Archive for the ‘Money’ Category

Best of: Don’t Pass it to the Other Team!

The CIS championships return to Ottawa for the last time this weekend (they go back to Halifax for a while after that), and with that in mind we go back in time to one of my favorite old postings Don’t pass it to the other team sound advice from an excellent (if not hard-edged) coach (Dave Smart of Carleton). You can find this post and several other of my favorites at My Favorites page (well worth a read).

As a note, I still dabble in helping out with basketball (although I suspect I am a much better assistant coach/team manager than I am head coach), and hopefully will get to 1 or 2 games this weekend (will be attending a coaching clinic on Saturday morning, hopefully there will be other useful messages that I can translate into the world of personal finance). Also Carleton’s string of 5 championships in a row was broken, however they are defending champions again this year, so we shall see how this weekend goes. (I am a Carleton fan, but a Waterloo Alumni, luckily my Alma Mater is not playing this year).

Don’t Pass it to the Other Team!

So one of my sidelights is coaching basketball, and I love going to clinics from coaches who talk about coaching and plays and stuff (I’m an old gym rat at heart). Last Saturday I was lucky enough to hear from Dave Smart who is the head coach at Carleton University (the Ravens have been Canadian Champions the last 3 years running), and he was fascinating to listen to. Coach Smart admits to being a perfectionist and telling it like it is, and one of the expressions he tells all of his players is “Don’t Pass the ball to the other team“.

The first time you hear this expression it sounds obvious, of course, who would do that, but what Coach Smart was trying to say (I think) is most basketball players watch their own players, but rarely see the other team’s players. If you watch the defensive players, you won’t pass it to them! Simple, right? No! You know where the offensive player is going to go, you don’t know where the defender is going, and you need to watch them!

What does this have to do about finances? (Darn good question, get ready for a stretch here) Don’t take your eye off things that you can’t control, the stuff you can control, your savings, your retirement, your investments, your debt reduction plan, if they are under control that is good.

You have to plan for the things you don’t control, and that means:

• Reduce DEBT! You can’t control interest rates, you can’t move forward with your car in reverse. Debt reduction is first and foremost. Everything else can be dealt with much more easily if you are carrying little or no DEBT!!!
• Have contingency funds in place for:
  • Car repair. I am guilty of that one, car repair bills always throw me off kilter
  • House repair. I am going to get a major bill to replace the roof and furnace on my house, but they had to be done. If your house is new, you’ll need to replace these things in 15 years, but in 15 years, if you haven’t saved any money for it, it’s going to HURT!
  • Catastrophic illness. I have long term disability insurance with my company just in case. If I had a stroke tomorrow, my family would at least have an income of some kind.
  • Loss of employment. If you lose your job, how long will you last? A priest once told me everyone is 12 weeks away from living on the streets, make sure you are not one of those folks
  • Death! Term insurance to protect your family, and a will to protect them even more (thanks Dividend Guy, for pointing out I missed that).

These are SOME of the unknowns, that you need to watch for, and not pass the ball to them!

Hope for the best, and plan for the worst!

Last night I watched a very interesting interview on the Daily Show with Harry Markopolos, one of the men who blew the whistle on Bernie Madoff (back in 2000). The interview with the Daily Show is astoundingly frank and entertainingly funny, and at the end of it, incredibly disturbing. The Comedy Network in Canada does not allow me to embed this interview so you’ll need to click to get to it, but it is well worth the hassle. Markopolos’ book No One Would Listen: A True Financial Thriller is an interesting read.

CNBC does have a more serious interview with Markopolos and a former co-worker Frank Casey, which outlines that Madoff’s shenanigans and financial tom-foolery had been noticed, but it seems no one did anything much about it for a long time. The best line is about how you never had to use Madoff’s last name, if you said, “Bernie” everyone knew who you meant.

I have the privilege of hosting this week’s version of the Best of Money Carnival . What is this carnival about? I’m glad you asked:

The Best of Money Carnival features the ten best (in the opinion of the carnival host) money-related posts of the past two weeks — giving readers the best of the best in personal finance.

Now this differs from my Random Thoughts posting, because these posts have been sent in and entered for judging by me, so the content is a little different. There were many, many entries and it was hard to get the list down to a “Top 10” format, but I did (and my apologies to those who did  not get chosen, remember there is always next time).

Remember the Quicktax Give-away ends tomorrow night too!

Best of Money Carnival #39 for February 22nd, 2010

There were a lot of great articles posted this week, and it was hard for me to choose a winner and the 9 runner ups, but given I am the “decider” this week, here are the posts:

Entries

These posts were really good, but which one is the best this time?

Clayton presents Free credit report posted at Just Good Financial Advice.
Talks about how you can get Credit Reports (in the states) for free every year, with some info missing, and you know how I loves that free stuff!

Craig Ford presents The Infinite Advantages Of Paying Cash For A New Car posted at Money Help For Christians.
I must admit I do have  a vested interest in this one, because I just did pay cash for my “New to me” car.

Jeff Rose presents Warning Signs You Need to Fire Your Financial Advisor posted at Jeff Rose.
A very good list of points to look for to make sure your Financial Advisor is on the “up and up”, also if your Financial Advisor goes on better vacations than you every year, start wondering about that as well.

