Thursday, August 16, 2018

Is Canola Lulling Us Into A False Sense of Security?





The colours of a blooming canola field are stunning. There’s no doubt, we live in canola country here in Saskatchewan.  Soon after harvest is complete, farmers will be able to calculate their profits for the year.  The importance of this practice is stated in the article “Is canola lulling us into a false sense of security” which appeared in the magazine, Farming for Tomorrow (Spring 2017 Edition).   

Paul Kuntz is the owner of Wheatland Financial and offers financial consulting and debt broker services.  Paul graciously agreed to share his article with me.  I believe his views are justifiable and provide a deeper understanding of our dependence on this profitable crop.  Here’s the question in need of an answer: “Is your farm built for long term sustainability? 

Paul is also a Certified Agricultural Farm Advisor through the Canadian Association of Farm Advisors (CAFA).   You can read Paul’s credentials here.  

Many things can lull us into a false sense of security. Let’s be sure our canola crop isn’t one of them.  Take a few minutes to determine whether the information applies to your farm operation.  





Is canola lulling us into a false sense of security?

As we get ready to plant our 2017 crop, I can guarantee that a good portion of seeded acres across Western Canada will be canola.   If you take a drive in July, there will be many yellow blooming fields. And why not, the crop has great technology put into it, there are great weed reduction systems, we have advanced fungicides to apply, our weather pattern provides the plant what it needs and the market wants our product. In the area where I am, we have three crushing plants close by that offer aggressive pricing, low basis levels and great delivery options. What is not to love?

The economics of this crop are hard to beat. Yields have been increasing at a rapid pace while pricing still remains strong. It is tough to find a crop that makes as much money as canola does. But how much can we grow on our farms? How often are we growing it? Are we making business decisions on poor agronomic practices?

I will put a caveat on this article: I am not an agrologist or plant scientist. My training and what I practice every day is the financial business of farms. So I am approaching this from a financial concern.

One of my clients had a discussion with me a few years ago right after harvest. Some new land had come available and he rented a complete section. You could actually farm it as a 640 acre block. It is a beautiful piece of land. He grew a canola crop that averaged 70 bushels/acre. In our area, that is huge. A 50 bushel crop is a great canola crop so 70 is unheard of. His discussion with me was not of optimism and great joy over the bumper crop he harvested, it was about rental rates.

You see there was a few quarters of land available in this area and the owners had done 1 year leases with some farmers. My client was a local producer but there were other parcels of land that were rented out to farms from quite a far distance away. These other farms would be considered very aggressive. My client had rented this land for $60/acre and was hoping to secure a long term lease at that rate. The other farmer had already made it know that they would be offering $100/acre.

At 70 bushels and prices over $10/bushel, there is no issue with paying $100/acre rent. All the numbers would be just fine. The problem is that we should not grow canola every year. We shouldn't grow it every second year. We should only grow it every third year. The growing conditions for the 70 bushel crop were also perfectly ideal. We should not expect that every year.

The problem is that whether my client wants to follow what is considered a proper rotation or not, the actions of the other farmer are forcing his hand. Rent in that area will rise because of profitable crops. If we took the economics of wheat and put that into the equation, no one would be rushing to rent land. But what happens if you have to grow some wheat for rotational purposes? The economics are already set out and you will lose money.

If you can grow a good crop of canola on most of your acres, you will be profitable. I do not have to conduct an analysis of your farm.  Based on my clients I know that an average canola crop will always pay the bills. So why don't we just grow it on every acre?

If you look to the real experts on growing canola, you will see that the recommendations given are not followed by producers. The Canola Council of Canada recommends to have at least one year, preferably two or three years of other crops in between canola crops. The reasons cited are to avoid diseases of Blackleg, Sclerotinia, and club root. But the article goes on to say that clubroot spores stay in your field for 7 years, so rotation does not help. Sclerotinina is windborne so with so much canola grown, rotation will not help prevent this either. So that leaves blackleg. But I thought all varieties are blackleg resistant? Well they are, but resistant to what strain of blackleg?

At a recent Pioneer Dupont grower meeting, they revealed that in almost every test plot there is blackleg. There is not enough to cause noticeable damage, but nonetheless, there was black leg there. So maybe we can't save our canola from blackleg just by planting the newest and best varieties.

