Teenager, His Phone, The Canary

When my first born son turned 12 or 13 (I really don’t recall his exact age – frazzled parent brain the likely cause), I caved to his relentless requests for a cell phone. Invoking the enormous power of rationalization, I convinced myself that although a phone at his tweeny age is far from necessary, as a matter of convenience and safety it’s not a bad idea.

As telecom companies continue to dismantle and remove public pay phones owing to lack of use (and the disappearance of superheroes needing a place to change into costume), I wanted to provide Teenage Son with a way to communicate with me should the thought ever occur to him.

Adding him to my phone plan cost about $40/month, including tax, for a talk and text plan. At close to $500/year, this was not an inexpensive solution and definitely pricier than dropping the occasional 50 cents into a public pay phone.

Still, rationalization again came to the rescue; this was a safety issue, I insisted to myself. (Upon reflection, the matter of convenience was not weighty enough to justify payment so I went with safety, an issue no parent charged with caring for a baffling, still-under-construction teenage brain could ignore).

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Must Have Data Plan, Must Have Data Plan

Then came more demands. Teenage Son said that his friends surf the web on their phone and he wanted to do the same, and that a talk and text plan is soooo yesterday.

“How much will it cost,” I ask? (my usual first question).

“I dunno.”

“How about you do the research and let me know what you come up with?”

“Dad, can’t you just get me a phone with a data plan.”

“It costs money.”

“So?” (translation: teenage brain believes Bank of Dad grows money on trees).

“Is it necessary to have data? Why isn’t the talk and text plan enough?”

“Because it isn’t.”

“Convince me why I should pay more money just so you can play on the Internet with your phone? Why isn’t it enough to use your computer for surfing the web?” (Granted, Teenage Son is presently at something of a disadvantage going up against Former Lawyer, me, who relishes constructive discussion based on sound reasoning, often interpreted by my children, as unfair argument. That said, my ultimate purpose was to have him think about his choices, to thoughtfully consider his own rationale for buying ‘stuff’ that he wants, and the price to be paid, whether financial, emotional and/or spiritual).

“All my friends have data on their phone.”

“You know the old, ‘everyone else has it so I should have it argument’, is nonsense, doesn’t work with me.”

“Why are you being so mean?!”

And he stormed out. Once I dusted myself off from the teenage accusation of meanness (translation: if you do not give me what I want, what I demand at this very moment, then you are at fault and you are mean), and once he calmed enough to remove his headphones so we could talk while he wasn’t listening to music, I offered to change his phone plan to include data on the condition that he pay for the increased cost.

As his eyes began the familiar bug out that precedes walking to his bedroom because it has the closest door that may be slammed (sound effects are hugely satisfying for teenagers), I gently explained why I dared to suggest he take financial responsibility. Though his facial expression and body language hinted of tuning out, he voluntarily chose to stay with me, physically anyway, so I continued talking about the importance of learning financial responsibility.

 

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Planting Seeds

When Teenage Son was six, I took him with me to a local bank branch and opened an account in his name. While the account was connected to mine so I could monitor future transactions, I wanted to give him a sense of empowerment through having an account in his own name, knowing he would eventually manage his own money.

When the ABM card with his name on it arrived in the mail, we went to the bank the next day. Having quickly learned how to deposit funds through the ABM, he deposited $20, starter money from Dad. At this stage of the game, the point was not the money. The point was to teach him about money … it’s value, what it’s used for, how it’s managed responsibly, how to retain control over money so it is not a source of stress, or worse.

I figured that if we kept an open dialogue about money matters through childhood and teenage years, about what ‘stuff’ costs, about the fallacy of money trees (no, the Bank of Dad does not enjoy unlimited funds and, even if he did, strict withdrawal limits would be implemented), about choices we make in spending and saving, and the consequences of both, then little by little he would learn well the lessons of money management. And, in the process, he would retain a sense of freedom throughout his life when it comes to money matters, thereby avoiding the fate of becoming a Noble Consumer and Holder of Too Much Debt.

Then the cell phone fiasco hit. And I feared that Teenage Son would be turned into a consumer pod, the attachment to his cell phone being like the proverbial canary in the coal mine, portending a life where he was programmed to wanting the latest and greatest toy.

Still, difficult as it was, I kept the faith, choosing to believe that seeds planted way back when would sprout in time. Because the best I can do as a parent is to be patient, generous, and loving, and this includes setting boundaries.

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Buds Flowering

Teenage Son is now seventeen and attached as ever to his phone. They go everywhere together: to school, out with friends, on bus rides, to the movies, and to bed (the mobile phone having replaced the blanket as a source of security). That said, I insist that he power off before falling asleep so as not to expose his still growing brain to a constant stream of radiofrequency energy.


Chewy Bit

Children may be more susceptible to cancer causing agents owing to a growing nervous system. As well, owing to their smaller heads compared to adults, children are subject to greater proportional exposure to radiofrequency radiation.

Though data from studies done to date do not clearly support higher cancer risk, when it comes to my kid’s brain, I prefer to minimize risk and err on the side of caution, especially knowing that at least some of these studies are funded by telecom companies who, shocking as this may be, could have been tempted to juice results in their favor.

For an exhaustive, hugely informative, eye-popping discussion of this issue, sit down for a lengthy read of Disconnect: The Truth About Cell Phone Radiation, What the Industry Has Done to Hide It, and How to Protect Your Family, by Devra Davis – http://www.amazon.com/Disconnect-Radiation-Industry-Protect-Family/dp/0525951946.


And yes, Teenage Son has a data plan. The bonus for both of us is that he pays for it himself from wages earned working part-time at a grocery store during the school year and working full time during the summer.

Not only that but he has learned to live within a budget, knowing that I won’t bail him out. If he blows his paycheck on a cool leather jacket, and has drained his savings, then he has to wait until he receives his next paycheck before bouncing into a local café and ordering a giant, humungous caffeine and sugar laden concoction tailor made to mess with teenage mood swings.

Sure, I encourage him to set aside 25% of every paycheck into a savings account but he doesn’t always do so. That’s his call. And he has regretted his lack of savings each time his account dwindles close to zero. And that’s just fine; he’s still learning and he’s still a kid so no major harm done.

Eventually, he’ll get into the habit of saving. Eventually he’ll understand that just because he has money doesn’t mean he has to spend it. He’ll get that saving and investing money feels good and helps us take care of the practical necessities of life.

Though his lack of impulse control (read: under developed teenage brain Executive Functioning) may frustrate him at times, Teenage Son has been stepping up and trying to take responsibility. He’s learning that work has its rewards beyond the financial (not only getting out from under Dad’s thumb, but also the sense of controlling his world, the freedom to make independent decisions), that it takes effort to earn money so it’s best to value that effort and give good thought to how you spend, save and invest money. I’m proud of Teenage Son and ever more confident that those seeds planted years ago are taking root.

 


 

Fear Not The Bag Lady

I know a woman named Lily. She lays awake nights worrying that her bed will soon be a makeshift cardboard box on the street. This despite financial wealth that would have the 99% salivating.

