Jul
04
Avraham Byers – Special to Financial Post It was spectacular. The crowd went wild when they saw Robin Van Persie leap into the air for his gravity-defying header against Spain – a play he calls “the best goal of my career.” And rightfully so; it was truly remarkable. Scoring that goal has solidified Hollands’ Van Persie’s reputation as one of the world’s greatest soccer players, earning him the title ‘The Flying Dutchman.’ But those astonishing plays are the exception, not the rule; teams can’t rely on them to win games. At the end of the day, good defensive soccer moves are equally important as jaw-dropping goals, although they’re often given less attention. If you want to win, stopping opponents at midfield may not bring in the glory, but it’s a vital component of the game. It’s great to score five goals, but you still lose if they score six goals against you. The same is true in the game of personal finances. Just like in soccer, if you want to succeed, you need a good defensive strategy. It’s nice to bring in the big bucks, but if the money leaves your bank account faster than it comes in, at the […]
Jun
24
Chosen best of the web by Globe and Mail personal finance columnist Rob Carrick Overspending is a common problem for many people; it creates debt, anxiety and relationship problems, even among high income earners. All too often, people’s spending habits seem to rise to meet – and exceed – their incomes. So why does this happen? What compels people to overspend when they already have the items they truly need? The answer lies deep within each person’s spending personality. Recently, I read Dr. April Benson’s book I Shop Therefore I Am, and was fascinated by what the contributing authors uncover about the emotional and psychological factors influencing our buying habits. I thought it would interesting, and beneficial, to touch on the six key spending personalities they explore: image spenders, bargain hunters, collectors, compulsive shoppers, co-dependent spenders (a.k.a. gift-givers) and bulimic spenders. For most people, their spending personality can influence purchasing decisions on a daily basis, and can sometimes have adverse affects on their personal and financial affairs. If you feel your spending has a tendency to get out of control, it can be helpful to consider which personality best matches your own. As you read through, you may perfectly fit […]
May
29
Retail marketing scientists have mastered the art of seduction. They make a living by influencing your purchasing decisions and, on occasion, roping you into buying something you really don’t need. They have a myriad of analytics at their disposal, and they’re not shy about using them to tempt you into abandoning all rational behaviour and making impulse purchase decisions – the kind that result in shocking credit card bills at the end of the month. Marketing scientists have many tricks up their sleeves, but the most common way they get us to drop our purchasing defences is by provoking us with sales. Sales have a powerful allure, appealing to restrained and uninhibited shoppers alike. Running of the brides One of the most extreme examples of how far sales can drive otherwise rational people to total shopping madness is Filene’s Basement’s ‘Running of the Brides’ sale. (The reference to Spain’s ‘Running of the Bulls’ is entirely appropriate, given the frenzy this sale invokes.) Filene’s Basement is now closed, but while in business, its annual sale event attracted thousands of brides-to-be from around the world, all eager to find their dream designer dress at a rock bottom price. And who could blame them? […]
Feb
21
My grandparents had great pensions, and my parents have OK pension plans. Me though? I have none. The most I’ve been offered by any employer, is a group RRSP. It used to be commonplace for employers to guarantee their employees a specific pension payout for remaining loyally employed with the company. However, in recent years, a lot of employers have shifted the responsibility for your retirement income from their shoulders onto yours. The newer designed company savings plans are entirely dependent on your own savings and participation. These days, it’s far more prevalent for employers to offer matching programs – group RRSP’s are one way of doing this – where the employer contributes a certain amount, say $0.50 for every dollar that you contribute, up to a maximum amount. Although there are some debatable sociological reasons for the shift, one thing is certain: It is less risky for an employer to contribute to a group RRSP than it is to guarantee a retirement pension for its entire workforce. Nowadays, the common group RRSP doesn’t come with much security; the amount you receive at the end is not fixed in stone. Instead, it remains a nebulous number, dependent on interest rates, […]
Jan
10
We’re into a fresh new year which, of course, means a lot of people have started dieting this week. The health benefits of shedding some extra pounds are obvious. What’s hidden, however, are the financial costs of a healthy diet. I know it from personal experience. Three years ago I joined a weight loss program, and lost 40 pounds. The program cost was $1,200 for 6 months. When I signed up, I thought this was going to be my only cost. Soon after though, I was surprised to discover the diet came with two significant hidden costs that I hadn’t anticipated or planned for – the cost of healthy food, and the new wardrobe I had to buy. The cost of healthy food A recent study from Harvard showed that a healthy diet costs $2,000 a year more than an unhealthy one, for an average family of four ($500 per person). In truth, I thought the number should be much higher. My own average weekly grocery shop has gone up by almost $80 since I started my diet. That’s an annual cost of over $4,000. Fresh foods are more expensive than processed foods. The sheer volume of vegetables you need […]