Garth Hodges, vice president of marketing and business development with Bayer Crop Science told the Canola Council of Canada that short rotations are weakening the crop's ability to withstand pressure from clubroot, blackleg, weeds pests, and other challenges. He asked the question "How do we go back to some of the basics like saying we have to go into good crop rotation and be better at crop rotation?"

Keith Downey, one of the researchers who created canola, is suggesting municipalities to use existing legislation to stop farmers from growing canola too often. He is concerned about only having three clubroot resistant genes and not being able to find new ones quick enough.

Hodges went on to say he is worried that growers assume that the industrial giants like Bayer Crop Science will simply develop new varieties and products that minimize the problem.  "It's hard to invent new chemistry" was Hodges comment.

So how bad are we doing? Are farmers really pushing the envelope? In Saskatchewan's canola growing capital, the north east, in 2015 46% of the acres were seeded to canola.  Almost half of the acres in that region are in canola. The quick math on those numbers show only one crop is being grown in between canola crops. Every second year is canola.

There isn't a farmer out there that wants to be unsustainable. Every producer wants to be able to make money today and grow great crops for years to come.  The current economics make it very difficult to make good rotation decisions.

Part of the problem is that the bad behavior is being rewarded. If you grew a great canola crop on a field that had canola on it two years ago, you will continue the practice. Producers are not seeing dramatic drops in yield when they push their rotation. If they did, they would change the practice immediately.
My fear is that I believe proper crop rotations can be compared to our health and nutrition. If you have one cigarette, you do not get lung cancer. If you eat a bacon cheeseburger with french fries, you don't have a heart attack. If you have a soft drink, you do not get diabetes. But the research shows that there is a direct link to all of those activities and the negative outcome. The same can be said about rotations. We all know there is a risk, but it is off in the future somewhere and the bills are due now.

Your seeding plans for 2017 will be set in stone by the time you read this. I want to challenge your financial crop numbers: Calculate your cost of production for your farm and run a crop scenario that has you growing canola every fourth year rather than every second or third year. Could you generate enough income to cover all of your costs? If you can, then your farm is built for long term sustainability. If you cannot, then maybe canola has lulled you into a false sense of security.

Thursday, August 2, 2018

So You Want to Start a Business




Uncover the Mixture of Uncertainty and Challenges

Do you ever wonder why we have difficulty answering our own questions when we are planning our future?   It’s likely the stakes are high, the risks are great, and fear of failure prevails.   

We may ask, “Which direction should we take?”

Uncertainty causes us to feel stuck. When we are unsure whether to embark on starting a business, a few indicators can help assess our skills to determine whether we are suitable for becoming the next entrepreneur.  We may believe our business can take off until we come face-to-face with obstacles and uncontrollable challenges. That old cliché, “When the rubber hits the road”, comes to bite us. The bite in those challenges may raise doubts in our capabilities and circumstances.    

This survey conducted by the RBC Royal Bank Small Business in 2005 shines a spotlight on the top five challenges experienced by business owners.  Those challenges then are most likely the same ones now. 

          1. Finding clients and developing your market (56%).
          2. Keeping a steady workload (37%).
          3. Working long hours (34%).
          4.  Keeping up with the competition (19%).
          5.  Finding qualified employees (16%).


Find a Clear-cut Recipe

Before determination sets you on the business path, let’s delve into helpful resources to pave the way and lead you to make the right decision.

Starting a business can feel both exciting and frightening. Finding the right balance is crucial.  We should always be mindful to feed the right emotion and starve the wrong emotion. The best way to combat our fears is to acknowledge and identify them.  Fears can be warnings worthy of our attention.  Preparation is the solution.  Some sure ways to determine our suitability for self-employment are: asking “What do I need to know?”,    hunting for information, and probing for honest answers to assess the prospect of being a small business owner.

A recipe for a successful business can be compared to the creation of a tasty dessert.   Both are based on the premise that the right ingredients are essential to be prosperous and enjoyable.  The methods in the preparation are as important as the ingredients. The ingredients have to be blended together in a cohesive manner.

