Historical Opportunity from the Lock Down Chaos

2020 tax year (April 2021) should have significantly higher refunds than 2019 tax year. To many it comes as a great relief or bonus, to others it’s too little too late. A lot depends on what your employment was during the year and what freight you were hauling. Some lanes dried up and others expanded. The vast majority of drivers/operators have survived, many even thrived not counting those households who have gone down to one income rather than two. Personal finances and cash flows have changed dramatically as attitudes of survival and fear influenced all we did.

During the restrictions buying habits changed significantly enough to change entire industries… maybe forever. Personally I found the lack of restaurant access traumatizing. I actually didn’t realize how much I became emotionally dependent on someone taking my order… and then enjoying the meal in public. I still can’t seem to accept eating food in a vehicle, that behavior still only seems appropriate when I’m in a serious time crisis.

Buying habits have changed venues also, as people starting purchasing things on line rather than shopping in store. Personally I seem to only relate to online purchasing when I know what I want. I used to enjoy “shopping” now I’m a simple hunter-gatherer. I found I spent less, however, I’m sure there are those whose spending increased due to online selection and availability. The point is that people’s habits have changed, collectively entire markets and opportunities have appeared and disappeared. What typically took a decade or more to shift, only took a year. For some, myself included, it is too much too fast. It’s not wrong, just different habitual preferences.

For some their perception of cash and debt wildly changed their habits. When they combined their fear of economic collapse they lost site of their goals. A close friend so dramatically changed their lifestyle due to fear they stopped making payments to anybody and frantically stock piled dehydrated and canned food. They were over 90% paid off on their mortgage and then just stopped paying it last summer.

They lost sight of their financial goal, which was independence. They got distracted by the events and never looked back at what they were accomplishing. As of writing of this article and after my counsel, they still haven’t made a payment. Maybe that just shows how little people listen to me.

Change is always unsettling, the important thing is to get your feet back on solid ground as soon as possible. When it comes to finances its usually never too late to correct your course, especially during the COVID crisis. I know people high enough up in banking to state their “foreclosure” rate has virtually disappeared. However, that’s not to say that 2021 and 2022 will not be the year of bankruptcies. I sure hope not, but I know one loans officer who estimated 20-30% of his clients will be declaring in 2021/2. He may have a client base over exposed from the norm but its not a good sign.

As an Operator reducing debt personally and business wise should be the focus of the next two years. Those operators who got a CEBA loan should start thinking about reducing it, December 31, 2022 will be coming faster than we think.

As a company T4 driver, when considering your tax refund remember your after tax goal… debt free living. Every bit counts. It may not feel that way some times but its amazing how good consistent financial management adds up to peace. A T4 company driver should be focused on debt reduction while its still possible.

CRA moved the TL2 meal allowance from $51.00 ($13.60 after tax)to $65.00 ($17.30 after tax) that’s a 27% increase in Non-refundable Tax Credits. With the average drivers tax return being $3500 a year in 2019 the new return will be about $4500. That represents one of the biggest jumps in the TL2 allowance since it was associated with the trucking industry back in 1984 (and slightly before). For a complete chart of the TL2 allowance history in Canada go to www.makingyourmilescount.com/about/research. The chart compares the TL2 non-refundable tax credits (red) to the blue non-taxable benefits (as described in my book “…taxes, taxes, taxes”). The real tax savings for an operator isn’t in the TL2… it’s in non-taxable benefits… which increases bi-annually and independently of lock downs political pressure or TL2guildline changes.

Getting and extra $1000 tax refund, if invested properly can make a phenomenal difference in the future. Be safe, be wise.