We had a strong start to the morning for the TSX. I thought we were going to exceed 20,300 points, but we closed the day at 20,260.13. It wasn't a bad day, and as long as we remain above 20,000 points, I will be happy. My non-registered portfolio closed the day at $145,789.22, my US portfolio at $5,206.19, my RRSP stocks-only portfolio at $65,387.33, and my TFSA portfolio at $127,540.48. The debt on my margin account still remains the same at $44,066.21. I have $61,290.24 available to invest on margin, but of course, I won't be investing that money anytime soon, especially at an interest rate of 8%.
In 2022, I was charged around $2,500 in interest for my margin account. It wasn't an excessive amount, but if I had kept my margin debt at $46,787.51 in 2023, the interest charged would have been $3,743. While I've never had an issue with managing a margin account, the current interest rate of 8% is becoming a concern for me.
I just filed my 2022 tax return and I'm expecting a $1,000 cash refund. This refund is due to my contributions to my RRSP, expenses for dental and eye care, and the interest earned on my margin account, which I declare as a financial fee every year. Despite my job and dividend income, and some capital gains, my income still exceeded $70,000. It's difficult to pay less tax without contributing more to my RRSP, but I'm not keen on doing that at the moment.
Since I'm expecting a tax return of $1,000, I can see that my margin cost me $1,500 directly out of my pockets for the year 2022. It's not an excessive amount for a bit of fun on margin. However, in 2023, with my margin debt at its current level of $44,000, it will cost me a whopping $3,520. If I expect to receive the same $1,000 tax refund as in 2022, my margin account will cost me $2,520, which is equivalent to $210 per month. It's beginning to add up. Additionally, there may be tax increases to consider, so I may not receive a $1,000 refund for my 2023 tax income.
At a certain point, it's not worth keeping my margin debt that high, which is why I began to pay it down. I am thinking of adding an extra $2,000 to it.
While the TSX had a decent day and all of my portfolios are performing well, I am becoming increasingly concerned about the high-interest rate on my margin account debt. I believe that my decision to pay down my margin debt is a wise one. The cost of maintaining such a debt could eventually outweigh the benefits of the investments held on margin. With the potential for tax increases in the future, I am considering all aspects to ensure long-term financial stability.
You're a very wise and smart woman!
ReplyDeleteThanks Jo, I try to be :-)
ReplyDeleteHaven’t read some of your articles recently. Still when I catch up and read a few I find them very interesting to read, especially your life in New Brunswick during this winter. Decluttering you’ll always will do, so don’t fret. I was told by my tax accountant to only keep 6 years of tax stuff. Well I’ll keep 7, just in case the rest will be shredded. Going thro papers is very tiring and better to do it when it’s quiet and actually now, before the weather gets too nice and more interesting things happen like living!
ReplyDeleteTwo things ….I got of track. Get out of debt asap. The next is RRSP in one way it’s ok, for a reduced income down the road. But if you have a pension plan at work that should be enough. You’ll only end up paying more tax and may be clawed back.
So enjoy your life!