Category Archives: Blog

We Graduate Kids Backwards

Nobody expects 18-year olds graduating high school, or anyone half way through college or university, to be experienced at something. We don’t expect a high school grad to do the rough-in plumbing in an entire new house. We don’t expect a first year university student to do a full set of final architectural drawings, a pre-med student to diagnose a patient, or a future teacher to teach a junior high school class today. Why? Common sense: Because they haven’t finished their education and aren’t trained or experienced. That’s not an issue of “fault,” but an issue of timing and experience. They’ll get there – they’ll be great at it – just not today.

However, with money, credit and financing it’s exactly the opposite. OK, you’re now 18 or older – best of luck with student loans, how to pay for an apartment, how to save, manage your credit card, and/or knowing the five things to watch for before you buy a vehicle. That’s also not a “fault” issue – it’s an experience issue, too. But we know they’ll get experience in their career after high school or two or four years of university before we set them loose, start to expect things, and judge them. That’s all AFTER they’re fully done with schooling, apprenticing, training, and/or an internship.

The first, and pretty big, money, savings, credit and finance decision come at them the opposite way. They happen before they have any experience or knowledge. In other words: Make the decisions, sign the loan, use the credit card, decide on the overdraft, and THEN you’ll get the education. By then, the education is that they’ve messed up and made a lot of wrong decisions. In that case, they’re digging out of a hole for the next decade or longer.

That’s the exact opposite of how they get hired: First comes the education, qualifications, safety training, coaching, more training, and THEN we set them loose. As a result, most of these 18 to 25 year olds never had a chance.

However, in areas where the high school curriculum provides money, investing, and finance courses, the impact is pretty significant. In the U.S., there are eight states who do that. In surveys way after graduation, it shows that these kids have more in savings and investments, are way less likely to be in debt, to use or abuse credit cards, or ever go near payday lenders. They also have lower student loan balances, and pay them off sooner. So the key is to get them informed, because knowledge is power. And that’s back to the premise of not graduating them backwards.  

The Big Decisions (And Pitfalls) After Graduation

Last week we talked about the dangers of that first credit card for someone who just graduated.

The same applies to banks getting you hooked on an overdraft or line of credit once you have some income. That overdraft will be there for at least a decade, and it’s not like you know how to shop around for the best loan deal or rate.

Car dealers also can’t wait to meet you. How many cars are you going to buy in a lifetime? Five, or six, maybe? Well, the average salesman sells that many in a week!  So who do you think knows stuff and have the upper hand? It’s like bringing a plastic knife to a gun fight – you’re gonna lose, even if you bring one of your parents or a buddy.

So you’re all set. At some point you may have student loan payments for two decades, you’ve got the credit card, an overdraft, and a car payment. Grade five math says that majority of your income is now going to pay all that every single month – forever. So someone telling you save some money is just a pipedream.

Now you’ll be thinking about how to get rich for the next 40 years. But you’ve already forgotten how easy it really is to actually GET rich, instead of just wishing it. When you were still in high school you probably had a summer job. You worked hard, had a goal of what you wanted to do with that money and saved like crazy. Plus, because you had so little money, you were careful how you spent it, right?

But that was before graduation. Now you have a paycheck and access to borrowed money, so you’ve forgotten how to get rich already, and you’re just getting started. Let me remind you again and maybe, just maybe, you’ll do these things to actually get rich, instead of that coming 40-year dream:

Pay cash for stuff

Don’t buy crap you can’t afford and don’t need

Save at least 10% of your money right off the top

In your high school class maybe one or two people will do that. The rest will just be the people hoping to get rich, looking to the government to lend them a hand, or maybe the lottery will come through for them. I don’t know which group you’re in: The going to be rich, or the just ‘wanna be rich’ group.

Maybe someone in your family will print this segment out for you. Maybe I’ll see you at the top, or maybe I’ll get an email from you in 10 years or so to help you with some of your financial mess.

You’re an 18-20 something who is about to make a lot of financial decisions which will impact you for a lifetime – literally.

Happy Grad Season: But Careful With What’s Ahead:

It’s Grad season again and this year, around 400,000 teenagers will graduate high school. According to Stats Can, there are over 2.1 million kids aged 15 to 19 and 2.5 million aged 20 to 24. But only one or two of those millions matter: Your son, daughter or grandkids.

