Other people’s money

(Part 2, the sequel to Netflix and chill – and spend)

When last we saw our plucky hero, a colleague was commenting “You’re a single woman, you don’t have kids, you have lots of money – why don’t you have Netflix? It’s only $10 a month.”

Thus enough content for two blog posts was born. I pulled out my trusty soap box and got started.

soap box

From the outside looking in you have no clue about a person’s financial well-being. In fact, being single is more expensive than being married in so many ways there’s a term for it – we pay the single supplement. Plus there’s the lack of a safety net. (I’m paying 80% of the expenses I had when I was married but with 40% of the income.)

You cannot – CANNOT – tell from appearances what anyone’s financial situation is. You think everyone is doing better than you? Show me the proof, the cold hard numbers. Debt, stress, overspending, living beyond your means – we know they’re big problems in North America. The man with the flashy car and the huge house? The woman who drives a 10-year-old car and patches her clothes? You. Don’t. Know.

When the economy collapsed in 2008/2009, it revealed just how many of us were building our lifestyles on credit and debt. A decade later, the level of consumer debt for Canadians is climbing – an average of $22,837 per person, not including mortgages. That makes us vulnerable.

As The Millionaire Next Door discovered, it’s not the outward displays of wealth that mean you’re rich. People with higher incomes tend to spend more on status symbols, feeling the need to keep up appearances. There’s a difference between income and net worth. Unless you know the intimate details of someone’s financials, you can’t tell what’s really going on behind closed doors.

So stop judging. Stop comparing. Do the best you can, make the best choices, for you.

I’ve heard a lot of “oh it must be nice” and “you’re so lucky” from people who see the trips, the condo, the concerts, but apparently they don’t see the extra time I put into working, the savings I work hard to accumulate or the energy I put into learning so I can make better financial decisions. Plus there’s the whole greener-on-the-other-side thing. Why do I have to justify myself just to make you feel better about your own choices?

Answer is, I don’t.

Jughead and Betty would understand. They’re waiting for me in season two, which I’ll eventually watch – with or without Netflix.

Netflix and chill — and spend

(Part 1 of Other People’s Money post)

I was chatting with a colleague about how I recently watched the first season of Riverdale (Jughead + Betty forever!), but because I don’t have Netflix I had to wait until it came to iTunes. He said, “You’re a single woman, you don’t have kids, you have lots of money – why don’t you have Netflix? It’s only $10 a month.”

Well, that gave me enough for two blog posts, so welcome to the first one. Let’s get started with Netflix itself and “it’s only $10 a month.”

piggy-bank-3117655_1920

Do you really think I can afford the fees for an image of Jughead and Betty, or Netflix? Instead, please enjoy this cool piggy bank I found free on Pixabay.

That’s $120 a year, not including tax. But I’d have to increase my internet bandwidth and at minimum, that’s another $10 a month, or $120 plus tax. That’s spending $240+ a year on a season of Riverdale.

Yes, there’s a lot of other content on it, but that’s what I feel like watching right now. Even paying as I go to download occasionally from iTunes, I do not spend $240 a year on TV shows or movies. (I track my spending. I work for myself, of course I do.)

When you’re considering spending, what else is involved and what are the whole costs? It’s like home renovations. First you fix the kitchen, but then by comparison the rest of the house seems off, so you keep going and spending. (Canadians spend an awful lot on home renos! ) Or you find the perfect cute top, but it doesn’t go with anything in your wardrobe, so now you need new jeans or a new skirt, and of course then you need new shoes. Hey, I get it, the whole spending scope creep.

One that catches me is the hidden costs to travel. Besides the airfare and accommodations, there’s the vaccinations if needed, the incidentals like sunscreen or bug spray you need to stock up on when they’re out of season and thus more expensive, the Uber fare to and from the airport and so on.

Ever play the game I’d Rather? You may have heard of it in other contexts. Kate Moss once said, “Nothing tastes as good as skinny feels.” (Obviously she’s never had chocolate cake. Or tacos. Or… but I digress.) She plays the I’d Rather game – she’d rather be skinny than indulge on food.

Personally, I’d rather put that $240 towards a trip, my concert fund, or some activity that doesn’t involve me sitting at home with my butt on the couch staring at a screen alone. (Even going to the movies, where I sit on my butt and stare at a screen is better, because I like the social aspect.)

Netflix is obviously just not a priority for me right now. Yes I’ll probably get it eventually, but until then I have other things to do with my money. It’s all about your personal choices.

Jughead and Betty will just have to hold on until then.

What I’m learning

It’s been a while, I know. I took a break for the holidays, then I went on holiday. Now I’m here with no excuses to put off the second part of the Canadian Securities Course. It occurs to me though that an outline of the topics covered might be of interest, if only so you have an idea of what I’m learning about.

