The Anti-Virus Shell Game

I continue to be tormented by the Anti-Virus shell game.

Anti-virus software in stores (or on Amazon for that matter) is always on sale. Norton continues to do this, and when you “register” you are asked for a Credit Card. You can’t get updates without giving them a credit card, and that means they have got you. You must keep getting updates to keep the software working to specification.

In a year when your “subscription” is to be renewed, the renewal price is at least twice as much as you paid the previous year.

You do have a way out, you can go on line, and turn off Auto-Renew on your subscription. This is where it gets interesting.

  1. You click the Auto-Renew to “No
  2. Suddenly it asks for a reason why? I answered, “Too expensive
  3. Next the web site says, “What if we give you an Amazon $30 Gift Card?”
    • Where was this perk? This kind of bate and switch silliness I expect from Rogers or Bell. with this “perk” suddenly the cost of renewing isn’t as bad.
  4. If you just don’t like this, keep saying No, maybe you’ll get other “perks”? A set of Ginsu Knives?

I really despise this kind of product silliness, but it looks like the Anti-Virus world is becoming like other Tech Firms (e.g. Internet Provider, Cell Phone Provider, etc.,).

Conclusions

Is the Anti-Virus worth having? Maybe, I am sure folks will argue you don’t need it, or worse, they don’t work, but I will continue to play along (for now).

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Pay Taxes or Your RRSP ?

Given my love for the RRSP (or the Tax Deferral Savings Plan), I was wondering whether folks use it to defer owed taxes? The simple question is Pay Taxes or Your RRSP ?

If you received my T4 early enough that you could estimate my taxes, what would you do if you estimated you owed $500 taxes?

You have two options:

  1. Give the CRA their $500 and forget about it
  2. Put enough money into your RRSP (before March 1st) to counteract the owed taxes. This means you would then owe $0 in taxes.

The argument I keep hearing is that if I put money away in an RRSP now, I’ll just end up paying a higher tax rate on it when I take the money out. There is a school of thought that you might be in a higher tax bracket when you retire. To me, it seems an odd statement given the money will grow (hopefully) in your RRSP. This mean you’ll have more money to be taxed, albeit at a higher rate ?

I tried very hard to find what your nominal tax rate might be in Ontario, but let’s just assume it’s 50% for you.

This means you need to put about $750 into your RRSP to not pay $500 in taxes to the CRA. To do this exercise, if you have Quicktax or something similar, you can simply plug numbers into their RRSP estimator. This might be a better way to estimate, how much to pay.

Now you have $750 in your RRSP, and say you are 32. You have about 30 years until you want to take your $750 out. Assuming a simple growth 4.5% year over year, it will be about $3100.

Why not Put It in an RRSP ?

You now take $3100 out at a higher tax rate (say 60% again hopefully taxes in 32 years are not that brutally high), but it is still about $1300 dollars net. The bonus is you didn’t have to pay the CRA $500 32 years ago (an added bonus).

A net investment of $250 (you were going to have to spend $500 no matter what) you end up with $800 ? Seems like a winner to me.

Why wouldn’t you do this? If you didn’t have $750 dollars I suppose that might stop you, but are there other reasons?

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When to Use a Pay Day Loan

Never use a Pay Day Loan. There is no reason to use this service, ever.

I was going to leave that as the entire post, but I suppose I should elaborate a little on my statement.

If you are considering a Pay Day Loan, you are in a bad place financially. Adding a pay day loan will simply add an accelerant to your financial demise. A ridiculously high interest rate loan is not going to help get you back on your feet. All a pay day loan will do is get you to bankruptcy faster.

What should you do if you are thinking of getting one of these short term high interest rate loans? Get Help!

See a licensed bankruptcy trustee. They will either recommend a plan on how to pay things off, or a Consumer Proposal or maybe that it is time to declare bankruptcy. Remember this is a one-time thing, you can’t keep doing this.

Pay Day Loans
Similarities Pay Day Loans and Loan Sharks

If you are thinking of going to a credit counselling firm, research them and figure out if they are reputable. How much this is going to cost? Some firms are helpful, others, not as much.

Sometimes you end up in this financial place due to life related issues, maybe it is time to talk to someone about that too? Talk to someone about the issues in your life, may help you fix your lifestyle (and your financial lifestyle). If you don’t understand how you got to this place (financially), how can you be sure you won’t end up here again?

Stay the hell away from Pay Day Loans and the new “On line loans” system coming forward as well. Fix the problem, don’t dig a deeper hole.

Simple Advice

No question has the answer, “You should get a payday loan”.

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How Important Are Credit Scores ?

I have been trying out social media to see what I can learn. About a week ago I put up a simple Twitter Poll on @bigcajunman, about Credit Scores and the results were interesting.

The first thing I saw was that only 16 folks answered, which is a little disheartening. I have 3600+ followers, but I guess folks are busy these days.

The question I asked was quite simple. Which is more important:

  • Blood Pressure Level
  • Credit Scores
  • Cholesterol Level

I was glad to see the results.

Results from my first Twitter Pool on Credit Scores

Yes, your blood pressure level is much more important than your credit score. Nobody died from their credit score, but many folks die from the complications from High Blood Pressure. Remember the most important part of your Retirement plan, don’t die! Your Health is the first thing you should worry about.

credit scores

Risks of a Low Credit Score

If Equifax gives you a low score you won’t get loaned money or won’t get a Credit Card. You can repair it if it is low. You may feel stress due to a low credit score. Stress is bad for your health as well.

Risks from High Blood Pressure or High Cholesterol Levels

Aneurisms, Blood Clots, Stroke, Heart Disease or Death.

From a lay person’s perspective, I would say that your Blood Pressure and Cholesterol levels are something you should know. Being able to quote your Equifax Numbers, doesn’t seem as important.

Do something about your health and then worry about credit.

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Exposed on Banks

Even as a simple country Index Investor (to paraphrase Bones McCoy), you need to understand the Index you invest in. If you own a TSX-based, Canadian S&P Based or Dividend Royalty based index you hold a lot of Banks.

Two examples of this are:

  • S&P/TSX Composite Index, (OSPTX) which holds 36 % “Financials“. The top 10 holdings 4 are banks (Royal Bank RY, Bank of Nova Scotia BNS, TD Bank TD and Bank of Montreal BMO).
  • S&P/TSX Composite High Dividend Index ETF (TXEI) which holds 30% “financials”. You find 4 banks in their top 10 holdings (Bank of Montreal BMO, Bank of Nova Scotia BNS, Canadian Imperial Bank of Commerce CM, National Bank of Canada NA)
exposed on banks

Why this imbalance? Banks are doing very well lately, and have done well for over 15 years.

Are banks likely to “Nortel out“, in the near future? No, but realize that you are holding a lot of Banks if you are investing in Canadian Indexes.

My problem is that I am highly exposed on Banks. From my days as a Stock holder, I still hold TD and BMO in one of my larger investing portfolios. In this same portfolio I also hold a TSX index fund, which means my exposure to banks is too large (given I may retire within the next 10 years).

As Interest Rates slowly rise to more normal rates, I should start thinking about some more stability and start building a GIC Ladder in my portfolio. I should be looking for more stability given I am within 10 years of retirement.

Treat This as Informational

I am not offering advice. I am simply pointing out that many passive investors are heavily exposed to the Financial Sector in Canada.

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