Lily owns her own home, a comfortably sized condo in a luxury building. She has an investment portfolio worth north of $5 million bucks. Annual revenue generated from investments? A tidy $200,000 before taxes. Oh yeah, as if that weren’t enough, government coffers kick in a yearly $16,000. Part of this bonus dough comes from simply reaching a certain age, and the other part is drawn from society’s pension fund to which we all contribute during our working years.

What does Lily do with all this money? Well, not one to feel that money is burning a hole in her yoga pants pocket, for the most part she’s a prudent consumer. That said, she indulges from time to time in travels around the globe. Sure, travel is pricey, but Lily loves meeting new people, experiencing different cultures, and she can afford it. And because she doesn’t come close to spending what’s remaining after taxes from her $216,000 gross income, she donates a fair bit to her favorite charities.

All in all, Lily has no financial concerns. But this doesn’t stop her suffering from a malady commonly referred to as, ‘What’s The Point Of Having Money If You Worry So Much About Money That Anxiety Stresses You Out, Meddles With Your Peace of Mind, And Jumbles Inner Equilibrium.’

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Let Go My Nose

I don’t mean to be glib. Money, and the chance of losing all of her money, is a real concern for Lily.

Frightened of losing her wealth, Lily fixates on the ‘what ifs’. What if my investment portfolio drops in value? And if that happens, what if I can no longer afford condo property taxes and monthly payments? If I have to sell the condo, and I place the proceeds in my bank account, what if someone then steals my identity, gains access to my account and all my money is taken? If I have no money, what will I do? Live on the street? Eat at a soup kitchen? Or if I get sick? What happens if I don’t have enough money to pay for health care? Or, or, or …

Are these real concerns? Sure. Conceivably, any of those scenarios could play out. But let’s step back for a moment, put a lid on fear, and give reason some room to breathe.

Lily is 75 years old. Her health is excellent. She has first rate insurance coverage that would take care of most, if not all, medical related costs. Her portfolio is mostly in high rated bonds and cash. Meaning? The portfolio is minimally exposed to stock market volatility, and risk of loss is highly unlikely. Her financial institution fully insures all customer accounts against losses arising from identity theft. And, if needed or desired, Lily could well afford private nursing care without dipping into her principal.

Still, try telling this to Lily and you hit a wall of fear that blocks reason from taking hold.

That’s the thing with money, our connection to it is intensely emotional, not rational. So, Lily, like too many others, lets money concerns lead her around by the nose.


ENTER BUDDHA

bmAttachment brings misery. Those who know the joy of peace of mind, whether wealthy or poor, have learned to let go the delight of having money and possessions.


Magic Numbers Are Delusions

The Boston College Center on Wealth and Philanthropy undertook a study titled, The Joys and Dilemmas of Wealth. The joys being obvious, the study focused on dilemmas.

For our purposes, here’s what stood out from the results: despite their enormous financial wealth (study participants had a net worth of $25 million plus), the majority of participants did not see themselves as financially secure. Go on, read that bit again. Now roll your eyes and shake your head because that’s the natural response.

You want nuttier? Here we go: participants stated that, to feel financially secure, they would need about another 25% of their current assets. 25% huh? So, with a net worth of $25m, we’re talking $6m and change. Whoa!

Just for fun, let’s break this down. Say participant ‘A’ has $25m. Presumably, peace of mind comes from being bumped up past $31m. As for participant ‘B’, she has $50m. Well, she needs to hurdle over $62m to bask in the warm and fuzzies.

What’s going on here?! The unfortunate part is that these folks will never feel peace of mind, regardless of how much money they have, because they are tying peace of mind to a dollar figure. The thing is, peace of mind does not suddenly arrive when you hit a magic number.

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Bag Lady Syndrome

According to results of a study by Allianz (Allianz SE – OTCMKTS:AZSEY), a giant German based life insurance company, nearly 30% of women between ages 25-75 who earn more than $200,000 annually fear the proverbial dropping of the other shoe that will result in them living on the street, alone and penniless.

And almost 50% of the women, regardless of their age, income, or marital status, fear becoming ‘bag ladies’. And these are women who run the family household and have a solid career, some of whom earn more than their spouse.

Why didn’t Allianz include men in the study? Well, it seems that while women tend to be grounded, willing to acknowledge limitations, and question themselves and others with a view to learning, men are, um, uh, um … different.

How so? Generally speaking, men make for terrible study subjects on this issue because they are prone to self-delusional thinking. Specifically, men the world over are known to inhabit two primary delusions:

  • Men know where they are going, thus never ask for directions.
  • Financial know-how is genetically programmed into their wiring.

My guess is that if someone ventured to study men on this subject, and were able to somehow, magically, tease out the male animal’s delusionary thought processes, there may come into being a condition known as Bag Man Syndrome, in which men exhibit the same money fears as women. Until that day arrives, we’re focused on women.


CHEWY BIT

For those readers who disagree about the nature of men, please write a letter to the editor (that would be me) explaining the basis of your disagreement, providing proof that you are not delusional, and I will be sure not to respond because, you see, a writer needs latitude and I humbly request that you smile and grant me this latitude.


Deconstructing the Mythical Bag Lady

I don’t claim to know precisely why this sense of impending financial doom is prevalent among women. But I’ll do my best to shed some light on the issue. In this regard, consider the following:

  • Travel through history and you’ll see that women were blocked from acquiring wealth, power and freedom. Today, this oppression continues outright in most countries though in subtler forms in Western countries.
  • Sure, women are now empowered like never before but there is still a ways to go. Economic imbalances persist in North America and Europe with women typically paid less than men for the same work.
  • As a result of taking time out from the work force to populate our planet and care for little ones, women earn less thus save less for retirement.

There are many excellent books on this topic, with the most recent one to make a splash written by Sheryl Sandberg, Facebook Chief Operating Officer, and woman extraordinaire, Lean In: Women, Work, and the Will to Lead – https://www.amazon.com/Lean-Women-Work-Will-Lead/dp/0385349947.

  • We humans become acclimated to our environment. If generation after generation of women are taught that money matters are not their concern, and are not afforded the opportunity to assume authority over financial matters, then over the decades and centuries, this kind of thinking burrows into the subconscious, leading women to internalize a belief that they are limited in their financial ability.

Okay, so if we know how the bag lady myth came about then the question becomes, how is the subconscious rehabilitated and destructive thoughts banished?


ENTER BUDDHA

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Do not allow the words or actions of others to define who you are, especially when those words or actions lead to self-limiting beliefs. Honestly acknowledge these beliefs, then challenge them. If false, discard them and replace with positive self-perception. Changing your thoughts, replacing the negative with positive, leads to confidence and ability.


Reconstructing Your Relation With Money

So if you’ve been plagued by this negative line of thinking, it’s time to stop and investigate why. It’s time to change your relationship with money, open up this particular space, and plant new ideas supportive of financial success and peace of mind such as:

  • There is no mysterious formula to successfully managing money. Read lots, study lots, and go to it, just like any other venture (oh, and staying part of the BuddhaMoney community will seriously increase your odds of success!)
  • Empowering yourself is good for you.
  • Banish fear through planning and saving.
  • If you’re feeling stressed, hire a qualified financial professional to help out.
  • The whole ‘bag lady’ myth and the shoe dropping superstition, let that silly thinking go so you can get on with life and not be dragged down by yourself.

