23 LESSONS FROM MALL SANTAS

Mall Santas are a traditional part of December. Do you remember the magic from your childhood? We can learn many lessons from them.

1. Sacrifice: Parents (grandparents) will stand in line for ages for their kids (grandkids).
2. Free: People will stand in line for a small, free candy cane.
3. Disguise: Mall Santas wear costumes which cover up who they really are.
4. Fright: Mall Santas scare some small children (clowns do too).
5. Disbelief: How can Santa be in different malls and look slightly different in them?
6. Belief: Children want to believe that Santa hears their wishes and will bring them a pony.
7. Priorities: Shouldn’t Santa be at the North Pole getting ready for the big night?
8. Impressionable: Children want to believe in Santa even when they’re skeptical.
9. Cutbacks: The candy canes have become smaller over the years. Dentists may approve but children do not.
10. Vanish: If the requested gifts don’t arrive, the Mall Santa is gone.
11. Scarcity: Mall Santas have limited working hours and working days.
12. Gouging: Photos with Mall Santas used to be free if you used your own camera.
13. Job Security: Mall Santas are easy to replace.
14. Appearance: Mall Santas show that a rolly polly figure can be an asset.
15. Monotony: There’s lots of repetition in listing to gift requests and giving out candy canes.
16. Impersonal: Visitors don’t get much time with Santa. Next.
17. Off-season: Mall Santas have a very short work season (unlike the team at the North Pole).
18. One-sided: Who asks what the Mall Santa wants?
19. Supervision: Mall Santas are trusted with gift wishes but not enough to be left alone with the children.
20. Breaks: Mall Santas can’t take a coffee break whenever they want.
21. Noncommittal: Mall Santas don’t guarantee that the requested gifts will be delivered (but the real Santa doesn’t either).
22. Naivety: Mall Santas tend to satisfy young kids … the older ones want a candy cane or mischief.
23. Consumerism: Mall Santas are better with the gifts that money can buy (and which the mall sells).

This is the final post of 2013.

Best wishes to you and yours during the holidays.
May 2014 be the best year you've seen!

Links

• How to get a job as a Mall Santa (Slate, 2006)
• 25 things your Mall Santa won’t tell you (Reader’s Digest)
• What Santa earns (PayScale, Dec 2006)
• The most special time of year
• 2012 final post: Where there’s willpower there’s a way
• 2011 final post: The most special time of year
• 2010 final post: Got 59 seconds for your gift list?
• 2009 final post: The gift of networking
• 2008 final post: Christmas in the emergency ward
• 2007 final post: Give your greatest gift
• image of Simpsons via Smashing Tops (Top 15 movie quotes about Christmas)
• image of Santa and dog courtesy of Mdk572

Podcast 251?

The podcasts have ended. You’ll find 250 episodes at podcast.riscario.com.

PS Look for more video in 2014 …

ARE YOUR FINANCES SNOWED IN?

You can't hear snow fall. You might not see the flurries accumulate if you’re asleep or away from a window. Where did all the snow come from? More important, how do you clear the deluge?

The tax-funded snow plows clear the streets, though perhaps not as quickly as you’d like. You’re left to tackle your own driveway and walkway with your shovel or snow blower. You’re left to tackle your finances too.

Not Again

Winter arrives every year. We know we need to prepare but continue getting surprised by

• the first light snow fall: where are the scarf, boots and ice scraper?
  
• the first snow storm: where’s the shovel and ice melter?
  
• the first cold spell: where’s the extra warm winter gear?

Have you put a shovel in your car? Do you have enough ice melter? Is there fuel for the snow blower and does it start? Did you get your furnace inspected?

We get surprised by our finances too. Do you know where everything is when you need it? Are we on track with our goals? Do we require an inspection or maintenance? It’s easier to think we’re prepared than to prepare.

Forecasts

Meteorologists want to give accurate forecasts but we can’t rely on them even if your favorite station has a weather guarantee. Storms get missed  or become more severe than predicted. Other storms are milder, if they even occur.

Financial forecasts are inaccurate but advisors often find plausible reasons for you to entrust more of your money with them. If investment returns are high, we’re encouraged to invest more to take advantage. If the returns are poor, we’re also encouraged to invest more to offset the poor performance and be ready for future growth.

Example

We were expecting 12 to 20 cm of snow overnight. Since I needed to register for a yoga class at 6:30 AM (not a typo), I got fuel for the snow blower. Nothing happened. Now the forecasters predict 6-12 cm in total. They’re probably right. I’ve already shoveled once. Maybe the snow blower will get a workout after all.

Your Finances

You can hire a snow plow service for the season but you can’t be sure if they’ll be there when you need them. Their profits go down when they provide more service (i.e., when snow falls). Even with the best of intentions, they can’t plow all driveways at the same time or the right time.

Financial advice is similar. Unless advisors charge fees for their advice, they make more when they provide less service. They make more when you invest more and as your investments grow if they charge based on the assets they invest for you. Their expenses pile up even if your assets melt.

Links

• 20 things to do on a Snow Day (Centsible Life)
  
• Reminders from disasters like Superstorm Sandy
  
• Is your life insurance like a shovel or snow blower?
  
• 9/13: prepare your disaster recovery plan now
  
• image courtesy of Igor Zhorov

Podcast 250

direct download | Internet Archive page | iTunes

PS When I wanted to use my snow brush, I found it wasn’t in the vehicle.

