Canadian Personal Finance Blog

Archive for August, 2008

After watching athletes work hard to reach their goals, I feel invigorated to attempt new financial goals of my own (OK, that’s pretty lame, but I couldn’t figure out any other way to spin the Olympics into a post over the past two weeks).

Glad to see the Canadian Athletes compete and do the Canadian thing and not win too much and be boastful, we are a very polite nation.

Coming Financial Decisions

The coming week is an important one for me financially because I must make key decisions on how much, and when my severance package is to be executed, and what to do about my pension (whether to leave it in my company’s badly underfunded pension (last time I heard it was funded up to about 87%)) or take the money and run, with some severe tax implications)).

I am meeting with a Financial Planner today (who is also a Chartered Accountant), to hear his ideas on how to make my severance package run as long as it can, and to maximize it’s financial impact for me. Ideally, when I find a job soon, I can simply use it as a debt destruction vehicle, but I must plan in case I have issues finding a job, as well (remember Hope for the Best, Plan for the Worst).

Mostly I am meeting with this gentleman, because it is free, as his services are being paid for (evidently he charges $175 an hour normally) by the Right Management team that I am dealing with. I’ll listen to anyone for free, doesn’t mean I will necessarily follow their advice, but I can listen easily for free.

Interesting questions that may come up:

• Is it better to pay down debt quickly thus having less to deal with, or plan to simply service debt so that my liquidity stays sound?
• Is it worth working at Home Depot in my spare time right now? The easy answer there is NO, not this year, because whatever I earn, I lose about 1/2 of, and we should be able to budget well enough to last that long.
• Should I cash out of my company’s pension plan? Do I think they will exist in twenty years, and will the pension fund ever get back to 100% funding is the real question.

What other questions maybe need to be asked? I am open to suggestions here folks, any good questions, please pass on in the comments section.

Should be an interesting visit.

I have had more than one person ask me how I find time to go to Church on Sunday given how busy my life is these days. I honestly first admit, I don’t always make it on Sunday (I try, but don’t always succeed), however, everyone needs a day to forget their main interest/past-time/job/whatever. I always find that as soon as I forget about something, I am more likely to resolve whatever issues I have in that area. It’s odd to admit that not thinking about something is a good thing, but in my world, that is how it works best.

Do you have a day of rest? Do you take the time to stop thinking about your main task in life? If you don’t, why not? There is always time to sit in front of a TV for 30 minutes of 4 hours, yet you can’t do something for you? Your day or rest need not be Sunday, but it should be one day a week. Can you live without your “crackberry” for a whole day? If not, why not? Who the heck is working on Sunday? Ask them if they call you or send you an e-mail.

I will give you peace and quietness.
                                                                                - I Chronicles 16:11

If you are given this peace, will you take it?

So today I had an excellent presentation about the financial aspects of my severance from my employer, by a C.A. who is also a Financial Planner. He brought up several very interesting points, one that I had heard about but didn’t understand and another that I wasn’t even aware of (and caused me to write down many more questions for my one on one session with him in the near future).

RRSP Severance Rollover

Up until 1996 the rules for moving severance packages into RRSPs was pretty wide open, but then in 1996 the rules changed and you were not allowed to simply plow your severance directly into your RRSP (if you didn’t have room to put the severance allowance in your RRSP). The accommodation for folks like me that were still employed (and have been) by the same employer before 1996 (and haven’t received a severance package), I get a $2000 per year RRSP “bump up” for every year I worked for my employer before 1996 (and working in the year, could entail only 1 days work, too bad I didn’t work there as a Co-Op student).

For me this means that since I was employed from 1988 to 2008, I get 8 years counting in there or an RRSP bump up (for this one time) of $16,000 which I can put some of my severance package in (which is a good thing).  Since it is so late in the year, any dollar I shelter most likely saves me 46 cents of taxes I don’t have to pay on this year’s CRA tax forms (sorry Mr. Harper).

