Fifty-five, Unemployed and Faking Normal

Most of us who are, already know this: It’s much harder, financially, to be single than to be living with someone in a relationship. There’s a basic cost of living that includes rent or mortgage, insurance, utilities, food, cable, phone and transportation. That’s just the basics. You pick the amount, but let’s call it $1,500 to $2,000 net per month.

For us singles, we’re paying that full amount. For those who are married, living with a partner or roommate, it’s almost the same amount, other than a small increase in food costs. Rent or mortgage payments don’t change if it’s one person or seven people paying it and  your cable company doesn’t care how may people watch what they’re billing you each month.

For women who are widowed, divorced or single it’s even harder. Arguably, they are paid 15 to 25 percent less than their male counterparts. They also have a harder time finding a job – especially in the last 12 years since the 2008 economic meltdown.

So I wanted to share an excerpt from a book called: Fifty-five, Unemployed, and Faking Normal by Elizabeth White. You can order it from Mosaic or online. Here’s an excerpt of the books’ introduction:

“You know her. She is in your friendship circle, hidden in plain sight. Her clothes are still impeccable bought in the good years when she was still making money.

To look at her, you would not know that her electricity was cut off last week for nonpayment or that she meets the eligibility requirements for food stamps.

But if you paid attention, you would see the sadness in her eyes, that hint of fear in her otherwise commanding voice.

These days she buys the $1.99 trial-size jug of Tide to make ends meet. You didn’t know laundry detergent came in that size.

You invite her to the same expensive restaurants that the two of you have always enjoyed, but she orders mineral water now, instead of the $12 glass of Chardonnay.

She is frugal in her menu choices, meticulous, counting every penny in her head. She demurs dividing the table bill evenly to cover desserts, designer coffees, and second and third glasses of wine, she did not consume.

She is tired of trying to keep up appearances. Faking normal is wearing her out.

There are no media stories about her. Her slide out of the middle class is not sensational enough.

A friend says she’s broke, not poor, and there’s a difference. She lives without cable, her gym membership, or nail appointments. She discovered that she can do her own hair.

She has no retirement savings – no nest egg. She exhausted that a long time ago. There is no expensive condo from which to draw equity and no husband to back her up.”

Kind of makes you think – and hopefully to be on the lookout for someone in your circle of friends.

Broke Is the New Rich

One of first chapters in the Money Tools book is called Broke Is the New Rich: It’s pretty much for anyone under age 40 or so who’s mentally decided they just can’t ever get ahead.

Being broke isn’t fun. It’s also stressful and leaks into every other area of our life from concentrating at work to relationship fights to bouts of depression. But a lot of times it’s not necessary. Last week I hired a taper/mudder to do my basement stairs and storage room – something I absolutely can’t/and refuse to do. He texted me before coming out on Saturday. “Good morning, George. I barely have any gas. I think I can make it out there. But making it back will be a problem. I know this may seem a little unprofessional of me but I figured it’s just best to be honest.”

His text was a roundabout way of double checking that he was going to get some money for the day of work. He did make it here and started the work. It turns out both him and his girlfriend worked for a painting company for over a week that stiffed both of them for their entire pay. It’ll now be a while before the Labour Board will get him paid. He’s 20-something and obviously honest and motivated to work on the side, he’s reliable (THE most important trait an employer looks for or should look for) and talented. He’s likely just ‘in between money’ and a victim of circumstances.

Before you find yourself needing to send that type of text, or to ask the question, stop for a second. No matter how broke or cash poor you are, get yourself some mini-emergency money. Put a $10 bill in your glovebox with your registration. It’s emergency gas money. It’s not an emergency to get you to McDonalds. It’s emergency gas money to be able to drive to a job that will make you money. As soon as you can afford it, change that $10 bill to a $20 and your stress level, constantly worrying about it, or having to send that text is gone.

At home, hide a $20 bill somewhere. It’s emergency food money. Not a skip the dishes emergency, or liquor store crisis – it’s for milk, cereal, bread-type emergency. As soon as you can afford it, up it to two $20 bills, then a $50 bill instead, and when you can, hide a nice brown $100 bill somewhere.