THE WEALTHY BARBER RETURNS WITH MORE WISDOM

My parents gave me a copy of The Wealthy Barber around the time I started working. I couldn’t read it. The story got in the way. Besides, there’s wisdom everywhere if we’re willing to listen. Why place more credence on what a celebrity says? We can learn from a real barber and other people we know and meet.

David Chilton wrote The Wealthy Barber Returns, which dispenses with the barber. I bought the book shortly after its release and deferred reading it until now. I wish I hadn’t delayed. The new book is well worth reading.

David has a deep understanding of the financial world. More important, he understands the irrational ways we behave. Most important, he’s funny. Very funny. What a powerful and useful combination.

This post features selected experts from the book.

Financial Marketing

One of the biggest reasons that it’s so difficult to save is that … almost everyone wants you to spend as much as possible … our instant-gratification-oriented minds aren’t putting up much resistance … There are really only three Canadians who want you to set aside some money — your future you, your financial advisor and me.

A new study from the US government’s Consumer Financial Protection Bureau (CFPB) finds that 25 times more is spent on financial marketing than  financial education. In the US, that’s about $17 billion on marketing versus $0.7 billion on education. If the marketing didn’t work, would the companies spend the money?

Unfortunately, the financial sector is the least trusted in the world according this year’s Edelman Trust Barometer. What’s good for the industry is bad for us. Education and changes in behaviour are the antidotes.

Peer Pressure

It’s hard to overstate the impact our “reference groups” have on our spending decisions. We consciously and unconsciously take in their consumption cues. Their lifestyles intoxicate us and when partnered with the great enabler — easy credit — lead us to act richer than we are, “act” obviously being the key word.

The antidote is to “expand your reference group as much as possible … not only to include the less fortunate throughout the world, but also to encompass those who have gone before us … Many Canadians are completely out of touch with how much our lives have improved over time.”

David says that "when people ask you to do something, you’ll have to reply, ‘I can’t afford it’ … We can’t possibly d o and buy everything we want. There’s no shame in that. Accept it.”

He’s right but can you resist? I prefer the terminology “I choose not to” because there are things I can afford but which aren’t good value. I don’t often say this out loud but think it to myself.

As a vegetarian, eating out has a lousy ROI when the bill is split evenly. Buffets are the same way. My next one is $26 per person plus beverages. There’s no way to get my money’s worth (without gaining weight).

Conflicts of Interest

"I phoned the loan officer. I asked him, point-blank, why he gave a huge line of credit to a customer who hadn’t requested it and who had admitted that she has a significant spending issue. His answer was succinct, honest and illuminating.

“It’s my job,” he said. Banks are a business and, like all businesses, they sell something … it’s no longer only about providing credit to those who need it, now it’s also about convincing people they should want it. 

That young loan officer had a true conflict of interest … what was best for the client and what was best for his employer weren’t aligned. He went with the paycheque and it’s hard to blame him.

Too few realize that they receive financial advice which doesn’t put their interests first. More financial education would help.

Investing

To outperform the market’s return, you have to outperform the majority of others who are also trying to outperform the market’s return … When you hand over your hard-earned savings to a professional money manager you deem smarter than yourself, be careful … it’s irrelevant if he or she is smarter than you. Instead, what matters is whether he or she is smarter than most of the other people who are smarter than you … we can’t all outperform. We need a bunch of underperformers to balance the scale.

We can’t beat (or cheat) the math of markets but “it’s estimated that Canadians do, in fact, try to beat the market with well over 80 percent of their stock-market money.”

What Are You Paying Your Advisor?

The financial-advice business must be the only business in the world where most customers aren’t told what they’ve received or how much they’ve paid for it. Performance and costs matter. But to evaluate them, you need to know them.

Do you ask what you’re paying?

There’s another problem I see almost as much as bad advice — no advice. I’m very frustrated by the number of people I meet who are paying advisors handsomely through their mutual-funds’ MERs, yet almost never hear from them … … we have a wacky number of financial products in Canada that are too expensive by any common-sense measure. For example, I see some mutual funds with MERs in the area of three percent. Anybody who thinks that’s a fair deal for clients has a fundamental misunderstanding of arithmetic, markets’ returns or both

Do you get value for what you’re paying? If not, consider other options. If you need help understanding, consider hiring an independent fee-only advisor.

David leaves us with hope.

Over the next few years, the costs of financial products and financial advice are going to go down significantly. Competition is heating up and consumers are becoming better educated — a powerful combination.

You don’t have to wait. Get better educated today.

Links

• David Chilton: wealthybarber.com and @wealthy_barber
• If you have/had/want money, read Pound Foolish
• CPFB study underscores need for financial literacy (Accounting Web, Dec 2, 2013)
• Do your advisors help with your financial literacy?
• Will you have financial freedom at 35, 55 or 75?
• How would Mike Holmes fix the financial sector?
• Do you have a financial dream or a financial nightmare?
• How to tell if your advisor is independent
• Do advisors put their interests first?
• What does your advisor drive?
• 12 timeless tips for wise shopping
• Why we get bad advice
• image courtesy of Colin Jones

Podcast 249

[instead of using Audacity, created with Cyberlink AudioDirect 4 for the first time; using M4a instead of MP3]

direct download | Internet Archive page | iTunes

PS If you already have The Wealthy Barber Returns, maybe it’s time to re-read it?

12 TIMELESS TIPS FOR WISE SHOPPING

‘Tis the season to shop. Retailers always find reasons for us to spend our money. Since when did Santa mean shopping? He symbolizes giving. Rather than give something we bought, we can give something more precious: ourselves.

If you must shop, here are 12 timeless tips. For examples, we’ll use gadgets rather than items like clothing.

