What were you thinking?

Blair and Cindy make $130,000 between them. Two snivellers. Mortgage of $250,000 they took with a 40-year am at a prime-0.6% rate. “But we have always paid it at 6.65% which is essentially a 20 year  payment schedule — particularly with the low VRM, which has allowed us to crush the principal over the last 3 years,” says he.

The problem? Not enough money. At least, not sufficient take-home pay to feed the house, the kids and the future. (The redeeming factor is they read this blog. Yes, a step closer to salvation.)

So how can a couple making twice the family average be in a bind? It seems easy.

“Here’s how things shake out,” he says. “If we Max out TFSA:  ~850/month. If we Max out RESP: ~420/month. If we Max out RRSP: ~2200/month. Meanwhile the mortgage + property tax + Utilities/Insurance: ~2500/month. Food, Household supplies, House/Life Insurance, Transportation (gas, car Insurance, etc.), $2500/month. Childcare $1600/month.

“That equals $10,000/month. Alas, our net pay is only around $7500/month, leaving a shortfall of about $2500 bucks. The house isn’t really killing us, and we are paying it down fairly aggressively with high fixed payments and a VRM.  I’d rather not cut down on these payments — especially with so much going to principal at the moment. We don’t live high on the hog – minimal savings, one car, no cell phone, no non-mortgage debt, no all inclusive vacations, etc., so living expenses can’t be dropped too much.

“The childcare is a killer, obviously, but eliminating it by having one of us stay home doesn’t quite make sense financially, and isn’t something we are interested in anyway. So . . . which to cut?  TFSA?  RRSP?  RESP?  Mortgage?   Any thoughts would be much appreciated — and I’m sure there are a lot of blog dogs out there in a similar position who would also be interested.”

You bet. And my first comment you’ll hate. But life’s about choices, and you chose to have kids and buy a house. This may be at the root of our entitlement society, where suddenly a SFH has become a right. Obviously if you wanted a family then you’d understand your financial obligation to take care of them – which these days includes a heaping big pile of money for university. So, was it really the wisest thing to put your cash into a down payment, and now have no savings, no RESP, no financial cushion – even at $130K a year? I hear there are families in Europe that actually have children in leased premises, and not all of them become terrorists.

But, here ya are. And if you choose to stay a homeowner, you’d better get a plan.

First, stop with the insane mortgage payments. The bank screwed up by giving you a mortgage at six-tenths below prime, which means it’s just 2.4%. Checked the inflation rate lately, Blair? Uh-huh. It’s 2.4%. That means the bank is giving you free money to live in the house. And I can guarantee that they love industrious, straight-ass little beavers like you, who are busy papering over their mistake by shoveling money in the front door of the branch.

So, why is it that you are throwing away this financial advantage, and madly building equity in a house that will likely be worth a third less in five years?

If you didn’t accelerate your payments, the house monthly would be $810, not three times that. So right there is enough to max your TFSA and throw $1,200 a month at the RRSP. That will earn you a tax refund this year of about $5,700 – which can be invested in the RESP. So without earning another nickel in income, you can in fact contribute to all three of these tax shelters.

But that’s just the start.

Instead of repaying mortgage money that costs you 2.4%, take the capital which will build up inside the TFSA, RRSP and RESP and invest it in growth and income-producing assets. This blog should have given you some ideas by now. Like exchange-traded funds which are cheap to buy, totally liquid, pass through dividends, provide excellent diversification, have no disgusting management fees and offer the promise of good long-term growth. Or preferred shares in banks and insurers, which are blue chip assets with low volatility and 6% dividend yields. Over time you can build up a non-registered portfolio also, then move the preferreds outside so you claim the dividend tax credit.

Hell, Blair, if you’ve poured enough cash into that house, you could always borrow against the equity to set up that non-registered fund. If it contains very secure and highly liquid stuff (like bank preferreds) then you have the security of being able to pay the loan off at any time – and yet get 100% interest deductibility. You can even have the fund pay the interest for you, while you get to write it off your income.

Not for everybody, Blair. And if you go that route, get some advice.

Remember, fellow dog, this is a time when the old rules will sink you.

  • Real estate will be a declining asset bringing tears to many.
  • The greatest gift an investment can give will be liquidity.
  • Repaying low-interest debt’s as dumb as investing for low returns.
  • Eschewing tax shelters and free government money is financial suicide.
  • Thinking children will value memories of a house with a chestnut tree over a university education is vanity.
  • Not being able to live on twice what most people earn means you screwed up.
  • Whining about it is worse.

Aren’t you glad you wrote?

192 comments ↓

#1 bee foot on 01.27.11 at 11:34 pm

> Repaying low-interest debt’s as dumb as investing for low returns.

I have to agree with this. It is dumb. We did it and it didn’t make us feel the “freedom” others have told me.

#2 InvestorsFriend (Shawn Allen) on 01.27.11 at 11:54 pm

I can’t argue with the advice to pay the house down more slowly (given the low interest rate) and use the funds for RRSP and TFSA and to invest it in growth assets that are still relatively safe.

I would not further borrow on a secured line and put that in a margin account. Too much stress there and usually the payments on secured lines of credit are not interest only but instead are larger than that. The invested funds in a margin account might now repay the line of credit on a cash flow basis, after tax. So skip the margin account but do the RRSP and TFSA thing and let the mortgage payments drop, given the ultra low interest rate.

I did not suggest a margin account, and the payments would be 100% interest, thus fully deductible. You should get out more. — Garth

#3 Analyst analyzer on 01.27.11 at 11:57 pm

I agree, why would you be in a rush to pay back cheap money. And why would you be stressed out about not having enough money when you have the enormous luxury of choosing where to allocate it.

#4 Lexie on 01.27.11 at 11:58 pm

“Every time you give your kid something that you didn’t have, you take away from them something you did have.” – Dr.Oz

People need to stop spoiling their kids and build some character.
Garth’s right , you kids won’t care if you owned or rented your house. Kids are expensive. We just had our fourth (and last) and live on $40,000 a year. And we don’t live on credit. We manage, but they don’t get the extras. My first grader came home from school yesterday wanting $42 for school lunch pizza days. I told him the money didn’t exist for that and after about 15 minutes of explaining it to him he got it. Today he asked if I could put something special in his regular lunch on pizza days. He got over it. We tell him regularly that if he wants something he needs to earn it by working for it. (We’re preparing for the teenage years) So many people won’t let their kids hold part time jobs while they’re in high school but they’ll gladly sign up for so many extra curricular activities.
I have a friend who moved here from Australia and got her engineering degree (4 yrs ago) from McGill without going a penny into debt, all on scholarships and grants. It can be done, it just takes planning and effort.

#5 squidly77 on 01.28.11 at 12:05 am

Edmontons Toast

#6 Soylent Green is People on 01.28.11 at 12:05 am

Re this line: and isn’t something we are interested in anyway.

Gee, sure glad their not my kids. Remember folks, what goes around, comes around. If you can’t be bothered to raise your kids, don’t be surprised if they never visit you in the old folk’s home. Good luck with that whole thing, not something we’re interested in anyway, that’s disgusting. DISGUSTING. SHAME on you people.

#7 Soylent Green is People on 01.28.11 at 12:06 am




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#8 Guy_in_Regina on 01.28.11 at 12:15 am

What happened to ‘thrash debt’?

Did I not start by saying he should not have jumped into it? However, debt that is so cheap is not meant to be paid off when invested money can earn three times more. — Garth

#9 Angry Bird on 01.28.11 at 12:19 am

first….finally im a winner!!! I beat the TO bubble boy!

my advice ditch the kids and wife and get yourself a hot car

#10 rental monkey on 01.28.11 at 12:23 am

Kinda off topic here…but not really. It occurred to me today that part of the problem is that the young folk under 30ish can’t do basic math. Like count change. Around 11 or 12 years ago a man came into a restaurant where I was working and he was shaking his head. I said “Is there a problem?” He says “yes, the bank teller next door doesn’t know how many quarters are in a roll.”

I was stunned, she worked in a bank and did not know how many quarters in a roll. Don’t we learn that in like grade 2 or 3?
Today I was getting my double double and handed the clerk $ 5.12 (coffee is $1.87), she hands me the change back and says you don’t need to give me this. I said, Ya, I do because I want the quarter. Talk about a deer in headlights moment. Confusion was on her face as she counted it out and entered the amount I gave her to tell her how much to give me back. Voila..$3.25.
Is there any wonder the majority of greater fools aren’t going to see the train coming? If they can’t count change forget about percentage, ratios and all the other fancy financial stuff involved with owning real estate. Sheesh. Gonna be lots tears soon.

#11 Northern_dirt on 01.28.11 at 12:28 am

#6 Soylent Green is People

If you can’t be bothered to raise your kids, don’t be surprised if they never visit you in the old folk’s home. Good luck with that whole thing, not something we’re interested in anyway, that’s disgusting. DISGUSTING. SHAME on you people.
……………………………………………………………………………..

Most families have two working parents nowadays. Don’t be so quick to point fingers and put words in this couples mouths. They didn’t say they don’t want to raise their kids, they said they don’t want to give up one of their careers.

#12 Angela on 01.28.11 at 12:34 am

#6 Soylent Green: “Good luck with that whole thing, not something we’re interested in anyway, that’s disgusting. DISGUSTING. SHAME on you people.”

————————————————————-

That’s quite the reaction to an innocuous comment. Dude’s just stating the facts. Shame on YOU for being so judgmental.

#13 LeftyGroove on 01.28.11 at 12:36 am

Sure VRMs are in the 2% range today.. What if in 2 years they’re in the 5% range and a 5-yr fixed runs you 7% (ie near historical norms)? Paying off principle now will save you bucks in future (higher) interest payments.

Not saying you shouldn’t max out the awesome TFSA and less-stellar RRSP (for us pensioned types), but the facts remain that 1) your house value might crater, your mortgage amount owing won’t and 2) interest rates are almost certainly going up (like my SC purchase t’day)

All good reasons why real estate is a potentially awful investment. — Garth

#14 Elmer on 01.28.11 at 12:40 am

That 2.4% will need to be renewed at a much higher rate in a few years, a rate which will be higher than what you could get from investing (excluding high risk investments), so the less you have remaining on your mortgage the better off you’ll be. If the house is worth less in a few years (which is just a wild guess by Garth) is also irrelevant because regardless of how much the house depreciates you still owe the same amount on your mortgage. It is ALWAYS a good idea to pay the max allowable amount on your mortgage. I would rather cut the RESP, let the kids get OSAP like I did, they’ll take their education more seriously if they have to pay for it themselves (assuming they want to pursue post-secondary education at all).

You have much to learn about investing. But you’re an expert on handicapping children. — Garth

#15 dave in calgary on 01.28.11 at 12:41 am

@ #6 Soylent Green is People – Were you raised by a stay-at-home Mom? It certainly did nothing for your manners.

Also, stating that you cannot afford live because you cannot MAX out your RRSP, RESP, TSFA, and mortgage is a silly statement. That would be living to the MAX, not living. If you can’t afford to max-out every single investment available to you, you just have to make due and scale it back. I don’t have kids, but my common law and I can do car insurance (two cars), gas, maintenance, food and household items for $900 a month (and our combined income is $130K too)… not sure two kids can eat $1600 worth of food.

#16 Concessionman on 01.28.11 at 12:43 am

Hear where your coming from Garth, but with a high Mortgage at a low rate, wouldn’t this be the time to be throwing as much as you can at it, so in a few years when rates are triple, you’ve ease’d the load?

Just saw your reply to #8, sure, your diverting and investing small dollars now and making 3X your mtg rate, but in a few years you could easily be paying 3X the current mtg rate on the same money you didn’t toss down on the house, no?

CMan
PS: That’s a Black Walnut out front of this bunker…:)

#17 westCoastRoller on 01.28.11 at 12:48 am

Garth usually im with you but in this case I think I would side with Blair. Look at the risk side of this, if interest rates go up (which you keep on saying they will) any principal they have left will hammer them, that 2.4% will soon be 7% and they wont be making extra payments, they’ll just be squeaking by. Mean while the returns on their savings will be small, because the principal they can assemble will be small (relative to their debt) that 9-10% return will be on a few thousand bucks, not on 250k worth of debt. Why not take 5 years, knock that debt down to a size that they ride out at 7%, get out of the death zone (ie if my rate goes up im screwed). Then pile into savings mode and ride the rest of mortgage over a long slow burn. They may not end up as rich, but atleast they will have protected themselves from cash flow shocks due to rate changes that could sink their ship mid sailing.

Bad strategy. Rates will rise this year, but by around 1%, not 5%. That’s not in the cards. Second, if they take a decade to pay down debt they’ll have no savings for kids’ educations, and be way behind on retirement planning. Third, they can have significant investment funds now by borrowing to invest, if they choose to. Or, they can flip out of real estate before the house takes a hit and really get on stable ground. Your plan is a lose-lose. — Garth

#18 Stevermt on 01.28.11 at 12:58 am

I may be #1..woohoo

#19 Burnt Norton on 01.28.11 at 1:07 am

#10 rental monkey on 01.28.11 at 12:23 am

You gave the Tim Hortons girl $5.12 to pay for a $1.87 coffee because you needed a quarter? I guess a twoonie, four quarters, a dime and three pennies change from a five wouldn’t have done it for ya.

I’m surprised she didn’t bitch-slap you with a hot breakfast sandwich.

And of course that also means nobody under the age of 30ish can do basic math. Gotcha.

#20 HouseBuster on 01.28.11 at 1:09 am

Excellent.

#21 DavidL on 01.28.11 at 1:10 am

My wife and I are in a similar situation (two young kids and matching income) to Blair and Cindy. We bought our house in Victoria in 2002 for about $220K (40% of its current resale value). If it were all about making money, we should have “cashed out” and sold the house a year ago and the peak of the market. The resale value has already dropped by 5-10% since March 2010. I expect it to slowly slide down another 30%.

When we bought the house in 2002, I planned to have it paid off within 17 years. We’ve paid a bit extra at various times and now expect to have the house paid off within 3 more years (for a total of 11 years). With the market fluctuations over the past few years, my long term investments have only seen minimal growth. (However 2010 was exceptional, with close to 20% growth.) Over the past eight years, extra money has been split between investments and paying off the house.

