Category Archives: Blog

My Savings Are Missing

I’m confused, and don’t have a good answer here – just questions:

If you lose five pounds, you can step on a scale and see that your weight is down and – yes – your five pounds are gone. You have actual evidence of it!

That’s not the case when it comes to our so-called savings. If a store sells you something at 30% off, where’s that 30%? You paid $200 and saved $60, but you never see the actual savings! Sure, you have less of a charge on your credit card, or that supposed extra $60 still in your bank account – but it’s not the same as seeing it.

When you realize you should cut out one of your many weekly stops at Tim’s or Starbucks, intellectually you realize you’ll be ahead about five or six bucks every week. You might even do the math and get pumped that this translates to almost $300 a year, and you’d be right. Except there’s one problem: Where’s the money? Show me the money! There isn’t a cashier or someone who sends you that $300 a year and THAT is what makes it hard to stick with the plan, at least in my opinion.

I recently quit smoking and converted to vaping. It was a $130 one-time expense for the battery, cylinder and liquids, and it is a lot less chemicals in my lungs, and a lot of so-called savings over buying cigarettes. I actually did a little excel sheet now taped on my fridge to motivate me by looking at the savings in not buying cigarettes. That excel sheet says I’ve saved $244 bucks so far. But I don’t see it, or feel any richer! Where’s my money?

I’m still motivated, but not as much when I started to realize there wasn’t actually any extra money coming my way. It stinks that I don’t have any answers. Sure, I’m not spending the money on cigarettes a day, but the only way to HAVE that saving is to spend it daily and put it into a jar. Yet, somehow I don’t have that kind of money. Who has an extra $10 to $14 a day? Yes, I had it every day, come heck or high water to buy cigarettes. But when it comes to saving it, spending it to save makes little sense to my brain. If that’s my best thinking, small wonder others don’t bother skipping Tim’s or Starbucks…

The Future For Online Financial Stuff Is Here

The future is here..well, it’s next door in the U.S.  I deal with one of the smaller U.S. banks out of Florida. When I called last week, it was the usual: Name, account number, phone access pass code, address, and verify the last transaction in your account. The usual 200 step process to verify identity. But then, the lady asked me if I wanted voiceprint access. Yes! She simply took a recording of my voice into her computer and from now on: No more identity questions! The computer recognizes my voice and that’s all they need. Love it, love it!

Setting up online access at Canada Revenue Agency isn’t easy. It’s actually a multi-step process. You need to enter your personal information, and then some trick questions from last year’s tax return that only you would actually know. Then you’ll need to call their Winnipeg Tax Office to answer some more questions based on your last return. At that point, they’ll send you a code to enter and you’re set up. The first thing I did when I had them on the phone is to thank them for all that security. The guy was a little surprised, but if you’ve heard any of the I.R.S. horror stories from the U.S. you’d be thankful, too, as the IRS lost $21 billion to fraud last year.

Finally, get ready for something called two-step authentication. In the old days, or now ending days, you just needed to log in with your user name and password. That’s rapidly changing to add a second step to verify it’s you and not a hacker. The second step will be to send you a text on your phone, or an email with a code number that you need to enter. It’s already the law with Amazon for sellers, and will be for banks, Ebay, and many others. When you enter that second step, it’ll let you into your account. You can tell the system to “keep” this number if you’re always at your same computer. However, when you do a clean up on it, you’ll need to get a new access code again.

It’s a bit of a pain, but in the big picture of financial accounts, or companies where you can spend money online, and who have your credit card information, it’s well worth it!

Love This: Young Millennials Don’t Use Credit Cards

Well, finally some good news…sort of. This is based on U.S. stats, but let’s hope some of it applies here in Canada.

Credit card issuers are very stressed out: Millennials, those around 18 to 35 really don’t want, and don’t use credit cards. Only one in three even have them, they use the sparingly, and don’t carry much of a credit card balance.