Just so you know, I’m not giving up on Lily. I’m working with her. I’m planting seeds. I’m watering the seeds. I’m hopeful that she’ll one day be able to minimize the irrational money fears that grip her way too tight. And when that day arrives, when Lily rejoices in all that she is and all that she has, she’ll know true freedom.


ps. Dear BuddhaMoney members, this article was published back in January, 2017. It’s posting for the second time results from me encountering this issue over and over, and wanting to do what I’m able to empower people to face this issue, do what they can to lessen the grip of negative emotions, and feel that much lighter in the way they relate to money. 

 

 

Risk is NOT a 4-Letter Word

My father-in-law retired from the practice of medicine a few years ago. During his fifty-year career, not only did he establish himself as a highly skilled and dedicated physician, he also displayed a head for numbers as they relate to investments. And because he was smart enough to enlist the aid of a savvy financial advisor, to plan for the future and nurture his investment portfolio, him and his wife are now enjoying a financially stress free retirement, living a comfortable existence courtesy of dividends and interest generated mostly from stocks and a sprinkling of bonds.

That said, not everyone shares his tolerance for investment risk taking. In this regard, one of his colleagues (let’s call him Dr. Aversion), was more inclined to place his discretionary cash in a bank savings account, earning a sometimes decent, sometimes woeful rate of return. Regardless the amount of interest earned, Dr. Aversion gained comfort from watching his bank balance grow, and he slept well at night knowing his money was not subject to stock market whims and fancies.

Now, keep in mind here that, save for a brief stint in California early in his career, my father-in-law lived and worked in Canada. And in this northern nation, the vast majority of medical docs are civil servants owing to the publicly funded health care system. While they are certainly paid well enough to afford a comfortable lifestyle, the pay is nowhere near the lavish sums heaped upon some State side physicians.

Dr. Aversion too was a Canuck based doc. One who didn’t understand the role that investments would play during his retirement. Who didn’t get that a pile of cash sitting in a savings account generating relatively meagre interest would dwindle once he retired, once his primary revenue stream (i.e., salary) came to an end.

Today, predictably, Dr. Aversion is paying the price for his unwillingness to become educated about investments and the role of risk, for clinging to the illusion of safety represented by cash. A few years after retiring in his early seventies, reality gave the good doctor a cold, bare handed slap. And he sold his luxury home and downsized to more modest accommodations because he needed to raise cash for living expenses.

Now near the age of 80, Dr. Aversion is doing his best to hold steady on the financial front, having finally enlisted the guidance of a financial expert. And though he is not likely to slip into poverty, he certainly will not return to his once financially stress free lifestyle. Though he was a fine physician, Dr. Aversion was an inept steward of his family’s money.

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You Want Success? Embrace Risk

In the investment world, ‘risk’ refers to the probability of losing part or all of your investment. Risk is not, as way too many people view it, the same as volatility. And it’s volatility that turns investors into scaredy-cats. And scaredy-cats make terrible, horrible, no-good investment decisions that most often turn into losses.

You see, volatility is part and parcel of the stock market. It’s simply the stock markets nature, ingrained in its DNA. If you understand this, then you accept the ups and downs and wild rides. Because you are confident that, based on more than 100 years of stock market performance, if you hang on for long enough, the stock market will smile upon you.

Check out the chart below published by Investors Friend:

total-real-26-2016Unlike other assets, stocks go through severe ups and downs from time to time. And investors with a long term horizon know this. They know that media noise heralding the end of the financial world as we know it (think 2007-2009 meltdown), is just that: noise, distraction, media publishing their usual ‘the sky is falling’ nonsense because it makes for good copy, believing readers want to be fed fear.

But if investors can muster the will to stomach the occasional precipitous fall in their portfolio value, they will be rewarded. When? No one can say for certain. Still, I’ll venture out on a limb here and say … it’s only a matter of time.

Let’s use the 2007-2009 meltdown as an example. Global markets dropped what, 40% or so? And for those who ingested a daily dose of Gravol to help calm nerves and restrain the fear impulse from hitting the sell button? Well, these folks reaped juicy rewards.

Check out the chart below (which is current only to 2015; sorry folks, a bit outdated. Given the continued market climb from 2015 through 2017, you can safely add on an even higher return than that shown by the chart):

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So, we’re talking more than a doubling or tripling of your money if you invested in 2009. And the way to have made this happen if you’re not the type to buy individual stocks but still wanted exposure to stock markets? Buy passive index Exchange Traded Funds (ETF).

How do you get a piece of the 30 blue chip companies comprising the Dow Jones? Buy an ETF such as the SPDR Dow Jones Industrial Average ETF (NYSEMKT:DIA).

Prefer to focus in on the technology sector? Buy Fidelity Nasdaq Composite Index ETF (ONEQ).

More comfortable investing in the broader market? Consider the Vanguard S&P 500 Index ETF (VFV). With each of these ETFs, your fortune is tied not to one individual company stock, but to all of the companies that make up the stock markets.

With each of these ETFs, your fortune is tied not to one individual company stock, but to all of the companies that make up the stock markets. (chewy bit: I do not own any of these ETFs, and am not recommending them one way or another. However, I do recommend you use these ETFs as a starting point for your research).

 

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Time Is On Your Side … Until It’s Not

On the issue of investing, Dr. Aversion was paralyzed by fear. And while fear led him to grow his cash stash, it wasn’t enough to last him for 20 or 30+ years of living post-retirement. Because today, you’re actually losing money by holding funds in a savings account, i.e., the rate of inflation is higher than interest paid so, in effect, these funds are worth less at the end of each year.

What would have happened if Dr. Aversion had a better understanding of stock markets, was willing to embrace at least some risk during the past 50 years? Most likely, he would not have downsized his home, nor would he be worried about outliving his money.

The huge, colossal, gargantuan, mistake that folks make is paying attention to stock market daily gyrations underpinned by self-serving political and media generated fear.

If we can block this out, if we can educate our self about the true nature of the stock market leading to a clear understanding of what it is we’re doing when investing, if we accept that volatility does not equal risk, and that we should have at least a three, five, ten, twenty or more year investing horizon, then we’ll be just fine.

And with patience as our ally, we’ll get to that place where our money is working for us, a place that affords us a financially stress free retirement not unlike that currently enjoyed by my father-in-law.

 

 

Parents: Discuss Money With Your Kids

I was fortunate to grow up in a middle class home with parents who cared for my needs and occasionally indulged my wants. The cost of stuff, what we could afford, the value of a budget, however, was rarely a topic of discussion.

Was their approach right, in the sense of being helpful, in preparing me to responsibly manage my own finances, and maybe pass along a nugget or two to my kids? Before answering this, let me express my unequivocal gratitude for the foundation of love, comfort, and security provided by my parents.

