Last week I announced a giveaway of the book Your Money Ratios . The winner of the draw is Nathan. He has been contacted by email. Thank you to everyone who entered and thanks once again to the Penguin Group for offering a book for the draw. For those who feel cheated by this meager post, I suggest reading Scott Adams' article in the Wall Street Journal . He might be onto something by trying to provide those who pay the most in taxes with various perks.

Preet Banerjee makes a casting call for his new show The Money Pit on W Network. Have you and your spouse got a money disagreement and a common desire to be on television? For now the call is limited to the Toronto area. Potato explains what’s wrong with the current trend toward usage-based billing in internet access. Rob Carrick tells the story of George Czerny’s persistent and ultimately successful battle with CRA over TFSA penalty taxes. Big Cajun Man looks at different ways of doubling up on reward points. Money Smarts reviews the TD Waterhouse discount brokerage.

When my wife and I were paying our most recent stack of bills, we nearly underpaid our Bell bill. We could certainly be blamed for being inattentive, but the layout of the bill doesn’t help. The first page of our Bell bill contains the summary information including the grand total to be paid for the month. The left side of the page has this total. However, the right side of the page repeats the same information, but without HST for some reason. Both sides have a highlighted total amount that draws your eye. When we have our banking application open and all that is left to do is type in the amount to send to Bell, it’s easy to type in the total on the right rather than the real total on the left. The fact that the left side is in a slightly larger font helps a little but it seems inevitable that we’ll make a mistake at some point. We haven’t made this mistake yet but presumably the consequence would be interest and/or late fees. Have any readers been caught by this? How pun...

For the past 17 years I’ve have an investment account that has returned 0%, but I’m not unhappy about it. In fact, my wife has a similar account and I get a good chuckle every year when the account statements arrive. Back in 1993 when we cleaned out these accounts, some sort of minor calculation error resulted in each account holding a few cents. I never did anything about it assuming that the bank would apply some sort of service charge and close the accounts. But that never happened. Each year we get our statements along with a newsletter that I’ve never found to be worth reading. The best part is the pie chart showing my asset allocation: The legend says that A stands for cash. I’m 100% in cash that has earned zero interest for over 17 years. If I’m ever in financial trouble, I can clean out these two accounts and make a down payment on an orange.

In the book Your Money Ratios , author Charles Farrell lays out a blueprint for your entire financial life through your working years. If you’ve ever wondered if your debt repayment and retirement savings are on track for your age, this book provides an answer. The book’s publisher, Penguin Group, has graciously offered an extra copy of the book as a giveaway for my readers. (However, the giveaway is now over.)  To enter, just send an email to the contact email address in the upper right corner of my blog with the subject “Book”. Readers who subscribe to my feed will have to click through to my web site . Another benefit of going to my site when reading a post is to see the comments other readers leave on that post. All entries received before noon on Sunday, January 30 will be considered for the draw. I reserve the right to eliminate entries that I judge to be outside the spirit of the contest. The word “ratios” in the title might scare off some readers who think there w...

In Rob Carrick’s Guide to What’s Good, Bad, and Downright Awful in Canadian Investments Today , he delivers on his promise to be opinionated rather than polite, respectful, and boring. However, Carrick doesn’t propose a single method of investing. He just points out the good and bad ways to go about many different approaches to investing. The book is written in a style of lists related to different subjects. For example, the first two lists are “four examples of investment industry propaganda that you can’t take at face value,” and “seven dumb rookie mistakes investors make and how to avoid them.” The most useful section to me was the one on investment advisors (as I said in an earlier post ). This is mainly because I’ve never had a good answer when asked how to go about choosing a good investment advisor. In the section on “big, fat mutual fund industry rip-offs,” Carrick is careful to say that some mutual funds are excellent but that investors should avoid almost all money ...

Million Dollar Journey looks at the ins and outs of opening a bank account for a toddler. Big Cajun Man used to see work as a way of taking a break from his young family but with the passage of time he now sees the value of a day off. Money Smarts reviews mint.com’s free online budgeting site.

I made my choice years ago to manage my own investments, but for many this is a daunting task. These people would rather work with a financial advisor. This may seem like the last investment decision an investor would have to make, but this isn’t true. It brings the daunting task of finding a good financial advisor and the need to continuously monitor the quality of advice. Some of the best advice I’ve seen on finding a good advisor is chapter 6 of Rob Carrick’s Guide to What’s Good, Bad, and Downright Awful in Canadian Investments Today . Carrick sets the tone early saying “Warning: Finding a good financial adviser is harder than you imagine.” This is because a disappointingly small minority of advisors are any good. Carrick goes through the traits of good and bad advisors and provides a list of “five killer interview questions that will help you avoid hiring a deadhead adviser.” A common theme is the willingness of the advisor to discuss fees and how he or she gets paid. G...

