Canadian Personal Finance Blog

Yesterday I found out that there is a class action suit that is being brought by a group of employees against my current employer.  I am unfortunately not part of the class, as I am still too young to join into the group, which is unfortunate, but it will be interesting to see if this group can extract a change with this suit. The suit has to do with the Pension changes made last year, where my employer changed from a Defined Benefit pension which had been in place for decades to a less expensive pension system.

Retirement Planning

This drastic change to my pension plans last year, meant that my assumptions at the time (though naive, because they assumed I’d make it to 55 or older with this employer) are now flawed.  I have been putting my RRSP money into a spousal RRSP, assuming that I would have a pension and my wife could then draw on the RRSP income thus creating an income splitting model, however, now that my pension will be drastically smaller, I will need to rethink that portion of my plan.

I also need to increase my RRSP inputs, which for the past 20 years have been debilitated by the Pension Adjustment that was in place (I could only put about $2000 a year into my RRSPs), the problem being all that growth that might have happened over the past 20 years is now lost to me, even if the CCRA gives back the RRSP room that I lost from the Pension Adjustment. This problem is kind of like my Golf Game, I need to go back in time and fix it about 20 years ago.

My other hope was an ability to retire earlier than 65 with this pension, but without it, those plans are much less likely, unless I find a new income source that can help compensate for this lost savings.

Would have been nice to have been part of that “Class”, but I must now re-think and re-plan.

But I need $520 for My Loan Shark

BMO has lowered the daily cash withdrawal limit to $500 to help combat debit card fraud (at ATM machines). Interesting idea, evidently the amount of ATM fraud last year was over $160,000,000 for BMO, and this is to slow this down. I don’t actually take large hunks of cash out these days, but more interestingly who ends up paying for this fraud? Does the Bank? The Consumer? Any horror stories from my readers that they care to share? The daily purchase limit is still around $2500 I believe.

No Fed Interest Drop?

That is the word, that in the U.S. there are no further interest rate cuts planned, which might be a very good thing given that Inflation is heating up. Canada has already held the line this month, so it shouldn’t effect the Canadian Dollar, but what might it do to stocks? We shall see.

Now that we have figured out how to track our Mortgage using this Mortgage Work Sheet with Excel , we can now start doing some interesting tricks to see what we can do with our Mortgages.

The Power of Overpaying

I have some dear friends who paid off the houses they lived in, very quickly each time they moved from house to house (as their family grew). They both had good paying jobs, so they set up a simple goal with their Mortgage, each Mortgage payment they made, they were going to “double up” (i.e. pay a double payment to the bank). They had chosen the type of Mortgage (so there were no penalties to make extra payments) and sure enough they paid off their houses incredibly quickly.

How quickly could this be? If we go back to the model I have been using all week, this is how fast our family could pay off their house if they doubled up on their payments.

That’s amazing, you pay off the house in 8 years (give or take a month or two). Can most people do this? Not very likely, but it is something to think about and play with. Can you pay off your house early if you give up going out as much, and instead pay your Mortgage down? That is the question to ask.

More Mortgage Fun

With this worksheet you can explore the following interesting scenarios:

• Interest rate changes and what that might do to your pay back capabilities
• What happens if you take your tax refund and put it on your Mortgage, instead of into savings.
  • This is an interesting scenario, where you put money in your RRSP, you get money back from your taxes and then put that money on your Mortgage, a Win-Win proposal!
• And other interesting fun games.

Use this worksheet as a tool, and learn about what you can and cannot do when you buy your house.

Security of your financial information is essential, for many reasons. Identity theft is the main issue, in that if someone can get enough information to re-create your identity in some fashion and get credit cards (or worse) in your name, it will create huge issues for you.

Fraud is rampant in our society, and you must be diligent to ensure you are not a victim of this crime.

Paper Security?

