Canadian Personal Finance Blog

I Spent How Much Last Week

Quicken is a useful tool for me, to track my family’s spending habits, but last week was an interesting week for me.

I started working full time in 1986, so some might say more than a generation ago (depending on how you count), and when I was first hired, I was paid a reasonable wage (not an exorbitant one, but reasonable). My wife and I lived on this income in a reasonable apartment, and we lived a frugal but reasonable life.

Flashback to last week, where in two purchases I eclipsed my yearly gross income for 1988 (2 years after I had started working full time). What did I buy? A house? A yacht? Nope, our orgy of spending was on:

• A used Toyota Sienna (stop snickering, it doesn’t have the accelerator pedal issue (at least not yet)).
• A knee brace for my daughter who has damaged both her MCL and ACL

That’s it, yes a fairly big expenditure, but remember this is more than I made gross (before the CRA got a hold of a lot of my income). The knee brace is actually about the price of 3 months rent from back then, but it is a necessary purchase (and I will be reimbursed (I hope) in some way from my health plan).

Other interesting factoids from these purchases:

• The van cost about 43% less than our last van which we purchased new (and paid off, with 0% financing over 5 l-o-n-g years).
• We were offered “financing” from Toyota of 6.5% annually, I pointed out that my bank would give me a rate of nearly half that, they didn’t seem to care.
• The purchase was not financed, and if I assume a 4.0% financing rate I have saved in the neighbourhood of about $4000 in interest charges (assuming a pay back over 4 years or so).
• The knee brace comes in many interesting colours and styles (colour styles), including: Snakeskin, Butterflies and Star Spangled Banner. My daughter chose metallic black (I think Black is the new Black this year).
• Didn’t get any car matts from Toyota, but given the recall issues about the placement of their car matts, maybe it’s a good thing I bought some replacement matts at Canadian Tire
• Believe we got a full tank of gas with the Van (given gas prices that’s about $100 added in)
• Got a reasonable trade in for the my GM Montana (that had a distinct odour of Anti-Freeze), so no complaints there
• Toyota spelled backwards is Atoyot, surprised there isn’t a car called that now.
• Knee Braces should never be worn backwards, or your knee will end up bending like an Ostrich’s knee, which is bad.
• Certified cheques cost more to get from my bank, than a bank draft, so I saved $2.50 by getting a bank draft.
• What is undercoating for, and why does it cost so darn much?

Lots of interesting factoids (where factoid means things interesting to me, and most likely me alone).

Employment Improves While Market Burns

Friday, Stats Canada published their monthly update on the Labor Force Survey for January and the numbers were a little better than the prognosticators were guessing, as employment increased by 43,000 jobs last month (the number bandied about I had heard was 15,000), which actually pushed the unemployment rate down 1/10% as well.

This is relatively good news, given the gloom and doom from the stock markets and the commodities world of the past few days (at the end of last week).

Employment gains in January were driven by women aged 25 to 54 and youths. This was the first notable increase for youths since the start of the employment downturn in the fall of 2008.

So more part time jobs, but at least work is out there, for the youths.

Employment Curve up to January 2010

Unemployment dropped a little, which should make folks happier, but it is still well over 8% which is a number that does not reflect a healthy thriving economy.

Unemployment Graph up to January 2010

Much of the gains were seen in Ontario (30,000), but Ontario’s unemployment rate stayed at 9.2% as more folks were also looking for jobs, which means unemployment is actually on an upward trend since the summer.

The Big Table

Here is the Big table from Stats Can, find your age group and see what happened to folks of your age and gender.

Video: Cliff Stoll Hacker Catcher

Cliff Stoll is an interesting “hero” for techno-geeks like me, and seeing that he did a talk for Ted, made me want to share it with you, good reader. His book The Cuckoo’s Egg is a very interesting read.

He found a KGB hacker, even though his expertise is in Astronomy, but he decided to figure out how all this Internet thing works, and became a techno-sleuth while doing it. His frenetic pace and stacato delivery is both wild but also refreshing to hear (OK I don’t think I could work with him, he might drive me nuts, but he is still an amazing person to listen to).

Clifford Stoll captivates his audience with a wildly energetic sprinkling of anecdotes, observations, asides — and even a science experiment. After all, by his own definition, he’s a scientist: “Once I do something, I want to do something else.”

Random Thoughts: Financial Shock Collar?

