Author Archives: George Boelcke

Someone Asking for Help – and I’ve Got Nothing…

Welcome to my very depressing day! My 11-year old car has a cracked thermostat cover, which translated to no heat for the last two weeks, and getting to part with $485 today.

But if that seems bad, it’s also the first time an emailer has me really depressed. Others email me and I respond with what I would do in their situation. I have no idea if they ever take the advice or if they were just looking for a quick way out – there never is one.

But this person is in it deep. I emailed him back to first decide if he wanted some painless solutions that’ll just have him in the same financial nightmare in a decade when he’s retired, or if he’s prepared to do what it takes. In other words: Not have a life for the next 18 months to work his way out of a huge hole. Today, I’m actually hoping he doesn’t email me back because this isn’t solvable for five more years. OK, I didn’t mean that, but I can explain why I said that in frustration:

He has a vehicle financed for eight years. Yes, you heard that right: EIGHT years. AND it’s one of the fastest depreciating vehicles around AND it’s a pig on gas. Right now, after two years of payments, his balance is $44,000. The most optimistic sales value today is half of that. Yup – he’s $22,000 in the hole – and won’t be at a balance that equals the value for another five years.

That’s bad enough, but the payments are $650 and $350 gas and $130 insurance and around $70 maintenance. That’s $1,200 a month. So he has to earn $2,000 of gross income, pay taxes, EI, CPP, etc. to have $1,200 left over.

So if $2,000 of his pay is gone right off the top, plus rent, plus food and normal bills, where is the ability to pay off or to pay down a $30,000 credit card, or $25,000 line of credit? With what money? Saving $50 on food won’t cut it. The car can’t be sold in order to drive a $3,000 vehicle for a couple of years, and there aren’t savings on utilities, cable TV or a $50 cell plan.

How exactly am I supposed to help this person? Oh boy, this is depressing. And he didn’t get ripped off on the vehicle – he did this to himself. Again, I’m not anti-new vehicles. I’d love to own one and would love you to drive a new vehicle. But only if you can afford it – and certainly never on the eternal eight year finance plan. The definition of afford it is to be able to write a cheque for the purchase! An eight year loan is not in the definition of being able to afford it!

I’m going to live for the day when someone emails me for help the day BEFORE they put themselves into a situation where there’s no way out!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Millennials Helping Change the Retail World

Millennials are helping all of us save a bunch of money in vast numbers of industries. They’re getting to being the largest group in the population, so retailers have no choice but to adapt.

One of them is with car repairs. Typically you take in your vehicle and deal with a service advisor whose job is to coordinate the work and to upsell you! Yes, they call it a treasure hunt – where they look for other work that could be done, or might need to be done sometime… The modern way has started at a service shop in San Francisco called Luscious Garage: No service advisor – you deal with the mechanic directly. That’s the person fixing it, and that’s who you communicate with, so it immediately takes out communication problems, the adversarial relationship, and the stress and pressure of being upsold.

The mechanic will text you with what they’re working on. So you might get a text update that they did the breaks, and here’s the picture of the newly installed pads. And there’s a hose leaking – here’s the picture of the leak. Want us to replace this hose for $30, and half hour labour cost? Customer love it – and that’s the wave of the future!

Online mattress purchases are only around 15% but that’s enough to drastically shake up the industry right now. The same is true for Gillette, which is in massive upheaval with an online retailer called Dollar Shave Club. It just take someone to find a better, cheaper, and more convenient way to shop. And it’s a great thing for an industry with massive markups. The industry has always been thought of as being right up there with buying a used car! Any upheaval will be your financial gain. The industry upheaval is to the point where Mattress Firm, the largest seller in the U.S., has filed for bankruptcy.

The changes are for two reasons: Firstly, Amazon has now gone into the mattress business. Look at the companies that also sell them and their massive decline in stock prices when that was announced late last year. The other one is a company called Casper. They’re way cheaper and compress a mattress so it can be shipped via courier. And, from what I’ve heard, they’re supposed to be great. You can also go to Costco and buy one in a box. And they’re all compressed to be able to fit into the back of a Honda Civic – that seems to be the industry rule for shipping size. Plus, now you have upwards of three months to return it – try that with a traditional mattress purchase!

