A Primer in Money Management
Concerned about your lack of knowledge of basic financing and how to save and invest your money wisely? So is the Canadian government. The Feds have already pulled together expert teams to address our illiteracy when it comes to money management, and they’re looking for ways to teach Canadians to be savvier about their finances.
School systems across the country are also on the move. They’re looking to introduce classes in finance fundamentals to our children as young as grade four and possibly as early as 2011. What both these moves point out is the reality most of us live everyday-that nobody ever taught us how to manage our money, or how to invest it wisely or well.
Good money management does require a few changes in your thinking, almost certainly a few new habits, and some discipline. To develop good money management skills-like any new skill-you have to practice them until they become ingrained into your lifestyle, and monitor yourself to ensure that the old bad habits don’t creep back in to your life, and send you back down the money hole.
What are your bad habits?
Before you can change anything, you need to know where your money pits are. Try this 30-day challenge. Monitor all your purchases-every one of them!-and keep the receipts. Carry a small book around with you-something you can easily slip into your pocket or handbag, and enter every single thing you buy and where. That includes the soda pop you might buy while strolling through the mall, or the quickie meal you pick up on Friday night on your way home from the grocery store. Track all of it. At the end of the month, see where and how (credit, debit, cash) you make unneeded purchases. Add those up. Are you surprised at the total?
How can you replace bad habits?
Now that you’re aware of your bad habits, start changing them. If you use plastic too much, stop using your credit and debit cards. If cash burns a hole in your pocket, stop carrying it. If walking through the mall on Saturdays always means you spend money needlessly, try going somewhere else-like the park or the library. Only carry your cards or cash when you are making a specific purchase like groceries, or paying a bill. Learn to feel okay about not buying anything, and saying “no” to the kids.
What’s next?
If you’ve stopped those bad habits, you may well feel richer-because you are. But don’t let that newly found money go to waste. Take the money you were frittering, and put it towards paying your highest interest bill. Once that bill is paid off, move to the next highest interest bill, and so on, until your debts are paid.
Money basics start with knowing your own spending patterns, changing the ones that cause you to waste money needlessly, and having the discipline to do things differently.
Oil Spill May Threaten Offshore Drilling Plans
The ever-growing oil slick in the Gulf of Mexico may threaten more than the environment. It will make it significantly harder to open up more coastal areas for oil drilling.
The Gulf oil slick moved within 16 miles of the Mississippi River Delta last week, placing residents from Louisiana to Florida on alert against the possibility of oily beaches, closed harbors and a decimated fishing catch. That makes President Obama’s plan to increase offshore oil drilling a much harder sell.
Such drilling is “clearly not clean enough, after what we saw today,” Florida’s Independent Governor, Charlie Crist — a former drilling proponent — told the Miami Herald Wednesday after flying over the slick. “That’s horrific, and it certainly isn’t safe enough. It’s the opposite of safe.”
Lawmakers from Maryland, Virginia, Rhode Island and Delaware have also expressed concern over offshore drilling following the Gulf disaster.
“The tide has shifted as a result of this spill,” said Kevin Book, a managing director at the research firm ClearView Energy Partners. “It will be much harder to open up any new areas.”
Last month, President Obama said the federal government would begin the process of leasing some areas off the coasts of Virginia, Alaska and maybe Florida to oil companies for drilling.
New offshore drilling in most U.S. waters had been banned since the early 1980s, when mounting public pressure pushed lawmakers into action. A disastrous oil spill off the California coast in 1969 sparked protests that grew into a broader environmental movement, which eventually succeeded in forcing a drilling moratorium.
The ban was renewed each year until 2008. But that year, public outcry over soaring oil prices made it politically impossible to reauthorize.
“Given our energy needs, we are going to need to harness traditional sources of fuel,” Obama said last month. “So today, we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources.”
But the federal government can’t open up new areas for drilling all by itself. It needs the approval of the states where the oil will eventually be offloaded, and whose coastlines would be damaged by any spill.
