Snowballing is a common debt management technique intended to accelerate reduction of the overall debt burden for people with several different loans. A person or a family dedicates a fixed amount every month to go towards debt repayment. Out of that amount, the minimum required payments are made on all the loans first, and whatever is left goes towards reducing the smallest debt. Once the smallest debt is completely paid, the amount available to pay off other debts becomes larger, because we are keeping the total amount fixed and one debt is now out of the picture. At this stage, the next smallest debt becomes a priority, and once it is paid, the amount available for the remaining debt becomes larger. This way, we eliminate debt after debt, beginning with the smallest and going up. Because fewer and fewer debts remain and the amount we dedicate for debt repayment is fixed, the repayment process accelerates.

The value of post-secondary education has diminished significantly over the last couple of decades. The law of supply and demand works in the labor market just as well as it works with commodities, real estate and everything else. Twenty years ago college education could guarantee you a better living standard. This lead to a disproportionate number of people pursuing higher education and today, a typical college grad in Canada starts at $12 to $15 an hour while uneducated assembly line workers make $70 and some skilled tradespersons as much as $100 an hour. There are some exceptions, and certain occupations that require post-secondary education, such as dentists, lawyers and accountants, still earn higher incomes. But with the large number of students enrolling in these programs today, a few years from now those professionals will be a dime a dozen.

We often see advertising and hear radio commercials screaming that this is a good time to buy real estate. You can even read articles explaining why this is the case. But anyone with a trace of intelligence can immediately understand that those are written or paid for by realtors and, therefore, completely disregard them. So is this a good time to buy real estate?

When you turn 71, your RRSP has to mature. And the maturity options include RRIF (Registered Retirement Income Fund) or an annuity. With a RRIF, you are forced to make withdrawals calculated using a special formula taking into account your age and your account balance. But you also have an option to withdraw more, or even everything as a lump sum. You can also decide how your money will be invested. The annuity option is different.

Amidst all the noise about failing companies and government bailouts, louder than anything else in Canada we hear the voice of our auto industry. They claim to be hit by the global financial crisis more seriously than others and ask for taxpayer money. One of the major roles of the government is to stabilize the economy, and there is nothing wrong with financially supporting a large company or a whole industry to help them overcome temporary difficulties. But are their difficulties truly temporary? Is the liquidity crisis to blame for their troubles? Is everything going to be OK once credit starts flowing again?

In one of our recent articles we shared our pessimistic views on where our economy is going. We compared the way the global economy works to a Ponzi scheme and argued that until we return to fundamentals and start rebuilding the economy on new healthy principles, no recovery is possible. As much as we hate being pessimistic, the recent developments make the gloomy outlook even worse, primarily because of the stupid decisions the major world governments are making.

More and more often, we hear the word downsizing. This is what companies do during recessions, and we are entering the scariest one in half a century. As gloomy as it may sound, downsizing is actually a healthy and reasonable response of a business to a slowing demand. Payroll expenses are mostly fixed, which means that no matter how much the company is producing, staff still needs to be paid. Therefore, reducing the headcount is a rational step. Also, labor costs are usually high in proportion to other expensed, especially in the industrialized world, and cutting them will make more difference to the bottom line than, for example, using smaller size fonts or turning computers off at night. A business is not a charity and its purpose is to survive and remain profitable. Therefore, unless you work for a collections agency, you need to be prepared.

There are many benefits of having a full-time job versus being self-employed. Guaranteed income, group benefits and sense of security are among the most important ones. But are they really as certain as many people view them? And what is their true value?

The idea of using charitable donations to reduce one’s tax liability is not new. The funny part is that normally it makes no financial sense. The charitable tax credit is calculated at the highest marginal tax rate (ignoring the first $200), which means that in order to get a $437 credit next year you need to give away $1,000 (in British Columbia) today. If your goal is to save as much money as possible, it won’t work for you. The credit is intended to encourage charitable donations by reducing your expense, not by making you wealthier if you give your money away.

As thousands of people in Canada get laid off every month and the situation is expected to get worse, more and more people turn to Employment Insurance (EI) for help. EI has nothing to do with charity. The benefits are not funded by the government. The program is, as suggested by its name, an insurance program funded by the premiums paid by employees while they are employed and the companies they work for. Therefore, there is nothing shameful in receiving unemployment benefits. This is something you have been paying for, perhaps for years, and something you are entitled to, as opposed to welfare which is funded by other people’s taxes and is, arguably, unfair. Employees pay 1.73% of their insurable earnings and their employers pay 2.42%, subject to certain maximums.