The Budget announced on Thursday did one or two good things, announced some ominous things (for me) and didn’t do much else.

Good: RRSP/RSP to RDSP

The one good thing is that estates of deceased parents and grandparents can transfer money tax-free to a child or grandchild’s RDSP, which helps those with disabled kids, so a very good thing.  The RDSP program will also allow for Carry Forward of the Disability Bonds for up to 10 years, so those who may not have enough to put in one year ,can make it up in the next year (seems a logical step in the program).

OK: Options Victims Saved?

There was a statement about the lucky folks being taxed for money they didn’t make on Stock Options, but the exact logic and methodology is not yet completely understood (as can be seen from this post from Michael James (an admitted victim)). I never had to worry about options ever being worth anything, so I think this doesn’t affect me in any way.

Interesting: Government Cost Controls

This one is directly in my new backyard, with a statement about budget freezes in the public service. What will this mean? Again, not exactly clear, but spending seems to have stopped for now, which might be a good thing for taxpayers (not for us civil servants). Will this mean lay-offs? My guess would be maybe, but a lot of attrition losses due to retirement not being replaced, might be the more logical choice. Will this cut down on bureaucracy and mismanagement? Did it do much in Nortel? Again, the answer is maybe, but I doubt it. Whatever bureaucracy that is there, will stay there, and anybody mis-managing things, are most likely going to stay where they are too, but we shall see.

No mention of the Public Service pension plan, but many ominous statements about it coming from the “side sources” of the government, so another area to watch closely.

Why Not Back to the Past?

So how is it that 4 years ago we were running surpluses and now we are running massive deficits? A couple of reasons come to mind, but they don’t quite add up:

• Massive infrastructure programs to help start up construction and such
• Less Government income, because less folks are working (and those that are, aren’t getting huge raises, and some even took pay cuts).
• More unemployed, so more money going out of the EI “cash cow”, instead of coming in.

But this doesn’t seem to add up to a $50Billion deficit in my mind, but again, maybe it is just not that simple. Anybody think of any other reasons?

A preliminary report from the City of Ottawa garbage folks has floated the idea of removing the Garbage Collection portion of the City Taxes and turn it into a user fee. With this move City Taxes will drop by $86 which sounds like a nice idea, however, the User Fee for Garbage is slated to be $195 per household which is about a 115% increase in the cost of paying for Garbage in Ottawa.

How is this possible? Let’s look a little closer:

• $86 is our original garbage fee, so we’ll keep that
• $41 fee for the black and blue box program in place (say that 5 times fast)
• $68 for the new Green Bin program for organics and compost and such

Now that is an expensive program. If you are a rural Ottawa person you won’t have to pay for the Green Bins, since you won’t have them, but you’ll still have your garbage fee go up by around 50%.

My suspicion is that garbage collection will become more like water and sewers and will become a bi-monthly billed program, which will then spiral in price to match the cost of garbage collection.

Do I have any other options here? No, I can’t opt out, I can’t claim I don’t use the service, so I must pay, as must my neighbours.

Care to complain? November 10th is your day.  Read the briefing notes, very interesting accounting discussions there.

Happy Guy Fawkes Day

For those with any UK heritage it is, in fact, Guy Fawkes day today. Hopefully there aren’t any more gunpowder plots out there!

It’s been a busy very Long weekend for me, so I will put up a Best of posting about the very High Price of raising ‘healthy” kids, which I wrote about two years ago, I wrote two follow up stories that  you can also read:

• High Price of Healthy Kids Part II
• High Price of Healthy Kids Part III

The High Cost of Healthy Kids? (part i)

I have seen many articles posted lately in the “real” media complaining about obese kids and the implication that it is their parents fault that they are fat. I agree in some ways given that you as a parent should worry if your kid is morbidly obese, or way over weight (also knowing that some kids fill out and then shoot up in height, and there are sometimes extenuating health issues). Parents should most definitely be worried that their kids are not healthy, no argument there.

What I will write about here, is how the “real” media implies that it is a simple case of parents just not trying to get their kids healthy, and the simplest resolution to the problem is:

• Make sure the kids are active at school in sports
• Sign them up for sports at home in their spare time
• Limit their TV and Video Game access
• Limit their intake of snack foods and foods high in sugar and fat

Simple enough, and in an esoteric way, I agree, however, let’s look at this from a financial model.

The question to be answered is: is it cheaper to have healthy kids, or is it more expensive? I’ll give my opinions in the next couple of days: (see the links for those posts)

• High Price of Healthy Kids Part II
• High Price of Healthy Kids Part III

New Month Coming

September is on the event horizon folks, that means we are in the final third of the year, maybe it is time to revisit your financial plans, and also start thinking about big ticket end of year items that could broadside you if you don’t think of it. What do I mean?

• Christmas, better figure out what you are doing there, or you may as well get a pile of money and burn it.
• When do your insurance policies renew?
• What other yearly payments might come due on January 1? Do you have enough money to pay them?
• How about your RRSP input goals? Reached them yet?
• RESP Goals?
• Savings in General?