1. Know What You Want

If you’re prone to saying “I’ll know it when I see it”, you risk spending lots of time shopping. You also risk overspending. Think about what you want first. You can still browse, but now you have a Plan A. If you like wandering around, you could go for a walk.

2. Watch Price Trends

If you don’t have a sense for the normal prices, you can’t tell if you’re really getting a deal. Sales may be based on prices that few would pay.

Items may be cheaper when major sales aren’t taking place. Over the years, I’ve noticed (and this is unscientific) that highend computers tend to be cheaper in late November and early December than just after Christmas. There are sales every week, but the deals vary.

You might notice patterns too. If you’re patient, you can win.

3. EXAMINE The Offers

The screenshot shows a Black Friday deal from Dell. On the surface, the deal looks good: a $90 hard drive for $50. I was tempted but looked closer. Does Dell even make hard drives? My Dell computer has disk drives from WD and Samsung. Since no one else sells Dell hard drives, they can set any price they want. The $90 is a “market price”, which is a fictitious. Even so, the offer looks good. However, the product page doesn’t show the warranty.

Instead, you’re told “For copy of Ltd Hardware Warranty, write to Dell USA LP, Attn: Warranties, One Dell Way, Round Rock, TX 78682 or see www.dell.com/warranty.”

If you click through, you’re told something 100% useless: “Dell-branded hardware products purchased in the U.S. or Canada may come with a 90-day, 1-year, 2-year, 3-year, 4-year or 5-year, or other limited hardware warranty.”

In contrast, Costco sells a WD My Passport Ultra hard drive with a three year warranty and carrying case for $90 (1 TB) or $129 (2 TB). Maybe that’s a better deal for peace of mind?

4. BEWARE OF Substitutes

The Simpsons were once looking for a new TV and kept driving further away to get the best deals. They saw brands like Sorny, Panaphonics and Magnetbox. Some buyers might get fooled by these seemingly familiar brands.

Comparing features and specifications isn’t enough either. What matches or wins on paper may not be a good choice. For instance, the tablet may have short battery life or an unresponsive touch screen.

5. Accept Substitutes

I’m looking for a webcam. My preference is Logitech but there are great choices from companies like Microsoft too. (In this case, I got the top-rated Logitech c920 at Staples today. Lower prices seem unlikely and I’ve lightened Santa’s load.)

Flexibility makes shopping easier. There will likely be something on sale when you’re ready to buy.

6. Watch Sales Cycles

Some items go on sale at specific times of year. For instance, anti-virus software is always on sale on Boxing Day. I don’t know why. A three-user Kaspersky Internet Security suite drops from $80 to $20 at Best Buy. Since the licence lasts a year, this is an annual must-buy item.

7. Wait After Buying

You might buy on impulse. That’s fine. We’re human. You don’t have to open the product immediately.

Wait a day or more. Do you still feel compelled to keep it? If not, return your purchase. This happens to us at Costco where the products keep changing and the return policies are fair.

8. Know The Return Policy

Shop where you can return purchases easily, without paying for shipping/restocking. I’m reluctant to buy online unless the retailer has physical stores for returns. Sorry Amazon. Especially sorry to smaller retailers (even with physical stores).

Suppose you bought the hard drive from Dell and decided you didn’t like it. You can return it without cost or penalty.

9. GET Quality

If you’re comfortable buying fewer items, you’ll have less clutter. The environment will thank you too. Quality costs more but what you get is often more enjoyable. I’m still using my iPad 1, which is still working fine.

10. Latest or Greatest?

Is last year’s model that bad? Everything becomes old. You might save more by getting last year’s proven model. With gadgets, it’s tempting to get the latest because newer is often better. That’s not true for products like toaster ovens where the changes may be cosmetic.

Another option is to get a refurbished model with a full manufacturer’s warranty.

11. Reduce Choice

Shopping consumes mental energy. Less choice can be better. For instance, Costco has a limited selection, which is fine. As an example, you can get hard drives in multiple colours but Costco only stocks black. Does that really matter?

12. Ignore THe Hype

We live in the world of buyer beware. We also live in a world where we don’t have to buy. Our basic needs are limited.

As George Carlin said, “If you didn’t have so much stuff, you wouldn’t need a house. You could just walk around all the time … your house is a place to keep your stuff while you go out and get … more stuff! Sometimes you gotta move, gotta get a bigger house. Why? No room for your stuff anymore.”

Links

• What lasting gift can you offer everyone you meet?
• Buying a video camera: can we trust the experts?
• How to leverage your philanthropic gifts
• Gift ideas for your business (2007)
• Two ways to show gratitude

Podcast 248

direct download | Internet Archive page | iTunes

PS Just because you have money to spend doesn’t mean you have to spend the money.

WILL YOU HAVE FINANCIAL FREEDOM AT 35, 55 OR 75?

Let’s dream. Imagine retiring early with nary a financial worry. What's the magic age? We’ll explore 35, 55 and 75.

Freedom 35

Julian: I’ve got a plan, all right. It’s called a Freedom 35.

Bubbles: What’s a Freedom 35?

Ricky: You’re not going to believe. This is perfect. Julian’s got these guards on the inside that are going to smuggle in a bunch of dope that we grow, sell it for big money in there and then we can retire and never have to break the law again.

This early retirement plan is from the Trailer Park Boys (Season 2, Episode 1). Not recommended.

Very few can afford to retire at 35. Suppose you could. What would you do with the rest of your life even if you live outside a trailer park?

