Category: General Thoughts

It’s the holiday season again! Between Thanksgiving and Christmas, people will be bombarded with advertising encouraging them to buy as much as they possibly can to prove the depth of their love for the special ones in their lives.

Do you want your child to be happy? Buy a toy! Do you want your spouse to be happy? Buy a car! Do you want your parent to be happy? Buy them a trip! Do you want to be happy? Open your wallet and buy!

For the most part, this is a stupid method for building the bonds of love and kinship. Gifts of stuff don’t make for great relationships. Gifts of time, gifts of effort – these are the the seeds of strong and loving connections to others. Luckily, these kinds of gifts do not need to be expensive or extravagant.

In my family, there has been a debate for the past few years about how to do the gift exchange. My mother is adamantly in favour of receiving gifts, and she is quite willing to give gifts too! My brother is the complete opposite. He’s of the view that none of us needs anything else so we shouldn’t be participating in the shopping frenzy of Christmas. A compromise was reached – gifts will be exchanged but there will be a limit of $20. It’s not  a perfect solution, but we’ll see if it works for us. My sister-in-law lifted a burden from my plate recently when she asked me for a tin of cookies for her Christmas present. I was so happy because her request eliminates atleast one trip to the mall! As for the extended family who celebrates the day with us… I will be buying something for each of them that I know they will appreciate and I will be sticking to the limit of $20.

One of my joys at this time of year is baking Christmas cookies: gingersnaps, shortbread, magic cookie bars, haystacks, peanut butter blossoms, thumbprint cookies!  

These are my family’s Christmas cookies, not to be confused with my other cookies that are made throughout the year. They are special because no one else bakes cookies anymore and I only make them at Christmas-time. I generally give away 7-10 tins of baking per year, and I start baking 4 weeks before the Big Day! Making an extra tin of cookies for my family is a simple thing that will make everyone happy.

Having the shortbread that our mother used to make for us when we were small will bring back happy childhood memories for my brother. The beauty of memories is that they need not be purchased with cash, stored, maintained, dusted, or otherwise handled. They are free, but they can still be powerful and wonderful and thoroughly enjoyed. This is the effect that people are seeking to create when buying gifts at the store, isn’t it?

Cookies are a gift to my mother too. She can enjoy them, without having to do all the work that they entail. My mother isn’t as young as she once was, so marathon baking is no longer an option for her. Yet, she still loves the assortment of treats that I bake for Christmas. Enjoying a few cookies will put a smile on her face which is what I want to see on Christmas day. It’s a win-win for both of us.

The holidays need not deplete your bank account, nor flatten your wallet. Do not let the AdMan and the Creditor tell you that joy can only be bought in a store. There are ways to create wonderful memories without working your way towards bankruptcy. The holiday season is already packed with so many over-the-top expectations about how everything “should be” so give yourself a break and relieve some of the financial pressure. Figure out the two or three things that you love most, focus on those, and build the relationships you want with those whom you love best. Trust me – that is definitely a gift to yourself that cannot be bought in a store! 

You are financially vulnerable.

Don’t feel too bad. Most of us are.

A few weeks back, I watched an interview with Elizabeth White where she talks about faking normal. In short, Ms. White is very well-educated, had a network of contacts, worked for an international organization, took an entrepreneurial risk, got caught by the 2008 recession, and tumbled down the income ladder. She had significant savings and she “did everything right” but she still wound up financially vulnerable. She has since written a book documenting her experience and the experiences of many others who are in the same boat. It will be released in 2019.

After watching Ms. White’s interview, I took a hard look at my own life. I’m roughly 10 years younger than Ms. White, but I still have my employment and I’m one of the Fortunate Few who can expect to receive a pension when I retire…unless my pension is bankrupt and there won’t be any money to pay me when it’s my time to collect.  (This is one of my personal financial nightmares.) So I’m doing what I think will save me from the possibility of my promised pension disappearing – I’m setting aside a large chunk of my paycheque into dividend paying investments. I let those dividends rollover each month, in the hope that my monthly dividend cheque will be enough to pay my retirement expenses if it has to. Check out how I’m doing this, if you’re interested. And while I’m saving, I’m working damn hard to stay out of debt. I’m also developing the habit of only spending money on the things that really matter to me: time with family and friends, travel, eating good food. Expenditures on anything else need to be justified because those things aren’t my priorities. It doesn’t mean that the expenditure isn’t eventually made. It simply means that there’d better be a good justification before my money leaves my wallet.

