2008 Financial Housekeeping

The first half of 2008 has brought a few changes that have affected my monthly budget and finances, so now is a good time to do some housekeeping and make some adjustments.

Three different expenses have gone up for me this year and the most obvious one is gas prices. My monthly gas costs have increased by around 50%. Luckily I had over-budgeted for gas, but even that is no longer adequate, so I’ve increased my monthly gas cost in my budget. Food prices have also risen slightly (and I’ve been buying more one-time purchase items for things I don’t have- like vanilla extract). So I’ve tweaked that number too.

Now that summer is here, my air conditioner has been running, so I’m expecting a sharp rise in my electricity bill. However, since this is my first summer living here, I don’t really have a good idea of how high it will go. So, I’ve doubled my hydro estimate for now. I bought a digital timer that I’m using to cycle my air conditioner on and off during the day and night so that I can save a little bit of energy rather than leaving things running; so I hope that helps.

Readers may or may not know, that the Bank of Canada (www.bankofcanada.ca) has lowered the overnight rate several times so far this year. (This is the rate that banks use to lend to each other). This has resulted in a decline in the interest rates on my savings accounts. Most dramatically at the online bank where I was previously getting my best rates. So I think I will be moving those savings accounts over to my credit union (which offers free chequing and high-interest savings accounts) which I had been planning on doing anyway. My credit union has not lowered the savings account interest rate as dramatically as the online bank. Plus, I think I feel a bit more comfortable with keeping my savings at a local credit union rather than some faceless online branch of a big bank. Either way, readers should stop by their banks’ websites to check what their rate has changed to lately.

These changes to the overnight rate are the Bank of Canada’s effort to control inflation and balance the economy. Unfortunately, cuts to the rate are bad for savers (savings accounts, GICs etc) and good for spenders (lower mortgage and loan rates, etc). At least, that’s my general understanding of how it works. By encouraging spending, the Bank of Canada hopes to stimulate economic growth. It’s all a big balancing act. As of today, June 10th, the BofC has held the overnight rate level at 3%. The next update is in July.

Other things I’ve noticed is that due to the the current economic slow down in both Canada and the US, my RRSP’s performance is down slightly from the blistering growth of last year. However it’s hold it’s own thanks in part to my foreign equity fund holdings. (Oooo- weee… listen to me, I sound like I know what I’m talking about. I don’t. *laughs*).

Anyway, my basic point is that people should always try to do quarterly adjustments to their budget, and keep abreast of economic swings that will affect them. Having an emergency fund and an aggressive goal to pay off debt- is a wise move for any economic situation.

Disclaimer: I am not a financial expert. Consult your adviser.