirement income, how does a DBP stack up against a retirement portfolio?

For this example, the Canadian family average income of $75,000 per annum is used as a benchmark. The contributor(s) are 40 years of age, thus at a fairly stable point in their career. The following assumptions are made:

• Inflation = 2.5%
• Cost-of-living pay increases = 2.5%
• Annuity investment return in retirement = 6%
• Plan member contributes for 35 working years

Based on the amounts one would receive from a defined benefit pension, one would have to purchase an annuty in the following amounts to ensure income equivalent to a DBP until age 90:

Those who are fortunate to have a DBP are well on their way to their first million already, even if they choose not to maximize their pensionable time.

While you don’t actually accumulate this wealth, and do not have a large estate upon death, the member and spouse will have a comfortable, often indexed, pension as long as either lives. It is also realized individuals may not live to 90, but DBP are a form of insurance, whereby it is expected that some will have a longer claim period than others. If, on the other hand, one needs to build wealth individually for retirement, how long should you plan to ensure income? Current age expectancies for a 40 year old in good health, with a good family health history is 77 – 78 years, but many live longer! Is a 90 year lifespan sufficient in planning a financial future?

This certainty of future income allows one to make many other considerations as to the use of the savings accumulated through regular RRSP contributions, the creation of a non-registrered portfolio, or other investments. This could fund early retirement, educational opportunities, sabbaticals, or other options for an enjoyable lifestyle.

If you are a member of a defined benefit pension, what will you do with your second million?

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