Canadian Personal Finance Blog

Yup, it’s half way through 2009 and how goes your financial plan for this year?

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.

So far I keep hearing from different sources (the Bank of Canada, Stephen Harper and now the IMF) that Canada will weather the Financial Apocalypse of  the 21st century (at least the first one) and come out of this whole recession/depression/meltdown quicker and stronger than many other countries. 

Do I believe it? Sure, for now it’s good to have hope, and hope might be a good thing right now (to paraphrase Stephen King), but remember the skepticism is important as well (i.e. don’t blindly believe this and make silly decisions based on this optimism).  Hope for the best but plan for the worst, is still an important credo to live by.

Bank Service Fee Ambiguity

For those who don’t know, I am averse (if not allergic to) Bank Service Fees I have come to an interesting question about how my accounts work. 

This past week I had to order cheques for my chequing account (I am astounded by the number of cheques I still write, given I pay all my bills on line) and I was gouged charged the regular $30 for a set of cheques by TD.  I grumbled about this but then I remembered that the last time I ordered cheques for my Line of Credit they came for free.

I then wondered if I ran my entire financial life through my Line of Credit would I be gouged charged the regular $15 a month (which I don’t pay) service fees that I do for using my chequing account and such? I realize doing this is a very precarious bit of balancing and you must be very diligent to make sure you are really paying down  your debt load, but it is an interesting question.

Why is doing the exact same banking activity free if I use my Line of Credit but costs $15 a month from my chequing account?

In Ottawa this week our Hockey team fired yet another coach, meaning our team is actually paying for 3 different coaches right now (the one we fired last year, the one we fired this year, and the current coach), which is not very good planning (paying 2 people NOT to do a job), however, the main statement is that the previous coaches did not hold the players accountable for their play (i.e. the players were allowed to do what the heck they wanted without concern of less playing time, or punishment for sloppy play in practice) and thus the players were “lazy”.

This got me thinking this accountability concept is vital in business and a few of the bigger problem areas of the economy there is a lack of accountability seen as well.

Bank CEO’s

We are seeing the Canadian Bank CEO’s making an attempt to appear to be “tightening their belts” and “taking one for the team” by eschewing some bonus money. While my opinion is this isn’t enough, at least the optics of the acts show at least some penitence for their actions, and thus some perceived accountability.

High Tech

There I don’t see as much. Nortel’s CEO has still not really shown any contrition or accoutability in his actions, which makes a lot of folk wonder does he feel accountable for the companies current situation? Employees who are about to get laid off with little or no severance are not as likely to “go to the wall” if they know their CEO is still raking in big money.

John Chambers from Cisco on the other hand for a while (and might still now, I can’t find any coroboration) took a salary of $1 per year (he got other compensation), but that alone has great optics for employees. Is he still very rich? My guess is it is not likely that he is trying to create extra income for his family by taking a part time job at Home Depot.

Overall Accountability

Accountability of the folks in power and of anyone you deal with directly (especially when it comes to your money) is a vital thing to look for. 

If you have a financial advisor, how are they accountable to you? If they give  you bad investment advice what happens? Ask that if you are talking to your advisor. If their answer is, “… well, I’ll try to do better next time”, you might want to think about not hiring them. How can you make this person accountable for their decisions with your money?

How do we make CEO’s of large firms accountable? Make sure if you are a stock holder you vote for your Board of Directors, since they are supposed to represent your best interests (whether they do or not, is another question). Go to the yearly stockholders meetings, ask questions and read the company prospectus (no matter how painful it might be).

You can’t hold someone accountable for anything, if you aren’t sure of what they are doing, and you can’t ask pointed questions about what is being done, if you don’t know, “what is being done”.

Make yourself accountable for your decisions, but also make the folks you deal with directly (and those that work for you) accountable for their actions and decisions, it will make the whole system work that much better.

You Guys are Bookies!

Given the upheavals in the financial world, now is the time to shuffle the deck, trade stock, buy new mutual funds, sell old ones and do lots more stuff that will incur you plenty of financial service charges, or at least that is what the financial services industry wants you to do. 

In the immortal words of Ray Valentine in one of my favorite Financial Movies, Trading Places, “… you guys are like bookies…”, when the evil Duke brothers explained how their commodities trading business works. The Financial services industry is just like bookies, they don’t make money if you make money, they make money if you use their services and incur their fees.

Transit Strike in Ottawa Over

However, that does not mean we have buses, oh no, we have to wait until February 9th to get those, we will have an O-Train, but not much else for a week. This strike (in my opinion) has killed all “good will” built up over the summer of ridiculous gas prices, that caused folks to start taking mass transit in Ottawa. The ridership may return slowly, but many people are now disillusioned and even more have found they can live without the bus for now.  This is bad for the Environment and for a lot of people’s finances, since some folks who shouldn’t buy cars, are going to (or already have), so I am displeased with this strike (and I blame both sides for it).

To attempt to lure some riders back, if you had a December bus pass, it will work for the month of February as well.

Lent is Coming

Remember Lent is coming folks and maybe it’s time to start thinking what you are going to do spiritually in this area, but also, you can use it for a Financial Period of Penance, Enlightenment, Learning or Cost Cutting. Keep this in mind Ash Wednesday is coming on February 25th, so keep that in mind. 

Some Ideas:

• You could cut out using Credit Cards, and see how your spending changes
• Use cash only, like Gail Vaz-Oxlade does on her program and see what happens
• You could take a course on the Stock Market or read to learn more about why you are investing where you are.
• Give up buying lunch and coffee at work, and save the money (or donate it to a worthy cause)

Just some ideas.