Freedom 55

I never quite understood the Freedom 55 ad campaign by London Life in the 1980s. The idea seems to be buying their products (perhaps whole life insurance) would magically to build up enough savings to let you retire at age 55.

To paraphrase Bruce Springsteen, a dream that doesn’t come true is a lie … or something worse. Was early retirement possible for typical buyers?

Who really retired? Probably the advisors --- on money they made from selling the products.

I grew up in London, Ontario where London Life was headquartered. At Western University, I was taught by actuaries from there and received The London Life Continuing Actuarial Scholarship.

I wanted to believe the dream. When you're in your 20s and 30s, age 55 seems so far away. Being able to retire at 55 had appeal and might have been achievable with a good job and a defined benefit pension plan.

Now people in their 50s plan to keep working after they retire in their 60s, often to supplement their income (Huffington Post, Aug 2012).

Freedom 75

Retirement ages look like they’re getting closer to 75 than 55. We're living longer than ever. That means our money must last longer. Even if we're saving enough based on rosy projections, the investment returns may not materialize. Well-paying jobs aren’t secure. Also, we face unpredictable expenses such as health costs. We don't know what the government can afford to provide for us or for how long.

Consider the case of Tom Palone, who was a VP at Oral-B earning over $100,000 a year. Now 77, he works two physically-demanding part-time jobs paying $10/hour or less. He says, “I earn in a week what I used to earn in an hour” (Daily Mail, Sep 2013).

Where does that leave us? We might have children but there's no assurance they'll care for us physically or financially even if they can. Maybe you can keep working part-time if you’re healthy. Besides earning money, you'll have things to do. Decades of retirement can feel like a job too.

Your Situation

You can get financial projections that show how much you need to save to achieve a particular level of savings by a target age. Unfortunately, higher risk accompanies higher projected returns.

Life insurance is sometimes proposed as a savings vehicle since growth is tax sheltered as in an RRSP. Withdrawals are taxable but you can access the savings via tax-free loans. This assumes that you're comfortable carrying debt when you're retired. Even if you think you are, you may find that you really aren't. If you're borrowing against the collateral in your policy, the interest rates aren't predictable.

Insurers provide guaranteed lifetime income via life annuities. The payments are determined at the time you buy, based on your projected remaining lifetime and projected interest rates. Since we're living longer and investment returns are currently low, the annuity income looks less attractive.

Step One

To get a better understanding of your financial situation, get an independent review by a fee-only financial planner who doesn’t sell any products or get any referral fees from product sellers. Fee-only planners vary in what they charge, ranging from hundreds to thousands. They may save you much more than that through lower cost investments and higher peace of mind.

You can get "free" advice from several advisors who sell investments or insurance, or claim to do real financial planning. You may have trouble figuring out the advisor's biases but don't be surprised if they recommend you buy more of something they sell. The investigation process is time consuming and the proposals may not be clear. A fee-only planner can help with the  review and inform you of the options left out.

Whatever your target age, make sure you’re planning financial freedom for you, not your advisor.

Links

• Whatever happened to Freedom 55? (BNN, Feb 2013)
• Reality check for Freedom 55 (The Globe and Mail, Sep 2012)
• Why $100,000 salary may yield retirement flipping burgers (Bloomberg, Sep 2013)
• Former six-figure marketing executive, 77, reduced to flipping burgers to make ends meet after running out of retirement savings (Daily Mail, Sep 2013)
• How to spot a fake fee-only financial planner
• Is the best advice free or for-fee?

Podcast 247

direct download | Internet Archive page | iTunes

PS Financial freedom means little without health.

WHAT DO YOU LEARN FROM GETTING SICK?

Why did I get sick?

Sometimes the cause and lesson are clear. Other times we make shaky connections. Either way, what steps do we take to avoid getting sick again?

We visited the only Corvette factory (worth seeing)  and ended up in a Kentucky hospital (worth skipping). We probably got food poisoning from a local restaurant.

• Suspected cause: bad salad (and likely cause)
• Lesson: avoid raw food in strange places
• Status: learned and still followed

In school, I got strep throat as often as once a year. I thought that was punishment for eating candy.

• Suspected cause: candy (likely cause: a contagion caught at school)
• Lesson: avoid candy
• Status: learned (easy since we rarely got or get candy)

The Latest

Recently, I had a painful tummy. After eating, I felt gassy and bloated. My stomach hurt while digesting the food. I thought the cause was eating at a restaurant but no one else in my family got sick. The only difference in our meals was that I had hot soup.

• Suspected cause: bad food while eating out (likely cause: unknown)
• Lesson: eat better and at home
• Status: learned (at least for now)

And You?

Does this sound familiar? You're busy. You're not eating well, exercising or sleeping enough. You've got deadlines! You've got no time. You've certainly got no time to get sick.

Your body doesn't care and forces you to bed. Now you have time. Your priorities changed. The world continues functioning without you. That's humbling.

While sick, we're often forced to listen and change the way we behave --- at least temporarily. Afterwards, what happens? Do we continue to apply the lessons or do we go back to our old ways? There's little value in failing and getting forced to learn the same lesson again. And maybe again.

During my tummy troubles, I ate smaller portions more frequently. The food was healthier, fresher and more alkaline. More salad. More vegetables. Less wheat. Some nuts like almonds. Fewer ingredients and condiments. Almost no processed food like cereals or protein bars. Very little added sugar. More walking (almost daily). More rest. I also got Ki Therapy from Julian Hirabiyashi (who I highly recommend). I've recovered and don't want to get sick again. I’ve continued behaving well for weeks. Maybe that will last.

