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Finding the Market Value of Financial Advice

By Teacher Man on April 23, 2013 in investing

Imagine (it’s easy if you try) a world where financial advice was priced by a competitive and efficient market in which everyone understood what they would get for what they paid. Now that would be a beautiful thing. One of our most controversial and commented-upon articles here at Y &T is our look at MER fees and the overall compensation model the investment industry encourages. Before I get onto my soapbox and talk about how Canada would look if I was made Czar of Financial Regulation for the day, I should preface my comments with the statement that I don’t think being an investment adviser makes you a bad person! Cue the usual *I’ve got several friends who are _________*. But seriously, I think a lot of investment advisors get into the industry because they want to help people in an area where there is a huge deficit of knowledge, and make a little money doing it. In my opinion, the main problems all revolve around the compensation models and the general structure of the financial industry. If you look through the comments of that the aforementioned article, you’ll see several investment advisors that are well-intentioned and bright individuals – this doesn’t mean using their services in the current context is a good idea however. As a side note, another of our popular articles here at Y & T revolves around real estate commissions. I find it humorous and interesting that real estate agents and investment advisers love to point out the flaws in each other’s compensation structure on a public forum. “Hey pot, have I introduced you to kettle?”

Why You Should Get Financial Advice From Somewhere

Before I get all negative and piss off the money caste that runs most peoples’ retirement savings accounts, let’s start with some of the reasons you should probably get some professional help with your financial life:

1) Statistically speaking, most people have no idea how to manage their own financial affairs, including credit, budgeting and an assortment of other personal finance basics.

2) For certain niche parts of personal finance such as writing wills, or making sure you’re at peak tax efficiency, it is often beneficial to enlist the help of a specialist. Continue Reading →

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Ego vs Basic Transport

By Teacher Man on March 30, 2013 in miscellaneous

I’ve noticed something interesting about many PF bloggers and car articles – they are often quick to point out advice that is entirely logical and data-supported when it comes to buying vehicles, but then allow their irrational mind to take over when it comes to actually making the purchase they will be using for the rest of their lives. I’m not talking about the people that make the conscious choice to purchase a luxury that they can afford, and that they have determined will give them a great amount of pleasure for their buck. As long as you’re consciously buying luxuries, it’s very difficult to assess if someone got their personal value’s worth or not.

No, the authors I’m referring to are the ones that claim they are only looking at “A-to-B transportation” and then get something else entirely. If you are talking about bare-bones transportation this should not include a large SUV full of bells and whistles like sunroofs. Unless you live in the most northern parts of Canada, basic transportation should probably be a small car that most people will derisively refer to as “commuter”. There is a solid argument to be made for buying 8-10 year old domestic cars, a Civic or a Corolla and just driving the crap out of them before replacing them (rinse and repeat). I’m sure someone out there much smarter than me has a formula for determining when the ideal point is to break ties with your car that involves the replacement parts, the likelihood of a drivetrain component breaking down, and what sort of mileage you’ve clocked vs making your next investment in a discarded commuter. I don’t have the faintest clue what rules to live by when trying to ascertain when an extremely old car becomes less financially sound than cutting your losses and buying a “new” sort of old car again, but I’d love to hear different theories on the matter.

buying good cars Now some of you out there that follow this blog might be yelling “Hypocrite!” at the top of your lungs and hurling overdue produce at your computer screen in protest (ok so it’s likely no one got that dramatic – I’ve just been reading too many Cracked.com articles lately) as you remember that I myself have purchase a new vehicle lately. In case you want to review my logical case for doing so you can check the article out here. The long and short of my speech in defense of buying the 2012 North American Car of the Year “before it was cool” is that it is pretty damn fuel efficient and I’m pretty damn inefficient at fixing older cars that often fall under the “basic transportation” banner. Now that being said, I intend to drive that sucker until fossil fuels have gone the way of the er… dinosaurs. Seriously though, I have hopes for investing in decent maintenance for that vehicle over the next 15-20 years and pushing it over the half million kilometer mark. In order to find these quality cars you can go to Autoblog.com Canada to get in depth reviews to select the right “long term vehicle” Continue Reading →

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Paying Back Credit Card Debt With an RRSP Loan

By Teacher Man on March 12, 2013 in money and relationships

Because I’ve never been in a position where an RRSP loan made a lot of sense I never considered all that many financial strategies that were associated with them. This led to a bit of a surprise last week when one my friends (we’ll call him “John” to keep it anonymous) called and asked for my opinion on a somewhat unique financial move he had read about and was thinking would work out well for him.

Before we get to John’s RRSP loan strategy, I’ll give you a bit of background on his situation. He readily admits that he wishes he had pay more attention to his finances a little earlier in life, but as a kid his parents didn’t have a lot of money and they absolutely never talked about how to manage any. Coming out of high school, because his parents’ income was quite low, he was able to receive large student loans – which he took advantage of like most 18-year olds out there. After four years of post-secondary John had developed some really bad spending habits. He worked hard in the summers and made a lot more than the average student did, but he also spent a ton of money.

He graduated with slightly higher-than-average student debt and a few thousand dollars’ worth of credit card debt. He didn’t expect this to be a problem since he had graduated from a unique program that allowed him to attain both a university degree and a college diploma in that four year span – and he naturally believed this would allow him to land a great job. The problem was that the field he had chosen – journalism – had some really terrible job prospects (and still does today). John knew he had to pay his dues and get some hard-fought experience within the industry, so he took every minimum wage job he could find in media and worked multiple serving jobs on the side to pay the bills. Of course because he still hadn’t learned anything about money, and had those negative spending habits to contend with, he continued to pile on credit card debt. This sort of spiral continued for a couple of years.

They All Lived Happily Ever-After

High Fees Thankfully, this story has a happy ending. John caught on to a great job with a provincial government (after several months of total unemployment) where he could put his media skills to use “from the other side of the fence”. He is now 29-years old and is making roughly 70K a year. A couple years ago when John landed his current job and felt like he finally had his head above water he began to talk to me about his financial situation and ask for help a little at a time. We talked about some budgeting basics and consolidating the staggering amount of credit card debt he had accumulated into a low-interest loan. Even after that step, he still owed over 20K on a LOC locked in at 11% (due to his bad credit rating this is the best loan he could secure) and a decent-sized student loan. Continue Reading →