  



Humor me and follow along with my trite comparison.

If you are looking for the ideal recipe for starting a business, look no further than to the website of Community Futures Saskatchewan which offers this guidebook, Starting a Business 101 (Canadian Edition).  Just like any recipe, you will discover whether you personally have the right ingredients for starting a business.   Simply answering the “To Be, Or Not to Be An Entrepreneur” quiz, comprised of 41 questions, will provide insight into your attributes and the confidence to proceed with your business idea.  


Acquire the Ultimate Ingredients

To condense the former list, the RBC Royal Bank emphasized a shorter version in their archived brochure (June, 2010).  You have to be willing, able, and above all passionate about forging ahead. Certainly some of these qualities may point out some personal weaknesses.  Recognize them and engage with someone who can complement your strengths and offset your weaknesses. This list of fourteen traits allows you to quickly assess yourself with a simple, “Yes” or “No.”

q Passionate about their work
q Someone who takes action
q Strong work ethic
q Strategic thinker
q Flexible
q Self-aware
q Able to ask for advice
q Resourceful
q A leader
q Creative
q Innovative
q Self-disciplined
q Financially disciplined
q A good communicator


Create an Effective Method

When we design an effective method, we will never have to guess.  We will know how we will begin and what things to investigate (market, competition, products and/or services). This task is achieved with the creation of a solid business plan.  Community Futures Saskatchewan provides a Business Plan Guide to create a winning plan for our business. It’s the roadmap to our success especially during the challenging times.   

Robert (Bob) Stocks, a business consultant and coach,  looks at a business plan in a different way.  He visualizes a business plan the same way you and I use the mirrors in our vehicles. The side and rear mirrors are always in sight. He claims, “If you move your side mirror to block your vision, you are blocking your visibility to the road. What would you be looking at--you would be looking at your past. Mirrors are representatives of the future and the past.”  Bob always recommends keeping our business plans current.  This means we should review our plan regularly and adjust it accordingly.


Add a Unique Touch

Another important consideration is to create a value proposition statement.  If you have heard the term, “elevator pitch or speech”, you’ll understand a value proportion statement is the same. By definition, an elevator pitch is a slang term used to describe a brief speech describing an idea for a product, service, or project. The name is derived from the view that the speech should be delivered in the short time period of an elevator ride, usually 20-60 seconds.

On the business front, value proposition statements have gained popularity in providing customers or clients with a clear perspective for the services and products offered.  I believe they help explain “why we do what we do”.

For example, when asked what I do, my response could be, “I create financial plans.” Some may think, “That’s boring.”  But if my response is “I am in the construction business.  I create financial roadmaps to help people understand where they are financially going and how to get there,” this may lead to more questions about how my work may help them.  I encourage you to reflect on how you provide value to others in terms of the services and products offered through your business.


Pay Attention to Specific Details

When I think about the people who didn’t do their homework, their stories did not end well.  One person believed a small city with an aging population had the potential for a men’s hair salon offering high-end haircuts and other exclusive services. He had misread the demographics, concluding that if the service was available, men would be willing to pay the higher price.  Another unfortunate incident occurred with a talented drywaller.  He had a strong market; his services were in high demand.  However, he encountered financial difficulties managing his business.  The business venture came to a halt when Canada Revenue Agency came to collect taxes owing on his business income.

The right ideas, products, and services may be waiting on the fringes for you to explore.  Perhaps you have something in mind.  Katelyn Lohr’s inspiring story is worth taking the time to watch.  Katelyn made an appearance on the Dragon's Den to pitch her toeless sock business. We can learn something from the questions the Dragons asked Katelyn and apply them to our business ventures.


Be Ready to Cook Up a Plan

Arming ourselves with valuable information is crucial.  Many believe all we have to do is work hard and our businesses will take off.  The guidebooks show how much “Business Stuff” we need to consider. To be honest, this stuff is too important to ignore. A great place to start is adopting the guidebooks as your own personal workbooks.   

A one-stop shopping centre generally offers everything we need.  When we are looking for a one-stop learning centre about starting a business, I recommend you stop here, Community Futures Saskatchewan for advice. The best part is the services are free for browsing, investigating, learning, and much more.  Take a peek for yourself.