We may be wrong about why we got sick but we can use the experience as a nudge to change the way we behave. Learning from sickness is healthy.

Links

• How healthy are you really?
• Five sweet ways to cut back on sugar
• Chocolate, price-fixing and salmonella poisoning
• Where there’s willpower, there’s a way
• The battle between temptation and personal responsibility
• image courtesy of Studio CI Art

Podcast 246

direct download | Internet Archive page | iTunes

PS The time we need a break is when we don't have time for a break. Enjoy the weekend!

INSURANCE LESSONS FROM BREAKING BAD

Diagnosed with cancer and given only two years to live, high school chemistry teacher Walter White attempts to secure his family's financial future by teaming with his former student, Jesse Pinkman, to produce and distribute crystal meth.  — Netflix summary for Season 1

Would Walter have turned to crime if he had the right insurance in place?

Bad Breaks

Good  people get bad breaks. Walter never smoked but he got lung cancer anyway. By the time of detection, the cancer was considered untreatable. Were there no signs earlier?

Usually symptoms of lung cancer do not appear until the disease is already in an advanced, non-curable stage. — cancer.org

Most lung cancers are first diagnosed based on symptoms. Symptoms of lung cancer are not very specific and generally reflect damage to the lungs’ ability to function normally. The most common symptoms are a worsening cough that will not go away, and chest discomfort. Other symptoms include shortness of breath, spitting up small amounts of blood, unexplained weight loss, back pain, loss of appetite, and a general fatigue. — lungcancer.org

Walter shows many of the symptoms. There are precautions to offset the financial costs of disease.

Health Insurance

"All the incentives are toward less medical care, because the less care they give them, the more money they make." — John Ehrlichman on HMOs

Walter was covered by an HMO (Health Maintenance Organization). That's a US-style of cost containment with unfortunate side effects. The premise is good: treating conditions early is simpler, faster and cheaper than waiting until later. The HMO get fixed revenue per subscriber, which provides an incentive to tame costs. Members have financial incentives to stay healthy too. Their out-of-pocket expenses (if any) are lower for basic preventative care than for specialized care.

The HMO (which could be run for-profit) makes more by providing less. That's not the same as keeping people healthy. For instance, having too few doctors means a greater workload and an incentive to spend less time with each patient.

Walter experiences the drawbacks. His pricey chemotherapy isn't covered. In Season 2, a $13,000 hospital stay isn’t either. There’s a difference between an MRI which is diagnostic vs exploratory --- even when ordered by a doctor. Walter got the one that was excluded. Does that seem fair?

Another cost is waiting time. Perhaps the best doctors don’t want to work in an HMO where they’re often on salary.
Doesn't the Canadian healthcare system feel similar? We also have waiting times, limited choice and limited coverage.

A friend who is currently undergoing cancer treatment is getting injections which cost $3,000 each. Private health insurance covers 75%, which means an out-of-pocket expense of $750 each time.

Disability Insurance

Income replacement insurance helps replace your income if you're unable to work after a waiting period. The definitions and benefits vary. You might not be able to work during treatment or be able to return to work afterwards. The bills keep coming in even if the income doesn’t.

Employers might provide income during short absences. Perhaps full pay for X days and then a reduction until the long term disability benefits start. The self-employed may not even have that cushion.

Critical Illness Insurance

This coverage typically pays a lump sum a month after the diagnosis of a covered life threatening condition like cancer, heart attack or a stroke. The money can be used any way you want.

Walter could have used the benefits to replace income until the disability insurance benefits start, pay off debt and/or get the hot water heater fixed. A hot bath can be therapeutic.

Life Insurance

"… good state college … adjusting for inflation, say $45,000 a year, two kids, four years of college...$360,000. Remaining mortgage on the home, $107,000. Home equity line, $30,000, that's $137,000. Cost of living, food, clothing, utilities, say two grand a month? I mean, that should put a dent in it, anyway. 24K a year provides for, say, ten years. That's $240,000, plus 360 plus 137...737. $737,000, that's what I need." — Walter (Episode 201)

Walter wanted to leave his family enough to

• payoff debt: mortgage and line of credit
• fund university: for two children (one age 15 with cerebral palsy and a baby to be born)
• cover living expenses: for 10 years

Do you see the flaws in the planning?

There's no provision for unexpected expenses. There’s a bigger problem. What happens after 10 years? Walter’s wife Skyler is then 50. Is she to go to work then? She isn’t trained in Walt’s lucrative side business. Maybe Walter expects Skyler to find other sources of income such as from her writing or selling items on eBay.

What To Do?

Walter has been seriously underemployed. While teaching, he worked part time at a car wash. Also, teachers get two months of summer vacation. Given his intelligence and resourcefulness, what was holding him back? More money would have provided a better standard of living and covered the insurance premiums. His impending death brought him to life but that was too late.

Insurance looks like an expense but provides peace of mind. Insurance could be the best investment ever when purchased through the right advisor and insurers. The underwriting process may have detected the cancer early enough for treatment. That would have been a good break (though boring TV).

Links

• Life-changing events no longer trigger insurance purchases
• Income replacement insurance: a guide to disability insurance
• Two types of insurance you may have but cannot own
• Oblivion: what happens if my life insurance company dies?
• Case study: what to do when your term 10 rates are about to spike?
• Critical illness insurance (Riscario wiki)
• The best and worst times to cancel your life insurance
• Test your life insurance literacy
• Tips for first time life insurance buyers
• how to fund the insurance you need

Podcast 245

direct download | Internet Archive page | iTunes

PS If you rent your hot water heater, you avoid a capital outlay and have your repairs covered. That’s insurance too.

