Canadian Personal Finance Blog

This is a quote attributed to Bill Gates, which resonates with me. Whether the quote banking is necessary banks are not, is the real quote, or it is:

Both of these quotes petrify banking executives, because they are both true.

Banks continue to claim they are embracing the use of technology, or FinTech as they would have you call it,  but that does not  ring true to me.

The reason I call bovine feces on this statement is my understanding of a few key factors in banks.

• Banks do not like new things, until they are proven money-making ideas. Adaptation of new ideas is not any banks strong points (unless it makes them a lot of money).
• The backbone of the #FinTech revolution is ATM machines and point-of-sale systems which are still running on Windows XP. #FinTech is not as futuristic as you might think.
• COBOL programmers are still making a fortune from Banks , because Banks are afraid to upgrade their existing core system to a language from this millennium. This odd situation which arose with Y2K, where programmers were paid ludicrous sums of money to make the following change in systems:
  • 05 YEAR PIC 99
    * DEFINE A YEAR ONLY NEED 2 DIGITS
  • 05 YEAR  PIC 9999
    * NOW WILL WORK UNTIL YEAR 9999
• Yes, that was a big money-maker for a few consultants (I am simplifying). These same consultants continue to make bags of money because banks are afraid to use a new language like say C++ or Java?
• Banks have Fiefdoms and they don’t like playing with each other, thus they typically have very diverse computer systems. This I can guess on the basis of a few observations I have seen at a specific bank, which merged with a large trust company many years ago. The Trust Company still exists in parts of the banks system, which has lead to issues with systems interworking with each other.

There are countless other examples out there, but this belief that FinTech will be changing things for Joe (or Josephine) Six-Pack any time soon is a falsehood.

Automation of systems continues with Banks, but again, these are cost-saving measures, not technological leaps forward. Being able to photograph a cheque to deposit cuts down on the  bank having to archive cheques, mail out cancelled cheques, etc., so it was finally adopted by the big banks.

The applications on Smart Phones are allowing banks to close more branches, and cut down on employees, again a cost-saving measure.

The Future is so Bright?

We need banking services, but, unfortunately the way the banks implement them, leave a great deal to be desired. The business of banking will see many changes over the next few years, but not quite as many as a lot of financial pundits think.

A while ago I wrote a review of the Quicken Business & Home 2017 (Canadian Version) . In that review I mentioned the Quicken iPhone/iPad app (I think there is an Android version as well). I have a better perspective on the subject, after trying them out.

Quicken 2017 Canadian Edition

I installed the Quicken app on my iPad and on my iPhone and initially I didn’t think about using it, but that has changed. Most of the time (when I remember), I will enter new transactions on the Quicken 2017 App, and sometimes even take a photo of the receipt.

The application itself seems to have some brains in it, as it will use the GPS and map data in your phone to try to guess where your expenditure happened. An example was when I was at Costco, and in the parking lot, I input the ridiculous  amount that we spent, and the App filled in the “Spent at” field with Costco. You can override this capability, but this is kind of nifty (while being a privacy concern too).

Another Step in the Right Direction

If Quicken continues to support these adjunct programs for its Quicken system (in Canada) this may be a big plus to the whole program. My hope is that the Quicken Cloud has a high level of security around it. The information in the Cloud would be highly valued by hackers.

If they could make Quicken 2017  easier to track investments that would be better. Currently there is a lot of manual data entry to track your investments.

I am not someone who deals with a budget well. I simply try to not overspend, but every budget I have had, I have broken, or abandoned. Everyone needs to understand their limitations, and I know mine.

I was reading an article (on Life Pro Tips on reddit)  which said after you set up your budget, you should revisit it every six months. On the face, this sounds like a good idea, and if you have discipline it should work. My opinion is that this kind of tinkering, could easily lead to lifestyle creep.

For those that have not read my thesis of lifestyle creep, let me sum up. As your income increases, lifestyle creep, is when your lifestyle over steps that income inflation. Instead of saving more, many folks simply spend more, and that is bad.

