Canadian Personal Finance Blog

My wife enjoys watching Gail Vaz-Oxlade and her show where she helps folks who are in dire financial situations by helping them control their spending. The result, after Gail has studied the spending habits (and the family’s lifestyle), is she will give them their discretionary spending budget in Mason Jars, which hold the cash for them, to show them just how much they have. The family is not allowed to spend more than what they are given, and that is Gail’s challenge (she rewards them if and when they succeed).

Cash is King

In a lot of businesses these days a favorite expression is “Cash is King” to point out that companies that have cash assets, are usually stronger companies, but for this argument, I believe that Cash is the King of budgeting tools.

If you are having spending issues, you must divorce yourself from your credit cards and especially your debit or direct withdrawal card as well. This is how I lived more than half of my life, since I didn’t have a credit card ’til I was into my twenties and the entire debit system didn’t come into play until my early 30’s, (heck Sunday shopping is a new thing to me, but let’s stay on topic). 

Take care of your large bills on  your budget and pay them however you do (cheque, on line, or in the bank), but your discretionary spending like:

• Groceries
• Entertainment
• Clothes
• Mad Money (coffee, eat out, etc.,)

Lies, Damn Lies and Stock Price Trends

To paraphrase Benjamin Disraeli. One of my favorite times of the year is here, with the opening of the N.F.L. season and with baseball coming down to the end of the season, the orgy of numbers coming from both games is astounding and quite satisfying for a number nut like me.

As a kid I reveled in the numbers from Baseball and loved collecting them and comparing them, but even as a kid I learned that all the numbers in the world are only telling you what happened in the past (which can be very important), but these numbers do not necessarily point to what will happen in the future. It is important to know what has happened in the past (because we do not wish to re-do our previous mistakes) but to know the future is what we all crave.

Football is awash in numbers to the point where there is an entire industry that has been created to use the statistics created by football games (Fantasy Football leagues), which astounds me, that you create a game from a game (is that recursion?).

Financial analysts do the same things to investors. They have mega-tonnes of data on every single stock and what it has done since it’s inception, and there are entire companies making fortunes analyzing these numbers, predicting what stocks “might” do by doing this analysis.

My understanding of the stock market, is that it has no conscience and no memory. Each day is a new day, and it’s like a Simpson’s episode (i.e. most of what happened yesterday isn’t relevant and it is forgotten) on the Equities market.  The simple fact a stock went down the previous day does not mean it will drop the next day (that fact alone, there may be other much better reasons, but the previous drop means nothing).

I have to laugh when I hear about “downward trends” and “upward trends” being reasons alone to buy or sell stocks, you may as well base your purchases on your lucky rabbit’s foot if you are going to think that way.

Keep crunching those numbers, but remember the numbers alone are meaningless without the context of why the numbers happened.

Proverbs 21:5  The plans of the diligent certainly lead to profit,
    but anyone who is reckless only becomes poor.

That works for me as a Sunday thought, and I like it. Financial Planning is something that needs diligence and your undivided attention, and if you are reckless in your planning you will most likely be poorer for your lack of diligence.

I have been guilty of acting quickly or without enough information and every time it has cost me money. If you are doing something that you are not sure you should be doing, when it comes to your finances at least, most of the time, you shouldn’t be doing it.

Do the diligence, make the plan and stick to it.

Monday I spent a good 2 hours with a Personal Finance Planner, that was made available to me by my soon to be former employer, and their right management team. I won’t divulge the name of the planner, just because I don’t feel right doing a “review” of their services, since I got them for a large discount.

Scope of Discussions

The scope of my discussions with this gentleman was mostly around what are my options to do with my severance package and what the tax implications would be if I withdrew from my company’s pension plan.

Bill (not the financial planners real first name) collected a fair amount of background information from us, which made my wife a little nervous (since she had not met him before, but I had at a group financial planning session). We were fairly strict in what we did and did not tell him, since we wanted the scope of the discussions to stay mostly around the task at hand (i.e. tax implications of my severance package).

Planning Session

After collecting the information, the financial planner had an already set up Excel spreadsheet with the tax scenarios possible for me and my family. Bill has done this with many (more than 100) former employees of my soon to be former employer. He also had a massive plasma display that he ran this on to show my wife and I what he was calculating. My wife pointed out I will never be getting a display like that for my computer.

He started by filling in some of the numbers he gave me about my yearly income, the size of the severance package, and the size of my pension pay out.

The variables to be dealt with are:

1. Do I take my severance package completely when it is made available?
2. Do I use the RRSP room I have now or later?
3. My employer was gracious enough to allow me to split my severance and take some now, and then some on January 1, 2009, do I do that?
4. What are the implications of me withdrawing from the pension plan?

The financial planner went through all of these scenarios, gave his opinions and dealt with my and my wife’s questions in a professional way.

Outcomes

I think my wife and I had already decided what to do, but we didn’t really have a clear plan of why or how much, I think now we do (at least I hope we do). Simply sitting down with someone with enough Tax savvy and background to “bounce ideas” off was just great and I think I got my moneys worth out of it (remember I got this at a large discount).

Bill did point out that his company does offer many services, and that if I did need them, I should call him (and I wouldn’t expect anything less from a small business owner), but he was not pushy and understood the audience he was dealing with.

Bill also told me his hourly rate, and I think I might think a bit before going back to him, and make sure I was much better prepared than I was this time, because his services do not come cheap (but then again, you pay for expertise, I have always found).

All in all a positive experience, and I would recommend dealing with a financial planner, with NO ties to any insurance company or mutual fund company. Make sure the planner charges you by the hour, for the service he is offering, so you know where he or she is making their money (mostly).