MCO Private Wealth reposted this
President, CEO - Freeing all Canadian captive advisors/clients. Improving Canadians knowledge of Corporate and Personal taxation, MCO Private Wealth
My total debt service ratio is like 70 percent, here is why that's amazing If you're a business owner or an incorporated advisor, you control your own salary My salary is quite low I don't need much to live off After my mortgages and car, most of my expenses are quite low I look like a financial disaster to the bank, on paper Because they only care about what I pay myself, for some reason Not how much I have in retained earnings It's a strange balance trying to get debt, while keeping your tax bracket low So I am asking all advisors What do you do? Take a huge tax bill to take on debt Or focus on tax planning? MCO Private Wealth Our focus is on paying less taxes Not looking good to the bank #CFP #taxes #debt
I'm at a point in life where I've acquired the assets needed for financial freedom which means my goals have shifted fully to managing taxes. If I needed a new mortgage, then I would likely increase the w2 income from my S-Corp, but like you, I'm more concerned with retained earnings and storing/creating value in my business. Retained earnings + tax management >cash flow for me.
Definitely a more nuanced approach is necessary.
It’s tricky but luckily there are some programs under what’s called “stated income” which allows for the use of business income to be considered when qualifying. Their are options available on both the insured and conventional side! Here’s an example of the insured program. https://www.sagen.ca/products-and-services/business-for-self/
Agreed - that's why it's important to have other lenders in the market who don't just look at income documents, but your business as well. I'm against the oligopoly we have in lending, more lenders/choices is always good for the client as well as for innovation in the market.
Tax planning all the way. If you are in that situation, I'd recommend having a conversation with some credit unions. Lending practices differ credit union to credit union but are typically significantly more flexible than the big five.
Similarly, many people for whom who I file insolvencies have credit scores above 800. ‘On paper’ can mean nothing in both ways.
Good insight
How can optimizing your salary and expenses transform your financial future? What’s one financial strategy you’ve found most effective in reducing your tax burden?
President, CEO - Freeing all Canadian captive advisors/clients. Improving Canadians knowledge of Corporate and Personal taxation, MCO Private Wealth
1moThe banks have gotten pretty poor at assessing who can qualify for mortgages. Income is only half the battle. Poor money management can mean an income that has 0 ability to service debt. What do you think mortgage qualifications should also include?