The Shredder , as we spoke about on Tuesday is your security weapon for your printed records. Any old financial records must be destroyed (after they are no longer needed, please don’t just destroy records without knowing whether you need them any more), or stored in a safe place until they are no longer needed. The safest place I can think of for saving important financial documents would be either a Safety Deposit Box or a home safe (or strong box). This will secure your printed information.

What kind of information?

1. Old Tax Forms, with receipts and associated responses from the government
2. An inventory of your house with it’s estimated value (don’t store that in the house)
3. Wills
4. Birth certificates and such
5. Receipts from Credit Cards, Property Tax Payments, and such (I think the rule of thumb is at least 3 years of that data).

Computer Security

Damn right you need computer security .

Possible Computer Security Attacks

First whatever computer you are running your Financial Software tools on, must be secured with a password of some kind, that is common sense.

Next if the computer is connected to the Internet (which it most likely is), then it must also have Anti-Virus and Anti-Spy Software, or your data can be corrupted, or worse still your machine can be compromised by:

• Trojan Horse software that simply replaces parts of your system with it’s own versions which will look for information on your computer.
• Key Capture software that will simply steal your on line banking password, by logging all the keystrokes you type on your system and sending them to another computer

Yup, this can happen to you, and you need to protect your finances from this kind of attack. There are many others, I am just highlighting the major ones here (there are many, many more attacks out there).

Network Security

If someone can break into your home network, they can get onto your home computers and steal information directly from your system. There are some easy fixes to stop this (or at least slow it down).

If you have a home network and have a home router, please change the password on the router from the factory default and turn off remote administration! You may as well leave your front door open if you have this turned on, and I can’t tell you how many configurations I have run into that are set up this way.

Linksys, has changed their default configuration to FORCE people to change the default password, but on older routers, this is not the case. If you have a router and don’t know what I am talking about, you need to get someone in to set up your network security.

If you have a wireless home network, TURN ON WAP or some other wireless security, and turn off SSID broadcast. Look up War Driving and see what can happen to unsecured wireless home network configurations.

I had an old router who’s security was compromised, and I ended up selling Herbal Viagra for a while (I didn’t make any money on the deal, and I had my Internet access turned off for a week, and only got it back because I plead stupidity about how I had not configured security on my system).

Again, I am only highlighting a few areas, if you aren’t sure, consult the Internet or call someone who knows about this kind of stuff, don’t just hope it doesn’t happen to you.

Disposal

Inevitably you will want to dispose of either the backup media you have been using for your computer, or even the computer itself and this is where many people’s identities get stolen (if it can happen to F1 Driver Lewis Hamilton, it can happen to you too).

1. If you have old floppies around the house and you do not know what is on them, run a powerful magnet over them, or destroy them (with a hammer).
2. If you have been doing backups on to CD’s or DVD’s and you do not need these backups any more, destroy the media (my shredder actually chews up CD’s and DVD’s, so that is where they go).
3. If you have tape media, cut it up, burn it, whatever.

This media if just thrown out, is insecure and can easily be used to get information about you (especially if they have been used to back up your financial data).

The one computer point people don’t think of is disposal of your computer. Your computer has a hard drive in it, if you simply throw the computer out, the hard disk has all of that information on it about your finances, and whoever picks up the computer now has this information.

The best thing to do with an old computer is the following, remove the hard drive from the system, and physically destroy it. Either take it apart and smash the platters, go at it with a sledge hammer or something of the like.

If you want to give this computer to someone or donate it, you must find a shop that will WIPE the disk clean or buy software that will do that. This software will overwrite the data on the disks over and over with varying patterns until the only people who might be able to read it is the CIA or CSIS, you can then donate your computer (but I won’t, I will destroy the hard drive by hand, I don’t trust any of this stuff).

Never, ever give a computer away with the hard disk intact, if you have used it for any financial work at all. Even if all you did was order some stuff from E-bay on line, wipe it clean.

Am I Being Paranoid?

You are only paranoid if everyone is not out to get you (hey I am now the Big Paranoid Cajun Man), but seriously, securing your financial data both hard copy and soft copies and the associated software is the most important thing you can do for yourself, and your family.