Why I am Not Rich (the 90’s)

As promised here, here are a few more of the reasons why I am not rich (financially). Here are more of the reasons (in my opinion) why.

In the 90’s the perception was that the stock market and making money was as easy as sex. I can assure you that this was not the case. I like to think of it like teenage sex, everybody talks about it, but (when I was young) there wasn’t any going on.

I am not rich
Nortel Once a Giant Now Deceased High Tech Firm

There were opportunities that arose that I might have taken advantage. If I didn’t have kids, a mortgage and a paranoid view of how the stock market worked I might have given it a whirl. I was in the Nortel Savings Plan. In the plan for every $3 I deposited the company kicked in $1. This was in stock and money could only be removed 2 years after the money was put in. I did actually make some good money on this in the early part of the 90’s. It helped pay for a car and some repairs on my house, so my claims of abject poverty are hollow. Yes, I made some money early on in the 90’s.

I did take a few flyers on a few stocks. Unfortunately I became overconfident and a few of these flyers crashed into the financial terra firma with a loud bang. A few of these were Corona Mining, and a few other mistakes.

Cisco

My biggest slap on the back of the head is when I was in the I.T. group at Nortel. I looked at these stacks of boxes from this company called Cisco. I went and talked to the Networking guys. Their opinion was this was the manufacturer we were going to use to set up our corporate data network. At that time Cisco was not a name I even recognized, but I thought, boy I should really buy some stock in that company if we are using them, this was in 1990, and if I had bought some Cisco (and presumably sold before 2000), I might be a lot farther ahead in my financial journey.

On the converse side of things, as I have written about before, in the Top 5 Investing Regrets of my Life I held onto high tech (specifically Nortel) shares for way too long (when I knew full well that most of the claims being made were at best fantasy). Another example of sometimes when to buy is not as important as when to sell. At the point I am commenting on, I had a substantial investment in Nortel in terms of:

  • Savings Plan stock which I had purchased with a kick in from Nortel of 25%
  • I was being paid by Nortel (including bonuses and such)
  • I had a pension with them (which was also buying Nortel Shares)
  • Stock options (which never were worth anything) to purchase Nortel Shares
  • Owned Nortel shares outside of the savings plan that I had bought myself (yes that was a huge mistake)

I could have made a lot of money here, I could have made some money, but at the end I lost a fair amount of money, which was my own fault. Luckily, I was able to extricate my pension in tact, but the rest of the money was mostly written off, so I am better off than a lot of folks.

Am I Feeling Sorry For Myself?

Now I have a boring RRSP, Spousal RRSP, and a Public Service Pension, and I am quite happy.

Am I lamenting with these posts about how this is all unfair? No, not in the least, this was all of my own doing, and it has taught me a great deal about what is valuable in life, and how a lot of times bad things happen for a reason.

{ 11 comments }

Why I am Not Rich (financially)

Why I’m Not Rich

So I am actually stealing the title and concept of this post from Million Dollar Journey. Originality is not as easy as it seems.

By all rights I should be rich in terms of my finances. I don’t think I am (but I add that I am a millionaire in many other ways in my life. I am not lamenting not being financially set, simply pointing out that mine is a story of opportunities missed as much as anything else.

First big chance I had to make a lot of money was in 1981 when I took BUS 111/121 at Wilfred Laurier U.. Back then it had the “Stock Market Game” as part of its curriculum. There I learned about a new tech stock that was just going IPO. The winners of that game bought only that stock and won the game handily. I could have simply invested $1000 back then and been able to pay for my education completely. Quite simply, I ignored that opportunity (what would you expect from a 20 year old?).

I could have made a lot more money had I left my money in CSB’s which back then were paying 19% interest. I guess we can ignore that “opportunity” since that really was an aberration in the whole system.

The Front Door of Microsoft in 1985

When I was about to graduate, I interviewed with Microsoft. Happily I actually got fairly far into their interviewing methodology. Unfortunately I managed to find the secret trap door and was not offered a job. If I had gone to work there in 1985, and had managed to hold onto my job long enough I would have easily been set for life monetarily, but whether I would be happy ends up being an open question. This lines up with how my financial luck has fallen throughout my working career (i.e. almost being in the right place at the right time). How real this opportunity was, I am not sure, but still an opportunity missed again.

Nortel Fortunes

As the 80’s ended I changed jobs and started working for Nortel. Back then, it was still just a Phone Equipment Manufacturer (with no megalomaniacal dreams of it being a Tech Superpower). Even back then I could have made some good coin by buying BCE stock, as part of a savings plan. I did actually enroll in that plan, but I simply cashed out of the plan every year to get the company “top up” portion of the savings plan. If I had held onto that stock, and simply lived on the Dividends I might have made a pretty penny, but I kept cashing out.

Tomorrow, the heady 90’s and the eventual Tech implosion!

{ 4 comments }

Risks in Life (Finale)

For a while we have been talking about where Risk fits in our day to day financial decision points, and I have been adding in examples of Risky Business in my life, today (finally) we wrap this whole thing up.

EQ Bank Savings Plus Account

When to Sell?

