Typically I do my taxes over about a 1.5 month period, while the various tax receipts and such arrive at my house. Typically the methodology followed would be something like:

• Buy Quicktax (although this year I could have had it for free, darn!)
• Update Quicktax (this is iterative, because there seems to be new updates every week, and then as tax season comes near an end there seems to be an update every day or so)
• Create this year’s tax returns for my family, based on last year’s Quicktax files, this manages to bring forward a lot of useful info like personal info, and also Rrsp limits and such, so I don’t have to reference last year’s returns from the CRA, just run the utility and start from there
• Go into Quicken and glean out whatever information I think I can get, and do a rough estimate of what my taxes might be. Inevitably I overestimate how much tax I have paid and I start getting delusions of large tax refunds, but that is soon remedied. Quicktax does have an import from Quicken tool, however, every time I use it, it really screws up a lot of things, because I don’t have my Quicken set up correctly, so I typically do this by hand.
• With this estimate I will see if there is a need to buy RRSP’s to lower tax owed, which usually is not the case
• As each receipt and/or T-4 or such arrives I then type it into Quicktax and watch my estimate become a closer to reality number
• Over this time I will remember things I have forgotten to input like the cost of my safety deposit box, or my kids bus passes, and I will add them with glee seeing my refund number inflate.
• By the time the first week of March rolls around my return is 95% complete and factual (i.e. not based on estimates), and I can start thinking about E-Filing my return, however, this year I printed out my return first to have a look at it, and found a few “oddities” that I am not sure where they came from, so now I am chasing them down to find out why.
• Finally I have to decide whether I feel confident enough to submit my returns via E-File, it usually happens on a Sunday morning, when I get a sudden burst of enthusiasm and it all gets done. One year there was a problem with my data that I had to follow up with the CRA (it actually stopped me from E-filing), but hopefully this year will not be one of those years.

With that, I await to see whether I forgot something (inevitably a receipt will appear near the end of March, which I have forgotten about), or whether I made an incorrect assumption, when the CRA sends me their response to my submission. Most years it has been spot on, which makes me very happy.

Anybody else do their taxes this way? Did I miss something?

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No Rate Hikes

So the Bank of Canada kept their overnight target rate at 1/4 per cent for March, giving us all cheap money for a little while longer. Rememmber that the C.D. Howe institute last week urged the bank to go Harder, Faster with their rate increases, but the bank is holding off for now.

The telling phrase to read in this report is:

“…Conditional on the current outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target….”

So the end of the second quarter, or say the June/July time frame, money is going to start getting tighter, which could make for an interesting summer.

Time to start planning on how you are dealing with your debt (if you have it) with a higher interest rate, or what to do about your Bonds, given interest rates will go up.

Federal Budget Looms

I suppose Larry MacDonald will again be locked in a large room with a bunch of other “sweaty” financial newspaper types in preparation for the Federal Budget scheduled for March 4th. Larry always has interesting stories about what really goes on in that room, while all these “touts” pour over the budget to boil the essence of it down to a 1 minute blurb on TV or 750 words or less for the papers.

Hopefully we shall move back to a more balanced budget and maybe put together a plan to start paying off the national debt (again), but stay tuned, I am sure there will be something exciting on Thursday.

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Harder Faster

That is actually one of my favorite April Wine albums, but unfortunately it is also the message the C.D. Howe Institute is pushing for Interest Rate increases this year in their report How Soon? How Fast? Interest Rates and Other Monetary Policy Decisions in 2010.

The report itself is a very interesting read on how and why things have happened in terms of credit and interest rates, however, there is a nasty little recommendation that is in it:

When the overnight rate does begin to rise, the changes must be as aggressive as the rate cuts of 2008 and 2009 with increases of 50 basis points at every announcement date until mid-2011 not seeming unrealistic.

Remember how quick and dramatic the rate cuts were last year? There may be an equal and opposite reaction in terms of speed and rate increase this summer and into 2011, which will cause a tightening of credit and tumult in the bond markets too.

Were you planning on renewing your mortgage, or getting a new one? Might be time to lock into whatever rate you can find now, if you need to, since it seems we are in for a bumpier ride in the interest rate world.

And The Winners Are

Yes there were 10’s of entrants to get the free copies of Quicktax, and the winners are:

• • • 2Hirondelles, who was selected by my son from my lucky Pittsburgh Steelers hat.
    • JohnnyG, who was selected by my wife from that same lucky hat!