Looking ahead three years to when the house is paid off, I expect interest rates to be 6 or 7% – which will be enough to financially ruin some recent buyers. I will need $500/month to cover taxes, house insurance and modest household improvements. My wife and I have postponed virtually all major improvements to the house until it is paid off. (No granite and stainless… yet.)

I can totally understand Blair and Cindy’s perspective. For me, paying off my house while interest rates are lower has been a priority. Is it the best way to make the most money? Probably not. Is it the best way to ensure that within a few years, I’ll have a lot more money for RESP’s, retirement and to finally do some big upgrades to the house? Yes. Does it gives me piece of mind? Yes.

#22 Steve Lee on 01.28.11 at 1:24 am

Some time ago US housing entered depression territory.

Does anyone have any idea when the Canadian market is going to tank?

Will it be when int rates rise?

#23 Valyrian_Steel on 01.28.11 at 1:28 am

Combined, my wife and I also bring in $130k… yet our montly expenses total about $3500. That’s inlcuding a mortgage – in Vancouver no less. Bought in 2002, thank god.

Live below your means – frugality without deprivation. Quite honestly, the only things we lack in our lives is a McMansion, and a couple of rugrats (didn’t want ’em anyway). At 38, the biggest question we have is this: How early can we retire?

#24 Daniel on 01.28.11 at 1:35 am

Garth,
You have strong beliefs about paying for a child’s post-secondary education. We read your blog because you do have strong beliefs, so that’s not the issue.

I’m just wondering if you have kids?

Not saying your advise is better, or worse if you do – just for a point of reference.

My conviction is societal. — Garth

#25 Outlier on 01.28.11 at 1:35 am

I realize this isn’t a parenting style blog and I assume Garth is about as interested in getting one going as having a revival of the “Gold Blog”. As a side note I would like to congratulate Garth on the restraint he has shown on not bringing up the hammering that gold has taken in the last little while. FTR, I am in gold’s corner, but it’s taken a lot of head shots in the last couple of rounds.

My wife is a stay home mom, that was our plan all along. I’m happy (somewhat, rather be in Vegas) to bring home the bacon for our family of four. Although a bit blunt, I understand Soylent Green’s reaction because having one of us spending time with our kids is more important than having stuff or having my wife pursue her career (was an elementary school teacher). Her choice, but not for everyone. To us our kids come first, that’s just how it is. They are a gift we didn’t think we would be able to have.

#26 Devil's Advocate on 01.28.11 at 1:36 am

#11 Northern_dirt on 01.28.11 at 12:28 am
#6 Soylent Green is People

If you can’t be bothered to raise your kids, don’t be surprised if they never visit you in the old folk’s home. Good luck with that whole thing, not something we’re interested in anyway, that’s disgusting. DISGUSTING. SHAME on you people.

Most families have two working parents nowadays. Don’t be so quick to point fingers and put words in this couples mouths. They didn’t say they don’t want to raise their kids, they said they don’t want to give up one of their careers.

What’s the difference? They made the choice and it was a choice – a choice of career or children first, we know what they chose. Sure… there are a multitude of bullshit excuses… but no good reason as need of more money is not.

#27 KindaDifferent on 01.28.11 at 1:37 am

What a pathetic couple! I bet they’re fat, too!

#28 Devil's Advocate on 01.28.11 at 1:38 am

#11 Northern_dirt on 01.28.11 at 12:28 am

#6 Soylent Green is People

If you can’t be bothered to raise your kids, don’t be surprised if they never visit you in the old folk’s home. Good luck with that whole thing, not something we’re interested in anyway, that’s disgusting. DISGUSTING. SHAME on you people.

Most families have two working parents nowadays. Don’t be so quick to point fingers and put words in this couples mouths. They didn’t say they don’t want to raise their kids, they said they don’t want to give up one of their careers.

What’s the difference? They made the choice and it was a choice – a choice of career or children first, we know what they chose. Sure… there are a multitude of bullshit excuses… but no good reason as need of more money is not.

#29 rental monkey on 01.28.11 at 1:57 am

Hey burnt [email protected]

It was 5 dollar bill, a dime and two pennies that I gave her.. Thus, saving me getting back a Loonie, a twoonie, a dime and three pennies. Instead I got back a Loonie, twoonie and a QUARTER.

Don’t know about you, but most parking meters around my neck of the woods use quarters or larger. Don’t need more dimes and pennies when I can easily use them up in a simple coffee transaction. Get it?

Where should I send your box of crayons?

#30 604genX on 01.28.11 at 2:05 am

GARTH: Do you have any advice for those in a similar situation but who are also seeking capital preservation because we believe the stock market and bank prefs will soon collapse because:
1. Too many boomers have followed your advice, leveraged home equity to invest in income producing assets (including many who use margin accounts).
2. When home prices inevitably collapse this will lead to paydown requirements on such loans.
3. Margin accounts will also be called.
4. Presto – another 2008-style meltdown.

The bank prefs dropped +/-40% just like everything else last time. Thus capital is in serious risk in such investments. Chasing “secure” pref yield at the moment looks like a lemming play.

Do you have capital preservation alternative strategies for those people sitting on the sidelines waiting for this to shake out? +2% yield is better than a -40% write-down in a year or so.

It must be a relief to live in such ignorance. — Garth

#31 Dark Sad Monster Bunny on 01.28.11 at 2:24 am

I’ll go with 21 David and 17 roller for paying down the debt quick while interest rate is low, just to protect yourself from higher rates down the road. And back off on the max RRSP contribution. Check your marginal tax rate(s) and find out how much RRSP gives you best
bang for the buck. RESPs? Your call, but don’t consider yourself a failure as a parent if you don’t. TFSAs
absolutely, but again you don’t have to do the max.
Dont try to max everything at the same time.

#32 whibur on 01.28.11 at 2:43 am

Garth,
I just found your blog…
I thought I saw what was going to happen to the Vancouver housing market a few years ago. I thought the down turn would happen because, of the olympics. Never did I image 2008 stock market colapse would happen. To date I have 250,000.00 in blue chips stocks an extra 475,000 in the stock market and I can only contribute $5,000 to TFSA this year. The rest of my assets $850,000 are in term deposits, as I am afraid to have so much in the stock market after 2008. I am 50 years old and renting in Vancouver. Any suggestions on how I can progess my portfolio or any changes I should make as we move forward in 2011.
Signed,
do not own a home ( Vancouver )

You are a financial schizophrenic. Get help. — Garth

#33 daystar on 01.28.11 at 2:57 am

We’ve all heard the term, “don’t put all of your eggs in one basket” and yet what do the majority of Canadians do? Buy a house while owning little else, essentially putting all of their eggs into one basket at a time when interest rates have nowhere to go but up. The amounts of unwisely used/unused tax shelters including TSFA’s, RESP’s and unwisely used/unused RRSP’s is staggering when one looks at it. This story is, in reality, far too common I’m afraid and has dramatically increased financial risk to this nation in general as a result. In hindsight, its risk is preventable with banks too distracted from easy money (real estate) to look after the financial needs of the very customers that feed them.

#34 Not Fooled By Property Spruikers Hype on 01.28.11 at 3:02 am

Song for Property Spruikers
….
(Sung to ABBA … Winner Takes it all) …

I dont wanna talk…About Property Prices Falling Through…Though its hurting me…Now I am history Ive played all my cards…

And thats what I need you to do…Nothing more to say…No more ace to play …..The Bank will take it all…I am a FOOL standing small…Thoughts of victory…Now just look at me… at my DESTINY……

I was in this mugs game…Thinking I belonged there…I figured it made sense…I was building me a fence…Building me a home…Thinking I would be strong there…But I was a fool…Playing by Spruikers rules……

The BANKS will throw the dice…Their minds as cold as ice…And a SPRUIKER way down here…Loses all thats DEAR…

The BANKS will take it all… were heading for a fall It is simple and it is plain…How can SPRUIKERS Complain …

The banks they must abide … they know they cannot hide…The Banks they must obey……They simply have no say…

I don’t want to talk about Property prices falling through , though its killing me , I am history ….

The game is on again…Property is not their friend…A big thing or a small…No winners here at all…

#35 debtified on 01.28.11 at 3:04 am

Less Debt > More Debt

#36 Vancouver smart renter on 01.28.11 at 3:08 am

Why is this not obvious?
When rates are low (close to inflation) you maximize investments which pay several multiples of the rate, eg borrow at 2.5% make 10-15% in a diversified, balanced AND liquid portfolio.

When rates increase AND you struggle to make payments (smarter people would have sold out by now and moved to rental with an even bigger bunch of cash, but this is about you who don’t want to sell) you will have a healthy pot of cash you can draw from to reduce your principal when you refi…

Basically, use their money for your gain instead of them using your money for their…

N’est pas?

#37 Bill Grable on 01.28.11 at 3:12 am

Neither housing nor employment show any sign of recovery. Nearly 4 years after the collapse of Countrywide – the nation’s biggest subprime lender – housing is still going down.

How far will it go? Gary Shilling says it will take another 20% drop in housing prices to bring them in line with their historical trend. Housing usually rises with the economy. Not more. Not less. To get back on track with the economy now, house prices have to go down.

What about over-shoot?

Yes, that’s a risk too. Bubble markets don’t tend to go back to “normal” levels right away. Instead, they tend to go below normal.

At first, homeowners think it is just a temporary break in an upward trend. They hold on…hoping to catch another move to the upside. Then, they gradually resign themselves to a long slump, but still believe that “you can’t go wrong on real estate, not over the long term.”

Then, housing prices continue to sink. More homeowners give up. Some sell. Some default. More foreclosures depress prices even further.

The peak in foreclosures is not expected until March of 2012. When it comes – five years after the crisis began – most homeowners will be ready to throw in the towel. “Housing may go up in the long run,” they’ll say to each other, “but this downturn could last longer than I do.”

Prices are likely to drop below their historical trend. Homeowners will tell their children: “Don’t bother to buy a house. Rent. Housing is a losing proposition. It never goes up.”

Then, with housing prices perhaps 25% to 40% lower than they are today, the market will have found its bottom.

When? Housing markets move slowly. It could happen by 2015…maybe 2020…

– Bill Bonner – http://www.dailyreckoning.com

#38 Bogdan on 01.28.11 at 3:19 am

“The childcare is a killer, obviously, but eliminating it by having one of us stay home doesn’t quite make sense financially, and isn’t something we are interested in anyway.”

Blair, Cindy… let me get it right, you are not interested in spending time with child, correct? Then, what are you interested in? Going out to work each morning for 8 to 10 ours, working like a drunk asses for somebody who’s not you and hoping to get laid at work?

Your problem is not that you don’t make enough money, but that you didn’t know what a baby is, that you most probably consider all of this as sacrifices for your baby (if not now, you will, in the near future) or that you didn’t do your homework about your future costs before signing the mortgage papers… which, of course, is baby’s fault too.

Garth is right, that house and garden of yours will worth nothing in 10 years time, but now… it gets you close to the middle-upper class, right?

I’m not sure which account you’re going to close first, mortgage or RESP, but I’m sure that one of them is loosing lots of money… if not both. Some video that might inspire you: http://www.youtube.com/watch?v=yT4tzwH_K8M

#39 Memories on 01.28.11 at 3:20 am

Property in the late 90s was selling for $300 p sq ft. Today, it wouldn’t be surprising to find prices that are double that.

My peers and I purchased one, two and sometimes even three properties. Fixed term mortgage rates were around 8% and falling fast. We started switching to variable mortgages as our terms ran out.

Then the bunch of us started getting married and having children. We didn’t need the small handful of properties any more so we slowly sold them off and rolled the profits into mortgage free homes for our newly created families. Not bad for a small subset of a generation that still hasn’t hit 40.

People have been warning about real estate since the last real estate downturn in the mid 90s. It’s a good thing we didn’t pay attention.

Fear masks opportunity so completely that it’s no wonder that many are stuck having to decide whether they should fund their retirement, childs education or pay down the mortgage; and forget about the idea of a family vacation!

Not sure what the point is. I guess perhaps not everybody is influenced by things that supposedly go bump in the night.

#40 Your Mom on 01.28.11 at 3:22 am

Praise be to the artists for they shall lead us to enlightenment: http://www.youtube.com/watch?v=-2rMeUkvpyI

#41 Memories on 01.28.11 at 3:23 am

I forgot to end my last post by saying that Canada has been great to me. Perhaps I’m biased, but it’s one of the best countries on the planet! The opportunity for prosperity is unparallelled in the free world – even more so now! Go Canada!

#42 AGIC on 01.28.11 at 3:32 am

#21 DavidL
…paying off my house while interest rates are lower has been a priority. … Is it the best way to ensure that within a few years, I’ll have a lot more money for RESP’s…”
***********************************
No DavidL, this is not the best way, because you are loosing $500 in grants from government for each child every year you don’t contribute max.
Big disservice to your children. Please reconsider.
With best intentions,
AGIC

#43 AGIC on 01.28.11 at 3:33 am

sorry for double post. Slip of the finger

#44 Angela on 01.28.11 at 3:37 am

Hi Garth,
Do US Preferred shares get the same favourable tax treatment in Canada as Canadian Preferred? I ask because I have found a US ETF that pays a higher rate than the Canadian ETFs and with the dollar at parity this is a chance to diversify my portfolio globally.

No. — Garth

#45 Waiting and waiting on 01.28.11 at 3:39 am

#19 Burnt Norton on 01.28.11 at 1:07 am
#10 rental monkey on 01.28.11 at 12:23 am

“You gave the Tim Hortons girl $5.12 to pay for a $1.87 coffee because you needed a quarter? I guess a twoonie, four quarters, a dime and three pennies change from a five wouldn’t have done it for ya.

I’m surprised she didn’t bitch-slap you with a hot breakfast sandwich.”

Is this hilarious or is it hilarious to people like me who wanted to slap a few people while working as a cashier decades ago?

I used to think it was retarded to have children and then let strangers raise them. I still don’t want others to raise my kids, but now I am very open to accepting any help I can get. Your experiences do have a profound influence on your opinions.

#46 Signpost in the bushes on 01.28.11 at 3:42 am

So that which is perceived as a disadvantage to some, may actually be an advantage to others. Is there any debt which can be called a good debt for those who wish to be truly free, and to sleep quietly each night? Be cautious around those who would urge you to become indebted to them; all the while, insisting that it will be to your advantage.
…”And borrowing dulls the edge of husbandry”….Shakespeare.

