Author Archives: George Boelcke

Lessons From Last Week’s Book Signing

Every time I do one of my (rare) book signing, I learn a lot. If it isn’t an insight, it’s what I need to explain better, more or differently. From last week at Mosaic Books, it was:

Making your teenager a millionaire: Your teenage relative won’t do it because you tell them and YOU know it’s guaranteed to work. They won’t listen to you and you can’t want it more for them than they want it for themselves.

A teenager isn’t likely to even listen to you. But maybe they’ll “get it” from the two page Money Tools book chapter. They have to read it and understand compounding works better the younger the person investing. You also have to remember that saving $9,300 is like asking you to come up with a few million bucks. Teenagers dream of $300 bucks and a BIG shopping trip to the mall next week. They don’t dream of $9,300 or anything past next month.

That’s where you come in: The chapter is two pages. When they ‘get it’ and work through the compounding math on their own where $9,300 becomes $18,600 in 7 years and $37,200 in 14 years without them doing anything at all – they’ll get committed. At that point you can also help. Maybe you can match what they save, maybe you can add 10 or 20% to what they save or whatever you can afford to boost the odds it’ll happen.

If you contribute anything at all, the deal should be that the investment account is in joint names. Your money is in there and then it’ll assure they don’t take out anything.

Not knowing this or doing this when I was early 20s or so is now one of the top 5 lifetime regrets of mine – for obvious reasons. And I’ll post the more detailed “how to and where to” invest again.

Spend the $20 on the book – at least make them read it and understand it – think about some seed money to get started or to keep going. THAT is starting a family legacy in ways nobody else does…

Investment How To

Money Tools & Rules book: Expanding on the “How to make your teenager a millionaire” chapter:

The fine print first: I only ever give feedback based on what I would do, and I am not an investment broker, investment guru, etc. Always do your due diligence and check with an investment professional, no matter what, because this how-to is for information purposes only!  For someone that age, investments should likely be in diversified good growth mutual funds with a long-term track record and no load fees. To find them, search for Morningstar, an independent rating company of all mutual funds, or it’s U.S. equivalent. Careful just giving someone some money: I would do it on a matching basis. I’ll contribute a dollar for every dollar that you save towards this goal, or I’ll contribute two dollars for every dollar, etc. But tell them a maximum, or a kid who is a great saver will surprise you, and cost you a lot more than you may have wanted to match!

Where to invest: At age of majority, everyone is entitled to contribute to a Tax Free Savings Account (TFSA) to a maximum of $5,500 a year. The great thing about the TFSA is that it isn’t income percentage linked – it’s currently $5,500 a year irrespective of income. And, while it doesn’t get him or her a tax deduction up front, it is also never taxed in the TFSA, and never taxed when it’s taken out! If the person is 20, for example, they can also use the available “room” for the prior years! They can also do it through an RRSP, but that’s to a maximum percentage of their income, and then it will be taxed when it’s withdrawn in retirement. But that’s up to you…

What to invest in: The younger you are, the higher your risk tolerance. That’s simply because you have a vast number of years to average out a bad year with a great year. The older you get, the more you need to protect your principal and not chase higher returns. That changes gradually as you get into your 50s and older. For anyone in their 20s to 40s, THE easiest investment with next to zero commissions and huge diversifications is the S&P 500. It’s a basket of the largest 500 companies – you can’t get much more diversified than that! And you can do it in ten seconds on your own (online or by call). You want (in my opinion) the S&P 500 Index Fund, ETF (electronically traded funds) in Canadian dollars (it avoids you having to do a currency exchange). The historical return over the past 50 plus years is 11.5%. That’s why I use 10% returns in all my examples. I’m using LESS than a 50 year proven track record average!

If you don’t want that, go to Morningstar and search any mutual funds in whatever category you want: Emerging markets, conservative, balanced, etc. by returns. Just make sure you’re only looking at the ones with a long-term track record!

Who to invest with: If you, or another family member is an existing customer of a brokerage firm, that’s worth checking out as to a)whether they’d take another family member with a small account as a favour to keep their (current big family) client and b) what the fees would be! If that doesn’t apply, it will likely need to be an online brokerage account. Most of the large banks have them – just don’t confuse their brokerage division with investing at a bank. That’s generally a bad idea with poor returns! Again, you can compare their published returns with those from Morningstar.

If you’re just starting, any online broker is fine. If you deal with any of the major banks, they all have an online brokerage. You just need a place and an account and can do the rest. They won’t give you advice – just execute whatever you want to buy or sell. No worries if you get the S&P Index funds – click to buy it and leave it alone until you’re in retirement. And for pete’s sake STOP checking it every month…set it and forget it.

