What your bank won’t tell you about your true loss on GICs / term deposits?

authortimchang — Sun, 15 Jan 2012 21:18:53 +0000

While the communists and socialists had failed in income re-distribution from the wealthy to the poor; the banks on other hand, had succeeded in the reverse re-distribution, the wealth of the middle class to the top 1% who know how money and inflation works!

The same middle class, mainly in North America and Europe, live on loans and credit cards that charge multiple times the GIC return rate by the same banks.

As a result, the middle class are squeezed by the banks at both the saving and spending fronts. They can protest and complain all they want; the real culprit against their financial well-beings is their reluctance to learn and practice simple ABCs of personal finance.

Inflation over the past 50 yrs averages 3.9% per year, while your GIC return average 3.5% per year. Compounded the difference over the years you invested into GIC, the exponential difference is huge.

How does the inflation beast affect you? Eroding the purchasing power of your money! Nibbles away your retirement eggs!

The Consumer Price Index ( Inflation ) does not reflect true inflation we faced as a consumers, take for example, 2 decades ago, we could get a decent town house for $50,000, the same house today sells for $250,000: 5 times more. Compounding 3.9% over 20 years is $108,000, only at 43.2% of current home value.

Surely you realized that the food and gas prices above have risen multiple times higher than the 2.5% to 3% inflation rate that our politicians and the statisticians proclaimed.

I am not accusing all CPI statisticians of manipulating the figures but generally, in most countries, the inflationary statistic is a propaganda tool of the governments. Even if they are honest, their baskets of goods and services that measure CPI are outdated and do not reflect real impact of inflation. Ask simple questions like, what is the % of housing costs and electronic devices in the basket of goods and services?

What is more alarming is a report from McKinsey Global Institute- predicts that as the middle class in the world’s leading economies continue to grow, creating a new generation of potential investors, the share of investment money heading to equities is doomed to shrink, the bulk goes into bank deposits, like GIC, term deposits.

“The emerging market investors keep most of their assets in bank deposits, which reflects lower income level, underdeveloped financial markets, and other barriers to diversification,” the report said.

The banks did a superb job of hiding the true losses (eroding purchasing power) of term deposits from most investors who are led to believe that GIC / term deposit is a guaranteed form of investments, while omitting the greatest evil deed of inflation.

One of the few exceptions to the laissez-faire principles is government intervention to protect the unlevel playing field between the financial institutions and the 95% of investors/ consumers who are generally financial illiterates; Governments world-wide should enact acts to protect the most vulnerable from the robber-bankers.

Change in Greeting: How bad are you?

authortimchang — Fri, 13 Jan 2012 16:36:09 +0000

Our human social behaviour evolves with time. Why should we be saying: How are you? Isn’t it hypocritical? We know 95% of us are not OK financially! Most of us are worried for our own future as well as that of our kids.

Reality check:
We face financial problems in this economic uncertainty; namely: unemployment, inadequate retirement savings, shrinking middle class, likely elimination or reduction of social / entitlement programs, especially, in developed countries.

The size of middle class used to be the yardstick of economic advancement of the developed countries. But, over the past two decades, technology and globalization have drastically transformed the economic structures of these developed economies: for example, middle class jobs have been shifted to cheaper cost countries; enriching some people, dislocating so many others. It is not solely attributed to greedy Wall Street robbers-bankers and the spend, spend, spend Presidents or Prime Ministers

Let us be honest to ourselves, unless you are the top 5%, use “How bad are you?

What should 80% of Ontarians do?

authortimchang — Sat, 24 Dec 2011 17:55:16 +0000

What could Ontarians do in the face of colossal challenges perpetuated by Premier McGuinty’s reign?
1. Risk of credit downgrade
2. Deficit hits $16 Billions
3. 300,000 increase in the # of public sector employees, not commensurate with the population growth; despite recession and economic uncertainty, he rewarded public sector employees with big wage increases.
4. New taxes disguised in different names
5. Become a “have-not” province

For billions spent on the public sector employees, he got big campaign endorsement from working families’ coalition, a super PAC funded by public sector unions.
What happen to the remaining 80% of the population that do not enjoy public sector pay, pension and perks?
Because we are (80%) not organized and or failed to vote; we deserved to be screwed!
Next election time, be aware of the public sector unions’ misleading campaign, exercise your common sense and vote against “entitlement coalition” of public sector unions and Mr. McGuinty
I used to be his supporter, prior to his mismanagement of our province
To cuddle his public sector union base, he has to spend more on public sector expenditure!