Virginia is the only state so far that doesn’t currently have drilling operations to give the feds the green light.
Book still expects new leases to be awarded, perhaps as soon as 2012. But he predicts that the process, which will include a lengthy public comment period, will now be much more difficult.
Especially given the comments this week from Rep. Frank Pallone, D-N.J.
Pallone announced that he is “adamantly opposed” to Obama’s plan to expand drilling.
“Advocates of offshore drilling will have a hard time convincing people along the East Coast that they have nothing to fear from drilling in our waters as they see the oil slick moving through the Gulf of Mexico towards the shorelines of three or four states,” he said.
New Jersey’s beaches, packed during the summer with tourists from the greater New York City area, lie just 45 miles from the northern reaches of Virginia’s offshore waters.
But environmental concerns will have to be weighed against two tough realities: America needs more oil sources, and the federal government needs more revenue. Royalties from U.S. offshore drilling currently contribute $10 billion to $12 billion to the federal coffers each year — a sum that would rise if drilling expands.
As for Obama’s offshore drilling plan, the administration still appears to be moving slowly forward.
“The president’s announcement was the beginning, not the end, of a long process,” White House Press Secretary Robert Gibbs said, when asked if the spill would affect the President’s proposal. “The president does believe that we have to increase domestic production.”
Canadians Still at Parity
This past April 24 weekend, the Canadian dollar slid as inflation and retail sales came in weaker than expected. Economists were surprised as currencies usually strengthen when interest rates increase to attract capital flows. However, the Canadian dollar managed to climb its way back up just above parity with our greenback neighbour, which was lifted due to the weaker US dollar.
The Canadian loonie fought back from a low $1.0066 to the U.S. dollar, or 99.34 U.S. as the price of oil climbed above $85 a barrel following positive U.S. economic data. The currency ended the session at C$0.9991 to the U.S. dollar, or $1.0009, up from Thursday’s finish at exactly C$1 to the U.S. dollar. It was up 1.4 percent for the week.
The central bank showed the annual core inflation rate was lower in March at 1.7 percent from 2.1 percent in February. Much of the cause in the push in CPI in February was temporary and due mostly to the Vancouver Olympics. This lower market reading means the bank may not have to raise the interest rates as aggressively as anticipated. Also weighing in on the currency outcome was data supporting the numbers that retail sales rose less than expected in February. Even though retail sales increased for the third consecutive month, economists were expecting a gain of 0.8 percent, up from the 0.5 percent in overall sales.
Now that the Canadian economy is back in check, the banks feel it may be time to begin removing some of the stimulus that helped get Canada out of the recession. The bank is no longer promising to keep its key rate at the record low of 0.25 percent. The next rate announcement is June 1.
The North American equity markets ended on a higher note with US stocks advancing due to increased energy and healthcare issues. Canadian bond yields had a large jump this week as well due to the anticipated bank interest increase that may come sooner and steeper than expected. The two-year Canadian Bond was up 7 cents to $99.13, yielding 1.984 percent, while the ten-year bond rose by 23 cents to $100.38, yielding 3.701 percent. Canadian bonds continued to outperform the US bonds with the two-year yield 91 basis points above its US counterpart.
With all the increase in interest rates also comes an increase in investment profits. If the central bank does indeed raise rates as expected, it may be a good idea to lock yourself in to a loan now if you are in need of one. If traditional banks are not an option for you due to bad credit, there are many private lending institutions that offer bad debt loans. They can be found on-line
Canadians Struggle to Afford Their Homes
The Conference Board of Canada has recently found that the lack of affordable housing has left one-fifth of Canadians struggling to pay for their homes. They fear this number could increase as the mortgage rates rise from their recent lows. This means that currently, 20% of Canadians are affording their homes by cutting other costs that could personally affect them. A home is considered unaffordable if the costs exceed 30% of one’s pre-tax income.
