Category Archives: Saving Money

Dollar Basics.

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Due to its soaring value against the American ...

The big news this week is that the Canadian dollar is at a one year high as it closes in on $1.03 U.S.. I thought it might be educational to look at this topic from a few different angles to see if we could get a better understanding of why our dollar is going up and if, in fact, it’s even a good thing.

With all the problems in Europe right now, Canada is increasingly viewed as a safe haven currency. People in other countries that are worried that their currency may lose value are buying Canadian dollars and gold in order to protect the money they have saved. This is the reason both the Canadian dollar and gold have gone up recently. Popularity!

Interest rates are basically the cost of renting money. If you went to rent a car and one car cost more to rent than the other, you could pretty easily figure out which car was worth more money. The same is true for currency. The Bank of Canada has indicated that it is planning to raise interest rates soon. The fact that interest rates are set to raise in Canada has added upward pressure to our dollar.

At the same time we are raising interest rates, the U.S. Federal Reserve is expected to announce more stimulus measures on Thursday. Usually this means printing more money and buying U.S. bonds in an effort to boost financial markets. The problem is, every time you print more money, you reduce the value of each outstanding dollar because there are then more in circulation.

Canada raising interest rates + America printing more money = Loonie goes up.

A high Canadian dollar is not always a good thing for our economy though. Here are some recent comments by Sal Guatieri, senior economist at BMO Capital Markets.

“There’s no doubt a strong Canadian dollar poses challenges to Canadian retailers, especially given the growing trend of Canadians to shop abroad. Similar to the impact on many retailers, Canadian manufacturers are being challenged by the strong Canadian dollar. Overall there tends to be negative impact on our manufacturing sector and of course, our overall trade position as we’re seeing with our current account deficit running more than 3 per cent of GDP, so that represents a drag on our economic performance.”

Now you know a little more about our dollar and why the value tends to rise and fall.

Happy investing!

Money News.

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  1. Sales of detached houses in Vancouver were down 39% in August from the same time last year. This is the worst sales volume since the global financial crisis in 2008.
  2. McDonald’s will be opening its first ever all vegetarian restaurants in India next year. The company is seeking to expand in a market where cows are sacred and eating beef is forbidden. I wonder if India will run ads on TV where their top Olympic athletes chow down on McDonald’s before a big event like we do here?
  3. Quebec elected its first female premier on Tuesday when Pauline Marois and the Parti Québécois claimed victory over the incumbent Liberals Tuesday night, winning a minority government in an election night that ended with a deadly shooting.


    Garth Turner    : “The Parti Quebecois victory is tough news for the Montreal real estate market, given the xenophobic, quasi-racist, isolationist and confrontational signals sent out by the premier-elect during her campaign. An increasingly unilingual, fractious province is not one that investment dollars migrate to, a fact already reflected in house prices being barely 72% of the national average.”

    Brian Lilley: “The Parti Quebecois will lead the next provincial government in Quebec and that’s not a good thing for Canada, although the problems this new government presents have little to do with separation. The real problem with the PQ win is that the party has no plan for dealing with Quebec’s real issues such as the economy and unsustainable government spending. Quebec has the highest debt level per capita of any province and among the highest taxes in North America.”

  4. Half of America on the dole. The Globe And Mail is reporting that according to the Census Bureau, just over 49% of U.S. households were using at least one government benefit to help support themselves in 2011. In the early 80′s, the number was about 30%.
  5. Pay your debts. Canadian debt-to-income ratio is at an all time high of around 150%. According to Equifax Canada, household debt levels continue to reach new highs each quarter. Mark Hopkins, a senior economist recently said in a report: “The situation that faces Canada is much riskier than in 2007-2008 when the first global financial crisis occurred.”
  6. Living paycheck to paycheck? A survey by the Canadian Payroll Association found that 47% of Canadians would be in financial dire straits if their paycheck was delayed by as little as one week.
  7. Stock markets rally. On Thursday European Central Bank President Mario Draghi announced a plan to buy unlimited quantities of short-term government bonds from struggling euro zone nations.

    The Dow Jones (U.S. stocks) was up 1.9%.The S&P 500 (broader U.S. stock index) was up 2% (its highest close in over 4 years). And in Canada the TSX was up 1.3%.

Interest Rates

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I am reading a book right now called How An Economy Grows (and why it crashes). It’s a great book because it explains complex economic principals in the form of a children’s story book with lots of pictures.

Today I thought I would do a very basic lesson on interest rates.

The interest rate is really the cost of renting money. If renting money is cheap, more people borrow money and buy things. If renting money is expensive, people stop borrowing and save their money.

When the cost of renting money is high, the bank will offer you high interest on your savings account knowing that they can lend your money out at an even higher rate in the form of mortgages.

