Michael James is a lover of numbers (but not a numerologist luckily) and pointed out one day how easy it is to approximate how much someone makes, by when they stop paying EI premiums (and you’d be surprised how many people talk openly about the fact that they have stopped paying the premium (in fact I had just told Michael James that very fact)).

It’s actually a pretty simple game to play and well worth a couple of minutes time to create a little model to figure this thing out.

Meet Jack

Jack gets paid bi-weekly, and works as an employee of XYYZZ. He gets paid a regular salary (assume no bonuses and such), so if we list the month in which Jack tells us “I stopped paying EI premiums this month” we can then approximate how much Jack actually makes in salary. We know from the EI web site that your premium is 1.73% of your insurable earnings (and the maximum insurable earnings is $42,300 in 2010).

Just remember what you tell folks can sometimes have more meaning than you might think.

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Here in Canada we are flagelating our government because they are going to be running a budget deficit (they are going to spend more than they make this year) of over $50B, and rightfully so, given we have been runnnig surpluses for several years (i.e. making more than we spend), however we are humble overspenders compared to our brothers to the south (the USA). The estimate now is that this year the US Federal Government will run a deficit (remember that is overspending this year’s budget) of over $1 Trillion, wow.

That is effectively the same as giving every single human being on the earth (assuming the Trillion they are talking about is 10 to the power of 12) $140.00, this year.  Canada’s deficit would only give every human a paultry $7 , as you can see we Canadians are small time in this overspending world.

How will this be remedied in either country. Some are arguing in both cases there are 1 time bail outs that do not reflect actual spending habits (Bank Bail outs, Car Company Bail outs, etc.,), and that may well be the case, but what is going to be the fall out trying to pay back this deficit? Canada had been paying back the National Debt (i.e. the money we owe, from accumulated deficits over the years) however this latest set back is not a good thing.

As with personal finance every time a deficit is run for a year, it will eventually need to be paid back, Live Now but you will Pay A Lot More Later.

Local Ponzi News

If you think Bernie Madoff is a uniquely American issue, think again, evidently a new collapsed Ponzi scheme has been uncovered in Montreal. Earl Jones, the advisor in question is missing, as is all of his “clients” money as well.

This begs the question, do you trust your financial advisor? Are you sure you know where all your money is, and why it’s there?

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Canada Day returns this year with Canada turning a majestic 142 years young today. There is no Expo 67 like celebration this year, however Canada is preparing for it’s third Olympics this winter in Vancouver.

Enjoy the holiday Canadians!

Happy Moving Day in Montreal!

For those of you in Montreal, July the 1st is also the day that most leases begin, so enjoy your moving day, hope you found a moving van, and don’t carry too much up those winding stair cases!

And Now A Large Flag

Happy Birthday Canada

And Finally an NFB Vignette

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For me my plan of having a job by now, has not come to fruition, but I am still working hard at making this happen.

This week’s posts will discuss what areas and ideas you maybe should be thinking about for your personal finance plan and what you might need to tweak, change, add or forget about in your Yearly Personal Finance plan.

Do You Have a Plan?

You are now saying, “Wait a minute, I don’t even have a financial plan for this year?”, that’s a problem, but not insurmountable that is for sure.

So many people a yearly financial plan has to be complicated, over-thought or grandiose, but that is really not the case (if you don’t want it to be).  A personal finance plan can be as simple as you want it to be, and is simply based on the goals you want to hit this year (financially), no more, no less.

Simple Plan

A simple plan for a year might be:

• Cut your credit card debt by 30% (if you have credit card debt, if you don’t then you have achieved this goal, give yourself a pat on the back). If 30% is way too much for you, then either:
  • You have one hell of a credit card debt and you need to see someone about this.
  • You need to adjust your lifestyle, because this is do-able if your credit card debt is less than $10,000
• Pay off 15% of your University loans (adjust as you see fit).
• Open an RRSP account and put in at least $1000 for the half year. Make sure it is with an investment firm and not with an Insurance Company or a Mutual Fund firm.
• Create an emergency account that you will deposit $100 a month into (open a TFSA if possible for this as well).
• See how much you pay in bank fees monthly and lowering them or cut them to Zero, if possible (see PC Financial or talk to your bank about lowering the fees). My regular readers know how I hate bank service fees.
• Buy 1 less coffee or latte a day and put that money in your top desk drawer (and then put it monthly in your emergency or RRSP account ).