The current Canadian mortgage rate of 5.25% is being raised to 5.85%, up six-tenths of a percent. This move is being followed through by five of Canada’s largest banks and will affect all five-year mortgages. The report from the Conference Board of Canada comes just as CIBC and National Bank announce they too, were raising their mortgage lending rates by more than half of a percent, ahead of the Bank of Canada’s anticipated rate hike that is expected this summer. This likely spike in bank rates will end the historically low mortgage rates that have brought us into 2010.
The Conference Board of Canada claims the high debt loads that are being taken on by consumers are an attempt to get in before the mortgage hikes take effect. These same homebuyers are considered responsible for the housing market rebound that Canada has seen up until now. However, there is a fear that anxious consumers will continue to overextend themselves in an attempt to get into the housing market meanwhile, the level of Canadian incomes has remained relatively consistent, not providing enough of an increase to match the housing prices.
Much of the problem lies with the buyers who didn’t put a lot down, which means their mortgage payments are quite high. Combine this with an increased mortgage rate and the outcome will be homeowners with a serious affordability problem. If the current prime rate of 2.25% rises by 2.5 percentage points, which is an average cycle increase, a variable mortgage rate could cost a homeowner about 30% more per month.
A large segment of the housing population’s demands have not been met due to the heightened fees of construction, resulting in developers being focused on building homes aimed at people in the higher tax bracket. There is also a gap in rental availabilities as developers are building condos instead of apartments, leaving rental properties sporadic and expensive.
There is an element of concern that there could be more defaults on loans or more home foreclosures due to interest rate increases, but it is felt that most people will find ways to cut expenses to pay off their mortgages, which may pose a risk to Canada’s recovering economy. If you feel that you are in a position of needing to tend to a bad credit rating or financially prepare for the upcoming rate hikes, a private bad credit loan may be an affordable answer.
Our Low Interest Days are Numbered
It seems the great ride could soon be over. As inflation continues to move at a rate faster than even the central bank expected, Statistics Canada says the Bank of Canada could lift its interest rates as early as June. Yes, this means it could very well cost more to borrow money.
The Bank of Canada is guided by the core rate. Consumer prices climbed 1.6% in February, down from 1.9% in January, but the core rate, which eliminates volatile items such as fuel, rose 2.1% from 2%. Economists had not expected Canada to reach this target until the third-quarter of 2011.
Some economist say that Canada’s core inflation mark up resulted in the ‘Olympic Effect’ due to hotels in Vancouver charging exorbitant rates for their rooms. One hotel that normally refers to itself as a discount hotel, was charging $1,200 a night for a suite that usually costs $280.
Either way, Canada is moving out of the recovery phase of the recession. This is going to be a huge factor on how aggressive policy makers are going to be. There is speculation that the central bank will begin increasing borrowing rates before the United States. This speculation has played a large factor on the loonie being close to parity with the US dollar. Out of the Group of Seven, Canada may be the first out of Great Britain, France, Japan, Italy and the United States to raise interest rates since the recession began. The US does not show any sign of raising their borrowing rates any time soon as their consumer prices did not show an increase last month, the first time in almost a year.
In Asia, the inflation is being beaten back as their country’s growth accelerates. The central bank in India announced a rate hike in an attempt to fight against inflation while China posted a 16-month high in its consumer index recently. Canadian retail sales increased by 0.7% in January due mostly to home-improvement products and the government’s Home Renovation Tax Credit.
Many economists think the banks will raise the rates by 0.25% at a time then re-evaluate, which means the clock is ticking on Canada’s record-low rates. If you are one of the many who are unable to take advantage of these low interest rates due to bad credit, you may want to consider alternate means of financing such as car title loans. While interest rates will be higher due to the high risk nature of these loans, doing some research will enable you to find a lender who provides reasonable rates with flexible repayment terms.
