That afternoon, at our kitchen table, he showed me how saving can earn you money through compounded interest, and how owing money can bury you in debt. His message? If you have a financial plan, you have choices—and having choices and setting goals is what leading a successful and satisfying life is all about.

My dad’s personal financial plan was his road map, helping him navigate to his dreams. And the roads to those dreams were built on details. For instance, dad always knew exactly what his take-home pay was, how much the family spent every week on groceries and gas, and how much he needed to save each month to pay off his mortgage in 10 years—his main financial focus when I was growing up.

His plan wasn’t just about counting pennies though, it also allowed him to plan for luxuries—and pay for them in cash. That’s why there was a special column in his plan for $50 in weekly savings towards a family trip to Italy. He had a system he believed in, and made sure the household finances were managed effectively.

These days, most people I know don’t have a financial plan. We spend a lot of time planning for other aspects of our lives, such as our careers, marriages and having kids, but many of us fail to build a plan to achieve our financial goals.

If you would like to stop wondering about whether you’ll ever realize your financial goals, and build a plan to actually reach them, I can help. Read on and I’ll not only show you how to build a proper financial plan, I’ll take you through each step, complete with worksheets and a blank financial plan template that you can fill in at the end. Follow my simple instructions and in no time at all, you’ll have the peace of mind that comes with a professional-quality personal financial plan—without having to pay a financial planner a dime.

1. Talk to your spouse
Most couples never talk to each other about their financial goals. If you’re in a relationship, before you roll up your sleeves and dig into the numbers, talk to your spouse about what you want to accomplish. “Have a brief conversation about goals, values, and what kind of lifestyle you want,” says Karin Mizgala, chief executive officer of Money Coaches Canada, a national network of fee-only financial experts based in Vancouver. “That’s key to a good start.”

Action step #1: Click here to find 10 worksheets in the “MoneySense financial plan kit.” There is a PDF version of each worksheet that you can download and print out if you want to fill in the sheets with a pencil or pen. There is also a Microsoft Word version you can fill out on your computer. Print out “Worksheet 1-Prioritize your goals” for this step. You and your spouse should fill this sheet out separately, then compare the results when you’re done.

2. Figure out where you’re at
Before you start worrying about where you want to go, you first have to figure out where you are now. In this step you’ll create a net worth statement, which is essentially an honest measure of your current wealth. You do this by tallying up the value of what you own (your assets) and what you owe (your liabilities). When you subtract your liabilities from your assets, you get a number that represents your net worth. Your net worth statement is an important tool that charts your financial progress over the years. For instance, if your net worth is going down, you’re eroding your wealth and making it harder to achieve your goals. If it’s increasing, you’re on your way to getting richer and achieving your financial goals.

Action step #2: Determine your net worth. Print out “Worksheet 2-Gather your documents.” It’s a checklist to help you pull together what you’ll need before you start, including bank statements, credit card statements, and life insurance polices.

Once you have all your documents in front of you, you’re ready to fill out “Worksheet 3-Your net worth statement.” First list the values of all of your assets, including your home, your cars, your cash and investments. Then list your liabilities, including credit card debts, your mortgage and any other outstanding loans. Tally both your assets and your liabilities and transfer those amounts to the following section, your simplified net worth statement.

Finally, subtract your liabilities from your assets to discover your true net worth. This shorter net worth statement gives a clear snapshot of exactly where you stand today.

3. Track your spending
The key to building a strong financial plan for the future is to understand how much you spend and save right now. This is called tracking your cash flow, and it can give you a sense of control and confidence that makes it easier to make financial changes in your life.

Personally, I’ve kept a small journal tracking my spending for years because it helps me modify my behaviour if my spending gets out of control. It’s not always easy, but it works.

“The part most people dread is taking a really close look at their expenses,” says Mizgala. “But don’t put it off. Successfully managing cash flow is your key to financial control. It will give you an awareness that has more long-term value than anything you can invest in, buy or sell.”

The point of the exercise is to find out whether you finish each year with a cash surplus or a cash deficit. This number will tell you a lot about your general financial shape. A surplus means you’re living within your means, while a deficit shows you’re spending more than you make. If you have a deficit, you will have to cut your expenses (or increase your income) to achieve any financial goals.

What do most people find after doing this exercise? “They’re shocked,” says Mizgala. “It’s a very revealing exercise, mainly because if you have a family with two spouses with debit and credit cards, it’s hard to really see the complete financial picture unless you write it down. This awareness allows you to set up a system for the household.”

Action step #3: Record your cash flow. Fill out “Worksheet 4-Your spending and savings.” It shows what money is coming in (wages, interest, government benefits) and what’s flowing out (rent, debt payments, utility bills). Fill in all your monthly expenses in column 1 and your annual expenses in column 2. (You can leave column 3, the estimate for your future spending in retirement for a later date.)

Tally up your expenses in both columns and subtract them from total net income on both a monthly and yearly basis. The result is your cash flow deficit or surplus.