Yup this one is the big risky one that, I can assure you, I have no idea of when the best time to sell a security is, blind luck has been my best method. Most of my “great” financial decisions have been forced upon me (i.e. I needed to sell to get the money in question), so deciding that a security should be sold is something I am not very good at prognosticating.

I have read many books who state unequivocally that if your investment decisions are made emotionally, you will lose in the long run. Going with your “gut” is a dangerous game to play in poker and also in investing, the danger is that if your “gut” is right once, you may rely on it far too much in the future.

Take your profits is the best way I have heard (e.g. re-balance your portfolio) in the world of investing. If your portfolio has one area that is doing great, maybe it is time to take your profits and lock them in, instead of “letting it ride”? Maybe you are very risk averse like me (i.e. burned so many times, I have very little nerve left), if that is the case taking your profits, when you see them might be your best decision point.

Am I espousing a specific investment method? No, my regular readers know me better than that, you need to find a method that fits your needs and I am NOT in any way shape or form advising you on what to buy, what to sell and when to do either, I am simply pointing out in my case, “Take the Money” has worked. I’ll let the REAL investment blogs talk about that kind of stuff.

The risks in this scenario is obvious, take your money now, or will you have more later?

RRSP or Mortgage?

Is this a risk area? That’s a good question, I don’t think it is a high risk area, unless you are doing something wacky like the Smith Manoeuvre or something like that, if you do either of these (pay down mortgage or build up RRSP), you are doing OK.

I have seen a few different models done about the ideal model for paying down debt/mortgage and RRSP contributions, but I am very debt averse right now, and also am in a relatively stable pension situation, so my decision has been to attack debt as much as possible (with a little success).

The risk again comes down to present money value vs. possible future gains. Get a plan for how you want to deal with it and then stick to it.

So What About Risk?

As we have seen the past few days, risk comes into most major (and a lot of minor) financial decisions but you need to weigh risk against the benefits and make your decision in a calm and rational manner.

Analyze the risks, weigh them in your decision, and you should do just fine.

Previous Posts

{ 0 comments }

Risks in Life (Part II)

Yesterday we discussed the topic of Risk and its importance in key financial decisions in your life. Today we continue on with more examples from my life about Risk and how it played part in my decision process.

Example 2: Exercise Options or Not?

When I worked at Nortel, I had stock options and there was always the question about whether I should exercise the options or hold them in case the stock went up in price. Luckily for me, they were never worth more than $389.67 (yes I remember the exact amount), and no I didn’t exercise them, because I was foolish, so that money was never mine.

Many people I worked with had the same decision to make but with MUCH larger valuations on their options, and they didn’t “pull the trigger” either. I do know a few folks who simply said, “Give me my money”, every time their options came up, and didn’t care about whether the stock might go up, they simply wanted their money, and those folks (in hindsight) are the ones who did the best in the options game.

Risks are high in options, and luckily it’s a game I won’t play any more.

Example 3: Buy or Lease a Car?

Many of my friends have leased cars, but I never thought for me it was a good deal. I have owned used cars most of my life (I did buy a GM product new, which luckily I had an extended warranty on) and I have typically driven my cars until they were dead (or 5 months after that), or until my mechanic told me I had to get rid of it (he did refuse to fix a Honda Accord I owned that was in very bad shape).

My view of a car is purely functional, it is not a part of my masculinity or of my prestige, so having a new car is nice, but not an important variable for me.

Leasing usually means you can afford “more” car than you can afford, however, after 3 years you own nothing (and if you have driven it too much, or worse dinged it once or twice, you are hit with extensive punitive fees). You can simply walk away from the lease, or you can buy your car at that point, however the money you paid in lease hasn’t gone towards the car really, you are simply paying the current value of the car.

Is there risk here? If you BUY a lemon (i.e. a car that is just overrun with defects and issues) you are going to have a problem getting rid of it and it will cost a lot to maintain, since you can walk away from it if you lease the car (typically the lease period and warranty period are about the same time frame).

I’ll continue to buy cars, unless I get a job where leasing might make sense (i.e. you can write off the value of the lease as a percentage of how much it is used for your job/business).

Tomorrow: Final examples and an epilogue

{ 4 comments }

Risks in Life (Part I)

Do you take into consideration all the risks that are part of your financial decisions? Do you look before you leap, or do you just roll the dice and let the fates take care of things for you? How do you deal with risks in life ?

Risk is  part of all decisions, and you can paralyze yourself worrying about risks, especially in personal finance, but with larger financial decisions it is imperative to think about what you are about to do, and what risks are part of the decision.

Let me run through a few personal experiences with major decisions and risk.

Example 1: Lock In or Float?

With folks buying their first home, the question always arises, should you lock in your interest rate, or should you go with a lower but floating interest rate? Back when I was looking at houses for the first time, I locked in at 11% thinking I was getting a great deal (given interest rates had been at 18% previously), so I locked in for 5 years. The decision was made because we could afford the payments at that rate and didn’t want any surprise increases in our budget.

The decision was wrong in hindsight because interest rates dropped quickly, but I don’t view that as a wrong decision, more a conservative decision.

I now live on a floating interest rate loan vehicle, because I can withstand a sudden sharp interest rate increase.

The risk here is, can I withstand catastrophic interest rate increases?

Tomorrow: More examples…

{ 1 comment }

%d bloggers like this: