SASKATOON – If you went a little overboard at Christmas, you could be looking at the worst gift of all. A huge credit card bill in the mail to help ring in the New Year.
At the exact same time, the Liberal tax cut for the middle class will come into effect and it’s predicted most Canadians will be looking at a lower tax bill.
A promise made by Prime Minister Justin Trudeau while on the campaign trail in the fall, “in just a matter of months you’ll be receiving more money from a Liberal government.”
Fast-forward to today and the federal government will be cutting taxes for middle class Canadians effective Jan. 1.
“The middle tax bracket is going to get a little bit of a break but then they’re going to create a new tax bracket for the wealth and higher income status,” said Sean Meshke, CFA investment advisor with Prairie Wealth Management, a division of Scotia Capital Inc.
READ MORE: Goodale: Tax cuts and new benefit cheques will be first priorities
The income-tax rate for those earning between $45,000 and $90,000 will go down to 20.5 per cent from 22 per cent.
Those earning more than $200,000 will see their taxes increase to 33 per cent.
Experts say while the majority of Canadians will benefit from these changes, the new found money socked away could make you even more.
“Put that away for the future because really what happens is the compounding growth of savings that you can continuously put away, that adds up.”
Start by setting a monthly budget going into 2016 and keep your eye on the prize. Meshke says the biggest mistake people make is overspending and living beyond their means.
“Everyone should be looking at their finances in detail, open the envelope, look at the statements.”
Once you know where every dollar is going, stay dedicated and disciplined. Meshke suggests redirecting at least 10 to 15 per cent of every pay cheque towards retirement.
“Ideally, the more you can save, the better off you are.”
To start off on the right financial foot, you’ll also want to consolidate any debt you have.
“Whether it’s taking the credit card debt and putting it onto the line of credit or taking the line of credit and putting into the mortgage if possible, any way to lower that interest rate payment is a benefit to the household income from that stand point.”
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