A good way to approach this exercise is to start with your regular monthly after-tax income and subtract the bills that don’t change month to month, such as rent or mortgage payments. If you don’t know the exact numbers, put in averages for things like groceries, gas or children’s activities. Then add in expenses that only come up a few times a year, such as travel, car repairs and gym fees. Estimate a total for these and divide it by 12, and put that figure in the monthly column of your worksheet. You may not pay the bills in 12 monthly installments but imagine you are setting money aside each month so that you have the total amount when the bill comes due.

4. Adjust your spending
Look closer. Are your expenses higher than your income? If so, you’re living beyond your means. You’ll need to adjust your expenses accordingly so you don’t go further into debt.

This step is not about punishing yourself or laying blame. If you’d rather eat out four times a week than buy a cottage in 10 years, that’s your choice. But you owe it to yourself to be honest about what you’re doing so you’re not wondering why you can’t reach your financial goals.

If you decide to cut back, there are some less painful ways of doing it. Consider renegotiating your mortgage to a lower rate or cutting out one major expense completely. A close friend of mine cut the $5,000 annual family vacation and substituted a couple of long weekends of camping instead. It saves his family $4,000 annually.

If you have a cash surplus, congratulations. You can start allocating money to meet your goals right away.

Action step #4: Compare your spending to your goals. Take a second look at “Worksheet 1-Prioritize your goals” and “Worksheet 4-Your spending and savings.” The idea here is to look at how well your current spending habits mesh with your goals. If you have a cash flow deficit you won’t be able to meet your goals, so you’ll have to see if you can free up cash by cutting back your spending in areas that are less important to you.

For instance, if you have a $5,000 a year deficit on Worksheet 4 and one of your goals is to go on a $4,000 family vacation to Britain in four years, you need to figure out a way to cut $6,000 a year from your spending. You could try using only one car and taking public transit to work. Such a cut could save you $6,000 a year in vehicle costs, allowing you to both balance your budget and reach your travel goal.

5. Set your life goals
Financial goals don’t just happen. You make them happen. This step requires you to assess where you want to be five, 10 and 20 years from now and answer some big questions, such as where you want to live in retirement and when you want to stop working.

One tip is to visualize what your life will be like 10 years from now if you do everything right. The truth is when they picture their future lives, very few people see themselves in a $10-million house in Hawaii. Most people’s goals are more realistic, such as keeping up their current standard of living in retirement (with maybe a few upgrades), preventing any financial disasters, and having the freedom to do the things they love, such as spending more time with friends and family.

“Think of what type of life you want in the future and how you are going to organize your life right now to get it,” says Mizgala. “Your job is to structure your finances so you can achieve your vision.”

Action step #5: Set your top three goals. Fill in “Worksheet 5-Your life and financial goals” and “Worksheet 6-Your top three goals.” If your are in a relationship, sit down with your partner and examine what your goals are and how they fit in with your spending and saving patterns. On Worksheet 5, list each of your top four or five goals and assign a dollar value to each, as well as a time frame for achieving the goal.

Now, compare how closely your goals align with those of your partner. In Worksheet 6, list the three most important goals that you both agree on, in order of priority, in column 1.

6. Develop a strategy
Once you know where you’re going, you need a plan to get there. The usual route is to spend less than you earn and invest the surplus in such a way that you can get where you want to go.

One word of caution—if you’ve identified your goals but you’re in debt, you probably should address that debt before you start investing for the future. “Even when people are not overspending and have debts that carry reasonable interest rates, I encourage them to work aggressively at paying those debts down,” says Norbert Schlenker, founder of Libra Investment Management in Salt Spring Island, B.C. “Don’t even think about investing before your debts are all gone.”

Action step #6: Chart a path to your goals. Go back to “Worksheet 6-Your top three goals” and in column 2, note any obstacles to achieving each goal. Then, in column 3, write down the action steps that you and your spouse have both agreed on to make that goal a reality. For instance, when you tally up the costs of your top three goals, you may find that you need an extra $65,000 in five years to meet those goals. The main obstacle may be that your household income is low because one partner works only part-time. That partner may decide to work full-time in order to earn extra money. The key is to develop strategies and appropriate timelines to make your goals materialize.

7. Review your insurance
If you work full time, much of your insurance may be provided by your employer’s group plan. But is it enough? If you feel confident enough to do some basic calculations yourself you can find out.

Many workplace benefit plans include disability insurance, but if yours doesn’t, get enough to replace at least 60% of your after-tax income.

Then look at your life insurance needs. The general rule of thumb is to get enough life insurance to cover 10 times your income if you have kids under 10 years old (five times your income if you have kids over 10), plus the amount needed to pay off your debt. So if you make $50,000 a year, you have $250,000 outstanding on your mortgage, and two kids under 10, you will need $750,000 in term life insurance. Go to www.term.ca for quotes.

