- At a time when the overall savings rate in Canada is negative, it is inspiring to read about the finances of this young couple profiled in The Globe and Mail. Granted, they have a high household income approaching $120K per year but still a combined net worth of over $500K at 33 years of age is pretty darned impressive.
- Investors wanting to establish or increase their exposure to gold stocks might want to check out the latest commentary from Leith Wheeler, a boutique money manager with a value bent. Titled Gold Rush or Fool’s Gold, the report concludes: The stock market currently values a typical gold company at almost 2 times its underlying discounted cash flow value, using an extremely low discount rate of between 0% and 3%! This makes no sense to us and does not pass our test of “if the stock market was closed, would we buy the whole company at its current price?”
- Larry MacDonald has an interesting post on various blogs that track the deflating housing bubble. I was a bit surprised to find that one blog even tracks the Ottawa Housing Market.
- Frugal Canadian has posted a nice chart summarising the benefits of the various popular credit cards. I use the Costco Amex Platinum card (no annual fees and a reward of up to 1.5% in the form of a Costco rebate cheque) for most purchases and the PC Financial MasterCard as a backup. Readers have also pointed out that Citi Driver’s Edge MasterCard is an attractive option.
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7 responses so far ↓
1 awardtour // Aug 30, 2006 at 3:06 am
It goes to show how insane the vancouver housing market is when a young couple with that much savings still have to take on a massive mortgage.
I was also confused by the fact that their net monthly income was $7483 (or almost $90K annually) on a gross income of $119K. I thought the income tax rate in that bracket would be much higher than 25%? Is the tax rate on rental income really low?
2 0xcc // Aug 30, 2006 at 8:36 am
Doing a little bit of math, I come up with a yearly figure of $83100 (the article says they have yearly mortgage payments of $33240 and that is 40% of their take-home income). At the bottom of the article they mention the $7483 that you quote is about $550 more than the $6925 that is calculated using their mortgage payment of 2770 making up 40% of their income. If you note in the summary at the bottom there is a $300 RRSP contribution which would help to increase their after-tax income, also charitable donations of $30 would increase their after-tax income. They also don’t split out their incomes so if they were both making just under $60k the 25% average tax rate would be in the right ballpark… The marginal tax rate (amount of tax paid on each additional dollar of income) is higher than 25% but the average tax rate (total tax paid divided by total income) at around 25% seems about right to me.
3 0xcc // Aug 30, 2006 at 8:39 am
Oh and one more thing, that rental mortgage interest is also tax-deductable so there is an extra $1490 a month that they can use to reduce their taxes.
4 Canadian Capitalist // Aug 30, 2006 at 10:06 am
As you mentioned, I figured that an average tax rate of 25% on an individual income of $60K sounds about right. What really impressed me that they have managed to accumulate a net worth of more than 5 times their annual income. Wow!
5 Phil S // Aug 30, 2006 at 12:45 pm
The webpage with the credit card comparisons doesn’t take into account some of the “other” benefits of the cards. For example, I have the RBC Platinum Avion card and if I rent a car, I can waive the basic insurance, or if I book a hotel room on it, I get automatic Hotel Burglary insurance, yada yada yada. In comparison, I have the BMO Gold Mosaik Westjet card which has diddly squat for extra features, other than some small Westjet benefits. Since I enjoy travelling as a pastime, my RBC annual fee (to me) pays for itself in spades every year, whereas my Gold Mosaik Westjet card is more like a money pit.
6 Al R // Aug 30, 2006 at 3:11 pm
Phil S - I agree, but it would be really difficult to factor all the extras into the equation. There’s dozens of rewards programs out there because different things appeal to different people. I’ve got the BMO Gold Mosaik card which pays off big for me because it’s easy to save up for flights, and it essentially gives you free banking at BMO. If you never rent cars or stay in hotel rooms, the RBC card looks weak. That’s why these exercises are kind of pointless…
7 Canadian Capitalist // Aug 30, 2006 at 10:05 pm
Phil, Al: That’s an excellent point. Some credit cards provide rental insurance or flight cancellation insurance. Depending on your usage these benefits may be more valuable than rewards. One idea would be to have a no-fee card that provides the benefit you are looking for as the backup card and use the reward card for other purposes.
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