What Happens With Low Rates

The Bank of Canada Governor, Mark Carney, has been warning Canadians for a while now that we will be in a low interest rate environment for a few years.  He has clarified that by "low" he means lower than average, not necessarily as low as interest rates have been over the past 2 years.

This past week a deputy governor at the Bank of Canada also spoke about low rates and their impact, warning that while usually good for the economy, people's behaviour can create risk during low rate times.

The following is a short list of impacts that low rates have on the economy:
Low Inflation - The Bank of Canada is trying to keep inflation between 1% & 3% annually.  They can influence this by increasing or decreasing the Bank of Canada overnight rate, which is the rate the BoC charges Banks for borrowing money from them to cover some daily incidentals.  Because inflation has been very low for the past 2 years, the BoC rate has been very low.  This means it costs the banks less to borrow money, and the lower cost is passed on to consumers and businesses through lower loan costs.

Lessons Learned from 2010

After a very enjoyable Christmas holiday, it's time to get back to work and the regular busy routines of life.

I must admit that while my family stayed very close to budget with Christmas gifts this past year, we went way over on the food budget during the holidays.  We only had some family over one evening, but we had other friends over a few times and we ended up buying a lot of snack foods.  While the snacks tasted good in the moment, I found that later on I wanted something more filling or substantial that wouldn't leave me feeling so groggy.  After seeing the bill for all the snack food, I really wished we'd just spent the money on a meal of ham, scalloped potatoes and corn rather than potato chips and fried spring rolls; in the end it would have tasted better and been far less expensive. A lesson learned for next time.

I'm starting out 2011 by looking at the things I've learned in 2010.  Here are a few of them:

The Best Gift You Have Received

What is the best present you have received?

I am a practical guy, and I enjoy practical gifts, meaning I enjoy getting gifts I will use.  I'm not big on decorations or fancy things.  I don't mind gift cards because I can use them to things that my family will use.  I like movies or books that I will see or read again and again.  Tools or camping gear is always welcome.

Now, I know my wife doesn't think like me.  She is a very practical lady, but she doesn't want gifts that, while making a job easier, try to assist her in doing a job she really dislikes to begin with.  For instance, she appreciates the high quality mixer that a got her several years ago because she somewhat enjoys cooking, uses the mixer almost everyday, and it helps make that job easier.  She currently wants a sewing machine, not because she enjoys sewing, but because she needs one.  So she already told me I can't get her a sewing machine for Christmas, because no matter how good it is, she isn't going to be thrilled at the chance to use it.  Message received; if she tells me she doesn't want something for Christmas, I can clue in and not get it for her.

2010 Personal Tax Info

We are approaching the end of another year, which means Christmas is close, but so is the 2010 financial year.  The following is some tax information that you may want to review as the year draws to a close.

The Federal Income Tax rates for 2010 are as follows:
•15% on the first $40,970 of taxable income
•22% on taxable income between $40,970 and $81,941
•26% on taxable income between $81,941 and $127,021
•29% of taxable income over $127,021
The Federal Basic Personal Amount in 2010 is $10,382

The Alberta Income Tax rate is 10% of taxable income.  The Alberta Basic Personal Amount is $16,825.

6 Tips to Controlling High Interest Debt

If utilized properly, credit can be very useful. You can obtain loans to help you purchase a new car or house, for example, since it is normally hard to find sufficient funds for either in a savings account. However, you should always bear in mind that any money borrowed must be paid back with interest.

If you do not pay close attention to your finances you can quickly run into financial difficulty, perhaps seemingly insurmountable difficulty! Some people wind up borrowing money simply to pay their debts, leading to a debt cycle that spirals out of control.

People find themselves financially strapped and consequently in debt from a number of means:
  * Unemployment, regardless of the reason
  * Unexpected bills
  * Divorce
  * Out of control spending well beyond one's budget
  * Inability to put money aside for savings
  * Inattention to mounting financial obligations
  * Any catastrophic and expensive life event (e.g. severe auto accident)

Below are 6 tips to help make sure you don't get even further into debt if you are already struggling.