Tips For Paying Off High Balances or Low Balances First

Let me tell you right up front that there is no best right answer. Paying off high balances and paying off low balances – both strategies have positive and negative sides. I personally like starting with low balances without looking at interest rates.

Pros and Cons of Paying Off Low Balances Without Looking At Interest Rates

- If you start with paying off lower balances, seeing those smaller debts evaporate will keep you motivated to stay on your debt management plan.

- Easier to manage your finances, as you are reducing smaller debts one-by-one.

- This strategy can cost you more money in the end, as you may be carrying higher balances with higher interest longer.

- Makes your life stress free, as you are dealing with less debt accounts day-by-day.

Pros and Cons of Paying Off High-Interest Debts Without Looking At Balances

- Best strategy to save money on interest charges

- You may get discouraged to stay on debt management plan seeing debts not going away soon enough.

- If you have higher balances with lower interest charge, this strategy does not make managing your finances simpler, as you are dragging the low interest debts longer.

Last Word

Which strategy is best to follow? It depends on your situations and objectives. Before deciding on anything, look at the pluses and minuses for both of the strategies and pick the one that makes sense for you. And yes, don’t forget to stop taking on new debts. No debt management plans will work if you don’t stop accumulating new debts first.

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Canadian Banks Received A Bailout

A recent report published by a Canadian think tank, the Canadian Centre for Policy Alternatives, points out that the “liquidity support” provided by the Canadian government for Canadian banks from October 2008 to July 2012 was actually more like a bailout and a lot higher than the government admitted.

Canadian Banks Did Not Receive A Bailout

However, many economists believe that the Canadian banks did not receive a bailout and the above report was a propaganda by the leftist think tank. Canadian government did set aside $200 billion dollar to help businesses in Canada – it was no secret and approved in budgets. Read more on this here: Bank Bailout Claim Pure Propaganda

Moody’s Investor Services downgraded Ontario‘s credit rating. This happened one day after Standard and Poor’s downgraded Ontario‘s outlook as well.

The UK Gets Double-Dip Recession

Britain falls into recession again for the second time since the financial crisis. Data released on Wednesday, April 25, 2012, shows that its GDP declined 0.2% in the first three months of 2012.

Canada Keeps Key Interest Rate At 1%

The Bank of Canada kept policy interest rate unchanged at 1% on Tuesday, April 17, 2012. However, BOC said that it may increase rate before the 3^rd quarter of 2013 as the economy will return to its full capacity in the first half of 2013.

Kids Should Not Spend All Allowances At Once

Giving kids an allowance should start at an early age. However, the art is to teach them how not to spend it all and save some for the future. The basics of budgeting should be considered while talking to kids about not spending all their money. Instead of leaving them without any guidance after giving allowances, it is recommended that you break down their allowances into pieces in terms of how it should be used. For example, 10% should go to charity, 10% should go to buy a science magazine, 10% should go to the piggy bank, and so on.

Some of the biggest challenges parents will face managing allowances or saved money from past allowances are misbehaviour and identifying the distinctions between wants vs. needs. Misbehaviour can be managed by applying a few rules for violating a good behaviour. Try to explain first that this is (a misbehaviour) something not acceptable and there will be consequences if it happens again next time. If kids do the same misbehavior again, stopping allowances for a few weeks or a deduction can be tried. However, be careful not to implement something too harsh. The differences between wants vs. needs can be addressed by talking to them. If they are asking for something unnecessarily, have a conversation if they are willing to give up (spend) their allowances to buy this, and this is something they need it enough to buy right away.

Parents play the most important role to instill right money habits on kids from the beginning. Whatever you are teaching them now will become a lifetime habit. Habit from childhood is something very hard to break. So it is important to give kids some positive money habits that will lead them to the highway of financial success.

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China Doubles Currency Trading Band

The fluctuation will still be done against a fixed benchmark, and this benchmark is set by the central bank. However, allowing it to fluctuate from 0.5 percent to 1 percent will increase China’s currency role in the global financial markets.

Although the U.S. has been demanding more currency freedom from China to ease its unfair advantage to exporters in China, this doubling the size of the renminbi’s trading band against the dollar may not work the same way as the U. S. is expecting.

The yuan increased about 4 percent in 2010 and about 5 percent in 2011. Many Chinese leaders believe that the yuan is close to an equilibrium. The yuan’s outlook among investors in the offshore non-deliverable forward market is not rosy and it is believed that there is room for the currency to depreciate. Also, as China is going through the slowest economy in a decade, Beijing is willing to concentrate more on its domestic economic growth than foreign export. A more flexible currency may give Chinese exporters more room to maneuver, making the currency lower than going higher.

As China wants to see the yuan as a global reserve currency and Shanghai as global financial and banking centre, the Chinese government is gradually allowing its currency to trade more freely and expect more moves from the Chinese government to achieve its dreams.  

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Canadians Don’t Know How Investments Are Taxed – A recent BMO Nesbit Burns survey finds that most of the Canadians don’t know how investment taxes work. The survey shows:

Respondents don’t know capital gains are taxed = 58%

Respondents don’t know how dividend income is taxed = 63%

Respondents prepare own tax returns = 42%

Respondents hire a tax professional = 38%

Respondents go to a friend or family member = 18%

Housing Starts Strong in Canada – Canada‘s March, 2012 housing starts rose 5.0%. Ontario showed the highest growth (30.3%).  British Columbia observed the lowest declines (-27.7%). 

