Canadian Personal Finance Blog

Jim Flaherty came through with an interesting and I would say very optimistic Economic Update (mini-budget, whatever), yesterday that took aim at something that all voters love to see under financial siege, Government Agencies and MP’s. 

No Debt Financing?

With some very creative and optimistic accounting the Finance Minister is promising to try to have either balanced budgets or very small surpluses up to 2013, which is very contrary to what most economists are saying is possible in the current economic instability (i.e. Financial Apocalypse). 

Flaherty did couch his optimism with the following cold statement:

“Any additional actions to support the economy will have an impact on the bottom-line numbers in our next budget. These actions, or a further deterioration in global economic conditions, could result in a deficit.”

So he isn’t saying there isn’t going to be deficits, just that there will be measures taken to avoid a deficit if possible.

Take that Ottawa Fat Cats

Not Really an Ottawa Fat Cat

No that is not a real Ottawa fat cat, it’s my cat from when I lived in Kitchener, but he is a good Metaphor for the “Fat Cats” in Ottawa.

Some of the measures against the “Ottawa Fat Cats” taken will be:

• Elimination of the $1.75 per vote allowance to support political parties that receive more than 2 per cent of the vote, staring April 2009. I really like this one, because all of the politicians are howling about it, so it must be a good thing. 
• Wage controls holding increases to public servants, including MPs and senators, to 2.3 per cent for last year and 1.5 per cent for each of the next three years. I really like this one, because the MP’s are mad about this as well, and the public service doesn’t like it either.
• Slash cost overruns on government travel, hospitality, conferences, exchanges and political services, this sounds like something they should have been doing already? What exactly were they doing before this, wait, I don’t want to know the answer to that one, so please don’t answer.
• Provincial equalization payments are gauged to the average GDP growth over a three-year period. Can’t wait to hear Dalton McGuinty tirade about this one.
• No mention of any extra taxes, but since this is not a budget, then I guess nothing has to be mentioned about that (yet).

Some pro-active steps being taken are:

• Giving $350 million in equity into the Export Development Canada and another $350 million in equity into the Business Development Bank of Canada. Interesting, guess I should send my resume in there since they might be hiring soon.
• A scary one for soon to be pensioners is allowing federally regulated pension plans to spend 10 years instead of five to make solvency payments if necessary. This is a slippery slope I think and it could end up like some of the private pensions that are woefully underfunded these days.
• Only allowing seniors to withdraw $7,500 instead of $10,000 from their Registered Retirement Income Funds (RRIFs), which is supposed to slow the cashing in of stocks and mutual funds I guess. 

Good Graphic to Show Canada is Doing Better than Most:

Canada Doing Not Bad with Debt

My wife told me about a new episode of “‘Til Debt Do Us Part” which Gail Vaz-Oxlade hosts, where one of the spouse’s financial tactic to paying off their debt was to go to the Casino and try to make some extra cash (no she wasn’t working there, she was gambling). Other folks I know buy lottery tickets or are part of “groups” that buy lottery tickets weekly, hoping to hit it big so that they can retire.

Allow me to be clear on this one, neither of these “Financial Plans” are effective, nor are they prudent.  My personal opinion is that if you have reached a point in your life where you feel you must gamble to catch up on your financial obligations, you are in dire need of serious help from some kind of professional. 

The Gambling Recovery Plan

If the Canadian Government came up with a plan to take $2B and go to one of the larger Casinos in Las Vegas and attempt to double it using a “gambling system”, there would be an armed Coup D’Etat that night, however, if we hear of friends or family going to the Casino, how many of us stop them? Gambling your money on a hot stock tip, a game of no limit Texas Hold’em or a pyramid scheme is not the way to recover from a financial set back. 

It usually takes time to get yourself into a financial bind, and thus it is going to take time to get yourself out of the financial bind you are in. There are no quick fixes to financial problems, and if there are, usually you’ll be back in the same financial bind quickly, if there was a quick fix (i.e. windfall money appears which helps you out, but you don’t fix the root cause of the problem).

The only Gambling Recovery Plan I could think that might be a success is if, you are a gambler and you have been blowing your money at the Casino and you decide not to go to the Casino any more, that plan will succeed (as long as you don’t find somewhere else to squander your moneys).

The Lottery Retirement Plan

Having worked in the lottery business many years ago, there are three groups of people who make money on the lottery:

1. The person that runs the lottery makes the most money, hands down. Governments, however, have made it illegal to run your own lottery, so you can’t make money on lotteries this way.
2. Printing and distributing lottery tickets is a fairly profitable business (look at Canadian Bank Note, or British American Bank note’s financials in this area), but it is a very small percentage compared to how much the lottery commission makes on a Lottery.
3. Selling lottery tickets makes stores money, and they get to share in winnings of their customers too, but the sellers don’t make as much as the printers do

Note there is no mention on that list of BUYING lottery tickets as being a way to make money on lotteries.