#47 Devore on 01.28.11 at 3:53 am

#6 Soylent Green is People

Whoa, hold the righteous indignation! Save it for spamming us with anti-Harper rhetoric.

#48 Blaire on 01.28.11 at 4:21 am

First: Thanks for the response, Garth. Much appreciated. Although it needs to be said that I never whined or snivelled about anything. But hey, if that’s the way you want to spin it, fine.

As you say, spending is about priorities. Ours has been to pay off the house. I find it odd that you would advocate putting less money down and paying less off, given that you think rates are going to rise and home values are going to drop. I’ll look carefully at your advice to put less on the house and more in investments, but I’m not entirely convinced yet. Rates were not at 2.4% when we bought the house, and I’m guessing they aren’t going to stay there for much longer. I’d rather have as much paid off before the next renewal as possible. Perhaps at that time we’ll reallocate.

Second: to Dave In Calgary, I never said we “cannot afford live because we cannot MAX out our RRSP, RESP, TSFA, and mortgage”. That’s Garth’s spin. I was looking for advice on WHICH of the four would be the best to not max out if necessary. Man, it’s not like I said we were living off bread and water. And it’s not like I’m spending the money on booze and porn. We’re investing every dollar possible — I’m just asking about the best way to allocate those dollars.

Third: To #6 Solyent Green is People — p*ss off.

So why did you ask for advice? — Garth

#49 Blaire on 01.28.11 at 4:22 am

Garth also neglected to include the information that I have a DBP that is already taken off the top . . .

Interesting but irrelevant to the math of your family cash flow and RESPs. — Garth

#50 PaulL on 01.28.11 at 4:45 am

For all of you saying “now’s the time to pay down the debt before the rates go up” — that is irrelevant. If today you believe you can get 6% after-tax return investing vs. 2% on your mortgage, and you believe the risk on the 6% return is bearable, that’s what you should do.

If somehow your mortgage rate jacked up to 6%, and somehow investment returns stay at 6%, well, *then* you liquidate some of your investments and pay down your 6% mortgage (risk-free investment @ 6% beats risky investment @ 6%).

And before anyone jumps on me for calling paying down your mortgage debt an “investment”, it is just that. The *home* isn’t a great investment (I’m a doom and gloomer too), but given you’ve decided to saddle yourself with the debt and you aren’t willing to sell, you now have the option of using your own mortgage as a fixed-income investment vehicle that pays a guarenteed risk-free return. What happens to the price of the underlying home is irrelevant.

#51 Vanman on 01.28.11 at 5:38 am

Garth, while I agree with you that they should invest their money in an asset that isn’t about to decline in value, I don’t see your math on this one. The difference between 6.65% and 2.4% on $250 large at 40 yrs is $665/month. How do you figure they can squeeze out $2050 monthly for there TFSA and RRSP payment sticking with the lower rate? It seems to me that they’re paying over $1000 in utilities, tax, and insurance fees per month. They’ll need to cut spending somewhere else to meet the awesome plan you’ve set forth.

Read it again. — Garth

#52 VanLarry on 01.28.11 at 6:29 am

I think emphasis should be made on why they shouldn’t skimp TSFAs, RRSPs, RESPs. I’ll do that with the usual compounding story:

First, “best” Canadian site I find on google:

http://dividendlover.ca/2010/03/compounding-most-powerful-force.html

They have a spreadsheet illustrating their point:

http://spreadsheets.google.com/pub?key=tkLjLjuOVO9wiDKUP6NoPSw&output=html

So, basic lesson from compounding: start as early as damn possible.

Applying to Blair and Cindy’s problem: If they cut down the loan payments and instead invest now, they could have it all. Sure, the mortgage will take longer and costs more as result. BUT, if you take in the compounding effect on your investments, you’d work alot less then paying off the mortgage right away since the rate is so low.

They could also try leveraging without doing a home equity.

#53 Bottoms_Up on 01.28.11 at 9:02 am

#44 Waiting and waiting on 01.28.11 at 3:39 am
———————————————–
An old Jewish Pediatrician told me that he long believed daycare was for the destitute (i.e. for families that couldn’t afford to have a parent not work). Through his life experiences he has grown to understand that daycare is an excellent, if not the best, way to socialize your children. (it’s also a great way to get your children naturally immunized against a plethora of diseases!)

Yes, life experiences (and an open mind) can play a phenomenal role in shaping one’s perspective.

#54 Moneta on 01.28.11 at 9:13 am

I have a friend who moved here from Australia and got her engineering degree (4 yrs ago) from McGill without going a penny into debt, all on scholarships and grants. It can be done, it just takes planning and effort.
—————-
One minute you’re saying that kids need to build character, then you applaud grants and scholarships. It can be quite contradictory.

When I was in University those who got grants and scholarships were the ones who NEVER worked part-time jobs because they could study 80-hours a week and get straight As.

Furthermore, it will be interesting to see what happens to grants and shcolarships over the next decade. The fastest growing business in the US over the last 2 decades has been the not-for-profit segment while the “easy money” do gooders felt compelled to donate. But guess what, not-for-profit is suffering right now. Something tells me grants and scholarships will tank just when students need them most.

I do agree on the building character thing but it’s one thing to cut expenses when you are tight and to cut when you are flush.

#55 Moneta on 01.28.11 at 9:17 am

I find it odd that you would advocate putting less money down and paying less off, given that you think rates are going to rise and home values are going to drop. I’ll look carefully at your advice to put less on the house and more in investments,
———-
You invest your money while the interest rate on the mortgage is too low and later use that money to pay down the mortgage when the rates rise.

#56 Moneta on 01.28.11 at 9:28 am

If you can’t be bothered to raise your kids, don’t be surprised if they never visit you in the old folk’s home.
—————–
I’ve seen parents sacrifice themselves and kids take everything for granted like I’ve seen parents do horrible things and kids turn out great.

I’ve seen parents with 3 or more kids where all kids turned out different. Imagine that!

Is there a fool proof parenting book because the hospital sure did not give it to me?

#57 Sampson on 01.28.11 at 9:40 am

question about bank preferreds. if i buy a preferred paying 6% dated through 2014 does this mean I will be paid 6% every year through 2015? What happens at 2015, does the bak buy back my preferred at the initial price?

Perpetual preferreds pay forever, until called – a rare event. — Garth

#58 Nibs on 01.28.11 at 9:52 am

Credit demand seems to be slowing as of October 2010, which was even before the new mortgage rule changes were announced. This suggests deflation is around the corner. Hard to keep house prices high without a rapid expansion in credit and a deep pool of fools willing to use it.

#59 MikeT on 01.28.11 at 9:55 am

@ dave in Calgary:
you will be surprised at how much kids eat (said half-realistically and half-jokingly), and here’s why:
I noticed that, when my wife and I didn’t have kids yet, I was shopping for groceries and would come home with 2/3rds of a 2-wheel cart full of stuff (didn’t have a car at that time yet) – which would be enough for a week. Then, when our first one was born, I would come home with a full cart and a bag or two in the other hand. But when the second one was born (and we got a car too), I carry food from the car into the apartment with the same cart and have to make 2 trips: 2 full carts and several bags in hand.
One more kid, but double the food we needed before she was born! And it’s not like we buy food that we weren’t buying before… Misterious…

#60 bob on 01.28.11 at 10:46 am

Wow.

Here’s a couple that has zero consumer debt, is paying off their house faster than they have to, and is contributing to a DBP, TFSA, RESP and RRSP (although not maxing any of them out) — and they get called pathetic, fat, disgusting, and shameful.

I’d hate to see what you guys say about people who dare to have a car loan.

#61 BDG-YYC on 01.28.11 at 10:55 am

#57 Nibs on 01.28.11 at 9:52 am
“Hard to keep house prices high without a rapid expansion in credit and a deep pool of fools willing to use it.”

That sums it up in a tidy nutshell. It really is about the debt. Money for nothin’, so folks with nothin’ can have everything, with nothin’ down. Illusions of wealth and prosperity on the pay later plan.

Very unlikely its getting any better …
http://www.cga.org/dialogue/en/articles/2010/Summer2010/pub-ec_drowning_in_debt.htm

#62 Tom from Mississauga on 01.28.11 at 11:03 am

Hi Blaire
It’s all about cash flow management for a homeowner today. Putting cash towards what pays the best NOW!!! Not 2 or 3 years from now. Blaire, take that money back out of the mortgage this weekend and pour into stuff that pays better. Which is easy to find. Try ticker ZCM?
Garth, the newspapers is talking about Garanteed Income Supplements a lot lately. Can you do a post on that?

#63 Soylent Green is People on 01.28.11 at 11:03 am

This really is one of the best posts I have ever read.

Truly. Awesome. Breaking down the myths.

Loves it.

#64 kilby on 01.28.11 at 11:04 am

Global BC just had the owner of ReMax Kelowna saying that because the market has flatlined for the last six months that this is as low as it is likely to go. And that because Kelowna is a “lifestyle destination” unfortunately prices will stay high. The mayor was on after, feeling bad because young people will be shut out of the market. ReMax advertises a LOT on Global.

#65 dave99 on 01.28.11 at 11:06 am

#38 Memories,

The point is you and your peers got lucky. You invested leveraged heavily into an asset class during its speculative upswing, and then sold before the downswing due to your life considerations, and with no understanding of the natural price cycle of that asset class.

I congratulate you on your good fortune, and certainly wish you no ill will. But there are people 10 years younger than you who are currently doing the same thing, and many of them will be financially destroyed by the same thing that was so profitable for you.

#66 Soylent Green is People on 01.28.11 at 11:12 am

If we’re not judgemental on other people, then they just go around and do what they want. Shame and jugement are healthy things in a society.

p.s. Could someone please ask the kids if they want a parent home with them to make their lunch for them OR have both parents working so they can pay for pizza days at school. Seriously, ask the kids what they prefer. ASK THE KIDS.
.
.
.
.
.
The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke
Elizabeth Warren, Amelia Warren Tyagi

… the two-parent middle-class working family is on the brink of financial disaster. The number of families declaring bankruptcy or receiving a foreclosure against their house has shot up dramatically.

– contrary to popular myth, families aren’t in trouble because they’re squandering their second income on luxuries. On the contrary, both incomes are almost entirely committed to necessities, such as home and car payments, health insurance and children’s education costs.

– When an unforeseen event such as serious illness, job loss or divorce occurs, families have no discretionary income to fall back on.

– The authors recommend a number of useful societal solutions to get families out of this trap, such as legally prohibiting credit card companies from charging grossly unfair interest rates and exposing banks that employ a loan-to-own strategy that steers minority customers to higher mortgage rates with an eye to future foreclosures.

– Warren and Tyagi point out that families buy homes they cannot afford in order to live in a neighborhood with better schools (this is for the US). Their proposed solution, however-to institute a public school voucher system with wider choice-is less carefully thought out. Overall, however, this is a needed examination of an emerging social problem.

Review book for free:
http://books.google.ca/books?id=_IFTf-_9fSsC&printsec=frontcover&dq=two+income+trap&source=bl&ots=ssHJGxqt_M&sig=JJoG8PsIISfFjiMndKp29oKjXoo&hl=en&ei=vJP6TIPmMcm6nAeDxonICg&sa=X&oi=book_result&ct=result&resnum=2&ved=0CCMQ6AEwAQ#v=onepage&q=two%20income%20trap&f=false

or watch video:
Elizabeth Warren – The Two Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke
http://www.youtube.com/watch?v=8GHg3GAeQ1Y
.
.
.
.

#67 Moneta on 01.28.11 at 11:16 am

So a dude goes to the bank and get a mortgage insured by cmhc for which he pays the premium, and when the dude defaults on the mortgage the bank gets paid their money (Dude insured the money through CMHC) then CMHC comes after him for the money they paid the bank!!!!

WTF!!!….WHATS THE POINT OF CMHC AGAIN?….
—————–

CMHC was created to get households into houses when banks were not lending, it was not to help households get out of their obligations in times of distress.

#68 dave in calgary on 01.28.11 at 11:17 am

@ #58 MikeT – Very interesting. I think I may go and buy my girlfriend a couple cats so she doesn’t start asking about kids :) I guess it’s none of my business what people spend on groceries and gas, but I think one could do a lot better than $2500 a month. That number just didn’t make sense. I asked my sister (husband and 3 kids) and she pegged that number at much less than $1500 for her. Maybe when you throw in clothes, shoes sports, music lessons, toys etc… it can crawl up much much higher. I wouldn’t know… we’re just a couple DINKs living large at the moment so I am yet to find out how much kids may cost. Just my two cents.

#69 GregW, Oakville on 01.28.11 at 11:18 am

Hi #7 Soylent Green is People,
Thanks for the interesting Calendar.
June’s, Biggest story of 2010, last point is most telling.

#70 AACI-Okanagan on 01.28.11 at 11:27 am

Garth your blog should come with a “caveat” not every person/couple should listen this advice, it just doesn’t make sense. Anyone that bought a home with a high ratio mortgage over the past few years and is just getting by at these “low interest rates” where will they be when their term is up and they have to renew their mortgage at higher interest rates and their home has depreciated 10% to 20% ? Is this a conspiracy on your part to make sure that what you predict still carries on? Your advice may be smart for some, but not so smart for others, hence the “caveat” .

#71 Scalgary on 01.28.11 at 11:28 am

#47 Blaire,

I understand that some of Garth’s comments undervalues your dignity or whatever, but you will never get such an invaluable, unbiased comment from anyone… And he does it for free..! Unimaginable in this commercial world..! He used your issue as a case study for the benefit of all of us…thanks for sharing with Garth, that way we all become more knowledgeable on these issues…

As Garth mentioned in several of his previous posts, he is against diverting your savings into real estate as it is deemed to vanish within next 5 years…

My two cents (learnt from Garth’s school)… Avoid too much getting into RRSP as you will be punished with more taxes when you withdraw down the road… Pay your tax now and invest that money into less-taxable ETFs etc

Cheers…

#72 kitchener1 on 01.28.11 at 11:32 am

Since when was the “social contract” rewritten to include the cost of kid(s) education?

Everyone here is overworried about the costs of having kids and their education etc…

If you can save for it great, if not, too bad, the kids can pay their own way– I did

I disagree with the advice regarding the mortgage payments.

We all know that house prices will decline, thats a given, but for someone who is in it for the long term, its a non issue. If these folks are, then who cares if the assets lose value. Pay off that mortgage at there low interest rate.