Business Optimism High In Canada – Bank of Canada’s Business Outlook Survey points out that Canadian business are optimistic about increased future sales, investment, and hiring – in general about the overall Canadian economy . The full report can be obtained on the Bank of Canada website.

Apple Hits $600 Billion – The world’s most valuable company, Apple, reached $600 billion on Tuesday, April 10, 2012. In the past, Microsoft reached $619 billion on December 30, 1999 and General Electric came close to $600 billion in August 2000.

Five Retirement Planning Mistakes

Not Planning Early and Setting Goals – If you have just joined the workforce and happen to bump into this article – congratulations! A lot of us make the mistake to plan and set realistic goals early enough to achieve it. You should have a clear picture of when you want to retire, how you would like to retire, how much income you need to support yourself, where you would like to live, etc.

Investing and Diversifying too Conservatively – If you are too conservative, you may keep all your money, but it is almost guaranteed that you will lose out to inflation. Technology has brought so many modern day investment vehicles (one example is ETF) to regular investors these days, which was unimaginable just 5-10 years ago. You need several considerable investments with a moderate diversification.

Misunderstanding Expenses – Don’t make the mistake of overestimating or underestimating your retirement needs. Make a list of all your expenses and try living on that before your actual retirement. Keep in mind that some expenses will gradually drop out once you retire.

Misunderstanding Debt Management – Don’t look at debt management the traditional way. One simple example is paying off your mortgage or investment loans ASAP. If you have investment loans that earn you more than the interest you pay to carry the loan, it may not make sense to pay off investment loans or mortgage on an accelerated pace as you can earn more money if you use the extra payments towards investments that have higher returns.

Misunderstanding Tax Consequences – You can re-energize your retirement assets and income if you go through proper tax planning. Optimized, tax efficient income retirement assets will last a lot longer than those without proper tax planning.
The best way to handle all these I mentioned above is to educate yourself on various retirement aspects. Although retirement planning looks black and white on the surface, it is complicated and it is unlikely that you will know all the ins and outs by yourself. I always recommend consulting a retirement professional to discuss your unique situations.

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Euro Zone Unemployment Reaches 15 Years High – Unemployment hits 10.8 percent in the 17 euro zone countries in February. Unemployment rate was 10.7 percent in January. Current unemployment rate makes 17 million people out of work.

Canada – The Fifth Happiest Country in The World – World Happiness Report, published by the Earth Institute and commissioned for the United Nations Conference on Happiness, finds that Canada is the fifth happiest country on Earth. Here are the top ten happiest countries in the world:

Denmark
Finland
Norway
Netherlands
Canada
Switzerland
Sweden
New Zealand
Australia
Ireland

Canada Unemployment Rate Drops – Canada‘s healthy economy added 82300 jobs in March. This is the most job gains in three years since September, 2008. Canada‘s unemployment rate stands now at 7.2 percent (from 7.4 percent).

Kenya Discovers Oil – East African nation Kenya discovered oil for the first time in its northwest Turkana region. This light crude is very similar to the oil found in neighbouring Uganda. However, it is expected to take more than three years to make Kenya an oil producing country – if it works out.

Western Canadian Cities Will Lead Canada’s Economic Growth – Canadian Think tank The Conference Board of Canada reports that western cities in Canada will lead Canada’s economic growth in 2012. The report looks at 13 Canadian metropolitan economies and cities like Saskatoon, Calgary, Edmonton, and Regina are forecasted to lead the growth.

No More Pennies and More US Shopping – Canada will stop producing pennies and cross border shopping limits will go up. Read more here: Canada 2012 Budget

Canada 2012 Budget

Canada’s finance minister James Flaherty released 2012 Federal Budget today. This was the conservative government’s first majority budget. The Canadian government plans to spend $271.6 billion in the fiscal year 2012-2013. Expected revenue is $255 billion – making it a $21.1 billion deficit. Expected debt-to-GDP ratio for 2012 is 36.6 percent – the lowest among G7 countries. Canada will be the first or one of the first industrialized countries to balance its budget by 2016. And also, Canada is one of the only two G7 countries to have recouped jobs lost in the global recession.

Now, let’s look at some important highlights that will affect you directly:

- OAS (Old Age Security) eligibility age will be increased from 65 to 67 starting in 2023. Those who are over 54 years old today will not be affected. Those who are below 50 today, will receive OAS once they are 67. Those who are between 50 to 54, will be able to receive OAS between 65 to 67.

- Canada will be stopping producing pennies. Pennies will still be accepted, but business will be rounding off transactions to its nearest five-cent.

- Cross-border shopping limits will go up. Starting June 1, trips between 24 – 48 hours will get a tax exemption increase from $50 to $200, between 2 – 7 days will get an increase from $400 to $800.

- Canada will invest $1 billion to support science and technology, $5.2 billion to renew the Canadian Coast Guard, and $275 million to support First Nations education and schools.

- Small business owners will get another year of a hiring credit and a limit on Employment Insurance premiums.

These are some highlights I have picked. For more information about this budget, visit Canada Budget 20112.

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