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The concept of spreading around your savings and diversifying, comes from an old adage that most of us probably grew up hearing our parents say:  “Don’t put all of your eggs in one basket.”    Basically it’s a simple financial strategy:  Divide up your savings into at least  three very different  types of investments:

Extremely Conservative  (and easily accessible in an emergency) could be a TFSA or savings account at your favourite financial institution (online or brick and mortar).  Mid-Range Risk could be a RRSP or mutual fund account (self-directed or handled by the institution you invest with - terrific for planning your retirement) and Higher Risk could be the stock market, DRIP investments (buy one share of stock then have all dividends from that stock reinvested with the company that issues the stock thereby ensuring a continuous small stream of income down the road) or something else that might be a bit less of a “sure thing.”  

In this volatile and highly-unpredictable economy that we’re enduring (and will most-probably continue to endure for several more years) it’s essential that you have a mix of investments and cash reserves you can count on to carry you through the bad times and well into your retirement years. 

By diversifying, and juggling multiple financial “egg baskets” you will discover over time that even when one type of investment isn’t performing as well as you would have hoped, another might be going gangbusters and really helping increase your overall portfolio.  

The bottom line is this:  Spend less and save more.  Canadians used to be huge savers (we had more savings accounts and funds in safe havens like Canada Savings Bonds than any other types of investments) and we need to get back to that frugal approach in order for us all to weather the dips in the economy that we know will face us in the future.  “A saver not a spender be” is another old adage that hammers home that philosophy.  

Statistics Canada released its employment figures for July today and the news wasn’t good.  Approximately 139,000 full-time jobs disappeared (including the slashing of jobs in the education, finance, insurance, real estate and leasing categories).  Granted, 130,000 part-time jobs were added during this same time period.  But we all know you cannot equate part-time jobs with full-time employment.  Many of those part-time jobs are most certainly student-held positions that will, come September, vanish again. 

And many part-time workers who are not students need to hold down two or more part-time jobs just to equal the income levels they would earn if they had only one full-time job. Not to mention  the emotional stress such work-loads place on many households across the country.

So are we turning into a nation of part-time jobs and contract positions?   Only time will tell but it sure looks like the full-time job (complete with health and wage benefits and other perks) is quickly becoming a rarity in Canada, as it has in the United States.

And with our labour market shrinking as well (due to older workers retiring and not enough younger workers entering the work force), our ability to compete in world markets could be affected.  Already we’ve seen a slight increase in interest rates by the Bank of Canada, and a drop in the value of our dollar against the American greenback.   According to Bank of Canada Governor Mark Carney, our annual growth rate slowed from the 6.1-percent rate during the first three months of 2010 to an anemic 2.8-percent pace in the current quarter. 

All of this means less money coming into Canadian households, more corporate failures and more financial uncertainty, after two years of an already-fragile global economy.  

Once again I urge everyone to pay down their credit card and loan debts and try to put some savings away in a TFSA or RRSP as an emergency back-up for any potential job loss or household income drop. 

Times continue to be tough and there is not necessarily a simple solution to our economic uncertainty this year… and possibly next year as well.  

I was somewhat surprised to see a piece in Thursday’s Toronto Sun, written by Sharon Singleton, about Canadians and their retirement savings.  Or,  in this case, the lack thereof. 

Apparently, according to a poll conducted by the BMO Retirement Institute, only 40% of the respondents actually have any funds put aside for retirement.   Despite the fact that the more than 2,000 Canadians polled were aged 35 years of age, or older. 

What I found even more frightening about this poll’s results was the attitude of the respondents.  More than 8 out of 10 of them said they were more concerned with satisfying “current needs” rather than stuffing away money for their retirement.   That means relishing the immediate reward of a shiny gadget (like the best-selling iPad or iPhone 4), a sun-filled vacation destination to the Caribbean or Florida, or a sleek new automobile rather than the safety of a RRSP, TFSA or conservative investment like a GIC. 

Of course, 90% of the respondents to BMO’s survey knew what they SHOULD be doing (i.e. salting away  that money for an eventual retirement)  but instead they were racking up credit card debt and getting deeper into a dangerous debt cycle rather than saving their money (or even paying down debt they had already accrued). 