Prime Minister Harper hints at SRED reform. Why and how to?

authortimchang — Sun, 18 Dec 2011 19:59:25 +0000

The Scientific Research and Experimental Development (SR&ED) Tax Incentive Program is plagued with abuses and scams since its inception. My earlier blog: http://wp.me/p1iD5s-D highlighted the problems
1. It cost taxpayers about $5 Billion in 2010 at Federal and Provincial levels (For Provincial Governments that rode on the same wagon) alone,
2. The bulk of the money goes to these big brand name Consultants: namely the big Accounting Firms, a crown corporation and those who claimed CRA connections; they took as much as 25-30% or $1.25 to 1.5 Billion in fees.
3. Many of the claims are absorb and abusive, bordering on fraudulent claims; but abetted and facilitated by high- priced Consultants
4. To elaborate on item 3 above, in the City of Ottawa; the number of technology writers is probably less than 10; these people are the same ones contracted to write SRED claim reports by the same high priced consultants; the only value-added is their brand name letterheads and connections.
5. The inability of the bureaucrats to distinguish the genuine and deserving claims from the legalized scammed claims. It is a joke to think that bureaucrats know scientific, research and technology and innovation!!! So, the only yardstick for these bureaucrats is the weight of the letterheads and the names they are familiar with
6. To elaborate on item 5 above, it is similar to using bureaucrats at department of culture to be the judges at “ Canada Got Talent”; if they are so talented, they would probably start their own businesses and claim “ SRED” themselves, facilitated by insider connections
It is high time, this Prime Minister who knows economics and finance to do something about SRED program
Here are my suggestions:
 SRED be turned into direct grants to those businesses that involve in scientific, research and developments
 SRED disallow payment of grant money to Consultants higher than 5% in consulting fee; it is still a lucrative fee for Consultants that only does T661 plus contracted technology writers
 The evaluation of these claims should be done by a panel of 3 independent experts appointed by the Government; their remuneration should be fixed irrespective of the number of approval or rejects. Just like “America or Canada Got Talent”; they should be distinguished in their profession careers; not bureaucrats or ex-bureaucrats or political insiders.
 To support the above point, Dipak Chopra, an “outside the political establishment management” expert was appointed as CEO of Canada Post; see what he has achieved compared to previous Liberal appointees, who are mostly ex-politicians.

With this simple reform, SRED reverted back to its original objective of developing the economy of the future.

U.S. government’s unwillingness to take measures to address the national debt !!! Same message is applicable to Canadian Governments, Ontario Provincial Government in particular !!!!