I feel like I’m doing okay, but I still question if I’ll continue to be okay if I lose my career in my 50s.

Ageism. It’s real and it’s pervasive. Sadly, it’s rarely on anyone’s radar until such time as they’re a victim of it. Those in their 20s and 30s are busy starting their careers, or simply finding jobs that allow them to pay for their necessities. The fortunate ones who have found employment most likely aren’t thinking about whether they will be turfed for having wrinkles when they hit their 50s and 60s. Those in their 40s are building families and careers, starting new businesses, or exploring the world. They too likely aren’t considering whether it’ll be easy for them to return to the world of paid employment should they need to.

Nope. For many who are trying to find work in their 50s and 60s, the reality doesn’t sink in until they cannot – for love or money – land a position no matter how hard they try. In the meantime, they still have to survive. There are still bills to be paid, mortgages to be serviced, and, most likely, children to raise or educate. As we all know, the expenses of life don’t stop just because someone has lost their job. Without an income, most people have little to no choice other than to dip into their savings while they’re receiving unemployment insurance payments. Once those payments stop, then there is no “choice” about it – savings must fund life’s expenses until another income is found.

And this is where the vulnerability is exposed. The vast majority of us do not have sufficient savings to survive for 30 or 40 years without an income. We have been conditioned to believe that we will always have and, if necessary, will always find another source of income that will be enough to keep us afloat. This hasn’t been true for a very long time, particularly not for those in their 50s and 60s. It’s a vicious and heart-breaking reality that employers are not financially incentivized to pay for talent, experience, and wisdom even though those very things are expected of employees before they are terminated.

Do I have the solution to this problem? No, I would never make such a boast.

However, I would strenuously encourage you to minimize your vulnerability while you can. I would suggest that you get out of debt as soon as possible and that you save as much of your income as you can while still enjoying the present. Figure out what your priorities are, spend your money on those, and ignore all other exhortations to spend your precious income on things that don’t matter to you. Whatever isn’t spent on your priorities should be set aside for long-term investing, paying off your debts, and building your emergency fund. It should not have escaped your notice that saving money should definitely be one of your most important priorities.

The more money your household makes, the easier it should for you to hit savings targets of 20%-50%. I harbour no illusion that lower income households are in a position to save great swaths of their income. Those of you with a healthy disposable income need to understand that there is no guarantee that you will always have employment that so richly lines your pocket. No one knows what tomorrow will bring. All you can do is look at the money you have today and figure out a way to not spend all of it. There’s no shame in saving some of today’s money for tomorrow’s needs.

If for some reason you lose your income in your 50s or 60s, your ability to survive until the next job – or until you can start collecting CPP – is going to depend on how much money you’ve committed to spend each month. Get out of debt. Have an investment portfolio that kicks off some dividends and capital gains, which are automatically re-invested until you need to rely on them. Establish a savings program that allows you to invest a good chunk of your income until you retire. Limit your spending to things that bring you a deep sense of joy and satisfaction. If it won’t make you happy, then don’t buy it.

A little while back, I read something online that said that some older women believe that they need not learn about money because it falls into the realm of things-that-men-know-about. These women believe that men are the only ones who need to understand money and that they will be fine so long as they have a man around.

I was literally blown away and couldn’t get to my computer fast enough to start writing this post! This is one of the most ridiculous concepts I have ever heard in my life. I had to ask myself – Why is this idea so foreign to me? Why am I having such a visceral negative reaction to this worldview?

The answer is as follows – money is a tool, much like a knife. If you’re smart enough to learn how to use a knife, then you’re smart enough to learn how to use money. A tool is a tool and its functionality doesn’t change based on the gender of the person who wields it. A butter knife is a butter knife whether held in the hand of a woman or a man. Similarly, money’s functionality doesn’t change – it purchases options for both women and men. Body parts have absolutely nothing to do with it!!!