At this point, it may make sense to have an agent review all your insurance policies—disability, life, auto and home—to make sure your coverage is adequate. But be careful. “Do not be oversold on insurance by an industry that is famous for doing exactly that,” says Schlenker. “Pay attention to fees, especially with life insurance. If you need more life insurance, chances are renewable term is the right product for you. You want plain vanilla coverage for a plain vanilla problem—your kids going hungry because you can’t work.”

Action step #7: Review your coverage. There’s no worksheet for this step, but you should still take some time to carefully review all of your insurance coverage. If you don’t have group coverage through work, you probably have private insurance policies for medical, dental, life and disability insurance. Consult an independent insurance agent for a quick review. If you need extra coverage, make a note of it so you can include that in your final financial plan.

8. Slash your taxes
Most tax planning is relatively simple. You’re probably doing a lot of things right already. For instance, if you own your home and use RRSPs, Registered Education Savings Plans (RESPs), and Tax-Free Savings Accounts (TFSAs), you’re already taking advantage of the best tax shelters out there.

To reduce the taxes you pay on your investment portfolio returns it helps to understand that the income tax system treats the various sources of investment income differently. Interest on bonds and foreign dividends is taxed at your full marginal tax rate, Canadian dividends are taxed at rates about one-third lower, and capital gains at half the full rate. So there are advantages to holding investments that generate capital gains and Canadian dividends outside of your RRSP and TFSA if you’re tight on contribution room.

Action step #8: Consider calling a tax accountant. Again, there’s no worksheet for this step. But a few basic principles apply. For those with low to moderate incomes, paying off debt—including the mortgage—is the best tax-planning you can do. That’s because you don’t pay taxes on the capital gains on your home and there’s no tax on the return you get for getting out of debt. If, however, you’re in a higher tax bracket—earning $85,000 a year or more—it may be worth paying for a couple of hours of an accountant’s time to see what mix of investment options—RRSPs, RESPs and TFSAs—is right for you tax-wise. Have these suggestions handy for your final plan.

9. Create an investing policy
Every professional financial plan includes an Investment Policy Statement (IPS) that recommends how a portfolio should be invested. It puts in writing the rules that will make you a more disciplined investor. Having an IPS helps you to stick with your plan and keeps you from changing course when the market gets volatile.

A typical investment policy might specify that your portfolio should always maintain a ratio of 60% stocks to 40% fixed-income investments. This ratio is determined by your time horizon and risk tolerance. The longer your time horizon and the greater your tolerance for risk, the higher the equity portion of your portfolio. As you near retirement and need the security of more stable income from your investments, the portfolio mix will usually tilt towards bonds.

An IPS also states the expected annual returns for your portfolio—typically 5% to 6% per year—over a very long time period, such as 20 years or more. Your IPS might also note the volatility you should expect for a given portfolio. For instance, it could say that you should expect the portfolio to suffer a 10% drop in the short term at least once a decade.

Action step #9: Determine which investments are right for you. Fill in “Worksheet 7-How are you currently invested?” and “Worksheet 8-Which investments are right for you?” On Worksheet 7, itemize every investment you own today—including cash, fixed-income products and equity holdings.

Worksheet 8 will help you assess how much you need to save monthly, when you’ll need the money, and what your risk tolerance is. The results will allow you to zero in on how you should invest in future to meet your goals.

If you have trouble with this section, you can always leave it for now. Once your financial plan is complete, you can consult a fee-only adviser to help you build an investment strategy that’s right for you.

10. Write up a will
Every adult who owns assets and has a spouse or children should have a will. An accurate and up-to-date will is the only way to ensure your assets will be distributed the way you want them to be. If you don’t have one, you’re letting the laws in the province you live in make those decisions for you. And if you hold the belief that your spouse will automatically inherit everything—you’re wrong. In most parts of Canada children trump partners. Without a will your husband or wife will get a predetermined amount of your assets—the rest goes to the kids.

Action step #10: Create or update your will. If you have an updated will it should be filed with your financial plan. If you don’t have one, hire a lawyer to draw one up for you. Visit www.lawyerlocate.ca and search for lawyers in your area who specialize in wills and estates.

11. Create your final plan
A typical financial plan has five main parts. The first outlines where you stand right now, that’s your current situation. The second contains your top financial goals, or where you want to go. The third is a simple net worth statement. The fourth lists the steps you must take to achieve your goals. It includes your income and expenses, an overview of your insurance, a section on retirement planning, and a section on estate planning. Finally, the fifth section—usually a separate document—is your Investment Policy Statement, which lays out how your portfolio is to be invested.

To get a better feel for what your financial plan might look like, let’s take a look at a plan that has already been created by a fictional couple, Patty and Walter Berglund. The Berglunds are a 34-year-old couple living in Halifax. They have two daughters, Debra and Marie, ages 5 and 2. Their household income is $110,000 and after all expenses have been paid, they have $20,000 in cash left over each year.

