While it wasn’t a big surprise, I was still hoping that the Canadian Prime Rate would stay at 0.75% for a little bit longer than this. Unfortunately for me and my line of credit, the Bank of Canada has decided to raise the Canadian Prime Rate at 1.00% (which means that your line of credit will reach 3% at best tomorrow morning!).

Mr. Carney also said that further move on the Canadian Prime Rate will not only be directed by the Canadian economy and current low inflation but also according to the world’s economic situation, leaving him more room for a pause in October.

In fact, if interest rate goes up to quickly, this will push the Canadian Dollar to a higher level (at parity or over parity) and would probably have negative effect on the Canadian economy. On the other side, this is with no surprises that we will reach a 3-4% level in a few years as it is considered to be a neutral rate. Having a 1% rate is considered to be a great stimulus for the economy.

My final thought: stay variable but pay down your debts faster!

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I’ve been having thoughts about how to interest my kids in finance when they become teenagers. I know it’s still pretty far away since they are only 3 and 5 but maybe seeing my son entering pre-school this fall got me thinking about how fast time passes by! Being a financial planner and a blogger as well, I can’t picture my kids having problems with managing money. On the other hand, even if I had all the knowledge in the world, I won’t be able to get them on the right track if they are not interested in finance!

So here are a few of my thoughts about how to interest (my soon to be) teenagers to finance:

#1 Have Them Buy Companies They Like

If you talk to any teenager, he will probably tell you how boring investing sounds. They don’t really get what would be useful or how to get ahead, they would rather use their money to spend on clothes, sports or going out. However, if you take the time to make a list, together, of what he likes, you will probably be able to find 4-5 great company stocks to buy.

He can’t go out of his bedroom without his iPod? Maybe investing in Apple would be interesting for him. He likes his shoes? Nike wouldn’t be a bad pick. Just think of the face your Teen would have made if he had bought West 49 Stock (WXX) when Billabong made an offer on the company? The stock went from $0.55 to $1.25!

The key here is not to make a huge profit since you are making stock picks with a biased portfolio model. However, it doesn’t mean that you can’t have fun with a small amount while teaching your kids how to deal with the good and bad side of the stock market.

#2 Do a Virtual Competition

You have a good relationship with your Teen and he is competitive? Open up 2 virtual trading accounts (you can use Google Finance, Yahoo Finance or Globeinvestor) and set the rules for a friendly competition.

I remember doing that at school when I was 16. We could pick any stock from the TSX60 (4 of them) and we had a set time frame for the competition. It was just nice to pick stocks and look at them go up and down. While we didn’t really understand how it worked back then, we could at least see that you can make money one day and be in the hole the next week.

I think that trading with your teen could be very interesting and he will be at an age that beating up their parents on something is greatly motivating .

#3 Share the account with him

Your teen doesn’t like competition? He is probably the cooperative type then. Team up with him and both invest money in an investment account. You can match or increase his contribution like an employer in a group RRSP. Taking trading decisions together can be a lot of fun and could be a way of communicating with your teen at the same time.

Slowly but surely, he will understand how stock trading works and how it can be fun to see your nest egg grow over time.

I hope that one of these 3 options will be enough to convince my teens to invest when they will be older! Do you have any other ideas?

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I was driving my car to work this morning (an hour ride each direction, there’s time to think a lot!) and I was thinking about the recent economic events and how they were reported in the media. I got this idea because as a banker, you are constantly confronted against what has been reported in the news and how your clients perceive that news.

When you look at how the media reports economic news, there are 2 big issues:

#1 Most individuals have a very limited background in finance/economics but since we all deal with money, think that they know what they are talking about. Therefore, they will take any economic news to the first degree and won’t do further research to understand fully why there is a recession or why there is a bull market.

#2 The Media industry (especially newspapers) is in the midst of a business model crisis. Therefore, the new “good” journalist is the one who reports the “biggest news”. So let me ask you a question:

What is more interesting between the following news items:

#1 The housing market in Canada will generally slow down based on our economic review and some inflated markets such as Vancouver, Calgary or Toronto might be facing a more important correction in housing prices.

#2 There will be a housing bubble burst in Canada! Interest rates will rise to 7%, people will lose their jobs and then their homes. Florida is nothing compared to what is coming our way!

I’d say that most editors will take option 2 as their headline . I have my opinion on the topic (housing bubble in Canada?) but let’s take a look at some major economic news from past years:

2007: Oil price will rise to $200/barrel; We don’t have much oil left.

Back in 2007, we were surfing on a huge oil price rise and more and more “specialists” with tons of diplomas were writing theses on how little oil was left on earth. Gasoline was ridiculously high, people were investing in oil income trusts like they were GICs offering 10% interest and Alberta was so prolific that they cut their taxes and their inflation went through the roof.