I will be contacting you via e-mail on how you would like to receive your free software. Congrats to all entrants.

There will be more giveaways soon (as soon as someone gives me more stuff to give away).

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Reader’s Note: Random Thoughts will return next week.

Also, watch for the First Big Cajun RRSP Software Giveaway! Coming real soon (once I figure out how it is going to work ).

Gasoline Pumps Inflation

Stats Canada announced the CPI for January and it looks like Inflation is starting to become more of a factor for the Bank of Canada to think about. Year over year for January Consumer Prices were up 1.9% (remember that in December year over year it was 1.3%), so the 0.6% jump is a big one.

Black Gold, Texas Tea

Yes, it is Gasoline prices that are helping fuel this inflationary jump, and this could mean follow on price increases as this price increase percolates through the system.

The increase in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. In January, gasoline prices were 23.9% higher than they were in January 2009. This follows a 25.6% rise in the 12 months to December 2009.

Gasoline prices exerted upward pressure on the CPI for the third consecutive month, as a result of price volatility in the second half of 2008 and the first half of 2009. Prices at the pump have been relatively stable since July 2009.

More importantly the Bank of Canada’s Core rate (which is what they start looking at for when they wish to increase interest rates) is now around 2.0% (year over year) up from 1.5% in December, which may cause the Bank of Canada think tank to start re-thinking when they plan on turning on the Interest Rate economy brakes, which most think is June July timeframe, but if we see another Inflationary jump next month, it may be sooner.

The Big Table of CPI

For those who love details and numbers, I present the Big Table for your perusal:

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Not Inflating Yet

What with the Interest Rates remaining steady and the CPI only at 1.3% for the year sounds like things are just peachy and rosy in the financial world, but I suspect that the Financial Blogosphere may not completely concur with that statement yet:

• Larry MacDonald crunches some numbers and cries bullshit (his words not mine) for the Life Insurance versus RRSP scam being promoted by some financial planners. Isn’t it fun the games people play with numbers?
• After my post about Financial De-Cluttering I was glad to see the post 3 ways being organized can save you money from the Million Dollar Journey. Yes it seems obvious, but is it?
• Michael James talks about how the Assault on Public Service Pensions Begins a topic near and dear to my heart. I feel like Typhoid Mary, wherever I go, I bring Pension issues.
• Preet does some number crunching of his own in The Counter-Intuitivity of Fixed Income Indices although I am curious about the word Counter-Intuitivity, can I use it in Scrabble?
• The Canadian Capitalist commented on Canadian REITs: No Longer a Bargain one day I’ll have to ask him to give me a tutorial on REITs because I don’t think I completely grasp the concepts in these investment vehicles.
• Gail Vaz-Oxlade asks What Your Mulligan Be? in the area of personal finance. I have far too many of those I’d like to forget, but glad to see Gail confess she bought Nortel as well. I only have a few flaws in my Golf game as well: my stance, the way I hit the ball, my clubs, my inability to judge distance and my lack of hand eye co-ordination, other than that my Golf game is just fine.

Big C8j’s Tech Corner

Occasionally I’ll jump out of my main role of Personal Finance Guru [sic] and show that my real role in life is technical savant, here are a couple of interesting things to note on the technology side of things:

• And for those cheap buggers like me that don’t want to spend $200 on a specialized piece of hardware to read e-books, I give you the Kindle for a PC, so now you can buy a $200 netbook and use it like a Kindle.
• Do you have Windows 7? Do you still want to use your Windows XP applications well? Guess what, Microsoft now has an Windows XP Mode for Windows 7 which sounds like you should get!

Carnivals Too

You can find my post Do you have saving questions? at the Carnival of the Road to Financial Independance.

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Stats Canada announced the CPI numbers for December and for all of 2009 and the trend started in November got a little more momentum with the CPI for 2009 being 1.3% (over 12 months), and Gasoline sits front and center again as an issue.

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices, which exerted upward pressure on the CPI for the second consecutive month. This follows an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.

For the year the big price jumpers were:

• Energy given we are back at $1 per liter this is no surprise there
• Transportation given gas prices again, no surprise, although the cost of mass transit is going up a lot too
• Health and Personal Care this one really worries me, if health care costs keep doubling the average on inflation, we older folks might be in trouble come retirement time
• Alcoholic Beverages not as high as health care, but you can at least give us a chance to drown our sorrows? C’mon!!!

See the big table for the numbers.