authortimchang — Sun, 18 Dec 2011 14:03:45 +0000

Sadly the U.S. government is unwilling to introduce cuts or raise tax rates. This is the result of short parliamentary terms and elections based on popularity. When votes are king, it becomes difficult to cut programs that people rely upon or raise taxes for some of the most influential men in America. it’s no surprise that U.S. lawmakers spent the summer of 2011 engaged in a partisan battle between the Republicans – who took control of the House in the 2010 elections – and President Obama and the Democrats –who still control the Senate – over spending and taxeS
Of course, in order to balance the budget spending would have to take some cuts in order to address the growing deficit, but it shouldn’t have been the only thing to take a hit. Balancing a budget is like losing weight. If you want to drop the pounds, you can either eat less or exercise more, but you’ll find the best results if you do both in a way that you can maintain. In the same way the government must cut spending or raise taxes in order to achieve a balanced budget. But for long-term success it should do both with the aim of sustainability. Neither effort is popular, but both are needed. Through the popularity of the rightist Tea Party Movement and the leftist Occupy Wall Street protests (more on these later), and even through Warren Buffett’s opinion letter in the New York Times, the public has demonstrated that it is willing to accept the consequences of unpopular choices if it means getting the country’s spending back on track. But lawmakers don’t appear to be hearing these messages.
Citizens don’t even need to protest to demonstrate their support. The larger problem is that the general public is not informed about the country’s debt or the consequences carrying so much debt will have on future generations. Robert Bixby, the Executive Director of the Concord Coalition, has worked with the Concord Coalition for nearly 20 years. The group’s aim is to “educate the public about the causes and consequences of federal budget deficits, the long-term challenges facing America’s unsustainable entitlement programs, and how to build a sound economy for future generations.” Bixby warns the public that the U.S. has “been running deficits of 200 to 300 billion dollars.” The feedback he receives from information sessions demonstrates overwhelmingly that Americans want the government to take great efforts to resolve the country’s debt problems.

What the 50 + should do in this market?

authortimchang — Thu, 24 Nov 2011 20:44:29 +0000

What the 50 + should do in this market?
Unless you enjoy a full public pension when you retire, those 50 and above should explore the only option available: realize the gain on your home and invest into equity funds, preferably Segregated Funds or Guaranteed Investment Funds (GIF) of Insurance Companies
With historical low interest over the past several years and over the next 2 years, the real estate market has gone up as much as 60-120% in most markets over the past decade. The highly inflated price has little room for upward potential but downward spiral when the interest rate does rise.
Just use buy low and sell high concept for once in your life: realize your tax free gain on principal home (high) and invest into GIF at (low) price during this economic uncertainty; it is more feasible to be a tenant at least for the next few years.
With medium RRSP for 50 + at only $58,000; most of them will not be able to accumulate the retirement assets even @ 85 yrs old.
GIF guarantees at 75% to 100% of principal, even those who have low risk tolerance profile in their whole lives, should adopt aggressive investment style. What choice have you got? Your lower risk profile got you into present financial situation- retire “broke”. With longevity on the rise, do you want to be broke for the next 15-20 yrs after retirement?
That way, when the economy recovers, interest goes up, the real estate go south, equity go north; you strike “gold” at both ends. You shall be the top 5%, not the 95% most of us are destined for life

Racial discrimination can happen to you!

authortimchang — Mon, 31 Oct 2011 14:02:50 +0000

As an established Accountant, Financial Planner & Financial Author, I would like to recount the abusive behaviour of a racist Employment Standard officer from Ontario Ministry of Labour, named GC, condoned by Ontario Provincial Court Justice of Peace, named M. If it can happen to me, as visible minority immigrant professional, it can also happen to you. Nobody in the judicial system will help you.
Instead of paying the fine of $360, which I could afford; I chose the trial option, hoping to rectify an injustice done to me by a racist officer from MOL
Just like the “wrongly convicted” victims who are lucky enough to be exonerated 10-20 years later, the police officers and the prosecutors who provided falsified evidence/ commited perjury and those judges that directly or indirectly condoned these practices, always got away with impunity. Even in cases where the exonerated obtains compensation, the police officers and prosecutors do not have to pay themselves; it is the taxpayers that pay the bills. Why didn’t these police officers and prosecutors be prosecuted, pay financial compensation and be jailed for the same length of time as the exonerated. As such, the prevalent culture of protecting and condoning the illegal acts of these bureaucrats persists in the judicial system.
Here are the briefs of the racially motivated episode:
On May 24, 2011 at 9.30 am, MOL officer GC came to my office to conduct compliance with Employment Standard Act. Here is her discriminatory behaviour against me, as a visible minority employer
1. Facing an Asian guy who speaks with a strong foreign accent, she expressed surprise that I am a designated Accountant; asked where I got my accreditation? I said I am a UK trained accountant, quickly added I have local CMA designation plus A Certified Financial Planner designation. I must admit, I have difficulty pronouncing the word “accreditation”, I used “local” instead. Does she ever ask a white Canadian employer whether he is properly accredited?
2. She demanded that “I want you to put the poster, now”; when I asked her not to embarrass me in front of my employees, (I even explained that humiliating me, as a Chinese, in front of employees is similar to someone raping my wife) she retorted “When you are in this country, you follow the laws and regulations” implying that a visible minority do not follow laws and regulations” added, “I can charge you for disobeying my order”. She repeated the second time, “I want you to put the poster, now”
3. When she threatens me “I can have you charge for disobeying my order” I hand her my both hands” and challenge her to handcuff me.
4. When I realized that the same poster was posted at the back room and mentioned to her; she was not interested to see but just wanted me to follow her instruction now: Put her poster now in front of her at her desired location. She had already made up her mind to misuse her authority by then.
5. Even though I had posted her poster personally before she left our office, she came back 15 min later with a charge sheet and said to me” This is a charge for disobeying my order” I disputed her imposed fine of $360 and opted for trial at Provincial Court at a cost of $2,500 in legal fee.

