BDSM in Finances?

No I am not going to change the blog to a financial bondage site (at least not yet).

The metaphor of handcuffs for many of the decisions in life and in our finances is quite apropos. Many of us struggle with decisions that we have made that force us to stay with the status quo in our lives, and here are the types of handcuffs that I think we struggle with every day.

Golden Handcuffs

Gold Handcuffs

The first time I heard of this concept was in the glory days of Nortel, where folks had Stock Options in the company, and thus were bound to stay (at least for a short period of time), until those options were exercisable. This was how most high tech companies used to work (not sure how they work now), but the opposite side of those bonds were, that if the Company stock dropped below the strike value of the options, they were no longer very good handcuffs (the analogy I heard was The Cuffs just fell off, and I am out of here).

Other Golden Handcuffs are things like good pension programs, that someone has a great deal of time as a member. That is the story you hear from many Civil Servants is they don’t dare move to the Private Sector because of their Pension benefits and such. These handcuffs are not as binding, if there is more monetary payment used to entice folks away, but still an important impediment to change.

A good benefits package for an employee has been known as a good employee retention program as well.

A low rate Mortgage can be Golden Handcuffs if rates suddenly sky rocket, but I’ll discuss the converse in the next section as well

Nasty Standard Handcuffs

These are the thornier binding programs that will not let us loose (financially) without causing a lot of pain and damage.

Standard Smith & Wesson Handcuffs

Typically attempting to extricate yourself from these decisions will cost a fair amount of money.

Cell phone contracts are an excellent example of this kind of punitive retention program, where the customer gets a better deal on a phone, but then must stay with their service provider fora period of time. I know many folks (including me) who regret putting on these handcuffs, but now must live with our poor decision (or pay the price of leaving early).

Some might argue that long term Mortgages can be like this as well. As most of my readers know when I bought my first house I paid 11% interest on my mortgage for 5 years, because at the time that seemed like a great deal, but as the term passed, it was obvious that I had made a blunder financially. The only way to extricate myself from it was to either blend and extend my Mortgage or break the mortgage and pay a 3-6 month interest penalty (depending on when I wanted to break it). In the end I ended up leaving the Barbed Wire Handcuffs on for the entire term.

Car leasing agreements are somewhat like this as well, you are paying a lower amount for a car, but it is very hard to break the lease without some severe penalties (depending on your agreement). I don’t lease cars, so I never really understood the attraction for this particular financial bondage device, however, I do know many folks who think it is a great idea.

Thumbscrews

Thumbscrews for a Little Extra Motivation

These financial torture devices really are quite despicable, yet some of us gladly stick our thumbs into them without thinking about the long term effects (or thinking it won’t be that bad).

Zero balance credit cards and don’t pay for 6 month credit deals are notorious examples of these financial pain infliction devices. You start off with the best intentions to pay off the balances, but you forget to make a payment, or you simply don’t choose to pay it off and the device starts to inflict pain. You end up paying a much higher interest rate on the complete balance you had, and now you will have problems ever extricating yourself from this financial trap.

The entire low rate mortgage debacle in the U.S. was based on this kind of excruciating financial bondage mechanism.

I hope the only handcuffs you wear are Golden ones. Please make sure you know what your cup of tea is when it comes to these financial bondage devices (better still steer clear of Financial Bondage completely).

I wrote this piece in 2010 just as Sunday banking was being introduced, and at the time I was against it, and I still somewhat am against it, but that is mostly because I try not to go into my local branch (if I can help it), but if there are folks who want to work on Sunday, I suppose it is OK.

TD Canada Trust announced that they will be opening some of their Bank Branches on Sundays from Noon until 4:00 PM, for our convenience.  Evidently they have been spurred by news that CIBC was going to open some of their branches on Sundays, which begs the question, Why would I want to Bank on Sunday?

I realize that many folks don’t get a chance to get to their banks during the week or even on a Saturday, but is opening on a Sunday really that important a service to offer as a bank? Will this cause a sudden rash of Impulse Banking (there is an expression you never thought you’d see).

My assumption is that bank transactions will still not be processed until the next business day (as is the current rules of banking), but now that banks are open every day of the week, maybe the term Next Business Day is a misnomer, in fact most transactions will be processed on the next Weekday that the bank should be open on (i.e. not a holiday).  So if you walked into a bank and did something on a Sunday it would be the same thing as on Saturday, it really wouldn’t happen until the following Monday (assuming that is not a holiday).

ATM Machines are present at pretty much every bank branch that I have been to, and most folks avail themselves of this service on Sundays currently, but now with this new service they can talk to tellers directly. I must admit I do like making larger deposits at a Teller’s Window, it just makes it feel less risky (yes, I am paranoid about computers and automated systems, it is the nature of my generation).