Result in 2010:

- The barrel of light sweet crude is struggling to get to $80

- Nobody talks about the lack of oil anymore or about all that was spilled into the Gulf of Mexico

- We don’t even care to report US oil reserves in the news (at one point, it was reported weekly!)

2008: Economic crunch; this is the end of the capitalism and all banks will follow it to the grave

In 2008, the market plummeted like it was the end of the world. Economists on Oprah were declaring that our economic system will never survive and that our banks will collapse. Even in Canada, it was the end of our Canadian banks. They saw their stock price fall by 50% in a span of a few months.

Result in 2010:

- We are getting out of a big global recession but capitalism is not dead.

- Most banks survived and Canadian Banks showed interesting profits, even throughout the crisis.

- The stock went back up almost to their peak prices in 2008.

2009-2010: Economy is back in Canada; Interest rate to jump through the roof!

After seeing Australia increase their interest rate in late 2009, some economists increased significantly their Canadian interest rate forecasts. We were talking about the Bank of Canada increasing their rate faster than expected. I even heard about variable interest rates going up to 7% within the next five years (I wonder if the same guy called the lowest interest rates for 2008 back in 2003 ).

Result in 2010:

- The Bank of Canada didn’t budge until June 2010 (which was announced 18 months prior)

- Variable interest rate hikes by 0.50% so far and no important increase is forecast for the rest of the year.

- Inflation is under control and there is no need to hike the interest rate anyways.

So back to 2010: Canadian housing bubble to burst or housing market going to slow down to a normal level?

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You know what? Running a business is a lot of fun; you make money while you are sleeping or while you are on vacation, you get a lot of expenses deducted on your income and you have the chance of being proud when looking at your baby growing months after months.

However, there are also some pretty bad moments. Such was when you think that you have found someone to take care of a part of your stuff…. Until you realize that you can’t get things done on time.

So here I am after cancelling my VA position and starting to look for another… with no roundups for 2 weeks in a row. Since my sister-in-law is getting married over the weekend, the week was pretty hectic and I really didn’t have time to read much blogs…

I promise I’ll be back with my ramblings next week .

Have a great weekend!

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The book the 4-Hour Workweek (by Tim Ferriss) has been mentioned on this site before. It’s a book with polarizing view points. Some completely love it. Others think that it’s a complete scam. I guess you could say that I fall somewhere in the middle. There are parts of the book that completely changed the way I think. Then there are aspects of the book that just didn’t resonate with me. At the end of the day, I wanted to share what I learned from the 4-Hour Workweek book:

You can always outsource.

There are simply some tasks that are either really time consuming or we just don’t want to engage in. I learned from this book that outsourcing can be done at almost every level (even the dating world). You can outsource your email, mundane daily tasks, shopping, customer service, etc. The benefit to all of this outsourcing is that you have more time to focus on your business or to do whatever it is that you enjoy doing. Of course the flip side is that you lose money. This then leads to a vital calculation– how and what can you save by outsourcing out certain tasks.

Cut out time-sucks.

There are many activities in a typical day that do nothing more than just waste our time. Anything from a co-worker that goes on forever or a meaningless task that takes hours to complete. My favorite time-suck to cut out involved responding to pointless emails. Anyone that runs a site or has a fairly public email understands how it feels to receive dozens of useless emails. Instead of taking the time to respond to each email, they can either be: deleted, given a standard response, or completely filtered out. Email is just one of the many time-sucks that needs to be cut out. As bad as it made me feel initially, I’ve come to accept that I engage in many time-consuming activities on a typical day that I need to cut out. What time-suck are you working on cutting out of your schedule?

There’s stuff you can’t control.

I used to get overwhelmed with the excruciating minutiae of everyday life. Now I’ve learned to accept that there are many things in life that I simply just can’t control. I can’t control the news. I can’t control decisions made by higher powers. I can’t control what major corporations do. The book suggest that if you can’t act upon something then you should just let it be. Of course there are times where your power may seem minimal but you should still try. However, more often than not we often spend too much time worrying about stuff that we can’t control. We need to learn to let it go.

Time is highly valuable.

When we thinking about making lots of money, we often neglect the massive amounts of time involved. I have a friend that makes really good money. Unfortunately, he’s pretty much always working. He works two jobs and they consume the majority of his time. His bank account is nicely padded, but at what cost? Are you willing to give up all of your free time? I’m certainly not. After reading this book I’ve started to highly value my time. Time away from activities that bring me pleasure and from loved ones needs to be justified. I’m no longer willing to spend all of my time on work. There needs to be more to life.

What have you learned from the 4-Hour Workweek? Do you view the book as a scam or has it helped you out? Please share with us.

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