I realize that many households run on a division of labor, and perhaps handling money is one of those items that falls along gender lines in some households. However, a division of labor is not the same thing as saying that one person cannot learn how to use a tool simply because their private bits are on the inside while someone else’s bits hang on the outside.

All people come into this world naked – no one is born knowing how to use any of the tools that have been invented by everyone who came before us. Adults don’t expect babies to know how to do very much beyond cry, poop, and sleep. For the first few months, we get a pass so long as we’re doing these things on a sufficiently normal schedule. However, there does come a point where we have to start learning how to use the tools that are available to us so that we can be fully functioning adults.

Money is one of those tools. My fervent hope is that the idea that only men need to know how to use this tool is one that will be extinguished forever. Every one needs to know how to use this tool in order to live a life that is truly reflective of their personal goals, dreams, desires and priorities. Parents teach all children how to use tools that are necessary to their offspring’s survival because parents want what is best for their children. It is perplexing to me that parents would purposefully limit their daughters’ armamentarium of tools by failing to teach them about money, which is so vitally important to achieving the financial goals that their daughters may have for their futures. The more money there is, the more options there are.

(And while we’re on the subject, washing machines and clothes dryers are tools too. There’s nothing intrinsically female about these machines. Both will start and operate properly whether they are loaded and unloaded by a man or by a woman. Yet it never ceases to amaze me how many older men – with wives or without – never consider doing their own laundry.)

Thankfully, dinosaur-esque attitudes about what topics are suitable for men and what topics are suitable for women are dying. Money is a tool that benefits all people because it affords them the ability to exercise financial agency over their own lives. Knowing how to use money as a tool is vitally important for everyone, regardless of their gender. Trusting someone else to take care of you for your whole life is a huge gamble. Even if you’re married to the most loyal, ethical and wonderful person in the whole world, someone who could never dream of harming a single hair on your head, there’s no guarantee that this magnificent person will always be around. There are things such as accidents, kidnappings, unemployment, comas, and death which can all work to prevent Magnificent Person from taking care of you every single day for the rest of your life.

This is why it’s imperative that you learn how to operate the tool called money. You have to know more than how to pay the bills. You need to know that part of every dollar that crosses your palm needs to be set aside in an emergency fund, and that your emergency fund needs to be worth atleast 3 months of income. You need to know that paying interest on credit card debt is the equivalent of setting money on fire. You need to know that it’s generally best to pay off your home before you retire so that you can rely on its equity if you need to pay for nursing home care. You need to know that from the smallest acorns do the mighty oaks grow – the same is true of your money. Steady contributions to your investment portfolio will yield a nice, fat cash cushion for you in the future.

There are many lessons about money that take a lifetime to learn, and you bear a responsibility to yourself and to your loved ones to learn how to manage the money that comes into your life. And it’s also your duty to teach the young people in your life how to properly manage their money, how to stay out of debt, and how to invest for their futures.

So many of us in the FIRE-sphere think about the financial independence that money will bring to us. Some of us dream about retiring early. However, there’s insufficient emphasis on the nuts and bolts of money that are just as vitally important to those who don’t live and breathe FIRE. Money is a tool – everyone needs to know how to use this tool so that they can pursue their own dreams and goals.

I recently finished two books about poverty – Evicted: Poverty and Profit in the American City by Matthew Desmond and $2.00 a Day: Living on Almost Nothing in America by Kathryn Edin & H. Luke Shaefer. The stories that were shared within their pages will stay with me for a long time.

I’m not an expert on poverty and I’ve been fortunate enough not to experience the kind of poverty described in these books.  After finishing both of them, the thing that struck me most deeply is the idea that intergenerational poverty is something from which it is almost impossible to escape. I say “almost” because I’ve also read Hillbilly Elegy: A Memoir of a Family and Culture in Crisis by J.D. Vance. And who among us hasn’t heard the story of how Oprah Winfrey started out in very, very disadvantaged circumstances yet managed to become a multi-billionaire?