Virgin Hotels caters to millennials. One of the biggest pet peeves of customers on every survey is the quadruple priced stuff in the minibar. That $2 package of nuts for $9! Their hotels price it at exactly the same as stores in their area – period. Managers send a staff member to the nearest Macs and Walmart to get the price that they’ll use in the minibars!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Donating at Retailers?

Loved last week’s Bell Let’s Talk day donation of 5c per contact. There was nothing to buy, a fixed amount, it was Bell’s money, and it added up to over $7.2 million for mental health.

I am a big fan of helping charities. I’m an even bigger fan when a retailer donates all the sales proceeds to a cause. The best example is Tim Horton donating every penny of coffee sales one Wednesday in June to their Camp Day foundation.

A Wharton Business School study shows it’s part creating customer loyalty and part marketing. In the U.S. these donations were over $2 billion in 2015. People do take advantage of it, but it turns out not to increase customer loyalty. The study also found that a company donating a buck or ten bucks doesn’t change our behavior or loyalty. Certainly not good news for charities, and the reason it tends to be a pretty tiny amount.

The Bell and Tim’s full amount donations are very different than being hit up at the cash register. Do you have our credit card? No way. Do you want to apply for it? Never. Do you want an email receipt. No, you’re not getting my email so you can send me junk email the rest of my life. And then asking if you’d like to donate a buck or two to this or that charity.

My standard answer is always no. If I wanted to donate to your chosen charity, I’d be writing them a cheque. When retailers do it, THEY get one massive donation receipt as they’re making the actual donation with our pooled money. No I don’t feel bad. No, I don’t appreciate the implied pressure. No, I don’t think companies should do this. Yes, I could afford the two buck donation, and yes, I might like the charity.

Others donate, but only in a sort-of way. Dairy Queen has a “miracle treat day” where they’ll donate the net proceeds from Blizzard sales to a charity. But note that it’s not all proceeds, it’s only the NET proceeds. So, I have no clue if my six-dollar Blizzard is contributing a buck or a penny to a charitable cause. Do they just cost the cup and content, or also their rent, wages, taxes, franchise fees, and total operating costs? And DQ can’t tell you, or we’d all know what their actual cost of a Blizzard is…and then my guess that they’re really overpriced may turn out to be true.

Amex wants to get in on the small spending on credit cards wave. They have a new promotion with McDonalds. Pay at McDonalds with your Amex card and they’ll donate one dollar each charge to Ronald McDonald House charities. Great. But we spend almost 150% more paying at McDonalds by credit card. So Amex wins, McDonalds sales win, we overspend, and a few bucks go to charity. Not a total win-win in my opinion.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Money Fights in Relationships

Since Adam and Eve, every couple has had arguments in their relationship. But the topics of the arguments are an accurate predictor of divorce risk.

In a study of more than 4,500 couples by Kansas State University (for the National Survey of Families and Households), money, finances and debt are the big red flags to trouble. In previous studies, it’s been found that 70% of couples can’t go a week without a money-issues related fight.

In the words of Sonya Britt, assistant professor of family studies, “arguments about money is by far the top predictor of divorce.” That’s not actually breaking news, but just one more study to confirm what’s been known for decades.

The study actually controlled for income, debt, and net worth. It didn’t matter how much you made or how much wealth you had. Arguments about money are the top predictor for divorce because it happens at all income and wealth levels. Money arguments last longer, they’re more intense and it takes a lot longer to recover from them in any relationship.

The study found that the predictor is accurate right from the start of a marriage. No matter how long ago that was, money fights plummet the quality of a relationship. Then, the increased stress, even setting aside the impact on kids, leads to even less financial planning, less getting onto the same page, and exasperates the situation.