Since they’re over 65 million people, it’s going to impact the future profits of card issuers. But why such a drastic change from their parents? It’s actually easy to explain. The U.S. had a massive financial meltdown from 2008 to at least 2010. So the vast majority of millenials would have lived at home at that time. They saw a parent, or relatives lose their job. Millions were home when the sheriff knocked on the door with a foreclosure notice, or had to move when their parents turned in the keys. They saw entire neighbourhoods wiped out, vehicles get repossessed, and felt the tension, fights, and stress at home.

Just like the students from Stoneman Douglas school in Florida will never be the same again when it comes to their view on guns. For a generation that’s labeled as having literally an 8 second attention span, their focus on gun regulations will last a lot longer. In that same way, the kids who saw the financial meltdown first hand will remember that for a lifetime.

Sadly, we don’t learn the horrific lessons of others. These things generally have to hit us personally, before we take notice. That’s generally the most frustrating thing for parents to realize when teaching their kids, even giving their adult kids feedback and advice. People don’t move until they’ve been moved. But when we’ve had that near-death financial experience, we generally get really smart, really soon, and it tends to last.

That’s the big picture, and the positive. On the reality side, 41% of them are buried in student loan debt and their income isn’t close to what their parents made. However, card issuers don’t really have to worry: Sadly, after age 30, credit card balances, even for millennials double, according to FICO, the company that creates credit scores.

An Expensive Disease Called FOMO?

It turns out that vast numbers of people in their 20s and 30s have a new condition called FOMO, which stands for Fear Of Missing Out.

Having grown up with social media, their priority is not buying stuff, but buying experiences. Whether it’s the super cool holiday, the sold-out concert, a trip to the Grey Cup, the safari to Africa, or whatever interests them. Everybody can buy a sofa or big screen TV, but their spending priorities are on experiences, so as not to feel left out when their friends post some of theirs on social media.

While their parents or grandparents may have accidentally lucked out in being at Woodstock, or having seen Elvis in concert – it’s a financial priority for this generation. While I’m a little bit envious, I wonder if our older generations aren’t better off financially because of our different priorities.

Experiences cost a lot more money. They’re also a one-off in that it’s the trip, the concert, and then it’s over, and the big bucks are spent. We certainly don’t need a lot more “stuff” in our life or our homes, older generations have also spent money. They’ve spent it on a television, dining room furniture, a sofa and the likes that may last a decade vs. a one-off experience. Which is better? That depends on the priorities of the person doing the spending.

Today’s 18 to 30 year olds don’t want to own things – they only want access to things. No box of DVDs, just streaming. No CD, but gotta have iTunes. No car, just ride shares or day rentals. No books, just kindle. Makes me wonder how ready retailers are for this group being the largest in the country. As a reminder, Blockbusters refused an offer to sell their business to a start-up called Netflix for $50 billion. Blockbusters is now just a memory and Netflix is worth over $65 billion.

There Are Businesses That Don’t Love You

Valentine’s Day is the day of love. To us who are single, it’s known as February 14th…

But there are businesses that don’t love you back. Here are a few examples from the last week:

American Express charges around $600 annual fees for their Platinum card. The people that could afford that would certainly be millionaires. But, according to Smart Money magazine, the percentage of American millionaires with that card is 6.2%. But their percentage who have a Sears card is 43%. Yes – you become a millionaire by not wasting $600 at a time.

The Federal Government apparently doesn’t love us. The online filing start for 2017 returns was to be this past Monday. It’s now moved to February 26th. No idea why – it’s the latest I can remember and doesn’t make sense to me.

It turns out Rogers doesn’t love their clients. Another week, another CBC Go Public story. I’ve linked it here:

No matter why you call Rogers, apparently there is huge pressure on staff to sell you something – anything! According to the investigative report, here is a sample interview question if you want to work there: If an elderly lady calls to cancel her TV sports channels because her husband just died, how do you convince her to keep them AND add more channels? Selling modems to people who don’t have computers, pushing their new credit card, adding second lines to home phones, and the list goes on. If you’re a client, you need to go through your bill with a fine tooth comb. If you can’t figure it out – get someone else to look at it to find any charges you shouldn’t have!