Simple as that, no fuss, no muss, and less worry, if you hit those goals.

Tomorrow

What to look for in your Personal Finance Plan and how to deal with success and with failures.

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Food Glorious Food

The main culprits in the upward pressure is the cost of shelter and the cost of food. Specifically Stats Canada points out:

Food prices, the largest factor, rose 7.9% during the 12-month period to March, on the heels of a 7.4% rise in February. March’s increase was the largest since November 1986.

Yikes, that is expensive, seems our Food dollar is really not going that far these days.

Energy and Transport DOWN

The Energy and Transport sectors did their best to lower the CPI, if not put us into a deflationary spiral, by dropping significantly over the year as well. 

Mitigating the overall increase in the CPI was a 6.2% decline in transportation costs. Year-over-year price drops for gasoline and for purchasing and leasing passenger vehicles were the primary downward contributors. Increasing prices for passenger vehicle insurance mitigated the overall 12-month drop in transportation costs.

Excluding gasoline, the CPI rose 2.4% in the 12 months to March. Overall, energy prices fell 11.2% during the same period, a larger drop than February’s decline of 8.8%.

Now that is a price drop! No wonder they are laying folks off in the oil patches. 

CPI for March

The Big Picture

Random Thoughts will return next week, have a great weekend all.

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I was watching CNN and saw that Jim Cramer was on and he seems to be starting up some kind of feud with Jon Stewart of the Daily Show, about how Jim is being taken out of context for his advice to buy Bear Stearns. I don’t see why Mr. Cramer is so upset, he does a daily show where he does advice, he was BOUND to have a few “clunkers” in his picks and doing it on a nationally televised (cable tv) show it is kind of hard to say, “I never said that”. Now Mr. Cramer is not saying that, he is saying he said later NOT to buy Bear Stearns, but like most pundits the rest of the media will pick him apart because they can show he did say BUY some time (8 weeks before Bear Stearns demise, as claimed by the Daily show). 

I rarely give out advice (I learned from This Big Financial Advice Mistake) on what and when to buy (and anyone taking that advice, needs to read my 5 Worst Investing Mistakes ), but I have said I buy banks and I am still buying banks (Canadian banks that is), but I am losing money on this advice and admit I am taking a beating, no big deal, but I am not making my living on my financial advice (if I did, I’d be living in a Refridgerator box on the Rideau Canal).  The most you can expect from someone like me is excellent examples of what NOT to do with your investing dollar.

My advice to Mr. Cramer is laugh it off, trying to vindicate yourself when being mocked by a Comedian who doesn’t necessarily have to make a point (although Mr. Stewart does) never looks good. You are in the business of giving advice, and entertaining people, but I suspect this “feud” isn’t going to be over very soon (since it helps both sides to keep it going).

I’d include the clips, but Comedy Central’s clips don’t play in Canada and the Comedy Network doesn’t like other folks using their clips (go figure). Interesting also that Mr. Cramer’s video clips seem to be lost on the CNBC site as well, but then again, “I KNOW NOTHING!” (that’s the Sgt. Schultz from Hogan’s Heroes quote, not the Cramer quote).

Addendum, but I do have this clip from CNN:

Proof in Point

Remember yesterday’s post where I said nothing good was going to happen this week? Well as usual, off by a mile, a sudden surge in stock prices makes me look like the stock prognosticator that I am (i.e. able to pick a loser in a 1 horse race). Although the Just Don’t Look advice still holds.

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For my American readers this is similar to the California gold rush, however it is in the North of Canada in Dawson City, and this film outlines the problems endured to try to “Get Rich Quick!”.

In today’s Get Rich Quick schemes, at least you don’t have to trek through snow and fight Grizzly bears, but are they as likely to make us money?

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That is one way of viewing your Lenten journey, but another way is to look for something to Enrich your life for the 40 days of Lent (leading up to Good Friday and Easter). 