Its a personal choice, its easy to talk about investing in other assets/equities but if people are risk averse then its not going to happen. Equities is a tough game, look at 08, everyone was selling, for those with the stomach to wait it out, it was awesome, but not many folks have that ability.

I think that family should stick to what ever they are going to excute, and if paying off the mortgage is what they can commit to 100% then leave it be. At least that money is paying off a mortgage and has some value.

Stock market has risks as well, it too can drop, the difference is that for most people, they will take the loss on the way down because of fear meanwhile, never taking a profit on the way up because of greed.

If the house losses value, they might actually ride it out if they can as opposed to taking the immdidate loss.

Thats why i am suggesting to have them work with what ever they are comfortable with, find a plan that they will stick too, and if that includes accerlerated mortgage payments, so be it, it might not be the best but its the one that is going to be actionable.

#73 GregW, Oakville on 01.28.11 at 11:33 am

Hi #14 Elmer, If you can put your money into something that grows 3x faster than your mortgage rate now and at renewal time, presumable at a higher rate, you use the extra growth to reduce the principle then, maybe & depends.
That is if I’m starting to ketch on to what Garth is trying to explain?

#74 Moneta on 01.28.11 at 11:33 am

Shame and jugement are healthy things in a society.
———-
I guess if you’re trying to force conformity and the ideal is fine for you. But what is the ideal we want to promote? Who decides what the ideal is? Who sets the rules?

Frankly, this blog only seems to confirm that we can’t seem to agree on anything.

Shaming is uselss if the person being shamed feels they have been treated unfairly. If you don’t convince them of their errors, you will only guarantee retaliation.

#75 Moneta on 01.28.11 at 11:39 am

p.s. Could someone please ask the kids if they want a parent home with them to make their lunch for them OR have both parents working so they can pay for pizza days at school
———
If the Mom is an emotional roller coaster because she needs to get out of the house, I’m sure the kids want her out of their hair.

If staying at home was so good, why did so many women re-enter the workforce? The stay-at-home mom was a one generation phenomenon and people are still stcuk on it.

Throughout history, 99% of women have had to work, get over it.

People keep on assuming that everyone else should have the same needs as them. It’s the root of most wars.

#76 Herb on 01.28.11 at 11:45 am

Blair and Cindy are guilty of wanting the Canadian dream: career (job), marriage, house (mortgage), kids (given a leg up with RESPs), a happy retirement (funded privately through RRSPs and TFSAs). Outrageous!

So it has become unaffordable for the average Canadian. And the suggestion for a follow-on dream? Invest safely and successfully (assuming the starting capital), or pick those elements you can afford and forget the rest.

The next phase will be a real Canuckistan: “Brethren relax, you are all poor together!”

#77 sue on 01.28.11 at 11:47 am

I couldn’t help but cringe when I read that a mother is “not interested” in raising her child. Most mothers wish they could but can’t because of finances, I get that but by choice? That just makes me feel sad.

That video by Bogdan was very interesting btw. I used to always say to my bf “When you wanna bring some real facts to the table to debate this issue, and not some emotions from your childhood, let me know”

#78 Timing is Everything on 01.28.11 at 11:48 am

#46 Devore – said “Whoa, hold the righteous indignation! Save it for spamming us with anti-Harper rhetoric.”

“Righteous indignation is typically a reactive emotion of anger over perceived mistreatment, insult, or malice. It is akin to what is called the sense of injustice. In some Christian doctrines, righteous indignation is considered the only form of anger which is not sinful, e.g., when Jesus drove the money lenders out of the temple.” [wiki]

Soylent…Fair comment. Your opinion is welcome.

Devore. Save it. IMO.

#79 Kevin in Winnipeg on 01.28.11 at 11:55 am

Talk about being a curmudgeon….

Blaire, my advice would be to not focus on the house, save for retirement if you need to and enjoy your time with the kids and wife. Go take that all inclusive vacation!

There are 3 people in my workplace this past year who have either died or are dying of terminal cancer. This real estate / working in a job til retirement dream is bull$hit.

#80 robert james on 01.28.11 at 11:56 am

#63 Kilby Don`t forget,,there is a very special kind of stupid regarding R/E here in the OK.. LOL I think the suckers have been pretty well used up, hence the pump and dump campaign by Remax..

#81 Soylent Green is People on 01.28.11 at 12:00 pm

The high cost of working for pay.

TAXES. A lot of the income you will make will be eaten up by taxes. If you’re returning to an existing job, you need only look at an old pay stub or last year’s tax return. If you’re looking for a new job, you’ll need to figure how just how much tax you’ll pay. Here is a terrific and easy-to-use calculator.

CHILD CARE. The next biggie is paying someone to do at least part of the job you’d be doing if you stayed home. You can hire a nanny, pay for out-of-home childcare or, if you’re really lucky, rope your parents into being all things to your kids while you’re off in the mines. There’s a cost to it all, and you’ve got to figure out what that cost will be for your family.

TRANSPORTATION. You’ll have to be able to get to and from work. If you live further than walking distance to where you work, it could be as inexpensive as public transportation, or as expensive as a plane-ride. If you’re driving, you’ll have to not only figure out the cost of gas, but the additional wear and tear on the car, resulting in a higher maintenance costs. Don’t forget the additional trips to and from your childcare provider.

CLOTHES. If you have to maintain a “professional” appearance at work, what’s it going to cost to keep you shod? If you’re carrying a lot of baby-weight, are you going to need a whole new work wardrobe?

DRYCLEANING. If you’re wearing a Power Suit to work, it’ll have to be cleaned once in a while.

FOOD. While it may be your (best) intention to take your lunch to work, you should also budget for the occasional lunch out, the occasional coffee with the chicks at work, the occasional birthday celebration. That stuff happens. If you pretend it doesn’t, it’ll bite you in the budget.

GIFTS. Speaking of birthdays, let’s not forget the presents you’ll be chipping in on, or the charitable donations you may be expected to make as part of belonging to that work community.

HOUSEKEEPING. If you’re both back to work full time with a new baby to look after, may you need to hire someone to do the vacuuming. Even if it’s twice a month, it’s an expense for which you need to budget.

LOST WAGES. If you’re both working, someone’s going to have to take time off if baby gets sick. Will one or the other of you get docked if you have to take the occasional day off to stay home with a sick child?

That’s the money. But there’s another equation you have to think about… the happiness equation.

If you love the work you do, that’ll go in the pro column. If you’re doing a job just for the money, your motivation to leave your baby will be very low. If you’ve worked out the money thang, and it says GO BACK but you hate your job, you hate your boss, you hate your commute, it may be time to think about making money some other way.

There are lots of people who change careers, develop new skills (while off with baby in that first year), or upgrade their skills. There are people who find ways to work a full week in three days, so they’re home four days with baby. There are couples who work off-shift, so one or the other parent is home with the kids. There are tons of ways to have the life you want. But you have to think about it. You have to plan.

http://www.gailvazoxlade.com/articles.html

#82 Lianne on 01.28.11 at 12:01 pm

With regards to RESPs, I’d be interested to know what readers believe will be a good career for their children. It seems to me that what we will be needing in the future is a lot more food producers and shoemakers and seamstresses and mechanics and carpenters – trades not requiring a university education. When the food stops coming on the trucks from California and on boats from China someone will have to feed all of the English and business majors.

#83 Jake on 01.28.11 at 12:01 pm

Garth, your images are getting tame… what happened?

#84 Tim on 01.28.11 at 12:09 pm

Canada has re couped all of the jobs lost during the recession, granted some may be part time…Garth is still wrong in calling for a market correction

Who among us does not know someone unemployed? This is nothing to be smug about. — Garth

#85 Industrial Guy on 01.28.11 at 12:12 pm

Statistics Canada is now saying the Job recovery not so good after all ……
Holy Cow! Batman …. like we didn’t know that. Graduate engineers are still dropping their resumes off for entry level welding jobs.

All the dominoes are in place for a very significant decline in housing prices. Dandelions and “For Sales” signs will dot the lawns of South Western Ontario in another six to eight weeks.
Canada lost 428,000 jobs during the 2008-09 collapse of the manufacturing sector ….. 11,000 more than previously reported. OK, not such a huge error in numbers …but!

They ..and some self congratulatory ads run by the Party in power claim 460,000 jobs were created since July 2009.
So now we learn it’s actually 398,000. Some 30,000 less than reported. That’s a significant error.

The industrial heartland of Canada was ravaged. The factory doors are still shut. No one wants to talk about how many of these new jobs are low wage, part time, seasonal and temporary.
Or how the Government skews the numbers with its little hiring blitzes like the upcoming Spring Census.

A cynic would say this is all staged to coincide with a Spring election … Right after the Minister juices housing sales numbers with his strategically delayed mortgage rule changes.
And just like in 2008. Once the voting is over… The wheels fall off .

Whenever this Minister of Finance says we’re in for a “Soft Landing”. I get nervous.

#86 camcool on 01.28.11 at 12:13 pm

#35 – I could not believe how the previous 34 posts did not understand that it is advantageous to use the bank’s money at 2-3% to get returns of 10% or more…

When interests rates do rise, simply take the gains and apply it towards the mortgage if you so wish.

#87 Jebus on 01.28.11 at 12:19 pm

ConcessionMan:
” Hear where your coming from Garth, but with a high Mortgage at a low rate, wouldn’t this be the time to be throwing as much as you can at it, so in a few years when rates are triple, you’ve ease’d the load?)”

I think the point here is that you take the extra $$ and place it in LIQUID investments, so IF rates to rise to a point where your returns are not offset, you can sell the investments and pay down your debt.

#88 Geology Joe on 01.28.11 at 12:21 pm

FROM: The Calgary Herald – Comments on a story about Calgary homebuyers sitting on the sidelines.

Friskie97
10:44 AM on January 28, 2011

anon 10:26
EXACTLY!!! Why do all these people think that the entire market is over invested. There are a lot of smart people out there that bought what theyu could afford when the market bottomed last year. Its going up people,.. I PROMISE you that
FACT:
Im not going to sell my house for less then I bought it.
FACT:
If I cant sell it, I’ll rent it
FACT:
Potential first time buyers will be left with 0 home options and will be forced into condos
FACT:
More condo sales will eventully translate into more homes sales down the road,… As a home owner now, I cant lose.

+++++++++++++++++++++++++++++++

The above was written in by some hopelessly misinformed individual in the Calgary Herald. Delusions run rampant. Apparently this person believes that he or she can singlehandedly determine the fate of the real estate market.

Gotta love Greater Fools!

#89 GregW, Oakville on 01.28.11 at 12:24 pm

Hi #37 Bogdan,
Thanks for the link to 13-1/2min Youtube video.
An interesting perspective.

#90 JayBoy on 01.28.11 at 12:30 pm

I’ve been a faithful reader of this blog for about 2 years now, and while a lot of the personal financial situations we hear about here are messed-up and deserve a healthy dose of reality this is the first one I’m asking myself, “Did I miss something?”

Let’s recap:
– Blair is investing RESPs for his children
– He is investing in RRSPs for his retirement
– He is taking advantage of his TFSA
– Most people on 40 year ams intend to pay down the mortgage quiker than that and never do, but Blair is actually trying

He does have a discrepancy in take home pay versus these payments, but he is doing what smart people do; seek professional advice before making a decision. He could be doing better with what he’s got, but I think he knows that and that’s why he asked for advice.

He’s hardly the type of irresponsible twit we usually critique in these comments; people maxed-out on excessive mortgages, consumer debt, and little to no savings. But yet some of the commenters are giving him similar treatment. Really?

One question remains after reading this blog entry – Garth, how old is the couple?

Actually Blair said he was not contributing to RRSPs, RESPs or TFSAs. I did not say they were irresponsible or in dire straits, just bad at choices. — Garth

#91 ken on 01.28.11 at 12:36 pm

By golly all your friends seem to make a lot of money. Is this prevalent throughout our society ? I am beginning to believe I am underpaid.

#92 Mackie on 01.28.11 at 12:41 pm

Blair: lots of know-it-alls here. You are doing a good job. Back off a little on everything and live a little. Get an emergency fund to help you sleep at night. This life thing isn’t a sprint, it’s a long-distance race. The problem with a lot of people here, especially Garth, is they continue to discount the possibility of a second stock market dip. I think the likelihood of that is just as good as a massive drop in housing prices. Our economy is not exactly in the greatest of shape. And, historic returns, at least in the past ten years, have not been all that impressive.

#93 Devil's Advocate on 01.28.11 at 12:48 pm

#63 kilby on 01.28.11 at 11:04 am
Global BC just had the owner of ReMax Kelowna saying that because the market has flatlined for the last six months that this is as low as it is likely to go. And that because Kelowna is a “lifestyle destination” unfortunately prices will stay high. The mayor was on after, feeling bad because ReMax advertises a LOT on Global.

It’s all true…

You weren’t being sarcastic… were you? ;-)

#94 Pat on 01.28.11 at 12:49 pm

Interesting… the main preoccupation and purpose of life for some people seems to be retirement.

#95 Devil's Advocate on 01.28.11 at 12:50 pm

#59 bob on 01.28.11 at 10:46 am
Wow.

Here’s a couple that has zero consumer debt, is paying off their house faster than they have to, and is contributing to a DBP, TFSA, RESP and RRSP (although not maxing any of them out) — and they get called pathetic, fat, disgusting, and shameful.

I’d hate to see what you guys say about people who dare to have a car loan.

Life is what happens while you are making plans for the future.

#96 ??wth?? on 01.28.11 at 12:52 pm

It would seem that the majority of people who post here would agree that the housing market in Canada is going to drop or crash. I agree to this as well, I would lean more towards a crash.

The one thing that I do not understand is why Garth and so many of his faithfull followers here think that their non-real estate investments are not going to crash as well?

The state of the world’s financial system is on the brink. U.S., Europe, AUS, Japan, our own…(the list goes on) are all unstable. Credit and personal as well as National debts are out of control and the middle class jobs are vanishing. This debt will never be paid back because it cannot be paid back.

In this particular post, Garth tells these people to lower the mortgage payment and increase or at least keep the other investments the same.

When the financial system crashes, one would be best off to have the title to his house, for many reasons. All other investments will be worth nothing at this point and will do you no good at all. It will be physical goods that will be of value. Pieces of paper or computer files that state that x-amount of money belongs to so and so won’t mean squat.

