Folx Finance

02/03/2023

Know this by heart🩷🏅😎🗯

01/27/2023

01/03/2023

“If you're the smartest person in the room, you are in the wrong room.”

11/25/2022

https://www.reuters.com/business/retail-consumer/canadas-inflation-remains-too-high-more-rate-hikes-needed-bocs-macklem-2022-11-23/

Inflation in Canada remains too strong, and higher interest rates will be needed to cool the overheating economy, Bank of Canada Governor Tiff Macklem said in testimony at the House of Commons on Wednesday.

11/19/2020

CAPITALIZATION OF INCOME
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Assumption with capital retention.
the income replacement approach is amount of capital that would have to be invested to generate the lost income, when retied or died for you family. calculated as:
Capitalized value = annual income ÷ rate of return

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Impact of investment returns, inflation and income tax

when capitalizing income you should consider either its Gross or Net income. If net income then you have to consider a after tax interest rate of return in capitalization formula.

Also tax rate on a family or individual income should be considered meaning:

If the amount of income is small, relative to the recipient’s other sources of income, the marginal rate tax rate should be used. However, if the amount is large, as is often the case when trying to
replace lost employment income, an effective or "average tax rate" should be used.

After-tax rate of return = rate of return × (1 – tax rate)

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Accounting for inflation
Means employment income usually increases over time with rate of Inflation. This can be addressed by using an inflation-adjusted rate of return when calculating the capitalized value.
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Accounting for income taxes and inflation simultaneously:
In reality, the amount of capital needed will be affected by both income taxes and inflation. To account for both factors, the after-tax, after-inflation rate of return should be used, which is calculated as follows:

11/18/2020

Canadian tax brackets: Marginal tax vs average tax
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In Canada, we operate under a marginal tax rate system which simply means the more money we make, the more tax we are privileged to pay. Marginal tax is simply the amount of tax paid on an additional dollar of income. As income rises, so does the tax rate. This is different than a flat tax rate where you pay the same rate of tax no matter what your income level is.

In Canada we have two layers of income tax – federal and provincial. To illustrate how marginal tax rates work, my example shows tax rates for Alberta residents and encompasses both provincial and federal tax.

For the year 2020, there are many tax brackets:🌏🌏🌏🌏🌏🌏🌏🌏

Taxable Income ($) Interest and Regular Income
0 to 12,298 –
12,299 to 19,369 15.0
19,370 to 48,535 25.0
48,536 to 97,069 30.5
97,070 to 131,220 36.0
131,221 to 150,473 38.0
150,474 to 157,464 41.0
157,465 to 209,952 42.0
209,953 to 214,368 43.0
214,369 to 314,928 47.0
314,929 and over 48.0

If you earn $50,000 in income in 2020, then you would be in the 30.5% marginal tax bracket and you would pay 30.5% of any additional dollar you made to the federal government. If you earn $100,000, then you would be in the 36% marginal tax bracket.

One of the biggest misconceptions about tax rates is that your entire income will be taxed at your marginal tax rate. Here’s an example to show you how it actually works:

The person making $50,000 per year would not pay $15,250 in tax ($50,000 x 30.5%). Instead, his/her tax would be calculated like this:

$12,298 at 0% = $0
($19,369 minus $12,298) at 15.0% = $1,061.50
($48,535 minus $19,369) at 25.0% = $7,291.25
($50,000 minus $48,535) at 30.5% = $446.52

Total tax = $8,798.27

Quickly estimate your 2020 taxes with our simple and free calculator. See how an RRSP contribution can increase your refund.

11/16/2020

Sovereign Wealth Funds
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A sovereign wealth fund is a state-owned pool of money that is invested in various financial assets. The money typically comes from a nation's budgetary surplus. When a nation has excess money, it uses a sovereign wealth fund as a way to funnel it into investments rather than simply keeping it in the central bank or channeling it back into the economy.

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Many nations use sovereign wealth funds as a way to accrue profit for the benefit of the nation's economy and its citizens.
The primary functions of a sovereign wealth fund are to stabilize the country's economy through diversification and to generate wealth for future generations.
The emergence of sovereign wealth funds is an important development for international investing.

sovereign wealth funds invest in a wide range of asset classes including:

Government bonds
Equities
Foreign direct investment

Sovereign wealth funds use a variety of investment strategies:

Some funds invest exclusively in publicly listed financial assets.
Others invest in all of the major asset classes.

Funds also differ in the level of control they assume when investing in companies:

There are sovereign wealth funds that place a limit on the number of shares bought in a company and will enforce restrictions either to diversify their portfolios or to adhere to their own ethical standards.
Other sovereign wealth funds take on a more active approach by buying larger stakes in companies.