The Money Tools book has an entire section on relationships. The before, the during, and the after – if sadly it comes to that. The basics are that each couple needs to:

-have a joint bank account – yes, some don’t and it works fine, but for most it just becomes a ‘my money’ and ‘your money’ when relationships are about US as a couple and a team

-have their own ‘me’ money to blow or save. Whether it’s $30 or $300 – then nobody starts with ‘you spent WHAT on a manicure’ or how can you waste that much on dinner with your buddies.’

-have an agreement on what debts you’re working on paying off, and which ones you’re fine with at minimum payments, such as a credit line or the car or mortgage.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Mortgage Rates Are Down…Sort Of…

It seems like a lot of people got really excited when the Royal (now matched by a number of others) dropped their mortgage rate by 0.15% last Thursday.

Any time rates or prices drop, it’s great for buyers, but this one isn’t anything to get excited about. It’s a rate drop for new mortgages and not a drop in the prime rate. So if you’re on a variable rate mortgage, it’s not likely your bank will drop your payment starting next month. Even if they did, it’d amount to $5.60 on a $250,000 mortgage. If they choose to drop your line of credit rate, you’d save $1.20 a month on an average $36,000 credit line.

Any tiny drop in rates isn’t going to rescue the housing market in 80% of the country. What needs to change is the mortgage stress rules that force borrowers to qualify for sticker rates when their actual rate will be about two percent lower. That rule certainly makes sense in overpriced housing markets.

It was designed to slow down the market. But what it’s done is not only slow it down, but stop it, and then shrink it in a big way. Toronto sales down 16% last year, as well as prices – Vancouver sales down 32%. Overall, sales are down 47% and mortgage applications are now at a 22-year low. One of the big banks’ mortgage applications are down by half over a year ago.

Is THAT what the goal was? The desire to own a home hasn’t changed, but the ability has. Now there are many signs that the federal government is running scared – and should be.

The stress test might still have a purpose but should be set by postal codes so the slow housing markets don’t keep getting killed. Plus, we’re pretty much done with rate increases. Sure, there might be one or two more, but we’re much more likely to have a recession in the next year than to have another huge wave of inflation with the corresponding rising rates.

It’s an old stat, but someone buying a home spends an additional $10,000 in everything from furniture to painting, renovators to appliances. None of that happens if the housing market has grinded to a halt. And I still maintain that there are tons of younger people who would love to get into the housing market but can’t. And if they don’t buy an entry level home, the people selling those can’t move up when they can’t sell…and none of the dominos to a healthy housing markets move!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Understanding Millennials Financial Stress

1/15 Understanding Millennials  

Hi George: We spoke for a minute after your radio show with Phil Johnson today and you asked me to email you.

I am a 23 year old full time university student and I am on a full ride scholarship. I also work a part-time job and am lucky that it pays well. I have lived with my girlfriend, who is also a full time university student that serves on her weekends and volunteers once a week at KGH, in a modest apartment in downtown Kelowna. I am a millennial and I understand a lot of the frustration pertaining to the “zombies” of my generation.

I guess the issue I have is that I, like many other people my age, can only tread water and hope not to drown in financial debt. There is no way you can go to school today without access to a computer and internet. On top of paying for schooling, you have rent, utilities, food, insurance, gas, cellphone bills (another necessity in today’s world – and not the millennial’s fault) and so on.

If you do the math; a full time student spends 15 hours in class and is recommended to spend an additional 3 hours studying outside of the classroom which adds up to 45 hours/week of studying time. In addition, to keep a roof over your head, your belly full, and your vehicle that is required to transport you throughout your erratic schedule, you will have to work at least a 40 hours/week at minimum wage.

It is also recommended the average person gets 8 hours of sleep per day, or 56 hours/week. So we are now at 141 hours of our week dedicated solely to studying, working and sleeping while we only have 27 hours left to kill.

Hopefully you can fit all your driving, grocery shopping, cooking, eating, exercising, banking, personal hygiene, volunteer work, and maybe, just maybe, you will have the time to put your feet up and prey you don’t have any emergency expenditures. 

