Nancy Zimmerman: a canadian money coach (not a financial planner!)

This is fun.  The Economist has found a way to explain Foreign Exchange in plain English.  We can make sense of it by Burgernomics, or, The Relative Cost of a Big Mac.

The idea is that “in the long run exchange rates should move to equalise the price of an identical basket of goods between two countries”.

So, if we consider the Big Mac, it should cost your average Londoner as much as it costs a Canadian to buy a Big Mac in their respective countries’ currencies.  But it doesn’t.   In Canada, it costs $4 to buy a Big Mac whereas Europeans pay (the Euro equivalent of) $4.33.   This means the Euro is overvalued.  In contrast, my Chinese friends in Hong Kong are paying only (the yuan equivalent of) $1.90 for their burger.

And what meaning does all this have for you, gentle readers?  Well consider this.  When planning your next holiday, do you want to pay $1.90 for a basic burger, or join me on my 2012 holiday in paying $13 for the same meal?

Photo Credit: Roffe used under Creative Commons License.

Photo Credit:  Vipez

You know those enticing balance-transfer offers credit card companies were making us every other day? The ones where we could transfer our $1000, $5000 or whatever balances over to the new card and pay only 2% interest for 6 months? Here’s the very, very nasty little hidden catch: our subsequent payments would first be applied to this newly-transferred low-interest balance portion and meantime, if we made new purchases (usually at 19% or so interest), we had no way of applying our payments to the high interest portion until we’d paid off the transferred amount in full.

So, let’s say Joe Canadian transferred over $5000, then bought an airline ticket for $1000. Until he paid off the $5000, he was stuck paying $190/year in interest for the airline ticket. And my hunch is that most folks who transferred their balances did so because they couldn’t manage to pay it off. So Joe Canadian would be stuck at the high interest rate on the airline ticket for years and years.

Like I said, nasty.

I just got a New Cardholder Agreement in my mail. Nerd that I am, I read it and interestingly, Payments will now be applied first to those amounts bearing the highest interest rate. This is much fairer to the consumer.

Visa is also playing cleaner by giving 21 days interest free on new purchases even if there is an outstanding balance from the previous month, effective Sept. 1, 2010. Currently, unless Joette Canadian pays off her card in full, she accrues interest on all new purchases immediately.

I notice that the author of Reality Check is cynical about his bank’s new Agreement in this regard. This puzzles me — I’m assuming Visa changed their policy for everybody, not just my bank. Can anyone shed any light on this? Have you received a New Agreement? If so, does your Visa now offer 21 days interest-free on new purchases?

Value: the relationship between the consumer’s perceived benefits in relation to the perceived costs of receiving these benefits

Holiday: A vacation or holiday is a recreational trip or a leave of absence from work for recreational, cultural or religious purposes.

I had my first “real vacation” in years this July. Not only was it absolutely lovely, it was also high value for money.

What I would do differently:

1. Spend the bucks on a pleasant flight. I used Canadian Affair. They were the lowest price, but man, were we packed in there. On the way home, I could not relax my arms without bumping into the big guy next to me, and I had no way of stretching out my legs in any direction. At 5′ 10″, nine hours is a long time to be crunched up in an airplane seat! Next time I’d either shell out for their Xtra Leg-Room seats or consider another airline.
2. Buy my tickets earlier.  By the time I got organized to purchase my airfare, I only had limited options.  My trip ended up being a few days shorter than I would have liked – I only just got over jetlag and I was heading home again.  Note to self:  book at least 2 months in advance.
3. Withdraw larger amounts of cash.  Yikes! I erroneously thought I could use HSBC machines for free, so made multiple withdrawals of £50.  Oops!  A Mistake, at $3 per withdrawal!

What worked well

1. For a girlfriends’ meetup in London, we booked in at a Travelodge.  I momentarily had my doubts when I saw how small and basic it was.  But of course we only used it for a few hours to crash in – we were in London for heaven’s sake! – so I’m really glad we used our money for enjoying ourselves out and about instead of a prettier pillow. (Good call, Wendy!)
2. Purchasing 50 minutes of international cel phone use with Bell.  You’ve heard the stories, and so have I – travelers unwittingly racking up $6,000 bills by using their phones abroad.  Many people advised me to purchase a disposable cel over there, but in the end I opted simply to purchase 50 minutes from Bell – more than enough for the quick calls I made.  It gave me peace of mind for a manageable price.  Yes I kept my data roaming turned off. (Well, mostly, except a couple quick gmail and twitter checks.  Fingers crossed.)
3. Mama Mia! Selecting the Saturday Matinee instead of evening performance.  This saved us money and kept us free for a night on the town (Covent Garden is a Lot.Of.Fun)

What I wouldn’t trade for the world:

Staying with friends.  I am blessed beyond telling by my treasured friends.  Of course staying with friends has all the pragmatic benefits of no accommodation costs, of personal tours of gorgeous places (like the Ely Cathedral and Polesden Lacey National Trust), and some home-cooked meals.  But far beyond that, for me, it adds the depth and meaning of reconnecting with people you love.  Oh, and, who start the day with coffee in their garden like this:

One of the most important shifts I help my clients make is moving from mindless or reactive behaviour with their money to thoughtful and intentional behaviour.

I found a great little list of cues by Barry Davenport that indicate when we are spending mindlessly.

Do any of them reflect your behaviour with money?

• Buy on a whim.
• Buy to impress others.
• Buy because you feel you deserve it.
• Buy when you can’t afford it.
• Buy just to update something that still works or looks fine.
• Buy because someone else has it and you want it too.
• Buy because the advertisement seduced you.
• Buy because you are bored.
• It’s purchased because buying soothes you.

Reader submitted question:

Q – Me, my sister and my uncle are sharing the cost of keeping my father housed in a care facility because his gov’t monies & pension do not cover the monthly fee. My understanding is that we cannot claim our contributions because my father is not a dependent who resides with any of us. Is this true? Thanks!

Answer provided by Intuit’s Ask A Task Expert:

A – There may be a few things that you are allowed to claim. You should be able to claim amount paid to the care facility as a medical expense. CRA publishes a guide for Medical and disability-related information. It states that you can claim attendant care expenses as medical expenses that include your share of salaries and wages paid to employees performing different kinds of duties – see the guide for the criteria. You may also be able to claim the Amount for Infirm dependants, depending on the amount of income your father receives in the year.

Readers: I think this is going to be an increasing issue for many of us. If you’re comfortable doing so, I’m interested in hearing your thoughts — do you think we Canadians have factored in that we may need to start helping out our parents financially in an ongoing way? Or is that just not in our consciousness yet?
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