Their plan lists their top five goals—to pay down $20,000 in consumer debt, save $5,000 for a family trip to Disney World in two years, pay off their $150,000 mortgage in 15 years, save $60,000 in RESPs for their daughters’ post-secondary education and finally, to retire comfortably at age 60.

This is followed by a basic statement of their assets and liabilities that shows a net worth of $82,000. The couple’s projected income and expenses show a $20,000 annual cash surplus. That money is earmarked for their goals in the following way: In the first year the entire $20,000 surplus will go towards paying down the debt. In year two, $5,000 will go towards the big family Disney World trip, $5,000 towards an extra payment on their mortgage, $5,000 to the RESPs and $5,000 to a spousal RRSP for Patty. The couple agrees to continue using the annual surplus in this way each year until their goals change.

After consulting with an insurance agent, the Berglunds agreed that their group plans with their employer are mostly adequate but they decided to increase Walter’s insurance coverage by $300,000. In the section on retirement planning, the couple made some assumptions: that Walter remains employed as a physiotherapist and stays in the hospital’s defined benefit pension plan until age 60, and that Patty continues working part time earning $30,000 a year as a social worker. Walter will start saving $5,000 annually in a spousal RRSP for Patty once their consumer debt is paid off (excluding the mortgage). If they do this, the couple should have more than enough to cover their retirement expenses adequately. Their wills and power of attorneys are all in order.

The second document, the Investment Policy Statement (IPS), outlines the Berglunds’ investment plan. They have an average tolerance for risk and don’t require regular income from the portfolio right now. So a balanced 60% equity, 40% fixed income mix suits them fine. The couple wants a well-diversified portfolio at minimal expense. Thus, their policy states that low-cost index funds or exchange-traded funds are to be used wherever possible.

Their IPS also states that once a year the Berglunds will review their portfolio and rebalance to bring the asset allocation back to their pre-determined target mix of 60% equity and 40% fixed income. It also states clearly that sudden market price movements are not grounds for revision. This will help stop the Berglunds from making impulsive investment decisions out of fear or greed.

Action step #11: Create your financial plan. Open “Worksheet 9-Your financial plan” and gather together all of the worksheets you have already filled out. Worksheet 9 is a blank financial plan with all the sections already labeled for you. At this point, all you are really doing is taking information from the completed worksheets and putting it all together to form your plan. Before you proceed, it may help to review the sample plan for Patty and Walter Berglund at the end of Worksheet 9.

Now fill out “Worksheet 10-Your investment policy statement.” Again, refer to Patty and Walter Berglund’s Investment Policy Statement at the bottom of this worksheet for guidance. Write a brief summary of your current status, and under Objectives and Constraints write down your risk tolerance, time horizon, any taxation strategies you plan to use, and the amount of time you wish to spend managing your portfolio—in many cases, minimal.

Under Investment Strategy Guidelines, write an outline of how your investments will be allocated, according to asset class. The next three headings—Security Guidelines, Location Guidelines and Risk Control, Monitoring and Review are fairly generic and are already filled in for you.

Phew, it’s done! You now have a financial plan for the rest of your life. From this point on, as your goals change, modifications to your basic plan will be straightforward.

Of course you still have to follow your plan. But you’ll probably find that the process of putting it together has already changed some of your beliefs about how your money should be spent and invested, so changing your financial behaviour may not be as hard as you think.

To make sure you stay on track, you should take the time to review your plan at least once a year, and update it as necessary. It’s also a good idea to pull it out whenever you run into a big financial or life event, such as a market crash, marriage or job change. “It’s a tool to support you through life,” says Mizgala. “Money and household finances won’t be as scary when you break it down into these manageable bits. If you truly commit, it will be a huge boon to your emotional and financial well-being.”

But by working with Allison Marshall, a senior manager at RBC Wealth Management Services, he came up with a plan to save big. Chad set up a family trust and named his wife, Claire, and their four children as beneficiaries (we’ve changed their names to protect their privacy). Then he loaned his $800,000 portfolio to the trust and charged an interest rate of 1%. That way, the income from his portfolio is taxed in the hands of his wife and kids, at a much lower tax rate. In fact, after fees and taxes, he’s saving about $5,000 a year.

Chad’s strategy is called income splitting, and it works especially well with investment income. The wealthy know that while it may seem natural for the main breadwinner to do the investing, if the investments are made (and taxed) in the name of the lower-earning spouse, the returns are taxed at a lower rate. But you can’t just give your spouse the money, because “anything you transfer to your spouse will be attributed back to you,” says Craig Senyk, director of portfolio management at Mawer Investments. Instead he says you should use a low-interest loan and a promissory note. As long as you charge at least 1% interest on the loan (the current minimum allowed by the Canada Revenue Agency), the spouse who borrows the money can invest it in his name, and the returns will be taxed at his rate.

Some affluent investors like Chad even set up family trusts and then loan the trusts money, explains Tony Maiorino, vice-president and head of RBC Wealth Management Services. This strategy enables an affluent family not only to split income, but also pay for expenses with pre-tax dollars.

