Deficit Reduction or Debt ?

These days the media seems to be very confused. They use the term Deficit and Debt interchangeably, and they are not the same thing (in terms of government spending).

In terms of Governments, a Deficit, usually describes how much more was spent than collected in taxes. It is usually measured over a yearly budget. If the deficit is zero, that means the government is taking in funds sufficient to pay for all the spending they have done for the year (this may include payments to service existing debts).

The 2019 federal debt is: $ 683,290,000,000.00 (according to Stats Canada)

Debt, on the other hand for a government is the amount the government owes, in terms of moneys borrowed over a long period of time. Deficit financing (or the accumulation of debt) for Canada started in the late 1960’s.

The federal deficit in 2017 was: $ 7.8 Billion (according to Stats Canada)

I was confused when the CBC had the headline, B.C. posts $1.5B operating debt, they have since revised the title, realizing their mistake. Their tweet remains mistaken:

Your Deficit and Debt

A personal deficit (or surplus), would be something you measure monthly. Did you spend more this month than you made? If you have more or a surplus, then you can put more money on your debt (overall debt), or save the surplus.

Your Debt is the sum total of all the money you owe. Your debt will slow your ability to enjoy your life. You cannot save for:

While you can have occasional monthly deficits, the goal is to have a yearly surplus. The other goal is to pay down debt as soon as possible, and that should be the main goal of your surpluses.

Seems straight forward, doesn’t it? Also seems that this isn’t really a topic for the current election.

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A Personal Spending Surplus ?

Before the previous Federal Election, the Tories claimed they had a “surplus” I read over the Annual Financial Report of the Government of Canada Fiscal Year 2014–2015 is the statement of the National Debt and saw that one of the ways a surplus was possible in the fiscal year 2014-15 was by ministries delaying spending, which made me wonder if it would be possible to do the same thing with our own personal finances?

Debt Subliminal

This is NOT a Debt Reduction Plan

If we take a young family, with a Home Line of Credit which holds the debt on their house (as opposed to a regular mortgage). This young family goes to a financial planner, who tells them they needed to cut down on their spending and get to a point where what they spend is less than what they earn (similar to the concept of this government’s surplus).

The family is lucky in that their Home Line of Credit’s minimum payment is the Interest Charge for that Month (and luckily their Line of Credit interest rate is nice and low). The young family does have a lot of expenses, with small children, car payments and a large amount of discretionary spending (and the debt that accrued because of that spending). The family decides the best way to reach the zen of spending less than they earn is by not paying down their largest debt (their house), so that they can pay for all of their other spending (cars, vacations, nice clothes, cable, etc.,).

This idea actually works well (assuming the bank doesn’t call the line of credit and ask for all of their money), in that the family is not spending more than they make, but there is a problem. Their debt load isn’t actually dropping, and they will eventually have to pay down the debt on their house, which is a huge problem. An even bigger problem will be when interest rates go up, so in the end, this family is living in a financial fool’s paradise.

In Real Life

At the end of it, the Tories “surplus” didn’t really come to fruition, and thanks to a new Government, we are back to deficit financing programs and such, but there are promises of balancing a budget some time soon. This might well be how our example family ends up as well (i.e. much farther in debt).

Remember as I always say, Hey we got extra money, let’s spend it! (No, I don’t I am being sarcastic).

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Election Reflections, Loose Money and #MoneyStories

Well, that was a very interesting election result, that I had a suspicion might happen, however, it does make for a very interesting future (note I am not saying good, or bad, just interesting). Trudeau is PM, and it was back to the Future Day on Wednesday? Welcome to the 80’s ? Guess I need to find my Nash the Slash T-shirts?

Harper's LEGO Hair Problem

Nice Hair Though

For the direct money view we go to the Globe which explains 9 Things that the Liberal Victory will change in your financial life. I am going to miss that income splitting with my spouse, maybe they can bring it back later, or I may have to retire to do it with my pension. Everything else is kind of m’eh to me, but the $2000 back on my taxes last year was mighty sweet. You do realize these new MP’s will be paid $167,400 per year, right ?

One of the big topics is how exactly is Mr. Trudeau going to change the TFSA limit back to what it was? A general amnesty for a year? Really not sure, but it should be interesting to see how he treads gently around the topic.