I realize that most likely every reader of this article knows someone (a friend of a friend, or something like that), that Won the Big One in the lottery. That is what the Lottery Commission wants you to remember. What you don’t realize is most likely you know of someone who was bitten by a shark or hit by lightning (both more likely occurances than lottery winning). 

If you are spending money on Lottery tickets, figure out how much you are spending yearly, then multiply that by 20, and that is the money you’d have in hand (plus interest) if you didn’t buy the lottery tickets (or the Cigarettes, or the Coffee, etc., etc.,), keep that in mind the next time you want to buy an “Early Retirement” lottery ticket.

You want a winning bet? Put that money in an RRSP or an RESP, or give it to a Charity.

After this week the easy answer to my post Is it Safe? is NO! Another very bad week on the Stock Market, worldwide and things are not looking up in the near future, that is for sure. The S&P TSX Index had it’s second worst percentage drop ever.

“…The S&P/TSX closed down 9.02 per cent, or 765.80 points, to 7,724.76 as the price of oil slid as low as $49.50 (U.S.) a barrel. It’s the first time the index has closed below 8,000 since December, 2003…“

• Free Money Finance asks the question Who Gets to Keep The Ring When an Engagement is Called off? I can say in my case, I asked for it back, but I felt it was my right. I also got a full trade in value (back then People’s jewelers did that).
• One Caveman pointed out that Tipd has gone live a new idea, Social Networking for Financial Folk. I have posted a few ditties there.
• Michael James continues his graph work to illustrate why MER: Death by a Thousand Cuts . If you own Mutual Funds, you really need to look at this one.
• Canadian Capitalist has some Ideas for your TFSA , which are quite good. I am still not sure what type of account we may open and how might use it, but we better decide soon, I guess.
• Ellen Roseman writes about How to cut back and be frugal, I guess frugality is the new extravagance? Kind of like short is the new long? I never understand fashion metaphors.
• All About Nortel asks the question, How Low Can it Go? A suitable fashion metaphor might work, but I will stick by my Zero means Zero statements of last week.
• No Debt Plan has good advice to Manage Your Spending Not Your Bills, which is very true, if you control spending you’ll have things under control, bills come no matter what!
• Canadian Tax Resource suggests using RRSPs to Offset Capital Gains, which means the tax on the Capital gains. Be nice to have Capital Gains to worry about.

Not Safe Yet!

I am on Twitter for those who feel your life would somehow be fullfilled seeing my wit and commentaries as I think of them, follow me.

I have 10 followers for now, and I am still astounded anyone cares (although I follow Stephen Fry, so I guess I am no better).

As for the question, I was toying with having an Umpire picture with the caption “Not Safe”. Then I toyed with a giant condom picture but figured that was a little vulgar (safe = prophylactic), so I ended up with this picture showing many dangerous things, and the answer, that it is not safe yet.

Have a safe weekend!

Is it Safe?

One of the most terrifying movies I have ever sat through is the Marathon Man which stars Sir Lawrence Oliver as a crazed Nazi dentist hiding jewels and Dustin Hoffman as a pawn in the entire scheme, and in this movie there is a set of scenes where the crazed Nazi dentist torments the Dustin Hoffman character with a hobby drill, drilling his teeth and the only question he keeps asking is “Is it safe?”. Just recollecting this scene puts chills up my spine, but it is actually a good metaphor for the current financial crisis.

Is it Safe?

At the macro level governments have no idea whether “It is safe” and they really don’t know what the answer to the question is, but in fact this movie is an even stronger metaphor at the Personal Finance level.

Is it safe? What does that mean? Is our money safe? Is our job safe? Is our lifestyle safe? Is what safe? Is our economy safe? Is my credit safe? Is my RRSP safe? Is it safe to retire? Is my house safe? (to paraphrase a frantic Dustin Hoffman), the question without context is very hard to answer, and there is the harder part, what is the answer? Is it safe? I have no idea, but I think we are all fighting to find out “Is it safe?”. I hope we are safe, but I guess we really won’t know what the question means and what the answer is, for a while.

Are you safe?

Pension Info Arrives

My final pension settlement has arrived from my former employer, which makes me feel a little more safe. I must now answer the question, “Is it safe(r) to stay in the pension or go to the LIRA?”, I think I know the answer but I will keep my readers posted.

Montreal Grand Prix Dead

One of the major economic events in Montreal every your for a while has been the Grand Prix of Canada held in Montreal, however, this year the F-1 board decided to not return to Montreal for 2009. The Quebec Government has been attempting to change Max Mosely (no comments about Nazis and prostitutes) and crew’s mind, but Jean Charest has said he has no more economic cards to play. I enjoyed the Grand Prix and am an F-1 fan and am saddened to hear of this turn of events. This will have a serious impact on the bars in downtown Montreal that relied on the Grand Prix to draw customers.