“We have [taken] extraordinary measures to protect the Canadian economy,” Flaherty told MPs in the House of Commons.  “Like virtually all other countries, we needed to run a substantial deficit to do so. But unlike other countries, we are in a position to ensure our deficit will be temporary.” (Flaherty, March 5, 2010)

Everyone seemed so happy in the House of Commons - there was clapping, back-slapping and cheers.  I’m not sure if I’m the only one to ask this question, but is a $53 billion deficit something to get super excited about?  This is the best that our leaders can do - adding $160 billion to our debt over the next 5 years?  Really?

Admittedly I know very little about domestic finance, but what I do know is that if I applied the same methodology being used by the Federal Government to my own finances, I would be more than bankrupt pretty quickly.  I realize that the goal of government is different than my personal goals, but here’s what I see from the current budget as well as the projected deficits going forward:

1. Projected revenue is $213.9 billion;  projected deficit = $53.8 billion. If this was my house, I would be in big trouble - 25% of my income being spent on “stuff”, that may or may not better my financial position at the end of the year.
2. With income decreasing, spending increases? Does this make sense to you?  Is this how you run your house?  It seems contrary to any financial plan that I’m aware of.
3. Canada’s debt will have increased from $517.5 billion in 2009/2010 to $622.1 billion in 2014/2015. Does it really seem like a good idea for our Government to plan to overspend for the next 5 years (which is seen as temporary)?  This spending spree is really the best idea we can come up with?  I don’t really know what I would say if my wife sat me down and said she was planning on overspending for the next five years, but it was “okay” because by year 6 we’d be back to just spending what we were making (because we would definitely not make plans to repay what we’re borrowing anytime in the future).

As previously noted, I am not an expert in getting a country out of a recession, maybe the only way to do so is to spend your way out.  If so, I guess I’m fine with that.  My main problem with the whole thing is that the Government seems so proud of itself for overspending.  After handing down a budget showing the first deficit since the mid-1990s I think a more appropriate reaction by the finance minister and MPs would be to at least act apologetic.  For 35 seconds (after a rousing 2-minute finale) rather then act apologetic our Government stood and cheered. I don’t have $53.8 billion, I’m pretty sure that readers of this blog don’t have $53.8 billion, but our government thinks that at some point in the future we as a country are going to get together $53.8 billion (and interest) to pay down what they’ve decided to spend this year.

In response to this budget, the opposition parties responded by saying they wanted the Government to spend even more money on such things as pensions, climate change, health care, culture, job creation, tuition fees…….  I’m not really sure what the opposition parties are looking for here - do they figure we’re already in bad shape and we might as well hit rock bottom?

I don’t know where our government gets their ideas from, but maybe they need some new ones?  Am I alone in this, or is there similar sentiment out there?

***As an aside, I’d like to state that I am not really for or against any party.  I generally vote with the one that makes sense to me on the majority of the issues.  This post was not meant as an attack on the Conservative government, more of an address to our current fiscal policy, which doesn’t make sense to me.  To me, it would have made more sense for the Minister of Finance to come out say -
“we’re kind of broke right now and can’t afford to do anything, everyone who wants money, they’re just going to have to wait until we get some” - that is something I can understand.***

So after spending almost a week in the US (by the way, 6am flight yesterday so hence no post) I got immersed in the local news and I was trying to wrap my head around the US federal budget that was around $3.7 trillion dollars.  WOW, that’s a lot of zeros!  But besides that, it is interesting that they are spending about $1.6 trillion more than they earn (that’s about twice the entire US military budget according to the paper I was reading).

In order to make sense of how crazy this situation is lets chop off a few zeros and put this discussion in terms of personal finance for someone named Mr. US.  You see Mr. US has a hard life.  For some reason he was appointed peace-keeper in his neighbourhood.  Yet for some reason now a few years later he is also keeping the peace over in the next neighbourhood which has a lake between them, so he spends far too much of his time worrying about things that have nothing to do with his house.  Then to top it off his family is completely dysfunction, they can never decided where to get take out food so they often end up ordering from three different restaurants trying to keep everyone happy.  This is also why they live in a 3000 sq foot home and have three cars.  This costs a lot of money and he is the sole income earner so the family has a massive spending problem because they don’t agree on anything and therfore have a huge debt.

In terms of pure numbers, Mr. US makes a mere $21,000 a year.  Yet this hasn’t stopped the family from spending $37,000 last year ($16,000 more than they made) thanks to their low introductory credit card from the Bank of China.  This is despite the fact the family is already still in debt to the Bank of China for a mortgage of $123,000.  Yet it gets worse for Mr. US, his aging parents have recently moved in so he expects his health care costs and their living expense in the next few years to eat up even more spending.  So his small income which already wasn’t covering the bills is looking rather pathetic right now.  Also no one in the house seems to be willing to discuss the obvious that they need to drastically cut their spending or they have to raise their income by having Mr. US get a better job or having Mrs. US get a job until the debt situation is back under control.

It’s a sad situation for a household, it’s even worse for a country.  I’m just trying to imagine the effect of having their credit rating shot down a level would have on all of this, which by the way is being discussed already.  Perhaps it’s time for Mr. US to cut up his credit cards.

Over the holidays, my wife and I will spend a lot of time in the car.  According to Google Maps over the next three weeks I’m driving 2,400 km which is basically a giant circle around Southwestern Ontario.  I’m not sure what other people do on their trips, but for the most part our time is split equally between the following activities:

1. Listening to podcasts: I am heavily attached to several, but I would highly highly recommend The Vinyl Cafe podcast (available through iTunes) - most of the other ones are not really family friendly.  Many hours have passed by listening to these.
2. Dance Parties: I do all of the driving on these trips (my spouse does not have a license) and the only way my passenger will stay awake is with the stereo cranked and singing/dancing along to some country (or at this time of year Christmas) songs - a lot of people like to “admire” these dance parties.*
3. Talking: Over 20+ hours in a car allows for some fairly in-depth conversations on many topics (if you want to get caught up with your significant other, just start driving).