If that sounds small or silly, you either haven’t been in that stressful situation, or don’t understand how others could be. But it’s more common than you’ll ever know, and it works and it’s worth it to reduce your stress level by a lot.

When you’re ready, set up a proper emergency account (see page 223 of the Money Tools book). Start by getting it to one week of your net pay and work your way up to three months of all your expenses.

From the $10 bill tucked away up to three months money in the bank – all of them take an emergency and turn it into an inconvenience.

Contrast that story with the one in the Money Tools book: Michael really wanted to get out from under his $3,200 credit card balance. Luckily, his work schedule came out with a New Years day opportunity. He had the chance to work a 10-hour shift on January 1st at double-pay. That would earn him over $640. It would mean passing up his New Years’ eve plans to attend a party. The party turned out to be his priority. The night cost him over $300 as he later admitted, versus $640 of extra income. Had he chosen the alternative to work, he would have been close to a thousand-dollar positive swing in his finances.

Talk about two very different 20-somethings! As I’ve said before: Don’t tell me what your financial priorities are – show me where you’re spending your money and I’ll know where your financial priorities really are.

My guy will be successful. Michael is just playing a huge self-defeating financial game, the reason we’re poorer than we think, and my question in frustration if I should just mail him the $1,000.

The Reasons We’re Awful At Managing Our Money

These are some excerpts from an older, but superb, article by Morgan Housel on the website Motley Fool. Here are some of the highlights that probably apply to almost all of us:

People usually get better at things over time. We’re better farmers, faster runners, safer pilots, and more accurate weather forecasters than we were 50 years ago. But there’s something about money that gets the better of us. It’s one of the only areas in life we seem to get progressively dumber at.

For investments, our definition of “long term” is the time between now and the next downturn in the market.

For every $1 raise we receive, our desires rise by $2 or more.

We spend lots of money on material stuff to impress other people without realizing those other people couldn’t care less about us. You’d be shocked at how few people care where your purse was made or how much noise your car makes.

We don’t learn from other people’s financial problems. By the time we get the hang of making smart money decisions, our life expectancy rounds to zero.

We get upset when we hear on TV that the government is running a deficit. It doesn’t bother you that you heard this on a TV you bought on a credit card in a home you purchased with a no-money-down mortgage and a big line of credit.

We don’t realize that when we say we want to be a millionaire, what we probably mean is that we want to spend a million dollars, which is literally the opposite of being a millionaire.

We take out $50,000 in student loans to earn a degree in a subject you’re not interested in, doesn’t offer marketable job skills, and for which you have no intention of working in — all by age 22.

We’re part of the roughly half of all people who can’t come up with $2,000 in 30 days for an emergency, even though we’re also part of the roughly 100% of us who will need to come up with $2,000 in 30 days for an emergency at some point in our life.

The single largest expense we’ll pay in our lifetime is interest. You’ll spend more money on interest than food, vacations, cars, school, clothes, dinners out, and all forms of entertainment. You do this because you don’t save enough and demand a lifestyle you can’t actually afford. The future owns your income.

We associate all of our financial successes with skill and all of our financial failures with bad luck.

We hire a doctor to manage our health, an accountant to do our taxes, a lawyer to manage your legal problems, a dentist to fix our teeth, and a pilot to fly when we travel. You wouldn’t consider doing it differently. Then, with no experience, you go about investing willy nilly, all by yourself.

We lack enough basic financial knowledge to even realize that we’re making mistakes. People’s lack of understanding about things like compound interest and inflation can lead them to believe they’re making good financial decisions when in reality they’re tripping over themselves with failure.

Someone Actually Did a Written Budget! Wow

Good morning George. I’ve just finished your Money Tools & Rules book! Thanks so much and well done on a great book!

We have two kids between 7 and 10-years old. I have done up a budget and I have reduced my monthly expenses a reasonable amount to add to my payments towards my credit card and line of credit debts. I have that goal of paying off those debts to be able to buy a house in the future, while also looking to gain a foothold in investing.