That said, ahem, parents of all stripes would be wise to reconsider the benefits, or lack thereof, of this non-constructive approach, otherwise known as ‘our-parents-didn’t-discuss-money-with-us-so-we-don’t-discuss-money-with-our-kids-although-we-don’t-really-know-why-it’s-just-the-way-it is.’

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Behavior Modeling

As kids, our primary behavior models are our parents. Like ducklings, we imprint upon them, copying their behavior simply because this is what we’re wired to do.

Whether we know it or not (usually not), we learn their values, internalize their ideas, even subconsciously choose a mate resembling, in appearance and/or character, one or another parent (possibly scary, but often accurate). So why shouldn’t we also copy their relationship toward money and the silly silence and secrecy surrounding money issues?

The thing is, we do. Other than telling the teenage me that I spend too much, and that money doesn’t grow on trees (an oldie but a goodie), my family didn’t have money conversations.

Even as an adult, well into my forties and my parents in their seventies, a time when estate planning issues should be front and center, lips remained sealed. Their net worth, who would assume responsibility for their investments should one or both of them become impaired, plans for distributing assets post departure for the purely spiritual world, none of this was shared.

Thankfully for me and my kids, I don’t accept that imprinting is permanent. If you want to change your ways, with persistence and effort, you can escape generational hand me downs.

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Break The Mold, Bear The Fruit

Here’s the question to ask your self: in staying silent about money issues, who benefits? And the answer is … no one.

As for kids and teens, they are wayyyyy savvier than you may credit them. It’s not difficult to connect the dots, piece together how much dough the parents have. I mean, if they’re so inclined, kids can go online to check your assessed home value, determine the cost of family car(s), piece together how much you’re dropping on family vacations, furnishings, clothes, etc.

And the middle-aged adults with aging parents? If it’s easy peasy lemon squeezy for kids to roughly calculate family wealth, then the +30, +40, +50 folks can do it that much easier. The point being, your wealth isn’t really much of a secret. And if you insist on staying the course, buttoning up money issues because you get all twitchy and squirmy and sweaty when even thinking about having THE TALK with your kids, oh boy, you’re missing an excellent opportunity not only to help them break the money taboo cycle, but to teach your kids about money.

Of course, talks should be tailored to a kids age. For example, more than once my 11 year-old son has asked how much money I have. In kidspeak, this means, ‘hey Dad, tell me how much you’re worth and I’m hoping you toss over a big fat round number because that would be so cool’.

So I tell him, $1,000. But he doesn’t buy it. Eventually, because I see no harm in playing the game, I go up to $50,000. He still doesn’t buy it but this is a huge number to him, one he can’t really place in any sort of perspective, and he’s thinking I may be getting close to the truth. Regardless, this isn’t information I share with my kids because in no way would it benefit them at this point in their life.

In addition to the cost of groceries, clothes, and restaurant meals, I do share the cost of a family vacation. And I share all of these expenses because I want them to know that life costs money, that I work hard for money, and that I do my best to make responsible spending choices, ones that enhance the value of our lives.

Ultimately though, it’s not about me. I want the kids to know that independence, grounding and self-esteem come from personal accomplishments, from work, not from being on the receiving end of gifts.

And when we work and earn money, our job is to then consider choices that life has to offer. To make good choices. To factor cost into our choices. And to know that we don’t get everything we want, that we don’t necessarily benefit from ‘having it all’, and that we’re successful when we learn to compromise and maintain healthy perspective on money issues.

Besides, one day, the Bank of Dad will close, or at least significantly reduce its operating hours, and the kids will be adults earning their own way and responsible for making their own money related decisions. And if I can help them along the way, encourage them to weigh the pros and cons of an intended purchase, and reflect upon how each purchase ties into their personal values, then I’ve done my job well. images


Down The Line

I have two theories as to why older adults, those +70, avoid money talks with their kids. First up is the money taboo, ingrained, not changing. Second is the fear of mortality. The thinking goes something like this: ‘if I talk about my will then I’m talking about my own death and that’s just too much for me to handle because I don’t want to believe I’ll die’.

From a nuts and bolts viewpoint, if you want to minimize stress and headache for your kids, then find a way to look mortality in the face. Because, like the song goes, ‘we’re here for a good time, not a long time.’ And when we get our house in order in preparation for our unavoidable departure, we’re doing our kids a huge favor.

Once kids know approximately how much (if any) money they will receive as beneficiaries, they can plan how to make use of these funds. That said, there’s the common concern that some kids will place their lives on hold, waiting for an inheritance. Or that an unequal distribution among the kids will cause resentment and family discord. These are real concerns, no doubt. And that’s where open discussion comes into play.

It may be tough having talks like this, for parents and children alike. But hey, that doesn’t mean they shouldn’t happen. The talks serve to remove the destabilizing element of surprise, give voice to all concerned, clarify issues, and support realistic expectations all of which make for a smoother transition of wealth from one generation to the next.

So all you parents out there, me included, know that the responsibility to talk with your kids about money remains until the sun sets because the job of being a parent isn’t over til’ it’s over.

 

 

 

Ozark and The Meaning of Money

It’s rare for a pop culture show to get to the heart of a financial issue better than the vast majority of so-called financial experts. And at the beginning of the first episode of the Netflix show, Ozark, which revolves around a financial planner caught up in a money-laundering scheme gone bad, that’s exactly what happened.

Now, I’m not here to tout the show (full disclosure: I’ve watched only one episode and I’m hooked) but you may want to watch at least the first three minutes of the opening episode. This is when the lead character, Marty, played by Jason Bateman, launches into a narrative that goes something like this:

“50% of all American adults have more credit card debt than savings.

25% have no savings at all.

15% are on track to fund only one year of retirement.

Is the American Dream dead?”

If these statistics are not entirely accurate, I’d say they’re definitely in the ballpark. For most Americans (and increasingly, Canadians), I’d say the dream of material wealth, of being comfortably middle class, is on life support, if not dead.

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Marty’s Take On The Meaning Of Money

Marty goes on to say that most people have a fundamentally flawed view of money. Contrary to conventional wisdom, Marty says that money does not represent security, happiness or peace of mind. Nor is it a unit of exchange whereby we exchange money for a good or service.

I listen to this and I’m thinking, where is this going? What is money if not a unit of exchange or source of security? Marty continues:

“At its essence, money is the measure of your choices.

Meaning, how much we accumulate, whether in debt or savings, is a direct function of our work ethic. And work ethic refers to our willingness to invest in our future, our family’s future, by employing patience, frugality and sacrifice.”

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Responsible Choices Leads To Freedom

Whether Marty’s discourse rings true for you or not, I’m completely on board with the idea that we may be measured by our choices. And in the money management universe, if our course of action is irresponsible, if we let impulse, emotion, envy and greed steer decision-making, then we pay a price.

Maybe that price is a life of financial struggle and attendant stress. Maybe the price involves never feeling fully independent owing to debt. Maybe the price is delaying retirement indefinitely because our savings are inadequate or non-existent, and we just won’t be able to get by if we stop working. Maybe the price is not being able to give our kids as much help as we would like when it comes to higher education. Whatever the price may be, it’s a cost to our self and/or our loved ones.