Dec
16
When making decisions about where to spend money, generosity often trumps or supersedes money concerns at this time of year. For some, it can be so difficult to go against this pattern, they actually feel helpless to control their spending, budget or not. In a recent Investors Group poll, 1 in 4 Canadians feel helpless to control holiday spending. Two-thirds of this group admit this is a reflection of how they handle their finances, year-round. Even with a budget, they feel out of control. I suggest this is because a lot of people misunderstand the difference between a budget, and budgeting as part of their day-to-day lives. What is a budget? Is it a series of numbers entered into an Excel spreadsheet? Yes, but that is only the beginning. To make it work, there needs to be a system in place that will bring the spreadsheet to life, out in real world application. There’s a quote I love: ‘Personal finance is more personal than it is about the finance.’ We’re emotional people. We spend for all sorts of reasons. The holidays simply highlight our existing patterns. With that in mind, remember that actual budgeting starts where the Excel spreadsheet […]
Dec
01
We have a lot of decisions to make in life. Sometimes the easiest, or most reassuring way to go about making those decisions, is simply to spring for the best your money can get. Do you need to have the very best internet or cell phone package though? Maybe. In reality however, a lot of people overpay, without using even a fraction of the service they paid for. In other examples, people will pay for a really good television, for a top-of-the-line computer, or even for a really good dog leash. All of these are undoubtedly superior than their less costly counterparts, but most of the time their quality, any advances and superiority, are only marginally better, no matter what the higher, added cost might suggest. It’s common for people to pay for far more television than they watch – telecom company business models depend on it. When it comes to technology, or gadgetry, some companies in fact only make one model, then actually impair the technology in some way, to provide an entry level model for consumers. You can have the very best high-definition television that money will buy today; within six months, if not sooner, there will inevitably […]
Nov
01
It’s pretty common to think that having more will make us happy. In reality, though, the more we have, the more complicated our lives get. We are hardwired to think about the upside when we buy things. We think about how great it will be to take our new boat out on the lake, or spend summers at the cottage with our family. Maybe the cost of your purchase is a part of your decision making. Almost certainly, though, complications are not. What complications, you ask? What about maintaining the boat? Getting it into and out of the water each year is a chore, or a cost, or both. You’ll need to find someplace to dock it, and make arrangements. At the cottage, winter break-ins are a concern. Maintenance in your absence is a concern. Opening and closing the property each year is a concern. Virtually every weekend of your summer is spoken for before the season even begins. I hate to always pick on the cottage, and summer fun. So how about all smaller stuff we buy? All of this stuff ends up owning us: We buy stuff, and it takes up space. When we start feel the clutter, […]
Oct
01
Fixed expenses directly impact our discretionary spending ability, and our ability to save. Some fixed costs are inevitable: We need to pay down our mortgage, pay our utilities, and make good with the phone company every month. These so-called “fixed” expenses, though, have a way of creeping higher across the board, under the radar, without us acknowledging their impact on our lives and livelihood. The incremental increases seem insignificant on their own, and seem acceptable at the time. Sometimes each little bit we give up, would appear, even, to be a good deal: We agree to get the upgraded features package on our new car lease, and we “bundle” features on our cable television, and telephone bills. We spring for a faster internet connection, after hearing it will result in $5 dollars off our newly increased cable subscription (never mind that this new “bundle” easily costs $50 more each month). All too often, we jump into these agreements with our service providers, financial institutions, and other companies to buy new, or add to the existing services in our life. Most of the time we do this without thinking about, or realizing how each decision adds to the squeeze on how […]
Aug
06
Starting a business might be scary, but for those already invested in a venture that’s underperforming, knowing when to pull the plug is by far the more terrifying prospect. To be an entrepreneur, you require a certain amount of blind faith, drive and ambition. At some point in your business venture, and long before you have too much invested though, it is absolutely necessary to do an analysis to know how much “financial runway” you have to make your business take off. Avoiding this analysis can lead to absolute ruin. Here’s why: Your “financial runway” is the amount of money you are able to invest or risk in business, without putting yourself, and your future in real financial jeopardy. It’s virtually impossible to start a business without incurring some debt. The business itself will also provide plenty of opportunity to overspend, particularly if you’re already inclined to do so in your day to day life. Even if your spending is necessary “for the business,” it’s your name on the debt being issued or incurred. If your business succeeds, your early spending will weigh on this success until you pay it off. Here’s the scary part: If your business fails, you […]
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