The Big CPI Table

I really like this table because it shows you all the ugly numbers together:

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This is getting a little repetitive but Bank of Canada’s key overnight rate remains at 1/4% unchanged again this month. The overall Bank Rate remains at 1/2% as well, which means cheap money continues in the market place.

The statement from the bank is mostly that the recovery continues and we should be out of this whole mess some time near the end of 2010 or the beginning of 2011, but the important line to read is:

Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target.

The end of the second quarter is June, which means interest rates will be going up this year, and you are running out of time to take advantage of these cheap rates to pay down your debt (assuming you are not paying Credit Card debt, in which case, this has no effect on you). If you have a variable rate mortgage can you lock in, or has the bank already altered it’s rates so that locking in might not be as attractive now?

Remember if the bank raises interest rates to say 2.5% somewhere along the line, that is a huge percentage increase compared to where they are right now.

CPI Numbers Today Too

To confirm the Bank of Canada’s inflation statement, Stats Canada will be posting the CPI numbers for the end of 2009, which should be a very interesting statement. With gas prices inching their way back to $1 per liter, I suspect inflation is back it’s just how bad is the question.

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• Former baseball star admits to steroid use. The only thing new here is that the player in question is admitting to it (mostly because he wants to take a job back in baseball). No surprise there, kind of obvious really
• A man who kept a “pet” tiger was mauled to death by the creature. The surprising part is that the beast hadn’t done it sooner.
• Snow falls in Ottawa in January, OK that is a trick one, but not very surprising, and certainly not a big news story.
• Financial bloggers see tough times ahead, again, not a surprise either.

Financial Surprises

In contrast I was surprised to see that my Secured Line of Credit and my Unsecured Line of Credit have the exact same interest rate (currently). For those unaware typically a secured line of credit has a lower interest rate because it is secured against something of higher value (e.g. a house), and an unsecured line of credit is simply the bank figuring you are a reliable enough person to loan money (and presumably pay it back in a timely fashion).

My guess is this is a fiduciary anomaly, and will soon be remedied by my bank, but given I don’t use the unsecured loan vehicle, maybe it won’t be? I’ll keep watching to see if and when my bank notices this interesting situation.

What will I be surprised by next? Free Banking?

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Stats Canada published the November Consumer Price Index numbers yesterday and it is starting to get some momentum in the UP direction, with their index going up by 1.0% (year over year ending in November 2009).

The rise in the all-items Consumer Price Index (CPI) was due primarily to gasoline prices. Prices at the pump are now exerting upward pressure on the CPI after an extended period in which they were the main contributors to year-over-year declines in overall consumer prices.

Interesting that gas prices in December seem to be dropping, so how this changes next month’s CPI remains to be seen.

Bank of Canada’s Core Index

More importantly the Bank of Canada’s Core Index is up 1.5% year over year, which is starting to push inflation into the target zone for the Bank. If this upward pressure continues, this may push the bank to act sooner with an Interest Rate increase to hopefully put the brakes on any Inflationary explosion.

The Big Table

NB: Random Thoughts may be on hiatus for a week or two, given the season coming up, or there might be a special Monday edition, if I feel exceptionally lazy next week.

Christmas Laziness and Cheer

I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).

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The vulnerability of Canadian households to a deterioration
in economic conditions has risen in recent years, as
aggregate household debt has increased in relation to
income. There is thus a risk that a shock to economic
conditions could be transmitted to the broader financial
system through a deterioration in the quality of loans to
households.

The report outlines that the levels of indebtedness in Canada are nowhere near catastrophic levels, however, we are heading in the direction that may lead to that kind of failures in the system. Remember I have been a bit of a broken record that maybe it’s time to start paying back debt, instead of picking up more debt now. The report also points out that if the “recovery” dies off and we go back into the economic “crapper”, household debt failures are going to happen a little more often.

There may come a time when lenders in Canada may tighten the purse strings and turn off the credit taps, and that would be an inconvenience but not a big issue to some folks. If they decide to rethink or revisit existing risks in the system that is when we can start seeing interesting scenarios like banks refusing to re-new Mortgages of existing customers (not likely, but if you have debt still a remote possibility).

The only absolute way to not have to face this possibility is to get out of debt and then you have control of your own finances. Much like the only absolute form of birth control is abstention (the Vatican is correct on that one, unfortunately), the only sure way not to have issues with your Debt Vehicle, is to retire it quickly.

(Sorry about the Planned Parenthood reference, one day I’ll write about how Vasectomies are not fool proof either).

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