Personal Finance: Canadian Common Sense


With the G8 and G20 summits being hosted in Canada this week, we’re taking a moment to recognize the relative economic success that Canada has enjoyed over the past five years, in stark contrast to the debt debacles that are consuming nations around the world.

Canada is known for its comedians and its hockey players, both of which have failed to bring the country prominence in recent years. Just look at Canadian import, Mike Myers, and his embarrassing film The Love Guru: the film won three Golden Raspberry (Razzie) Awards in 2009 for worst film, worst screenplay and worst actor. The Montreal Canadiens may have made it to the NHL playoffs, but they couldn’t close the deal. It doesn’t help that episodes of South Park and Family Guy continue to bash the country with crude references.

Although some describe Canada as boring, you might prefer to use the words “responsible,” “resilient” and “good management” to illustrate its economy, just as the New York Times did in this op-ed piece. In a Newsweek article by Fareed Zakaria, entitled “Worthwhile Canadian Initiative,” the author explains why the World Economic Forum ranked Canada’s banking system as the healthiest in the world in 2009.

So, on those two uplifting Canadian notes, we’d like to call attention to some Canadian common sense the U.S. might want to consider following as we move into a new economic period.

Plan modestly

While the European and American banks were leveraged at extreme amounts of up to 61 to 1, on average the Canadian banks are leveraged 18 to 1. Canada gambled less of its capital on high-risk investments, and when some of them failed the fallout was not substantial enough to shock the banking system. The stock market is the world’s largest casino and delving into exotic derivatives, like many firms did, was like betting on a roulette wheel.

We need to stop believing that we can make 30%+ gains on our investments year after year and have a more realistic view of our savings. If you plan and expect to make a modest amount each year, say 5% to 10%, you will be attracted to safer investment vehicles and will steer clear of dangerous assets that are hard to fully comprehend, which is how you could personally practice a bit of Canadian common sense.

Cash is king

While other countries were betting on mortgages and derivatives, Canadian banks were stockpiling their funds and have enough now to make strategic purchases while the market is on sale. The 2007 purchase of the American magazine The New Republic by the Canadian media company CanWest Media Works International proved just how profitable Canadian common sense can be when it comes to preserving funds and waiting for the right time to buy.

If you save more of your hard-earned money in good times, you will be prepared to take advantage of downturns in the market. Wouldn’t you like to have 50% of your savings in cash right now and be able to buy stocks that are cheaper than they have been since 1997?

Don’t asset-discriminate

There is also the trouble with the immigration system in the U.S.: Canadian companies have been hiring a talented foreign work force by utilizing the Canadian Skilled Worker Visa, while the U.S. turns many of them away because of domestic policy. In 2007, Microsoft began building research centers in Canada so they could legally add these experienced workers to their ranks.

A lesson in Canadian common sense would be: Don’t discriminate against different assets just because they aren’t popular or hip at the time. Do your homework and find safe and profitable recession-proof investments and try not to worry about what your friends or the cable television personalities think. It’s your money, not theirs.

Take responsibility for your investments

One of the most heated issues in America is the idea of fiscal responsibility, namely the incentive programs the U.S. government provides to fuel overconsumption. Many people just don’t want to take responsibility for their actions or want to wipe the slate clean and call a “do-over.” They want the government to come to the rescue when they can’t pay off their mortgage or want out of a dead-end job.

Take responsibility for your situation and prove your Canadian common sense by doing so. If you made a bad investment, the first step is admitting it. Don’t hold out hope that you will recoup your losses in the long run on an insolvent company.

Do it like the canucks

We could all learn something from the common sense of our friends in the North. Play it safe with your portfolio, look for investment opportunities that will provide a modest gain, and play the Canadian common sense game. And next time you think of Canadians, remember: They’re not “boring,” they’re financially safe and secure, which is more than we can say.

Personal Finance: Canadian Common Sense originally appeared on

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