Author Archives: George Boelcke

Not Snakes On The Plane – Snakes In The Bankruptcy

If you want to compile a list of stupid financial collapses of pro athletes, get a LOT of paper as it’s a very lengthy list. Over 70% of athletes in the NFL and NBA are bankrupt within five years. The NHL is a little different, but not this time: This weeks’ bankruptcy filing by Vegas Golden Nights NHL goalie Robin Lehner won’t be the only one this year, and won’t crack the top 50 dumb stories – sorry.

Lehner apparently always had a thing for snakes. In 2017 he thought it’d be great idea to buy a bunch of rare snakes from world renowned breeder Ben Renick for $1.2 million as an investment. He made $4 million that year with the Buffalo Sabres, but still didn’t have the money for this new investment under his new company RL Investments LLC. Instead, he went to a company that specializes in loans to athletes by the name of Eclipse Services with quarterly payments of $200,000. The company makes lots of loans to athletes based on their contract. After all, when you get a big bonus and a huge contract, you gotta have money THAT DAY so you can buy your Mom a house and six cars for your buddies and third cousin. Then you gotta get a penthouse somewhere exotic to party with your entourage of old and new-found buddies. That’s all really expensive and you haven’t actually earned a dime of your future contract yet. But I digress.

That snake breeder was then murdered by his wife. Yes, the story has a lot of twists that I’ll skip as it’ll just make you shake your head too much… And, it turns out, breaking news: these snakes are pretty high maintenance and eat a lot. In the first four years, Lehner “only” made around $7.5 million – barely enough to live on – never mind the snakes.

In 2021 he signed with Vegas for $5 million a year and a $2 million signing bonus. But, by that time, the lawsuits, allegations of stealing some pythons, the lawyer bills, trying to just put food on the table, all that interest, etc. were mounting. And, let’s face it, $5 million a years isn’t much, is it?

It’s a mess and a pretty convoluted story. But there’s good news: Now a bankruptcy trustee can figure out this massive mess and handle Lehner’s finance for a year or two. More sort-of good news: Lehner is out the rest of the year with back problems. Sure, he still gets paid, but he’s probably out looking for some part-time work to pay back some of his debts…and right after bankruptcy discharge, he’ll have another two years at $11 million total on his NHL contract.

Sleeping With Walmart

Late fall, the rollout of Sleep Country Canada stores into select Walmart locations started in Quebec. They’ve now worked their way to Western Canada with locations in Saskatoon, Lethbridge, Calgary, Edmonton, and Duncan, BC.

The express stores are around 700 square feet and may replace the hair salon, optometrist/eye glasses, nail salon or other smaller “stores” to make room. Sleep Country has around 300 locations and simply wants to expand their customer reach. Walmart is certainly the place to do that, so it seems like a win-win for both companies.

Mattresses, along with jewelry, certainly have enough markup to make them profitable, even after paying Walmart. When furniture markup is around 300 to 400% (compared to less than 10% for electronics) and mattresses are significantly higher than that, make sure you shop around. For over a decade, a national retailers has had a billboard on a busy intersection in Edmonton advertising 50% mattress sales. That’s not a sale – its re-establishing a lower (but still) retail price. That’s taught me to believe: 50% off is actually full sticker price.

Consumer Report is a good place to start your research. They’ve done testing on everything from $1,000 to $3,000 mattresses and found very little difference when cutting them open and comparing coil count and padding. In their opinion, suggested retail pricing is pure fiction and fancy phrases and brand names don’t justify the additional cost. Feel free to test-sleep them for a few minutes and shop around. If you have a Costco card and are looking for a new mattress, January is the month Costco carries them (as in: check it out right now) since it’s only a seasonal in stock item.

With Your Mortgage: Now Do The Opposite

Since 80% of homeowners have a five-year fixed mortgage, millions of people have a mortgage renewal to deal with this years.

With rates at their highest point since the 1980s and likely a couple more rate hikes coming early this year, that’s a nightmare about to hit them. If you’re one of them, as I was last year, don’t just shrug your shoulders and sign up for another five-year term before doing some thinking and research. Yes, spend a few days thinking this through – just make sure you never do anything because you read me suggest it – or the suggestion from anyone else without doing your own due diligence!

Remember last year when gas prices were at insane levels? Our brains are wired to think that that’ll be the case forever. Remember looking at any of your investment statements in the last year? You’d have been better off to never open the envelopes. But, if you did, it was down, down, down and your brain thought it’ll be down forever and (hopefully not) to just get out and put the money under your mattress.

Today, gas prices are back down and in 2023 and next year, your investments will also come back. What stays down (or up) doesn’t stay there forever. So don’t get depressed or in that “what’s the use” mindset and just sign another five-year mortgage term.

My thinking, and what I did, might be a good starting point for you to consider another mortgage term this time around: As we discussed in a story last year, I was able to do an early renewal. Yes, it was a two percent higher rate, but avoided the last three (and coming two plus) rate increases.

