Inside The Happiest Country: Denmark

Back in July, I posted an article titled, The Danish Way of Wealth. The article was a hit, with readers sending me oodles of positive feedback. And included in the feedback were comments from a few kind souls who were born and raised in Denmark.

Not being an expert on the home of Hans Christian Andersen, I invited one such friendly, bicycle loving soul, Carl, (who maintains his own personal finance blog: www.moneymow.com) into my virtual world to provide his take on Denmark, and why its citizens are consistently rated as the happiest folks on the planet.

Oh, but before I welcome you to our discussion, you should know that no money or other compensation will change hands between Carl and myself. We’re just having fun here, hoping to provide you with an informative, enlightening and entertaining read.

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Enter Thy Kingdom!

Welcome to the Kingdom of Denmark! (is that introduction okay, Carl? Too hokey? Do tour guides speak like that in Denmark? No? I should stop now, shouldn’t I? Right.)

BuddhaMoney (BM, from here on in): Hey Carl, in the spirit of talk show hosts, welcome to the BM community! No, scratch that. It sounds ridiculous. I’m trying too hard. Let’s just dive right in, okay? How about we start with you filling in some general background about Denmark?

Carl: Sure! Here’s some general tidbits:

  • We’re a small country, about 5.5 million people living on land that’s about twice the size of the State of Massachusetts (the 7th smallest State of the Union).
  • Our native tongue is Danish, a useless language that pretty much no one speaks outside of Denmark. But mostly everyone speaks English as a second language, which is taught in school from third grade onward.
  • As for placing us on a map, our neighbors are Sweden to one side and Germany to the other.
  • And yes, as you already mentioned, I do love biking! And it’s made so much easier by the fact that Denmark is as flat as North Dakota.

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The (Horrors!) Welfare State

BM: Tell me about the so-called ‘welfare state’, as some North Americans pejoratively label Denmark and the other Scandinavian countries.

Carl: Denmark is definitely a welfare state! But unlike residents of countries that favour more capitalist systems, we’re good with this. I mean, close to 100% of Danish citizens approve of our political system, a system that ensures an acceptable level of welfare for all people living in Denmark.

Not to be cute here, but think about the word, ‘welfare’. Divided in two parts, you have ‘well’ and ‘fare’. We want all of our residents to live well as they travel through life. Because we see this as society’s responsibility, and we are all a part of society. Why this is seen as a negative in some parts of the world is beyond my understanding.

BM: There’s complete consensus then about government support given to people?

Carl: There’s close to 100% agreement that taking care of all members of society is everyone’s responsibility. Sure, there’s quibbling about the degree to which the welfare state should support people but not the fact that it should.

BM: Based on what you’re saying, it comes across as though your political parties are generally in agreement on most issues.

Carl: Hey, politicians are politicians, right? Meaning there will always be differences between the party holding power and minority status parties. But I will say that our political landscape is way less fragmented than that of many other democracies. For the most part, all of our political parties are social democratic. And within the social democratic framework, some parties lean left, others right.

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Free Education For All and Virtually No Debt!

BM: I hear that all education is free. Is this right?

Carl: Yup. 100% free tuition from elementary school through to completion of university studies. Bernie Sanders totally envies us! Hah! Know what else? From the age of 18, as long as we are in school and not living with our family, we get paid $1,000 / month. For those who still live with their family, the monthly stipend is slightly lower.

BM: What! Why?

Carl: The thinking is that this money allows us to focus on our studies rather than working a part-time job to support ourselves, which takes away from study time. Still, we are not prevented from working and some people do choose to work part-time jobs.

Also, unlike North America where so may people live with their parents into their mid and late 20s, most Danish people live on their own by the time they’re 20. Simply because, to a large extent, most people can afford to do so with the government giving them $1,000/month.

BM: It follows then that students graduate from university without any debt?

Carl: Correct. Student loans are available from the government at low interest rates but few people see any reason to take a loan.

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Know What Else is Free? Health Care

BM: Tell me about health care in Denmark.

Carl: Like education, there’s no political debate about the provision of health care. It’s free and we all agree it should be free.

BM: Well, it’s not really ‘free’. Health care is paid for through income taxes, yes?

