Canadian Personal Finance Blog

Random Thoughts: $100 Hot Dog? Seriously?

Yes P.T. Barnum’s statement about a Sucker born every minute continues into the 21st century with a restaurateur willing to charge you $100 for a Hot Dog. Dougie Luv is willing to charge you $100 for a Dougie Dog which is infused with $2000 cognac, lobster and Kobe beef and deep fried in truffle oil, but can I get poutine with that? Yes this is possibly the oddest dietary/financial choice you could have made this week, oh and call ahead because it takes 10 hours to prepare too. I’d sell you a hot dog for a bargain price of $10!

For my Chinese readers, Happy Year of the Water Dragon!

The interesting story of the week for me aside from ludicrously expensive hot dogs, is the cat that got loose in the cockpit of an Air Canada causing the plane to be delayed while the crew attempted to extricate the feline. Now that is what I call security!

In other news Newt Gingrich is promising a base on the moon by 2020 and his GOP opponents agree this would be a great plan, if Newt was sent their (by himself).

All hail the New York Football Giants and their birth in the Super Bowl, can they repeat history? I have no idea, any prognostication I might do will assuredly cost you money, so don’t ask me, but I will be wearing my Phil Simms shirt on Super Bowl Sunday (can’t find my Y.A. Tittle shirt). Here is your Giants Trivia to astound your friends, “What two Super Bowl winning coaches, coached the Giants offense and defense in 1956?”, answer at the bottom of this article.

Weekly Recap

No $100 Hot Dog posts this week but still some interesting subjects across the board:

• Fun and Sunday thoughts wondered just how hard it could be to become a cruise ship captain
• The economy continues to sputter along but inflation slowed a little to end 2012 but is this a slow down or a simple lull?
• I ask this question a lot these days can I retire? The answer is unequivocally, NOT NOW! but maybe later.
• More tales from behind the untaxed money wall should bring fear into your financial heart.
• Does Canada need a Buffett rule? I am not sold on the concept, given I have lived on both sides of this argument. A flat tax is always an interesting idea, but hard to implement.

And thanks to those who added me on Twitter I am now over 980 folks who follow me, carumba. Check out my facebook page as well.

Links for the Week

After Suze Orman’s scathing Twitter attack on we financial bloggers, this week was a little more sedate in terms of controversy:

• Briana at 20 and Engaged made a nice synopsis of Ms. Orman’s debacle with Suze Orman’s “Approved Card” gets DENID; Thinks PF Bloggers are Idiots, which runs through the entire Twitter exchange (I wasn’t part of it, too bad, looked like fun)
• Tom at Canadian Finance Blog asks are group deal vouchers all theyr’re cracked up to be? In Ottawa we have vendors who aren’t honoring the deals for various reasons (mostly they can’t afford to honour an oversold set of coupons).
• Mr. Money Mustachewonders if it is time to gaming the system with rewards credit cards, which is a risky game and you better read all the rules involved.
• Larry MacDonald contends that most Boomers have the wrong financial advisor and given most are about to retire, they had better find a good one soon.
• Michael James wonders if Rob Carrick got it right when he suggested locking in a natural gas price as usual MJM does the math for you.
• Canadian Capitalist is busy working on a bunch of interesting projects (I had coffee with him over the holidays), but keep checking his site, he may be back soon.
• Yes I am Cheap goes back to basics with get out of debt in 2012: how much do you owe? and then figure out how to pay it back
• Our happy finance cabaleroMy Own Advisor points out that we should be thankful Canada, austerity doesn’t live here, but wait, cuts are coming in the Government, maybe not as drastic as Greece, but it will mean less services, taht is for sure.
• Echo of Boomer and Echo discusses using TFSAs in retirement one of those things your financial advisor should have a plan on how to use too!
• Sustainable PF gives us a review of online textbook rental - eCampus.com an interesting idea, that might save some folks some money.
• Miranda at Planting Money Seeds, asks what do you do when your family is on vacation — and you are not, which is rhetorical for me, since I don’t go on vacation (but my kids do).
• Proving that sometimes the rules change (and not for the better) Dad V. Autism wades into the argument Dad V. Redefining Autism the new definition is kind of like wearing bigger pants and then claiming you have lost weight.
• Preet had Tusk Trader guest post and ask the interesting question is it time to buy RIM? My experiences with Nortel and that debacle means I will never believe a High Tech company when it says it can return to profitability.

Carnivals this Week

I was included in the Canadian Carnival of Finance #72 with my piece Quicken 2012 review

Other Bookkeeping

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Giants Trivia Answer

That was pretty easy really, Vince Lombardi and Tom Landry (I hadn’t realized that until I read Giants: What I Learned About Life from Vince Lombardi and Tom Landry)

Does Canada Need a Buffett Rule?

Warren Buffett has been saying to the media he thinks the American Tax rules are flawed if he ends up paying less tax (as a percentage) than his secretary does, and while I applaud his sentiments, I think he is blustering for the media (i.e. he knows the rules aren’t going to change quickly, so he can say what he wishes about this topic).

President Obama has taken Buffett’s statements a step further and has dubbed his push for tax reform as the Buffett Rule, where as a percentage rich folk should not pay less than folks who work for them. A good explanation I heard was we shouldn’t people who make money from money less than those who work for a living.

Is this a problem in Canada? Yes,  wealthy Canadians can have a lower tax rate depending on how they work the system, but is that a problem?

A few examples of this would be:

• Living on Dividend Income, you will pay less (as a percentage) than someone who earned the same amount in salary. If you make less than $40K it’s almost a negative tax (wild)
• Capital Gains laws are such that if you make money on the sale of stocks, or other capital gain devices, you will pay less than someone who earns a salary.
• Donations and RRSP tom foolery can lower their income as well, as well as trusts and such too.

I have only scratched the surface, there are many more tax swerves out there that really are only available to those who the money to use them (i.e. not for we poor folk).

Should Canada think about a Buffett Rule? I am not really too sure on that one, our tax rates are still pretty darn high (even for the rich, compared to American tax rates, Canadians are paying significantly more), and more power to you if you can dodge the tax man has always been my view of things. Should we eat the rich with taxes? Your opinions?

Tales from Behind the Untaxed Money Wall

For the past year and a half I have been attempting to buy into the Federal Government Employee pension plan, and it all finally went through a while ago (I am planning on doing a string of posts outlining the exact events, and how much fun it is to deal with the Government from the inside, at a later date), and after the dust had settled, it turned out the government owed me money (good they are giving it back, bad they had it for so long).

All the moneys I was using was on the other side of the Untaxed Moneys Wall (i.e. the money was in RRSPs, and LIRAs), and I have learned the importance of ensuring that moneys from the other side don’t accidentally end up migrating over to the taxed side of things, because this can cause no end of headaches and troubles for you (as well as an inflated tax bill). I learned this when previously the bank had put money into my RRSP, that should have gone into my wife’s Spousal RRSP (that was a big mess), so you must be diligent that moneys go where they should and take the correct route to that end point.

All of this is a preface to the fact that I received an RRSP contribution receipt from my bank for a substantial sum of money. I saw the envelope and trepidation was already running up and down my back like fire ants, but when I opened the envelope I spewed a fountain of expletives, questioning the parenting and intelligence of the bank folk. As soon as I saw that receipt I knew my life was going to have many hours lost attempting to remedy this situation.

My first call was to the CRA help line (which isn’t too busy, yet), and got a nice young man who agreed, that I should start with my Bank to find out how they received the funds from the Government Pension folks, and see if they are the ones that screwed up (i.e. thought the money was a donation and not a transfer like it actually was), and get them to fix the problem, because this mistake can cause:

• Obliteration of any remaining RRSP room I might have had, since the CRA gets a copy of this receipt as well and a nasty letter or possibly an audit from the CRA asking me “What’s your game?” when they realize this isn’t really a donation but a transfer
• Endless hours on the phone trying to fix this (unfortunately this one is a guaranteed occurrence)

If the bank then claims they received this as a contribution from the Government Pension folks, then I am in a right pickle, because then I have to get the Government Pension folks to send a letter to the bank saying, “No that wasn’t from the Taxed Side of the Wall, it is from the UNtaxed Side of the Wall”, and given how long my Service Buyback has taken so far (and the number of hours I have wasted on the phone), will be a Headache of the Himalayan variety.