How can adjusting your budget every 6 months lead to lifestyle creep? Simple, that is the definition of lifestyle creep. Think of the following rationalizations you might have doing this tweaking.

• You notice, normally,  you never have enough cash, two days before you get paid. You just got a 5% raise, you decide to not increase your saving, so you have enough money those last 2 days. This is the prototype for lifestyle creep.You should increase your savings level by 5%, and figure out how to spend less. Don’t treat the symptoms, cure the illness.
• Your income has increased by $350 a month, and that is precisely how much you need to buy a car (on a 7 year term). This equates to adding a $4200 a year anchor to your life. This tweak could cause other ripples in your budget tweaking, which will sink you financially.
• Thanks to a bonus, you now have a 5% down payment, and at current interest rates you can afford to make the monthly payments on a mortgage.  If you can’t tell all the things missing from this, you need to get help.

Conclusions

If you have intestinal fortitude, and can keep from rationalizing spending too much, then this idea might be a great idea. For others like me it is a cautionary tale. There are still others like Michael James who just don’t really need a budget, and good for them!

Three of the big banks in Canada announced good profits ( TD, CIBC, and RBC) which has caused another jump in their value, and dividend output. Michael James thinks that the Canadian Banking system is in for a day of reckoning (i.e. their profitability will drop), but  evidently  not today.

Canadian sportscasters have been lampooning Ottawa Sens fans for not selling out every playoff game. The Sens do, however, have the highest average attendance in the playoffs of the remaining teams. Financial talking heads are annoying, sports talking heads are wastes of space.

A Little Too Relevant to Southern Ontario

When is the best time to buy a house? Same time as when you should buy anything else, when you need it. I am sure the Used House Industry (they call themselves Realtors, I like Used House Salesfolks) would disagree, but that is when I have bought a house. I suppose I could have rented when I needed a house, but if you need more space to live in (e.g. you are living in a bachelor apartment  and you are expecting your 2nd  child) and you have either a down payment or enough to rent, do so. Don’t become part of the lemmings being stampeded  to  the cliff of “Buy now before the prices go up!”.

Two great races are this weekend, the Indy 500 and the Grand Prix of Monaco. You can guess what I will be doing on Sunday, and no, I won’t be going to Church (this week). There is also the Coke 600 if you have a few hours spare.

The Bank of Canada announced no change in their interest rates, keeping that loose money policy in place. Their reasons are getting repetitive, but worth checking out.

The Canadian economy’s adjustment to lower oil prices is largely complete and recent economic data have been encouraging, including indicators of business investment. Consumer spending and the housing sector continue to be robust on the back of an improving labour market, and these are becoming more broadly based across regions. Macroprudential and other policy measures, while contributing to more sustainable debt profiles, have yet to have a substantial cooling effect on housing markets. Meanwhile, export growth remains subdued, as anticipated in the April MPR, in the face of ongoing competitiveness challenges. The Bank’s monitoring of the economic data suggests that very strong growth in the first quarter will be followed by some moderation in the second quarter.

They seem to imply that housing prices are going to start going up everywhere?

Ramadan begins on Saturday, so Happy Ramadan to my Muslim readers and friends.

Things I wrote this week

I did write something new this week, by cribbing Kerry’s presentation on RDSP‘s on the CBC. Being one of her researchers for her piece, I felt I had the right to use the intellectual property. The piece is called 5 Steps to an RDSP, which is a short synopsis  of  the  steps needed to  set up a Registered  Disability Savings Plan.

On the sister technology site, I wrote a short piece attempting to explain, What is Ransomware? Quite topical as Mrs. C8j was the victim this week of a FedEx phishing scam. Her boss received the infamous, “You have a package with FedEx” e-mail with a “hinky” link. Unfortunately she clicked the  link, but  luckily her anti­ virus software caught things before they got out of hand. Never trust links in an e­ mail from anyone, even on a trusted  web site, by the  way click here.

COBOL rules

For all of you lovers of FinTech, this tweet (from me) does sum it up quite nicely.

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