I’m not trying to go all doom and gloom here. Rather, I’m pointing out what you could say is the in-your-face-obvious: our choices matter. And too many people choose to charge it, to run up credit card bills because ‘hey, this is a free country, I’m entitled to buy what I want, I’m entitled to have the same stuff as my neighbor’.

Well sure, you can make that choice, you can load up as many credit cards as financial institutions are willing to offer. And if you do so, know the consequences of spending beyond your means: financial holes resulting in stress, relationship damage, impaired self-esteem, to name a few. These are the result of irresponsible choices. Choices that do not lead to any sort of freedom.

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Cut The Card

I was in my early twenties when I was approved for my first credit card. And wow, was I excited. I had achieved another adult marker. Pay for stuff with a plastic card. How cool is that?! Oh, and a few years later, when I got myself a Gold card, well, look at me and my newfound status! Oh, oh, oh, right … and when I received a statement showing the interest I was obligated to pay because I had not paid off the balance in full … um, uh, that’s what it took to get me to stop and think that I’d been hoodwinked, or maybe I just didn’t bother to fully inform myself about the pros and cons of the uses of plastic.

Look, a credit card is a convenient way to pay for stuff. Nothing more. Forget about the airline miles, the cash back, and any other perk peddled by financial institutions. Ignore the gold, silver and platinum marketing pitches appealing to status, ego, and an illusory sense of belonging.

Most people can’t handle the temptation to spend more than they have. And financial institutions know this. They know that plastic doesn’t really feel like money so you’re more apt to use a card than to spend the $20 in cash in your pocket. And they really don’t care. They make money from you; that’s their sole purpose. Your debt is your problem.

So here’s what you do: you choose to change your spending habits. You choose to pay via debit card, cash or PayPal (online) whenever possible. This will minimize, with the goal being to eliminate, all credit card interest. Know how else you’ll benefit? Impulse buys will go way down, you’ll spend less and save more.

To give your self a hand, cut all your cards but one. That’s right, hold only one card, a Visa or Mastercard. You don’t need anything more. And get one of the cards that doesn’t charge an annual fee. Sure, no fee cards don’t offer rewards but so what? Rewards exist to charm you into unnecessary spending. Life will go on just fine without counting any kind of credit card rewards.

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What’s The Problem?

To effectively tackle the credit card problem, to permanently relegate overspending and interest payments to the proverbial dust bin, take a look in the mirror. Review your total spending during the past six months and review credit card charges. In other words, look at where your money is being spent.

What can you cut? What was frivolous? Did you spend too much on one or more items and, if so, why? Was the purchase worth it? If so, why? What’s the cost other than financial? How does your spending impact short term paying the bills each month and long term planning for a life of financial freedom? What charges could you pay with via cash or debit card?

Look at these issues. Wrestle with them. Find answers. Don’t ignore, don’t minimize the importance, don’t stick your head in the sand and complain. This is simply not the BuddhaMoney way. Instead, recognize overspending, recognize mistakes, take responsibility, and make it different going forward. Make the choice to manage your money more effectively, in a way that bolsters your current assets and your long term plan to have your money work for you one day (through investments) rather than you working for the money.

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Make The Right Choice

The right choice means using credit cards only when absolutely necessary. And it means paying off credit card debt. It means figuring out a realistic plan for eliminating debt, whether you owe $500 or $5,000 or more.

Usually, the most effective, most realistic way to pay off debt is little by little, step by step. Of course, in doing so, debt won’t disappear overnight. And that’s just fine. That’s reflective of this little thing called patience. Together with frugality and sacrifice, this is what it takes to forge a winning path forward, one that does NOT include you among the 50% who have more credit card debt than savings; one that does NOT include you among the 25% who have no savings at all.

Instead, it’s a responsible plan, one that takes into account todays needs, and sacrifices some of todays wants, all so you can live with a little more freedom today (i.e., less spending = less debt = less stress), and a lot more freedom for the future you.

 

 

Drive a Bargain, Save Money

Looking to buy an 8 x 10 rug for our family room, I visited a local rug seller. Before doing so, I knew full well that the rug selling business has a bizarre business model: first, rugs are marked up by a ridiculous amount; then the merchant touts a ‘50% off sale’, ‘going out of business sale’, ‘liquidation sale’, ‘time sensitive once in a lifetime sale’ – any promotional tactic the purpose of which is to drum up foot traffic. It’s amusing really; this particular rug store has been ‘going out of business’ for the past four years running.

After finding a rug I liked, taking note of the wink, wink, nudge, nudge list price and ‘sale price’, I asked the owner if he was willing to accept a price 25% lower than the ‘sale price’. Knowing what I do about the rug business, that there are fat profit margins resulting from buying rugs cheap in places like Afghanistan and India (I won’t get into the child labor issues here), and selling to naïve North Americans at hugely inflated prices, I was confident that a lower price could be negotiated.

But I turned out to be wrong. The owner looked at me as if I were from another planet. A hostile planet at that. Who did I think I was?! Daring to ask to pay a price less than what is written on the price tag! By the way he reacted, you’d think asking a question is an unforgivable crime.

Still, I figured he was posturing: this was the owner’s opening volley in negotiations. But after he walked away from me, effectively communicating that our short-lived interaction had ended, I realized I misread the situation.

Here was a guy steeped in North American retail culture. A culture that has effectively trained consumers to pay list price. Likewise, retailers have been trained to expect list price to be paid. And if the consumer doesn’t like the price, then there’s only one option: leave the store and go look for a lower price elsewhere.

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Florida Flea Market

I was 17 years old the first time I struck a deal with a merchant. In Florida with my parents, we visited a flea market. One of the stalls was selling brand name knock off watches with minor defects (i.e., the tiny Gucci name was changed to Cucci – who would know the difference?).

I saw a watch I liked and asked how much. Ten bucks I was told. Before I could reach into my pocket for the money, my father pulled me aside.

“Offer him $6,” he said.

“What do you mean? The guy said the price is $10,” I naively responded.

“Listen, he expects you to negotiate. Offer him $6. Haggle with him. See what you can do.”

This was all unfamiliar territory to me. But with my father’s encouragement (and a smile on his face, telling me to relax and have fun), I started the process. After a few minutes of back and forth haggling, the merchant offered the watch for $8. Thinking I was doing well, and that eight bucks was a good deal, I returned to my Dad for guidance. He told me to take $7 out of my pocket and place the money in the merchant’s hand.

“Why?” I asked.

“Because $7 is a fair price, and because when someone is putting money in front of you, in your hand, it’s difficult to resist.”

He was right. The watch was mine for $7. And once the negotiating process was over, I felt both a sense of relief and satisfaction. I mean, after I got over my initial trepidation, I saw bargaining as a game to play. As for the merchant, he still turned a healthy profit as his cost for the watches was a whole lot less than what I paid, so I learned afterward.

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Bargaining: The Third Option

Negotiating on price is not limited to Florida flea markets or Middle Eastern bazaars. The option to negotiate presents itself in many situations but we don’t know this unless we ask. And when we ask, and find a willing merchant, well then, say hello to a lower purchase price that translates to savings and more dough in our pocket.

