Take Advantage of the Rules When You Can

Over the years I have learned a great deal about the importance of knowing the rules in life (not all the rules, and I am by no definition an expert). What kind of rules? Mostly rules in systems that directly affect me, like my health insurance(s), dental insurance, rules for banking, etc., etc.,.

The first time, was figuring out that my Health Insurance with my employer (at the time) would actually pay for private testing for my children (to determine whether they were gifted and/or if they had learning disabilities). What looked to be a very expensive bill (well over $1500 at the time), ended up only costing me around $100 or so. I must admit that I did not actually figure this out, the Psychologist we were dealing with already knew “how the game was played” and simply let my wife and I in on the rules.

Knowing the rules of the game, is the single most important thing to learn, no matter what game you are playing. Michael James is also known as Mr. Rules, but it has served him well in his life (being a Mathematician it seems to come to him naturally), and knowing the rules will help you make sure you are compensated by “the system” (even when you think it is just not going to happen).

No, I am not espousing going out and finding a Shyster Lawyer to try to skirt the tax laws (good God, I am not saying that, and anyone who is thinking that I will personally spank with a cricket mallet),  but I am saying you should find out how the rules to all benefits packages work and how you can take advantage of them.

What kind of things am I talking about? Here are some simple examples to go with my testing example:

  • If your benefits cover glasses, find out how often and when the time frame deadlines are. One year I ended up buying two sets of glasses in two months, because they straddled two different time frames (at the time I was compensated for one set of glasses every two years). Line this up correctly and you get two sets of glasses covered in less than a month.
  • There are thousands of bursaries and programs for University and College students, that aren’t given out some years, because no one applies (sometimes it is because there are no actual candidates, but sometimes it is due to candidates not applying). My daughters basketball club gives out a bursary at the end of the year for graduating players, more than one year no one applied for it (guess they didn’t want free money).
  • My daughter’s have learning disabilities (which I got tested for cheap) however because of these learning disabilities they also received bursaries from OSAP and their schools (and dispensations for writing exams as well), however, we didn’t really think about this until we looked and saw what is available to folks with learning disabilities.

Some simple Rules to Live By

Know the rules, understand the rules and if you can use them to your advantage (in a legal and above-board way) then do so (don’t be shady, ask first if you are unsure, it may be that no one has tried before, the worst thing they can say is, “no”).

 

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CEOs Salaries, are they worth it?


The CCPA (Canadian Centre for Policy Alternatives) put out a fun graphic on their site yesterday which has really caught the fancy of the Media in Canada. The graphic is an updating graphic showing the Clash for Cash: CEO vs. Average Joe which gives you an idea how much some of the top 100 CEOs in Canada make in compensation.

This kind of tool is always useful to show folks just how much is spent on the top end of the management tree in many of Canada’s largest companies. The actual numbers suggest that a CEO makes about 189 times what an average employee makes in a year (but the graphic is just so much more fun to look at).

The question does arise from this simple ratio, are the CEOs of Canada’s Elite 100 companies really worth the $8.38 Million (on average) that they make every year? I have no idea, but my opinion is that the reason these folks make what they make, is that they have convinced someone they are worth that, and thus they get that kind of compensation. Is this fair? Fair doesn’t really come into it, if the company is successful, then the CEO has earned their pay, and if they don’t they are fired, that should be the way it works (although in some cases like Nortel you had to wonder what was going on).

The mainstream media seems fixated on pointing out the 1% that make so much money and such, but I’d like to point out that there are a couple of Hockey players earning that much, a few more NFL Football players, even more Basketball Players, and pretty much every baseball player that earn that kind of compensation as well. Is that fair? Some billionaire is willing to make a Multi-Millionaire out of someone who is talented at their job, that is just what happens in this world.

Do I like all of this? Hell no, I’d love to make that kind of money myself, but if I did, just think how much folks who were more talented might make?

I do still like the graphic as well:

CEO Income, REAL BIG

If you go to the link (click on the picture) you’ll see it being updated (which makes it that much more depressing).

 

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Accountability

In Ottawa this week our Hockey team fired yet another coach, meaning our team is actually paying for 3 different coaches right now (the one we fired last year, the one we fired this year, and the current coach), which is not very good planning (paying 2 people NOT to do a job), however, the main statement is that the previous coaches did not hold the players accountable for their play (i.e. the players were allowed to do what the heck they wanted without concern of less playing time, or punishment for sloppy play in practice) and thus the players were “lazy”.

This got me thinking this accountability concept is vital in business and a few of the bigger problem areas of the economy there is a lack of accountability seen as well.

Bank CEO’s

We are seeing the Canadian Bank CEO’s making an attempt to appear to be “tightening their belts” and “taking one for the team” by eschewing some bonus money. While my opinion is this isn’t enough, at least the optics of the acts show at least some penitence for their actions, and thus some perceived accountability.

High Tech

There I don’t see as much. Nortel’s CEO has still not really shown any contrition or accoutability in his actions, which makes a lot of folk wonder does he feel accountable for the companies current situation? Employees who are about to get laid off with little or no severance are not as likely to “go to the wall” if they know their CEO is still raking in big money.