My impression after reading these books is that the majority of people who are born into intractable intergenerational poverty do not have anyone in their lives who has money, or other financial resources, that can be given or lent in order to assist them to move out of poverty. Most people in this situation do not escape the desperate poverty in which they live nor are they ever in a position to help their family escape from it either.

Intergenerational poverty appears so intractable to me because I interpret it as a complete absence of a financial infrastructure. What do I mean by a “financial infrastructure”? Simply this – it is a person’s ability to access financial resources.

On the other side of spectrum is intergenerational transfer of wealth. My definition of the intergenerational transfer of wealth is that one generation in a family transfers wealth down to the next generation, traditionally from parent to child.

I’ve noticed that, very often, the concepts of a financial infrastructure and the intergenerational transfer of wealth are very tightly linked. Throughout my life, I’ve had the opportunity to observe and learn from examples of people who have a financial infrastructure and who have benefitted from the intergenerational transfer of wealth. And while I always knew the families in my circle weren’t all equally rich, I didn’t know anyone who did not have the ability to access money from somebody if it was really, really needed. I never would have articulated it this way as a child but I inherently understood the idea that those who have a financial infrastructure and those who can benefit from an intergenerational transfer of wealth are in a position to get money when they need it.

My parents weren’t rich, but my maternal aunt had a farm. When my parents were a young couple with a new mortgage and young babies, my aunt would raise some chickens just for them and my parents would fill their freezer with meat. Since my parents had a large backyard, they planted a garden and canned vegetables for the winter. The availability of these financial resources meant that my parents lowered their grocery bill, thereby saving money, while feeding their family. They might not have been living large, but they weren’t living above their means and they were able to set a few dollars aside every paycheque to build a money-cushion for themselves. Eventually the mortgage was paid and those former mortgage payments could be redirected to other goals. The help from my aunt was part of my parents’ financial infrastructure. My aunt didn’t give my parents money, but she was able to indirectly help my parents to accumulate money so that they could meet their financial goals. My aunt was part of my parents’ financial infrastructure.

I know another person who worked in a retail liquor business during his undergrad. His graduation coincided with his boss’ retirement so his parents gave him the down payment to buy the liquor store from his boss and they co-signed his business loan. He worked his ass off to repay the loans to his parents and the bank and he is quite comfortable today. This is an example of intergenerational wealth – his parents had the ability and willingness to help him buy an established business so that he could support himself. Thanks to his parents’ financial resources, this person has been able to build a strong financial infrastructure for himself and his young family. This situation exemplifies what I mean when I use the term financial infrastructure – this man had the ability to access financial resources from other people. His life includes people with money. As a result, he is now a person with money and he will be able to both transfer his wealth to his own children and also be a significant part of their financial infrastructure until they are able to create their own wealth. It is this cycle of transferring money from parent to child for the purpose of acquiring assets that creates, maintains and increases intergenerational wealth.

Another friend started working a part-time job in her first year of high school to support her household and she’s worked hard ever since. Through her own efforts and her dedicated savings, she created her own financial infrastructure and relied on it to get her though university. Once married, she and her spouse were able to purchase land in the mountains and to build a rental property due to the assistance of her mother-in-law, who runs a business renting that propety on a year-round basis. My friend jokes that she and her family have a hard time using their own property because it’s always booked so far in advance. All kidding aside, my friend has benefited from an intergenerational transfer of wealth and the fact that she has created a strong financial infrastructure for hersefl. She and her husband share in the profits of the rental business. Both of them are careful with their investing. As a result, they are simultaneously strengthening their financial infrastructure and creating more wealth for themselves and their own children.

I know of several people whose parents were able to assist them with down payments on their first properties. One of my friends had parents who were able to give her the down payment on a condo when she graduated from university. My friend had a roommate to assist her with the mortgage but she eventually sold that condo when she moved into a larger townhouse. She then moved from that townhouse into her now-husband’s home. They sold that home and are raising their family in a very nice luxury home. Without her parents’ initial infusion of cash, it is unlikely that my friend could have saved enough money from her starting salary to build a sufficiently-large down payment which would have permitted her to buy before real estate prices skyrocketed. The money from her parents allowed my friend to benefit from the rise in real estate prices and to build equity that allowed her, and eventually her husband, to purchase their current home. This is yet another example of both intergenerational wealth and access to a financial infrastructure.