HOW TO SCREEN YOUR SOURCES FOR FINANCIAL LITERACY EDUCATION #FLM2013

Before gobbling the bounty from your trick-or-treating, don't you first check the loot and throw out questionable items like apples?

Financial information is even scarier than Halloween. You might get the wrong information and be worse off. Your sources could be in costume, hiding their true identities.

Screening For You

November is Financial Literacy Month and anyone can create an event. That doesn’t make them worth your time.

Journalists and credible bloggers pre-screen events which are worth your attention. The Financial Consumer Agency of Canada (FCAC) lists events across the country. The calendar is worth a peek because of their screening process.

The Requirements

The FCAC requirements for event organizers include

• the information is:
  • Accurate and up to date
  • Not tied to the advertising or sale of any product or service
  • Accessible to the general public
  • Free or on a cost-recovery basis (e.g., room rental, facilitator fee)
• FCAC deems the activity or event contributes to financial literacy:
  • acceptable
    • Budgeting tool launch
    • Workshop on how to get debt-free, budget or protect yourself against fraud
    • Activity to create awareness on the importance of Financial Literacy/Financial Education.
  • unacceptable (rejected)
    • Any quiz or tool that point to branded financial products and/or services
    • Any seminar that favours certain financial products and/or services over others

These criteria are sound and well-considered. The events listed generally look safe.

Worth Your Time

In Toronto, check out these FCAC-listed events

• Financial Basics: a workshop for young adults featuring Ellen Roseman
• Money 50/50 Toronto 1: insights from carefully-selected writers like bloggers (think TEDx with Q&A) [disclaimer: I’m the organizer]

Screening By You

You can also screen events on your own. Here are three warning signs:

Avoid events with commercial sponsorship. What are they expecting in return? The money might influence the content delivered or the speakers selected. You’re less likely to hear independent voices.

Be wary of free events. Space and refreshments cost money. What’s the catch? You’re safest when the sponsorship comes from noncommercial sources (though they have less money available). For instance, you needn’t worry about Ellen’s workshop, which is supported by the FCAC, the Investor Education Fund and Ryerson University.

Avoid celebrities who don't blog or publish content regularly. They might keep reusing content which is becoming increasingly stale. I saw one author six times. The world changed over the years but the presentation didn’t --- not even the jokes. Yet there was no time for a blog. Content creators often have fresh things to say (and rarely mind getting recorded).

Silence Speaks

To which groups and associations do you belong? Which financial institutions have your money? Which advisors do you heed? They already have relationships with you. Where are their financial literacy events? How good are they?

The general lack of financial literacy is scary. So too is skewed or incomplete information. If you're not getting solid, objective advice in a form you understand, find other sources. After careful screening.

Links

• Ellen Roseman makes financial basics lively
• Does your advisor help with your financial literacy?
• Forget financial literacy: check your pizza literacy
• How to tell if your advisor is independent
• How would Mike Holmes fix the financial sector?
• How Tom Hanks got cheated by his insurance advisor
• How to spot a fake fee-only financial planner
• If you have/had/want money, read Pound Foolish
• image courtesy of siloto

Podcast 244

direct download | Internet Archive page | iTunes

PS Choose multiple sources for different perspectives.

FIVE SWEET WAYS TO CUT BACK ON SUGAR

Sugar used to be scarce but now we’re suffering from abundance. Here are alarming findings from the Credit Suisse Research Institute:

“… added sugar is in almost everything on the supermarket shelves.” 

“Today, the world daily average consumption of added sugar per person is 17 teaspoons — up 45% compared with 30 years ago.” 

“The US is rated #1 in the consumption of sugar and caloric sweeteners with an average of 40 teaspoons per person per day. It’s not surprising that the country has the world’s highest rate of adult obesity (34%). “
— Sugar: Sweet With A Bitter Aftertaste

This short video explores the effects of sugar around the world.

We pay for excessive sugar consumption with our own health and as a society.

The Manufacturers

The manufacturers are tough to blame. Information about sugar is easily available online. They don’t force us to buy (but entice us as much as possible). They don't tell us how much to consume (but their packaging influences us).

Depending on your age, you may recall that soft drinks in Canada came in 10 ounce tough-to-crush steel cans. After the switch to the 12 ounce aluminum cans used in the US, we didn’t throw out the extra two ounces. That would be wasteful. Instead, we quickly learned to consume more. Children did too.

Even Worse

While normal sugar may be bad, artificial sweeteners and high fructose corn syrup look even worse.

Also manufacturers also play games with their labeling. To avoid showing sugar as the first or second item, the label, they may show different forms of sugar (e.g., brown sugar, molasses, concentrated fruit juice, dried cane sugar, hydrolysed starch, dextrose, maize syrup, honey). Sneaky, even for people who read the labels. We care about the amount of sugar, not the subdivisions designed to deceive.

Strategies

Here are five ways to reduce your consumption of sugar.

1. Eat Less

You can't take sugar out of your dessert but you can take a smaller portion (no seconds!) or eat less frequently. You can share too. Sometimes we’ll pour a can of pop into two small glasses.

2. Add Less

We're used to adding sugar to foods such as coffee and tea. We might add hot fudge to our ice cream or sugar to our cereal. We may have ice cream with our apple pie or apple pie with our ice cream. We can cut back and perhaps eliminate some of the extra sweetness.

