Author Archives: George Boelcke

Is Traditional Banking Dying?

Banks have now spent over 30 years getting us out of the branch and onto using ATMs. They’ve also spend almost a generation slowly getting us to use online banking. Those are certainly big changes to the traditional banking model. But when they don’t see you in the branch, it’s much more difficult to sell you products or services.

On the one hand, that’s great news. You can’t be sold something you don’t need, or that’s not suited for you, if you don’t talk to the commission based people in the bank. On the other hand, banks’ profits keep reaching new highs of billions per quarter. Well, that’s because the service charges increase twice a year now and we just take it without firing them.

But how long can this go on? Here are some insights from the founder of a new U.S. online bank called Bankmobile. They’re U.S. stats, but we’re not much different here in Canada:

The average person goes into a branch twice a year, but does 20-30 transactions a month. What’s even more stunning is that the average bank branch opens between 40 and 50 new accounts in a year! That’s it!

The average online banking customer is 27 years old. And I’d bet most of them have never been anywhere else but online.  I recently talked to a 20-something who had never seen a cheque, never had a cheque book, and had no idea what they are, and what they do. He’s not alone – an entire generation has direct deposit and online everything else.

The millennial generation of 35 and under are actually way smarter than us older people who deal with banks. As of an hour ago, online bank Tangerine (bought by Scotia from ING) has a basic savings account rate of 1.1% vs. TD of zero interest until you reach $5,000. Then it’s 0.5% – same as the other banks. So the online banks are more than double the rate and don’t grab your first $5,000 without paying you a cent of interest.

In the U.S., the branch network has shrunk by 10% over the last few years and is expected to shrink another 20% in the next three. The largest nine Canadian banks have 6190 total branches – no change since 2012. Many fewer visits, but still an incredibly expensive branch network. Small wonder they have the highest service charges, up them twice a year, and literally half the savings returns compared to online banks.

Maybe the under 35 generation is helping us all out by avoiding the physical banks in favour of online banking at vastly lower fees and significantly higher savings rates.

Your Will AND Your Notes With It

In the last month, I heard two more horror stories of someone not having a will, and another person having zero notes with them.

If you do not have a will, the government will take over your estate through a public trustee. That means you either have incredible faith in the government, or you’re incredibly selfish and do not care about the family members you leave behind. I hope that’s not too vague.

A third of Canadians don’t have a will. Come on people. You ARE leaving behind some bills, a house to sell, or at least someone who has to pay for your funeral, close your bank accounts and just basic stuff.

If it’s simple and you’re single, it’s literally 20 bucks for a software program from Staples that will walk you through the form inside of 15 minutes. Fill in the blanks, pick an executor, print it, sign it, have it witnessed, and give the original in a sealed envelope to someone in your family. If you have dependents, a spouse, etc. a lawyer will charge you around $300 for a simple fill in the blanks will, and they’ll even store it and witness it for you! Just let a family member know which law firm has the original.

More important is what 99% of people do not do, or have never thought of: You need to take half an hour and note down the things your executor and family need, but won’t have, and cannot get:

-Your login and password for your Facebook account. It’ll let them post a note in your account. It’ll let people know you’ve passed away and give them some healing from the many nice notes and memories people will post.

-Your login and password for your email account. They can never get it after your death, so it needs to be in your notes.

-Your banking and asset information such as RRSPs, etc. Remember that the people you leave behind have no clue where your bank accounts are, what they login information is for your online statements, your investments, who your accountant is that has your last tax return, etc.

The first think your executor has to do is to provide an estate lawyer with a list of all your assets and debts as of the date of death. The lawyer then sends all those people a letter to get the balances for the date of death. They can either start hunting them down at $150 or more per hour, or you can simply put together a list of the company, their address, what kind of accounts, and the account number. No, today, your balances won’t be accurate years from now. The balances aren’t important – having the basic information is!

Doing those notes isn’t just an act of love or kindness. It’ll save your estate thousands of dollars, and your executor dozens of hours of work for half an hour of your time this week. Care enough to do it! Put it in a sealed envelope, write “notes for will” on the front of it, and just update it when significant information changes every few years.

And one more thing: I’ve been an executor a number of times. Please pick one that’s really good with details and paperwork and not necessarily the person you trust the most, or that’s the kindest or nicest to you. What they do is all governed by the law and managed by the estate lawyer. It’ll go a year or so faster if you pick a really detailed oriented person.

Some Cell Phone Insights & Tips

Strange, but true, one of the most common email questions I get is about saving money on cell bills. Part of that is probably because I keep harping on insane $100 or more plans.

The big three carriers in Canada are Rogers (almost 11 million clients), Telus, and Bell, both at around 9 million total, which includes all their subsidiaries. To me, those three are for businesses and rich people. Rogers second tier carrier is Fido, while Telus has Koodo, and Bell has Lucky and Virgin.