There are many legal ways you can split your income. You can set up a spousal RRSP in the name of the spouse with the lower income, and the spouse with the higher income can contribute to it. As long as you leave the money in there for three years, when it’s withdrawn, it will be taxed in the hands of the lower-earning spouse at a lower rate. You can also contribute to a spouse’s Tax-Free Savings Account (TFSA), and once you retire, you can share your Canada Pension Plan (CPP) benefits and other pension income. (See Slash your taxes for more on how to use these strategies.)

In some cases you may want to consider more complex strategies, such as setting up a family trust. Trusts allow families to income split with all members of the household, regardless of age. For instance, if a married couple with three kids, ages 4 to 12, spends $5,000 per child on sports each year, they could set up a trust naming each child and spouse as beneficiaries. The family could then loan trust a sum of money, which is invested. They could then pay the $5,000 per year to each child out of the returns on those investments, and little to no tax will be paid on that income. “But do the math,” says Maiorino. It will cost you between $1,200 to $1,500 in legal fees to set up the trust (for non-complicated situations) and every year you’ll have to file a tax return for each child, regardless of their age, in order to report their trust income.

Use tax shelters
If you dream of hiding your money from the tax man in a secret offshore account, keep dreaming. The legality of many such shelters is questionable, and lately the Canada Revenue Agency has been cracking down. Besides, why resort to numbered Swiss accounts when Canada already offers a perfectly legal tax shelter? You know it well: It’s called an RRSP and it’s the best shelter around. (The TFSA is a close second.)

Many high-net-worth investors max out their RRSP and TFSA contribution room quickly, but they make the most of the room they have by putting the investments that are taxed the most heavily inside the shelters, and keeping investments that are taxed lightly outside. The income from bonds and GICs is taxed at the highest possible tax rate, for instance, so wealthy investors keep their bonds and GICs inside their RRSPs and TFSAs. On the other hand, the capital gains on stocks and the dividends from Canadian corporations are taxed at a much lower rate, so those investments can be kept outside of registered accounts.

Another way affluent investors smooth out their tax hit is to use their losses and gains in the stock market strategically. When investors harvest an investment loss — by selling the sinking stock — they can apply that loss against gains in that year and subsequent years to pay less tax.

Statistics show that in 2008 the total amount that Canadians contributed to their RRSPs accounted for only 5.3% of the available room. “So before you even think of a family trust or spousal loan, maximize your RRSP and TFSA contributions,” says Maiorino. “These plans are simple and effective, which makes them no-brainers.”

For those using mutual funds, you could also consider corporate class funds. “This is a family of funds that allows you to switch from one mutual fund to another without incurring a capital gain,” says Mawer’s Senyk. These funds do come with a higher fee, so make sure your investment strategy warrants the added expense.

Yet another way to make your mutual funds more tax-efficient is to select funds with a high tax-efficiency ratio. “Affluent clients look for a tax-efficiency of 90% or greater,” says Senyk, “as they’ll retain about 90% of their money on an after-tax basis.” Finally, you could switch to exchange-traded funds, which are inherently more tax-efficient.

Get some sound advice
Earlier this year Chuck McQueen, the head of a multi-million dollar manufacturing business in Southwestern Ontario, hit his mid-50s and began to consider what retirement would look like. Despite being financially savvy, McQueen knew that if he wanted to legitimately keep more money from the tax man, he’d need to enlist the help of a professional (we’ve changed his name to protect his privacy). So he met with Ted Rechtshaffen, president and CEO at Tridelta Financial in Toronto. He paid $3,000 for a plan that enabled him to extract $2.5 million in tax-free earnings from his business. Not a bad return on his investment.

“Advisers have insights that allow them to seek out opportunities to take advantage of tax laws and strategies,” says Talbot Stevens, financial educator and author of Dispelling the Myths of Borrowing to Invest. “So an affluent investor has no problem paying a $20,000 fee if it means saving millions.”

This, in fact, highlights a significant difference between the affluent and the majority of regular investors: the rich have no problem spending a bit of money in order to grow or preserve wealth because they take a long-term perspective on estate management. Instead of trying to maximize their tax refund every year, the affluent develop a tax plan that spreads their earnings and losses over a number of years. The result is a lower annualized tax rate, which minimizes the taxes they pay overall.

Once your portfolio hits a certain size — say $150,000 or more — it’s time to hire a professional to draw up a proper financial plan. Even if you do most of your investing yourself, a long-term plan can save you tens of thousands of dollars in taxes. A detailed plan can ensure that you make the best possible use of your RRSPs and your TFSAs, as well as the income-splitting plans available to you. Making your investment portfolio as tax-efficient as possible is a complex process, so this is one area where you’ll almost always get your money’s worth by hiring a pro.