Part of my reply that relates to (this portion of) the email: I only ever answer questions of what I would do since I never have all the information. Plus, caring isn’t telling someone what they want to hear, it’s caring enough to be honest and direct.

Nice that you’re one of the rare people that put their spending on paper to be able to see it AND reduce it a bit – that’s pretty impressive. And remember you’ll be way over here and there – just keep tweaking it for the variable bills and DO have some “me” money in there and some “kids” money. And tell them in an age appropriate way some of the budget stuff!

When they know the rule of what their “me” money is AND what it can go to (clothes, field trips (?), school extra billing (?), dollar store, snacks, etc) they’ll learn to live within their own budget and it’ll take most of the hassle out of shopping with them. Make it cash in an envelope for each of them so that they can “see the money,” or lack of it, towards the end of the month! This, however, is not their (hopefully) earned allowance! That’s their money to invest – give – spend as you’ve defined the rules for it.

Your investing goal is confusing as it states opposite things in your full email: If you’re NOT adding to your investments,  you just need to follow the step up plan in the book to the letter, which would be credit card only – minimum payment on LOC. Then the LOC with the minimum you paid all along AND all the money you’ve paid extra on the card that’s now cleared.

If you meant ADD to your investments as well: Unless you’re a doc, vet, or someone else making maybe $150k or more, you’re doing the exact opposite of what works. I hope you’ll email me in a few years that you’re in roughly the same position, just a few years older. Plus, you won’t meet the debt ratios, etc. of the Trudeau stress test for debt load, total debt service ratio, etc. if and when you want to qualify for a home purchase.

Get A New Furnace or AC For $39 A Month? Not So Fast…

If you’re financing any major purchase through a retailer, that company doesn’t actually carry your loan. They are in the business of selling furniture, jewelry or home improvement products, but aren’t in the finance business.

But these companies know that they need to find a way to help tons of people get the financing in order to buy their products. That’s where many finance companies come in that you’ve never heard of. Yes, you can put the charge on your credit card, use your line of credit, or arrange a loan, but lots of people will simply get the store to be the middle person on getting the money arranged. That may be convenient, but it’s always much more expensive.

If you’re buying something at the Brick, for example, they’ll handle the application for credit with Flexity Financial. It’s owned by Curo Financial Technology. You need a pretty low credit score and can get approved for a credit line that’ll cover your furniture purchase. Or you can apply for the Brick Visa that’s done through Desjardins in Quebec. In the same way, the Lowe’s Consumer Card is issued by Synchrony Financial. It’s a US company with almost 70 million finance customers in everything from home improvements to vehicles, travel and home products.

A few years ago, financing started for air conditioners, furnaces, roofers and others. On the surface, that makes sense. Most people have no emergency savings, and are in no position to pay four, five or six thousand dollars for a new furnace or AC.

Plus, almost all of the companies in these industries are small or medium local businesses. They’d love to sell you a new furnace, but YOU need to have the money or get the financing done first. In came two or three finance companies who specialize in big ticket items for your home. If you look at most heating and air conditioning companies’ websites, they’ll have a link right on there to one of these finance companies.

When you hear an ad that you can have air conditioning or a new furnace for starting at only $39 a month – it’s not the contractor that’s financing it, it’s one of these companies.

Before you jump in, be super careful and read and  understand every scrap of paper before signing it. Better yet, don’t do it. Find a way to find the money or, if need be, get a small line of credit or loan from your bank.

These finance companies will put a 12-15 year lien against your home. How can you have such a low payment? By stretching the time to forever! But forever means a staggering amount of interest, no matter what the rate. And they mirror all the mortgage lingo and rules: You’ll have a 12-15 year amortization. That’s the total length of the loan and a three or five-year term. That’s how long the initial rate is fixed before it’s changed. So two things: Most people see the word “term” and think that’s the total loan length. BIG mistake number one. And after five years, just like a mortgage, a $5,000 loan will still have a balance way over $4,000 because of the tiny payments and stretched term!