3. Buy Less

Since you can't eat what you don't have, a simple solution is to avoid buying sugary processed food. If you wouldn't buy a product at normal price, should you buy because it's on sale and you're "saving" money?

4. Buy Quality

In the quest for profits, companies switch to ever-cheaper ingredients with names we can't easily pronounce. Products with better ingredients usually cost more. Buy them and you're paying a tax for quality. That's a financial incentive to buy less, eat less and savour each bite.
Depending on your skills, you could even occasionally make treats at home. You’ll know how much sugar you're using, which can be disturbing.

5. Exercise

When you exercise regularly, you want results. Eating better helps. That means less sugar and likely less cravings for the wrong things. Besides, you have less time to eat.

What About Oreos?

Sugar has been called “addictive and the most dangerous drug of the times”. Oreos are as addictive as cocaine for rats, according to a flawed study. Rather than argue over the headlines, let’s live better. Where there’s willpower, there’s a way.

What sugar do you consume daily? How can you cut back before your doctor tells you?

(new from TED-Ed)

Links

• Sugar: Consumption At The Crossroads (Credit Suisse, Sep 2013) [PDF]
• How sugar is destroying the world (Business Insider, Oct 22, 2013)
• Are Oreos really as addictive as cocaine? (The Guardian, Oct 21, 2013)
• Sugar is ‘addictive and the most dangerous drug of the world’ (The Telegraph, Sep 2013)
• Foods surprisingly high in sugar (WebMD)
• How to protect your money from Goliath
• Chocolate, price-fixing and salmonella poisoning
• The battle between temptation and personal responsibility
• Where there’s willpower, there’s a way
• How healthy are you really?
• The world's fattest country consumes an astounding amount of Coca-Cola products (Quartz, Nov 5, 2013) (new)
• How sugar affects the brain (Nicola Avena, TED-Ed) (new)

Podcast 243

direct download | Internet Archive page | iTunes

PS Next week is Halloween …

HOW TO TELL IF YOUR ADVISOR IS INDEPENDENT

Dad, can I borrow the car?

Like teens, advisors want to look independent but may not be.

Dependent

Advisors who aren’t independent are called “captive” (Investopedia). They are dependent and forced to sell products from a specific catalogue or specific companies. They can't scan the market. Management influences what they sell through quotas and bonuses. Somehow, the captives convince themselves they have freedom of choice. They convince themselves that what they have is the best (or at least good enough). They then try to convince you.

You don't go to the Apple Store for unbiased advice about Apple or Android. At least you know that. With financial advice, the limitations aren't as obvious.

Captive advisors are like commissioned employees. They're stuck selling what they're told to sell, regardless of quality or value.

Spotting Captives

Dependent advisors don't have their own brands. Their business cards show the name of the company they represent. Dependent advisors rarely have their own websites. Instead, they may have a page on a corporate website that lists competitors (other advisors from the very same firm).

What about social networking? Since captive advisors are representatives of a brand, they may not be allowed to use social media. It’s as if the brand doesn’t trust the judgement of their own employees.

Captive advisors might be on LinkedIn but have an especially bland profile due to corporate standards. Following the rules is called “compliance”. They may belong to Groups, but do they participate? If you connect to a captive, don't be surprised if they block their connections from your view. Actually, that could easily be true for independent advisors too.

Write Wrong

An article from a captive advisor may have been ghostwritten by the corporate head office or approved there. You can often tell by the blandness and wishywashy-ness of the content. The writing rarely sounds like the advisor. There's rarely any personality or a controversial stance.

Do a web search for an article title and see what shows up. You might find the same article but with different author names. That even happens with books like Speaking Of Success written by Ken Blanchard, Jack Canfield, Stephen Covey and    (fill in the blank)   . Actually, independent advisors can play this game too.

Independent

Independent advisors can scan the marketplace. That choice might be an illusion. In practice, they often have preferred suppliers which get the bulk of their business.

An independent advisor is more likely to

• show up in a web search
• have a real website
• be on Twitter (check their Klout score)

The products they sell might cost less or guarantee more.

Which Is Better?

A captive advisor can't offer you much choice. That may seem like an advantage because choice can paralyze. An independent advisor can scan the marketplace and filter the choices for you.

Mommy, where do independent advisors come from?

They often started as captives to get training. The top ones often leave after they’re trained and established. Why? Independents tend to get paid more. Also, independents tend to get better service because vendors are competing for their business.

If you're young, your needs tend to be simpler. The difference between captive and independent matters less. By the time you need choice, you've established a relationship with your advisor and your advisor has developed more sales skills. You're less likely to leave or realize what you are (not) getting. You risk becoming the captive, caged by a Goliath.

Links

• Why advisors become advisors
• The word advisors imply but dare not say
• How to protect your money from Goliath
• How would Mike Holmes fix the financial sector?
• Should you change advisors when you move?
• Do your advisors help with your financial literacy?
• Do advisors put their interests first?
• Where is your advisor’s blog?
• What does your advisor drive?
• Imagine your advisor in the Olympics
• When your advisor is on vacation
• Why we get bad advice
• image courtesy of Jenn

Podcast 242

direct download | Internet Archive page | iTunes

PS Just because an advisor is paid on commission doesn't make them independent.

HOW TO PROTECT YOUR MONEY FROM GOLIATH

Once you understand that Goliath is much weaker than you think he is, and David has superior technology, then you say: why do we tell the story the way we do?
--- Malcolm Gladwell, TED Talks Q&A

Do you remember the tale of David and Goliath? That’s the title of Malcolm Gladwell’s new book. He shared his interpretation at TED@250.
There are lessons for you and your money.

