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I (Adina J), a self-confessed personal finance snob, select a handful of excellent PF articles from the week gone by. The TimelessFinance Sunday Reader serves these pieces to Readers of refined tastes. And because we all need a bit of comedic relief at the end of a long week, I’ll label one Personal Finance Fail — a self-explanatory category. |
Article submissions will be accepted at your author’s TimelessFinance Gmail, adinajtf@gmail.com. Fellow bloggers: don’t all rush to send in your links. Recommendations are welcome, but the TF Sunday Reader is not a quid pro quo link circle. Don’t be disappointed when your article is omitted. I am writing this column for Readers like me — the ones who want dependably good content to peruse on a lazy Sunday afternoon.
I don’t want him to start getting ideas, but here’s another Sunday reader and another post from PK at Don’t Quit Your Day Job. This time, he asks you to consider what your weight says about your net worth. See, last year, I gained about 40 pounds, and my income dropped significantly. Alright, if you must know: I had a baby. (Babies – also bad for your net worth.) But all facetiousness aside, it’s an interesting correlation that invites even more interesting speculation on causation. Run with it, folks!
The Toronto Star turned on the housing market with a vengeance this week. Moneyville ran not one, not two, but three articles about the slow-motion train-wreck known as the Canadian residential real estate market. Susan Pigg — previously admonished by Joe for handling real estate with kid gloves, ignoring economics, and putting high-school graduate realtors on the same pedestal as academics — was the author of two of these articles. Congrats on the good work this week, Susan! Or, should I say, finally seeing the light … of the incoming train barrelling down the tunnel.
Erin at DIY Passion wrote an eloquent post on why she has an emergency fund… because sometimes “[the unprintable]” happens. One minor nitpick: if you are concerned about access to non-joint bank accounts (or TFSAs, etc.) in the event of catastrophic health crises, it’s easy enough to get a personal directive designating an agent (i.e. your spouse) who is to look after your financial affairs in the event that you become incapacitated. To be clear, you sign the personal directive now, but it doesn’t take effect unless and until you are deemed incapable (by one or more doctors) of looking after your own financial affairs. Much like a will, a personal directive should be on everyone’s financial checklist.
I missed this article last week, but reading about the plight of Millenials is timeless entertainment. Mochi & Macarons takes a balanced look at the question of whether the Millenials are screwed (probably), and how much of it is their own damn fault. In my opinion, the worst legacy of the Boomers to their kids has been an overblown sense of entitlement, premised in part on being shielded from all consequences of their actions. Boomers always cared too much about being liked by their precious little snowflakes. Oops, there goes my inner old grump again. (Editor Joe’s Note: remember, Adina, you’re a “nomad”.)
Dave at 6400 Personal Finance read PK’s post last week on why cutting math from school curricula is a terrible idea, and has added his own thoughts on the subject. Aside from his spot-on observations (as usual), this post taught me that Dave and I have at least one thing in common: we both hate physics. OMG, it’s like we’re twins. Well, as twin-like as a cannon cocker and a, um, non-artillery officer can be. Besties!
The Personal Finance Fail of the Week award goes to Lisa Aberle, over at Get Rich Slowly, for ruining a good topic by being indecisive. The post starts off strong, with a question about whether it’s better to be a generalist or a specialist, and ends with a sad little whimper when Lisa chickens out on her conclusion. Lisa, your gut instinct was right: it is better to be a specialist. (As long as you’re not a specialist in Women’s Studies.) Sometimes you can become a specialist thanks to nothing more than a (specialized) degree, but more often than not the key is to identify a niche that needs filling in whatever area you happen to be already working, and position yourself to be the right man (or woman) in the right spot and the right time. And then watch others jealously tell you how “lucky” you are.
And that wraps up another Sunday reader, folks!
Awesome Sunday Reader this week Adina!
I fell in to the internet rabbit hole after reading the 6400 Personal Finance article and ended up on a Moneyland article about how consumers prefer increase in quantity vs decrease in cost (http://moneyland.time.com/2012/07/03/consumers-prefer-to-get-more-rather-than-pay-less-because-theyre-bad-at-math/) and it’s so true: if people were better at math they would be so much better with their money. The same concept also applies to decreases in cost and quantity. For example: the gym I go to has a swim pass option that was $25 for 12 visits, and it is now $21 for 10 therefore I am spending an extra two cents per visit, which translates to about an extra $5 per year. Even though I am paying less at one time, I’m still paying more overall. Yes, I know, a bit retentive of me to obsess over this small change, but it’s a great small scale example of houdini-esque misdirection that people just ignore because they are too lazy to do the math. Next thing you know it will be 8 visits for $17 – what a great deal!
Anyway, I know you didn’t point directly to this article, but it really got me thinking, so thanks for the great recommendations you did make! If we all applied a bit of common sense, we would all be just a little bit richer.
