Canadian Personal Finance Blog

Archive for August, 2008

“The rich ruleth over the poor, and the borrower is servant to the lender.”  -Proverbs 22:7

My that is a very topical quote for a Personal Finance Blog isn’t it?

The bible says that the Rich rule over the poor, that is your thought for Labor Day, since the rich do as they please and the poor work for their lives (OK, trite and over simplification, but still pretty true). I’m sure the bible is not speaking solely on a Financial angle, but this is something to keep in mind.

The borrower is the servant to the lender is very correct. If you are in debt to someone or an institution, they call the shots, and you have no control of the situation (or very little). The only way to get back control if you are a debtor is by paying off the debt, and then you are free.

Tired of me bludgeoning you with Bible quotes on debt? How about this one then?

From Shakespeare’s Hamlet, 1603:

LORD POLONIUS:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend…

In life, in the bible and in literature, debt is a bad thing.

Long Weekend Random Thoughts

I note the gas prices in Ottawa have inched there way back up by about 11 cents in the past few days, in preparation for the long weekend. Am I saying this is a conspiracy? If it isn’t all contrived, then this is the most amazing coincidence I have seen. Our van continues to sit in the driveway, because it is just too expensive to use on long journeys.

The coming weekend brings a great deal of turmoil and excitement. My eldest daughter is off to University out of town, my middle daughters are preparing for High School and my son prepares for nursery school. September is always an expensive month for my family due to many activities and school ask for money and then there are the inherent expenses of returning to school (clothing, school supplies, bus passes, etc.,).

Is it time to turn off the Air Conditioning? I think it is, but we shall see how bad allergies and such are, since opening the house up, inevitably means me sneezing my head off (and thus buying antihistemenes and such). Which is more expensive, running my A/C or buying Claritin in bulk?

Today is the day I return my equipment and a set of forms outlining what to do with my severance package as well, which is a bit of a milestone as well. I will outline how this works, once I am sure how things will work, but the opportunity is if I can find a new job quickly and thus use my severance as a significant financial “hammer”.

Enjoy your long weekend, drive carefully wherever you may be going, careful of gas prices and speed traps and relax.

Fruitful Bank Trip

My visit to the bank was quite fruitful.  I arranged to get money out of an RESP (evidently there are two ways of doing it):

• EAP which takes out the CESG portion of the RESP
• The other thing that takes out the other part, which I did

Tax implications? No bloody idea, I’ll figure that one out in February.

Opened a self-directed RRSP with TD, and ensured I could get at their E-Series index funds (another point well made by the Canadian Capitalist).

Opened a Locked In Retirement Account, well sort of did, filled in the forms, yet another system in TD which is all paper based. Found out from our service rep there are 5 different systems she deals with (at least) and none of them talk nicely to each other and many are still mostly paper based. Maybe TD can use their HUGE profits to fix that?

Finally, I got free banking for a while too. This time I phrased it in a way that made our rep happy to give it to us, and thus I don’t have to pay for banking for a while longer.

I love it when a plan comes together!

Owe for 3 on Stocks

After bad mouthing Scotiabank, BMO and Nortel yesterday, on Wednesday they all rebound back…

• Nortel up 5%
• BMO up 3.6%
• Scotiabank up 2.26%

I can sure pick them, can’t I? I have pointed out this is NOT where to get your hot stock tips, have I not? One day does not a trend make, and given most stocks were up, could be just a “follow the leaders rally”, but again, don’t take my advise on that one.

Humor

Here is a rhetorical question for the lady readers, would you go to LaSenza to a “Sports Bra Blow Out” sale? Something about that advertising doesn’t sound right to me.

BMO Numbers Stink

Is now the time to buy then? I have no bloody idea, but it is an interesting question to ask.

BMO announced their numbers on Tuesday Morning, and they were crappy. Not crappy like Nortel numbers (which are really crappy), crappy where they didn’t make enough money to make analysts happy. Does this mean we should all run out and buy stock because they did such a bad job? OK, maybe I phrased this incorrectly, but that is basically what I am hearing from some analysts, “Buy now because the stock is lower, and it is a stock with good solid foundations”. 

If a company performs badly and puts out bad numbers, and the stock drops in values, I should buy the stock? This is an over simplification, but that is some of the advice I have heard, and that I heard during the Tech Bubble explosion too.

I have never really figured out when is the best time to buy stock, so I just buy when I have the money and hope for the best. An odd tactic, but that is the way it works for me.

Scotiabank Sucks Too

Scotiabank announced at 2:00 PM and their numbers did not make analysts dance for joy either. Should we go out and buy Scotiabank now too? Don’t ask me, I just report this stuff, should you invest in a company that had their profits drop by 2%? At least they have profits, is one way of looking at it.

Today Bank Attack

Today, I walk back into my bank and will attempt a few precise financial manoeuvres:

• Set up an RRSP for me
• Investigate how to set up a locked in retirement account
• How to extract money from an RESP, which is interesting
• Try to get no fee banking for another year

I want 4 out of 4 success, I’ll keep you all posted.

Monday I spent a good 2 hours with a Personal Finance Planner, that was made available to me by my soon to be former employer, and their right management team. I won’t divulge the name of the planner, just because I don’t feel right doing a “review” of their services, since I got them for a large discount.

Scope of Discussions

The scope of my discussions with this gentleman was mostly around what are my options to do with my severance package and what the tax implications would be if I withdrew from my company’s pension plan.

Bill (not the financial planners real first name) collected a fair amount of background information from us, which made my wife a little nervous (since she had not met him before, but I had at a group financial planning session). We were fairly strict in what we did and did not tell him, since we wanted the scope of the discussions to stay mostly around the task at hand (i.e. tax implications of my severance package).

Planning Session

After collecting the information, the financial planner had an already set up Excel spreadsheet with the tax scenarios possible for me and my family. Bill has done this with many (more than 100) former employees of my soon to be former employer. He also had a massive plasma display that he ran this on to show my wife and I what he was calculating. My wife pointed out I will never be getting a display like that for my computer.

He started by filling in some of the numbers he gave me about my yearly income, the size of the severance package, and the size of my pension pay out.

The variables to be dealt with are:

1. Do I take my severance package completely when it is made available?
2. Do I use the RRSP room I have now or later?
3. My employer was gracious enough to allow me to split my severance and take some now, and then some on January 1, 2009, do I do that?
4. What are the implications of me withdrawing from the pension plan?

The financial planner went through all of these scenarios, gave his opinions and dealt with my and my wife’s questions in a professional way.

Outcomes

I think my wife and I had already decided what to do, but we didn’t really have a clear plan of why or how much, I think now we do (at least I hope we do). Simply sitting down with someone with enough Tax savvy and background to “bounce ideas” off was just great and I think I got my moneys worth out of it (remember I got this at a large discount).

Bill did point out that his company does offer many services, and that if I did need them, I should call him (and I wouldn’t expect anything less from a small business owner), but he was not pushy and understood the audience he was dealing with.

Bill also told me his hourly rate, and I think I might think a bit before going back to him, and make sure I was much better prepared than I was this time, because his services do not come cheap (but then again, you pay for expertise, I have always found).

All in all a positive experience, and I would recommend dealing with a financial planner, with NO ties to any insurance company or mutual fund company. Make sure the planner charges you by the hour, for the service he is offering, so you know where he or she is making their money (mostly).