Jan 302017
 

How to Find the Best Financial Planner

Financial planning can be simple, but it can also be very nuanced. So who is the best person to help you create your perfect financial plan? The answer is simple.

That person is you. 😀 Here’s why.

Unlike a meal plan or other short term aspirations, a financial plan isn’t an event that you can predict and design a specific result for. Financial planning is more of an ongoing process, with assumptions and approximations. Money is a part of life, and as long as we’re alive, we’ll need to make plans for it. 🙂 Financial professionals can give us guidance, but who will look after our money when they move, or retire? The best financial planner for you is you because you are always with you.

Give a man a financial plan and he’ll probably be okay until his plan needs to be adjusted. But teach a man to make financial decisions for himself and he will be free to explore the endless possibilities on his own.

A Few Analogies to Financial Planning

Who’s the best person to write up a business plan? The entrepreneur of said business, of course.

Who’s the best person to create a road trip plan? The person who’s organizing the road trip!

Who’s the best person to design a personalized career plan for Alex, who’s about to graduate high school? The answer is Alex.

In each of these cases the “plan” is based on future probabilities and assumptions with an approximate outcome in mind. As time progresses, events in reality will replace those assumptions chronologically. Adjustments will have to be made to each plan, but the overall goals are maintained. The company may alter its business plans due to unforeseen market forces. Road closures may force the road trip to take a detour. Alex may change his mind about his major in college.

Plans don’t have to be made alone. Individuals can consult business planners, school counselors, or other professionals. But it’s ultimately the responsibility and the decision of the individual to create the best plan for him or herself.

That’s why the best person to create, update, and adjust your financial plan, is you. Nobody knows you better than yourself. 😉

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Jul 282015
 

Insolvencies by Age and Province

A lot of money is tainted. It taint yours, and it taint mine. 😀 That’s why it’s important to make the most of the money we do have and spend it responsibly. But sometimes if we don’t have enough money to buy what we want, we’ll need to use debt.

There’s nothing inherently wrong about borrowing money, but we have to be careful to not overextend ourselves. When we are no longer able to service our debt payments we are considered to be insolvent. The insolvency rate for Canadian consumers is only 4.2% and has been steadily declining since 2010. Here’s an interesting chart via the Government of Canada showing the distribution of insolvency by age groups.

15-07-consumer-debt-by-age-Insolvencies by Age and Location

According to the graph adults between 25 to 29 years old such as myself only represent 7.1% of all insolvency cases. This is lower than most other age groups. On the other hand, Canadians between the ages of 40 and 44 are most likely to become insolvent.

Younger adults are generally still building up their financial stories. It’s easier for younger workers to change careers. And they’re also more likely to live with their parents. Meanwhile, middle-aged folks have fewer financial options. It appears after we turn 40 we’re likely busy raising families. Salary increases are not as generous as earlier in our careers. And some of us will need to start taking care of our aging parents. This sounds like the worst time to be worrying about debt problems, yet the evidence shows this is exactly when we’re most likely to struggle staying solvent.

How can we prepare for this mid-life financial risk?

Allow me to present a brief case about debt and age groups. 😀

15-07-about-debt-and-age-groups

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Apr 192015
 

If money didn’t exist, we’d all be rich. However the reality is that society needs a simple and effective medium of exchange so the economy can run efficiently. Since money is so ubiquitous, yet also finite, we should try to maximize its utility by controlling and spreading our spending over time. Sometimes this means delaying a purchase until a future date or just not buy it altogether.

Chronic shoppers often have to overcome a sense of deprivation when they pass up an opportunity to spend. But changing the way we think about delayed gratification can help. 🙂 Instead of dwelling on what we will potentially miss out on we can think in terms of what we will gain instead. 😉

Next time we decide to not buy something, we can tell ourselves that since we’re not spending $X on that, we can add this $X to our emergency fund, or build up a larger down payment for a future home to raise a family in. Or we can use this $X to pay down our debts. Once our debts are completely gone we can work less, travel more, and take up new hobbies like pottery making. 😀

15-04-delayed-gratification-zombieland-cry-money

Everyone’s reasons will be different. But the basic idea is use our goals, aspirations, and dreams to convince our brains to not feel deprived because of our decision, by replacing the temptation for an immediate reward with a larger, or more enduring reward. Rather than wallow in self pity we should feel proud and anticipative of a better life tomorrow.

