Archive for the ‘Procrastinate’ 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!

For a while, Mrs. C8j and I have been hunting for a new family vehicle. We have had many arguments discussions about what type of vehicle we wished to purchase. I think we will not need a van for much longer and she sort of agrees but thinks we still need one for the short term so we should get one, and after a great deal of consternation consultation I we agreed that a van would be the best way to go. I must admit that we did try a few SUKs SUVs and while they felt OK, they did feel a bit “truck-ish” for my liking.

We have been dealing with a smaller dealership who had in stock the van we were hoping to get (used) a Sienna from Toyota (please don’t treat this as me endorsing this model, or that I have received any compensation for this story). The salesman at the dealership seemed a nice personable chap, although maybe a bit slick for my liking, but we thought that might be where we wanted to make our deal.

We had decided before we got too far into this process, that we would purchase a used vehicle this time (we purchased new last time, but I decided a used vehicle was the way to go). We borrowed from the Ottawa Library the Lemon-Aid books and saw that in fact the Sienna from ‘07 on seemed to be a good choice. If we were going to buy a used car, I was going to have my mechanic who I trust in these situations, to have a look at whatever we might choose to buy (I simply do not trust dealerships that much).

I mentioned to the salesperson we were dealing with that we wanted to take whatever vehicle we were thinking of buying to my mechanic to have a look at it, and the sales guy kind of got twitchy (i.e. tried to dissuade us), but eventually relented, figuring that he might lose a sale if he didn’t agree (smart guy).

I then called my mechanic and said I would like him to have a look at a vehicle and he said he would, and he asked who I was thinking of buying from, and when I mentioned the name of the dealership my mechanic hesitated. After a short pause he said he had had some dealings with the dealership and gave me some advice about possible issues getting the van off the lot and to his garage. When my mechanic makes that kind of statement the hair on the back of my neck starts to raise up. I thanked my mechanic and said I’d call back when I had decided on a specific van.

Time passed and eventually we decided (after consulting CarFax on line) on a specific Sienna that our original salesman had on his lot. My wife called up to talk to our salesman, but he wasn’t around, so she spoke to the “Owner” of the dealership.

Now this is Chutzpah

My wife asked the question, “What do we need to do to take a van to our mechanic to have him inspect it before we buy the van?”.

After a short pause the Owner’s answer was classic chutzpah, “First you buy the van, and then take it to your mechanic and whatever he may find that needs fixing, we’ll fix.”. This is most definitely not what had been discussed previously (we had been told no worries, it should be fine, you can have the car inspected BEFORE you buy it).

Let’s analyze this amazing piece of chutzpah, you want me to give you a large amount of money, have the car licensed into my name, and then once I am owner of the vehicle and my mechanic finds something, I should trust you that you will fix these problems? I do realize that in Ontario a bunch of new rules are in place dealing with used vehicles, but I am also not naive enough to believe that they will somehow protect me in this situation.

I guess it all comes down to who(m) do I trust, a car dealership that I have never dealt with (that I have heard some odd stories about), or do I trust my mechanic, who has fixed my cars for 20 years? As you can guess, we did not call back this dealership.

We have since found a similar vehicle with a larger dealership, which may cost a bit more, but they are fine with us taking the van to my mechanic (if I leave a deposit, and my current vehicle) and will abide by whatever my mechanic says (and will find another van if my mechanic finds an issue with the van). The CarFax report on the van suggests there should not be a problem.

Financial Moral of the Story?

None really, just that I am a very untrusting person and that if you try to sell me things, it doesn’t take much to get me to go elsewhere, or completely walk away from the purchase.

I was astonished at the response I had from my posting Do you have saving questions? and I thank all of those who posted about their financial situations. I will not comment on them specifically, but again, I am astounded by the responses. Honestly that posting started as something completely different and then I realized just how many questions I had written and wondered if I could make an entire post of questions.

New Year Random Thinking

Naturally there were other intriguing posts by my Financial Blogging brethren that are well worth a few minutes to peruse in your spare time:

• Keeping with New Year’s Resolutions, Gail Vaz-Oxlade asks the tough questionWhy are You in Debt?, in fact this is the first of a group of posts. Don’t go over expecting to be treated gently, Gail asks the tough questions.
• Million Dollar Journey had a guest post by Jayn Steele entitled, How an Average Canadian Woman Became Financially Independant, although the title is a misnomer, since if she is financially independent, she is no longer Average.
• Michael James points his razor sharp analytical skills at himself and finds more More Pointless Frugality, but who really thinks about their furnace humidifier that much?
• The Canadian Capitalist bites back at a Shark, by writing a Note to Kevin O’Leary: Don’t confuse GDP Growth with Stock Market Returns hopefuly Mr. O’Leary won’t bite back!
• Larry MacDonald talks about a popular topic The Sandwich Generation which talks about how my generation gets to worry about everyone, not just our kids, oh joy. Jon Chevreau wrote about this as well.
• Preet at WhereDoesAllMyMoneyGo.com shows his TechnoGeek side by pointing out that The New Google Phone is NOT a game Changer, he just loves those gadgets.
• Four Pillars puts their money where their mouth is and challenges other Financial Bloggers with their annual 4 Top Stock Picks for 2010 Competition. I wasn’t invited, they must actually read my site then .

