Canadian Personal Finance Blog

I like that title, in fact that could be the entire post, I like that title that much, but I will elaborate on this provocative statement.

Today’s consumers (myself included) love of things and what money can purchase has turned into a full blown obsession with money and it’s trappings.

Are you seduced by spending? Ask yourself these question:

1. Does anyone really need to spend $8.00 on a cup of coffee? In my mind if the beans were picked my Marilyn Munro in the nude (and she delivered it to me in that same state), then I might think that coffee is worth the money I spent. Starbucks has seduced you to spend that money with it’s cache and marketing.
2. Can you hear the difference of $10,000.00 speakers for your stereo over a cheaper set of speakers? I can’t, but I am also fairly deaf from younger days in printing plants and rock concerts. If you feel it is really important and you can tell the difference, you have been seduced into hearing something that may well not be there (except for your dog).
3. Why would you pay $16,000.00 for a Toyota Corolla when you could pay $80,000 for a BMW or Mercedes Benz? Do you live in your car? For that price, in some places you could get part of a house for the Benz. If you think people will be impressed by the Mercedes name you have been seduced into thinking people care what car you drive (I might care if you drove me to work).

These are pretty crass examples of the seduction of spending that we all fall for (I am not portraying myself as being lily white in this, I have bought things that afterward I have asked, “Why did I do that?”), but this is one of the hardest things to control, the urge to spend money.

We can stop ourselves from walking up to an attractive member of the opposite sex and introducing ourselves, simply by rationalizing the embarassment we might feel and the fear of rejection in that situation, yet we can’t stop ourselves from spending money when we know we shouldn’t (and worse we know we can’t afford the thing we want to buy).

Should we all be taking Prozak or some other psychotropic drug to curb our spending urges? I don’t know, I don’t think they would stop us (they might make us so stoned that we might not do much of anything), so how can we stop ourselves?

No Credit Therefore No Buy

The idea I have is so simple but also very hard to do, for most of us, since we feel naked without a wallet full of credit.

If you go out with no credit cards and no money, you are going to be hard pressed to buy something, aren’t you? Yes, I know with instant credit it’s not impossible, but it will slow you down a fair amount. If you are going out to look at a high priced item or even just going “shopping” with friends, don’t take your credit cards, and maybe bring enough cash to buy a coffee (not a $6.00 one either).

If you are someone who can control your impulses to spend, I applaud you, and strongly suggest you should write a book about it, I’d buy it on the spot (anyone see the dichotomy of me impulse buying a book that is to stop me from impulse buying).

After reading Max’ed Out (review of this book coming in a while), I have come to the conclusion that I really don’t care about my “credit rating” any more. I have far too much credit as it stands, and from what I can tell what I think SHOULD make my credit rating better doesn’t actually help it.

Bad Credit Rating

At this point in my life if I had a bad credit rating (let’s assume I go completely insane, go to Vegas max out all my credit cards, put it on “Green” in Roulette and lose), what would that mean?

• No one would give me a credit card? Not necessarily the case, since they are already sending credit card applications to my kids who have no credit rating, but let’s just say this is the case, I cannot get any more credit cards. To me that is a good thing, I have far too many credit cards as it stands, if anything I should be destroying the ones I have.
• I won’t be able to get any more credit at my local bank. I don’t need it, and if anything I should collapse my existing credit vehicles.
• The Bank may foreclose on my existing credit vehicles. Not likely again is my response, if that is my current only debt, and I am making payments on it, the bank won’t do that (is my guess).

Admittedly this is a bit of a synthetic case, since everything I have done in my life financially has built up a good credit rating, so most of these points are conjecture on my part.

Good Credit Rating

What does a good credit rating do for me?

• It will allow me to get more credit. Don’t need it, and shouldn’t get any more (I wish I could put that on my credit report).
• Keep me healthy? Nope, sorry, the only remote way it might help is if I need to buy a massive home gym at Home Fitness Jock House and they will then allow me to open a credit account with them, but that is a big stretch (and I had better stretch before using it as well).
• Cause my wife to love me more? I could get a credit card at a Furriers and buy her a mink coat, but if that causes her to love me more, I think I don’t know who I am married to.
• My kids will be more respectful and clean up their rooms? I am not touching that one.

A good credit rating for me right now is much like my appendix, it’s there, it doesn’t do anything for me, but it can cause some serious nastiness should it all go wrong.

Conclusions

I should go out and trash my credit rating? No, the only way to do that would inflict financial hardship on me and I wouldn’t have only a screwed up credit rating, I’d most likely have a ton of debt too (and screwed up my home life and such too).

The obtuse point I am trying to make is that the Credit Rating concept is an odd one, if you have a good one, you shouldn’t have credit (yet you most likely have it, and can get more), and if you have a good credit rating, unless you are about to buy a house, it just means you can get 100 more credit cards really easily.

For those of you who haven’t heard today is Mardi Gras (or Fat Tuesday in a literal translation). Today would be the day in past times when you would use up all your fat and leavening type agents to prepare for the coming season of Lent.

Financial Plan?

If you didn’t have time to implement a financial plan for the new year, here is a perfect opportunity for you to restart and retry. You even have a set time frame to work from, make the promise to yourself that you will implement your new Financial Regimen and have it run from February 6th to March 21st, and on that weekend you will revisit (and celebrate if you succeed in your goals). Pretty simple really, don’t you think?

I got a very good comment yesterday about a pledge by one of the Financial Bloggers who reads my column as well (we are an incestuous bunch and enjoy reading each other’s copy), that she would not only give up the Latte a day habit for Lent, but she will donate that money to charity! Now that is good Karma at work. No matter what religion you are, one of the pillars of your beliefs is Charity, so keep that in mind. If you don’t believe in God, then believe in doing a good thing for one of your fellow humans on this Earth, especially if you are blowing $4.00 on a cup of coffee!

Remember When?

On the weekend something tweaked my memory of when I was a teenager, and how back then if you had a savings account, you only got interest paid to the account twice a year (sometimes only once), and the big new exciting thing was Monthly Interest payments on your savings accounts. Banks fought implementing them and then embraced them and called them “Daily Interest Accounts” (except that they computed interest on the minimum monthly balance you had for the month, so I am not sure where Daily fits into that model).

Why am I writing about this. I noticed how much interest my savings account got this month, 10 cents, whoopee! If I paid for my banking, that means I’d only be out of pocket $14.90 this month instead of $15.00! Ten cents interest? However, if I had left that same balance on my Credit Card I most likely would be paying tens of dollars in monthly finance charges. Wonder where banks make money do you? Hmmm…

Evidently HSBC is offering 4.75% on their savings accounts (on line), sounds ok, except there was a small caveat even in the announcement:

…The 4.75 per cent introductory interest rate will apply to new deposits until May 2, 2008. Interest is calculated daily and paid monthly on balances up to $1 million.

Wonder what the rate is after that? I believe the rate it drops to is 3.70%, but I am not sure about that one (here is the full legalese explanation of the account). Now the account has no fees on it, which I do like, so if you are going to put money in a bank, this might not be a bad choice (how Rumsfeld-ian of me), but I am not recommending this, I am simply pointing it out.