Thursday, July 19, 2018

Staying Put (Well, Not Exactly)


"Cat on Deck!"


When Staycation was first coined in the United States during the financial crisis, many didn’t realize this choice of holiday would gain popularity. People simply stayed home rather than travelled because of necessity.  The reality, even today, is vacations can be quite costly depending on our choice of travel, accommodations, and entertainment venues.  When we have so many items on our wish list, occasionally we may have to forego an elaborate holiday.  The cost of a family wedding, a kitchen renovation, or a new vehicle suddenly hampers any getaway plans for one season. The money-on-hand may be a little sparse to entertain an expensive getaway but it may be sufficient for a staycation.

The words “stay” and “vacation” were creatively blended into “staycation”.   By simply staying home and planning unique activities, we can ideally create everlasting memories.  The trick to having a memorable staycation is to create new experiences or take part in fun activities we often can’t fit into our busy schedules. After all, the real importance of a vacation is to relax, create memories, and spend time with family and friends.

The important consideration for a successful staycation is to plan daily activities.  Our imaginations help to design the perfect holiday at home.  With a little assistance from the Internet, endless ideas pop up. Simply click here to discover 30 Ideas for Summer Fun, Staycation Style.  This fantastic article tells us How to Kick Back, Relax and Vacation at Home.

The downside to a “staycation” is feeling the need to catch-up on projects and work activities.  We can easily fall into the trap of working our way through our vacation because we have the extra time. Caution should be exercised so we don’t exchange a sense of accomplishment for physical exhaustion.  All work and no play is not fun. While a staycation can be easier on our budget, we need to be fair to ourselves and our family. 

Staycation spells F-R-E-E-D-O-M.  There are no deadlines or delays because everything happens on our timetables. We control everything from when we choose to do something to what we choose to do.  This kind of holiday provides freedom from jet lag, packing, long drives, or waits at airports.  

Kick back and relax as you plan your next unforgettable staycation which is…

          F - Fun-filled
          R - Relaxing
          E - Experimental
          E - Enjoyable
          D - Daring
          O - Outstanding 
          M - Memorable

Thursday, July 5, 2018

Preserve the Knowledge of Others





The CAFA (Canadian Association of Farm Advisors) Parkland Chapter ended their membership year in late June on a high note. The meeting’s theme was “Why Advisors are Valuable to Farm Families. Our presenters, ranchers and farmers, shared their first-hand experiences working with advisors on their businesses. 

Robert and Karen Ivey, partners in Evergreen Cattle Company, and Terry Aberhart, CEO of Aberhart Farms and Sure Growth Technologies and Managing Partner with Aberhart Ag Solutions, graciously shared their knowledge, experience, and wisdom.  Their insights are worth capturing and preserving in writing so that others may learn from their journeys. Here are a few take-aways from their presentations.

1. Have a keen interest and passion – important ingredients to drive success.  This sound advice may have been reiterated previously by different people as they pursed their careers.  Today, our presenters confirmed this again.  If your heart is not in the work you do – whatever it may be – then no matter how hard you try, you will not drive yourself to do better than average.  Your passion causes you to lie awake at night, dream about your work, and devise strategies. Living and breathing what you know and love becomes part of your DNA.  The fuel -- your interest, passion, and dedication to your work -- are the driving forces of your mission and vision statements. This takes us to the next point.  


Robert and Karen Ivey
Evergreen Cattle Company
2. Create and review your mission and vision statements for your business.   A person does not realize the value of words. A well-designed and crafted mission and vision statement motivates people to succeed especially through setbacks.  Failures, obstacles, and challenges will happen.  Our determination to see the light at the end of the dark tunnel helps us to persevere through the tough times.  Robert and Karen designed their mission statement four decades ago when they first began farming.  This important step should not be overlooked.  The vision statement tells you where you want to be (and what you represent) and the mission statement tells you how you’ll get there.  





Terry Aberhart
Aberhart Farms / Sure Growth Technologies
Aberhart Ag Solutions

3. Embrace change.  Change occurs with or without your permission.  New ways of doing things -- technology, processes in a business operation,legislation (legal and tax rules) – affect a business.  You cannot control everything so you need to focus on the things you can control.  “Have the right mindset and work with future-minded people,” was Terry’s advice.

