Tag Archives: personal finance

So why are our kids poorer than we are?

Ugh. A study released last year by Deloitte Canada reported that “Canadian output per worker is only 86% of American output.”

What does this mean for the Canadian economy?

Our children will not be as affluent as we are. Not only are we behind, but the gap grows every year. We use the U.S. as a benchmark, but we’re behind other countries as well. And as we continue to slide, the long-term implications for Canadians are very significant. Most income growth in the last decade and more has gone to the top 1% or top .1% of Canadians. Part of the reason for that is because our productivity lags. Productivity is not about people working harder. Productivity is about people producing more per hour worked, which is a different thing. Our problem is not Canadian workers. Canadian workers work as hard, they work as many hours, they are as capable as U.S. or other workers. But we need business to invest in their companies in order to allow those workers to produce more. And we need our workers to accept the fact that that’s actually the key to getting better pay. If you want to fix income disparity, improve productivity. If we don’t do anything about productivity, we’ll go from earning three-quarters of what a U.S. family does for the same work today, to earning half or some other smaller number. The standard of living our children experience will not be what we enjoy.

How credit scores work

Matt Haughey has a great post on how credit scores work

Today I learned that my credit score dropped into the high 600s and my risk just went from low to medium. The culprit? The credit card account I opened had "too low of a limit" (it started at $5k) and I had "too high of a balance" on it as I used it on vacation (I paid off the card as soon as I returned, two weeks before the first bill even showed up).

Financially, I’m in the best shape of my life right now. My house will be paid off in about 5 years at the rate I am going, I have a great retirement portfolio that I contribute aggressively towards and it continues to grow, and my business is doing well even as we’ve expanded with a new employee and several contractors.

I had the highest credit score at a time in my life when I was leveraged to the hilt and I lived paycheck to paycheck. Now that I have my own business, a healthy retirement, and can pay for everything I need/want, I have a low score and I’m dubbed a higher risk even though my ability to pay is very high. I used to think a credit score was all about your ability to pay, but it’s clear now it’s more about how profitable you will be to banks.

Canada’s Personal Debt Crisis

According to the Globe and Mail

Sometimes, recessions can breed a hunker-down-and-save mentality.

Not so this time. Canadian household debt – a perennial worry in recent years – has ballooned to a point where it’s now more than double 1989 levels – just as rising borrowing costs are set to squeeze budgets, a national report cautioned Tuesday.

Household debt in Canada reached a record $1.41-trillion in December. If that was spread among all Canadians, each person would carry more than $41,740 in outstanding debt – an amount 2.5 times greater than 1989, according to a report by the Certified General Accountants Association of Canada.

And Canadians are okay with taking on still more debt. Nearly 60 per cent of respondents whose debt had increased through the recession – and 92 per cent whose debt decreased or stayed the same – still felt they could either manage it well or take on more debt.

It’s not looking good for mortgages either.

Mortgage rates – which have been trimmed in recent days – are higher than the start of the year, and poised to rise further as the Bank of Canada readies for a rate hike in the next month or two.

If mortgage rates rise by 2 percentage points, mid-income to mid-to-high income families may have to cut about 10 per cent from other expenditures if they want to maintain the same level of spending on shelter, taxes, food and transportation, the report said.

A separate report yesterday said almost half a million more mortgage holders would be in trouble if their rates hit 5.25 per cent. The study, by the Canadian Association of Accredited Mortgage Professionals, said about 375,000 mortgage holders “are already challenged” by their current payments.