Comments on the moneygardener: good financial government

@Scott - Point is, buy and hold doesn't work. Col...

2009-03-08T00:10:00.000-05:00

@Scott - Point is, buy and hold doesn't work. Collecting dividends is not working lately either.

debt reduces flexibility. debt is good until when ...

2009-02-21T23:54:00.000-05:00

debt reduces flexibility. debt is good until when it is not. what would happen if your family income goes down due to job loss or wage cuts? the servicing of debt would force to less optimal decisions. It is not about feeling in control it is about having the flexibility to deal with unforeseen or unfortunate circumstances. besides in times where deflation is a risk debt stays on your chest while your asset base shrinks.

Anonymous wrote: "I really disagree with your por...

2009-02-20T16:44:00.000-05:00

Anonymous wrote: "I really disagree with your portfolio makeup (cut and paste from your main blog page below).

We're talking major dogs here. I am short some of these same names."

So what's your point, anonymous? Do you have something constructive to add or was this simply a pointless interjection?

Foreclosure is the major cause of our financial cr...

2009-02-20T05:43:00.000-05:00

Foreclosure is the major cause of our financial crisis. Government should really prioritize this issue.We should really keep ourselves updated.Thanks for sharing your thoughts.Good Day!

I really disagree with your portfolio makeup (cut ...

2009-02-19T23:46:00.000-05:00

I really disagree with your portfolio makeup (cut and paste from your main blog page below).

We're talking major dogs here. I am short some of these same names.

* Toronto Dominion Bank (TD) 11%
* General Electric (GE) 7%
* IGM Financial (IGM) 7%
* Sun Life Financial (SLF) 7%
* Inter Pipeline Fund (IPL.UN) 6%
* Yellow Pages Inc. Fund (YLO.UN) 6%
* Bank of Nova Scotia (BNS) 5%
* Walgreen Co. (WAG) 5%
* Saputo (SAP) 5%
* Reitmans (RET.A) 4%
* Procter & Gamble (PG) 4%
* Sysco (SYY) 4%
* Johnson & Johnson (JNJ) 4%
* Husky Energy (HSE) 4%
* Royal Bank of Canada (RY) 3%
* Clorox Company (CLX) 3%
* Telus (T.A) 3%
* Fortis Inc. (FTS) 3%
* Canadian Pacific Rail (CP) 3%
* Diageo PLC (DEO) 2%
* Manulife Financial (MFC) 2%
* Scotts Miracle Gro (SMG) 2%
* Bank of America (BAC) 1%
* Cash 0%

Sampson, I see your point. I feel that debt/incom...

2009-02-19T11:50:00.000-05:00

Sampson, I see your point. I feel that debt/income is a a poor measure. Debt/Asset is a much better judge of one's financial health in my opinion. A solid savings rate north of 15% and a debt/asset of less than 0.8 or so is probably a sign of good financial wherewithall.

We have no debt. Here is why: My wife and I both...

2009-02-19T11:45:00.000-05:00

We have no debt. Here is why: My wife and I both enjoy the freedom that being debt free gives us. In the last 17 years, we have dramatically changed our lives 3 times. Each time, it was by choice and it involved moving to a different part of the country. The fact that we did not have any debt to service made quitting our jobs much easier.

Debt is both a financial decision and a lifestyle decision.

I always wonder about these ratios - and exactly w...

2009-02-19T11:42:00.000-05:00

I always wonder about these ratios - and exactly where my household stands. I feel we have a pretty good handle on our finances - but we have huge, huge debt.

Our #'s
Debt:Assets = 0.548
Debt:Income = 381%

So does this mean we are out of control?

Our savings rate is 20-25%. We are on pace to have our principle mortgage residence paid off when we reach 45yrs.

Again, I feel very in control of our household finances (minus any economic disaster related issues) - but show these numbers, and most would say they are out of whack?

Thanks for the great stuff Traciatim. A lot of st...

2009-02-19T11:02:00.000-05:00

Thanks for the great stuff Traciatim. A lot of stories like this really just scratch the surface.

Any study of debt is meaningless without information about assets.

Oh, one more tidbit I found in one of teh other Va...

2009-02-19T10:05:00.000-05:00

Oh, one more tidbit I found in one of teh other Vanier Institute of Socialisms and Scare Mongering was a neat stat of "Total debt as % of total assets" which was 19% as of 2008. Not quite as scary anymore. Average net worth per household was listed as $393,111 for 2008.

I guess they left those stats out of their release to the papers so that they could make more headlines.

Oh, I found it... they do include mortgage debt, a...

2009-02-19T08:34:00.000-05:00

Oh, I found it... they do include mortgage debt, and do not include home value off of the mortgage debt, the 90000 figure simply adds up everything they owe and spits it out. It's a fluff piece.

The real numbers were actually the average is $25,563 of consumer debt and an average mortgage of $56,732. This would include all investment loans, car loans, house mortgages, but not include the value of the asset backed by the loan. So if you borrowed $25,000 to buy some high yielding stock these days that are valued at $25,000, even though you had no mortgage and your stocks could pay off the LOC in a heartbeat if you wanted you would show in their study as having almost the average amount of 'consumer debt'.

Buy a car for 30K with 5K down with no other debt obligations? You have 25K of 'consumer debt'.

Traciatim, I agree with you fully and I don't thin...

2009-02-19T08:31:00.000-05:00

Traciatim, I agree with you fully and I don't think they are making a distinction. Therein lies the rub...

Yeah, that's just a newspaper article. The exact s...

2009-02-19T08:25:00.000-05:00

Yeah, that's just a newspaper article. The exact same one was run in a bunch of newspapers stating the exact same wording.

What I mean, is say someone has no consumer debt at all, has a house worth 200K and a mortgage of 100K. You can hardly call them 'in debt' even though technically they have above average debt according to how you are calculating. If you simply just add up everything they owe then they owe people 100K, if they earn 75K a year then their debt to income ratio would be 1.33.

Their next door neighbours may rent a house and make the same income, but own three cars that they just purchased on credit for an average 33.3K a piece having 100K of debt. If it's all lumped together then for the purpose of this scare article it seems like they are in the exact same boat as the person next door, but if this family decided to close up shop, sell everything and walk they would still be underwater because they can't sell the cars for what the owe.

Since the article doesn't specify how they obtained the numbers it can be essentially ignored since it's just fluff trying to scare people in to worrying about how much consumer debt everyone has when it may not be consumer debt at all.

Traciatim, Here is one source:http://www.timescol...

2009-02-19T08:14:00.000-05:00

Traciatim, Here is one source:
http://www.timescolonist.com/news/Household+debt+rises+Canada/1285142/story.html

I don't think it spells out mortgages explicitly but one has to assume that with the number being what it is mortgage must be included. I'm not quite sure what you mean by 'value of the house backing it'. I take this to mean all money owed to others (including mortgage, credit cards, car payments, LOCs, etc.)

Could you find the study that said the average hou...

2009-02-19T06:00:00.000-05:00

Could you find the study that said the average household debt in Canada was $90,000? I saw it in the paper and another blog but I still haven't been able to find the answer if that is simply all debts, or all debt - assets backing it.

I believe it may be including mortgages, but not the value of the house backing it. I have a very hard time believing that the average home out there has 90000 in consumer debt, which is what the newspaper article seemed to imply.

Foreclosure is the major cause of our financial cr...

2009-02-19T03:27:00.000-05:00

Foreclosure is the major cause of our financial crisis. Government should really prioritize this issue.We should really keep ourselves updated.Thanks for sharing your thoughts.Good Day!