How to get started: Open the account where you decide, and how you decide (RRSP or TFSA). I would do it under joint names. That way both names are on it (especially if I’m helping with money), and if it requires joint signatures  you’re sure the person doesn’t do something stupid and make a withdrawal to pay a bill, etc. without your consent and signature. That’s not what this money was designed to do. It was/is meant for retirement and never to be touched until then… When your minor reaches the age of majority and can contribute to an RRSP or TFSA take the investments you’ve already made and move them over to one of those! It’ll protect them from ever having to pay taxes on the returns inside either of these!!

To check reasonable annual returns: Do a web search for “historical S&P returns,” “historical Dow Jones returns,” etc. (On the yourmoneybook.com site you can click on “radio stories” and search “historical returns.” I’ve posted the chart going back about 70 years!! For someone aged 18 to 25, there are more than four decades before they should access the money, and thus four decades of markets going up and down, so the historical averages apply, and are well above the 10% used in the Money Tools example of How to Make Your Teenager a Millionaire. If you’d like, you can use a different guestimate of returns for the next four decades, and re-do the easy math (or with an online calculator) of how long it takes for the money to double. IE: If you use 8%, it’d be 9 years.

Hopefully that gives you some of the how-to and/or steps to get from here to there. (updated 11/10/2019)

THIS Is Paying It Forward

This is a Facebook post from a buddy of mine in South Dakota from earlier today. And it works the same way with the Money Tools book.

No, it’s not a box of chocolates or flowers for someone. But those are gone inside a week. With over 540 tools, tricks, and traps to avoid, there HAS to be a few that every person can learn and benefit from.

Care enough to share. Pay it forward. Believe me when I tell you it’s not just for someone who clearly “needs” it – but for anyone who “deserves” to do more, to do better…or maybe do a little “less…”

Those Insane Car Payments

This story was in the Globe and Mail yesterday. It just re-states what I’ve been talking about twice a year or so forever. It’s not because I hate new cars, it’s because I hate you being buried in debt with no way and no hope out!

https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-the-problem-of-crazy-high-car-payments/

Stretching car payments to seven years is financial suicide. But they keep getting more expensive so manufacturers, banks and car dealers have no option but to keep looking for ways to make it more affordable.

Unfortunately, they’re all going to make things worse – so much worse. They’ll do balloon payments for seven years and you STILL owe a buyout balance, promote leases…fleeces…where you pay for years then return it because the value isn’t what you owe or just advertise weekly payments. That just makes you think it’s cheaper – it isn’t.

The story states that a ‘recent study’ shows 30% of people owe more than their trade-in is worth. It’s actually closer to 50% according to J.D. Powers.

Before you sign, here are six questions you need to ask yourself:

-You know that you’re signing a large part of your life away, right?

-Add about 30% to your payment to see how much it’s costing you just for transportation off your gross income

-Signing a payment this high means you are predicting continuous perfect finances for the next seven years: No layoffs, downsizing, higher rent or mortgage, no loss of your partner’s income or any negative financial troubles

-You realize you will owe more than the value for at least six years. If you want to trade it, if it’s written off or stolen, you will get the actual value only and need to cover the difference of owing vs. value with cash savings

-You have to love this vehicle in good times or repairs times no matter what for seven years until it’s paid for. It’ll literally be longer than 40% of marriages last.

-You know that the same vehicle as a three or four year old would have been about 40% less expensive, right?

We Now Live In a Subscription Society

20 to 30 year-olds have changed our entire way of purchasing things. Millennials typically don’t want to own much, they want to be able to use it – and that’s done through subscriptions or rentals. They’re renting access versus owning things, and it’s changed the business model of vast numbers of companies and entire industries.

Some things we all have to rent or pay monthly because we can’t actually own them. Those include utilities, cable TV, gym memberships and the likes.

Many others just leak out $10 or $20 bucks at a time for years and years. There are now lots of phone apps, some from the major banks in the U.S. to scan your credit cards for subscriptions you may no longer be using but still paying for.

Microsoft Office is $11 a month for life or $79 to buy and own

You cell phone can be $40 (that’s mine) or $50 a month with two or three gigs of data instead of $100 or more

Streaming music subscriptions and Netflix, etc. are going to be $30 or more.

Netflix just hit 150 million subscribers and has single-handedly destroyed the idea of even owing movies on DVD. Want proof? They have over 150 million monthly subscribers and just paid $100 million for one year of the rights to the show Friends.

That’s fine if you’re not also paying for cable. But if you do – that’s a ton of very expensive doubling up

Amazon Prime is $80 a year. Are you really getting value from that or just want something shipped a day faster than I get it without paying for Prime?