The good news is that you can rest easy knowing their Grade 12 math taught them to solve trigonometric equations and to graph exponential functions. The bad news: They have no clue about overdrafts, the rule of 72, buying a vehicle, their first credit card, how to budget, manage money, the minefield of student loans or any other financing or investing.

If you’re between the ages of 17 to 21 or so, or have a son or daughter that age group, banks, car dealers, and especially credit card companies are salivating to meet them.

Those companies will do whatever it takes to get their business. Banks, and especially credit card companies, have THE best marketing minds in the country and want your teenager in debt to them – really soon and really deep.

We have a huge emotional attachment to our first credit card. It’s the reason they’ll do whatever it takes to be front and center in your teenager’s wallet. Once they’re first, they own you, and the memories and loyalties are way bigger than the teenager’s first boyfriend or girlfriend – and last a lot longer.

On average, we keep our first credit card for over 15 years. It doesn’t matter that the rate hasn’t been competitive for years, that the perks are junk, or the fees they add on. For this group, the default rates are below average because, in most cases, parents will step in and pay the balance, or at least make the payments.

Why do they target your age group? Because they can’t market much to your parents. Adults already have all the credit cards they need or want. So they can’t grow their business unless they get to you. It’s millions of fresh customers, and bonus: You don’t know squat about credit and the dangers of credit cards, but you do love to impulse buy.

Good Bye Esso Extra

Add Esso to the retailers who have moved up their reward earnings needed this past month. After five years or so, I had enough points for a $50 gift card that I redeemed. But also had another 1,200 points. At 1,400 it was going to get me another $10 gift card before cancelling the card.

Nope – a $10 gift card now needs 1,800 points. As the closest Esso station is almost always 2 cents higher than anyone else. To get the 600 points, I’d have to spend $600 in fill-ups. But that requires overpaying 2c or $12 to get $10. Or overpay about 7 cents on average over the Costco gas bar five km down the road. That’d need $40 overspending to get $10.

Good bye Esso Extra – not going to miss you.

Finance 101: Don’t Bounce Cheques

In a week when the Edmonton Oilers play the Canucks four times and may well lose all four, maybe I have something that cheers up Canucks fans. Or makes them feel a little better about their team.

Part of Money 101 is pretty easy: Don’t get into bills that you can’t pay – don’t write cheques when you don’t have the money in your account. You’d think that’s pretty basic common sense.

When NHL teams are on the road they stay in 4 or 5 star hotels. Not bad to be in $200 to $300 rooms. In Dallas, a number of teams, including the Edmonton Oilers, stay at the Crescent Court. It’s in a very upscale area of Dallas called UpTown, with a discounted rate of US$261 or so.

That was the case for an Edmonton road trip December 16, 2019 with a bill of $28,000. Then again after another away game in Dallas March 3rd of 2020 for another $27,000 hotel bill. The good news was that the Oilers won the game that night (2-1). The bad news was that the team bounced the cheque to pay the December hotel bill.

To make matters worse, the Crescent Court hotel then didn’t get that bounced cheque (or thus the actual bill) paid for 11 more months, and never did get paid for the March bill just before the start of the pandemic and NHL shut-down. I suppose I have to keep saying “allegedly,” even though court filings are accurate, because lawyers can’t lie in court and court documents.

Yes, the hotel finally had enough and sued the Edmonton Oilers in court for the outstanding US$55,000 in November. That’s over a year after the first bill – not good. The matter has now been “settled.” I’m guessing settled should just mean “paid in full.” Plus, add the Oilers to the long list of businesses using the pandemic as an excuse for bad behaviour. “We face the same challenges as any business in the midst of a global pandemic.” That was the statement from the team. FYI: the unpaid bill was November 2019. That was four months before the pandemic.

A company with owner Daryl Katz (living in Vancouver by the way) who is worth $3.5 billion (according to Forbes) shouldn’t have this in the media. They should also have a better accountant, and an overdraft, or a bank that trusts them enough to cover the cheque even if that account is short. There are definitely more questions than answers here.

Conner McDavid is the Oilers captain. So I’d suggest he does the check-out at the hotels on his credit card. He’s responsible and reliable. That way the bill gets paid, and I’m sure the Oilers will reimburse him within days not months. Plus, he makes enough income to get the Amex Black Card with literally unlimited spending to make sure the charges on a long road trip go through. Sure, it’s a $7,500 first year annual fee – but it’d be a win win: He gets massive points and the Oilers get a massive reputational boost.