For instance, Patricia Domingo, an investment and retirement planner at RBC, recently helped a client in his mid-50s who was avoiding taking money out of his RRSP, because he was already receiving $80,000 a year from a disability pension. The client thought he was avoiding a tax hit, but he wasn’t. “His disability pension was self-funded, so he paid almost no tax on his yearly income,” explains Domingo. By constructing a plan with the client’s accountant, Domingo was able to use the client’s TFSA contribution room and unregistered accounts to withdraw some RRSP funds. “By doing this we will be able to help him keep some of his government retirement benefits, such as Old Age Security.”

We did too, so we went on the hunt for a detailed breakdown of what a typical taxpayer is paying for.

Surprisingly, such a list didn’t exist, so we decided to ask Jack Mintz, taxation expert at the University of Calgary, for help.

Under Mintz’s guidance, graduate student Matt Krzepkowski pored through the financial statements of the government of Canada to figure out where the $6,017 in federal taxes paid by a person making $50,000 in employment income is spent.

Here’s what a receipt would look like.

Here’s how to do it:

Check for fairness
Property taxes, which pay for most municipal services, are the product of your home’s assessed value multiplied by the local tax rate. You can’t change the tax rate, but you can argue that you have been over-assessed. Begin by checking your home’s assessment report. This is typically a computerized estimate of your home’s selling price, based  on sales information from a particular assessment date. Is it fair? If a similar house on your block sold for much less than your valuation around the time of the assessment date, you may have evidence of over-assessment.

Fix factual errors
Assessments are carried out by provincial agencies or municipalities. If you’ve spotted a factual error on your assessment—it claims you have a two-car garage when you don’t—you can often get this fixed by simply calling the assessor. If there are no clear-cut mistakes, but you still think you’ve been over-assessed, you will need to officially appeal your assessment.

Prepare your case
The more unique your house, the harder it is to value—and the better your chances of winning an appeal. “If you live in a cookie-cutter neighbourhood, assessments are usually pretty accurate,” says William Howse, a Toronto tax lawyer. “But as soon as you get anything unusual in features or lots, or get into pricier neighbourhoods, then the computer can have big problems.” An older or smaller house in an expensive area or proximity to a busy road, railway or school can provide a strong case for appeal.

Compare, compare, compare
Find comparable local homes that sold around your assessment date for less than your home’s assessed value. This will be evidence that your assessment is too high. You’ll need to show a minimum 5% difference between your assessed price and the selling price on three comparable houses to have a good chance of winning.

Chose wisely
Selecting the right comparison houses is the true art behind a successful appeal, says Howse. Pick comparables that are within 100 interior sq ft of your own house (30 sq ft for condos), and ensure the houses  are the same quality as yours. For a formal appeal hearing, Howse strongly recommends hiring a certified appraiser.

What are your odds?
Few homeowners challenge assessments, but of those who do, many are successful. Roughly 45% of Ontario property owners  who submitted evidence of over-assessment last year got their valuations reduced.

For most Canadians, doing your taxes is as easy as sending in a T4 and tax return, but if you’re not paying close attention you may be missing out on precious savings. Aurèle Courcelles, director of tax and estate planning at Investor’s Group, says there are a number of deductions and credits that are easy to overlook. If you’ve already filed, here are some of the things you missed — and if you’re waiting until Friday to file, make sure you don’t forget to claim or deduct everything you can.

Deductions

Interest on income producing assets
If you’ve borrowed money to invest or own a rental property, you can claim the interest. It’s something that may be easy to forget, since you can’t claim interest payments on credit cards or your non-income producing property. But if you’re paying the bank every month for an investment loan, you can get a deduction. “You won’t get a slip,” says Courcelles, so make sure you ask the bank for a receipt.

Safety deposit box deductions
This might come as surprise, but you can deduct your safety deposit box expenses. It’s true! Just get a receipt from your financial institution.

Union or professional dues
Those pesky union or professional dues getting to you? You’ll be happy to know they can be deducted too. This only works if your employer is not paying for them, but for many lawyers, chartered accountants and other Canadians with a professional designation, these costs come out of pocket.

Moving expenses
Good for students and workers. If you moved more than 40 km for a new job or school you can deduct those expenses. Everything from renting a U-Haul to hotel and meals are covered.

Credits

First Time Home Buyers Credit
Buying a home is stressful and costly, so you may not have been thinking much about tax time when you purchased your new abode. Now that you’re crunching the numbers though, make sure you claim the First Time Home Buyers Credit. As the name suggests, this only applies to Canadians who are buying their first place, and you had to purchase the home after January 28, 2009. You’ll get $750 back with the credit and “you can make as much or as little as you want, as long as you bought a house,” says Courcelles.

Medical expenses
Many Canadians have the misconception that all our healthcare related needs are covered. Not so. We still pay for medicine (if an employer doesn’t cover the full amount), some or all dental costs, extra doctor fees, orthodontists, chiropractors and the list goes on. If your bills exceed 3% if your net income, or $2,011 — whichever is less — you can claim those expenses.