What happened to the NDP? The Jack Layton Party returned to being the NDP again, and are back to their normal historic seat counts, which is too bad in some ways, and good in other ways (remembering Bob Rae in Ontario for one thing). Interesting that the popular vote levels are not that different, but all it takes is a few areas to change their previous voting habits (i.e. Quebec) and voila a change of government.

In Ottawa there was much rejoicing in the demise of the Harper Government (in the Public Service area, remember I am a Civil Servant) and here is one of the reasons that Ottawa was part of the Red Tide, an open letter from Mr. Trudeau to Public Servants. I may do an article on how Mr. Clement’s plan to revise the sick leave system in the Public Service might have been a good idea, however, it had some flaws.

It was pointed out to me that Mr. Harper’s hair was never really mentioned in the election (even though Mr. Trudeau’s had its own catch phrase “Nice Hair Though”), but am I the only one who said it looks like LEGO hair?

In celebration of the Liberal victory the Bank of Canada did not change their key overnight rate and money continues to be as loose as can be (all right, it had nothing to do with the election). You should really read the Monetary Policy Report for 2015 as well. The bank’s exact statement was:

The Bank judges that the risks around the inflation profile are roughly balanced. Meanwhile, as financial vulnerabilities in the household sector continue to edge higher, risks to financial stability are evolving as expected. Taking all of these developments into consideration, the Bank judges that the current stance of monetary policy remains appropriate. Therefore, the target for the overnight rate remains at 1/2 per cent.


Tax Software That Gets You Every Penny You Deserve

My Writings for Week Ending October 23rd

I actually felt very re-energized by my attendance at CPFC15 (and am thinking I will be back next year), however, that still doesn’t expand my schedule, but I will be trying to write more soon. I did enjoy chatting with my peers, and some very experienced writers, and enjoyed the fellowship.

  • In Home Insurance: Three Strikes and You Are Out, I was pointing out that my mother’s home insurance was cancelled after three (major) events that she made insurance claims on, and that is the way home insurance works, so keep that in mind. Chime in the comments if you have your own stories in this area.
  • The Bank of Mom and Dad is a cautionary story about lending money to your kids (and family members in general) and how bankrupting one generation so the other can have a nice house, might not be the best idea.
  • I did check out my archives and found a classic, Top 5 Reasons You Are in Debt, it is a swerve post, as it is not what you think it is.

Facebook Post of the Week

Dave Ramsay does have a way of summing it up in one line


Click here for more great financial stories 🍁📥♔🍁

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Vote Today Canada

No, I am not quite back from Blogcation yet, but I have created a friendly reminder, that if you are of voting age, and you are allowed to vote, it is a moral imperative that you do so.

Voting is the only time when the Government asks your opinion and is forced to listen to your answer (no matter how small you think your answer might be).

Over my voting career, I have had the privilege of voting against Pierre E. Trudeau, Vote No on a referendum and other equally important votes, and surprisingly they all mattered (even the ones for school board trustees, and Hydro board members). Voting is your right, and you must exercise it (and if you don’t, I don’t think you have the right to complain about the government (but that is my opinion only)).

I don’t care who you vote for, but go out and vote! If you don’t know who  you will vote for, go and vote, an inspiration will hit you in the booth, and if not, then flip a coin?

Vote Canada!

Then you can sit back and watch the fun on Monday night.

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Unemployment Inches Down, Employment the Same

Stats Canada says that in March 2011 Unemployment inched down 0.1% however, employment figures hovered and remained unchanged. The good news is that the Employment numbers had losses in Part-Time jobs offset by increases in Full-Time positions, which is better for the economy overall (in my opinion).

Overall employment was unchanged in March, as gains in full-time work were offset by declines in part time. The unemployment rate edged down 0.1 percentage points to 7.7%. Over the past 12 months, employment has risen by 1.8% (+305,000).

Employment being up 1.8% over the year suggests Canada is recovering (Slowly) from the great Economic implosion of 2009, but there is still a long way to go.

RDSP, Employment, RESP, 401k

Employment for the past little while.