Doom and gloom or truth? I know most here would like to believe that this will never happen. Like the price of real estate, the way the world is going right now is unsustainable. There will be a correction in one way or another.

Garth, you make good points and you back them up with solid facts and stats. I personally think that you have too much faith in the fiat currencies of the world. Some people have a hunch to get out of debt and own their own house rather than gamble that RRSP’s or whatever type of investment will pay off in the future. Before you belittle someone for thinking this way, think that there may be a reason why they ate thinking this way.

Do any of you ever wake up enough to realize that a complete economic collapse is a possibility? If it happens to real estate, it will probably happen to your treasured investments as well.

Sorry, dude. There will be no economic collapse. — Garth

#97 Devil's Advocate on 01.28.11 at 1:01 pm

“There are no bad kids, just bad parents”

#98 Timing is Everything on 01.28.11 at 1:03 pm

#46 Devore – said “Whoa, hold the righteous indignation! Save it for spamming us with anti-Harper rhetoric.”

“Righteous indignation is typically a reactive emotion of anger over perceived mistreatment, insult, or malice. It is akin to what is called the sense of injustice. In some Christian doctrines, righteous indignation is considered the only form of anger which is not sinful, e.g., when Jesus drove the money lenders out of the temple.”

Soylent. Fair comment. Your opinion is welcome. IMO.

Devore. Save it…for DA. IMO

#99 Timing is Everything on 01.28.11 at 1:04 pm

@ #67 Timing

Quote from Wiki. Sorry about that.

#100 Alex on 01.28.11 at 1:06 pm

Problem is that government is serving to huge corporations, the rest of us are on our own. Tell me why do we need to send so many jobs to China? What good does it serve to Canada (and USA for that matter). WE were shading jobs for years to China. Only now it caches up. Recovery? What recovery? Go to Canadian Tire and find something that is made in Canada. That is the problem. Donald Trump said it at Garry Kudlow report last week. Just like that. Knowing Kudlow and his attiude to protectionism I wonder what is going on there that he let it trough.
Maybe we should create 2 institutions: one to protect corporation’s interests and another to protect workforce
and let them sit and discuss these matters in parlament. I think the parlament in the shape as it exists now is absolutely unefficient. What is happening now, polititians are coming and going with bribes through lobbists groups (who are not surprisingly sent by multinational corporations). Another thing is we need to create a unit within RCMP that monitors polititians and their financies (here and abroad). We need to create mechanism how to reward politicians legally if Country is doing well. Yes pay them millions if country is
performing . Right now every government is kicking the can down the road every 4 years without any responsibility. Garth I do understand that you care of
what is going happen to first time buyers, but don’t you care with what is going to happen and why it does with
the whole country? In hard times politician that shows problems and how to solve them will get the most votes.
I hope we will not wait too long cause the more we wait
the more chances that ALL our jobs dissapear and country will be in chaos.
P.S. I hope Donald Trump will be this man in USA. Who
will be in Canada?

#101 Timing is Everything on 01.28.11 at 1:06 pm

Damn…Sorry Sir/Madam Moderator..You can turf #67 and #68…My bad…Sorry.

#102 Mikey the Realtor on 01.28.11 at 1:22 pm

“Here’s how things shake out,” he says. “If we Max out TFSA: ~850/month. If we Max out RESP: ~420/month. If we Max out RRSP: ~2200/month.”

By a quick look, this couple is living for their retirement. Maxing out every savings vehicle the government comes up with is just plain stupid. How about living a little and enjoying some of the money you make today for today. Max doesn’t mean must.

#103 Mackie on 01.28.11 at 1:23 pm

??with?? Well said.

#104 GregW, Oakville on 01.28.11 at 1:29 pm

Hi #7 Soylent…, Your Calendar link no longer works?

#105 Blaire on 01.28.11 at 1:31 pm

Actually Blair said he was not contributing to RRSPs, RESPs or TFSAs. I did not say they were irresponsible or in dire straits, just bad at choices. — Garth

Actually, I never said any such thing. Feel free to repost the entire email if you like.

We do contribute to all of RESP, DBP, TFSA, RESP and Accelerated Mortgage. We also do have ~40,000 in existing RRSPs — a tiny amount, obviously, but contrary to previous assertions, we are not without any financial cushion.

What I said was: we cannot afford to MAX OUT all of those options.

The question was: if we can’t afford to max them out, which ones should take priority? I suspect this is a question that *most* Canadians ask.

Currently we are prioritizing the mortgage. Garth and others have argued this is not as cost effective as prioritizing other investments. I appreciate the advice, and I’ll consider it strongly.

To answer a few other questions:
We are mid-30’s

And, yes, all of you anti-daycare types are absolutely correct. We hate our children, send them to daycare for 19 hours a day, and put them straight to bed when we get home so that we don’t have to spend even one miserable minute with them.

Actually, my wife only works 4 days a week so she can spend that full day with them, and I pick them up every day at 2:00 — meaning they are spending a whopping 5 hours/day in a caring, stimulating, literacy rich environment. And for 2 of those hours they are asleep.

But please, by all means, feel free to judge my parenting style without every having met me or seen me or my kids. It reflects well on the style of your own parents.

Let me remind you, dude, that this is a blog and you are anonymous. Don’t get so defensive that you cannot see the value of this immense focus group. — Garth

#106 eaglebay on 01.28.11 at 1:32 pm

# 21 DavidL – Blair and Cindy

The odds are that one of these two couples will be divorced sooner or later.
Now what was it about the house?

#107 DavidL on 01.28.11 at 1:32 pm

AGIC on 01.28.11 at 3:32 am
No DavidL, this is not the best way, because you are loosing $500 in grants from government for each child every year you don’t contribute max. Big disservice to your children. Please reconsider.

Thanks for your concern … We have been enjoying the $500 grant (on the first $2500 we contribute per child, per year)! As I mentioned in my original posting, money has been paid into investments (RESP’s, TTFSA’s and RRSP’s). Money have also been contribute to paying down the mortgage early. We haven’t paid off the house at the expense of investing.

We have a modest lifestyle, live according to our budget and don’t bother trying to “keep up with the Jones’s” – because we can’t afford it!

#108 super dave on 01.28.11 at 1:44 pm

Correct me if I am wrong, but paying off a loan at 3%, when you can put the money into a RESP, and get an instant interest payment from the bank of 20% is dumb, and yes many people borrow to invest and write off the interest they pay, invest in preffered, and dividend producing stocks, and the dividends more than pay the interest payments… easy money no brainer.

But what is the cut off? Ok interest rates are at ultra low right now, but what if and when they go viral, 6% 7% 8% ? who knows. At some point in time, paying off a high interest loan is a good idea, why, because it compounds. If you were a great ninny and took out a 0/40, in the last 5 years, chances are you will be paying much higher interest in the next couple of years, these rates will not last.

Yes you should sell your house now, get the hell out, rent for 2-3 years then buy back in. (I am a renter toot toot there goes my horn)

Compared to the rate of return on prefeered and etfs, at what interest rate is it better to pay off the loan?

my vote is 6% and up… (credit cards… don’t even go there…)

#109 BigAl (Original) on 01.28.11 at 1:53 pm

I keep saying this…but…again, households in their 20’s / early 30s making 130K/yr.
The business world today is breeding the entitlement culture in their blind zeal for the young workforce.

We seem to be bombarded with Youth Employment Programs / Initiatives / Grants / Training. Young people have absolutely no problem getting jobs, and much much better paid ones than older wokers with comparable skills and experience.

One niece of mine – 24 yrs old, 1.5 years work experience in a non-hr role….just got a job 75K/yr for a major company in HR designing training programs. Reasons? Her age, and a degree in sociology, with couple of HR courses – employer willing to pay for her to finish the balance of courses towards HR certification (only has finished 10-20 percent of the certification). Is the youth aspect so important to employers now that they don’t even have to have their certifications?

#110 mattbg on 01.28.11 at 2:41 pm

People suggesting that the RESP should be dropped are wrong.

If you can be sure of anything, it’s that, if the education system as we know it is still going in 15 years, the price of education will be going up — possibly significantly, as the price comes closer to the cost of delivery. Education subsidization was one of the first significant casualties when the UK recnently started to deal with their budget problems.

With so many people now investing in RESPs in Canada, the future price of education can very much afford to go up — the money and therefore market demand will be there to allow it to go up. The people that will suffer most are those that will have to take loans for the whole amount.

#111 SAD on 01.28.11 at 2:45 pm

#11 Northern_dirt on 01.28.11 at 12:28 am
Most families have two working parents nowadays. Don’t be so quick to point fingers and put words in this couples mouths. They didn’t say they don’t want to raise their kids, they said they don’t want to give up one of their careers.
Thanks for pointing out the priority thing.
Money (House)
Career (ME)
Than Kids (WE)
You hit the nail on the head. Now I understand increasing divorce rates and present housing formations.
Thanks.

#112 GB on 01.28.11 at 2:49 pm

Blair,

You inform #6 Soylent green….to pi$$ off. I don’t think the method by which “soylent” set out to get the message accross was very nice( calling you disgusting)….but I do think the concept is spot on. Dead on.

Here you are making double what the average family does and all you seem concerned about his your future financial health. Well brother…life is indeed about balance and those kids of yours deserve more time at home than they get with a “sitter” who, regardless of how “smiley” they are….could give a rats arse about you kids. Seriously….they DON’T care.

I know Garth disagrees with my ascertion on this one…but he has no kids so…no concept or reference point in my opinion.

However….your investment NOW in your kids should really be your main focus. Period. End of story.

It does seem to me that nowadays….people have lost sight of what really matters…and it ain’t how much money you can hunt and gather.

Smarten up. And I mean that with all sincerity in the hopes that you look into your kids eyes tonight and ask yourself some serious questions. You make more than enough money and have kids that need you…NOW.

I’ll end by asking a question: what kind of car do you drive? Your answer will tell me everything I need to know about where your priorities lie.

This comment is shallow on so many deep levels it stands as a classic. Thank you. — Garth

#113 prairie gal on 01.28.11 at 2:51 pm

Re: #6 Soylent Green’s disgust at another family’s choices. As an outsider to the whole parenting hysteria, I think I am at least objective, although YES I lack parenting experience. Nevertheless, I am entitled to my opinion and here it is:

YOU ARE ALL NUTS! I’d like a university to do a study on the change that happens to people’s brains once they reproduce because from my perspective, they lose all rational thought capability and start operating on some primitive fight or flight level that makes them completely impossible to reason with or have an adult conversation.

Witness the rise of ‘lactivists’ – women who band together to go to a public place to make a spectacle of nursing their baby as if it were a political statement. Usually its in response to some oversensitive mom who whipped out her boob in the middle of some retail therapy to feed the little one, and had someone politely mention to her that its probably not the most appropriate place. So she gets on one of those mommy boards and gets her supporters together to make an even bigger show of the ‘nature of things’ and files a human rights complaint.

I’m afraid to have kids because I like being self-aware, rational and considerate of others. Parents today do not exhibit these qualities.

#114 Azza4 on 01.28.11 at 2:53 pm

#4
//We tell him regularly that if he wants something he needs to earn it by working for it. (We’re preparing for the teenage years)//

This is wrong attitude. You would benefit from reading “Rich dad, poor dad’. The more I look the more I reassured that you cannot work for money and get ahead. Look! You gave great example of money for effort (not work) in your own post.

#115 vreaa on 01.28.11 at 3:05 pm

Extra! Extra! Read All About It! –
Pablum From ‘The Vancouver Sun’ Lulls Locals

http://wp.me/pcq1o-1MW

#116 Signal Loss on 01.28.11 at 3:05 pm

One-page snapshot of graphs showing how the recession changed American society:

http://assets.theatlantic.com/static/coma/images/issues/201101/numbers.jpg

#117 City Slicker on 01.28.11 at 3:09 pm

#107 BigAl (Original) on 01.28.11 at 1:53 pmI keep saying this…but…again, households in their 20′s / early 30s making 130K/yr.
The business world today is breeding the entitlement culture in their blind zeal for the young workforce.

We seem to be bombarded with Youth Employment Programs / Initiatives / Grants / Training. Young people have absolutely no problem getting jobs, and much much better paid ones than older wokers with comparable skills and experience.

One niece of mine – 24 yrs old, 1.5 years work experience in a non-hr role….just got a job 75K/yr for a major company in HR designing training programs. Reasons? Her age, and a degree in sociology, with couple of HR courses – employer willing to pay for her to finish the balance of courses towards HR certification (only has finished 10-20 percent of the certification). Is the youth aspect so important to employers now that they don’t even have to have their certifications?
———————————————————-
I think its just more BS. I think at times there are exception which are rare and far in between, but majority with those qualifications make in the $40,000 range. When I worked in HR for a Communications company, large one 9000 employees, HR/payroll/benefits people were in the $40-50K range. If you were making 75K you were in the supervisor bracket which means 5-7 years work experience easy. Degrees are nice but don’t hold weight vs. a persons people skills and work experience. I know a guy who just finished a degree in IT and claims to have landed a job paying 70-80K as a fresh grad. Whereas I knew a guy who moved up to senior level in IT and made 57K – and thats a fact I looked up, and he’s not an old geezer, only in his 30’s. I think people lie about how much they make left, right and center, then make it look beleivable by mortgaging themselves to the hilt and buying BMW’s on credit….then the domino effect goes on the on….until the day of reckoning comes.

#118 Azza4 on 01.28.11 at 3:11 pm

# 21
//Is it the best way to make the most money? Probably not. Is it the best way to ensure that within a few years, I’ll have a lot more money for RESP’s, retirement and to finally do some big upgrades to the house? Yes.//

TFSAs, RESPs and RRSPs need time to grow and multiply. By postponing contributions you are giving up most of the tax free growth those vehicles can give you through power of compounding interest/capital gains (like in 40% against 700%).

#119 debtified on 01.28.11 at 3:14 pm

Problem: Not Enough Cash Flow (Among others)
Diagnosis: Too Much Entitlement Syndrome.
Solution #1: Pay Less On Debt
Solution #2: Invest Using HELOC

I wonder if selling the house and renting another one for less than what they pay now makes more sense. Okay, if ownership is a must, sell and buy a cheaper house. Address the too much entitlement issue and solve the cash flow problem at the same time. This also addresses the underlying problem of having too high a portion of their assets in real estate. Just make sure that at the end of it all, the debt is lesser than what they started with. Live within your means (by that I mean actually doing some “living”).