Carl: Fair enough. That’s right. Just like in Canada. The only medical procedures you’ll pay out of pocket for are cosmetic services. And included in health care is dental treatment. Although this is free only until age 18, after which you pay out of pocket.

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We’re Not Utopia

BM: Not that I want to bring down this feel good story about your homeland, but are there any negatives you see about Denmark?

Carl: No problem, BM! Sure, Denmark isn’t utopia. We have our share of problems too. And the big time problems are similar to what other countries are experiencing.

Take immigration. Owing to increased immigration to Denmark, there has been a considerable rise in support for the right wing (nut) parties, with about 25% of Danish voters backing parties with a nationalist, close the border bent. The unfortunate response from mainstream political parties has been to make it increasingly difficult to immigrate to Denmark. I see this development as shameful. Because people from all over the world make positive contributions to Danish society. We used to be a more open country. Sadly, this is changing.

Then there’s the urban/rural divide. Politically and socially, Denmark is becoming more divided between people living in large urban centres and those living in small towns. Again, sadly, this divide creates more conflict and tension within our society.

And of course, there is the issue of taxes. While we benefit greatly from free education and health care, we pay an enormous amount of taxes! Our tax system is progressive so the more you earn the more you pay in income tax. The downside here is that, as you earn more and pay more in taxes, the incentive to work harder diminishes, because so much of your earnings will have to be paid in taxes.

Like any country with excessively high rates of taxation, some really talented people opt to leave Denmark to avoid paying high taxes the rest of their life.

And the same goes for successful companies. I mean, what’s the incentive to remain in Denmark if an unfair portion of earnings goes to taxes and not to employees or shareholders? Also, high tax rates make it more difficult for companies to attract talent from outside of Denmark, which of course reduces our global competitiveness.

BM: You mentioned that few Danish residents take on student debt, which is amazing when compared to skyrocketing debt rates among North American college students. What about credit card debt? Is this an issue?

Carl: Credit cards are used somewhat but much less than cash and debit, which is much more common. So to answer your question, owing to limited use of credit cards, there’s not much credit card debt. For me, this is a result of strict financial regulation and a culture of low debt that is ingrained in us from the time we are children.

BM: That’s amazing. And smart. And with no to minimal debt, surely this contributes to Denmark consistently rating as one of the happiness countries in the world. What about bicycling? This I suppose also contributes to happiness?

Carl: When was the last time you rode a bike and did not smile? See what I mean! Yes, we love our bikes. Most everyone owns a bike here and rides it! Think of Denmark as having a bicycle culture, whereas you have a car culture in North America. The whole country is flat as a pancake, and the biking infrastructure in the bigger cities, like Copenhagen, is fantastic with whole streets having been cleared to make for larger bike lanes. Like many Danes, I bike to and from work daily wearing my work gear which, for me, is a suit.

Also, and this ties back to taxes, when you consider the amount of import taxes on cars, I totally understand why people choose to ride bikes instead! For example, a Tesla model S that costs $69,500 (USD) in the USA would cost about $118,000 (USD) in Denmark. As for a bike, there are no additional taxes and I assure you that the initial cost, and maintenance fees, are nowhere near the cost of a car.

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Hygge. What’s That?

BM: As you know, one of my recent posts talked about hygge. As you also know, I’m not Danish. Being an authentic Dane, and me being the pretend King of Denmark, I anoint you an automatic expert on this subject. So, please, tell us about hygge.

Carl: Glad to! Hygge is a subject that has been discussed a lot abroad; there are plenty of books about hygge being sold everywhere at the moment. For us in Denmark, it’s part of everyone’s daily life, but we rarely discuss what the concept of hygge means. Everyone just seems to know what it means.

To me, hygge describes a special mood. The closest English word is probably “cozy”, but it is much more than that. I often associate hygge with the picture of being inside during a snowstorm in front of a fireplace with a cup of hot chocolate. It is about the feeling of happiness, trust/safety, fun and relaxation all at once.

We use it mostly as an adjective for different situations. For example, when I describe a nice dinner with some of my friends, I might say that it was ‘hyggeligt’.