Financial Lenten Journey

What areas of your personal finances could use either Enrichment or Better still a sacrifice that might help your financial well being? There are some very simple ones that I think about every year (and have done a few of them):

• The Latte withdrawal penance. Cut out buying coffee for the 40 days of Lent and put that money aside, to either save, give to charity or pay down your debt. Keep track of this and see how much money you might be saving here, it’s worthwhile finding out where this discretionary money is going.
• Read 4 Personal Finance books over the 40 days to enrich your understanding of your personal finances or your investing adventures. Building up your expertise over Lent is a good thing.
• Brown bag it for 40 days, give up buying lunch at work, and bring your lunch instead. Another way to find out where your discretionary spending is going.
• Take the bus to work for Lent. Leave the car at home, buy a bus pass and take the Bus to work. Yes gas is cheaper right now, but not driving might have other benefits for you (less stress, more exercise, etc.,). 
• Live on cash for 40 days and get rid of your credit cards. Freeze them in your freezer, lock them in your safety deposit box, or cut them up, but live on CASH only (no debit either) and see if you can do it, does it change your spending habits?

Think about these or suggest others, I am open to suggestions myself. Shrove Tuesday is tomorrow and then Ash Wednesday means Lent begins and your journey begins that day.

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Budget Things that are Good For Me

Since I personalize things usually here is a list of things in the budget that are a good thing for me:

• EI payments will be extended by 5 weeks, which is great, except I haven’t started collecting E.I. yet, but it is good to know that if I need it, I will be getting it for a longer period of time.
• $8.3 billion for the Canada Skills and Transition Strategy, this is a good thing, since it helps unemployed folks like me get retrained and learn new certifications and skills (I am currently working on I.T.I.L. base certification and will move on to more technical training soon, as part of a provincial training program).
• Basic personal tax exemption for this tax year goes from $9,600 to $10,320, not a bad thing making $720 more not taxed!
• Tax brackets move up with (quoted from CBC) “…The upper limit for the 15 per cent bracket would go to $40,726, while the upper income limit for the 22 per cent bracket would rise to $81,452….”.
• Some very vague statements about “Mortgage Insurance” that we couldn’t really decypher (whether it pertained to CMHC insurance or the insurance banks offer on their mortgages).
• Tax relief for home improvement projects up to $1350 (if you spend $10000 or more) but only for this year and only for work done starting today.
• Adding CDIC support for TFSA accounts. This one surprised me, since I thought that was already in place, but I am very happy to know my TFSA is insured like a bank account is.
• “…Extending the Wage Earner Protection Program to cover severance and termination pay owed to eligible workers impacted by employers’ bankruptcy….”  which should help Nortel employees in specific, but not by much.
• EI Rates are now frozen for a while, which is cool.

And a lot of other rhetoric and vagaries that confuses me.

I actually got to read the Budget document when Larry MacDonald showed it to me, which was kind of cool, but he kept it. 

Is this budget going to help? I don’t know. Are the Liberals going to vote it down? I don’t know, but don’t worry all that will give me much more to write about in the next few days, so stay tuned.

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Given that stock markets seem to have rebounded a smidge in the past day, it will be interesting to see if the stock markets have hit bottom, and whether now is the time to look at getting back into the investing world.  Don’t take this as “advice” from me to buy, or sell, just my opinion, for what it is worth. I am still invested in what I was invested in previously, and have bought some modest amounts of other stocks (and have enjoyed buying lower priced stock with my DRiPs as well).

Experts are guessing at another rate drop, from the Bank of Canada, but I remain skeptical, since the Canadian Dollar is quite fragile and very low right now, and a lower rate, would send it back to the low 70 cent range compared to it’s American cousin.

Inflation may well be under control for now, in fact Deflation may kick in with gasoline prices now at rates not seen for the past 6 years, but lowering interest rates may not be in the cards for a lot of reasons, but again, it remains to be seen. If liquidity issues are the main reason then expect a rate drop simply to help out.

Advent Financial Calendar Box Day 10

This box has a cane in it? No, not a candy cane, a cane, like an older person might use. Retirement, and RRSP’s in specific, an excellent thing to take care of during Advent. Yes the RRSP deadline is in February, but if you buy now, you avoid the rush and general “hub bub” of the February RRSP season and you get two more months of growth on your investments as well.

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