The Judge of Peace, M was very biased; she already made up her mind before the trial. She is a Justice of Peace with no legal training but appointed by the Government.
Here is the behaviour of the Trial Judge, M:
1. She disallowed most of the relevant questioning by my lawyer, of Labour Standard Officer GC from the onset- claiming all are irrelevant
2. When my lawyer insisted on getting the right regulation or provision for the amount of fine, she over-rode it on flimsy ground. Showing irritation at my lawyer’s questioning. How can you impose a fine of $295 or $360 without legal or authoritative basis? What if Ms GC put in a $1.0 Million fine? It is not the amount but the principle behind the levied amount!
The Prosecutor failed to show any documentation relating to the fine computation; brought up twice by my lawyer, and Judge M was so dismissive and impatient.
3. Item 2 shows her bias in behaviour, repeated through the trial. She already made up her mind before the trial!!!
4. When I was questioned on the stand by my lawyer relating to the event, she said my testimonial is not relevant for the trial, that I should explore other avenue against Ms GC! Isn’t it this confrontation that led to this trial in the first place? Why is the episode that led to imposition of fine- not relevant? Then, put me on the stand under oath? Apparently, just for show and compliance with procedure!
5. By her bias behaviour, she has condoned an abusive and racially motivated behaviour of Employment Standard Officer, GC, who abused her authority to take revenge on confrontation between herself and I
6. Isn’t it the Judge’s job to understand the abusive and racial motivation behind the fine?
Judge M becomes an enforcer to abusive and racial attitude of GC. She ignored the vendetta of GC.
6. Stop my lawyer’s questioning most of the time and told me to air my testimony (about GC’s behaviour and action some else). In other words, this racially motivated behaviour of GC is not considered.
I paid the fine under protest. Refusal to pay is contempt of court; judging from her bias behaviour, she shall send me to jail if I refused to pay.

7. I have to spend my own money to fight GC’s vendetta that was legitimatized by judge M while the racist GC was supported by crown resources (taxpayers’ money), just like those police officers and prosecutors who falsified evidence and or comitted perjury
As a visible minority aggrieved by the system, the only recourse available is to file complaint against GC and Judge M to Ontario Human Rights Tribunal and Ontario Judicial Council respectively.
Again, as I said on the onset, the judicial system is more interested to protect officers within its rank, rather than redress the “wrong” and “Injustice” done.
One thing, these people can’t take away from me, is my dignity and my ability to write on social media.
So, GC and or Judge M, you can’t shut me up; I can expose your abusive action. As a professional, I am not going to let you abused me and carried the burden of injustice to my grave. Even at huge legal costs, I am going to bring this injustice to the highest level possible.