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…

Bonus Points On Your Credit Card…Maybe

Wow, you’d think that after 15 years and almost 700 of our radio segments we’d have talked about everything by now. Not true – not even close – never in the world of money and finance!

Pop quiz: Is hiring a company for a $20,000 job to finish your basement considered a home improvement? Nope – probably not.

Is buying gum and hand cream at Lowe’s considered a home improvement purchase? Yup.

See – and you thought you knew!

On Monday, the Royal Bank Westjet MasterCard (MC) started a double points (Westjet dollars) promotion on “eligible” electronics and home improvement purchases. Just after I bought $200 of treated lumber – it never fails…

Almost every card will have these promotions from time to time. But it’s buyer beware because the key word is “eligible” purchases. The hundreds of thousands of retailers and companies who accept credit cards all have a merchant category code (MCC) that identifies their primary type of business. My company is consulting – so it’s coded as professional services. That’s the same for accountants, dentists and the likes. So if you buy some lumber from your lawyer, or an “I love George Wednesday mornings” T-shirt, it’s still a charge in the category of professional services and not home improvements or clothing.

It is not what you buy that matters. It’s a charge in the right category that determines whether you get your bonus points for any promotion. A contractor won’t be coded correctly so your $20,000 charge won’t get you bonus points. But Home Depot, Lowe’s, Rona, Home Hardware, General Paint, or the likes are always coded home improvements. So whether you buy gum, lumber, paint, or appliances there, you’ll get the points.

Here is the full disclosure on the bonus point offer. It took me almost half an hour and comes from three different places. Thank you Royal for the details, but would you look a half hour to find these when your card offers them?

-Your bonus points won’t show up on your statement for 6 to 8 weeks. By that time, any promotion is probably over and you won’t know if you actually got them.

-You can’t get the MCC code in advance to know if you’re buying the right stuff from the right merchant with the right code.

If you stick to the “obvious” retailers, you’re safe – but never sure. Here’s the disclosure. It’s the same for every points promotion but I bet you’ve never heard of seen it:

Home Improvement Purchase means a net purchase made at a merchant that is classified, by such merchant, as hardware stores, home supply warehouse stores, building materials, hardware equipment and supplies, plumbing and heating equipment, lawn and garden supplies, paints and varnishes, contractors and other home improvement supplies under MCCs 0780, 1520, 1711, 1731, 1740, 1750, 1761, 1771, 1799, 5072, 5074, 5193, 5198, 5199, 5200, 5211, 5231, 5251, 5261, 5996 and 7692.

Costco is considered a discount club with MCC5300 –Walmart is typically MCC5310 (discount store) or MCC5311 (department store) but they may also have a code set up under MCC5541 (groceries) – but that’s unlikely. So no bonus points there for any promotion from anyone – ever.

You could:

-Call your card issuer and ask for the MCC code for a specific retailer – but I doubt you’d get it.

-Check your old statements in case they’ve had the same promotion in the past where you can see what qualified.

-If you get an annual summary of charges (not with Royal Westjet) that will give you the spending under specific categories and you’ll be sure those stores qualify

Or do what most everyone does: Get excited about the promotion and charge away and hope you might get the points in the MCC code crap shoot.

Lastly, if any bonus offer ever has you buying from a more expensive retailer just to get the points, you’re tripping over dime to pick up a penny. You REALLY need to read the “what are your points really worth” on page 139 of the Money Tools book.

AC Refunds, Lower Your Cell Bill Today & Netparcel Sure Works!

AC refunds are here: As predicted, Air Canada will now fully reimburse your non-refundable flights in order to get the federal government bailout this week. Any tickets bought since February 1st, 2020 where you cancelled the flight because of the pandemic, or the flight was cancelled by Air Canada, are eligible. Just go to aircanada.com and follow the big link section at the top of the home page. You have until June 12th to do so. They are also offering a voucher, but that will not make you a free agent – take the money back on your credit card! Westjet will follow soon if and when they agree to their bailout plan.