I can’t believe so many comments here encourages borrowing to invest – worse, borrowing the money from home equity. Yes, it’s smart to earn ~6% capital gains with the money borrowed for ~2% interest. It’s easy to say that you can always pay for the borrowed money when it costs more money to borrow than the ROI. Please don’t forget that only recently a lot of people lost significant portions of their investments while, at the same time, they struggled to pay off their debts. Worst hit were those who borrowed money off their home equity.

In the case of Blair, why should he borrow to invest when he’s already having a cash flow problem to begin with? A lot of people here who advocate borrowing to invest also criticized over-leveraging in their previous comments.

I just can’t see taking on more debt to address issues caused by too much debt is the right solution.

#120 prairie gal on 01.28.11 at 3:15 pm

addendum to my previous post: … *some* parents are not self-aware, rational or considerate of others. The rest are fine. Still, the odds appear to be against a move away from the ‘mommy wars’ and for a retrenchment of moral/righteous indignation, human rights complaints, and the treatment of lactation as a disability. What a world we live in!

#121 John on 01.28.11 at 3:19 pm

Substantial decline in future US home prices predicted. Don’t you think this would have a ripple effect in Canada?

http://www.zerohedge.com/article/substantial-future-home-price-declines-predicted-goldman-sachs-and-peak-theories

#122 Blaire on 01.28.11 at 3:26 pm

Hey Garth — could you please approve my previous message (still awaiting moderation) that rebuts the “anti-day care crowd”.

It is getting tiring.

2007 Mazda5. Paid off.

#123 (low density) Sam on 01.28.11 at 3:41 pm

#38 Memories on 01.28.11 at 3:20 am
____________
Interesting.

Someone writes one day they feel like a total loser for not being deeply in RE

Someone writes the next day in exactly the same English style he’s a master of the universe for being in RE.

#124 Antonio on 01.28.11 at 3:51 pm

Here you go Garth. Some fodder for your discourse tonight.

http://www.marilynpalmer.com/Toronto-real-estate-Market-Outlook.html

#125 jess on 01.28.11 at 3:58 pm

“The Commission concluded that this crisis was avoidable. It found widespread failures in financial regulation; dramatic breakdowns in corporate governance; excessive borrowing and risk-taking by households and Wall Street; policy makers who were ill prepared for the crisis; and systemic breaches in accountability and ethics at all levels.

Changes in the regulatory system occurred in many instances as financial markets evolved. But as the report will show, the financial industry itself played a key role in weakening regulatory constraints on institutions, markets, and products. It did not surprise the Commission that an industry of such wealth and power would exert pressure on policy makers and regulators. From1999 to2008, the financial sector expended 2.7 billion in reported federal lobbying expenses; individuals and political action committees in the sector made more than 1billion in campaign contributions. What troubled us was the extent to which the nation was deprived of the necessary strength and independence of the oversight necessary to safeguard financial stability.

page 18/32

===============================
NO OVERSIGHT …but yet I was led to believe there was …those commericals were so colourfully convincing and so non dirty.

From the Globe and Mail:
“Mr. Baird was responding to a report from the federally appointed Oil Sands Advisory Panel, which noted “significant shortcomings” in the federal-provincial system. “Until this situation is fixed, there will continue to be uncertainty and public distrust in the environmental performance of oil sands industry and government oversight,” the panel warned”

Science Evidence

For years, both Alberta and the federal government have played down all such concerns, saying the industry is committed to developing in a sustainable manner. But the oil sands report released Tuesday concluded that there is little scientific evidence to back up those assurances.

http://fairwhistleblower.ca/content/oil-sands-down-stream-pollution-50-times-higher-normal

#126 Maxamillion on 01.28.11 at 3:58 pm

#107 BigAl

As someone who is presently looking for work and having gone on many interviews I can tell you first hand that these individuals in HR have to be some of the biggest idiots I have come across. Sorry, but the majority are little naive girls who truly don’t understand a thing about the job. It all make sense now when someone unqualified to do a job is placed in the position to evaluate others abilities. The HR dept needs to be called the Head in the Rectum Dept. When will business leaders wake up?

#127 (low density) Sam on 01.28.11 at 4:03 pm

#59 bob on 01.28.11 at 10:46 am

I’d hate to see what you guys say about people who dare to have a car loan.
_________________________
read it again: 2500 a month in transportation. They’re leasing 2 ferraris, from the looks of it

#128 Dan in Victoria on 01.28.11 at 4:05 pm

Hey Blair, I wouldn’t get too worried about the comments.
After all you did ask.
I think Garth has given you a straight up no BS answer.
You’ve got a poke with a sharp stick.
You have some good advice and some rather bad advice given here.
Now make some choices.
Emotion in one hand, hard cold facts in the other.
Good luck.

#129 Mountain Girl on 01.28.11 at 4:16 pm

I found the case study today interesting and some of the replies helpful and good food for thought.
The totally uncalled for judgements on Blair and Cindy’s family life? Not so much. It is up to each individual family to find their work/home balance. Blair and Cindy, if you like your jobs, as well as being parents, good for you. Kids thrive on the socialization of daycare just as much as they do having one parent at home full-time. They also benefit from seeing both their parents leading balanced, happy lives. I have done both the stay-at-home and the working parent scenario and don’t regret either choice. Nor would I EVER judge someone else’s decision on this. It’s absolutely none of my business. It also has nothing to do with the case study presented.
Soylent and others who feel they have the right to make this decision for the rest of us – you do what makes your family happy and don’t assume that your solution is right for everyone else.

As for the case study:
Blair and Cindy, I don’t have your problem with the mortgage, but I can comment on what I would do if needing to choose between the RRSP, TFSA, and RESP.
I do RESP, TFSA, and RRSP in that order.
RESPs are maxed every year. This is not because I expect to hand my kids some easy ride through university. Tuition increases are very steep and projected to be at over $130k for an undergrad degree (just tuition and books) by the time my two year-old turns 18. Not only do I get a good matching grant on this investment, I also feel that if we don’t do this for our kids, they won’t even have the choice about post-secondary education. It doesn’t have to be a university degree, either. Trade schools are going up in cost just as steeply. So RESPs are my first saving priority. They are also relatively small in size and easily attainable (I can comfortably do $5k/year).
TFSAs are making more and more sense to me as I try to figure out retirement. They just seem to have the most flexibility and no hidden tax bombs.
RRSPs – I think lots has been said about them in the last few posts and I don’t have anything particularly pithy to add! :)

#130 Mart on 01.28.11 at 4:20 pm

For those who like funny videos, BNN started a series on real estate with Don Campbell, president of the Real Estate Investment Network:

http://watch.bnn.ca/squeezeplay/january-2011/squeezeplay-january-27-2011/#clip408499

They discuss “value” investing in real estate, because owning a hundred houses with cash flow is so much safer and more profitable than diversifying in the stock market.

For the best part, skip to 8:20:
“I know for a fact that this region will go up 3-5%”

#131 Mickey on 01.28.11 at 4:24 pm

How long realistically until this Achilles house owners cost to renew his home will rise? If every tom could leverage their home equity to play the market than we would all be rich. Advising people to not pay their mortgage faster and borrow against their home to gamble in high risk the markets is dubious dubious advice at best. Yes Garth there will be a correction someday in real estate which will look like a blip 5 to 10 years thereafter. Yes it does rain in the Mojave if you wait long enough but don’t leave your water bottle at home if you see clouds. As per your own advice why play now with RRSP’s and pay later with claw backs and higher taxes? RRSP’s are truly the tool of greaterfools. Real Estate still and always will be a relatively safe investment in the long run. For those with a strong latch to financial advice remember that analyst are wrong 2 out 3 times and ultimately newborns will have to eat solid food of their own making some day. The largest single contributing factor in the USA to the housing collapse is loss of jobs. Not much chance of that happening in Canada thanks to the endless expanse in size of the municipal, provincial and federal workers 100K salaries and pensions the size of lottery yields. Final thought for the chicken little crowd is how long did it take for the tsx to recover after the last collapse? (2 years). 90% of the people who read this blog are waiting for Garth to tell them when to buy and when the Real Estate market will bottom out. Sadly Garth doesn’t have a crystal ball and by the time he sees the bottom it will already be racing for the top again. The only sure thing is a hooker. Investing has never been for the faint of heart and those who try to time it are usually wiped out.

#132 doctore on 01.28.11 at 4:30 pm

They make $130 k a yr and took a 40yr mortgage? And the mortgage is $250k, alot lower than many other mortgages, and these people are running into trouble already. How many other out there is there like this or worse?!

#133 realpaul on 01.28.11 at 4:32 pm

It was just a matter of time. The market between Christmas and today has been a kind of ‘while the cats away’ scenario for the pumpers….now the evidence against the farty clouds of BS that have been thrown up is dispelling the many recently engendered myths.

1) Canada made up for all the jobs lost during the recession…..a whopper of a lie…..not even close….and if it wasn’t for civil service hiring the growth in jobs has all been in the part time service sector paying minimum wage jobs. Full time jobs and professional class employment is in the toilet.

2) Housing is stable and prices continue to escalate. Bwahahahahahahahahahaha…there is enough evidence on this blog to dispell that nonsense.

3) The US markets were reacting well to Obama’s speach where he said he was reigning in spending and would be ‘investing’ instead.

http://www.kitco.com/reports/KitcoNewsMarketNuggets20110128.html

4) That gold had topped out and was going to get creamed. Oh Oh…….when the BS spilled over and people started getting the real picture into focus again it only took a two day run of the mill protest in Egypt to put the run to the shorts….who have crapped their pants and covered to the tune of a 50% retracement so far today…..bad news for the bears…..good for us’n who bought the dip.

5) UK has fallen into ‘double dip’ territory and hasn’t the credit to resurface the potholes as it continues with its plan to lay off half the civil service.

6) US foreclosures are building and prices are falling….nothing even close to the hope filled propaganda the bulls have been hoping for.

7) S&P has downgraded Japan debt to -AA with implications that US debt is on the line for a downgrade. Canada has pissed so much money away on shorting the $Cdn to keep it down that they can’t stand up to the S&P stress tests that will follow. F has no where to hide. Higher taxes can’t save the government at the same time as consumers are 150% in debt already…..room to tax is sphincter tight. If the BOC buys any more ‘bonds’ from itself it will trigger another admonishment from the IMF exposing the whole ugly scene regarding Canada’s national debt and debt to gdp ratio.

BTW the ratio the IMF has advanced is 50% higher than the one the government book keepers have admitted to. Who are you going to believe?

Apparently ….the cat came back.

#134 edmonton mortgage broker on 01.28.11 at 4:46 pm

anyone have any suggestions for a vehicle to convert current taxable income (at the highest personal tax rate) to capital gains?

this would be for someone who has huge capital losses they’d like use to offset taxable income. i’m assuming this will probably need to be done within a corporation.

thanks in advance.

#135 FormerVanCityOwner on 01.28.11 at 5:07 pm

Blair and Cindy, good on ya, looks like you’re doing fine. How about these minor changes —
1) Max out your RRSP’s = $26K annually. The tax refund from this will be enough to almost fully fund your TFSA each year
2) Cut back on the mortgage pre-payments for the reason previous posters cited, it’s relatively low risk to earn more in investments than your mortgage interest. This will leave you with good liquidity later, should you want to prepay your mortgage when rates go up or should you need the funds for a rainy day

Just my 2c

#136 bob on 01.28.11 at 5:11 pm

#59 bob on 01.28.11 at 10:46 am
I’d hate to see what you guys say about people who dare to have a car loan.
_________________________
read it again: 2500 a month in transportation. They’re leasing 2 ferraris, from the looks of it

You should actually read it again.

One car (2007 Mazda5 paid off). It was $2500 TOTAL for ALL living expenses (food, transportation, clothing, household supplies, insurance, utilities, entertainment, etc.). That’s doesn’t seem so high to me for a family of four . . . rather low, in fact.

And I’m confused about all the comments about how these folks are “running into trouble” or have “cash flow problems”.

As Garth has pointed out, they are flush with cash, just putting all of it into the house.

They don’t have a cash flow problem at all. A cash distribution problem, perhaps, but not a cash flow problem.

#137 Alister on 01.28.11 at 5:18 pm

Blair and Cindy – It’s not what you make, but what you spend. I know because I’m ready to retire.

My wife was a stay at home mom, and still is at home. It was our choice. I never made big bucks. I paid off the house first, before investing. That way I knew if I lost my job, at least the bank wouldn’t take the house and devastate the family.

Paying the house off took away a lot of anxiety for me. I don’t blame you for making that your priority if it gives you comfort. But keep some liquidity for a rainy day. Can’t lock everything in the house and registered plans – what if you need $ for an emergency? Get balance with the money allocation.

Equities can be a roll-a -coaster, so decide if you have the emotional stability for that, before you try them.

Now that I look back, it was all about controlling the expenses. We took trips, had a new house, did lots of things.

My son is in 4th year of university, and daughter in college. They are both debt free. Warning tho – my sons’ education is going to cost over $100,000. Plan for that.

#138 Devore on 01.28.11 at 5:19 pm

#56 Sampson

There are plenty of articles and sites about Canadian preferred shares, how they work, what the different types are, etc. Here is also a handy dandy reference.

http://www.prefinfo.com/

#139 MikeT on 01.28.11 at 5:21 pm

Why do so many people say “education will be so expensive in 10-15 years if tuition keeps growing like this”? It’s subjected to the same old rule of supply and demand. If it becomes too expensive, there will be fewer people going to university and the prices will be under pressure to go down, to a more affordable level.
I am not against RESPs and saving for kids’ education, I am just puzzled by why people project into the future the trends from the past, so that the future numbers look crazy. Yes, they grow, but no trees grow to the moon.

Universities have fixed costs. Fewer students could just as well raise tuition. — Garth

#140 Pat on 01.28.11 at 5:30 pm

Regarding education costs – top students can get university education for next to nothing. Some even end up in the plus.

So the best education savings plan for your (future) offsprings – start by doing well your natural selection :)

#141 Devore on 01.28.11 at 5:31 pm

#64 dave99

The point is you and your peers got lucky. You invested leveraged heavily into an asset class during its speculative upswing, and then sold before the downswing due to your life considerations, and with no understanding of the natural price cycle of that asset class.

It’s what I’ve always told people who come here and tell us how much money they made on their house and what a great investment it is.