Here in Edmonton, as most cities, we now have electric scooters from Lime and Bird. They’re great, but $1.15 to start and then 35 cents a minute. So using it twice a week as a rental will be way more expensive than owing a bike within a month or two.

Getting the use of a vehicle is now available by subscription – or on demand use. Pogo has been around for years and other companies, including the manufacturers such as GM are starting in this area now. You’ll pay based on the time and mileage used and can pick your class or size of the vehicle: small car, sedan, pickup, SUV, luxury, etc., and it’ll usually include insurance coverage as well.

Ask yourself:

What’s the cost of owning vs. renting

Will I use it enough to justify the subscription or membership?

Will I actually notice when the subscribers put through their price increases or will it just keep growing the balance on my credit card?

Will I remember it’s on automatic renewal to cancel it if not being used?

Canadian Tire…Who Knew?

If you want to start a credit card, called an Affinity Card, your logo goes on a Visa or Mastercard. But it’s run by one of the banks who takes a huge slice of the profits and gives you a small commission on all transactions. That’s pretty much every card from Westjet to Petro Can, Starbucks and pretty much any card with a company logo.

The Canadian Tire Mastercard is very different: Not in the use, not in the Mastercard logo or in the way you use it – but behind the scenes.

Did you know there’s actually a Canadian Tire Bank with 1,400 employees? And it’s their own bank that has the Canadian Tire Mastercard. In the 10 years this latest Mastercard has been out, it’s reached $8 billion in outstanding balances! The credit card income – and it’s a lot – is now over a third of the entire company’s profits! Oh, and in 2014 Scotiabank bought 20% of it.

It’s one of the reasons Canadian Tire can give out more perks than the industry average of 1.5% of your spending. They don’t have any of the commissions to pay to third parties – their credit card income is all theirs.

Thank You For Not Voting

Yes, this is a financial segment – but it’s about next weeks’ election:

If you’re a millennial, roughly under age 35, only about 30% of you vote. That’s compared to over 70% of those aged 65 and older.

Would you let your grandparents pick your clothes or your music choices? Of course not! But you’re letting them pick your financial future for the next 50 years or so.

You see, anyone over maybe 50 or so isn’t going to be around to pay back all the debt we’re running up. Ironically, that’ll be up to you – and 70% of you don’t seem to care. We are paying about 80 bucks for a $100 government. They’re not collecting enough to pay for what they’re spending. If you’re just paying 80% of your bills every month, the day of everything crashing down on you comes pretty quickly. With governments – not so much. It’ll be a long time before we hit the wall as a country. When we do – it’s your age group that’ll be massively impacted, and not the 50 plus age group.

Should the government live and spend within it’s means? That’s up to you to decide. But if you’re a politician you’re not paying it. So it just makes sense to make promises and overspend to make their voters happy. Is that right? Is that a good idea? Should that happen? That’s up to you and your political views and real or perceived reality to decide. In the world of economics, it’s insane…but that’s your call.

If you’re under age 35 group were to vote in two city, provincial, and federal elections in the same numbers as seniors, everything would change in five or six years. Because you’re actually a larger voting block. Politicians have only one job: To get reelected. So they cater to those who vote and that ain’t you.

Two elections would turn that around. If you voice your opinion, you’d be the group they’d have to focus on. One election would be a fluke in your voter turnout. Two elections is a trend and they’d get the message.

I hope to see you on election day. It’s not likely, but I hope you take the half hour. Until then, on behalf of those of us who won’t be left holding the financial bag down the road: Thank you for not voting.

The Art of Deception (in prices)

The last thing manufacturers or retailers want to do is to raise their prices. Most of us would notice – especially if it’s frequently purchased products.

But there’s another way to get you to pay huge price increases, and it’s likely you’ll never really notice: It’s shrinking the size and weight of products: The art of deception.

I was at the Dollar store last week looking to buy more 12 packs of felt markers. The price is still $2 (ironic for a Dollar store that doesn’t have much for a buck anymore…) The product still exists and still has the same SKU number, but it’s now a 10 pack. That’s a 17 percent price increase without increasing the price.

In the last two years that’s been the same for vitamins, chocolate bars, crackers, cereal, chips, cookies, coffee (multiple times with a lot of shrinkage in weight) peanut butter, mayonnaise, apple sauce, and a ton of other products. Lots of times, they’ll change the packaging, or take the same glass containers and just trim them a bit in width and length where you likely didn’t even notice it. Look at almost any toilet paper rolls now. You can clearly see they don’t fill the holder like they used to. For toilet paper, it’s an average of 23% less product just in the last two years.

Keep an eye on the weight and cost per ounce or gram. It’s the only way to see the BIG price increases they’re sneaking by you!