BM: Well my new friend, your insights are much appreciated. May your days continue to be filled with hygge!

Carl: Thanks for listening to all my babbling about this tiny country, and may your days be filled with enormous amounts of hygge too!

$1,000 For Apple iPhone 8? Really?

About one year ago, my cell phone contract expired allowing me to upgrade my phone. At the urging of my totally plugged in teenage son, who threatened incessant ridiculing of me for using ancient technology, I upgraded from an iPhone 5c to an iPhone 6. Sure, I had the option of choosing the current model, the iPhone 7, which offered the latest and greatest tech improvements. But I couldn’t fathom one good reason to do so.

The thing is, the 5c was working just fine. It suited my needs, being fast and smart enough (I mean it’s called a ‘smart’ phone for a reason other than being an in your face, silly little marketing ploy, right?). So, just as I had no reason to exchange a 5c for a 7, nor did I have reason to upgrade to an iPhone 6.

But I did exactly that for one reason: cost (so sorry, Teenage Son, my Dad coat of armor makes me impervious to your ridicule!). Not only was there no cost for the new phone but I was able to change my phone plan resulting in reduced monthly charges.

At the end of the day, I had lowered monthly expenses, added more money to my pocket, and was the proud owner of a shiny new piece of stainless steel, glass, plastic, etc, that Teenage Son grudgingly accepted as an improvement, though certainly not worthy of any sort of excitement.

‘Excitement? You want me to get excited? You bring home the iPhone 8. Now THAT’s a PHONE to get excited about! said Teenage Son.

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Bitten To The Core

From 2009 through 2016, new model iPhones rose in sticker price from an average of $629 to $645; a reasonable increase of 2.5%. Then came 2017.

While the retail price of the least expensive iPhone 7 model was $649, Apple tested the waters for big time price jumps by slapping the 7 plus with a $769 tag, an 18.5% jump from the non-plus 7.

And how did consumers respond? They loved it! Expensive or not, beyond their means or not, the 7 was gobbled up faster than a juicy stuffed turkey at Thanksgiving dinner.

And Apple execs loved it, counting profits hand over fist and watching the company’s share price (NYSE:AAPL) soar more than 60% in the past year, from about $100 to more than $160.

So the boardroom thinking went, ‘if the masses are willing to digest an 18% price increase with barely a burp, well, how about we really rock this world by moving the needle to 4 digits for the new iPhone 8, making it the first $1,000 phone?’

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Justified? Reasonable? Or Not?

Oh yes. How exciting. To drop a cool grand on a phone. Who wouldn’t buy in? Who in their financially sensible mind would object to paying a whopping 50% more than the iPhone 7 for a new phone which is substantially the same save for a few new optional, admittedly cutting edge, yet entirely unnecessary features?

Because, let’s face it, this isn’t your father’s 1980s rotary phone (you mean all it did was make phone calls? How quaint. How … how did you survive?), it isn’t the laughable flip phone of the early aughts, and it isn’t even the iPhone 7 for that matter.

Dudes! Dudesses! The iPhone 8 is from the greatest of all tech companies, APPLE, and it’s their new flagship out of this universe cool product that offers infrared facial recognition and wireless charging!

Okay, look, sarcasm aside, here’s the deal: Apple’s making a bet that it can move enough consumers into the luxury phone market. (To be fair, Apple isn’t the only one looking to juice gigantic profits; Samsung, is not far behind. Later this week, Samsung will introduce its Galaxy Note 8, priced at $950). You see, companies in the know understand that if you want to plant your flag in the luxury market, no matter how well built or designed your product, involuntary salivation is triggered in a certain kind of human animal only if product price is moved beyond easy reach of the masses.

Luxury buyers WANT a higher price. I mean, how else would people be able to judge and compare themselves against others? How would they set themselves apart from the riff raff? How would they know who has more money except by what kind of phone you flash to strangers and lovingly kiss good night? (Ooops, sarcasm creeping back in).

So what’s going on? Is Apple gouging? Is this pure corporate greed at play? Is it not enough that Apple is the planet’s most valuable company? That they have more than $260 Billion sitting in the bank (you read that right)? Or … is Apple simply satisfying demand, giving a segment of consumers what they want, and in the process being a good corporate citizen?

