Weight Management & Money Management

For many, managing money is like managing weight.

You get burned by a purchase or gain a few pounds, you feel lousy. You save $100 or lose a few pounds, you feel great.
But winning over the long haul requires sustainable, and proven strategies. And the strategies to succeed in both categories are very similar.

Allow me to share a few:

Little things matter, and they do add up.

Having a system to track daily progress will help close behavioural gaps.

Setting long term goals is important.

Writing those goals down helps people achieve them.

Limit your snacking between meals, and don’t go shopping when you come into ‘sudden money’.

Educating oneself is always a smart thing to do.

As is learning from those who are successful themselves.

Having an accountability partner is important.

And finally, the occasional splurge is not the end of the world.

We all want to live an enjoyable and meaningful life. However, only living for today can really hurt your tomorrow. Staying fit financially and physically does take some discipline and will power, but no one regrets the trade-offs made when, later in life, the benefits come back tenfold.

So if you struggle with money or weight or both, reflect on these winning tactics – you may be closer to success than you think.

Don’t Do What Our Governments Do

When you hear about our federal or provincial government deficits, it’s always interesting to take note of the language used.

It’s rare that you hear that our deficit is actually in decline. We usually hear a politician bragging that the deficit is growing at a slower rate, or that a government is trying to grow our economy at a faster rate than the debt is increasing.

I guess when the debt is approaching $650 Billion, it’s hard to even just pay the interest. Especially when the interest is $53 Million a day. So to speak of ‘success’ means to define it in creative ways, and this is where the language gets in the way of common sense for regular Canadians.

Growing debt at a slower rate should not be considered a success strategy for personal households.

If someone told you that their income was rising, but their debt was rising at a similar pace, would that be considered success? DO NOT do what our governments do.

Rather, spend less than you make to eliminate debt altogether. We don’t have the benefit of being able to print money or raise taxes like our government can. So don’t take financial lessons from our politicians. Plain and simple – live below your means. Your future self will thank you.

Charity at the Checkout

Is it just me? Is it just me who is annoyed every time I’m forced to say ‘Yes’ or ‘No’ when asked if I want to contribute to some obscure charity at the check-out counter?

In my book, charitable giving is a very personal thing. My wife and I try to keep our giving to ourselves. But when I am asked straight-out if I want to contribute to a charity I know nothing about – on the spot – I cringe.

First of all, I feel that corporate generosity should be just that – corporate generosity. Why are customers being asked to support a charity chosen by the retailer’s head office? When the money is passed on it will look like the retailer is being generous and put them in a positive light. All they did was ask their customers for it!

I feel most sorry for the cashiers who must ask every customer if they would like to contribute. Coming between them and the transaction they need to ring up, are the awkward question and the response. How do they feel when people say ‘No’? Is there pressure felt among those who can’t afford to give any more than they are giving elsewhere? And what about those who choose to give generously to other charities, yet feel selfish by having to say ‘No’?

Call it a pet peeve. I choose to say ‘No’ every time, because I want to make sure my giving strategy is intentional, and I try to give generously to those chosen by me. I don’t like to be ‘nickeled and dimed’ by spontaneous choices forced on me by giant retailers.

And you can do the same if you choose it. Another strategy might be to allocate a certain dollar amount each year to unspecified charities that might just work for these cashier moments.

Most important – be thoughtful about your giving. It might be the most important financial decision you make each year as you improve your relationship with money by recognizing what your money can do for others.

Is Bank Bashing at an All-time Peak?

When we look at the popular culture of late, you’d think that the big banks were robbing the poor to feed the rich.

Just look at the premises of recent American movies ‘The Big Short’ and ‘Going In Style’ – where big financial institutions are being blamed for the fall of the little guy. And we have the recent headlines exposing Canadian banks of using aggressive sales tactics to hit financial product sales targets.

Let’s be clear. Banks are in the business of making a profit – and they’re good at it. They are not charitable organizations whose only interest is doing right by their customers. They are as likely as any other business to mislead and mistreat. What’s surprising is the higher standard Canadians seem to have regarding their banks’ business practices.

There’s nothing evil about McDonald’s offering to up-size our meal order, but when a bank is exposed for doing something similar, shock and awe are the resounding reactions.

Banks sell financial products – that’s how they make most of their money. It might be a chequing account at $14.99/month; it might be a GIC offering 2%; it might be a line of credit at 4.9% or a credit card at 19.9%; it might be a mortgage at 2.7%. These are all financial products – all with profitability associated with them. And the more they sell, the more profitable the banks are. And it adds up to more than $35 billion a year among them, which means they’re good at it.

So yes, banks sell financial products, and they sometimes push the ticket in terms of their tactics, and how they motivate staff to achieve their goals. They may be aggressively selling – and the issue isn’t that they are selling products – it’s that they are taking advantage of customers’ lack of financial literacy in doing so.

Many Canadians believe that banks will always do what is in the clients’ best interest – that they should take their bank’s advice in making their financial decisions. While there may be some fiduciary responsibility in how banks assist clients, I cannot count the number of times I have shaken my head at a bank’s recommendations to their unknowing clients.

My simple advice – Talk with your feet. Don’t berate a teller or any bank employee for doing their job. If you’re not happy with your bank’s products, fees or practices, don’t be complacent and give them the benefit of the doubt by letting them keep your business. Educate yourself, consider the alternatives, and reward the most innovative and best (not the biggest) financial institutions with your business.


Understanding CPP and OAS

Knowing when to retire is a complicated calculation. And it’s never just about the numbers. You need to be ready to use the time effectively, replacing the time you spent at work with pursuits that fulfill you – whether it’s hobbies, helping out family, travel, community clubs, sporting pursuits or friendships.

When it comes to the numbers, you should know what to anticipate from your Canada Pension Plan and Old Age Security.

The maximum you can receive from these sources are currently $1,114/month (for CPP) and $578/month (for OAS) and require that you contributed the maximum to your CPP for at least 39 years, and lived in Canada for at least 40 years after turning 18, for maximum OAS. You should contact Service Canada to get your personalized amounts at different ages.

Something else to consider – you can start taking CPP as early as 60, and as late as 70. Penalties or bonuses apply if you start before or after 65. You can’t take OAS early, but you can take it late… Again bonuses apply if you take it after 65, but the latest you can start it is age 70.

CPP and OAS just isn’t enough for most people, and that’s why we save during our working life. But what does $100,000, $500,000 or $1 million get you in retirement? One simple calculation for a 65-year old is “$500/month for every $100,000 saved”. It’s a rough approximation, but it might help you figure out what income you’ll be capable of generating.

What this means is that if you have $500,000 saved at age 65, you may be able to generate $2,500 in monthly income indefinitely from the nest egg. Add it to your anticipated CPP and OAS and you will have an idea of whether it’s enough for you. And remember all of these sources of income will be taxable as regular income throughout retirement.

And if it’s not enough, save more, work longer or spend less. The choice – as always – is yours to make.

How to Control your Spending

There comes a point in just about everyone’s life when you decide you want to limit your spending. Maybe it’s your overall spending to get rid of some debt or as you prepare for a fixed-income retirement, or perhaps you just want to reduce your spending in a particular ‘leaky’ category. Continue reading…