My current plan is with Fido at $39 a month for tons of calling minutes, unlimited text, and some data – enough for what I need. But that plan is now $45 a month and that’s not competitive in a market where rates are dropping, Fido is increasing theirs. If your plan goes up, call them – as I did. Do you want to keep me? If so, lower it back to what it was. or I’m gone. That can only be done if you are not handcuffed by a horrible contract – something I’d never sign.

Telus now has a third-tier carrier for the super price-sensitive people. It’s called Public Mobile and everything is online. There’s no 800 number and everything is on their web site – period. It drastically cuts their expenses and some of that is getting passed on to customers in lower rates.

 

Public Mobile has unlimited talk text, and 500mb of data for $30 a month. But there’s a trick in the fine print: The unlimited talk is only province-wide! So if you ever call outside the province you’ll need to also add an $8 Canada long distance plan. The lesson? The headline cheap price isn’t always it. You need to read the details on their website.

Freedom Mobile, owned by Shaw now, isn’t ready for prime time yet – we’ll skip that for a few more years.

Koodo has massively increased their rates from a year ago. I have their rate list from both years. Now it’s $50 for the cheapest plan with unlimited calls, texts and any kind of data (it’s 1 GB). That’s up from a comparable $30 last year!

Lucky Mobile is the pre-paid plans, lower-end carrier for Bell who also has Virgin Mobile. Lucky is available in 17 areas, and only rolled out in December, so be careful that you’ll have coverage. They’ll give you throttled 3 G coverage on their 4G network. You can find them online and through Walmart. You can get a $40 plan with unlimited calls and text plus 1 GB data. Hello, Koodo? That’s 25% less than your new rates! And it’s only $45 with 2 GB data. I couldn’t find any mention of whether they’re compatible with iPhones.

There are two lessons: NEVER sign a contract – always stay being a free agent, and shop around at least once a year, just like you would or should on your insurance.

A Retailer Vent and Two Money Tips

Why are so many receipts I’m getting these days more of a book than a simple receipt? Retailers, please skip your junk mail offers and surveys on my receipts! Many now have an offer or a long story on how you should go online for a survey? They’re just trying to get your email address to keep marketing to you! The odds of winning that so-called prize for doing the survey is likely less than the lottery! Staples for one glue stick gave me a 12 inch receipt. A simple gas up at Esso is over 10” on theirs. Home depot for one item comes in at 11 inches, and one small parcel at Canada Post now gets you a receipt that’s over 14 inches long!

Heads up if you have a storage unit: Firstly, there’s a reason most places give you the first month free: You’re likely to average over three years paying for it! And one national company (according to some staff members) now has a software program similar to airlines, rental management companies, hotels, and others to maximize profits. Their new system will increase your storage unit price 15% every nine months!

In Vancouver, they’ve seen that it’s not working as their business is down 20%, but a heads up for the Okanagan. They’re going to keep squeezing you, because all most everyone is on automatic payment by credit card and won’t notice or do anything. But I’m guessing the stuff in the storage unit isn’t worth what you’re paying for three months! Go look – clean it out – get a smaller unit, or ask a couple of neighbours if you can rent a small part of their garage!

Save money on beauty products:

This comes from US consumer guru Clark Howard. His link is included here, and is based on research from Consumer Guide and Reader’s Digest. Here are three of them:

Shampoo: Save your money – any brand will do as they contain the same basic ingredients, including those from the Dollar stores, according to studies by Consumer Report. You may want to spend extra on conditioners, though. Just make sure you use conditioner only on the tips of your hair and not the scalp.

Really expensive pore-shrinking creams: Sorry, that can’t be done over time, so save your money. Dermatologists will tell you that the size of your pores is determined by genetics.

Expensive sunscreen: Yes, you need it, and should use it – but buy the inexpensive stuff! Consumer Report has done extensive studies and some of the best and most effective are also the least expensive:

Two lotions are No-Ad Sport SPF50 for $0.63/oz (all in US$) and Equate from Walmart SPF50 at $0.49/oz

If you prefer a spray, they recommend DG Body SPF30 from the Dollar Store at $0.88/oz or Equate Sport SPF30, also from Walmart at $0.83/oz

6 beauty supplies that are a waste of your money

The Huge Payday of Today Savings

Trying to save money for the long-term when you’re in your 20s is kind of like the challenge with climate change. We know we need to, or should, do something, but we’re not really willing to pay a price to do it. Why? Because the payoff is so incredibly far down the road, and most people don’t want to make many today sacrifices in order to achieve it.

Yes, there’s a price to pay to set aside savings. It’s the stuff you’ll need to give up right now in order to have the investments way down the road. And that’s a value judgment where the long-term typically loses out to the “today” spending.

That’s the reason it almost has to be savings that come directly out of your bank account automatically. You can’t spend it if you don’t have it. My biggest financial regret is definitely not saving a few bucks every payday into an S&P ETF (electronically traded funds) index fund. Set it and forget it, because it’s a basket of the top 500 companies where you now own a tiny piece of each of them. That’s great diversification and it’ll take you less than 30 seconds to search that the S&P historical returns over the past 50 years are over 10%.

