Stagnant family incomes

Canadian family incomes are stuck. You probably know this already. Here are the disheartening facts.

Statistics Canada reported that over the 20 years from 1980 to 2000, median family income grew from about $51,698 to $55,016. (The median is the midpoint: half the families earned less and half earned more.)

Adjusting for inflation, the annual growth over two decades was only 0.31%. Over the last decade, the growth was 0.08%. That's not much. We're keeping pace with inflation, but that's about it.

The Future
We're at risk of falling behind financially. There isn't much that can be done about this problem. Demanding higher wages doesn't work when there's pressure to drive prices down due to retailers like Wal-Mart and lower cost producers like China.

If family income is stagnant, then how likely are we to save for retirement or other needs. Lottery tickets aren't the solution ;)

So what can you do? That's a really tough question. Higher income comes from

• higher education
• switching jobs or careers
• switching employers
• becoming an entrepreneur

None of these choices is easy. But neither is life. My bias is towards improving skills. You can't go wrong by getting better no matter what you do :)

Chemistry and Credentials

Anyone can call themselves a financial planner or advisor. Who can you trust?

Chemistry
Well. You want someone you like. Without chemistry, you're not going to build an open trusting relationship.

Surprisingly (or not), patients are more likely to sue a doctor they don't like for malpractice even if a doctor they do like is at fault. Malcolm Gladwell reports on these eye-opening findings in his book Blink! The Power of Thinking Without Thinking.

Credentials
There's a problem with salespeople in general: they have a gift for creating chemistry. Unfortunately, that doesn't mean they have the technical skills to really help you. That's where credentials help. Generally speaking, you'll want to deal with a

• CFP (Certified Financial Planner), or
• CLU (Chartered Life Underwriter)

Click on the links above to find out more. You can learn about other designations here. The list is long.

Quick, what's a CFDA? That's a Certified Divorce Financial Analyst. (I didn't know either.)

What About Experience?
You'll encounter potential advisors who have no relevant credentials but who claim to have years of experience. They argue that experience is more important than 'book learning'. Are they right?

Yes and no.

Experience is indeed important. We recently hired an electrician to install lighting in our kitchen. He had 30 years of experience. Surprisingly (or not), the work wasn't as straightforward as expected. But he knew what to do. He had the tools. He had the techniques. The results were remarkable.

He also had current accreditation.

That's the ideal: chemistry + credentials + continuing education.

What do you think?

What's in a Name?

This blog helps Canadians learn about financial risks and how to reduce them. Objectively.

The key financial risks are

• longevity: living too long
• mortality: dying too soon
• morbidity: getting sick
• disability: getting disabled

But there's one more: overpaying taxes (taxevity). This one is often overlooked. Life insurance is often a solution — often overlooked.

The name Riscario combines three elements

1. risk: we want less
2. care: we want more
3. scenarios: there are many possible futures

If you have questions, feel free to ask. I'm here to help.

(new) Image courtesy of Wikimedia Commons