Now I cannot speak for all millennial’s, but the fact that I am on a full ride scholarship and still contemplating taking out a student loan frustrates me, and when I hear people on the radio commenting on how spoiled and lazy all of us millennial’s are, it frustrates me even more.

If you have any financial advice I would appreciate hearing it, and again, I apologize for the breadth of this email, but I thought you may be intrigued by a 23 year old’s perspective on why the majority of us millennial’s are broke.

A BIG thanks for your note. It’s so well written and thought out AND accurate! Sure wish I could magically insert your email into my book today!

You’re right that millennials get labeled. It’s mostly off US surveys of various degrees of quality and accuracy. In the next year or two, “you” will outnumber baby boomers so the world, including myself, really ought to be a little more careful in the generalizations. Thank you thank you! For every stereotypical millennial there are vast numbers of superstars and future leaders such as you.

Not sure when you’re done or if you read the Money Tools chapter If you’re about 25 or younger, but DO start thinking about the critical year after grad as outlined in there.

Nope, you can’t save right now. Reality sucks but it’s about financially treading water – of surviving and not thriving. And that’s you with a full scholarship, never mind the 90% or so that don’t have that “luxury.”

Do NOT let the need for some student loans depress  you! I know there’s really no such thing as “good” debt, but there is “better” debt on the proviso it’s not around for a decade. Everything in life is a trade-off and you’re not looking to use it for a three week Europe holiday. Just knowing that you hate doing it makes you more financially responsible than the vast majority of the world. Better sleep, less stress, a small cushion “in case” is worth using some student loan money!

The BIG goal, even if it’s funded with student loan money, as reasoned above, is to have a month of expenses in a savings account for any emergency. It’s fine if that’s half your savings, half your girlfriend’s for the time being. It’s worth the reduced stress and just knowing the next “emergency” will then be more of an inconvenience…

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Aeroplan Sale & Cell Phone Sales

A new update on Aeroplan for the five million of us Canadians who are in the program. It turns out that your points won’t likely depreciate in value, and you won’t need to have them all cashed out next year.

The re-purchase of Aeroplan was finalized yesterday. $450 million price and assuming the ($1.9 billion) points liability the (outstanding points IF they’re all claimed…and less than 70% will be, according to Consumer Report studies). But Air Canada received $622 million from TD and another $308 million for future points. CIBC also has a card that gives you Aeroplan miles, so they kicked in $200 million and another $92 million for future points. Right now, they’re still negotiating with Amex to continue with Aeroplan.

So Air Canada paid $450 million and received over $1.2 billion. As of the purchase date, they got the whole company AND made $772 yesterday. There’ll now be a lot of competition with PC Optimum and  Esso Extra points for your business. Those two are almost immediate gratification points. A month after I signed up for Esso Extra I had a free carwash already. Aeroplan miles are more dream rewards for the long term in hoping there’ll be enough points someday way down the road for a trip to Europe.

Right after last Wednesday’s segment, the Dow dropped 660 points and this time it wasn’t President Trump’s fault, but ours. It was started by Apple announcing that iPhone sales were way down. Yesterday, Samsung announced the same thing with a 22% drop in sales.

In the U.S., as we discussed last year, there are no more two or three-year locked-in plans with a so-called free phone. You need to pay for the phone and then get a month-to-month plan. It’s increased customer satisfaction with carriers a ton and reduces your cell bill by a lot. No more being locked in for two or three years and having the almost spit on you when it comes to customer service. However, if you need to buy your phone and can’t pretend it’s ‘free’ any longer, you’ll shop around more ,and will keep your old phone an extra year or two. That’s why Apple and Samsung stock has been way down, due to less sales volume. Apple was a trillion dollar company last fall – now they’re down 40% in stock values.