I’ll keep you all posted on this one, but I am not very optimistic it is going to resolve quickly (maybe it’s time for another visit to the bank and some more free banking for my troubles).

Can I retire?

I was reading a very interesting article on-line by Mr. Mustache Money about the shockingly simple math behind early retirement and the predictor function used is surprisingly simple, but it also made me wonder when I can retire.

Being a Civil Servant I have a nice pension plan (with a medical plan (for now, we shall see what comes in the future)), but for now I am effectively saving for my retirement by paying my pension premiums, and I can (if I manage to keep a position until 65) retire with a full pension (i.e. the maximum I can earn in the pension system which is 70% of the average of my 5 best years of salary). Mr. Mustache’s calculations don’t take into account pensions, it is more a how much must I invest and save to then live on type of calculation (but it cleverly takes into account your ability to live with less income because you are saving too).

For me the even easier question is when will I be able to make the following function true:

limit X -> 35  (X > 20 already)

X * B  * 2%  == Living Expenses for Year

Where B is my average salary over 5 years.

Pretty simple, really, I will view any RRSP moneys I still have as slush funds for fun things, but my day-to-day expenses and living stuff had better be down to 70% of what they are now! The other fun variable in this is that my pension income can be split, so the equation is assuming Net Income not Gross, since what matters is the folding green that ends up in my bank account, not some imaginary number that means nothing.

My real suspicion that unless I get a windfall of money somehow, I will continue to work for another 14 years (job & health willing), and I will then have to retire and I may then force myself to live on less? An interesting quandary, or maybe I will then end up as a greeter at Wal-Mart or work at McDonald’s.

If anyone knows how to make the above equation look like a real Limit equation, feel free to comment as well.

Inflation Slows a Little to End 2012

Year over year 2012′s Consumer Price Index ended at 2.3% according to our friends at Stats Canada. The drop from last month’s 2.9% is being attributed to gas prices moderating (i.e. not increasing as fast, and in some instances almost dropping a smidge), and car prices dropping a little.

This is not to say that Gas prices are really dropping, but that the increase compared to last year at this time doesn’t seem quite as bad. The actual rise of gas prices year over year was about 7.6% as compared to last month where the year over year where gas was effectively up 13.5%, so it looks like the gas price increase is declining (but not the price really).

Other words from Stat Canada:

Consumers paid 4.4% more for food in the 12 months to December, following a 4.8% increase the month before. The year-over-year change for food purchased from stores eased in December to a 5.0% gain from 5.7% in November.

Bouncy, bouncy graph

Even though the CPI is moderating the bad news is that prices are up in every major category on the Index. Everything ends up costing more year over year, is never a good thing to read.

Since 2002, you can see how inflation has chewed away the actual value of a Canadian Dollar, and this period has been low, what happens if inflation suddenly heats up?

Bank of Canada’ Core Index

What the Bank of Canada thinks the inflation rate runs at is even more important, because they are the only one who has a brake for the economy (i.e. Money supply rules and Interest Rates), and luckily they think it is actually a little lower than their target which is around 2.0%, using their index. This means interest rates won’t jump due to inflation for this month.

The Bank of Canada’s core index rose 1.9% in the 12 months to December, after increasing 2.1% in November. Increases were recorded for food purchased from restaurants and passenger vehicle insurance premiums, while prices for the purchase of passenger vehicles declined.

The seasonally adjusted monthly core index posted no change in December.

The BIG Table

Where were the biggest jumps in the CPI? Always check out the Stats Canada web pages for more details, but I always love publishing one of their BIG tables too.

Table 1 Consumer Price Index and major components, Canada - Not seasonally adjusted