Variable rate: That’s only a good deal when rates are at their max and heading down. That way, each month, your mortgage rate will be reduced with decreases in the prime rate. But that’s not today.

One year term: That made no sense to me to have to renew again when rates will have barely peaked. I wanted/needed a little more time for rates to finish rising, stabilize for some time, and start to come down.

Two year term: That would be 2025. Maybe that would have made sense, but when the rate fever breaks, it’ll take a bit for the inflation to ease – meaning a period of stable rates before a rate drop happens to again re-boost the economy. Two years didn’t seen long enough for me to be able to be on the sidelines.

Three year term: That, to my way of thinking was the perfect timeframe for all that to happen and already be pretty much assured rates will be down. Down all the way? No idea? Still rising? No chance the Bank of Canada will not have inflation beaten down and the economy back on track. In my view and action, three years made the most sense right now.

That doesn’t mean I’m not still massively jealous of a neighbour with a 1.8% rate for four more years…but I can’t live for a better past. I can just deal with the reality of today…

Bed Bath & Beyond Bankruptcy?

Yikes! Another well known retailer may be going out of business as early as next week.

Bed Bath & Beyond warned yesterday that it may have to file for bankruptcy and has started to prepare for it, at least internally, stating that there is “substantial doubt it can continue its business.

Having already announced that 150 of its stores were closing in August and laying off 20 percent of its work force appears not to have been enough – or soon enough. Third quarter earnings were well under expectations with sales down 28%, and Tuesday’s release of fourth-quarter earnings are likely to show that the Christmas season wasn’t sufficient to help.

How sad, even though the writing has been on the wall for a few months when suppliers started to refuse to ship inventory. Bed Bath & Beyond is a well known and well respected company. It’s easy to write it off to “people just buy online.” However, that’s often an easy excuse, too. Changing to generic brands cost them a lot of business from loyal customers looking for their favourite brands during the pandemic. Three different CEOs didn’t help, along with big staff turnover, turn-around plans that came late, and a decade of experimenting with private-label products was mismanaged, at best.

In an online world, it also doesn’t help that their website is bad – really bad. The joke among staff is that it’s easier to search for their products on google than their own website. I can vouch for that with a purchase last week. But that also applies to Rona, Lowe’s and even various departments for Walmart!

Still, I’m going to go shopping there today or Monday. Here’s to hoping it won’t be the last time.

Ready For The Recession?

Happy New Year! But likely not so happy in the financial world for the next six months or so as it’ll be unlikely that we’ll avoid a recession this year.

While rate increases happened pretty much all of 2022, the impact isn’t usually felt in a big way by consumers for at least six months. And that time is upon us. Actually, it was upon us in November or so, but there isn’t anyone who’s going to turn off their spending tap right before Christmas. There also aren’t many companies who want to be seen as Scrooge in doing big layoffs in December.

January, however, is very different and we’ll see an immediate decrease in consumer spending and a large increase in layoffs. Once person’s spending is another person’s (or companies) income. That creates a spiral effect boosted by inflation and high interest rates that’ll accelerate a slowdown rather quickly.

While 80% of Canadians holding a mortgage have a 5-year term, this year another one-fifth of those are up for renewal. Add that to the one-fifth who renewed at much higher rates last year and 40% of them are now facing the reality of $400 or more in mortgage interest. National Bank estimates that the median amount spent on mortgage costs is 67% of income. The normal ratio anyone uses is around 30% tops and this is an even worse situation than the early 19080s. That doesn’t leave a lot of money for non-essential spending for those who are laid off, had their hours cut back, are in the 40% who’ve had to renew their mortgage or the 20% who had a variable rate mortgage all along. That group of being hit with huge mortgage renewal rates will keep going until 2027. That’s the big advantage the U.S. has where everyone has a 15 or 30-year fixed mortgage…

Oh, and rental rates keep rising as landlords pass on their higher carrying costs, utilities, etc. so you can add most renters to the large group of people who are now barely able to cover their basic living expenses.

That’s assuming we’re not using credit cards to keep up our lifestyle. Since the end of summer, credit card pay rates (the percentage of balances paid each month) has been dropping significantly while auto loan arrears are growing.

So happy New Year is more likely to be an un-happy new year of 2023…

Tim’s Gets 250% Worse

This morning, Tim’s is joining the long list of retailers who have changed (worsened & significantly dialed back) their “loyalty” program.

As all the others, it’ll now be spending money based, instead of number of visits. In my opinion, Tim’s is making a big mistake. Average coffee and re-heated bagels and muffins hasn’t worked for a number of years. Sure, Covid lockdowns didn’t help, but now changing their reward program to be 250% less rewarding isn’t going to help their business. People may go in for a coffee and end up with something else, as well. Discouraging the coffee crowd from coming in the first place seems like a pretty dumb step backwards. Maybe I’m mistaken and Tim’s knows how to upsell people who don’t come in in the first place?? But then, they didn’t ask me…but now I don’t feel so bad having switched to McDonalds coffee some time ago…

What Would You Do? Pay $40 Or Destroy Your Credit?