A good financial plan is a living, breathing entity, that you must attend to monthly.

House Keeping

I will be out of town for a few days this week so I may miss a day or two this week, my apologies, if I could figure out how to do THIS full time and make a living, I’d gladly do it.

I have found that in my life that I do not change unless the situation I am in, causes drastic change (i.e. I cannot do things in small measures, it must be a big thing). I need a good reason to change, and that reason can’t be rationalized easily, that is how I usually succeed.

Question: Could you live without a cell phone? Do you use your cell phone at your work? Do you text at work? Do you text or use your cell phone at work, when you should be working? Do you text message in meetings, or on teleconferences? Do you text while driving? If any of these questions made you think that you might be addicted to your cell phone, then good (let’s not get into the entire Crackberry generation, talk about enabling ADHD).

Currently my wife and I pay upwards of $90 a month for two cell phones, which is a ridiculous sum of money for how much we use this service. This and a few other factors are pushing me towards cutting down my cell phone usage, if not completely cutting it out (we’ll see if I can go all the way, and lose the addiction).

Our Cell Phone usage consists of:

• Text messaging each other and our kids (55% of time)
• Calling each other and home (35%)
• Calling others and emergency calls and such (less than 10%)

We will be cancelling our contract when it expires in a month or so and moving over to a pay per use model and see how that works (luckily we can keep our phone numbers).  I suspect that there will be moments where I might regret this decision, however, I will remember this is for a larger good.

CPI Tomorrow

Given my new position, I will be commenting on the CPI numbers (that come out today) in tomorrow’s posting, stay tuned.

To make the summer pass a little easier I give you another one of my favorite and earliest posts from 2005 when I figured the best thing was to talk LOUD and fast and people might listen, maybe that works?

It’s Simple Isn’t It?

So the first and easiest principal of financial planning is to SPEND less than you MAKE. Notice, I am not charging you for this piece of advice, so please no notes saying, “Well D’UH!”, or such. This is so obvious, that maybe it gets obscured with all of the odd plans and peccadillos that we put together in our financial lives. Let’s look at this as the actual equation:

Incoming cash – Outgoing cash = SAVINGS (or Losses if negative)

You are probably thinking, I know that one! Really? Do you know how much money comes IN to your household? It’s not too hard to figure out, if you keep your pay stubs, but the rub is how do you figure out how much is going OUT of your household? Can you figure out where you are spending most of your money? Can you guess? My bet is you might be able to guess approximately, but I have also found that you might be wrong.

I am part of the “Quicken Cult” in that I track most of my expenditures and income in Quicken (no I don’t get any money from Intuit for saying this), and given that I use direct withdrawal to pay for most things, I actually have a pretty good view on what my family spends their money on (I’ll write another article on controlling spending, right now I am more worried about just bookkeeping).

Do you need to use Quicken to do this? No. You can use Microsoft Money, Excel, an accounting practice book, a spiral binder, or just keep your receipts for 2 or 3 months (or as long as you can stand keeping track of all of this). The important thing is that you are keeping track of things, you are watching (let’s not discuss the Heizenberg Principal just yet), and learning about your habits.

“I don’t need to track that, it’s only a coffee.”, think you? NO WAY! Go nuts for a short period and keep track of all that INCIDENTAL spending you have (if you are a smoker, you’ll have a heart attack on how much you spend on those). Let’s do a simple calculation here:

2 Stan Mikita’s Large Coffees per day * 5 days per week * 48 weeks * $1.40 = $672.00

The thing to remember this is AFTER TAX money too, could you use that much extra a year? If not, mail me a cheque for that amount (I sure as heck can).

The longer you do this “watching” of your spending the better a picture you can get about your spending HABITS. If you do it for a month, you’ll have a good snapshot, however, if you do it for 3 months, your picture is a bit clearer (and you are less likely to have “fudged” because you knew you were keeping track), and if you keep track for an entire YEAR, well then you can then plan for an entire year! WOW!!! That’s awesome.

Now that we have all this data, it is time to separate it into categories, the first is easy INCOMING and OUTGOING. Incoming is simple, that is your pay stub (but remember there is outgoing on there as well, taxes, cpp, ei, etc.,), outgoing is pretty much everything else. If you want you can use that big equation:

Incoming – Outgoing = Savings

and see where you stand (and whether it lines up with your bank statement), however, it might be better if you do a little more separation. In the OUTGOING, create subcategories for yourself, here are a few examples:

• Groceries/Food
• Transportation (Car/Bus/Moped expenses)
• Taxes! (no, don’t add up GST unless you are a glutton for punishment)
• Household
• Utilities (if you live in an apartment or condo you might not need that)
• Entertainment
• Miscellaneous (i.e. all that is left)

OK, so we have done this and we now have a good view of where the money goes, and where it comes in, and hopefully at the end of it, you know why you have the savings (or debt) that you have in that time period. Is this the end of our quest? No way, this is only the beginning, all we have right now is raw data, next we need to use this data to make our financial plan.