Cell rates: In response to Shaw entering the cell carrier market with their almost unlimited $25 plan if you are a Shaw customer, most other cell carriers have now dropped their rates. If you’re a free agent, make the call and simply tell them that you’re shopping around for a reduced monthly plan. If you’re not a free agent and locked in a contract – bad idea – and you’ll need to keep overpaying. If you deal with the big 3 of Rodgers, Telus or Bell you’ll likely also be out of luck. The main carriers (unlike their secondary providers) have a majority of customers and business clients that are not price sensitive).

My call was to FIDO (the secondary outlet of Rogers) and my plan went up 20 fold in data (2gig per month), added unlimited Canada-wide calling and free, full North America wide texting. and went from $45 down to $35! A $120 savings (23%) a year for a five-minute hassle-free call! PS: With Rodgers buying Shaw, the rate drops will likely stop in a year when the government approves the sale – and they will. Until then, enjoy the lower rates because of the competition in the industry!

Netparcel.com update: Wow! We talked about this Canada Post parcel alternative a few weeks ago and a bunch of people have already tried it. I hadn’t when we talked about it – but did use it for the first time last week. It was a 28 pound parcel Edmonton to Kelowna. The site is super easy: Do the quote, set up an account, and a bunch of courier offers pop up. Mine was $18 from UPS. Enter the details and print the label I print my labels on normal paper and then tape it onto the parcel. The site, based on your postal code, then pulls up the closest 10 drop off depots or stores for you. Even with my Canpar Courier national book sellers association rates it was almost half the price!

(Note that it’ll be a different courier and different rate each time, even for the same parcel size and weight. This is dynamic pricing so you’ll get a different rate from different couriers depending on whether they want the business that day or that hour, how busy they are, where you’re shipping from and to, etc., based on supply and demand!!)

Dear Federal Government: Can We Get On With It, Please?

This picture pretty much encapsulates the state of many businesses. It’s a massive 15,000 sq ft. store in a so-called A mall. Those are newer malls, most with a large anchor tenant, and the malls that will survive. But this store is staffed by one person – guessing at $15 an hour, and sells nothing over $10. In the entire mall (Outlet Mall at the Edmonton Airport) there may have been 20 or 30 shoppers the three times I’ve been in there the last month.

In March, my company made $244 and it’s now month number 13. We’re now the second time around of no church services for Easter, no Grad celebrations, no spring plans, no Canada Day celebrations, no travel this summer, and no end in sight here in Canada.

Canada is currently (stats as of Friday April 2nd) 64th in vaccine procurement.

We’ve vaccinated 15.6 people per 100. In the U.S. it’s 45.9%. That’s more than triple our rate. The US, as of the end of next week, will vaccinate anyone over age 18 that wants it. They’ve had huge tents in mall parking lots across the country for months now.

And we have 1.8% of Canadians fully vaccinated. Less than two percent, while the U.S. is at 17.5% – TEN TIMES AS MUCH. When Ontario premier Ford called the federal efforts “a joke” he was right on the mark as of now.

I have a friend on Vancouver Island that is over age 65, with two pre-existing conditions, and he’s not even close to getting his vaccination. In a relatives’ nursing home in Calgary, there’s another outbreak because health care workers aren’t even vaccinated. Sorry, but I don’t see any of the national media in Ottawa asking any hard questions, or any signs that the federal government is exhibiting any signs of urgency.

California, one of the most cautious and locked-down states, is lifting all business related restrictions as of June 15th. Here in Canada, maybe middle-aged Canadians will get vaccinated starting in September. But that’s just another of many promises. If so, it will take until the end of the year to get most people vaccinated.

According to multiple websites, including ourworldindata.com, many third world countries are ahead of us in vaccinations to get back to some kind of “normal.” Even the most disorganized U.S. now has its act together. They vaccinated around 4 million people a day over the Easter long weekend. If you told me we did zero vaccinations, because it was a holiday weekend, I wouldn’t be surprised at all.

The government has extended the application time for the Canada Emergency Business Account loans, but not the criteria. So that doesn’t help at all. Plus, the original $40,000 loan has to be repaid by December 2022. But by the time we’re sort of back in business, that’ll be less than a year. What business will get back to 100% AND grow so quickly as to have an extra $30,000 net profit made inside of a year in order to re-pay the loan?

PLEASE: I, along with millions of Canadians, and tens of thousands of small businesses can’t go much longer at this rate.

Update: Sure enough, as we discussed, within two hours of talking about it, the U.S. CDC has issued a travel advisory for Canada because of our rising Covid numbers and lack of vaccinations…