During a recent trip to downtown Edmonton, I purchased an all-day ticket from the lot’s dispenser, put it on my dashboard, grabbed my laptop, and left. Three hours later, after my seminar, I got back to my car only to find a violation ticket for $40 under my wipers. What the heck? I was choked! It turns out that the wind had blown the receipt off my dash when I opened the passenger door to get my laptop bag.

The majority of people would ignore the ticket, while some might phone the company and try to talk their way out of it. That may work, but I doubt it. The ticket wasn’t displayed so the fine was issued. Even if someone can talk their way out of it, unless they take the extra step of getting the ticket voided in writing, it will show up again.

Within a month, the collection letters will start to arrive. Then, a few months later, this will end up at a collection agency. After their hate letter, they’ll report it to the credit bureau. You now have a collection on your report. That will drop your credit score about 100 points if you had a decent score prior to this. In other words – it’s destroys your credit.

But the chain reaction gets worse: Your interest rates on your credit line and some new borrowing will now jump a lot! Sure, you can eventually pay the ticket. There’s even a small chance you can convince them to remove it. But it’s more likely it’ll just get changed from an outstanding collection to “paid in full”. And for the next three to six years this impacts your borrowing ability or rate.

Unlike most everyone else, I swallowed hard and paid the fine the same day. Expensive lesson learned – something I call a stupid fee. But a $40 lesson is a lot cheaper than thousands of dollars in higher rates, and years of credit problems.

A Vernon person emailed me the same kind of issue. He had collection letters he ignored and now the item is on his credit file. What can he do now? Pay it and learn a very expensive lesson for the next few years.

Would You Be Willing to Cancel Christmas This Year?

Well, maybe that’s a little extreme – but I’m just talking about the excess spending part of the holidays.

Whether it’s Covid, lockdowns, inflation or recession, on average, we spend more than $700 on gifts. But we’re already spending over 165% of our household income each year, and our savings rate is barely four percent. That means most of our holiday spending will need to go on credit cards. Ouch!

When asked, the average person claimed it took two months to pay off their holiday shopping. Yet the actual time was over six months! Let’s face it – July is NOT when you want to deal with last years’ holidays!

And it’s not just the gifts we buy, but also the added spending for trips, the tree, decorations, cards, postage, concerts, clothes, hairdressers, all that food, and the total amount quickly adds up.

So here are five tips to financial survival this years’ holidays:

 Cash is king – when you’re paying, there’s a very different feeling to laying a bunch of $20 bills on the counter instead of using a credit card. With a number of cards, there’s no reason to stop, and merchants know that the average purchase is much higher when customers pay with by credit card!

 Get realistic – make some kind of simple budget, stay within it, and practice the four most powerful words nobody ever wants to say: “I can’t afford it.”

 Know what’s important – resolve to make this holiday season less about money. Focus on the difference between the meaningful and the meaningless. This might be time with your family, a donation to your favourite charity, your faith, or many other things.

 Speed kills – it’s not just a traffic rule, but also includes your impulse purchases.  It will almost always cost you more money if you don’t take the time to shop around.

 Make a list and check it twice – it works for Santa, so discipline yourself as well. Don’t leave the house without a list and a good idea of what you’re looking for, as well as a price range. Cruising the stores is frustrating and many people tend to just buy something – anything – just to get on with it, and that’s never a budget smart way to make purchase decisions.

So-called “Good” Debt and Your Stay-at-Home Partner

BNN has previously featured a Bank of Montreal survey with the headline that Canadians are taking on more “good” debt. Oh nice. So everything is fine – nothing to see here – move on.

Give me a break. I understand the logic of what they’re saying, but I disagree with the premise that there’s really such a thing as “good” debt.

The survey called borrowing for the purchase of a home, to do renovations, or for education good debt. Well – maybe. But most of these CAN be done with cash and without taking on more debt. The only exception would be the purchase of a home. But only in comparison to taking on debt for vacations or credit cards, as two common examples.

News flash: At the end of the day you still need to make the payments. It’s “good” if the rate is really low, bad if it’s the 20% credit cards. But debt is debt. It stops or reduces the amount you can save, because you only have a finite amount of net income. So, every time you borrow, you’re taking a voluntary pay cut: Same pay, minus the necessity bills minus one more new payment now.

It’s good or at least “gooder” if it’s a fixed loan where you have three, four, or five years and there’s an end. It’s never good when it’s interest only, such as a line of credit where the average person owes over $35,000 and owes it for more than 14 years. It may have started off with the sales pitch that it’s “good” debt, but when you add up all the interest and time to eventually pay it off, it was a horrible idea.

And one more thing, if you have a spouse who is a stay at home parent with your kids: A new study just found that a stay at home parent would be fairly compensated at $117,000. So if your partner is a full time parent, do not begrudge them their “me” money, or question their personal spending unless you want to pay them what they ought to get paid! You really need to read the Money Tools relationship chapter: When you got married, it stopped being  “your” money or “their” money and became “our” money.