The more experience I get with personal finance, the more I realize that I fear different things than most people fear. Investing and mortgages illustrate these differences. Investing Almost all personal finance gurus recommend that investors put some fraction of their long-term savings into bonds or some other fixed-income investment. The reason for this isn’t because it will produce better long-term results than an all-stock portfolio. The reason is to prevent investors from panicking and selling stocks at low prices. It could be that these gurus are right. If most people would sell at the worst possible time then owning stocks is a bad idea. If owning some bonds is enough to moderate the extreme losses enough that investors sit tight through the bad times then owning some bonds is a good idea. But I don’t fear bear markets for stocks. I’m content to receive whatever the stock market will give me over the long term. When I think I’m 3 years away from permanent retireme...

BMO has a new Lifetime Cash Flow Product that seems suited especially for investors who are looking for safety and don’t understand inflation. A quick summary: make a lump sum contribution at age 55 and collect 6% per year for the rest of your life starting at age 65. When you die, if there is anything left after these payments and the yearly 2.75% MER, it goes to your estate. Suppose that Jim is 55 years old and has a lump sum of $200,000. He can get $1000 per month starting at age 65 guaranteed for the rest of his life. This sounds appealing until we consider inflation. Recently, inflation has been around 2% per year. The average since 1916 has been about 3% per year. So a bad period would be around 4% per year. The purchasing power of Jim’s $1000 per month of income would be hit by 10 years of inflation before he starts to collect. Here is the purchasing power of Jim’s first payment at the three different inflation levels: 2%: $820 3%: $744 4%: $676 If Jim makes i...

I’m not sure if there are any good arguments in favour of keeping the penny, but there is a bad argument from David Howden who teaches economics at St. Louis University. Howden thinks that the high cost of making pennies puts the brakes on inflation. Back when money was made out of gold, governments were limited in creating more money by the cost of acquiring gold. Howden believes that the high cost of pennies has a similar effect on modern governments that seek to create new money. According to Howden each penny costs about 1.5 cents to make. With more inflation the nominal cost of each penny rises causing an increasing “loss” per penny. Howden believes this effect helps to hold the government back from causing ever more inflation. This effect is obviously miniscule compared to the costs associated with gold back when we used the gold standard for money. The cost of handling pennies by businesses is a drain on Canada’s productivity. I’m sympathetic to frustration about gov...

Bill Mann reports that Ontario will be using new facial-recognition technology to help problem gamblers stay out of casinos. Canada Mortgage News explains how banks are playing with the numbers to pump up penalties for breaking a mortgage. Potato has an interesting collection of alleged China-based stock frauds. Preet Banerjee explains what is worth $5400 per hour to him. Big Cajun Man takes a look back at some financial decisions he’d like to change. Mike Holman is calling for the Canadian government to unlock locked-in retirement accounts (LIRAs). A LIRA is like an RRSP except with restrictions that make you leave it alone until you hit retirement age. My wife and I each have one of these and life would be a little simpler if we could just combine them with our RRSP accounts, but I’m not as passionate about this issue as Mike is. Million Dollar Journey gives himself a report card on his 2010 financial goals. Financial Highway looks at the evidence that Canada ...

Christine Romans, anchor of CNN’s Your $$$$$ , has a new book out called Smart is the New Rich . In an interesting mix of personal financial advice and macroeconomic commentary, Romans makes the point that being smart with your money is necessary to live well financially. In making her points, Romans manages to use statistics without overwhelming the reader with numbers. Some big chunks of the book are only relevant to U.S. readers, but the book has value for Canadians as well. The author is careful to avoid angering the reader. She commiserates with the reader before stating an unwelcome truth. A good example of this was in the discussion of jobs when she warmed unemployed readers up for the messages that they may have to take pay cuts or move to find work. Jobs One interesting section looks at where the new jobs will be and which jobs are disappearing. The highest growth rates are for biomedical engineers, computer analysts, and home health aides. The jobs disappearing ...

Last week I ordered my credit reports from Equifax and TransUnion . The Equifax report has arrived and it contains less than I would have guessed. In addition it has a few errors. The first thing after my name is wrong. It shows me living at a family member’s house. Based on the reporting date this seems to be incorrect information from when I opened a joint account with this family member. The bank managed to send me statements at the correct address, but somehow the information they sent to Equifax was messed up. My previous addresses are accurate, but the dates associated with them show no correlation with reality. The next category of information is current and previous employers. This information is fairly accurate except for the barely recognizable phonetic spelling of a previous employer’s name. Then it shows my birth date (with the month omitted for security) and Social Insurance Number (with the middle three digits omitted for security). Based on the reporting da...