In a recent conversation we talked about what we were going to do with my car.  I am currently driving a 2002 Nissan Sentra S-ER.  I bought the car used five and a half years ago and have averaged 19,000 km per year in driving (it currently has about 155,000 km on it).  There are a few obvious rust spots starting to show up that will need attention in the spring, as well as a few repairs that will probably total about $1,000 to $2,000 over the next year or so.  We were planning on buying a car in the fall of 2011, but after a lengthy discussion came to the following conclusions:

We’d like a “new” (to us) car, but don’t need one: The current car just had a new engine installed 50,000 km ago (under warranty).  The engine in this car is probably in just as good or better condition then anything we’d buy right now.

We’d rather pay off the house then have a new car: Provided there are no major repairs, it seems like it aligns better with our current financial goals to use any available money to pay down our mortgage then to have something that is not really needed.

In the end we decided that we are going to drive my poor Nissan into the ground.  Financially I think this makes sense, to essentially bring the vehicle value to $0 and get all of the use we can while we are paying down our mortgage.

While we are paying down the mortgage we will still be saving money for a new car.  There has to be a point where it isn’t worth fixing.  We decided that $3,000 would be our cut-off where we would essentially call it quits, even if it happens next year.  I’m hoping that because I have kept the vehicle maintained this will never happen, but sometimes this kind of thing is beyond a car-owner’s control (as I have found out with previous vehicles).

I’m sure this plan will get refined over time, but that’s what we are currently thinking.

I’d like to take the opportunity to wish everyone a happy and safe holiday season.  If you see a silver Nissan driving around with a girl dancing in the front seat, after you’re done pointing and laughing, give me a wave

What do you think of our plan for our car? Any Suggestions?

*According to my iTunes most played songs - the current favourite is “My Favorite Things” - as made famous in The Sound of Music.

For me, Christmas hasn’t really changed over my entire life, it takes place on different days (my parents divorced when I was 18) but in general the theme has stayed the same.  The most important thing to me around the holidays is getting together with the people I love, whether it be on December the 12th or sometime in the middle of January when everyone can get  organized.   I like the food the drinks  and the parties.  I look forward to watching the World Junior hockey tournament that starts on Boxing Day every year and seeing people that I haven’t seen since Thanksgiving.

My favourite memory from when I was young (probably 10 or 12 years old) was sitting around the kitchen table by the roaring fire-place playing a board game (The Farming Game) and listening to a play on the stereo (Letters From Wingfield Farm) with my family - eating snacks and just relaxing, having a quiet day at home with nothing to do.  I couldn’t tell you what I got for Christmas for presents that year, in fact I can’t remember what I got last year either, but I can remember that afternoon (and many like it) from almost 20 years ago.

I think about how easy that afternoon was to organize (no organization at all) those afternoons and contrast that to the people I see roaring around the mall with three to five page lists of presents to buy for friends and family and wonder how much enjoyment these people are going to get from spending all the money they are going to spend.  Everyone has seen the VISA television commercials where people’s credit card bills magically disappear - what the credit card companies won’t show are the people paying for Christmas until next spring because they decided someone needed a special “thing” that was not affordable to them at all.

It seems that the holidays have become much more commercialized in the past 10 or so years, with the introduction of such things as super-expensive video game systems and fancy electronic toys.  “When I was younger there was no such thing as fancy electronics” (In the words of an old curmudgeon) - I didn’t own a video game system until I was 13 or 14 (which I bought for myself) and at most got a few toys that probably cost around $10-$15 each.  Fast forward to today when even cheap toys cost around $30 and I can understand why people go broke over the holidays.

I recently had a discussion with my wife and was talking to her about the cost of toys and how many toys we were giving to kids and how they wouldn’t even realize that we bought them this awesome “thing” because they are getting 20 awesome “things” to go along with it.  Remembering my favourite Christmases, it definitely wasn’t the forgotten toys that made it special - it was family, food, and laughter.  If more time was spent thinking about that then running around to malls, maybe people would be a little less stressed (and broke) at the end of the season - putting a little less emphasis on presents and a little more on visiting and fun.

Do you have any special memories/ideas for Christmas fun?  Can you remember any awesome toys you got when you were younger(maybe jog my memory)?

Cars are money pits.  So in the world of personal finance avoiding them is often worth some consideration.  When you include insurance, gas, oil changes, other maintenance and depreciation you can spend around $4000/year with out trying hard.  So that is why my second car is the bus.

You see we don’t need a second vehicle all that often, perhaps a couple times of month.  So rather than keep a second car for those odd times I invest $18 in a sheet of 10 bus tickets and keep them in my wallet (they don’t expire ever).  That way I’ve never looking for change to take the bus (also it’s cheaper than the $2.25 per fare).  So at the upper limit I spend $172 per year on bus fare, which compared to $4000 is steal of a deal.

Then there is the time factor.  Yes it takes me longer to get to and from work by an hour in total, but I also get some extra reading done on those days.  So all in all I consider the whole thing a small price to pay to save around $3800/year.  On a hourly basis per year that works to $158/hour in savings which is certainly a hell of a lot more than I make at my job.

So yes you can call taking the bus good for the environment in lowering greenhouse gas emissions, but really I’m doing it to save a small fortune in costs.  So don’t always think that reducing your carbon footprint makes you spend more, often it is about fattening your wallet.