Apple’s bet is informed by their belief that consumers will cough up a premium price for a cutting edge product. That increasing price will increase sales. And this thinking is informed by knowing that US consumers spend an average of three hours per day (three hours!!!) on a mobile device, that the Apple name commands a premium, and that consumers will pay to associate with the Apple image.

Because only at its margin is the device a phone. Moreso, it serves as a personal computer, video player, camera, gaming player, GPS system, music player, reader, wallet … and status symbol. And in the minds of tens of millions of people, its become vital to their daily existence. Not only vital, but for some “the iPhone is your dream phone,” according to Satish Meena, analyst at Forrester, a research and advisory firm to big tech corporations.

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Dangerous Dreams

Okay I’m totally out of the loop. Who knew that people have dream phones?! Talk about a marketing home run. Apple, Samsung and their competitors are now burrowed in our subconscious, seemingly as essential to life as oxygen. Or so it seems for some.

And for those folks who gasp for breath when their phone isn’t within reach, the dream is often a financial burden. Because too many folks buy these devices owing to the cool factor generated by tech companies in cahoots with fawning media types.

Sure, for the true techies out there who live for the next digital advance, new model phones may be a must have. But for most of us casual device users, there is no need to buy a new model every year or two or three assuming the current model its functioning well.

But there’s want. And the want is driven by NEW and SHINY and EXCLUSIVE things that inflate our sense of status (well, really, only delusions are inflated, but too many folks derive feelings of being ‘better’ (empty as the feeling is) than others because they own a THING that’s available to relatively few.

Apple knows all about want. Same with Samsung. Any tech corporation worth its motherboard knows that phenomenal sales happen only when there exists emotional attachment. And this kind of attachment is manufactured through savvy marketing.

As corporations go deeper inside consumers heads, vulnerable consumers suffer. Because they convince themselves of the need for an expensive phone that they can’t afford. So credit cards are used for purchases. And when the full balance owing isn’t paid, the consumer incurs interest charges, adding to the total phone cost.

Or wireless carriers offer financing plans, as if this is an excellent solution. I’m here to tell you: NO, IT’S NOT! When purchases are financed, you’re charged interest and interest adds to indebtedness. And as debt grows, savings are depleted or at least not increased, and the consumer’s financial situation only worsens.

So before you chase the dream, do an inventory check of your wants and needs. Measure any desire for a ridiculously expensive electronic device against your inner values. Consider whether you enjoy being played by a giant corporation with an insatiable appetite for more. Ask your self whether you prefer to add to Apple’s monstrous cash pile or whether you prefer to build your own cash pile, through wise spending, saving and investing.

 

 

 

 

 

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. 

 

 

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.

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Danish Way Of Wealth

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures …

Since 2012, the Sustainable Development Solutions Network (SDSN) has undertaken an annual comparative study of happiness within nations. The study measures a host of variables factored into measuring happiness then publishes its results in something titled the World Happiness Report. Now, for anyone who may be about to raise their eyebrows and question whether the study is nothing more than a hippie dippy tie dyed waste of taxpayers money, check your impulse and have a look at some of the study’s purposes:

  • Mobilize global scientific and technological expertise to promote practical solutions for sustainable development, including implementation of the Sustainable Development Goals (SDGs) and the Paris Climate Agreement.
  • Accelerate joint learning and promote integrated approaches that address the interconnected economic, social, and environmental challenges confronting the world.
  • Enable a large number of leaders from all regions and diverse backgrounds to participate in the development of the network.

Seemingly laudable goals? Sure seems so. And all the better for putting forth ideals recognizing that we live in an inter-connected world, a world where the force of an Australian sneeze may reverberate in Chile; a Chinese smile may ricochet in Iceland.

 

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Building Social Trust, Not Walls

Still, what do these stated goals have to do with Happiness?

To answer this question, I’ll pass the megaphone over to Jeff Sachs, co-editor of the study and director of the Earth Institute at Columbia University.

Jeff says that world leaders need to understand what matters most to people if they are to have any hope of creating sound policy. He goes on to say that,

“Happiness is a result of creating strong social foundations. It’s time to build social trust and healthy lives, not [arm our self with] guns or [build] walls.”