A colleague I’ll call Andy came up against a curious barrier to deducting mortgage interest on a rental property. Canada Revenue Agency (CRA) likes to see a straight line between the mortgage lump sum and the purchase of the property that will generate rental income. Unfortunately, it seems that Andy cannot easily draw a line that would satisfy CRA. Andy owns a small home free and clear. He plans to move to a new larger home soon. He had hoped to rent out his old home to make some rental income. His plan had been to take out a mortgage on the old home and use this money to reduce the size of the mortgage on his new home. A side benefit Andy hoped for was using the interest on the mortgage on the old house once it becomes a rental property as a deduction against the rental income. Unfortunately, CRA won’t allow this. From CRA’s point of view, the borrowed money wouldn’t be used to purchase an investment, but would be used to buy Andy’s new home. The following Q and A on page...

A new year brings us ever closer to the dreaded tax filing deadline. A visible change this year is that QuickTax has been renamed TurboTax in Canada. This aligns the names between the Canadian and U.S. products. However, there seems to be little change other than the name. I’ve used QuickTax for years and familiarity has kept me coming back. Once again this year the comparison chart designed to help customers decide which of the 5 versions they need makes it seem like investors need at least the third level product (“Premier”, $69.99+tax this year). However, I’ve always used the second level (“Standard”, $39.99+tax this year). According to the comparison chart, I’d be missing out on extra guidance for investments in stocks, bonds, mutual funds, employee stock plans, rental properties, and calculation of capital gains and losses. From experience in past years I can say that it’s been possible to declare investment gains and losses without this extra guidance.

Larry Swedroe reports that the average dollar invested in ETFs underperformed the ETFs themselves due to failed market-timing efforts. Big Cajun Man explains the changes you’re going to see on your pay cheque starting in the new year. Larry MacDonald reports a reversal of contango in commodities ETFs. If you don’t have the faintest idea what that means, Larry explains it well. However, these concerns are one factor in why I avoid commodity ETFs. Million Dollar Journey has a guest article from Mike Holman explaining the benefits of low interest rates for investors. Rob Carrick isn’t too impressed with scare-mongering polls about whether people have saved enough for retirement.

A recent article about getting free credit reports gave enough practical information that it overcame my natural laziness. It turns out that you can order these credit reports with a call to an 800-number that responds with an automated system. You don’t even have to talk to a person. I was able to order my credit reports by keying in information that I had in my head and wallet: Social Insurance Number, credit card number, address, telephone number, date of birth, etc. I attempted to place the order with both Equifax (800-465-7166) and TransUnion (800-663-9980 (outside Quebec) or 877-713-3393 (within Quebec)). You have the option of paying to get your credit score at the same time. I decided to stick to just the free information. Ordering my credit report from Equifax went quite smoothly. You have a choice of keying in the information or saying it. I tried saying my date of birth at first, but it just couldn’t understand me. The hardest part was my postal code. There didn...

Much has been written about the relative merits of saving in RRSPs and TFSAs. The discussion usually comes down to a close call based on some elaborate calculations. For me the choice is clear. For those who make a good living, marginal tax rates are somewhere near 45%. Given $10,000 of income burning a hole in your pockets, the choice is to put the $10,000 in an RRSP or to pay $4500 in taxes and put $5500 in a TFSA. If all goes well in the future then it can be a close call which approach is better. But what if your financial future is terrible? What if your income is so low that you will be able to withdraw the $10,000 from your RRSP during retirement and pay a low tax rate? In this case, $10,000 from the RRSP is much better than $5500 tax-free from your TFSA. Choosing the RRSP over a TFSA offers some downside protection. Of course, it’s better to save enough to fill both your RRSP and TFSA, and if your marginal tax rate is much lower than 45% you may prefer saving in a ...

Nine bloggers had a stock-picking contest for 2010 . I decided to see how my actual portfolio would have fared in the contest. If I had added an entry into this contest, it would have been the index-based part of my portfolio.  It managed a 22.6% return for 2010 helped by a tilt towards small-cap stocks. Adding my indexed portfolio as an entry in the contest would have left me fourth out of ten with a 14% edge over the average of the other entries.  However, when you add my not-so-great stock picks from the non-indexed part of my portfolio (which I'm slowly selling off), my 2010 return drops to 12.9%, which is still fifth out of ten and 4% above the average. A result of fourth out of ten of is roughly what we should expect when comparing indexes to individual stock picks. The index will rarely be first, but it will be above average most of the time. Stock-picking contests are fun, but aren’t a great way to invest real money as the bloggers in the contest have said.

Apple has had quite a run over the last decade selling a string of products that have changed our lives starting with the iPod. Looking back over this period of time, what amazes me is the way that Apple went about promoting these products. As each new iThing became available, Steve Jobs made it clear that only out-of-touch losers wouldn’t own one. The truly amazing part of the marketing story was that when a new version of each iThing came out less than a year later, Jobs managed to create the impression that only out-of-touch losers would be caught owning the old version. Being an out-of-touch sort of person, the only Apple product I own is the least cool and least expensive iPod: the Shuffle. It’s a good thing Apple didn’t have me anywhere near their marketing strategy because it would never have occurred to me that the best way to market electronics is to exploit people’s inner drive for social climbing.