4. Anticipate the storms, the financial setbacks. You may need to rely on a different strategy.  In the farming industry, severe weather conditions and disease infestations can hamper the bottom line.  Regroup. Strategize. Persevere. Rely on your mission and vision statements.

5. Know your financial situation. If you are not a number person then linking up with an advisor who can help establish your yearly budgets and analyze the financial data is vital. The Management Trinity has been previously discussed. Generally, people are good at two of the three essentials necessary to carry on a business. These three are finances, marketing, and the hands-on work. Business plans with realistic financial projections are road maps.  Robert and Karen had created their business plan with financial projections and asked their banker, “Do you want to come into business with us?”  They proved to their business advisors their capability for achieving their business goals with a concrete plan.    

6. Engage with other advisors.  Advisors help you think and plan realistically.  Terry said it best, “You may be blinded by what sounds like a good idea until someone shoots holes in your boat for good reason.” Advisors fill in the gaps with their knowledge and expertise then advise accordingly.

7.  Find a way which works for you.  “Canned programs” with a step-by-step process do not work for every business family.  Two examples are whether to implement an estate freeze or purchase land inside a corporation.   The strategy has to be right for you.

8.  Keep your business and family affairs separate.  Treat your business as “business first” which results in doing what is in the best interest for the business. The Three-Circle Model illustrates that the family business has three unique groups within its structure: the owners (or shareholders), the family, and the business.  

To operate a farm or ranch successfully, like any business, you must have a great understanding of all the elements.  Our presenters shared the core foundation for any successful business remains unchanged in order to strive, thrive, and survive. 

Reflecting on the years when our ancestors first came to Canada, you can see how agriculture has evolved over the years. Breaking new land was first done with horses and plows. Roots were handpicked.  Labour was intense and backbreaking. Today caterpillars and heavy discs relieve the strenuous labour.  Yet others stressors, which are uncontrollable, remain constant. Weather is one factor.

The benefit of learning from others is hearing about their strengths, weaknesses, opportunities and threats.  Naturally, a person thinks others have it so good until we hear how bad they had it. But their ability to turn their situation into good is reassuring and encouraging.  Advisors and mentors help us find the way.

Thursday, June 21, 2018

Deliberate Thinking

Many times I agonize over 'what to write'.  The reason is one of the steps in writing the perfect blog is to determine your audience.  In the financial planning world the conversation could go in a hundred different directions.  If the truth be known, I either precisely hit or completely miss the mark.  Everyone's needs are different at different stages in their lives.



Nevertheless, the one thing I am certain about is that we all “think”.  It’s our thinking which shapes our days, the days we call the future.  We think about…


  •       Our profession or business.  What kind of work will we do in our lifetime?
  •       Our finances.  Depending on our income, how much can we afford to pay?
  •       Our goals.  If we decide to do something, how will we achieve these goals?
  •       Our ideal life partner.  What kind of person is the perfect match for us?


The straight-forward question is:  “How much thought do we devote to thinking? “  In John C. Maxwell’s book, Today Matters (2004), he writes:



I believe that many people take thinking for granted.  They see it as a natural function of life. But the truth is that intentional thinking isn’t commonplace. What you do every day in the area of thinking really matters because it sets the stage for all your actions, and it will bring you either adversity or advantage.



According to Mr. Maxwell there are actually eleven different thinking skills when it comes to good thinking. Who knew?  To give you a sense of the skills, here’s an overview:

  1. Big Picture Thinking:  the ability to think beyond yourself and your world in order to process ideas with a holistic perspective.
  2. Focused Thinking:  the ability to think with clarity on issues by removing distractions and mental clutter from your mind.
  3. Creative Thinking: the ability to break out of your “box” of limitations and explore ideas and options to experience a breakthrough.
  4. Realistic Thinking: the ability to build a solid foundation on facts to think with certainty.
  5. Strategic Thinking: the ability to implement plans that give direction for today and increase your potential for tomorrow.
  6. Possibility Thinking: the ability to unleash your enthusiasm and hope to find solutions for even seemingly impossible situations.
  7. Reflective Thinking:  the ability to revisit the past in order to gain a true perspective and think with understanding.
  8. Questioning Popular Thinking: the ability to reject the limitations of common thinking and accomplish uncommon results.
  9. Shared Thinking: the ability to include the heads of others to help you think “over your head” and achieve compounding results.
  10. Unselfish Thinking: the ability to consider others and their journey to think with collaboration.
  11. Bottom-Line Thinking: the ability to focus on results and maximum return to reap the full potential of your thinking.