What Sachs is getting at is the idea that trusting each other, our elected leaders, and institutions, is essential for an individual and a society to establish a firmly anchored sense of well being. And the bonus about feeling groovy, about feeling in soulful harmony with our self? Aside from the genuinely positive vibrations we share with fellow humans and other creatures, we’re more productive, more peaceful, more compassionate, earn more, and live longer.

And this is how happiness connects to the study’s purposes: governments that truly wish to build an inclusive society, one that fosters social cohesion and sustainable economic development, first need a baseline assessment of their people’s current state of well being. Then comes the task of figuring out what’s working, what’s not working , and implementing change to make us better.

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Is Denmark Utopia?

Each year since the first World Happiness Report was issued, Denmark has ranked at or near the top. Why? What does a country that is home to less than six million people know that others don’t? A country where people prefer to stay inside for much of November through March owing to the cold, and pop umbrellas open for near 180 days of the year because of rain.

Ya, well, weather is a state of mind as far as Danes are concerned. I mean, we’re talking about a country that entertains a steady flow of foreign government representatives who are on a mission to find out what the heck it is that makes Danes so damn happy.

There’s no such rush to the USA, a country sitting at #14 on the happiness scale. Some argue that this relatively poor showing is a result of misguided political leaders who espouse misguided policies emphasizing economic growth above all else. The thinking among these leaders being that more money translates to a better, happier life. Really? Will they never learn?

Living in a monster house does not bring happiness. Driving a Mercedes does not nurture one’s soul. Having more money than one’s neighbour does not elevate self-worth or contribute to one’s value as a human being. Because here’s the thing: happiness is not driven by the bottom line. And this is where America (and some other countries) falls down; with an overriding emphasis on money, the economy, taxes.

Back to Jeff Sachs, he says,

“America’s crisis is, in short, a social crisis. Not an economic crisis.”

So what may the USA, and other countries (I’m not trying to pick here; every country has their pluses and minuses) learn from Denmark? First off, this Nordic country knows neither economic nor social crisis. Along with the other top 5 countries, they rank high for caring, freedom, generosity, honesty, health, income and good governance.  All reflective of a strong sense of community and understanding in the common good.

But you know what’s even better? You know what puts the Danes over the top? A little something known as HYGGE (pronounced ‘hoo-gah’ – see youtube video link here).

 

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HYGGE Is the Secret

‘Hygge’ is a Danish word. Though there’s no precise translation into English, here’s a few close approximations:

  • Cosiness of the soul
  • The art of creating intimacy
  • Cocoa by candlelight

Whichever definition you hang your hat on, Hygge is about an atmosphere, an experience. It’s about being with people we care for, people we love. It’s a feeling that we’re safe; that we may let our guard down; that we may engage in conversation about “big important” issues or silly nonsense; or that we may be silent in the company of others.

Of course, you could say that while Hygge sounds pleasant, the Danes have other reasons to be happy. Such as free health care, free education (from pre-school through university), subsidized childcare, job training and re-training, generous unemployment insurance (about $1900 USD/month after taxes), fuel subsidies and rent allowance for the elderly.

Yes, these social programs cost money. And to fund these programs, Denmark has the highest tax rates among European countries. Agh! Oh no! Taxes are evil! Or … are they? Is it not possible to find a compromise, a balance beneficial to both citizens and society at large, to the common good? Danish folks would say yes.

They say yes to a social system that has a burgeoning middle class, high taxes are acknowledged as a drag on economic growth but the welcome trade-off is a peaceful, caring society where no one, including vulnerable members of society, is left behind.

And this choice in favor of an expansive social system is made with awareness that collective wealth results in collective well being. In this regard, taxes are far from evil; rather, they’re perceived as an investment in society. They’re a purchase of quality of life. Because sharing and spreading wealth reduces risk, uncertainty and anxiety among citizens. And doing so nurtures happiness. And spreads the joy of Hygge!

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The Humility of Hygge

Oh, there’s so much more to say about Hygge, this word, this concept, this value, embraced by so many Danes, and contributing to one of the most successful societies we know.