Frugal Canadians Opt for Web over TV
It’s finally happened. Canadians have caught up with the rest of the world when it comes to web surfing. According to Ipsos Reid, the average Canuck spends more than 18 hours a week surfing the web compared to 16.9 hours a week watching television. It’s what Canadians are doing on the web that may be surprising. They’re watching television. As more of our favourite shows migrate to the internet, so do we, so in essence, we’re not necessarily watching less television.
Although television shows are being watched on-line, the usage of radio, magazines and newspapers remains about the same. Part of the reason people are watching television on the internet is due to the rising cost of cable and satellite services, so watching television on-line for free is a logical choice. If you’re not an avid television watcher, paying $30 a month is not really a big deal, but paying $80 a month to watch one or two shows just does not make sense to most people.
As we slowly climb out of our recession shell, it’s still a good idea to save where you can and avoid extra spending or expenses. If excessive cable or satellite bills are weighing you down, then internet television just may be for you.
According to AdAge.com, US television giant CBS has sold out on its on-line advertising inventory for March Madness on Demand, bringing in $37 million dollars, up 20% from the previous year. Other major companies such as AT&T, soft drink giant Coca-Cola and credit card giant Capital One have all bought into the on-line advertising market.
Last year, 7.5 million people watched the NCAA tournament online, compared with 130 million on TV. The internet is an amazing tool and does not necessarily have to be only about television. It can also be a resource for information and provide help on any number of topics.
With more on-line content such as games, video-clips, movies and channels from abroad, these additional factors add to the growing trend. For younger generations, the internet is much more important than television than say to those over 55. Even though computers are becoming increasingly important to everyone, regardless of their age, they’re still a form of entertainment.
If you’re one of the many whose surfing is not because they dislike t.v., but rather because you haven’t paid your cable bill, you may want to consider a private secured loan to consolidate your debt and pay off that massive cable bill. It could have you back to watching the small screen instead of staring at your monitor in no time.
How Much Will a Die-Hard Sports Fan Pay?
I swear, now I’ve heard it all. The latest concept to hit sports teams and their fans, the all new ’sports mortgage’. Yep, you read right! Dedicated die-hard, long-term fans can now lock themselves into prime seats for the duration of 30 or 50 years with the Stadium Financing Capital Group. The concept goes something like this.
Being as the cost of prime seats continue to rise, even if the team is lousy, cash-strapped athletes remain frustrated by their deteriorating stadiums and struggle to keep them upgraded. They are constantly at a loss in making up for the financial shortfalls.
This new innovation in marketing benefits the big-time athletes by offering fans guaranteed top football seats. Jayhawks fans, for example, will pay as much as $150,000 US over a period of ten years to buy the seats for the next three decades. In return, the cost of the seats will remain locked in to the current 2010 prices.
This marketing fundraiser is being called ‘equity seat rights’ and has been advertised as a win-win for both the teams and the fans. The teams can bank on extra revenue and avoid borrowing money from taxpayers while the fans can be assured of the seat prices they will be paying to see their favourite teams well into the future. If one is buying seats for college or university football, the seat-fees become a tax write-off for donating to a school.
In California, fans have been given an even greater opportunity. They’ve been offered an ‘endowment seating program’ which allows 30 years to pay for 50 years worth of season football tickets. The program is going well, as it has sold more than 1,800 of the 3,000 available seats. This has generated $150 million for renovations to its own Memorial Stadium, which was built in 1923. The long-term seating programs come with annual interest payments, much like a home mortgage plus a 6% annual administrative fee.
The Chicago company behind the ’sports mortgage’ is confident that these equity seat rights will take over the personal seat license, which does not lock in ticket prices. Even during difficult recession times, the cost of professional and university stadium seat prices go up. Top Jayhawk tickets tier between $175,000 and $225,000 but a club seat will cost more than double that amount if it was paid out over a 30-year period.
In the event you are a die-hard fan looking for a long-term sports commitment or maybe you’re just in need of a loan to clean up a bad credit record, you may want to consider a car title loan. These secured loans are tailor made for people with bad credit who need cash fast.