This tidbit of information may have piqued your interest.  This curiosity may trump your need to know why this is important.  Much to your surprise, as the title of the book implies, when you change your thoughts, you change your life.  Mr. Maxwell’s follow-up book, How Successful People Think (2009), dedicates a chapter specifically to each thinking skill.  These eleven thinking skills also appear in detail in his other book, Thinking for a Change (2003). 


Believing we will master all of these skills is a fallacy.  However, understanding these skills enables you to determine your strengths in each area on a scale of 1 to 10. Previously, I asked the question, Are Negative Thoughts About Money Holding You Back?  Now I am asking you to consider how you think simply because I honestly believe we don’t give this much thought. 




The danger lies in the consequences of our rushed decisions. When we don’t take the time to adequately think our way through our thoughts and ideas, we experience conflicts with ourselves and others.  I can think of an instance when someone recently shared, “I wish I hadn’t bought that new truck.  My budget is stretched with the new payment.”   Any kind of impulsive no-thought purchases cause people stress more than they would like to admit.  Mr. Maxwell’s book, How Successful People Think, changes our perspective about thinking.   When we take the time to think through our thoughts, like he encourages, we have a greater sense of control over the outcome of our decisions.  

I love the mental projections in my mind when I think about the strategy.  I see “clarity” as we concentrate, map out the details with pen and paper in hand, and weigh the pros and cons of our decisions.   It’s much like the feeling I have when I decide what I will say in my blog posts.  

I distinctly remember Mr. Maxwell’s lesson about our thoughts either requiring a runway or launch pad.  When our thoughts are so small we don’t need a runway to fly them, a launch pad will do.  So how big are our ideas?  Are our thoughts like a Boeing 747 in need of a long runway or a helicopter in need of a small launch pad?  I wish I could say all my thoughts and ideas were great “runway” thoughts.

I have made some good decisions but I also made some poor ones, like my idea for a U-Pick Raspberry Farm.  The U-Pick idea turned into an I-Pick because people were interested in purchasing berries, not picking them. Intense labour problems compounded with flood issues resulted in downsizing.  The small business venture existed for a number of years but in reality never soared.   This serves as an example of my launch pad idea.




Taking time to think and create a business plan (even if the plan is designed for your personal growth) is extremely important. We are so geared up in “go-mode” that we often don’t consider where we are going.  The consequence of this kind of drive creates regrets especially when money is involved.

The vision of purchasing a cabin or acreage can serve as an example. With dreamy eyes, we think, “Wouldn’t it be nice to look out the front window onto the lake.”  “Wouldn’t it be nice to hear only the birds and not the traffic sounds if we lived on an acreage?” Often our dreamy state gets us into financial hot water. “Big Picture” or “Realistic” Thinking helps work out the details of our dreams. 

Mr. Maxwell has been my mentor through his books and monthly mentoring lessons; he certainly has shaped my thoughts.  His inspiration and teaching offer encouragement to all his readers and listeners.  I recommend taking hold of his information and applying it to our lives.  Listening to our thoughts is like formulating lifetime goals. If we don’t allow ourselves time to think then how will we know what we should be doing with our time, wealth, talents, and abilities?  In the end, thinking benefits us by offering us a chance at a changed life. 


Literally taking a page from Mr. Maxwell’s book, How Successful People Think, is the best way to end this blog post.  “One Final Thought” is the section of his book where he shares inspired thoughts based on quotes from renowned people.



1.  Everything begins with a thought.

“Life consists of what a man is thinking about all day.” – Ralph Waldo Emerson.

2. What we think determines who we are.  Who we are determines what we do.

“The actions of men are the best interpreters of their thoughts.” – John Locke.