This person is a typical BBB complaint, but it’s not valid. All the information is in the signed loan documents. They thought the “term” of five years (and it’d be paid off) was the total amortization (15 years). They were surprised so little of their payments had gone to principal. Yup – five years of payments pretty much went mostly to interest. That’s the downside to a 15-year loan! They also complained that the payments went up 15%. Yup – after five years (in this case) they’ll move up the rate. A lot – in this case! Just like a mortgage – fixed for a while, then it’ll adjust.

Sure they can offer you a low rate because they have almost zero risk. Furniture type financing is 20 to 30% rates because they don’t have any collateral. They can’t come repossess your three year old couch. Financing your furnace or AC puts a forever lien on your home. You might not pay, but they’ll just add massive fees and penalties and they will always get paid because it’s the same as a 2nd mortgage: You cannot sell your home unless this debt is paid in full.

Yes, the AC, new furnace or solar may be necessary, and may even increase your home value – but you can’t transfer the debt. You have to pay the balance in full before the sale can close.

Finally, all of these finance companies charge a rip-off admin fee and MAY have big penalties in the fine print. The last one my realtor friend saw was a $6,700 early payout penalty. His seller had no choice but to pay it or his home sale would have collapsed. The same applies to any solar installation that’s financed.

If you’re wanting a new or replacement AC unit this summer, you can either sweat the bad finance contract for over a decade or sweat in your home until you can come up with the money. The choice is yours – but it’s definitely buyer beware!

PS: A 50% higher interest rate for half the time is still way cheaper! $5,000 at 8% over 12 years vs. six years at 12% is over $700 less interest. But then, most people finance a vehicle for 8 years when their track record for trading is 4 or 5 years…and the average in Canada is 4 1/2 years…and all of them are surprised and shocked when they owe way more on the loan than the value of their vehicle…

About Those True But Wrong Inflation Stats:

While the one-sentence so-called top line inflation numbers the media reports are accurate, they’re also totally false. Here’s one of the best recent examples:

The Council of Economic Advisers issued a statement in November that this years’ average family turkey thanksgiving dinner was down by 5%! A great reinforcement to politicians stating that inflation is back under control. Nothing to see here – move on.

Not so fast: That same calculation of the cost of thanksgiving dinner in 2023 was UP 15% from two years prior and UP 20% from three years before.

Inflation stats are released for the prior month and is used as a 12-month floating average. The biggest wave of inflation was in the time period of August 2022 to July 2023. That’s all baked in and will never go away. But since then, inflation has slowed down. But that’s “new” or “further” inflation and now doesn’t include calculations of what happened more than a year ago.

Politicians, especially in the US, can’t understand why people aren’t feeling great about the economy. After all, inflation is under 3% and everything is great again. It’s a total disconnect between reading stats and going to the grocery store to buy stuff that’s a whole lot more expensive. But a story that it’s really expensive now but not getting worse just isn’t ever sexy.

If something was priced at $10 in 2022 and went up 20%, the price became $12. To now tell people that inflation is “only” 3% is telling you that the new $12 price is now $12.36. That’s not a decrease – it’s a slower increase. There’s an old saying: Statistics don’t lie, but liars sure can use statistics. It doesn’t help that reporters that parrot the monthly stats are either lazy or overworked. That’s why we get the one-sentence newscast line that: Inflation is now under 3% without the context or reminder that the other 20% (average) or upwards of 50% (food) is still in there.

It’s Here: Your Car Is Talking to Your Insurance Company

Two years ago, we did a story that sometime in the near future, vehicle manufacturers will share your driving information with insurance companies. I’m not sure the feedback that that won’t happen was wishful thinking or dread, but it’s here and it’s happening.

Drivers are getting insurance increases between 20% and a doubling of their rates already. When some wanted to trace why, their consumer disclosure information on lexisnexis showed hundreds of pages of detailed driving information from their vehicle manufacturer.

According to a story in the New York Times and other outlets, the information being shared includes your speed, breaking habits, how you accelerate and the distance (time) you drive. That information is shared with insurance companies by most manufacturers, including GM, Ford, Subaru, Kia, Honda, Hyundai and Mitsubishi.