It’s also why Apple started discounting the price of their phones last month! If you can’t pretend it’s ‘free,’ a thousand dollar phone is quite the shock. You can also now get an Android for under $300 and apparently the Nokia 7-1 is really inexpensive and a great phone! That trend will continue with better phones at a much lower price, and the no-contract plans will come to Canada sometime soon – so don’t be stuck in a new two or three year contract. And avoid the big marketing starting soon on 5 G phones. It’s a much faster network – way faster than your home internet. But it’ll be three years before you’ll actually have the network to use it.

Update from first January segment to try some simply your life and get rid of 100 things:

I tried the Japanese method of decluttering where you hold something in your hands and if it doesn’t bring you joy, you throw it away. So far, I’ve thrown out all vegetables, my Amex bill, the scale and a mirror!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Three New Year’s Suggestions

Happy New Year! I’m not going to urge you to make a bunch of resolutions, because most of them go by the wayside in the first month. They’re just as valid when you make then in March. In fact, they’re more likely to be successful when they’re not made January 1st based on societal pressure. But do remember to never set any goals that have an expiry date!

There’s an older book called Simplify Your Life. I loved it, and still re-read it every couple of years. Keep an eye out for it in any Thrift store for a couple of bucks – it’s worth the read. In that same spirit, look around your place at all the stuff you’ve accumulated. In the Money Tools book (page 216) is our family story when we had to throw out 14,000 pounds of this stuff when our parents had to sell their family home. I’ve done this a number of times, and want you to think about this for January. Walk around your place a few times this month and throw out, give-away, or donate 100 things. Do you need 26 coffee mugs for the two of you? How many sweaters are in your closet you haven’t worn in years? It won’t take long to get 100 things out of your place and you’ll never miss them! It’ll remind you that all this stuff cost big money and may get you to slow down buying even more stuff this year that just gets stashed away somewhere!

Change your thinking about getting out of debt just as much as your savings.

“Only rich people can save enough money.” If that’s your thinking, you can spend a lifetime proving that you’re right, and staying broke, but it’s just not true. The Royal Gazette recently had a story of a 92-year-old man who died after having worked as a gas station attendant and janitor his entire life. He had a pretty modest lifestyle, so his friends were stunned to find out that his estate was worth over $8 million! He just paid himself first every month, invested a small amount of money each and every month, and reinvested the dividends (which mutual funds do automatically through additional shares). If a minimum wage earner did it – you can, too. But first you need to change your thinking.

George Boelcke – Money Tools & Rules book – yourmoneybook.com

Four Actually Useful Christmas Tips

This week before Christmas, you’ll hear a lot of logical Christmas tips: Drink a lot of water, skip the sugary pop with your drink, and have a healthy snack before all those cookies. Gee – thanks – but I don’t know anyone who actually does that.

Hopefully, here are four things that might be more practical:

Speed kills. That’s not just a traffic rule, it also applies to your Christmas shopping. The faster you want to do it, or the later you leave it, the more it’ll cost you when you overpay just to get it over with. If you’re close to any stores, change your lunch hour one or two days this week to go at 10 or 11 AM, instead of noon, or trying to get into stores when the rest of the Okanagan is going at the same time. Even better is to take a morning off and do it then. Take a list, take the cash and have a plan.

If you’re a grandparent, your demographics have a reputation of buying too many gifts for the grandkids. Of course, you mean well, but stop a second and think of the unintended consequences: You’re setting an impossible expectation and template down the road for the parents, and you’re probably wasting a bunch of money. Lots of studies show that small kids play with the latest toy for less than half an hour. After that, they go back to the simple stuff, like that huge empty box, all that string, or the blankets to make a fort.

For us adults, I saw a wonderful Facebook picture last week. What lots of us really want is financial security, a raise, a stronger sense of purpose and a long, undisturbed nap. If you didn’t draw names, don’t kill yourself trying to buy a dozen presents. Just find a way to let us have a nap a couple of days in a row…

And lastly, I hope you remember something for the entire next year: For at least the first six years of your life you had an unshakable belief in Santa Claus. Could you find that same faith again in yourself for just a year to turn your finances around?

George Boelcke – Money Tools & Rules book – yourmoneybook.com