I think this idea that a house is a great (and even best) investment you can make, has come about as a result of a multi-decade bull run (with some dips here and there) ending in a bubble.

But for them, it’s all been just luck. Just as legions of young couples in the US are starting out their lives together and starting families will have the opportunity over the next 2-5 years to buy houses at prices never before seen for two or more generations. (Their older peers, not so lucky though.)

No doubt, when they are old and wrinkly, they too will tell their children about how awesome of an investment buying a house is. There will be another Garth in 30 years, telling everyone who will listen, on whatever passes for blogs then, about how house prices are too high and will come down, and people should get out of the way.

And the cycle will continue.

The lesson about cycles is, you buy when prices and demand are low, and sell when prices and demand are high.

#142 Angela on 01.28.11 at 5:32 pm

#65 Soylent Green – Am watching the Elizabeth Warren video. Thanks for the link.

#143 harsh crowd today on 01.28.11 at 5:48 pm

Hey Blaire and family….chin up, you’re doing great. For whatever reason people seemed to get polarized today around your situation. Hope you’ve got a thick skin :)

It’s terrific that you’ve got good household income and are interested in planning for the future. FWIW I think the folks who are saying “live a little” make some good points…..life is pretty short and you never know what’s coming.

Kids do fine in day care IMO. But everyone’s situation is different.

Good luck to you and yours!

#144 DavidL on 01.28.11 at 5:55 pm

eaglebay on 01.28.11 at 1:32 pm
# 21 DavidL – Blair and Cindy
The odds are that one of these two couples will be divorced sooner or later. Now what was it about the house?

Huh? You comment doesn’t make any sense. The odds are that we will all be dead at some point too.

#145 Coho on 01.28.11 at 5:57 pm

Big Al #108,

We seem to be bombarded with Youth Employment Programs / Initiatives / Grants / Training. Young people have absolutely no problem getting jobs, and much much better paid ones than older wokers with comparable skills and experience.

Age is a big factor in getting employment. Was at a shareholders meeting 10 years ago and an engineer from England said that laid off engineers over 40 years of age had little chance of getting hired again over there.

As I’ve posted a couple times before, too often a noticeable “disability” comes with poverty in this country. Discrimination abounds and government pretends it isn’t happening. If it visits you or your family, you’ll find out that fancy sounding government departments are just fluff…for show…to give the illusion of some kind of safety net to those, who are the vast majority, not needing it. But when it happens, the facade shatters.

In a way, it is a blessing because when one finds himself or herself kicked off the “race track”, all of this talk about becoming millionaires, which is really what it would take to fund a retirement, is like sitting on the sidelines watching a horse race where the finish line moves in the same direction around the track as the horses. They’ve got blinders on running around the track towards a moving target they’ll never really reach.

In my opinion, it would be a good idea if people diversified more than just their material assets. The way things are going, if people don’t have an anchor other than a hefty portfolio to rely on, they will have a hard time coping as we continue the process of transitioning from a have to a have-not society.

#146 Blaire on 01.28.11 at 6:06 pm


Let me remind you, dude, that this is a blog and you are anonymous. Don’t get so defensive that you cannot see the value of this immense focus group. — Garth

Final post from me: thanks again for posting the question to the Pound. It has been . . . instructive.

I absolutely value the focus group and the useful comments on where best to allocate money. I wish there had been more on the actual question of how best to prioritize Mortgage vs TFSA vs RRSP vs RESP. In any case, I’ll look strongly at reducing mortgage payments and increasing investments.

I’m less convinced that comments like, “Gee, sure glad their not my kids. DISGUSTING. SHAME on you people.” have much value.

Such comments reflect on the author. I am sure some day your children will forgive you. — Garth

#147 Moneta on 01.28.11 at 6:08 pm

Universities have fixed costs. Fewer students could just as well raise tuition. — Garth
——–
Assuming a lot of it does not go online.

#148 The InvestorsFriend (Shawn Allen) on 01.28.11 at 6:12 pm

HOT OFF THE PRESS

The latest 90-day mortgage delinquency figures for Canada (and by Province)

No change, they remain very low. Higher than 2007 numbers but still VERY low.

http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf

Amazingly, they show only 17,386 mortaes out of 4.1 million or just 0.42% are 90 days or more past due.

Comparable figures in the U.S. for 90 days late are closer to 4%.

What explains the low 90-day delinquencies in Canada?

Recourse mortgages, we can’t walk away?

Stable house prices. Why walk away if the house is still worth more than the mortgage?

Jobs, few homeowners lost their jobs long enough to prevent paying?

People in trouble are paying the mortgage with a line of credit?

Negotiation – Banks allowed people in trouble to extend the term and get a lower payment and “excused” several late payments to get the loans back in the good books before they hit 90 days?

Maybe a lot of people dodged a bullet here in Canada.

But I smell a rat in these numbers, I jut can’t believe so few people are in trouble.

I predict trouble ahead. Mortgages entered into before the recent doubling and tripling of house prices should be okay. But what of $400k mortgages signed by young people? A job interruption or a big increase in interest rates and these people are toast.

Or maybe they can just keep paying the mortgage with their VISA card. At least until they can’t…

The numbers are suspect, but the danger in Canada is not default. It’s negative equity. That should be clear. — Garth

#149 The InvestorsFriend (Shawn Allen) on 01.28.11 at 6:24 pm

Garth said:

The numbers are suspect, but the danger in Canada is not default. It’s negative equity. That should be clear. — Garth

Okay, but negative equity is trouble mostly for for the INDIVIDUAl. Sad for them.

Defaults, if they happen are trouble for EVERYONE. Foreclosed houses drive down house values, CMHC is on the hook. The bank has troubles and expenses and tightens up credit. Sad for all of us.

So I am watching the delinquencies out of fear we will see defaults.

Why do you think the numbers are suspect. (Not disagreeing, but what is your theory there?)

#150 Markey on 01.28.11 at 6:27 pm

Have you seen the latest from Reguly in Report on Business? Thank goodness “things are different here”. http://www.theglobeandmail.com/report-on-business/rob-magazine/the-irish-arent-rioting-over-austerityyet/article1879098/

#151 bill on 01.28.11 at 6:42 pm

”It occurred to me today that part of the problem is that the young folk under 30ish can’t do basic math. ”

I would disagree slightly.
we all have our strong points and weak points.
one can be a very good musician but math illiterate.
personally I can take a 350 chevy motor apart in my mind ,modify it for more horsepower and reassemble it.
certainly this is what I did during math class as there wasn’t a hope in hell that I would understand calculus and trigonometry . ever.
however predicting collisions in three dimensions [calculus I think, hey I was taking apart motors eh] is instinctive to me in the sense that in motocross and other forms of motorsport I had relatively few collisions as did the rest of the guys. we were there because we were good at it. math majors were few and far between.
something else i am not so bad at is predicting likely outcomes of a series of events.
many of the blog dogs share this ability. we can see it coming.
others literally cannot. it aint their fault.
Garth ,being a charitable soul is doing his best to help .
not all will understand.
my math skill are still abysmal so I rely on my other skills to get by.

#152 GB on 01.28.11 at 6:52 pm

This comment is shallow on so many deep levels it stands as a classic. Thank you. — Garth

Intersting comment Garth and one I just don’t understand. The fact remains that today…we have a generation of kids growing up without proper parenting. You simply cannot rely on someon else to raise your children.

I get it if you have no choice financially. But Blair’s family makes gobs of cash in comparison to the national average.

You make a grown up choice to have kids and raise them hopefully with proper values.

Regardless of what you think Garth( and I highly respect you and your insights on where the future is heading)…my comments are likley “deeper” than perhaps you seem able to grasp.

And it seems Blair just doesn’t get it. That’s the real shame here.

#153 Mark on 01.28.11 at 7:18 pm

Better yet…sell your home and move into one of these container boxes:

http://www.planbeconomics.com/2010/12/28/real-estate-bubble-in-china-container-homes-in-chengdu-18-sqm-only-6-rmb-rent-per-day/

#154 Two-thirds on 01.28.11 at 7:23 pm

#147

Shawn:

One can look at things this way (all data from the link you provided):

Using Alberta as an example, one can see that at peak RE prices (2007), arrears had a minimum value of 0.14% (659 of 458k mortgages).

Fast forward to November, 2010, the arrears are 0.81% (4k out of 504k mortgages).

So in roughly 3 years, % arrears have increased by a factor of 5.8, while total # of mortgages in arrears have risen by a factor of 6.2, almost without pause.

I would be very curious to know what RE inventory for sale was in Alberta in November, 2010. If 4,099 mortgages were in arrears, I wonder how that compared to units for sale.

In an case, a six-fold increase in mortgage arrears is truly alarming. Not to mention that the previous arrears peak was 0.69% (Feb, 1997) vs. 0.81% on Nov, 2010.

Tough times have arrived.

#155 GB on 01.28.11 at 7:26 pm

well…I just read Blairs response( above mine)…and it certainly does seem as thouigh Blair and his wife are spending great amounts of time with their kids.

So…Blair does does seem to get it. And that’s a good thing.

I just happen to live in an area where I see two income families driving two 35+ grand SUV’s….complaining about how hard they have it.

Kids in daycare 7:30-5:00 M-F.

#156 Dan in Victoria on 01.28.11 at 7:29 pm

Bill @ 150 Great another gear head. LOL
Of course you are right about that all those parts spinning around…..383 vs 377 vs 421 small blocks.
Longer rods, bigger bores, offset piston pins offset ground cranks…….
Angle milled heads, asymmetrical camshafts, siamese cylinders… reverse coolng.
All a great distraction at school.
All common sense stuff that some find so easy to understand, yet many people have no hope of ever figuring it out.
A good comparison that you made here thanks, it really brought a smile to me this afternoon.

#157 kitchener1 on 01.28.11 at 8:13 pm

Just wanted to post something regarding Uni educations.

Up until now, educatators and profs have been successfull at still keeping the internet out of the classroom.

BUT, i think they are being reationary and will have to at some point, take advantage and leverage the internet.

How long before an accredited university starts allowing entire 3-4 year online courses? I dont mean university of phoneix, i mean U of T or York or U of BC etc..

IF that were to happen it should bring down the cost of an education as there would be many more students, think 10 times the amount and the cost would be minimal to the university. Who knows what will happen in 10-15 years.

#158 kitchener1 on 01.28.11 at 8:30 pm

#147 Investors friend

You posted

http://www.cba.ca/contents/files/statistics/stat_mortgage_db050_en.pdf

these numbers are indeed very suspect.

Here is why.

In Ontario

As of 2010-1 there are 588 557 mortgages in Ontario
As of 2010-12 there are 596 874 mortgages in Ontario

So for the entire year of 2010, there have only been
8 317 mortgages added? And thats for all Ontario?

But in the GTA there were 86 170 home sales for 2010 and thats just the GTA.

http://toreal.blogs.com/

So 9 out of 10 buyers are buying in cash?? Never mind the rest of Ontario.

Something is not adding up here.

Yes i understand that mortgages are discharged etc… but still, that ratio is way out of whack.

#159 Outlier on 01.28.11 at 8:38 pm

Universities have fixed costs. Fewer students could just as well raise tuition. — Garth
——–
Assuming a lot of it does not go online.
——–

Doesn’t have anything to do with going online, this might have an impact of course. Simple lack of students. In our city of about 85 000, we have less than half the number of students entering kindergarten as we do graduating. Similar in other parts of Vancouver Island as well. Schools have been closed or should be closed to receive funding that is being cut due to empty classrooms. Our local University has empty seats in programmes that once had wait lists or higher standards for seats. Universities have to pay their bills somehow, can’t just be put onto the backs of International Students.

#160 Behavioral Finance on 01.28.11 at 8:49 pm

Mackie,

Do you even know/understand why the correction in 2008/2009 timeframe happened?

Please share with us what will be the reason for the second correction that you predict will happen?

#161 ballingsford on 01.28.11 at 8:52 pm

Devil’s Advocate on 01.28.11 at 1:01 pm
“There are no bad kids, just bad parents”
*************************

That is just wrong. When I was a young fella, there was a Crown Prosecutor who a friend of the family and he had the same thought until he had kids of his own. In fact, he was going to propose that the courts make the parents more responsible and pay for their kids actions.

He and his wife were perfect parents, but it turned out one of the kids became too much to handle. He was a little hellion as a child, and into his teen years. No amount of parenting or counselling could help this child. I don’t know whatever became of him.

Anyway, guess where his proposals to the courts on making the parents responsible for their kids actions went?

No where! You never heard a peep from him on that topic again! True Story!

#162 West Coast on 01.28.11 at 8:53 pm

Rates are going up… Evidence:

I just got a letter from my bank saying they want me to invest in a 2-year term deposit at 2.30%. Banks don’t loose money on the like of me.

Realtors – furthermore Dracula – looking smarmy realtors are admitting rates WILL go up in “6 to 12 months”.

http://www.youtube.com/watch?feature=player_embedded&v=zVe2psOU0qw

#163 West Coast on 01.28.11 at 8:55 pm

Just curious:

How many others just got the term deposit letter from the bank and what rate were you given?

#164 Behavioral Finance on 01.28.11 at 8:57 pm

??wth??

If there is a complete financial collapse owning your home will not do much good either as the entire global economy would come to a screeching halt. That means if you are part of the grid you are dependent on the functioning economy. Bottom line governments will do everything to avoid such scenario.

That is when Garth’s bunker comes into play.

#165 NotAGreaterFool on 01.28.11 at 8:59 pm

TERANET: Third consecutive monthly price decline in November

Canadian home prices in November were down 0.2% from the previous month, according to the Teranet-National Bank National Composite House Price Index™. This retreat followed monthly declines of 0.4% in October and 1.1% in September after a run of 16 consecutive increases. November prices were down from the previous month in four of the six metropolitan markets surveyed. Declines of 0.9% in Ottawa and 0.5% in Toronto were each the third in a row. The Calgary decline of 0.7% was the fourth in a row. Halifax prices were down 0.8%. Montreal prices were again flat from the month before. Prices in Vancouver were up 0.6%. After three consecutive months of decline in the composite index, Canadian home prices are still 4.8% above the pre-recession peak of August 2008.

Blog Regulars, of course, already know this.

#166 Moneta on 01.28.11 at 9:05 pm

“Intersting comment Garth and one I just don’t understand. The fact remains that today…we have a generation of kids growing up without proper parenting. You simply cannot rely on someon else to raise your children.”