GLBL presents Money Saving Mondays: How to know if your loan should be refinanced posted at Gather Little by Little.
OK I am a sucker for any post with a racing car on it, but also some good points about when it might be a good idea to refinance your debt (no, it is not when your bank thinks it would be a good idea).

Jason @ Redeeming Riches presents 6 Ways To Find Free Money posted at Redeeming Riches.
Again, I am a sucker for free things, but this points out areas where you can keep from losing money (which is free money as well).

Wealth Pilgrim presents Why This Boyfriend Doesn?t Need A Valentines Day Gift Idea posted at Wealth Pilgrim: Money Management Advice, Financial Stress Management, & Resources.
The price of the gift is not what matters, it’s the reason for the gift that matters, and that message resonates with me a lot. I still think his girlfriend isn’t going to be very impressed by this, but that is just my opinion.

FIRE Finance presents Annual Fee Introduced for Citi Cash Returns Credit Card posted at FIRE Finance.
I love stories where people simply cancel credit cards or move banks, because the reason they were there changes. A sudden fee change is an excellent reason to change or get rid of a Credit Card!

2 Cents presents Taxes: The Missing Step posted at Balance Junkie.
A good list of things we Canadians should remember during tax time (yes it is Tax time both in Canada and the U.S., who says we don’t share crappy traditions?).

LeanLifeCoach presents Combat The Closing Techniques – The Puppy Dog Close posted at Eliminate The Muda!.
I read this and thought, “… wait a minute, I almost fell for this once as well!”, damn puppies! Another important sales technique to watch for, and be wary of.

The Investor presents Pros and cons of being wealthy posted at Monevator.
So this one has me scratching my head, but it is intriguing, so I include it for your perusal. Any article which says, “It ain’t easy being rich”, is bound to make you stop and think (and possibly cause you to have a violent reaction, which makes it a useful article).

The Winner!

Taxes: The Missing Step

Guess I am a sucker for a set of Canadian Tax tips, during Tax season, thanks to all who participated!

I have had some fun with a few over the top ideas for folks who cannot control their spending (i.e. their internal shock collars seem to have gone off line), but I have thought about a service that banks might offer that would be worth their exorbitant monthly service charges.

Think of a system that:

• Sends spending alerts to your cell phone when you make the purchase. Sends your spouse an alert of what you have spent and an itemized bill of what you bought.
• Sends you updates to your PC or Cell phone warning you that you are close to over-spending on a specific budget areas.
• Causes your credit card to explode if over used. OK, it disables the credit card and forces the user to call with a specific pass code to have this overridden (and they have to give a reason for this override, which is noted).
• Allows you to set up a “budget” for the month on line which you can easily monitor, or get daily and weekly reports on how your progress works
• Sends a large wrestler or MMA fighter to your house to go over your monthly spending habits, and if they feel you are not following the plan, put you in the sleeper hold, or use a guillotine choke hold on you, to stop you from doing this in the future. Maybe they send over a financial advisor the first time, to discuss these points, and show you a picture of the wrestler, pointing out what might happen if they don’t follow the plan.
• Rewards the consumer with a higher interest rate on their savings, or a lower service charge for each month that the consumer follows the financial plan (I realize that you must give positive feedback some time).
• Offer a points reward system that you can redeem for various rewards like Air Miles or such, thus creating a Rewards system for people who save instead of a system to reward spending that are currently in place.

If a bank offered this or a service similar to this, I might view that as a good use of my money if I had to pay for the service. I don’t think I’d use this service (although I might try it out for a while), but this might be what some folks might need, almost a Financial Nanny or Money Conscience concept (both terms copyrighted by me).

Do most people need these kind of services? Maybe not, but it is evident that some folks might benefit from this kind of helpful concept.

Some banks already offer parts of the service, by giving their customers access to cheaper or free copies of Quicken to help track their spending, but the financial feedback loop needs to be much tighter than the control that Quicken puts out (and maybe needs to be a little more severe in it’s ramifications as well).

Is this kind of interventionist methodology needed? My opinion is, in some instances, yes because there is a shocking lack of financial training for consumers. Money and manipulating it is one of the top skills any adult needs to survive in this world, yet the amount of training given to teenagers and young adults is negligible.

Given we start a new year, all we folks who receive pay cheques (I believe the Japanese term is Salary-man), we get to start paying CPP and EI premiums again. For a lot of folks, they are just deductions that appear on every pay stub, but for folks who make over a certain amount, this deduction appears some time in the year, and after that, they get a “virtual raise” given they do not have to pay these deductions for the rest of the year.

Michael James is a lover of numbers (but not a numerologist luckily) and pointed out one day how easy it is to approximate how much someone makes, by when they stop paying EI premiums (and you’d be surprised how many people talk openly about the fact that they have stopped paying the premium (in fact I had just told Michael James that very fact)).

It’s actually a pretty simple game to play and well worth a couple of minutes time to create a little model to figure this thing out.

Meet Jack

Jack gets paid bi-weekly, and works as an employee of XYYZZ. He gets paid a regular salary (assume no bonuses and such), so if we list the month in which Jack tells us “I stopped paying EI premiums this month” we can then approximate how much Jack actually makes in salary. We know from the EI web site that your premium is 1.73% of your insurable earnings (and the maximum insurable earnings is $42,300 in 2010).

Just remember what you tell folks can sometimes have more meaning than you might think.