Tuesday, August 16, 2011

Minor "John Galt" in the making

My friend SF has decided to do a minor "John Galt". The more she makes the case for doing so, the more I am inclined to agree with her.

SF is in her early fifties. She is single. She lost her job about 2 years ago and hasn't managed to find another. She has owned her dwelling for close to 20 years and is completely mortgage and debt-free. She pays over $3000 in property taxes. The upkeep on her house, including hydro, cable, internet, phone, minor repairs etc. comes to approx. $14,000 in a "good" year when the "minor" repairs don't jump to major repairs. Otherwise, the major repairs plus replacing an appliance like a fridge, etc. in a "bad" year would cost anywhere between 2-10K extra.

SF is now planning on selling her house, which is a modest little bungalow in a good enough neighbourhood and is sure to get a minimum of 350K from the sale. That money, added to whatever she has in her RRSPs will total, according to her, close to half a mil or a little over.

She is sure that she will be able to get a rate of 4% on a fixed deposit or a GIC by the start of 2012. On this point, I have told her that she will have to be more conservative and think of that as 3% as according to me our rates for GIC or FDs are not improving to benefit "savers" like SF anytime soon. They will continue to benefit "spenders" as always.

So .... SF thinks that an income of 20K according to her calculations or even an income of 15K according to mine, will still suit her fine when she moves into a one bedroom rental apartment, rentals being readily available all over the city of Toronto starting from as low as $750/month. She will sell her car too and constrain her social life to live within the new constraints of either $20K or $15K income annually until the economy improves and she manages to find employment.

There are several drawbacks to SF's plan. One that I saw and mentioned to her was the withdrawal of the RRSPs to transfer to a FixedDeposit or a GIC interest bearing vehicle for her annual income. What happens when she starts working again?  SF, however, thinks that if she can manage to live within the income of $20K or even $15K then she won't bother looking for full-time employment and would be just content making a few thousand a year on a part-time job. Of course, she will be speaking to a financial consultant, before taking the life-changing step of selling her beautiful home and moving to a scaled down dwelling.

SF is totally fed up with the way our govt. treats people like her who are proud and decent and would rather die than even dream of taking a hand-out from the govt. She views entitlement seekers with the highest disdain, as do moi. She feels that the govt treats people like her like the father from the Bible story who thought more of the prodigal son than the good and true son. The badder and louder you are, the more the govt. wants to enfold you in it's arms and love you to pieces.

She does not want to give the govt any more of her money. By paying a monthly rent, she will be entitled to get a tax refund which will be 3 times the refund she got for paying her property tax. I never knew this.... and it's giving me ideas too. Just kidding.

I wonder how many unemployed people with houses to maintain are thinking like my friend SF.

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