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Dec 022014
 

We often become what we repeatedly do because we are creatures of habit, and usually the best way to form a habit is to start early. 🙂

In a book I once read, Secrets of the Millionaire Mind, there’s a story about a successful professional who makes a six-figure salary and lives in a nice house with expensive cars. But for some reason he never has any savings. Despite his high income he’s always in debt. His net worth is negative, his investments tend to under perform, and he’s living paycheque to paycheque. The root of his financial struggle lies in his childhood. When he was growing up his parents were poor. They resented rich people, and blamed economic inequality and other social problems on money. Growing up in a household where money was considered bad and corrupt gave him the notion that having a money is bad. As an adult being wealthy would give him a sense of guilt. So whenever he makes money he would subconsciously try to spend it all. Many people lack the skills to take care of their own money because they were either never given the proper management tools to begin with, or were simply misinformed. By not forming good financial habits at an early age consumers might have a hard time getting out of debt when they become adults.

A recent survey by Consolidated Credit, a non-profit credit counselling service, shows that roughly a third of consumers had to turn to family or friends for financial help at one point.

14-11-infographic-survey

Not surprisingly the biggest challenge for many when facing financial hardship is being unable to pay for housing.

Becoming financially literate.

The way to tackle financial literacy can be done on two fronts. At home parents need to make financial education a priority in their household. At school there should be a full length course for basic personal finance. Children have to learn to work with money instead of being afraid of it or being told that money will lead to problems. The lack of knowledge is usually what leads to economic problems later on in life. It’s important to instill in children responsible spending habits and budgeting skills from an early age. 🙂 As Aristotle once said, “Good habits formed at youth make all the difference.

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Random Useless Fact:
Some 40% of Canadian families carry an outstanding balance on their credit cards, with a median amount of roughly $3,000.

 

Nov 102014
 

Rich people value financial security while the middle class focuses on job security. There use to be a time when these two terms meant the same. When I was going through school my parents wanted me to have a good education, so I could go on to get a high paying job someday. But that was the old way of thinking because the modern world doesn’t work like that anymore. 😐 Many university graduates with high grades today can’t find those “high paying” jobs anymore, let alone any job. 😕

14-11-entry-level-job-position-catch-22-financial-security

In today’s world we have to think outside the box. We have to see the bigger perspective. For most people the point of having a job is to make money. If that’s the case then we should start with the money, not the job. Financial security means having a financial plan. It should begin in life as early as possible, but it’s never too late for anyone to start. Giving our finances priority means learning about our career paths, and life choices. It’s about making financial goals regarding savings, investing, and retirement. Financial security means knowing what we want our money to do for us. It means giving our financial future a purpose.

Finding job security can be a part of our financial security, but it shouldn’t be the priority. Job security is about finding a job. Financial security does that too, but it also teaches us how to survive if we lose a job. With a direct understanding in financial literacy we’ll have the knowledge and confidence to utilize other options like entrepreneurship, investing, network marketing, etc, in case we aren’t lucky enough to land our dream jobs right away.

The governor of the Bank of Canada recently received some heavy backlash from vocal individuals when he suggested that unemployed millennials should volunteer their time to build up relevant work experience. He probably meant volunteer work would help improve someone’s resume. However his words could also be interpreted to mean he supports unpaid internship. And there’s a lot of people angry about corporations taking unfair advantage of young people who are willing to work for free. I’m glad I’m not a public figure. In today’s politically correct world it can be difficult to speak candidly about anything. The best way to not offend anyone is pretend to be old, ignorant, and poor, lol. No offense. 🙂

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Random Useless Fact:
On August 16, 2013, Google went down for 5 minutes and in that time, the global Internet traffic dropped by 40%.