Apparently 18-23 year olds don’t love saving or investing: This is pretty shocking: According to a survey by Microinvesting, over 45% of 18-23 year olds spend more money on coffee than savings. Oh, and over a third of 24-35 year olds have the same coffee priority!

Lastly, I’ll give you a money-saving tip for this Valentine’s day. Take your partner to the card store. Both of you find the perfect Valentine’s card, give it to each other, read it, then put it back on the rack and leave the store. There…romantic or what? You’re welcome…

Doing the RRSP Deadline Money Dump?

It’s getting close to the end of the month RRSP deadline and lots of people are now thinking about doing their annual RRSP investment money dump.

But you shouldn’t do it. Not just because of the insanity of the market in the last few days: The Down was down 500 points or so Friday, down almost 1200 on Monday, then a 1000 point swing on Tuesday from opening down 500 to being up almost 600 at the close.

If you’re trying to time the market, you’ll never be successful. And if you’re just dumping money into your investments once a year, you’re also going to be disappointed over the next few decades.

THE best way to invest is dollar cost averaging. We’ve talked about it before, just search here for that term and you can read some of the research.

Dollar cost averaging is putting the same amount of money into your investments each and every month. No matter what the market is doing, put your monthly amount into the same investments you’ve chosen. That way, you’re averaging out the market. Some months, when it’s down, you’ll get more mutual fund shares. Other months, when the market is up, you’ll get fewer – but it’ll average itself out over the years. In other words: Set it and forget it, because you’re not retiring this month, year, or decade.

Even in the great depression, someone who stuck with investing every month, all the way through the depression was way up a decade later, compared to someone who pulled out, then re-invested, and tried to predict the market. The once a month investor had doubled their money while still in the depression. The once-a-year investor took 25 years just to break even!

If you don’t have the money, it’s probably a great idea to skip the RRSP loan. Yes, you’ll be out some tax refund – but only for this year. Then, instead of a year of payments for last year, invest something each month taken directly out of your bank account starting this month. You’ll get the refund next year, you’ve started on the successful track of dollar cost averaging, and you’re not going in debt to time the market. A triple win with just one adjustment!

Oh, and you do know, or remember, that banks are for parking your money and not the place to do your investing, right?

Don’t Get Mad – Get Saving

This, in my view, was THE best Superbowl commercial this year. It’s from E-trade, a U.S. online brokerage firm. I hope you don’t need it explained to you and hope that’s not how you’re visualizing your retirement years. But that depends on what you’re doing today as your savings will double every seven to 10 years, depending on how you invest!

Paying Down Your Credit Cards

When I was at Mosaic last month, there were some common themes of questions from listeners who stopped by to say hello.

I’m trying to pay off three credit cards and then I’ll be debt free. I’m paying extra on all three of them.

OK, firstly, stop saying that you’re trying! It gives your brain permission to fail and just shrug your shoulders. Say I AM paying them off – it doesn’t sound like much, but it’s way more powerful when you say it and believe it!

Secondly, that shotgun approach has proven to not work that well. Paying a little extra here and there is the least effective way of getting it done.

The Money Tools book walks you through the step-up plan to pay off a sample $25,000 in debt in around half the time it should take. What you need to do is pay everything extra on the smallest one. In this person’s case, it was a $500 Visa. Make the minimum payments on the other two – every dollar extra on the smallest one. It was going to take until May or so – now it’ll be done by February. Then take the next smallest. Every dollar of the first card is now just re-directed to this 2nd card along with the minimum payments that have been paid all the way along.