Goliath

The financial sector is huge, powerful and the least trusted in the world. We're still recovering from the harm caused by the 2008 financial meltdown. There are lots of examples of misdeeds in Pound Foolish (Helaine Olen), Fight Back (Ellen Roseman) and @trustandyou.

David Then

David took a stand against Goliath in hand-to-hand combat when all others cowered with fear. The match looked unfair.

Goliath had size, strength, experience and armor. David didn't. In a conventional battle, Goliath had the clear advantage. David changed those strengths into weaknesses. He turned his own speed and nimbleness into advantages. He used his slingshot to down Goliath from a safe distance. The battle was unfair ... to Goliath.

David Now

You are nimble. You have a weapon more powerful than sticks, stones and slingshots. You have social media. You have access to the world from your smartphone wherever you go (though mind the roaming rates!). You can attack Goliath anytime you see misconduct using text, photos, audio or video.

Goliath has trouble responding in a quick, caring and believable way. Employees are often restricted or prevented from using social media. For instance, Air Canada lost a dog and internally planned to “just ignore” the media attention, hoping the story would fade away (like RBC-iGate did).

David fought alone. Your weapon is even more powerful because you can mobilize others. Even total strangers can help as your word spreads. Thanks hashtags, retweets, Likes and +1s.

Your Ultimate Weapon

Your ultimate weapon is your money. You alone can decide to

• support banks with low (or no) service charges and fees
• question advice from your advisors
• deal with better people and better companies

Unless you take action, you help Goliath grow stronger. You must give incentives to force change. You must be willing to move your business. You might even need to admit that you made mistakes.

Your Successes

You do make a difference. Here are examples:

• Rogers gave mobile customers a credit for the latest service outage (perhaps worth $18 million). This seems to be a first.
• Apple reversed a decision to leave a rating system which measures the environmental impact of their products.
• Starbucks stopped colouring Frappuccinos with bug extract

There's less need to fear Goliath. We're connected. We’re stronger. We’re more resourceful. We vote with our wallets and feet. We're winning … unless we stay silent.

Links

• David, Goliath and the appeal of the underdog: a Q&A with Malcolm Gladwell on this often-misunderstood story (TED Blog, Sep 2013)
• How to beat Goliath with your marketing
• If you have/had/want money, read Pound Foolish
• Fight Back against corporate trickery with Ellen Roseman’s insider tips
• We're easy to fool (with examples)
• Case study: seller beware vs buyer beware
• Handcuffed: comparing mobile phones and life insurance
• image courtesy of Wikipedia

Podcast 241

direct download | Internet Archive page | iTunes

PS Support those who support you

NETFLIX FOR LEARNING: UNLIMITED ACCESS TO eMAGAZINES, eBOOKS, AUDIOBOOKS

One of the best ways to keep earning is to keep learning. Maybe the solution is the Netflix “all-you-can-eat-for-low-monthly-fee” approach.

Netflix For Watching

We've had Netflix since the launch in Canada (no cable or satellite TV). We get great value for our $8 a month. Thanks to fast unlimited internet, we don't have to worry about bandwidth considerations. 

Netflix works because of the large selection and low price. Thanks to Canadian innovations MoreFlicks and Unblock US, we can access Netflix titles from other countries. How can you not get your money’s worth?
This same model may not work for other services.

Netflix for Learning

We can learn by reading and listening. Here are ways.

Magazines: Next Issue

Next Issue (US, Canada) gives you unlimited access to all issues of 100+ magazines for $15 a month. This might sound like a great deal but is it? You can certainly browse many titles. Would you?

There is already so much content available online for free. You already get a personalized magazine-like feel with services like Google Currents, Flipboard, Vu and Zite. When you’re looking for something, it’s much easier to do a web search than to go to the magazine’s website. I’m more interested in the article than the publication. I like looking at different sources, including blogs.

How much do you spend on magazines today? For us it's about $50 a year. With Next Issue, the price jumps to $180 a year. We'd be spending much more than we currently do. Why? It’s not as if we have hours of extra time for the extra reading. Does Next Issue look appealing to you? I’d rather spend the money upgrading my mobile data plan.

Books: Oyster and Scribd

If you read books, you can easily spend hundreds of dollars a year. And get stuck with titles that simply aren't very good. No refund.  A flat fee subscription has appeal. You get to browse without penalty. Since the publishers get paid based on how much of a book you read, they bear the risk for lousy content.

The Kindle Owners’ Lending Library has 350,000 titles as part of Amazon Prime for $79/year. There are two new options with 100,000 titles: Oyster ($10/month) and Scribd ($9/month). These choices are US-only at the moment.

Not all publishers are participating, which limits the selection. As with Netflix, you won't get the newest releases until later. That's fine with me because I've already got too much to read.

Audiobooks: none

I’m a big fan of listening to books but there’s no all-you-can listen service now that audiobooks.com switched to the unsatisfying Audible model of a title per month. Their price of $25/month looks too high. You can skim books but not audiobooks. A lower price makes sense.

Why should audiobooks cost more than magazines? Why should magazines cost more than ebooks? Why should they all cost more than Netflix?

I'd love to see a service which offers both ebooks and audiobooks for a reasonable price. I like listening while commuting and having the ebook for making notes. Given the pace of innovation (or copying Netflix) that may happen soon.

Links

• The right way to view Netflix in Canada

Podcast 240

direct link | Internet Archive page | iTunes

PS For a free “Netflix for learning”, visit your public library in person or online.