So who can you bargain with? I’ve bartered with big telecom companies (i.e., cell phone), department stores when buying large appliances and mattresses, even the Gap when buying clothes for my kids (they threw in extra discounts and coupons for future purchases). Whatever the store, if I see an opening, I try to drive through.

As for retailers who look at you as if asking for a lower price is somehow not playing fair, or as if you’re speaking a language known only to Klingons … that’s their issue. If they’re willing to lose a sale, lose a customer because their ego is bruised, so be it. It’s a competitive landscape out there and you, the consumer, may always take your business to the competitor most willing to meet your terms.

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Big Ticket Item No. 1: Automobile

You absolutely need to know that bargaining is expected when shopping for an automobile.

Car dealers typically shoot for a 10% profit. Meaning, there is 10% wiggle room, with most dealers willing to accept a 3-4% profit. But they’re not going to just give it to you! The dealer’s starting position is that you pay list price (Manufacturer’s Suggested Retail Price – MSRP). And if you don’t ask for less, if you don’t even try to bargain, then that’s what you’ll pay.

If you’re willing to give bargaining a go (highly recommended) when purchasing a vehicle, start by grinding down price, with your opening offer being 10% lower than MSRP. The dealer won’t accept such a low offer because they wouldn’t make any profit. But setting your opening bid low gives you room to move up in price and the dealer room to move down to meet you somewhere around 5% less than MSRP.

If you’re not getting as much of a price reduction as you want, lean on the dealer to throw in cash rebates or other incentives. When I bought my last car, and I wasn’t entirely satisfied with the price being offered, I caved to the dealer’s price in exchange for a few goodies, including car mats, trailer hitch, roof rack cross bars and a car box.

And keep this in mind: you always have the option to walk away. Don’t underestimate this option. It’s powerful. It’s a tough business, car sales. Salespeople want your business, and they’ll usually do whatever is reasonable to close a sale.

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Big Ticket Item No. 2: Home

After my recent post about buying a home, I received a comment from a reader saying that people need to know, in a buyers market or balanced market, how much under the list price do you initially offer.

Unfortunately, unlike autos, there’s no one size fits all answer. That said, here’s a few pointers:

  • Upper Limit. Know what you can afford to pay and do not exceed that number, no matter how excited you are about fulfilling your home buying dream (because if you exceed your limit, you’ll dig your self into too much debt, and the dream morphs into a nightmare, or at least undue stress).
  • Do Your Homework. With the upper limit number in mind, as well as the list price, have your real estate agent give you the stats, i.e., sale price of similar homes in same neighbourhood during the past few months, and all other available research relevant to home price and current market activity. And do your best possible sleuthing to try to find out the seller’s situation.

For example, if the seller has already bought another home, and that transaction closes in two months, then you know seller is feeling the heat because they need money from this home to fund their future home. Otherwise they’ll be carrying all the expenses of two homes. Under a time crunch, seller may be more willing to accept a lower offer.

  • Don’t Be Reasonable. Right. Not something you hear everyday. But in negotiating, your job is not to look out for the other person. Your job is not to be liked, not to be thought of as a good guy/gal by the seller or their agent. Nope. Your job is to get the lowest price possible. It’s up to the seller and their agent to look out for themselves.

So start with a low ball offer. And don’t fret that an unreasonable offer equates to showing disrespect. It’s not. You can show kindness and consideration to the seller AND make a low offer. One does not cancel out the other.

Then wait for the seller’s reaction. If they ignore the offer, then you increase the bid by a small amount if you’re serious about purchasing. If they counter-offer, then you know you have a seller who wants to get a deal done, even though the lowball bid won’t fly.

Here’s a concrete example. A friend of mine (HomeBuyer) was looking to purchase a home for him self and his family. They found what appeared to be the perfect fit. The home was listed for $595,000. After four months on the market, the seller dropped the price to $505,000. Clearly, a sign that they wanted to sell.

Armed with detailed market research, knowing there were no other offers and the seller was ‘motivated’ (as they say in the trade) HomeBuyer offered $460,000. Seller balked, saying that Homebuyer’s bid was a slap in the face.

Homebuyer tried again, increasing his offer to $480,000. Though Seller wasn’t thrilled with the revised offer, they saw that HomeBuyer was for real and countered at $495,000. Homebuyer, asking to split the difference, made a third offer of $487,500. Seller refused, saying they were already taking a bath if they sold at this price. Still, they gave a little more, reducing the ask price to $492,500. HomeBuyer, believing it wasn’t wise to push any further, accepted and moved into his new home a few months later.

Now remember, Seller could have exited negotiations at any time. But they didn’t. Likely because they were able to alter their perspective, i.e., the home’s value may have been $595,000 to them but in 4+ months, no buyer had agreed with that valuation. So they had a choice: wait for a higher offer or take what was on the table.

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When You Try, Sometimes You Get The Price You Want

You won’t ‘win’ every time you step up to negotiate. That said, you’ll never get a price reduction if you don’t even try. So try. See what happens. Experience the thrill (is it just me?), the fun, of bargaining, and odds are you’ll be saving yourself money.

 

 

Negotiating For Your Dream Home

Sure, a home is an investment and it gets all exciting when it’s located in a market where real estate prices are rising and property value is increasing. But the thing is, as much as it feels good to know that our net worth is getting a boost, first and foremost, our home is a sanctuary.

Home is a refuge with deep emotional meaning; a place of comfort, waiting to greet us with a warm cozy bed, a spouse, loveable munchkins, and a furry four-legged friend; a place where we don’t have to put on a face to the outside world, where we can let it all hang out. Home is our soft landing.

We fall in love with our home, maybe at first sight, maybe sometime later. Either way, we ultimately develop an attachment for our home that simply is not formed with any other investment, no matter how much money it is worth. And that attachment, dear readers, is a problem.

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Emotions Monkey Wrench Negotiations

Any sort of successful negotiation involves emotional detachment. This doesn’t mean you have to dial down the delight at having found your dream home. But to get the best price possible, it would help to bring a cool reserve to the bargaining table, an objective perspective focused not on the picture perfect property but on striking an advantageous deal.

Advantageous to you and the seller, that is. Because both buyer and seller need to feel that they’re benefitting from the transaction. Otherwise, the deal won’t get done.

And typically, the most effective way to ensure that the deal is fair to you, the buyer, is to stop your self from blurting out during a tour of the home,

‘I don’t care what it costs! I love it! I want it! Money be damned!’

And the best way to do this is to hire a real estate agent. A realtor places distance between you and the negotiation process. They take emotions off the table. Because for the realtor, this is all about business. And their business is to advise you, to guide you, and to negotiate on your behalf and in your best interest. They have zero emotional attachment to the house. Rather, they’re just doing their job. Oh … and the bonus? Seller pays the realtors commission; you don’t pay a dime.

 
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Market Conditions Dictate

The local market will determine your offer and how much wiggle room, if any, there is in negotiations. That said, real estate is a local game, meaning prices will vary not only in different cities but also in different neighborhoods.

