Personal Finance essays, stories, case studies and how to articles with a distinctly Canadian Point of View, from the Chief Kibitzer of Personal Finance. Paying it forward as best I can.
Many of us seem to be living in a financial Echo Chamber. We have friends, and family who we agree with, and we read financial articles the reinforce our financial plans.
What do I mean by Echo Chamber?
“an environment in which the same opinions are repeatedly voiced and promoted, so that people are not exposed to opposing views…”
Dictionary.com definition (2nd)
Amazon Link to Book
Michael James pointed me at a very good book by Annie Duke, “Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts“, which is quite an eye opener. Ms. Dukes is known as a world class Poker Player but she was a Doctoral Candidate in Psychology before that, and she writes in a very entertaining way.
If all you do is listen to people who agree with your perspective, how can you be sure you are on the right path? Without exposure to differing perspectives and ideas, how can you be sure you are that correct?
As I get older, I seem to be slowly turning to Ms. Dukes perspective on seeing differing points of view. I have never enjoyed hearing arguments that disagree with my inner beliefs, but I have learned it is important to hear them. There is a need to empathize in some fashion with opposing viewpoints to at least understand where they came from.
Empathy does not imply agreement, it is simply understanding it.
For a long time I had a perspective on folks who got into financial troubles, was usually of their own making, but I now think that is a flawed perspective. After living through my own lay off I started questioning my theories, but after talking with Doug Hoyes and reading his book, “Straight Talk on Your Money: The Biggest Financial Myths and Mistakes . . . and How to Avoid Them” (Amazon Link) I really realized how incorrect my perspective was.
Understanding our own biases is an important part of growth.
Examples
If you’d like a few examples where you could benefit from listening to opposing money viewpoints?
If you are an Index Fund investor, read some of the active trading newsletters out there, to at least understand their perspectives on the markets.
If you believe your house is your biggest investment, maybe read some of the interesting studies on the perspectives of lifetime renters. Their perspectives on the freedom of not owning a home are quite thought provoking.
If you live in one of the large cities of Canada and are of the perspective that Real Estate can only go up in price, there are contrary writers to that perspective as well.
Everyones Opinion Matters?
I am not saying you should immerse yourself in contrarian perspectives, but it is important to at least read some different perspectives on things. Understanding their perspectives will help you have a better view on the entire story.
This year (2020) is a very odd year in terms of submitting your taxes. Thanks to the COVID19 outbreak, the current official date for submitting your 2019 taxes is: June 1, 2020 (check the link for any updates)(you only have to pay on September 1st though). Just remember Taxes Delayed is Money Lost (to you).
Tax Time
September 1st, is the date when you must pay your taxes if you owe money. If you are owed a rebate, what are you waiting for? There are so many good reasons to do your taxes now:
If you owe money, better to know now what you owe, and then you can plan accordingly. The CRA will send you a response, and you could even appeal if you feel they are wrong.
Stats Canada announced on the 9th a massive drop in the employment numbers with (March 2020) over 1,011,000 jobs lost and many other folks had significantly less hours worked. Increased jobless claims will continue to climb during this pandemic.
I have not seen a drop like this in my lifetime
The unemployment rate now runs at 7.8% (March 2020), and things will only get worse for the next few months, unfortunately. What will happen as jobless claims rise?
A few more weeks into the COVID19 Lockdown of 2020 and more folks are sick, more medical staff are burning out, and we are running out of supplies. Many folks seem to be refusing to believe the seriousness of the situation, and plan parties and meetings and such.
But, we will come through this. We will learn and hopefully all of us will be a little wiser (in life and with money as well).
Easter comes and it is a time of Hope and new beginnings, but those new beginnings may not be soon. For those upset that they cannot be with loved ones, remember why.
Past Writings
A few new ideas over the past two week:
My CRA Account is something that you really should have. It helps you see what is going on with your Income Tax Returns, gives you all your maximums for the year (e.g. RRSP, etc.,) but also you can watch your status for the new CERB.
I kind of cheated claiming I wrote Henson Trusts since it really is just a link back to a great article on the Blue Bean Counter. I started writing an article, and it was just too darn complicated for me.
Michael James points out, Rebalancing Does Its Job, even during a horrific downturn where the markets are completely unpredictable.
Is it time to do some Spring Cleaning in Your Finances ? Well you do have a little spare time, and maybe you don’t need to make any more muffins or bread today.
Preet is getting prodigious on his video postings during this Quarantine, amazing what being locked in your home most of the day.
Possible CERB eligibility expansion coming soon? (And an update for those who pay themselves with dividends from their corp and the $5k income criteria) https://t.co/FkVxyUPfFQ#CERB
The most important minute and a half from this week’s podcast:@BenRabidoux predicts that within a month banks will kill your #HELOC “You thought you had a $200K limit? No you don’t” Full answer starts at 44:48 on all podcast apps, and here: https://t.co/z5CvZB0prU#DFI30pic.twitter.com/c0MaSAAASR
Before RDSPs there were not a lot of options for Parents of disabled children to protect income they were saving for their child’s future, without having to pay a great deal of tax on it, as it grew.
The RDSP helps a great deal with this, however before the RDSP another way to dissipate the impact of a disabled person receiving a large inheritance which could cause large tax implications and worse a loss of services and programs (due to the change in their financial status) was a Henson Trust (a specialized version of the Absolute Discretionary Trust).
I was going to attempt to explain this one, but thanks to Mark over at the Blunt Bean Counter, he has a much better explanation with this one:
The RDSP is a much “simpler” (for lack of a better term) program to work with in terms of set up, but in some instances, the Henson Trust may be the only option available.
Note: Yes, this is a bit of a cheat on my part relying on other writers, but this has been sitting in my “To Do” list for a while. Please feel free to comment and ask questions, I will make sure I get some answers for you.
Also remember your loved one needs to have a Disability Tax Credit (DTC) for this as well. Evidently, I was mistaken, however, the ODSP is actually involved for Ontarians as well.
I found this one in my archives, and I started writing it two years ago, having no idea what 2020 was going to bring. Read it with that in mind, it is about Personal Financial Doomsday.
One of my favourite Star Trek episodes is The Doomsday Machine , where a robot is let loose to destroy both sides in a long past war. There was much overacting and emoting by both William Shatner and William Windom but I liked it.
We are not in a Doomsday scenario right now (COVID19 Pandemic), but we might be in a big mess in the financial world (on the Macro Economic side of things).
I think 2008 showed that things can go off the rails badly, but now we live in completely uncharted waters. I worry, this is going to be a very long mess, so we shall see.
I think the financial apocalypse I was thinking of is was at a personal level. As we have learned from a few financial books, personal finance apocalypse can happen much more easily than we think.
Your health failing suddenly is more likely than you hope, as I learned in my Movember story. There are other more catastrophic health issues that can arise, and that can easily trigger a personal finance failure.
Simply losing control of your debt load, or maybe a sudden increase in interest rates, is the most likely financial doomsday. The interest rate sudden jump is not out of the question, but I suspect governments are fighting against this, knowing the impact it might cause, financially.
The ultimate doomsday of course is our own demise, but then again, your financial concerns are over then as well.
Losing your job can be another financial apocalypse, that many folks have a hard time recovering from.
The best way to avoid a Financial Doomsday, is be ready with a financial plan that takes into consideration the Risks possible. Is there a financial apocalypse likely globally? We shall see is all I can say.
I do know that a personal financial doomsday is more likely than most of us wish to admit.
The Big Financial Snit ?
“… and I thought YOU, wanted to play, SCRABBLE!”
One of my favorite apocalyptic shorts from the NFB, the Big Snit.
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