One more way to save, or likely to pay off about half your student loans in a year is also in the Money Tools book chapter called: Broke is the new rich.

If you’re graduating from university, you’ve had two or four years of living on mac and cheese. Now going into the work force with a paycheque, you have an incredible pent up demand for spending and buying stuff that you really couldn’t and didn’t for all those years.

However, if you just live like a poor student for one more year, you’re not really make any lifestyle adjustments. You’re just living on very little money for one more year. If you can do that, you’ll be able to pay off a ton of your student loans in the coming year. Only one problem: Stay on your tiny student spending plan. Once you have a credit card, bought a vehicle, stepped up for some nicer furniture, or moved to a nicer place, it’s next to impossible to give all that up again.

Maybe two or three people in your entire grad class will do what we talked about the last four weeks. I hope you’re in touch with one of them for the next couple of decades as you watch them become incredibly successful financially…

Three Grad-Year Resolutions That’ll Last a Lifetime

Happy Wednesday, especially to all grads, whether it’s high school or University. On a personal note, that includes my stepsister Brigitte McKenzie in Victoria, now Pastor Brigitte, who just graduated as a Minister in the Evangelical Lutheran Church this week. I’m so incredibly proud of her!

Her aside, for the 18 to 25 year old grads, it’s unlikely you’ll believe me or your parents. But one day – years from now – hopefully you’ll remember these three resolutions or heads-up before it’s too late:

Go vote in every election: Every level of government politicians make financial decisions for you that YOU have to pay for over many decades. You are the most impacted by their spending (or not spending) priorities. But your 18-24 age group won’t invest the half hour: Less than 38% of you vote. Compare that to the over 65 age group where 75% vote. Easy math: Which group gets their way? Which groups gets the most benefits? But also which group will pay the most and the longest?

Keep using your debit card: If you’re 18 or so, you always have because you couldn’t get a credit card. If you’re graduating from University, you’ve probably been using one for most of your purchases. Keep it up. It’s the best way to stay out of 20% credit card debt. Stats say you’ll change over to credit cards by your early 30s. It’s the powerful credit card marketing making you think you’re getting a lot of free points or perks. Maybe you will…but it’ll cost you 10 to 50 times what you’re getting through the fees and interest.

Fight the attempts of retailers to make you stupid: For a few years now, almost every advertised payment is weekly or bi-weekly – for expensive vehicles, I’ve also heard payments per day. It’s just stupid and designed to make the payment for whatever it is sound so tiny you’ll want to buy it and finance it.

In Red Deer, off gasoline alley, a large new apartment building has a huge poster on the front: Rent for $295 per week. The stupidity continues. Who rents an apartment for a week? That’s called a hotel! But the dummy-down marketing continues to expand. Better something stupid like $295 a week than the reality of actually paying $1300 a month.

Stop and think: Pull your phone calculator out and multiply it by 52 weeks and divide by 12 to get the real payment!

Want to Assure Your Teenager Succeeds? It’s Three Things

The Wall Street Journal recently reported on an extensive study of teenagers and their odds of being in poverty. The stats were pretty depressing, but the way out was also quite impressive and easy.

No matter what background, ethnicity, poverty growing up, etc. the odds of any teenagers getting into, or staying, in poverty are less than six percent if they just do three things:

Finish high school

Hold a full-time job

Don’t marry or have a kid until after age 21

That doesn’t seem so hard. If that’s true, the odds are more than 94% that your teenager will have financial success for a lifetime. If any one of these three isn’t done, the odds increase quite quickly, because each have a significant ramification on their income and lifestyle.

These three basic things really are incredibly important for any teenager to know – and to carry through on.

Step two would be how to now become financially successful. That also isn’t that hard to do. In the Money Tools book is a two page chapter on how to make your teenager a millionaire. In short: Save $9,300 by the time you’re 21 and invest it. The money will double every seven or eight years until they’re ready for retirement. At that point, it’ll be over one million dollars without saving another dime.

The challenge for parents or grandparents is that their kids or grandkids don’t listen to them. Yes, it’s true – I hear that over and over again. It doesn’t help that 80% of parents don’t talk to their kids about money or finances, but that was then – this is now. You can’t live for a better past and you need to remember that you can’t make a horse drink. Lead them to water and remember that, when the student is ready, the teacher appears.

Go to Mosaic (they have a bunch of signed copies) or to Amazon and get the Money Tools book. When they’re ready, they’ll use it. But don’t wait for the “ah-ha” moment where they tell you that you’ve been right all along and now they’ve seen the light. It won’t happen! You have to know that they’ll learn when they’re ready. All you can do is give them the tools and the information and keep an open line of communication. That way they know they can ask without judgments or lectures.

That’s it! I harp on this every week and maybe get one or two emails a month with positive feedback. If I were to think I should be getting hundreds of emails, I’d be incredibly depresses. It’s my job – and your job – to plant the seeds. It’ll be their job to grow up and to grow those seeds into something beautiful – if they choose to – and when they choose to.