Your realtor will provide you with up to date information (i.e., comparable sale prices for similar homes in the same area during the past few weeks and months) and tell you whether it’s a buyers market, sellers market, or somewhat balanced. This matters because the kind of market will go a long ways to determining your bargaining power.


Buyers Market

This kind of market is reflective of too much housing supply among limited demand. A market where properties sit for months. Where price reductions and other purchase incentives are common. And where buyers can strike their best deal. For buyers, this is nirvana!

Here, you definitely do not pay the asking price. As for determining how much to offer, this can be tricky. Make an offer too low and the seller may be insulted and close the door on you.

That said, you never know what a seller will accept if you don’t ask. That’s your role as a buyer, to ask. The seller’s role is to push back. And the offer is your way of asking. If a seller responds with a “no” to your offer, and does not extend a counter-offer, well, then you have two options.

First, walk away. This being a buyers market, there will be other homes for you to choose from.

Second, submit a revised, higher offer that is within your limit and respectful to the seller. Because how the buyer presents them self is important for a lot of sellers. In this regard, no one wants to feel like they’re being burned on a deal.

If you do submit a higher offer, be sure you know your upper limit and that limit is within your budget. Otherwise, you may end up overpaying and digging your self a big, deep, financial hole.

As for timing, you may submit a revised offer immediately or wait. If there are no other buyers on the horizon, then wait a week or two as this will add pressure to the seller. Seeing no other potential buyers, seller is more likely to accept a bid under the list price.


Sellers Market

This is a major headache of the migraine variety for buyers (Hello San Francisco! Vancouver! Both examples of steaming hot markets where prices seem to climb and climb and climb and …).

For the most part, buyers have no leverage. Whatever the asking price is, buyers offer that price if they are to have any chance of completing a deal. Still, with demand high and supply low, sellers can be picky and wait for the best offer. Often, this means multiple offers over the asking price.

When competition is intense like this, and buyers are in a tizzy, fearful they will miss out on a once in a lifetime opportunity, some offers exclude the usual conditions (i.e., subject to financing and/or inspection) in an attempt to woo the seller.

To put it mildly, this is not a wise approach, one I certainly would not recommend. If financing falls through, tough luck for the buyer because the contract is enforceable and they’ll have to find the money somehow if they don’t want to be subject to a lawsuit for breach of contract. Or if the inspection turns up asbestos, a leaky roof, or cracked foundation, that is at buyers cost as well, further adding to an already inflated purchase price.

If you can be patient, wait for the market to cool, this will serve you well in the long run. But if you’re intent on buying in a sellers market, know that you’ll most likely be holding the short end of the stick when it comes to price to be paid.


Balanced Market

With the forces of supply and demand about equal, neither buyer nor seller has a distinct advantage. As a buyer, you would want to offer a fair price that is less than the list price. But know that the seller may not be in hurry to accept the first decent offer that comes along, believing that other offers will soon follow. Still, if your offer is reasonable to the seller, expect them to at least provide a counter-offer. And if both sides want to get the deal done, then both sides compromise on price.

Chewy Bit. Buyer and Seller had come to terms on a property listed for $1.5 million. One contentious issue remained: a built in cappuccino machine, cost $500. Buyer wanted it included in the purchase price. Seller refused. The deal fell apart, and the seller waited another two months to sell the property for $100,000 less than what the initial buyer offered. A $1.5m deal implodes because of a $500 difference of opinion? That’s ego talking, and the seller paid a huge price for not being able to see the big picture.

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Hold The Love

That whole ‘falling in love with your home being a problem’ bit that I mentioned near the beginning of this post? It’s only a problem when you’re wearing the residential real estate buyer or seller hat. At all other times, well, bring it on!

 

Inside An Investor’s Mind

Little more than one year ago, I bought shares in Canada’s largest airline, Air Canada (TSE:AC), at about $9 per share. At the time, my investor geek friends (naturally, I count myself among the geeks) questioned whether jello had replaced the brain previously inhabiting my head.

Historically, you see, the airline industry has not been friendly to investors. That, I suppose, is putting it mildly. For the brutally honest take, lets defer to legendary investor and gazillionaire, Warren Buffett, who called the airline business a ‘death trap’ as recently as 2013.

From one notable quip to another, Buffett offered this in your face sketch:

“If a capitalist had been present at Kitty Hawk back in the early 1900s, he should’ve shot Orville Wright; he would have saved his progeny money.”

So … if I haven’t been invaded by jello, what makes me think I know more about investing than Buffett?

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Research, Research, Research, Before You Buy

Let’s get this out of the way: I fully recognize the limits of my investing chops. Besides, comparing myself to Guru Buffett? Really? He’s a self-made gazillionairre. I’m not. Enough said.

Then what was I thinking?

To start with, life is nothing if not teeming with change. And that includes the aviation industry. So when I read a research report issued by TD Securities (TSE:TD)(TSE:NYSE) that argued the case for AC, saying that the airline was massively undervalued, and slapped a $21 target price on a stock hovering around $9, I took notice.

But, hey, it’s just a research report. And it’s essential to keep these reports in perspective, to understand that the company issuing the report may be self-interested (i.e., they may own the stock directly or through a subsidiary). That if you have ten securities companies issuing reports on one publicly traded company, often, nine will have a ‘buy’ or ‘hold’ recommendation and one lone voice will issue a ‘sell’ recommendation.

What does this all mean? While stock analysis may be informative, prudent and reasonable, it’s also self-promotional. By way of research reports, analysts do what they can to support the investment industry, to get investors to enter and stay in the game.

So while TD’s report was intriguing, it wasn’t enough to convince me to buy AC.

And the $21 target price? Which was more than double the current value?

Every investor must absolutely, positively, take these with a healthy grain of salt, skepticism and doubt. If I’m not making myself clear, how about this: Do NOT make investment decisions based solely on a stock analyst saying a certain stock is about to lift off, destination moon.

Because here’s the thing about target prices: they’re educated guesses, nothing more. Granted, securities analysts have access to more information than your typical investor, and may have more of an understanding of a particular industry and inner workings of a particular company. But, and this is hugely important, they do NOT know where a stock is headed, no matter how confident and blustery they appear.

 


Off Target

Consider a research study published in 2006 by Mark Bradshaw of Harvard Business School and Lawrence Brown of Georgia State University. These two guys examined nearly 100,000 12-month price targets issued by analysts from 1997 to 2002.

And here’s what they found: only 25% of stocks were at or above target at the end of a 12 month period; and less than 50% of stocks exceeded the target (then fell back) at some point during the 12 months.

This is their conclusion:

“Target price forecasts are overly optimistic on average, and … analysts demonstrate no abilities to persistently forecast target prices.

This evidence is consistent with prior findings of low abilities of various experts to forecast interest rates, GDP, recessions and business cycles, and the infrequency with which actively managed funds beat the market index.”

Okay, fine. Then are price targets and analyst reports of any use? Sure. Read the reports. Understand the rationale for slapping on a high price target. But don’t be sold. And certainly don’t let these reports be your only information source upon which investment decisions are made.