Courcelles says it’s best to pool these expenses onto the lower income spouse’s return, so that 3% will be exceeded quicker than if it was on the higher earner’s return. It’s important to note that you can only claim what you pay yourself. If an employer covers 80% of medical expenses, you can only claim the other 20%.

Eligible dependent credit
This one applies, in most cases, to single parents. If you’re raising family without a partner — whether you’ve been divorced, widowed or are a single parent — you can get this credit. The eligible dependent amount is $10,320 minus the dependent’s income. “If you have a 5-year-old child who has no income you multiply the $10,320 by 15% and that’s your credit,” says Courcelles. This also works for child support payments, and you can claim the credit if your spouse makes less than the eligible dependent amount.

Four tax tips you already know about, but a reminder never hurts

Don’t file late!
It seems like a no-brainer, but make sure you send that return in by, or on, Friday April 30. Patricia Lovett-Reid, senior vice-president with TD Waterhouse, says the Canada Revenue Agency will charge you 5% on your balance owing plus 1% every month it’s late after that.

Capital losses and gains
If you sold your stocks before the market recovered last March, there’s a good chance you incurred capital losses. You can offset any gains you made with losses in the previous three years. So, if you were hit with gains in 2006, use your losses to offset those costs. (And don’t wait — this is the last year you can reduce ’06 gains). If you can’t use the capital losses, you can carry them forward indefinitely — so when you have a good year in 2010, you won’t have to stress over any capital gains.

Pension splitting
You had to do this in 2009, but don’t forget to indicate how you allocated your pension. A few years ago the government allowed retirees to transfer up to 50% of their pension to a (presumably) lower income spouse. That, theoretically, should even up the spouses’ tax brackets, translating into less tax paid on a whole.

Home Renovation Tax Credit
There’s no chance you forgot about this one, right? Probably the most talked about tax credit in recent memory, the Home Renovation Tax Credit allowed people to claim renovation expenses between $1,000 and $10,000. A few things to remember: don’t send in your receipts, just be sure to keep them around in case the CRA wants to see them. Your contractor had to have a GST number and you can add up many smaller jobs so it equals at least $1,000. It’s a good credit, but don’t get too excited — the HRTC wasn’t renewed past January 31 of this year.

With Fraud Prevention Month well underway, the Canada Revenue Agency recently issued a news release “reminding Canadians that the minority of tax preparers and promoters who try to make money at the expense of Canadian taxpayers are not getting away with it.”

“Since 2000, 19 tax preparers have been assessed nearly $1.7 million in third-party penalties. Audits of 15 tax preparers are currently underway,” says the CRA release.

Tax preparers have been identified by CRA as a group at higher risk of tax non-compliance. Indeed, they are one of three areas targeted for special prosecutions through a special CRA initiative labeled Project Trident.

The convictions section of CRA’s website describes some recent cases of tax preparers who bent the rules and were subsequently convicted. Here’s five:

1. Martine Laprise of Saint-Sauveur Quebec was fined $41,252 for providing third parties with a total of $518,197 in false child-care receipts. She also “hired fictitious caregivers, who declared income equal to the amounts on the receipts issued in order to avoid raising suspicions from the tax authorities [and expenses were claimed against this income to allow the parties to avoid paying income tax].”

2. Elavalakanar Kanakaratnam of Guelph was fined $96,000. “Kanakaratnam had gained a reputation with his clients, mainly new immigrants with no knowledge of Canadian tax laws, as someone who could get them substantially higher tax refunds than other tax preparers. To fulfill this claim, Kanakaratnam fabricated deduction amounts, including child care expenses, interest and carrying charges, employment expenses, charitable donations, and property tax credits.”

Kanakaratnam also directed refunds totaling $160,377 to himself and his wife by changing direct deposit information from his clients to reflect banking accounts maintained by himself and his wife. A routine CRA review … “showed 31 tax refunds for 27 different individuals were being deposited directly into one of two bank accounts.”

3.  France Desjardins of Grand Falls, New Brunswick was sentenced to three months in jail and fined $35,991 for preparing fictitious T4 information slips used by another tax preparer to file fraudulent income tax returns. This is the second time Desjardins has been charged with tax evasion (on May 13, 2008, she was fined $32,093 and sentenced to 16 months of house arrest). Two other Grand Falls, New Brunswick tax preparers are facing related tax evasion charges.

4. Daniel Paradis of Edmundston, New Brunswick was fined $275,196 and sentenced to a conditional term of two years less a day of house arrest. He operated a tax preparation business under the H&R Block banner; a CRA investigation found that he had obtained fraudulent income tax refunds in excess of $250,000.

5. William Ankomah of Brampton was sentenced to just under two years house arrest and fined $50,000 for overstating charitable donation receipts from various charities on his clients’ income tax returns.