Says who? Children used to be brought up by a village. Throughout history wet nurses have been used… the women who produced milk by the gallon fed the babies, the other women worked the fields or were productive in other ways. In the 1800s, they worked in factories. Do I need to go through every century?

“You make a grown up choice to have kids and raise them hopefully with proper values.”

What are proper values? I’m sure Canadians, French, Brits, Egyptians, Greeks or the Natice in Papua don’t all share the same values.

#167 Daisy Mae on 01.28.11 at 9:09 pm

Blair, you care so much and you’re trying so hard…but you just can’t do it all. Give yourself a break!

#168 AGIC on 01.28.11 at 9:09 pm

#58 MikeT
Misterious…? Mike, did you gain weight?

#169 Derek on 01.28.11 at 9:13 pm

People need to chill out about daycare. There are more important factors in the raising of kids than whether mother stays at home or goes out to work. To name just two, consistent parenting and a happy home atmosphere. If one parent is soft discipline and the other hard or if the two parents are at each other’s throats all the time, or if the household is run chaotically, it’s pretty small beer whether a child goes to daycare or not.

Even the kid’s own personality comes into it, believe it or not. More than once I’ve seen cases where one kid has grown up to be lovely and the other awful, despite the fact that both grew up in the same mother-at-home environment.

So predictions based on whether the kid’s mother works full time or not are about as likely to be right as lottery number predictions. There are just too many other big factors that aren’t being taken into account. And sensible folk won’t rush to judgement when they don’t know anything about those other factors.

#170 Moneta on 01.28.11 at 9:25 pm

Here are some of the Universities/Colleges offering online courses/degrees:

http://www.mcgill.ca/firstyear/mcgillessentials/onlinecourses/

http://www.cu-portland.edu/online/

http://www.athabascau.ca/

http://www.collegia.qc.ca/fr/index.html

The irony is that during the credit bubble of the last 10-15 years many universities have spent millions in infrastructure! I wonder if those bonds/loans will have to be written down.

#171 Behavioral Finance on 01.28.11 at 9:26 pm

Antonio,

TREB Market Outlook 2011/12: Jason Mercer – I love how they claim that the raises in the real estate prices are justified base on treb affordability assumptions.

I guess he forgot to mention the ability of borrowers to load up on excessive debt and relaxed lending standards over the last decade.

#172 HouseBuster on 01.28.11 at 9:37 pm

Devore – give up the charade…everyone knows you’re devil’s advocate

#173 HouseBuster on 01.28.11 at 9:41 pm

111 GB – Just because they both work means they are bad parents. In fact studies show that kids are not any further ahead with one parent at home.

And another thing…how the F. do you know that Garth has no concept of this?

#174 Soylent Green is People on 01.28.11 at 10:03 pm

TO #103 GregW, Oakville on 01.28.11 at 1:29 pm
Hi #7 Soylent…, Your Calendar link no longer works?

I punched in my linkie and the CRUSH Harper calendar came up for me.

You can always try this link:

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B3WCCQUs7ZrwYTAxMjRkOTQtMTNlNS00MmE5LWI5OTktMTA0NjJlNjcwNDY5&hl=en

.
.
p.s. I agree my initial comment re their lack of parental instinct was too rude. I will be more polite in future when I attack people throwing the kids over in favour of stranger care so they can buy shiny cars and big houses and pretend they’ve “made it.”

In other news:

The operator of a Mississauga daycare has been charged with second degree murder after the death of an infant, police said Friday afternoon.

April Luckese, 35, was arrested and charged late Friday afternoon after a 14-month-old girl died in hospital Friday. The infant was identified in court documents as Duy-An Nguyen. Police were first called to a home on Asta Drive in Mississauga on Wednesday.

http://www.thestar.com/news/crime/article/917887–daycare-operator-charged-with-second-degree-murder
.
.
.

#175 AGIC on 01.28.11 at 10:06 pm

#109 mattbg on 01.28.11 at 2:41 pm
“…With so many people now investing in RESPs in Canada, the future price of education can very much afford to go up… The people that will suffer most are those that will have to take loans for the whole amount.”
****************************
Matt, I totally agree, and that was exactly my thought, that RESP already contributes to increase, even doubling of tuition fees in the last few years. We experienced it first hand with two children in university.
But we are glad, we started putting money aside, as soon as RESP was introduced.

#176 Soylent Green is People on 01.28.11 at 10:08 pm

He picks them up every day at 2:00 pm? In a pig’s eye.

I wouldn’t send my child to daycare for 30 minuts a day, let alone three hours. Also, you can afford to have one of you stay home. They will be grown up before you know it. I like what some of the other posters said here, enjoy your life today.

When will you be starting? — Garth

#177 Pat on 01.28.11 at 10:10 pm

@ Moneta:

For some introductory subjects online classes may work, but for anything more advanced you need 1-on-1 interactions with the instructor. And that’s what takes a lot of the professors’ time. There are also labs… The time spent for actual lecturing is usually negligible – a few hours a week.

#178 MikeT on 01.28.11 at 10:36 pm

@167 AGIC:
No, as a matter of fact, I am at the same hole on my belt that I was at when my first kid was born…
We just buy more food and it all gets eaten during the week. For the last 2 evenings, my wife and I had baguette, sheep feta cheese, scallions and tomatoes, with a glass of wine. Very little, very simple and very tasty. So we gotta blame the kids :)
I shall admit though: we buy much more veggies and fruits: my kids eat bell peppers, tomatoes, celery and even fresh parsley and dill. And fruits, of course. So that’s probably why there’s more food consumed.

#179 realpaul on 01.28.11 at 10:37 pm

Some Americans are begging for more inflation…Bwahahahahahahahahaahaa

http://money.msn.com/investing/10-reasons-to-love-rising-prices-jubak.aspx

as if the economy wasn’t already a freaking circus.

#180 mid-Ontario on 01.28.11 at 10:55 pm

I think that the current events in Tunisia and Egypt will affect RE in Canada quite significantly in the future.

The use of social network will eventually guide the protesters in the US and Canada against the deliberate efforts by the banksters and politicians to plunge future generations into debt that can never be paid back.

History is being made this weekend. Where it ends, no-one knows but my gut says that it will be very bad for energy costs and everything that goes with higher costs.

Egypt just might start the RE plunge on fast track.
Small world eh?

#181 MikeT on 01.28.11 at 10:59 pm

@168 Derek:
Totally agree with you. I will add here: from our own observations (we have 2 kids): my wife changed her behaviour during her 2 pregnancies: with the first kid, she wasn’t patient and if something wasn’t working out the way she wanted to, she was getting very irritated very quickly. Once, she couldn’t open a jar and she threw it on the floor – that’s how irritated she got. Note: she was never like this before her pregnancy. And guess what: the kid is just the same way – short temper, easily gets irritated, etc.
Next, the second pregnancy: my wife was so much into sudoku – she was so patient (much more patient than she usually is) and would keep trying till the puzzle was resolved. Fast forward 1.5 years: the second kid’s favourite pastime is hiding somewhere with a (kids’) book, flipping through pages and looking very thoroughgly at each page.
From our own experience, we can say that the kids’ characters are not something that parents can mould. Parents can influence it somehow, but the characters are already pre-formed when the kids are not even born yet. Thus these stories about parents who used the same parenting techniques for 2 kids, and one of them turned out to be ok and the other – not so much.
Allright, this is not a parenting web site, so I will stop writing about it now.

#182 Bottoms_Up on 01.28.11 at 11:01 pm

#107 super dave on 01.28.11 at 1:44 pm
——————————————–
If you are advocating selling now just to buy back in 2-3 years, I think your advice is wonky.

If one is selling now because they think this is the peak, and we’re in for a slow melt as Garth is suggesting, try buying back in 10 years as more realistic.

#183 Moneta on 01.28.11 at 11:02 pm

Pat on 01.28.11 at 10:10 pm
@ Moneta:

For some introductory subjects online classes may work, but for anything more advanced you need 1-on-1 interactions with the instructor. And that’s what takes a lot of the professors’ time. There are also labs… The time spent for actual lecturing is usually negligible – a few hours a week.
——-
I agree that there will always be the need for one-on-one but there are a lot of courses that can be done online.

All math can be done on-line. You can do all your finance stuff on-line. Even health care programs can be done on-line. Since many procedures are done with computers, you can visualize one being done halfway across the world instead of waiting for a case in your home town. On top of it, you can rewind and zoom in as much as you want, impossible when in class.

It’s amazing how cheap education could be.

Last week, I wanted to know if CMHC was guaranteeing loans from subprime lenders so I went to Home Capital’s website and did a search for CMHC in their annual report.

Ten years ago, what took me 2 minutes would have probably taken a week…. getting the annual report without being a shareholder and then looking page by page for CMHC.

You can learn more surfing the net than wasting your time taking the bus going to University. Somebody is going to take advantage of this fact.

#184 jess on 01.28.11 at 11:02 pm

City Slicker
regarding your overstated income post

Tuesday, January 11, 2011
Fannie and Freddie’s Managers bought Nonprime Paper for the same Reason Merrill Did

By William Black

….”In 2006, the Mortgage Asset Research Institute (MARI) explained in its Eighth Annual report to industry about mortgage fraud:

“Stated income and reduced documentation loans speed up the approval process, but they are open invitations to fraudsters. It appears that many members of the industry have little historical appreciation for the havoc created by low-doc/no-doc products that were the rage in the early 1990s. Those loans produced hundreds of millions of dollars in losses for their users.”

“One of MARI’s customers recently reviewed a sample of 100 stated income loans upon which they had IRS Forms 4506. When the stated incomes were compared to the IRS figures, the resulting differences were dramatic. Ninety percent of the stated incomes were exaggerated by 5% or more. More disturbingly, almost 60% of the stated amounts were exaggerated by more than 50%. These results suggest that the stated income loan deserves the nickname used by many in the industry, the “liar’s loan.””…

http://neweconomicperspectives.blogspot.com/2011/01/wallison-leader-of-financial-wrecking.html

#185 Bottoms_Up on 01.28.11 at 11:05 pm

#174 AGIC on 01.28.11 at 10:06 pm
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University has always, or for a long time, been for the the world of the rich and the indebted. I don’t see how RESPs will change that much.

#186 Moneta on 01.28.11 at 11:10 pm

Coho on 01.28.11 at 5:57 pm
——-
Thumbs up.

#187 Bottoms_Up on 01.28.11 at 11:11 pm

#173 Soylent Green is People on 01.28.11 at 10:03 pm
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You’re crazy! (does anyone else think so?)

Many months ago I use to read your posts. They’ve just gotten worse and worse.

Every single family is in a different (financial) situation, with different goals, different choices, different desires.

Just because two people choose to have kids doesn’t mean they have to put their own lives on hold. Yes, I believe kids should come first. No, I don’t believe putting your children in daycare is harmful or bad parenting.

If you grew up in a world where you can afford to stay home and/or have no career aspirations of your own, then that’s fantastic. More props to your kids. Many people have no choice, and many others have individualistic aspirations and pursuing these doesn’t make them bad parents.

#188 Bottoms_Up on 01.28.11 at 11:21 pm

#151 GB on 01.28.11 at 6:52 pm
“we have a generation of kids growing up without proper parenting.”
————————————————
If this is true I would really like to see the evidence. Please post a link to your evidence. Or, are you just pulling the classic ‘as every generation passes it just gets worse’ phenomenon?

#189 Moneta on 01.28.11 at 11:25 pm

Universities have to pay their bills somehow, can’t just be put onto the backs of International Students
———
Under the weight of their underfunded pensions and other debts, they can just default … or some other entity without the deadweight can easily enter the field and start offering courses.

Considering how underfunded boomers’s retirement funds are, I’m sure thousands of them would be willing to teach on-line. Especially the 50+ engineers and other knowledge workers who are overlooked in the workforce.

In the US right now, many degrees are not worth their cost and students are starting to realize this.

There’s going to be a shakeout.

#190 AGIC on 01.28.11 at 11:41 pm

#177 MikeT
I was just kidding.
Your kids are lucky to have parents who provide healthy, nutritious food. Organic?

#191 BigAl (Original) on 01.29.11 at 12:30 am

#125 Maxamillion

Agree with you 100% Max.

HR people have carved out a nice, lucrative little phony ‘profession’ for themselves.

Business leaders need to wake up to the fraud of their HR people.

HR departments have added so much red tape and bureaucracy to businesses. They use fear, fake legal-speak in the form of the buzz-words of the day – they are not labour lawyers but they try to convince their bosses that they are.

Beware of any so-called ‘profession’ that can’t add directly to the bottom line and prove it…those that always justify their existence by only claiming they “add value”.
Bull.

#192 Just Looking... on 01.29.11 at 8:58 pm

Garth, I know you like to use an acerbic style, but starting out by characterizing Blaire and his wife as “two snivelers” seems to me not only to be unhelpful, but based on his posts and email excerpts, untrue. Even when presented with corrections to statements that you made that were not accurate, you still remained acerbic and contemptuous. I don’t understand why. Why not little humility on your part?

It seems at odds with this post: http://www.greaterfool.ca/2011/01/07/big-life/
Your three rules
(1. Consolidate, 2. Simplify, 3. Be beholden to no one) and the contrast of this case study with the one from the G&M discussed in that post also seem at odds with your characterization of this couple as “sniveling”.

It seems to me that this family has the fundamentals right. A mortgage of 250k which represents <2x annual income. No high-interest debt. A work schedule that minimizes time spent in daycare. A reasonable question about prioritizing the kind of savings/investments they want to make. Why is this snivelling? It seems to me pragmatic.

You also commented that Blaire should appreciate the crowd-sourced focus group here. You don't acknowledge that through providing semi complete and in some cases incorrect information, you framed his issue in a way that biased the crowd, and therefore diminished the value of the opinions this forum could provide. There is a difference between giving BS-free advice and being unduly negative. I don't see what purpose the negative remarks you have made in the discussion serve – perhaps you can illuminate this for me?

That said, I think the advice seems to make some sense that if you can reliably get a much higher rate on investments rather than paying down the mortgage debt, then one should do so. That said, it all depends on how risk averse you are.

I only wish that I could be as well-positioned as Blaire when I reach my late 30's.

JL

The ‘snivellers’ reference was to their two children, of course. Get over yourself. — Garth