As I have said previously (many times) I do most of my banking on line and rarely (except on some extenuating circumstances) if ever go into my local branch, other than to use the ATM machine. I pay my bills on line, I transfer funds on line and I order cheques on line (for $40!!! but that is for another post), so going to my local branch isn’t that important.

My guess is that this Sunday opening at some of the Branches is mostly for things like Mortgage Negotiations, Loan and Credit Discussions and maybe RESP Cashing (Ooops, sorry about that, I promised I was going to not talk about that any more). Some banks have even opened on Sundays already during peak RRSP season, to ensure we all have a chance to get our savings in place (Impulse Retirement Planning?).

Is Sunday banking really needed?

I really don’t understand the importance of opening on a Sunday, if you already open a Saturday, but I am also from a generation where Sunday shopping was not legal for a long time, so maybe I am just old and don’t comprehend the importance of having access to a bank on a Sunday. I am willing to open the floor to discussion about whether this new service is needed or not, but I do pity the folks at the bank who must now work on Sundays.

In these days where discretion seems to have been lost on most of my generation and completely on the following generation (in my opinion), I wonder what this might mean for society in general, but in Personal Finances in specific.

What do I mean by Discretion? The dictionary says one of its definitions is:

the quality of being discreet, esp. with reference to one’s own actions or speech; prudence or decorum: Throwing all discretion to the winds, he blurted out the truth.

This loss of the social mores and verboten topics has meant a lot more frank discussions. What big banks and other financial institutions do, is an important topic. I applaud the frank talk and think this kind of lack of discretion is very much needed (i.e. full disclosure). We have seen that many Ponzi Schemes thrived on this discretion when it came to how they operated. It is a secret how you are making more than the market, and thus you should not be telling anybody about how you are doing it.

Are you discrete about your money? I am somewhat, in that I don’t typically talk to friends and acquaintances about the specifics of my money, and I think I inherited that ideal from my Parents. I never knew how much money my parents made, or what financial issues they might be having, and I still don’t know much about their finances, but is that any of my business? When I was a child, I would argue, no, it wasn’t my business, now there might be an argument that I should know more, and I am finding out some things slowly but surely.

Given the current generations need to talk about everything will this change how Money and Finances are spoken about? I hope so.

Discussion usually causes change, but in this topic, will frank discussion change things for the better?

What do you think?

If you have got it flaunt it, seems to be the catch phrase these days. I like that folks really don’t know much about me and my money, for some odd reason it makes me feel safer.

Do you openly talk with your children or others about your money? Are there any taboo subjects in the area of money out there any more?

Tickling up CPI

Stats Canada announced on Friday that the CPI rate of increase ticked up a bit more in September, hitting 1.9% (over 12 months) up from last month’s yearly rate of 1.7%. The usual culprit of Energy in general and Gas and Electricity in specific seem to be causing this increase. The problem with increases in Energy is that it then trickles into all other aspects of the Basket of Goods, and we get Ripple Increases as well, which could cause the Bank of Canada to rethink it’s laissez faire view on Interest Rates.

Wow, I sound like a real economist there, don’t I (i.e. I took a little information, obfuscated it, and then made a non-commital statement about it), maybe I missed my calling?

Energy prices advanced 5.6% during the 12 months to September, following a 5.0% increase in August. Prices for electricity rose 7.7% in September compared with the same month a year earlier.

Excluding energy, the Consumer Price Index (CPI) was up 1.5% in September.

The way that Gas prices have been jumping in Ottawa and Montreal, my guess is that the CPI will continue it’s upward trends for a while, and may see a big jump next month, due to the price increases seen locally.

Again Ontario led the way with a 2.9% increase year over year, which makes us all proud here in Fortress Ontario. Electricity prices and homeowner replacement costs seem to be causing the jumps here. Must be an electrons shortage causing Electricity prices to jump? Dammit we need to smash more atoms!

Bank of Canada Basket

The Bank of Canada’s basket of goods that makes up the CPI was up 1.5% (year over year) in September down from the August 1.6% yearly rate. Aren’t statistics wonderful things, it all depends on what you count and when you count it, and you can have contradictory stories from the same data (or at least data from the same sources). This is well within the Bank of Canada’s range of inflation, so any interest rate increase on this data is less likely to occur (we hope).

The Big Table

I love the big table, it makes me feel good knowing where the biggest price jumps are, and helps me understand why my effective income shrinks the way it does. You can check the Stats Canada web page and see this as well.

Darn, I love a good table of numbers, nothing finer.