Volume 1 and the first exam covered:

The Capital Market
The Canadian Securities Industry
The Canadian Regulatory Environment
Economic Principles
Economic Policy
Fixed-Income Securities: Features and Types
Fixed-Income Securities: Pricing and Trading
Equity Securities: Common and Preferred Shares
Equity Securities: Equity Transactions
Derivatives
Financing and Listing Securities
Corporations and Their Financial Statements

Not a whole lot of everyday practical tips here, or anything I’d really consider personal finance. Volume 2 covers:

Fundamental and Technical Analysis
Company Analysis
Introduction to the Portfolio Approach
The Portfolio Management Process
Fundamentals of Managed and Structured Products
Mutual Funds: Structure and Regulations
Mutual Funds: Types and Features
Segregated Funds and Other Insurance Products
Hedge Funds
Exchange-Listed Managed Products
Fee-Based Accounts
Structured Products
Canadian Taxation
Working with the Retail Client
Working with the Institutional Client

Hedge funds – that sounds sexy. There are exchange-traded funds (ETFs) in my future too. I’m up to Chapter 15 and I’ve actually found some practical tips! But that’s a story for another post – I’m off for a study break to watch another episode of the TV show Bitten (based on a really good book series by Canadian author Kelley Armstrong).

Brave enough to fail

I can’t do math (specifically algebra). Have I told you that lately? As sure as I am that I have blue eyes, I know I can’t do math. So I was understandably stressed while preparing to take the first exam for the Canadian Securities Course. Even one of the easier formulas like this:

blog-ytm

Made my brain look like that:

brain-on-math

But I can do words and study and memory. I decided to tackle the formulas a different way. Instead of the mathematical shorthand seen above, I broke it down into words I could study and memorize:

Yield to maturity equals interest income plus or minus price change, divided by, face value plus price divided by two.

Once I wrote it out enough times I could add a little shorthand of my own:

YTM = interest income +/- price change, divided by, FV + price divided by 2.

I was getting somewhere.

But still – if there were too many math questions I was in for a hard time. Seven months and it came down to this. I needed at least 60% to pass and while many people were cheering me on, I never take anything for granted and my concern was real (there is nothing false about my modesty). I was just going to have to suck it up and ride the fall. I went into the exam prepared to be brave enough to fail.

The time came, the proctor handed me the exam booklet and I took a look. There, of the 100 questions, only 10 even had numbers in them. I only used one formula I had memorized and there was one calculation I could do IN MY HEAD.

Results were swift – three days later I emitted an “Eep!” when I checked online and found I had passed. I didn’t ace it but I didn’t squeak by either.  I did something that scared me, did it successfully and lived to tell the tale. If there’s hope for me, there’s hope for just about anyone.

Halfway there.

Politics, markets & other animal spirits

I haven’t been on here in a while because I just don’t know what to say. I haven’t known what to say since the American election on Nov. 8.** As soon as the winner was officially declared people started asking me questions about what to do with their money. But the market response was unexpected, to say the least. (Great article here about experts and economic uncertainty.)

A few months ago when Brexit hit, stocks tumbled a bit and I went shopping. I was expecting the same to happen after Nov. 8, but instead, aside from an initial stumble by the overseas markets, they started climbing and stayed strong for days. (The Dow Jones set an all-time high on Nov. 9.)

It seems people are hoping that Trump will make good on all his economic promises, and that we’re at the start of a growth period. I’m also guessing that after such a long, drawn out affair, everyone was happy a decision was finally made and we could get on with it.

Yes, I’m guessing. As is everyone who tries to anticipate the markets, don’t let them fool ya. In a recent seminar, Larry Berman revealed that a 10-year analysis of his predictions showed he was right about 62% of the time. (Love his honesty.)

There’s more to come, with other elections imminent across Europe. It seems nationalism and protectionism are in fashion, again.  (Can I just say that Coco Chanel would be my hero if she hadn’t shacked up with a Nazi? Sigh.) Here in Canada there’s the old joke that every time the US sneezes we catch a cold, so we’re right to pay attention to our neighbour’s business.

It’s going to be an interesting four years.

** I don’t know what to say about money, I mean. I have a lot to say about the election, and here’s a fun clip from Saturday Night Live.

 

In the news

Here’s a quick roundup of a few interesting things.

US Banks Finally Getting Sued for the Great Recession Crash

Remember back in 2008/2009 when the US banks lent people money to buy homes they couldn’t afford, then raised interest rates and foreclosed? Miami nearly went bankrupt — if people lose their homes they’re not paying property taxes. But no one went to jail because for years before the crisis the banks and other financial institutions changed the rules in their favour (deregulation). Now Miami is trying to sue the banks. This will be interesting. Read all about it in the Washington Post

Canadian Banks Overcharging Customers

Meanwhile here in Canada the big banks are turning themselves in, admitting they overcharge customers and paying them back. Here’s the key point in this article – it is just too hard for average people to figure out what’s going on with their money. Most of our financial information comes from people trying to sell us something, which makes unbiased decisions much more difficult. Read all about it on CBC

Hillary & Donald: It’s Almost Over

Finally, is anyone else out there waiting to see if election anxiety affects the markets? When people get nervous they start pulling their money out by selling off their stocks, which sends prices lower. That’s what I love about the whole financial and economic scene – it’s not about numbers, it’s about people, and whether they have hope or fear for the future. I won’t direct you to any article about the American election though; I think we’ve all had enough over the past 18 months.