Severance Income is the Worst Kind of Income

Well, if there is such a thing as bad income, a severance package is that, because you get a T-4A for this income, but this income will not increase your RRSP room for the year, and it is not really counted as income per say (other than the fact that it gets TAXed like it is income). What I am trying to say is that severance is not an EARNED Income, thus you don’t pay CPP or EI premiums against it, but you don’t get RRSP room for it either.  I didn’t know that one either.

Another Idea the Lifelong Learning Program

Instead of simply cashing in RRSPs to pay for going back to school, the government has set up the Lifelong Learning Plan (LLP) where you can withdraw $10,000 in a  year and $20,000 total over 4 years to help pay for your schooling. There are rules for you to repay your RRSP the amount you borrowed to pay for your education, but I thought this would be a really good idea (for me or my wife). I don’t think this is something I will use now, but it is an interesting concept.

Best Joke to Say Around Former High Tech Workers

The presenter had a great comment for the section we skimmed over, “So this should be a short section, it’s about what to do if you make profits on your stock options during your severance period…”, everyone in the room burst out laughing, as did the instructor. If you aren’t in High Tech, you might not get it, but if you saw the Simpsons episode where it showed a high tech company giving out Stock Options from a toilet paper roller, you might get the joke.

I learned a lot today.

Consumer Price Index at 3.4% for July

All I can say is “Uh Oh”, with the CPI numbers for July
being released by Stats Canada.

July saw the highest 12-month increase since March 2003. A climb in gasoline prices was the primary source of higher consumer prices in July. The 12-month variation in the Consumer Price Index (CPI) and the gasoline price index have been increasing at a faster pace over the past four months.

Inflation without gas prices included in it, is at 2.1%, which isn’t as bad, but it is still startling to see these numbers jumping up like this.

On Going Consumer Price Index Graph

This means other prices are going up but not as dramatically, but this is very worrying and I wonder what the Bank of Canada may do about this? Gas prices seem to have plateau’ed for now, but what is going to happen this fall?

More information after the BIG table

Leading Indicators Remain Flat

The composite leading indicators remained unchanged for another month, for July. This is the second straight month this is happening, but the actual results are quite mixed. The Housing Index seems to be the biggest drop and is the heaviest anchor keeping the index from rising (which is a good thing, I think), and New Orders in manufacturing is up too (i.e. people or companies are buying more).

Humor: And You Can’t Even Rely On Teenage Sex Either!

Yup Stats Canada put out a study that says that Teenage sex in Canada is on the Decline.

In 2005, 43% of teens aged 15 to 19 reported that they had had sexual intercourse at least once, down from 47% in 1996/1997.

The decline was due to young women, among whom the proportion who reported having had sexual intercourse fell from 51% to 43%. The proportion of young men who had had intercourse remained unchanged at 43%.

After doing the simple math in my house, I am going to go ground 2 of my three daughters!!!

Busy week, so I am taking a break and publishing one of my favorite posts, about Risks and dealing with Risks.

Cancer, Now That I Have Your Attention

Yup, I am really talking about that, as Cancer’s ability to kill Canadians is rising, and Canadians are taking care of Cardiovascular issues more. Six out of every 10 deaths in Canada are caused by these two issues. Cancer is becoming more of a killer, is the bottom line for now.

So what the heck does this morbid topic have to do with Financial Planning issues? Maybe I’m just feeling morbid? No, but, if you look at this data, maybe you need to ask yourself the following important financial questions:

• Do I have enough life insurance so that my family can survive my death? Same question for your spouse too?
• Can my family survive financially a prolonged illness (as Cancer is capable of being)? Do I have any disability insurance?
• Do I have a will?
• Do I have enough health insurance to deal with a catastrophic illness?

If you are young and single, no it doesn’t matter that much, but if you are young and just married and planning on having kids, NOW, is the time to do this kind of stuff in place. No I am not selling insurance (and I am not advocating whole life insurance at all), but I am saying, go find out about what you need to deal with these concerning numbers about Cancer.

Hope for the best, and plan for the worst! (a wise saying).