Again, I’m not an expert but it seems to me that intergenerational poverty is intractable and it prevents one generation from helping the next because there are no financial resources to be distributed when needed and there are precious few opportunities to accumulate those resources. It is incredibly detrimental to all who are its victims.

When I read Evicted, I was struck by the fact that the tenants portrayed in the book had no family with whom they could stay until they got back on their feet. The tenants’ financial infrastructure simply did not exist because they couldn’t access enough money to build one. For the most part, they did not have full-time wages and they did not have their own homes. Their family and friends couldn’t be counted on for help because they were similarly under-employed and they were also renters living in dilapidated structures that were only slightly better than being homeless. The tenants were at the mercy of their landlords, and they were essentially powerless in the landlord-tenant relationship. Their landlords knew that they could be easily replaced by someone who was just as poor and just as desperate.  For a variety of reasons, the tenants could not pool their meagre funds with others in order to create a little bit of a safety net for themselves. In other words, they had no opportunity to create and build a financial infrastructure because they had no money that could be set aside for the future. Whatever meagre income they received went to their rent, their food, the basics of survival. There literally was no money leftover for the proverbial rainy day, and it was always raining in their lives in one way or another. The tenants depicted in Evicted did not appear to have any way out of their abysmal situations beyond winning the lottery. No one in their respective circles had financial resources. The seeds of a financial infrastructure and intergenerational wealth simply did not exist.

The story was even worse for the people described in the book $2.00 a Day – which translates into $730 per year for those who like to do the math. These poor people were literally starving, and they were forced to make horrible choices in order to survive from one day to the next. They did not have family members who could help them with a down payment, who could raise food for them, who could help them find a job or to start a business. More often than not, the people of $2.00 a Day were born into poverty and were raising children in poverty. There didn’t seem to be an end to the cycle as there was no way out without cold hard cash. It made me so sad to realize that many of the people living in the horrid conditions described in the book simply couldn’t begin to build a financial infrastructure for themselves or their children because they had to devote so much energy – mental and physical – to basic survival. They did not have the luxury of “big-sky thinking” because they were so worried about living without food, water, electricity, etc…

This blog is about money so my comments are limited to the financial impressions that these books left on me. There are many layers to the problems faced by the people in these books, so forgive me for simplifying. All of the people in both books had many issues and challenges that needed to be resolved and I don’t want to create the impression that all of their problems could have been solved with money. However, having money would have meant that their issues and challenges would have been addressed, even if not solved, because they would have had the ability to seek the help that they needed. If the people in these two books been able to access sufficient financial resources, then they would also have been able to address the other problems in their lives without losing their homes, their children, or the basic necessities. They would have had a financial harbour while they sorted things out.

Did the books’ subjects have any examples in their lives of people who had made it out of poverty? I don’t know – the authors were silent on that question. In both books, the only people with money were the landlords and they were not portrayed in a favourable light. Neither book gave any indication that any of the landlords had ever been in the position of their tenants. Beyond the landlords, the impoverished subjects of each book appeared not have had any exposure to anyone who had overcome dire financial circumstances or who could teach them how to get out of poverty.

Whether you choose to read the books is up to you. What I want to impart to you is that you should carefully consider your own financial infrastructure and assess your own access to intergenerational wealth. If you lost everything in a fire, do you have insurance in place so that you can start over? Do you have family or friends who could put you up until you get back on your feet? Do you have a source of passive income that can tide you over if you lost your employment? Are you the kind of tenant that a landlord wants to keep? Are there people in your social network who could help you find job leads if you needed them? If you wanted to start or buy a business, are there people in your life who could help you fund that dream if necessary?

What are you doing to build your own financial infrastructure? Is building intergenerational wealth important to you?