The Government Financial Resolutions You Didn’t Get

Prime Minister Trudeau just gave his New Year’s message that us Canadians should focus on “key values” for the New Year. OK, that’s nice and vanilla, but there was nothing on maybe some government resolutions on financial issues. Since it was missing, here’s what I’d want the PM, and probably all governments, to commit to:

If you’re one of the many people who are waiting for the government to fix your life – sorry – we can’t and we won’t. You need to get off the sofa and start fixing your own economy – the government makes a lot of feel-good promises, but we can’t fix it for you.

We’re going to commit to using the rule of doctors: First, do no harm. That means we’re going to fix the punishing new mortgage rules that will make it really hard for the average Canadian to sell their home or to buy one – even with 20% or more down-payments.

From now on, the government will become better stewards of your tax money. You send us a lot of it. Not just off your pay, but in GST, gas taxes, EI, CPP, and places you don’t even know about. We’re going to start treating it as if it were our personal money. No more throwing cheques at small but vocal special interest groups that yell a lot, or who we want to bribe to get their votes again.

We’re also not going to just hand out money as if it were candy anymore. Sorry about giving $10.5 million to a terrorist – tax free. If we need to settle claims, we’ll do it after a court orders us to.

Lastly, we’re going to stop lying or fudging the numbers. Sure we promised we’d “only” be overspending $10 billion and it became $40 billion.

Yes, I promised we’d have a balanced budget before the next election in 2019. Yes, two days before Christmas when nobody noticed, my finance department released a report showing we would be in deficit spending until at least 2055. Yes, the damage we’ve done will last an extra 36 years just to not overspend each year. We’ve seen the light, and our New Year’s resolution is to tell you the truth, and to actually start making the hard choices – just like each and every family has to make, and to live within a budget.

When pigs fly…..

We’re More Confident – But Why?

Yesterday, the Bloomberg Nanos Consumer Confidence survey came out and great news, apparently: We’re getting more optimistic about the economy.

So, these 1,000 respondents studied a lot of economic data first? No chance. I always wonder what the respondents base that on. My best guess is that we just respond based on our personal economy. We base it only on what’s happening in our lives. Then, the economists take the responses and work backwards in guessing why we’re more or less confident.

The government loves a higher consumer confidence level. You and me are responsible for around 70% of economic activity with our spending. If we stop, the economy crashes. If we’re confident and keep spending – it’s all good for governments and business. Not so good for our debt…

The analysts say it’s because oil is over $60 and people in the West are more confident as a result. Really? I bet very few respondents would know that. I’d bet it’s more about hanging onto their job, reading about fewer layoffs, or seeing their neighbour or kids getting at least some kind of position.

A 5.9% unemployment rate is certainly great news for anyone looking for a job in Eastern Canada. But the national unemployment rate wouldn’t make me more positive – it’d just be what’s happening in my life.

The most optimistic people are in Quebec. The survey people think it’s partly because of foreign buyers now going into Montreal. Well, that happened so recently, there’s little chance it’s in the survey results. All time low unemployment certainly helps get people a raise. So you now make $200 more a month. That’s normally enough to make someone optimistic. But our brain blocks out the fact that we need a new roof, our line of credit hasn’t shrunk in a decade, and every day the car starts is a miracle.

That’s a province with massive infrastructure problems, debt, and corruption. The government is doing well because we Westerners send them tens of billions of dollars a year. Without that, the so-called optimism there would probably match the reality that they’re a financial basket case. If you were to send me a thousand bucks a month to band-aid my financial trouble – I’d be optimistic, too.

43% think house prices will rise in the coming year. If it’s respondents in Vancouver or Toronto, that makes sense. I don’t also mean to pour cold water on it, but the reality is that the new mortgage laws will make that next to impossible. You now need a buyer with $150,000 higher income to buy your home. Or, if you’re a buyer, you need to find a home $100,000 to $150,000 less than you could buy last year. In fact, there have already been comments from some federal government people they’d be prepared to re-visit these changes if need be.

And if optimism is high now – wait until the numbers come out after recreational drugs are legal. The high could be much higher…