Has the New Year already turned sour on you? That’s OK, the Lemon crop is about to fail in Florida, so you can’t make Lemon-aid either…

Did you hastily make some New Year’s resolutions this past December 31st, determined that 2010 will be the year that you “get it done” (to paraphrase Larry the Cable Guy). Are you confident that you have chosen something that you can achieve and is it something you really want to do? If the answer is yes, I wish you luck and hope you have the “self control” to keep to the resolution, as I have rarely (if ever) been able to stick with my “promises to myself” in the New Year.

Financial Resolutions

Not sure what the New Year does to folks, I think it might have to do with the fact that they mortgaged their homes to pay for Christmas, but New Year Financial Resolutions seem to be particularly difficult to live up to (especially if you have already put yourself in the hole, with Christmas).

Some examples of financial resolutions might be the following:

• I resolve to not spend as much next Christmas: this one sounds great and wonderful, however, how can you decide if you have succeeded? First, you need to figure out how much you spent on the past Christmas, which is not as easy as you might think, but it’s not impossible (especially if you kept your receipts). Then you need to figure out how much you still owe, and figure out how you are paying that off (say pay off all of it by April?). Then you need to make a plan on how to save enough money to pay for your cheaper Christmas this coming year and how you might do it. This is a very complicated resolution, maybe you should resolve to Pay off Christmas by March?
• I resolve to pay down my Credit Cards: Wow, this one is a really good one at face value, but then again, maybe a STRETCH resolution for many. The folks that have Credit Card debt, usually don’t live the correct lifestyle to be able to pay down this debt (sort of a cyclical problem), so maybe you should change the resolution to: I resolve to get no further into Credit Card Debt?
• I resolve to save more this year: Again, a noble resolution financially, however, can you afford to save? Are you carrying a staggering debt load, in which case, why are you saving, you should be paying off debt! Maybe a better version of this would be, I resolve to increase my Net Value, and you can then either lower your debt or increase your savings.
• I resolve to spend less this year: an excellent resolution but a little vague and kind of hard to measure of succeed with. Maybe be more specific in your goal and you might be a little more successful? I resolve to buy 1 less coffee a day is a great one, I resolve to pay less for my banking, is another very good one,I resolve to not shred $20 bills or light my cigars with them might be the best one (if you are doing that).
• I resolve to get my financial life back in shape: wow, that is a huge one, again, maybe look at this and break it down to something simpler like, I resolve to make or update my Will is a very good thing, I resolve to cancel 2 credit cards is an interesting one as well. You may as well be resolving to solve World Hunger on this one, way too general and way too hard!
• I resolve to read more financial blogs and especially Canadian Personal Finance Blog: that is an excellent resolution, which I hope you all add to your list.

Remember the great movie “What About Bob”, and the Dr. Leo Marvin method of “Baby Steps”, make your resolutions achievable and you will succeed. If you are burning or mutilating money, please remember that is against the law as well.

Yesterday we started out by discussing NFL football, and then got onto the topic of Risk and it’s importance in key financial decisions in your life. Today we continue on with more examples from my life about Risk and how it played part in my decision process.

Example 2: Exercise Options or Not?

When I worked at Nortel, I had stock options and there was always the question about whether I should exercise the options or hold onto them in case the stock went up in price. Luckily for me, they were never worth more than $389.67 (yes I remember the exact amount), and no I didn’t exercise them, because I was foolish, so that money was never mine.

Many people I worked with had the same decision to make but with MUCH larger valuations on their options, and they didn’t “pull the trigger” either. I do know a few folks who simply said, “Give me my money”, every time their options came up, and didn’t care about whether the stock might go up, they simply wanted their money, and those folks (in hindsight) are the ones who did the best in the options game.

Risks are high in options, and luckily it’s a game I won’t be playing any more.

Example 3: Buy or Lease a Car?

Many of my friends have leased cars, but I never thought for me it was a good deal. I have owned used cars most of my life (I did buy a GM product new, which luckily I had an extended warranty on) and I have typically driven my cars until they were dead (or 5 months after that), or until my mechanic told me I had to get rid of it (he did refuse to fix a Honda Accord I owned that was in very bad shape).

My view of a car is purely functional, it is not an extension of my masculinity or of my prestige, so having a new car is nice, but not an important variable for me.

Leasing usually means you can afford “more” car than you can afford, however, after 3 years you own nothing (and if you have driven it too much, or worse dinged it once or twice, you are hit with extensive punitive fees). You can simply walk away from the lease, or you can buy your car at that point, however the money you paid in lease hasn’t gone towards the car really, you are simply paying the current value of the car.

Is there risk here? If you BUY a lemon (i.e. a car that is just overrun with defects and issues) you are going to have a problem getting rid of it and it will cost a lot to maintain it, whereas you can walk away from it if you lease the car (typically the lease period and warranty period are about the same time frame).

I’ll continue to buy cars, unless I get a job where leasing might make sense (i.e. you can write off the value of the lease as a percentage of how much it is used for your job/business).

Tomorrow: Final examples and an epilogue