Full-time employment rose by 91,000 in March, and was offset by a decline of 92,000 in part time. This large full-time increase brought gains in full-time employment to 251,000 (+1.8%) over the past 12 months, while part time increased by 54,000 (+1.7%).

The full-time employment increases over the past year is a good thing. The increases were most noticed this past month with men 25 and over, while the losses were with youth 15-24 and women over 55 years old.

RESP, RDSP, 401k

Unemployment over the past little while

This graph is a bit more indicative of the Canadian recovery  from the bad days of 2009, slow but sure dropping of the Unemployed, but a long way off from the days of wine and roses of 2008.

The Big Table

As usual I include for my own interest, as much as anything else, the big table for employment.

Labour force characteristics by age and sex

Feb 2011 March 2011 Feb to
March 2011
March 2010 to
March 2011
Feb to
March 2011
March 2010 to
March 2011
Seasonally adjusted
thousands (except rates) change in thousands (except rates) % change
Both sexes, 15 years and over
Population 27,866.5 27,889.2 22.7 338.5 0.1 1.2
Labour force 18,678.0 18,663.1 -14.9 231.3 -0.1 1.3
Employment 17,229.6 17,228.1 -1.5 304.6 0.0 1.8
Full-time 13,843.1 13,933.7 90.6 250.8 0.7 1.8
Part-time 3,386.5 3,294.4 -92.1 53.8 -2.7 1.7
Unemployment 1,448.5 1,435.0 -13.5 -73.3 -0.9 -4.9
Participation rate 67.0 66.9 -0.1 0.0
Unemployment rate 7.8 7.7 -0.1 -0.5
Employment rate 61.8 61.8 0.0 0.4
Part-time rate 19.7 19.1 -0.6 0.0
Youths, 15 to 24 years
Population 4,458.8 4,458.6 -0.2 -1.3 0.0 0.0
Labour force 2,888.5 2,873.5 -15.0 -24.7 -0.5 -0.9
Employment 2,475.8 2,459.2 -16.6 11.7 -0.7 0.5
Full-time 1,286.1 1,298.8 12.7 22.6 1.0 1.8
Part-time 1,189.7 1,160.4 -29.3 -10.9 -2.5 -0.9
Unemployment 412.7 414.3 1.6 -36.3 0.4 -8.1
Participation rate 64.8 64.4 -0.4 -0.6
Unemployment rate 14.3 14.4 0.1 -1.1
Employment rate 55.5 55.2 -0.3 0.3
Part-time rate 48.1 47.2 -0.9 -0.7
Men, 25 years and over
Population 11,451.1 11,462.6 11.5 168.4 0.1 1.5
Labour force 8,351.0 8,377.8 26.8 157.6 0.3 1.9
Employment 7,783.1 7,815.5 32.4 207.7 0.4 2.7
Full-time 7,155.0 7,204.9 49.9 157.9 0.7 2.2
Part-time 628.2 610.5 -17.7 49.7 -2.8 8.9
Unemployment 567.9 562.3 -5.6 -50.1 -1.0 -8.2
Participation rate 72.9 73.1 0.2 0.3
Unemployment rate 6.8 6.7 -0.1 -0.7
Employment rate 68.0 68.2 0.2 0.8
Part-time rate 8.1 7.8 -0.3 0.4
Women, 25 years and over
Population 11,956.5 11,968.0 11.5 171.4 0.1 1.5
Labour force 7,438.6 7,411.8 -26.8 98.3 -0.4 1.3
Employment 6,970.6 6,953.4 -17.2 85.2 -0.2 1.2
Full-time 5,402.0 5,429.9 27.9 70.2 0.5 1.3
Part-time 1,568.7 1,523.5 -45.2 15.0 -2.9 1.0
Unemployment 467.9 458.4 -9.5 13.1 -2.0 2.9
Participation rate 62.2 61.9 -0.3 -0.1
Unemployment rate 6.3 6.2 -0.1 0.1
Employment rate 58.3 58.1 -0.2 -0.1
Part-time rate 22.5 21.9 -0.6 -0.1

Related CANSIM table 282-0087.

Addendum

What were the Employment numbers like for March 2010 ? Click back there and see, remember every month I post these numbers.

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