Are you one of the folks who prefers to “live for today” rather than plan for tomorrow?  I can’t help but think of the fable “The Grasshopper and the Ants” whenever I read reports like the one BMO has compiled.  That image of the Grasshopper lazily relaxing while those industrious Ants prepare for the winter is a chilling compliment to these types of statistics. 

Better to be more like the Ants and less like the Grasshopper, folks.   Retirement will be upon us before we know it and those without a financial safety net could be in a very rude awakening.   

Gen Xers Carrying Too Much Debt, says recent survey

Not that this will come as a surprise to most people, but it was revealed in a recent survey by the Investors Group that Gen Xers (Canadians aged 30 – 45) are grappling with higher mortgages and more credit card debt that their parents’ generation.  

It seems Gen Xers, with their higher income potential, post-secondary education and lack of pension plan investments, are buying more and saving less.  And racking up major credit card debt and mortgage debt in the process. 

The study quotes Tom Moran of Investor’s Group as saying “you want to own the house, you don’t want the house to own you.” 

How can Gen Xers solve this problem?  First, pay down the credit card debt as soon as possible.  Secondly, begin putting funds aside in a RRSP for retirement.  Third, pay down the mortgage debt.   The end result will be no high interest rate debt accumulating (i.e. credit cards and department store cards), an asset that you fully own (your house) and retirement funds in the bank to fall back on once you reach retirement age. 

It’s never too late to start this process but it’s always better to initiate it as early in life as possible.  That’s why 30 – 45 year olds are in a dangerous position.  They’re not that far away from retirement and they’re accumulating too much debt along the way. 

Today’s Financial Post article on Canadian Imperial Bank of Commerce’s acquisition of a $2.1-billion credit card portfolio from Citigroup’s Canadian Mastercard business will firmly intrench the CIBC as the largest issuer of credit cards in the country.  

Why is that newsworthy?  By acquiring Citigroup’s Mastercard business, as well as two other recent acquisitions of CIT cards and a minority stake in Bermuda-based bank N.T. Butterfield & Son Ltd, CIBC has effectively reduced the competitive field in Canada by gobbling up the competition.  That could mean fewer choices for those anxious to acquire new credit after a discharge from insolvency.  It could also mean fewer choices, fewer options and fewer deals for Canadian consumers as CIBC amasses more control over the credit card marketplace in our country. 

CIBC cites the acquisition as being directly aligned with its “strategy to grow our core Canadian operations and further strengthen our highly successful credit card business.”   This according to Gerry McCaughney, CIBC’s chief executive officer. 

Fewer choices in an already tight lending economy = fewer options for those struggling with debt or, after insolvency, attempting to rebuild credit.   And with more and more American firms considering a pull-out from the Canadian marketplace (as Wells Fargo did last week with its lending and mortgage businesses), consumers in Canada will need to do even more homework to locate the right credit products for their needs.

Welcome to our new A. Farber web blog.  This is the space where we will update you on the latest issues affecting you, your family, your small business and your world.  We will try to provide you with helpful tools for managing your money and useful tips for holding on to as much of your hard-earned money as you can.

We will also provide you with advice on the Bankruptcy Insolvency Act (also known as the BIA), the economy, the insolvency process and the best ways to keep your financial head above the rising waters.

We’d also like to hear from YOU.  Please tell us your stories, share your tips and tricks for financial success and let us know what you’d like to see on this new blog. 

And now a little bit of information about who we are:  A Farber & Partners has been assisting Canadians with their financial difficulties for more than 30 years.  We have 29 offices across Ontario and more than 100 dedicated staff.  Our Trustees will be participating in this blog and will be on-hand to answer your questions and field your enquiries.  We will also be relying on them to tell us what the future might hold for us all - average Canadians.  We will also detail for you how our customized R Plan works, and how you can benefit from a free consultation that reviews your financial situation and provides you with answers to the questions you may have about how to survive in this murky economy.

Thank you for visiting our blog today.  We hope you will drop in regularly, contribute, comment and take some information away with you each time you visit here.