3. Our thoughts determine our destiny.  Our destiny determines our legacy.

“You are today where your thoughts have brought you.  You will be tomorrow where your thoughts take you.” – James Allen.

4. People who go to the top think differently than others.

“Nothing limits achievement like small thinking; Nothing expands possibilities like unleashed thinking.” – William Arthur Ward.

5. We can change the way we think. 

“Whatever things are true… noble… just… pure… lovely… are of good report.  If there is any virtue and if there is anything praiseworthy; think on these things.” – Paul the Apostle.


Thursday, June 7, 2018

Our Expectations Need to Be Realistic



A Facebook post caught my friends’ attention.  They reacted by sharing the message.

The post read:

Time for change..

The base rate for old age 

pension in Canada is $586.00 

Time to raise it to $2,000.00 

Share if you agree.


It’s true enough that the base rate isn’t sufficient to pay anyone’s monthly bills but is it the responsibility of the Government of Canada to do so? 

When the first old-age pension was implemented in 1927, the government’s intent was to provide some financial relief for the elderly. What started then as a monthly benefit of $20 per month has now increased to a benefit of $589.59.  

In the early years, many deprived Canadians had to verify their need for financial support by undergoing a means test revealing their income and assets.  Even children had to prove they were unable to provide financial support for their elderly parents. History has shaped and changed the rules since 1927.

In 1951, The Old Age Pension of 1927 evolved into the Old Age Security Act.  At the height of Canada’s prosperity following World War II, the government passed legislation for a universal monthly pension benefit of $40 for all men and women who were 70 years old and older.  The best outcome was seniors did not have to undergo a means test to prove their eligibility.  However, one requirement was they must have lived in Canada for twenty years.  Eventually this condition was reduced to 10 years along with further changes.

The most notable change to the Old Age Security (OAS) benefit was when the legislation of the Canada Pension Plan was passed in 1965.  The qualifying age was changed from 70 years of age to 65 and continues to remain as such unless you chose to defer your Old Age Security benefit to age 70.   

It’s difficult to fathom the total cost to finance Canada’s largest pension plan until we have a grasp of the number of Canadians entitled to the OAS benefits.    The latest quarterly report, published by Employment and Social Development Canada, indicates the number of benefits paid in January is 6,062,989.  The amount paid in millions is $3,364.9.  No one contributes directly to the Old Age Security program; the benefits are paid from the Government of Canada’s general revenue accumulated from personal, corporate and sales taxes. Of course, the cost escalates even higher when the other social security programs, Guaranteed Income Supplement, the Allowance, and the Allowance for the Survivor are included.  

The off-handed comment made on social media to increase the Old Age Security benefit was probably done with minimal consideration.  Currently, the federal and provincial governments fund many programs, including major ones like health care and education. Prior to the federal government’s recent acquisition of the Trans Mountain pipeline, their current spending continues to increase the deficit; the promise to return to a balanced budget in 2019 is unlikely to occur.

The lesson on budgeting is to work with what we have.  We should try and operate with a balanced budget. The magic formula is:
There is no negative sign in front of the zero value.  Everything balances.  The after-tax income stretches over our day-to-day spending including debt repayment and savings.  From time to time, we find borrowing money necessary because we do not have sufficient cash on hand for major purchases. 

The pledge to yourself is to prepare for the future. The plain and simple fact is one day we will be old and will not be able to work.  The stark reality in 1867 was that most Canadians did not “retire”.  We are told, “Canada was then a largely pre-industrial, agricultural society.  Most people lived and worked on farms well into their old age.  When they were physically unable to work, they were supported by their families on the farm.Those without family support had few options.”

Today, we have more options if we are unable to work due to disability or injury.  However, the intention is not to rely on the government to fund our “dream retirement.”  If we do, we can’t expect much. They will and can only afford to pay a minimum amount.  The combined Old Age Security and Canada Pension Plan generally equal 25% of a typical retirement income.

Our expectations need to be realistic.  Expecting the government to support us would be like our children asking us to support them for their lifetime.  This may sound like a good plan for them but for parents not so much.  We need to step up and share in the responsibility to create our desired income for the future with the resources we are given today.