I am glad you enjoyed the articles – the best part is losing yourself chasing down links
I can’t say I’m a math whiz by any means, but it’s the simplest of calculations (like yours) that confuse or escape people these days. Or maybe it’s just laziness, LOL!
On Emergency Funds – Adina, did you see Garth this weekend wrote that Emergency Funds are archaic, and LoCs are free and therefore should be used in their place?
Interesting, I’ve gotten into it with him before on whether sizeable house downpayments (I know Joe has a big one..wait that sounds wrong) should sit in a HISA for the safety or if they should be in bank/utility preferreds to get a decent return (Garth says preferreds, but he also is in the business of investing).
I’m starting to come around to his way of thinking with my own ever larger house fund. I wish the rates weren’t so anemic.
I have deep respect for Garth Turner. But you’re right: he is wrong on a couple points.
Sure, preferred shares have a regular “payment” but they’re still tax-preferred. OK, we get it. It’s not as secure as a bond, and you don’t have the appreciation potential of common stock — two things that he consistently fails to give fair coverage in his pretty trite ‘investing articles’. I say tax-advantaged dividend stocks, and the entire history of the stock market backs me up (capital gains on stocks are tax-advantaged, too, just not as much as dividends and I prefer not to gamble on appreciation or depreciation). I think index investing is the only other empirically-sound system.
And his advice to put money into REITs right now is garbage. Commercial real estate has taken a brutal dive in every recent real estate bubble — the US, Dubai, Australia, etc. — and yet he’s like “Oh pile into non-residential REITs!” Those dudes have a very leveraged business model that’s dependent on cheap credit and a growing economy; when demand shrivels, they die the death of a thousand needles, too.
Also, he drones on about liquidity. Well, guess what is a lot more liquid than preferred shares? CASH. Sure, I keep a lot in the bank, it’s the largest part of my “portfolio”. I’m only 25 and have a OK-paying job; my ability to earn more supersedes my ability to enjoy a 5% annual return, despite its tax-advantage, from his beloved preferreds. So long as I can SAVE a high % of that income; so that’s what I’ve focused on in this stage of my life: work hard, get better jobs, save 50%+ of my income.
Cateris paribus, I would prefer to own rather than rent. Of course, the equation is SO disgustingly skewed in our markets that I’d be an idiot to buy until prices come down a lot or wages go up a ton (and, given the debt bubble, condo crisis, etc., smart folks like us know exactly what’s going to happen) unless I was OK living in Hamilton or something. It’s funny to call somebody house horny and it’s a deserved title for the idiots piling into the markets, or the wannabe-nouveau-riche-losers incessantly badgering their partners to buy a house. But it’s a really broad brush to capture people who would love to own a house but who are smart enough to definitively stand at the sidelines and wait long enough. Also Garth owns a house, right? So it’s kind of hypocritical.
In my view, if you want to spend a certain amount of money in the next five years, a person should have said money in cash rather than held hostage by the whims of the markets. I suspect the market’s stupendous fall will be well enough along to buy in the next five years. Even after buying I want to REMAIN liquid. So I need to have more cash than just the downpayment.
I may re-write this as a blog post. lol
No, I didn’t see Garth’s article, but I disagree on the use of LoCs as emergency funds – simply because most people are not disciplined enough to use them properly. I don’t necessarily advocate keeping your entire EF in a savings account, especially if we’re talking about more than a few grand, but I think the whole point is to have short-term savings … somewhere (and separate from your RRSPs). If you don’t have the discipline for that, you likely won’t have the discipline to pay off a LoC in any reasonable time frame.
I’ve written about my views on EFs before, and I think it’s a concept that has more than a few flaws, at least as it’s commonly understood by most folks. Putting aside 2, 5 or even 10K is just a start, and an arbitrary one at that. Unless you analyze your risks, it may (but most likely won’t) be enough to really cover your butt if emergencies start piling on. Just save – as much as you can, all the time. You can call the pile o’ money whatever your want
I hadn’t heard of a personal directive before, and looked it up. In this province anyway, it’s only for non-financial matters. Just curious if there’s something simple that would work in a similar way, or if you would have to go a Power of Attorney, which seems a little more complicated.
My bad! Yes, indeed, the one I meant is Power of Attorney. The personal directive works with respect to health and other personal matters. Both are probably a good idea to have
Sorry about any confusion, and thanks for bringing it up!!
Oh, and to add: I don’t think a PoA is any more complicated to get, though much like both a will and a PD, you probably want a lawyer to be involved (even though it’s not strictly required).
Haha, having a baby will do it! I don’t want anyone to think I’m anti-baby; I’ll need to kiss a ton of babies when I run for President, right?
Yes, I believe it is a requirement
Thanks for the link
Glad to hear your side of it, however brief.