From Larry MacDonald’s Investing Ideas blog on CanadianBusiness.com

Currently, Canadian investors pay 5% GST on their mutual fund management expense ratios (MERs), but no provincial tax. Under the new system, both taxes will be applied, meaning the tax on MERs will jump to 12% in B.C. and 13% in Ontario. As a result, the mutual fund industry — backed by an odd bedfellow, the federal NDP’s Olivia Chow — is battling it out with the federal Tories and Dalton McGuinty’s Ontario Liberal government to have the tax increase on MERs killed.

If implemented, the tax will have a big impact on most Canadians’ nest eggs. For example, if you invest $10,000 every year for 25 years, assuming a management expense ratio of 2.6% and an annual rate of return of 6%, you will end up paying a total of $9,100 more in tax, according to Alan Rowell of The Accounting Place in Stoney Creek, Ont. Or, say you have a portfolio of $250,000 in mutual funds. If you keep it for 25 years, you will end up paying $19,800 in additional taxes. Ouch.

Think you’re safe if you don’t live in Ontario or British Columbia? Think again. It’s not clear at this point if the tax will be applied based on the residency of the purchaser or the location of the fund. Most Canadian fund companies are based in Ontario, meaning the tax could impact investors across the country. Fund companies aren’t sure how they would administer the new tax, and it’s possible it could be averaged out amongst the owners of national funds, meaning everyone would pay a portion of the tax, regardless of where they live. (In Nova Scotia, Newfoundland and Labrador and New Brunswick, where they already have the HST, MERs aren’t subject to the provincial portion of the tax.)

Mutual fund industry representatives say the tax will make it harder for people to save for retirement, just when they need all the help they can get. “Seventy per cent of the mutual funds sold sit in RRSP vehicles, so this is really a tax on retirement savings,” says Joanne De Laurentiis, president and CEO of The Investment Funds Institute of Canada. “Given we have public policy concerns about the level of savings that people have for retirement, we think it’s problematic that we would tax them while they’re trying to save for retirement.”

The dispute took a bizarre turn in September, when it was reported that officials in Ontario Finance Minister Dwight Duncan’s office threatened to release a document showing the negative impact of high mutual fund fees on investors if the industry continued to complain — a claim the government later denied.

Industry representatives haven’t given up yet. They are still meeting with the federal and provincial governments in hopes that mutual funds will get an exemption, like the one given to books and children’s clothing. But they may be fighting an uphill battle. “The minister has publicly cautioned against making assumptions that any further exemptions will be applied to the HST in regards to fund companies,” says Alicia Johnston, press secretary in the finance minister’s office. In the House of Commons in October, federal Finance Minister Jim Flaherty didn’t offer much hope either, saying it was a provincial issue.

So what will this tax grab mean for your retirement planning? In short, it means that less and less of the money that you deposit in your RRSP is actually making it into your account. The solution that many will turn to, the fund companies fear, is to invest in products with lower fees, such as exchange-traded funds (ETFs). ETF management fees will also be subject to the HST, but since their fees are much lower in the first place, the tax increase will be small.

Property taxes are usually based on what government assessors think your house would fetch on the market. The higher the assessed value, the higher your taxes. A homeowner in Mississauga, Ont., with a house valued at $300,000 will pay $500 less in taxes a year if he can prove it’s worth only $250,000. His total savings could multiply to $2,000 since homes are assessed only every four years or so.

Getting your assessment lowered is time-consuming but not impossible. You should start by calling your local assessment office and asking to speak to the person who valued your home, says Bob Topp, chairman of the Coalition After Property Tax Reform, a citizens group based in Toronto. That’s what he did four years ago when the assessment on his cottage near Parry Sound, Ont., doubled. Topp, a retired investment specialist, told the assessor that since there was a busy road going right by his cottage, his property was less desirable than his neighbors. “I just kept talking and he finally agreed to lower my assessment.” Though Topp’s taxes rose, his appeal cut the amount by nearly $1,000.

No matter who you speak to, be prepared to explain why your home is overvalued. A home’s value is primarily determined by the neighborhood it’s in. But there are special circumstances that assessors sometimes overlook, says Paul Cappa, a consultant at Cohen Highley, a law firm in London, Ont., that specializes in real estate. If your house is on the edge of a busy street or backs onto a railroad track or industrial property, it’s worth less than a house on a quiet tree-lined street just a few hundred metres away. The condition of your home is another factor. A house without a paved driveway is worth less than one with a paved drive.

But to prove your case you have to know what other homes are worth. The easiest way is to identify houses that you think are comparable to yours and that have recently been sold. Then ask the new owners what they paid. In some provinces you don’t even have to leave your living room to get detailed information. In Ontario, for instance, the Municipal Property Assessment Corp., which handles assessments, will let you compare your house to 24 others in the same neighbhorhood at https://portal.mpac.ca/wps/portal/.

Cappa also advises you to check and see if there are any errors on your home’s assessment. Maybe the assessors thought your basement was finished even though it isn’t, or they thought you have two washrooms when you only have one. “They may not even have the lot size correct,” he says. “It’s little details like that which can ultimately make a difference.”