John Chambers from Cisco on the other hand for a while (and might still now, I can’t find any coroboration) took a salary of $1 per year (he got other compensation), but that alone has great optics for employees. Is he still very rich? My guess is it is not likely that he is trying to create extra income for his family by taking a part time job at Home Depot.

Overall Accountability

Accountability of the folks in power and of anyone you deal with directly (especially when it comes to your money) is a vital thing to look for. 

If you have a financial advisor, how are they accountable to you? If they give  you bad investment advice what happens? Ask that if you are talking to your advisor. If their answer is, “… well, I’ll try to do better next time”, you might want to think about not hiring them. How can you make this person accountable for their decisions with your money?

How do we make CEO’s of large firms accountable? Make sure if you are a stock holder you vote for your Board of Directors, since they are supposed to represent your best interests (whether they do or not, is another question). Go to the yearly stockholders meetings, ask questions and read the company prospectus (no matter how painful it might be).

You can’t hold someone accountable for anything, if you aren’t sure of what they are doing, and you can’t ask pointed questions about what is being done, if you don’t know, “what is being done”.

Make yourself accountable for your decisions, but also make the folks you deal with directly (and those that work for you) accountable for their actions and decisions, it will make the whole system work that much better.

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RRSP and Financial Learning

So today I had an excellent presentation about the financial aspects of my severance from my employer, by a C.A. who is also a Financial Planner. He brought up several very interesting points, one that I had heard about but didn’t understand and another that I wasn’t even aware of (and caused me to write down many more questions for my one on one session with him in the near future).

RRSP Severance Rollover

Up until 1996 the rules for moving severance packages into RRSPs was pretty wide open, but then in 1996 the rules changed and you were not allowed to simply plow your severance directly into your RRSP (if you didn’t have room to put the severance allowance in your RRSP). The accommodation for folks like me that were still employed (and have been) by the same employer before 1996 (and haven’t received a severance package), I get a $2000 per year RRSP “bump up” for every year I worked for my employer before 1996 (and working in the year, could entail only 1 days work, too bad I didn’t work there as a Co-Op student).

For me this means that since I was employed from 1988 to 2008, I get 8 years counting in there or an RRSP bump up (for this one time) of $16,000 which I can put some of my severance package in (which is a good thing).  Since it is so late in the year, any dollar I shelter most likely saves me 46 cents of taxes I don’t have to pay on this year’s CRA tax forms (sorry Mr. Harper).

Severance Income is the Worst Kind of Income

Well, if there is such a thing as bad income, a severance package is that, because you get a T-4A for this income, but this income will not increase your RRSP room for the year, and it is not really counted as income per say (other than the fact that it gets TAXed like it is income). What I am trying to say is that severance is not an EARNED Income, thus you don’t pay CPP or EI premiums against it, but you don’t get RRSP room for it either.  I didn’t know that one either.

Another Idea the Lifelong Learning Program

Instead of simply cashing in RRSPs to pay for going back to school, the government has set up the Lifelong Learning Plan (LLP) where you can withdraw $10,000 in a  year and $20,000 total over 4 years to help pay for your schooling. There are rules for you to repay your RRSP the amount you borrowed to pay for your education, but I thought this would be a really good idea (for me or my wife). I don’t think this is something I will use now, but it is an interesting concept.

Best Joke to Say Around Former High Tech Workers

The presenter had a great comment for the section we skimmed over, “So this should be a short section, it’s about what to do if you make profits on your stock options during your severance period…”, everyone in the room burst out laughing, as did the instructor. If you aren’t in High Tech, you might not get it, but if you saw the Simpsons episode where it showed a high tech company giving out Stock Options from a toilet paper roller, you might get the joke.

I learned a lot today.

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Best of: Cancer, now that I have your attention

Busy week, so I am taking a break and publishing one of my favorite posts, about Risks and dealing with Risks.

Cancer, Now That I Have Your Attention

Yup, I am really talking about that, as Cancer’s ability to kill Canadians is rising, and Canadians are taking care of Cardiovascular issues more. Six out of every 10 deaths in Canada are caused by these two issues. Cancer is becoming more of a killer, is the bottom line for now.
So what the heck does this morbid topic have to do with Financial Planning issues? Maybe I’m just feeling morbid? No, but, if you look at this data, maybe you need to ask yourself the following important financial questions:

  • Do I have enough life insurance so that my family can survive my death? Same question for your spouse too?
  • Can my family survive financially a prolonged illness (as Cancer is capable of being)? Do I have any disability insurance?
  • Do I have a will?
  • Do I have enough health insurance to deal with a catastrophic illness?

If you are young and single, no it doesn’t matter that much, but if you are young and just married and planning on having kids, NOW, is the time to do this kind of stuff in place. No I am not selling insurance (and I am not advocating whole life insurance at all), but I am saying, go find out about what you need to deal with these concerning numbers about Cancer.

Hope for the best, and plan for the worst! (a wise saying).

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