Getting back to AC, reading TD’s report was step one. After which I reviewed AC reports issued by other securities firms; researched and compared other airlines based within Canada, USA, and elsewhere; and read domestic and foreign newspapers, searching for information about the airline industry. And after taking time to digest all this information, I made the decision to buy AC.

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The Times, They Have A Changed

It just so happens that as I was contemplating purchasing shares in AC, Warren Buffett was considering buying certain American based airlines. And after word got out that Buffett invested nearly $10 billion in four airlines in late 2016, he had this to say:

“It’s true that the airlines had a bad 20th century. They’re like the Chicago Cubs. And they got that bad century out of the way, I hope.”

As an investor, what did Buffett’s considerable investment do for my psyche, for my decision to buy AC? Reflexively, I experienced a boost, felt good about my call. ‘Hey, look at me, I got in the game before Buffett.’

Then I talked myself down. I mean, what did it really matter that I spotted an investment opportunity before Buffett? It meant nothing other than I may have had access to some similar information. And just because Buffett is buying airlines, that in itself is no reason for me to buy. Because my investment objectives are likely different than his. Because he can afford to lose $10 Billion, and I’ll be hurt if I lose a lot less. And most importantly, even though Buffett is an investing genius, he’s human (gasp!) – no, really, he is – and he too experiences losing investments.

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Higher and Higher … Not

This week, nearly one year after my buy of AC, the stock soared to $22. More than doubling my money. Well, look at that, the TD analyst was right! Uh huh. And on 50-75% of his other predictions he was wrong. So, as my teenage son would say: whatever.

Still, I have to tell you I was feeling good. To my thinking, I bought low, and sold high. The perfect trade. And I rode that wave of satisfaction for about 24 hours. Because the next day, I read a new report issued by TD. Seems that they have now upped their target price to $34. Other securities analysts have also increased their target price, most to the mid and upper 20s, with one lone voice calling for a fall back to the teens.

And for a few minutes after reading these ambitious price targets, jello does jiggle my brain. Suddenly anxious, I’m thinking, uh oh, did I sell too early? The analysts say AC stock is going even higher! I could make even more money! Oh no! Why did I sell?!

The insanity then passes. BuddhaMoneyLama takes hold, reminding me that greed sucks. Telling me to be grateful for my good fortune, for my wisdom to sell at a peak. All is good now. Mental balance returns.

Will AC go higher still? Maybe. Do I care? No. Because I’m no longer invested. Because I’m satisfied with my profit and am now looking forward to investing the proceeds in other companies that offer better value.

And I’m certainly not buying the analysts bluster that the stock will now rise another 75%. I mean, this is what analysts do. If they’re lucky enough to make a correct call on target price, as soon as the price is reached or within spitting distance, they raise their target even higher. ‘Hold forever; the stock will go up, up, up!’ And they do this because it’s their job, to entice more people to invest in the stock market.

Here’s what I have to say to that: don’t succumb to jello brain. Once a security has reached YOUR target price, whether on the upside or down, stay disciplined and sell. Say thank you very much. And move on to the next investment.

 

 

 

 

 

 

 

The Seattle Project

There was an amazing response to my last post about Hygge (pronounced “Hoo-gah”). So I’m following up by continuing the discussion, focusing in on this thing we call happiness. Exploring why happiness matters, and how to bring more hunky-dory feelings into our day-to-day living.

Not just because happiness is a worthwhile goal, although mellowing in blissful mental states is most definitely high on the list. But also because when we’re clear-eyed, feeling the groove, and our mind is in a good place, then we’re driven by positive, constructive thoughts, and we make healthier decisions all around.

This includes money related decisions, i.e., better investment choices, increasing savings and reducing debt. In short, happiness is good for the head, the heart, and the wallet.

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Gross National Product … Rejection!

If you read the business pages, you’ve no doubt come across the term, Gross Domestic Product (GDP).

Technically, GDP is defined as the value of all goods and services made by a country’s residents and businesses. In essence, GDP refers to measurement of an economy’s output or production. And it’s used to gauge the health of a country’s economy.

GDP plays a large role in driving government policy and Central Bank interest rates, both of which aim for strong, sustainable GDP growth. Because the thinking goes that more economic growth means more employment, more people making and spending money, and a more prosperous nation.

And, so says conventional wisdom, when people have money to burn, they are happier. Governments like happy, content people because they’re less likely to agitate for change, less likely to ‘throw the bums out’ at the next election. Thus continues the relentless focus on GDP.

The government of Bhutan doesn’t buy it. Bhutan (bordered by Tibet and India; human population less than one million) rejects the idea that prosperity is measured strictly in economic terms. Instead, the Bhutanese people measure prosperity through Gross National Happiness, i.e., ‘well-being’ takes preference over material growth.

But let me be clear here: Bhutan is not saying that GDP doesn’t matter. Not at all, because economic output, growth, has tremendous potential benefits for individuals and all of society. But Bhutan’s question is … growth at what cost? 

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The Happiness Alliance

There’s a non-profit organization based in Seattle, Washington, called The Happiness Alliance (HA). Inspired by Bhutan, these forward thinking folks assume a holistic view of life that expands the concept of prosperity beyond how much dough you can jingle jangle in your pocket.

Here’s the jist of what HA has to say:

  • The purpose of government is to secure equitable opportunities for all people’s happiness.
  • The purpose of the economy is for human happiness and planetary sustainability.
  • The point of life is to be happy.
  • You are the happiness movement.

Radical notions? That instead of going to battle every day for our share of the pie, accumulating as much stuff as we’re able and keeping it to our self, well, we’re all in it together, cooperating, compromising, accepting shared responsibility, breathing life into the notion of ‘common good’.

And we can do so if we understand that,

“You are the happiness movement.”

Really, I love this! The idea that it’s up to each of us to shape our own perspective, to choose to let the light in … or not. Now, I’m not here to tell you what that means, to let the light in. That’s personal, it’s for you to figure out.

But I will reveal my own hand in saying that when enough people see the purpose of government as being to secure equitable opportunities for all peoples happiness, then you get a society like Denmark (see The Danish Way of Wealth) that repeatedly scores at or near the top of the World Happiness Report.

Denmark. Derided by some as a ‘welfare’ state. Praised by others for adopting a balanced approach to life. Not pursuing growth at all costs yet enjoying a high standard of living. Compassionate toward its people. All of its people. Not just those fortunate enough to afford a middle class, or higher, lifestyle.

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What Does Wealth Mean To You

That’s the question we all have to ask. What is wealth? How do our values inform our definition of wealth? And does monetary wealth affect our values?

Is wealth only about accumulating assets? Or is there more to being wealthy? Is it about finding contentment? Does contentment lead to the warm and fuzzies? Some would say that contentment is our greatest wealth.


Enter Buddha

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The cause of suffering is craving. When one is filled with intense drive to acquire, the drive in itself causes suffering, causes much anxiety, and little satisfaction even once the desired object is attained.

Do not confuse quality of life with a quantitative ‘standard of living’. Quantity does not lead to happiness.