You may love your vehicle, but your vehicle and the companies that sold it to you don’t love you back. In fact, they’re stabbing you in the back. Privacy laws? Not so much. Unless laws are passed that the information originating from inside your vehicle is yours and yours alone, this sharing will continue and accelerate. But don’t hold your breath for any legislation: Insurance companies donate more to political parties than you and I do…

Oh and those DNA tests? Want to now bet whether your results and any indication of illnesses, potential of cancer or other markers will get shared with life insurance companies sometime soon…if they’re not already being re-sold…

Hands Up If You Believe This

Last month, Wendy’s announced they would join Popeyes, Taco Bell, Chipotle, Panera Bread and other fast food chains in converting to AI controlled electronic menu boards.

No – of course they won’t use it for dynamic pricing like ticket sellers or ride-sharing companies, hotels, big box stores, airlines, Amazon and others do for busy times, according to a Wendy’s spokeswoman. It would only be used for “suggestive selling” and maybe to lower the prices of a Frosty on cold weather days. Never for higher pricing during busy times. So: Hands up if you believe that?

Yup – didn’t think so. Neither does anyone on social media. Why? Because other chains do it – use it for that.

In China, with their facial recognition technology light years ahead of North America (to the detriment of customers and shredding any semblance of privacy, their restaurant AI technology embedded into menu boards not only recognizes returning customers but can tell their mood and age.

Not to mention AI use in drive-throughs. Chains think it’ll be great that the speaker will start with “Hi, Bruce. Welcome to…” What a shame the vast majority of younger customers do not care about their privacy. And THAT is the reason this will get implemented and stick AND be used for dynamic pricing.

Dealing With a Collection Agency

440 companies with revenues of half a billion a year, that’s the size of the collection agency business. Unfortunately, millions of Canadians are going to meet one of them sooner or later. It’s one of the most stressful things you can go through. But it doesn’t need to be.

Collection agencies are all licensed so they do have rules to follow. They’re also all on commission, as is every collector you may talk to. That makes them highly motivated to get the money. Most follow the law – lots do not. Remember that they are collecting money that has no collateral. It’s not like they can just foreclose your home or repossess your vehicle. They’re collecting smaller amounts, largely credit card debt that’s over six months old.

Since they can’t use the “repossession” threat, they have to intimidate and borderline harass you to the point where you will do anything to make them stop. That’s the game they play – to the edge of the law…if not further.

Collection agencies will first send you a letter giving you a heads up about the debt and start calling you five days later and really never stop. You do have the rights, however. But you have to send them a letter in writing or they will likely claim they never got it.

It’s your right to have them stop calling you at work.Its’ your right to have the debt fully broken down in writing – the original amount, interest, fees, penalties, etc.They cannot sue you after two years of last activity. So if it’s been two years since your last payment, they cannot take you to court. They can, however, keep calling and attempting to collect.Do not ever send them a note or email acknowledging the debt or paying even one dollar. That simple step will re-set the two year clock and they can now take you to small claims.

If you do not have the money, there is no debtor prison in Canada. Take a deep breath, tell them once you don’t have the money or assets and stop calling. Then hang up the phone and stop answering their calls.

If they take you to small claims court, you must show up on the date of the summons. Just showing up gives you a 50-50 chance the debt will be wiped out. You need to ask for the full breakdown and the documents you signed to prove you legally owe the money. It’s likely the collection agency does not have any of that. If they can’t produce it – the claim is dismissed. If you do not show up, there will be an automatic judgment against you for the full amount. That half a day at small claims matters a lot!

If you have the money and want to settle the matter, negotiate the amount. It’s likely half of it is interest and fees. Offer them 30 cents on the dollar and haggle from there. When you agree on an amount, you must get it in writing from them. If not, they’ll take your money and start collections on the rest all over again and you have no proof that you settled for less. If you’ve settled and have it in writing send them a bank draft or money order. NEVER send a personal cheque. Many have been known to take your banking account information and jam through a second charge for the rest of the balance.

Lastly, keep the settlement letter and your money order receipt for the rest of your life! They may re-sell the collection to another company who will now start calls again. You must have the proof that you paid. You will also need to send it to the credit bureau to have the collection now shown as paid and removed after six years.