Debt sucks, yet people go into debt like they’re the ones earning the interest!!! Think about it for a moment. Financing purchases means paying interest to a creditor in order to acquire things. Whether it’s buying the latest flat-screen TV or acquiring a vehicle or upgrading one’s wardrobe or taking a vacation, a great many people have no trouble using credit to finance their purchases.

The credit card comes out, the purchase is made! The bother of paying off the debt is pushed aside to a later and more convenient date… Of course, there really is no convenient time to call yourself an idiot for using a credit card at 18.99% interest (or more!) to purchase whatever it was that had to be acquired at that very second. The creditor, whether a bank or another financing company, is always happy to help people scratch their instant gratification itch because the creditor knows who is really earning the interest on each and every one of those transactions.

(If you’re one of those people who saves first, buys with a credit card and pays off the credit card in full every single month, then I’m not talking about you. You’re one of my people and I salute you!)

Why would right-thinking people borrow money at very high interest rates to acquire items that are not necessary to their survival? My personal theory is that people would rather be poor than look poor, so they use credit to go into debt in order to create the illusion that they’re doing quite well financially.  A new car every two years – extravagant holidays each year – magnificent home renovations! These are all wonderful things and we’ve been taught by the Ad Man that we will feel better about ourselves and that the world will think better of us if we buy these things because then no one will think that we’re poor. If we buy the stuff that’s being marketed to us, then others will think we have money and that we’re doing well financially. Having the latest and greatest must signal to the world that we’re not poor!!! Psychologically, the Ad Man has perfected a very seductive message. Who doesn’t want others to value them highly? Who truly enjoys feeling bad about themselves? Why wouldn’t a person want to feel good, to be admired? Who wants to be thought of as poor?

Unfortunately, the Creditor stands alongside the Ad Man and offers anyone and everyone the credit needed to finance any and all of the enticing offers put out by the Ad Man. Truth be told, the Ad Man doesn’t care if you finance whatever he’s selling or whether you pay cash for your items. His sole purpose is to sell you dreams packaged as stuff. How you pay for it really isn’t his problem…but he definitely benefits from the presence of the Creditor. And the Creditor’s sole purpose is to earn interest off of your debt. The Creditor doesn’t even care what you buy, so long as you borrow money to do so. It’s a financially destructive combination that traps a great many people!

The unfortunate debtors who succumb to this two-pronged attack fall prey to the highly successful plots of the Ad Man and the Creditor.  The Ad Man creates the psychological fear that you might not be as happy as you could be, that others might think you’re poor or they might think badly of you because your whatever-it-is-that-the-Ad-Man-is-selling-right-now isn’t the latest and greatest. You decide to remedy this situation by making the purchase, but you don’t have the cash to do so.  However, you’ve decided that you don’t want to live with the psychological fear so you decided to borrow money from the Creditor to fund the whatever-it-is. Whether you know it or not, you’ve made the decision to be poor rather than look poor.

The reality is that people who rely on credit to satisfy their desire to purchase things immediately have agreed to sacrifice their future financial autonomy to the Creditor – in other words, they’ve committed all of their future income to paying for yesterday’s purchases.  The Creditor wants loan payments, even if they are only minimum payments.  Failure to make the payments means that credit is eventually withdrawn, which means no more money to buy things to satisfy the seductive call of the Ad Man, which means that the psychological fear of being though of as poor stays firmly in place.  Sadly, the withdrawal of credit doesn’t mean that the original debt goes away.  The interest on that debt steadily and relentlessly grows until it dwarfs the original loan amount.  The debt stays in place until it paid or eliminated through bankruptcy.

So what is the remedy, you ask? The solution to this pervasive problem is complicated, but it starts with each person identifying their priorities and figuring out what really makes them happy.  Each person has to figure out how to feel good about themselves without going into debt.  Could you volunteer with an organization that supports something you believe in? This is a way to feel good about yourself that doesn’t involve borrowing money.  If it’s time with family and friends that you crave, is it possible to host a game night at home? What about a movie marathon in the comfort of your own family room? How about a picnic with those whom you love best?

Trust me when I say that there are many, many, many ways to feel good about yourself that don’t involve digging yourself into a pit of debt.