Tim Chang

Eliminate handouts to Charities & NPO-save $4 Billion or more a year

authortimchang — Sat, 29 Oct 2011 13:11:38 +0000

NPO means No Profit for Others, except promoters.
In 2007 at a MP Pierre Poilievre’s gathering , I asked Monte Solberg, the Minister of Human Resources and Social Development how much does the government spent on handouts to Charities & NPO, his answer was $4 Billion and added the government is reviewing the program
After 5 years, it took another Minister, Diane Finley to announce that the government is reforming charity rules and drawing inspiration from Big Society experiments in UK”. By the time this announcement was made, the tax payers already forked out (borrowed money) $20 Billion
As a practicing accountant, I witnessed the abuses committed by many of these organizations in the name of delivering social goods:
1. Lack of accountability. One charity promoter/director put his 80 yrs old on payroll; another community based organization got $750,000 grants for 3 yrs: the only tangible social benefits are helping immigrants to write resumes for job applications and providing Sunday school to learn their mother tongue language to kids who are growing up here . Another one, founded by ex- employee of HRDC got an average of $200,000 per year; the only visible benefits is a network of 10 computers housed in a rental space of probably 1000 square ft; a place for City’s Social Welfare department to park welfare recipients in the name of providing training. What training? Learn how to write resumes!!!
2. Critics of reform claimed that there are stringent audit requirements in place! As an Accountant, I have to remind the critics that these are not value-added audits, but audited Financial Statements, the 80 yrs old payroll is considered a legitimate expense. I asked Minister Stockwell Day (prior to his retirement from politics) at OCC breakfast meeting months ago. His response: There is audit and other requirements; Charities and NPO are more efficient in delivering public goods! What a stupid comparison? Bureaucrats Vs Abusers of Charities/NPO! They are equally unaccountable and lack transparency!
3. Stats can shows big increase in the number of 6 figures compensation among these organizations. I advise clients who want to go into business: investing into business is inherently risky, may be a better option is to start a NPO or Charity Organization; big car, home and fat pay cheque; can’t be fired because the money come from the “ Majestic the Queen”
4. The grants are evaluated and approved with oversight by Government Departments; are these bureaucrats who are equally unaccountable, the best enforcers of taxpayers’ money
5. Time again and again, any government with its big bureaucracy has failed in picking winners or losers. Why the exception, other than to carry favours with few community based political /social activists who took the bulk of the money in the name of community/society they purportedly represent! The Liberal government entrenched this misbehavior but the Conservatives who opposed it ideologically; found it a useful tool to garner votes. So, they keep it for political advantage. They know: Organized entities enjoyed proportionally higher voting strength when compared with loose sand – unorganized general public. Look at the union bosses; they can bring the corporation/ country down to its knees.
It is time to scrap these handouts! Instead give more tax credits for charity contributions and let the taxpayers decide what the best value is for their bucks. The taxpayers should decide, not the Government or its bureaucrats. This way, the Government can lay off more bureaucrats and cut deficits; a win-win for the society as a whole

10 ways to save money #10 – Avoid impulse purchases

authortimchang — Thu, 15 Sep 2011 20:18:25 +0000

Many of the things you want to buy no longer seem necessary if you delay the purchase for a day or two. Waiting also gives you the opportunity to compare brands and check prices, allowing you to make an informed decision.

To help prevent impulse purchases don’t carry credit cards in your wallet and, whenever possible, pay cash. Studies have shown that it’s harder for us to part with cash than to make a payment with a debit or credit card. Cash is more tangible and makes buyers more aware of how much money they’re giving away and how much they have left. We’re willing to pay much more for an item when we don’t pay with cash.
www.10waystosavemoney.com

Banker and his daughter Joke

authortimchang — Tue, 13 Sep 2011 21:01:18 +0000

Daughter: Dad, how do you make so much money?
Banker: That’s easy Mary. I just create financial papers, like derivatives!
Daughter: But, Dad! Police catch people who make fake money!
Banker: Don’t worry dear. What I do is legal. You see, nobody understands my financial papers. Not politicians, not prosecutors, not police, not even investors.
Daughter: I can use my crayons to colour papers to make money too!
Banker: No, no Mary. People understand your abstract drawings, so they know there is no real value. But because nobody understands my papers we can call it “value” and people have no choice but to believe us.
www.10waystosavemoney.com