As my regular readers see, sometimes my mind wanders to weird places and I must admit I am not sure where most of this came from. On Sunday night at 5:00 PM I had nothing to write for Monday, but looked at the GPS I had just received from Christmas, started writing about a Financial GPS and from their we got to Financial Shock Collars and here we are Friday with a whole week of very odd postings by me.

I empathize with those in dire financial quandaries, but in some cases the Financial Shock Collar may be the only answer. As Mrs. C8j pointed out in a comment she made, a lot of issues with money in couples comes from lack of communication, so maybe it’s time to start talking to your spouse about money? Just an idea.

Random Shocking Thoughts

This week other Personal Finance Bloggers found more solid issues to write about, and some are well worth checking out in this weeks Random Thoughts:

• Given the C.D. Howe institute put out a very good e-brief Saver’s Choice: Comparing the Marginal Effetive Tax Burdens which has caused many bloggers to discuss this interesting point.
• Michael James spoke of this in his post RRSP versus TFSA where he discusses various scenarios about putting your money in either savings vehicle.
• The Canadian Capitalist also posted talking about the C.D. Howe’s take on TFSA versus RRSP where he talks about the Howe findings specifically.
• Canadian Financial DIY also comments on the Howe findings in New Data on TFSA vs RRSP and Canada’s Rube Goldberg Tax System.
• On a related topic, Larry MacDonald talks about RRSPs and business owners and how business owners might want to think about setting up RRSPs for their retirement, or perhaps even TFSAs?
• Preet wraps up his expose with Severing the Link Between Price and Weight Part IV.
• Million Dollar Journey talks about where they might get the money to put into their RRSP or TFSA with a the post How I saved 70% on my grocery bill, remember 50% off meat should be eaten the day you buy it too!
• Gail Vaz-Oxlade writes an important spiritual posting about Keeping Focus, which is important in this day and age, don’t get distracted from your goals.
• Let’s stop the madness is a very good rant by Ellen Roseman about the dirty tricks being played on some consumers, read this and be warned!
• I hadn’t noticed but Dave over a Investing Intelligently Got Laid Off, now it looks like he has found something, but does bring home that the alleged “recovery” may not be fully entrenched yet!

Enjoy your weekend, and remember, if you think you need a Financial Shock Collar, please get some help!

On Monday, Labor numbers which are out today!

No Bank Would Do That!

It has been pointed out that my post yesterday about a Real Service for Chronic Over Spenders is at best naive at worst unlikely to ever happen. Why wouldn’t a bank run a service like this? The answer is simple, it does not make them any money.

Banks make money on:

• Customers who carry balances on their credit cards.
• Customers that use the over-draft service available to them.
• Folks with bad credit that don’t get preferential interest rates.
• Consumers who do not carry the minimum balances in their bank accounts to get free banking (and thus pay $25 a month in service fees)
• Debtors who do not pay back their loans quickly (i.e. they do not make over payments)

This is an interesting paradigm for the Banks.

They must portray themselves as being helpful, trustworthy and someone who wants you to succeed in your financial journey, when in fact anyone who does succeed, does not make the bank a lot of money. I have friends who have paid off their mortgages in 5 years instead of 25 years, saving themselves tens of thousands of dollars (but in turn costing the bank tens of thousands of dollars in lost interest earnings), yet the bank must publicly say that this is a good customer, even though they are bad for their business.

A good bank customer makes minimum payments on their debts (especially their credit cards), incurs many service fees (or penalties) and rarely if ever talks to anyone in the bank about their issues. Reading that sentence it seems to be an oxymoron, in that it seems to be a description for a bad client, but if all you look at is the bottom line banks will fight over getting these customers.

How do they fight over them? They offer interest free credit cards (for the first six months), and lower interest rates on loans (for the first year), and other interesting marketing gimmicks (free iPods even). These customers make banks much more money than someone who is careful about their debt load, and that keep meticulous records of every purchase and pay things off quickly.

Conclusions

This week I have let my imagination run a little wild, on the problem of how to help people who spend too much or that are chronically in debt, but at the end of it the answers are evident:

God helps those that helps themselves –Anonymous

The banks will help you, but be careful of the help you get –Big Cajun Man

It is kind of like the guns don’t kill people, people kill people argument the NRA uses, in an obtuse way of thinking. People get into debt trouble because they can’t control their spending, and try to fix their spending issues with more debt, which the bank gladly obliges, and the financial death spiral (TM) begins.

Final conclusion:Getting out of debt is hard work, choose your tools to get out of debt carefully (unless you would like to try out a prototype Financial Shock Collar, then contact me).