Canadian Personal Finance Blog

Last Day of Giveaway

Tonight at Midnight (or somewhere there about) a lucky name will be picked in the First Big Cajun Quicktax Software Giveaway , and we have been deluged with 10’s of entries, so your chances of wining are quite good! Remember you never miss the shot you never take!

Fatwa Against Credit Cards

In Ottawa last week Imam Khaled Abdul-Hamid Syed (local Muslim Community Leader) has declared a fatwa against Credit Cards, and I say to that, Good on you!.

“I conclude that it contains usury … which is forbidden in Islam, so it should not be used…”

I wonder if he reads this blog? The Imam is dead on (in my opinion) in his view that Credit Cards are the modern equivalent of usury and I applaud him speaking out about this topic.

The Imam has said that this Fatwa is not binding, and some folks are concerned about whether this means you should never use a credit card, even if you pay them off monthly (or only use them in emergencies)? I think any statement by any Community Leader that causes folks to talk seriously about this subject is a very good thing. Discussion causes folks to think about how they are doing things, and may cause some to change bad habits.

Will I soon be changing to Islam as my religious following? No, as most of my readers know, I am a devout Anglican, but I wouldn’t mind hearing what the Archbishop of Canterbury or the Anglican Church of Canada has to say about this interesting subject, as well.

Usury = Credit Cards?

As for the Credit Card companies and the banks, I wonder if they are worried about this or not? I doubt they care, but if a ground swell of folks stop using their cards, what might happen? Maybe the “Tea Party” should be looking into this (in the United States)?

I guess I got on a bit of a rant on the concept of Chutzpah this week, so I will leave you with one more post on some of the things in my life that I view as chutzpah that I run into in the financial world of today:

• Bank Fees: An institution that used to simply make money by loaning your money to other folks and doing business in the greay area between loan rates and savings rates, now charges over $10 a month for the priviledge to put your money in their bank. You have heard my rants about Free Banking before, but the banking racquet has a corner on chutzpah, that is for sure.
• Credit Cards: after watching the PBS Front line special The Card Game, the entire Credit Card business is a shrine to Chutzpah. The Canadian Capitalist has a link to the special, well worth watching, but unmitigated temerity and complete contempt for your customers is so prevelant in the Credit Card world, it should be renamed the Screw You We Get Your Money Card business. The fact it still exists and is not very regulated, shows that Chutzpah works.
• Gas Prices in Canada: How gas prices are set in Canada is claimed to be by free market pressures, I disagree. To tell a consumer that gas that has been refined and delivered and sitting in holding tanks at your local gas station has gone up in price, due to International Shortages, is Chutzpah.
• Financial Bail Outs in the U.S.: that was gall, and chutzpah combined. TO have created the entire credit crisis via your own foolish (if not illegal) practices, and then going hat in hand to the government asking for Trillions of dollars to bail you out is chutzpah. You lose consumers money, through flawed methodologies, and then ask for more money from that consumer (through their taxes) to not lose more money? Staggering.

Anybody else wishing to chime in with their own private financial chutzpah examples, please feel free to comment!

Chutzpah?

For those of you who still don’t get the concept of chutzpah the best explanation I can find is from Leo Rostein (author of the Joys of Yiddish ), who stated:

“…that quality enshrined in a man who, having killed his mother and father, throws himself on the mercy of the court because he is an orphan.”

Now that is chutzpah!

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…

Gail Vaz-Oxlade pointed out that a lot of folks who are supposed to be teaching kids about money don’t know the basics of their own financial situation. She sighted one important piece of information which is “How much does your credit card charge as an Interest Rate?”, which is a very important thing to know.

I thought about it, and realized, I don’t know this, but I am also not worried.

I pay off my credit cards, so they could easily be charging over 50% annual interest rate and it wouldn’t affect me (unless I forgot to make a payment, which I did once).

I am not having a go at Gail (far from it, I read her site every day), just pointing out that maybe the real statement should have been “What are the interest rates on the credit vehicles that you use?”, (and I do know the interest rates on my lines of credit, so I do pass that part of the test).
I also don’t really know my credit rating (another thing that Gail thinks we should all know), but then again, I don’t plan on making any large Credit Applications either, I think before you do that you need to know your rating, that is for sure.

Here is an excellent question, How Many Credit Cards do you have?. This is important because how would you know if one was being defrauded or stolen if you didn’t know about each and every one of them? You need to have a list of all your cards and maybe the phone numbers of where to call to CANCEL them quickly (or report them stolen).

Christmas Laziness and Cheer

I am planning on doing a Top 10 postings for the Christmas/New Year stretch (given I may or may not be around), so if you have any suggestions for this kind of a list (top 10 for this year), please leave a comment with a title or story you may have particularly liked (written by me, that is).

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