Tag Archives: US debt

Money & Dating Plus First Time Home Buyer Plans

Spending and Dating

OK, since I’m single I have to keep up on these kinds of surveys. This one is from match.com and surveyed a ton of singles on their opinions on spending and dating. It turns out that men and women have very different expectations:

Men are three times more likely to consider the cost of a date.
On the other hand, 58% of women prefer a casual date, and not one that involves spending a lot of money.
While I’m guessing it’s not a big consideration for men, 53% of women do spend money before the date on things such as a new outfit, manicure, or stylist. I hope the date is worth that money! Or maybe it shouldn’t be called spending – maybe it should be called an investment…

For both sexes, 82% of respondents say their interest in the other person increases if they see an act of financial generosity. That could be many things ranging from a larger tip, or some kind of charitable giving.

On the downside, three-quarters of both sexes are turned off if they find out that their date has more than $5,000 of credit card debt.

First time home buyers:

With the requirement of a 5% down payment, and pretty high average home prices, it keeps getting harder and harder for someone to get into their first home.

I read some interesting stats the other day on using the RRSP Home Buyers’ Plan: Since inception in 1992, almost 2.5 million people have taken advantage of the program, with an average withdrawal from their RRSP of just under $11,000. In total, over $26 billion has been withdrawn from the program.

Over the past five years, the numbers and average withdrawal have both decreased. It may be a good idea to sort of borrow from yourself, but you have to remember that it’s money that is now NOT growing in your RRSP for retirement and you DO have to pay it back over the next 15 years. If you don’t, one-fifteenth of the total is added to your income that year, and you’ll be paying taxes on it. You also need to remember that this payback in on top of your new mortgage payment, utilities, property taxes, etc. Those are all likely to be a much larger part of your income now.

Who cares? Well, most of us do – or should. Almost 70% of Canadians own their own home – well, have a lender who lets them live in the home. And almost 40% of our entire wealth is tied up in the equity of our homes.

If the US government were a family:

Here is an interesting way of taking the staggering U.S. debt of over $14 trillion and breaking it down to figures we can understand:

This family would earn $58,000 a year, and spend $75,000, and have $327,000 in credit card debt. The proposing so-called “huge” spending cuts would cut expenses from $75,000 to $72,000 a year.

Yesterday’s U.S. Elections

Yesterday, the U.S. had their mid-term elections and there are certainly some interesting philosophies and policy suggestions raised when it come to debt and financing.

A number of very conservative Tea Party Republicans were elected as senators yesterday. Their common belief, and quite correctly, is that the deficit (spending) is out of control, and spending has to be curtailed – NOW. OK, but between March and June of next year they will need to vote on increasing the debt limit. That’s the total the government owes, but something nobody really talks about at all. That’s kind of like the U.S. credit limit, and it has to be voted on a specific day when the debt ceiling is reached.

Will these senators stand on principal and refuse to vote for it? If so, you are going to see a huge, immediate, and world-wide impact on the stock market, consumer confidence, the dollar, and many other areas. It will also immediately shut down all but essential government services. Will they do it on principal, no matter what the implications?

What drove me insane yesterday were a bunch of politicians flagrantly refusing to answer direct questions of what spending they would cut. For the entire election campaign, it was nothing but generalities and buzzwords. That sounds nice, but specifically, what would you cut? Pretty much all of them said it couldn’t, and wouldn’t be defense, social security, and medicare. Fine, but there’s a problem: These three areas are around 93% of all federal spending. So what does that leave?

The equivalent is that you can’t or won’t cut your spending on housing, vehicles financed, and utilities. What does that leave where you can have a meaningful impact on your debt? Yup – nothing. Take a $4,000 income, and now work with only 7% that you can impact. That’s $280. Can you work your way out of an incredible mountain of debt when all you can work with is maybe 5 or 10% of that $280? It’s nuts. It’s political talk, and it’s ridiculous.

There are literally trillions of dollars that the U.S. government has in unfunded liabilities. That’s IOUs for pensions and medicare that are not funded and for which there’s no money. Yet, there was no talk about that. They can’t even come up with specific solutions to today’s debt – never mind the next wave that will hit within five or ten years.

There’s a Canadian politician that coined the phrase: Elections aren’t the time to talk about policy. Yesterday’s elections reminded me of that. Or essentially, we’re pretty much too stupid to understand policy questions and meaningful solutions.

Lastly, you know I’m not in favour of debt and borrowing. But in the U.S., and Canada, there are only three groups that can spend in the economy: Consumers, businesses, and the government. In a recession as severe as the one just ending, consumers stopped spending, as did businesses. Who does that leave? Can you imagine how much worse it would have been without the government infrastructure spending?

And ironically, the U.S. Chamber of Commerce heavily lobbied politicians two years ago to vote in favor of the stimulus programs. A year later, they’re spending tens of millions in campaign money against those same people who did! But that’s not much different than what some of the opposition parties did in Canada. Ah, if we could only be like politicians and have it both ways – all the time. Unfortunately, for us, in the real world – that’s not reality.

Greetings from Phoenix

For the millions of Canadians who make a trip across the border to the U.S. each year, it is certainly easy to notice some huge pain, and some big differences, in the economies of our two countries. Here are just a few things:

There are some seriously great travel deals to be had south of the border: For my holiday, I am staying at the Marriott in Scottsdale, Arizona for $28 a night. Yes, you read that right, thanks to priceline.com, and the place is still only about a third full, from what I can see.

Here in Arizona, the state legislature is actually considering selling the state capitol building and leasing it back. They’re looking to fund the current deficit. Not to put it on the debt – just the deficit. If you sell your home to pay OFF the mortgage and bills – that’s often a great deal. But we’re talking about selling to pay this year’s utility bills and payments. But then, there’ll be a lifetime of lease payments which will make the budget worse in perpetuity. That’s nuts! But that’s how many politicians think: Worry about today, because years from now, they won’t be there to deal with the mess in the future.

Coincidentally, MSNBC, which is generally a soft liberal TV network, called this mornings’ two-hour program “sticking it to the kids.” It was a show discussing the $12 trillion national debt, the $1 billion health-care proposals, and that Medicare is already in a deficit right now.

I’ll share some more insights from south of the border in the coming weeks.