In 1981 banks would offer you 5% interest on your savings account because they could then lend that money out in the form of mortgages at 24%. As a result more people saved their money and people only bought a house when they had saved up a big down-payment.

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Canadian Performer’s Money Investment Club Notes.

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Yesterday we had the first meeting of what I call the Canadian Performer’s Money Investment Club. These are the notes for those who attended and hopefully they may contain some useful information for those who didn’t.

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Dear Donald…

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My friend Donald just landed a role in the Disney Channel movie “Girl Vs. Monster”. It’s his first big break and his question to me was, “what should I do with the money?”.

He is in his twenties, lives at home and is still going to school. Since we have both been too busy to get together, I thought I would write to him here. Maybe other actors would be interested in my advice. After all that was the idea behind this site. Actors helping actors.

Dear Donald.

First let me tell you how envious I am of you. Not because you are booking acting work. I have seen how hard you work in class and you deserve your success. I am envious because if I had had someone mentor me in personal finance when I was your age, I would probably be able to retire by now.

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Road Trip!

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Canadian shoppers have been frustrated that although our dollar has been at or above parity with the U.S. dollar for the past two years, we continue to pay up to 20% more than Americans do for the same products.

Last year Finance Minister Jim Flaherty asked a Senate committee to study the pricing disparities and is now awaiting its report.

I guess he got tired of waiting because he announced new spending limits this week that will benefit all Canadians who enjoy shopping in the States.

Thursday’s budget raises the limit to $200 from $50 for residents who have been out of the country for 24 hours. The exemptions for longer trips are going up as well – doubling to $800 for those who have been away for 48 hours. Retailers anticipate a surge in cross-border shopping starting in June, when new rules are slated to take effect.

Pay off debt or invest?

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Do you think you should wait until you are debt free to start investing, or start investing even though you are still in debt?

I don’t have a definitive answer for you on this one and welcome your feedback in the comments section. I think everyone’s personal situation is different and there is no “one size fits all” answer.

Some things to think about… 

  • There is nothing more important to your financial health than becoming debt free. The average Canadian’s non-mortgage debt in 2011 was $25,594.
  • There is no point working, paying tax on the income, then investing what’s left over in a “high interest” savings account earning 1.5% (taxable income!) while paying 18% interest on a department store credit card balance.
  • Every dollar you use to pay down a credit card balance at 18% is the same as investing a dollar in an investment with a guaranteed rate of return of 18%.
  • Not all debt is “bad debt”. Money borrowed for investment purposes is tax deductible. Using leverage to grow your investments can be very powerful.
  • It takes years of experience to become a savvy investor. Even if most of your money is being used to pay down debt, using a small amount to invest can be a great learning experience.
  • Learn how to set up a mutual fund, and then invest $50/month into it. Follow that fund and learn how global events are effecting the value of the companies that fund holds.
  • Learn how to set up a brokerage account and buy a few shares of your favourite company. Go to Tim Hortons every day? Buy a few shares, follow the company, feel like an owner when you walk in!
  • Treat yourself like a business. Businesses have some debt and they also have some assets, but they always try and do what’s best for their balance sheet.
  • Create a personal balance sheet. List all your assets, then list all your liabilities. Subtract your liabilities from your assets. This is your net worth. Do you have a negative net worth?
  • Try and improve your net worth. Notice how both paying off liabilities and adding assets improves your net worth equally.

Although paying off debt is important, I also know that when it comes to investing, there is nothing more important than starting early.

Happy (Frugal) New Year!

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The River Rock Casino's main entrance.

I never really liked New Years Eve. It seems like one of those nights where everyone feels they should be doing something big and important, but nobody knows what to do. Add to that that it always comes a few days after the expense of traveling home for Christmas, and I usually don’t have any money leftover to party with.

When I used to bartend, I always volunteered to work that night. I usually made a ton of tips and was in a party environment where I could sneak a drink at midnight.

I looked online and the ticket price to get in the door at any Vancouver venue seems to be about $100 and that doesn’t include anything. Add a few drinks and a couple of cab rides and you are looking at a $200 night easy.

I think this year I will do what I did last year and take advantage of one of the few places in town that you can count down the new year with several hundred drunken strangers absolutely free; The River Rock Casino.

The Canada Line skytrain goes from downtown Vancouver right to the casino’s front door. It’s free on New Years Eve and runs until about 2am. It’s free to get into the casino, they have free coat check, free party hats and noise makers, a live band, a DJ and lots of security, so no Stanley Cup style riots.

And don’t worry if you don’t enjoy gambling, there is lots to see and do anyways. They have several bars and lots of food options as well. You could jump on the skytrain, have a couple of drinks, count down the new year and get home safely for around $20.

Whatever you do this New Years, I hope you are spending it with people who care about you and have a safe and happy night! And please, be kind to your credit card…