Hygge is humble. Hygge is not rushing. Hygge is moderation. Hygge is watching leaves fall, baking cookies, sharing stories and laughter. Hygge is playing board games, swimming in the lake, dining on home cooked food. Hygge is saving money, making do with less, savoring simple pleasures, being grateful for what you have. Hygge is listening to birds sing, watching a child ride a bike or, better yet, riding a bike with the child. Hygge is the right atmosphere, degree of comfort and warmth, wanting to be engaged with people, caring for whom you are with. Hygge is real, balanced, down to earth.

In effect, Hygge is anti-bling, anti-consumption, anti-prestige not for ideological reasons but because it is not possible for money and entitlement to buy Hygge. In fact, if money is used in an attempt to improve Hygge, well, this act in itself is so anti-Hygge that the Hygge factor will be reduced or eliminated altogether!

What else?

Hygge is Candles. The Danes burn more candles by far than any other country. Candles, you see, create the right atmosphere.

Hygge is Presence. In this sense, Hygge is Buddha-like in emphasizing that we Be Here Now; welcome each and every moment.

Hygge is Simple Pleasures. Coffee, cake, cookies, chocolate. Whatever relaxes your mind and warms your heart.

Hygge is Equality. ‘WE’ takes priority over ‘ME’.

Hygge is Gratitude. Enjoy what you have; do not envy others.

Hygge is Harmony. Life is not a competition. We like you for you, not because of your achievements.

Hygge is Comfort. Get cozy. Relax. Take a break. Sip tea.

Hygge is Compromise and Truce. No drama. Let’s be kind and get along.

Hygge is Togetherness. Building relationships.

Hygge is Shelter. Your home, your country, this world, is your tribe. A place of peace and security.

If nothing else, my hope is that by reading the word ‘Hygge’ so many times that you now feel somewhat comfortable enunciating the word out loud (H00-gah). May you embrace Hygge!

ps. thanks to Meik Wiking, chief executive officer of the Happiness Research Institute in Copenhagen, for writing The Little Book of Hygge: The Danish Way To Live Well. A warm, inviting read that inspired this post, inspired me to continue learning more about Danish society, and to welcome more Hygge into my life.

 

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MEIK WIKING jacket.jpg

 

 

Amazon Prime: The Inside Story

When shopping for books, my first choice is to buy used at the online marketplace, AbeBooks, a company that sources books from local bookshops around the world.

The fact that the books are used? Not an issue at all. I pay a whole lot less than what I would have paid if buying new, with the added bonus that every book I’ve ordered arrives in excellent condition.

The downside, if you can call it that, is that books may be mailed from countries like Australia or England and not arrive for anywhere between 7-21 days or so after placing an order. But I’m good with that. Because it’s rare, if ever, that I absolutely need a book immediately. And you know what? It’s fun waiting. It’s fun anticipating arrival, not unlike looking forward to going on vacation. Waiting reinforces my understanding of the phrase, ‘patience is its own reward’.

Besides, if I need a book immediately (owing to impulse control system shutdown), it may be available at a local bookstore. If not, there’s always Amazon.

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Prime Time With Amazon

Amazon bills its annual Prime Day as ‘a one-day only global shopping event exclusively for Prime members!’ Oh, how exciting, more shopping, more deals, more spending, more getting excited about … stuff.

Sarcasm aside, Amazon is not (surprise, surprise) acting out of the goodness of its heart when enticing consumers to shop until they’ve maxed out their credit card. Nah. Instead, Amazon is intent on taking over the consumer world (chewy thought: given Amazon’s voracious and insatiable growth, will the federal government step in one day, brand Amazon a monopoly and require it to break up into smaller pieces? Stay tuned).

And here’s where Prime Day greases the ravenous machine. July being a quiet retail period, Amazon offers big time deals. In the process, they attract new third-party sellers to their site (which, in turn, enhances product assortment) and persuade more consumers to sign up for Amazon Prime. Because, remember, this is a member’s only sale. And as one credit card company put it in an advertising campaign of years past, ‘membership has its privileges’. Right. The privilege to buy more stuff. Whooo Hooo (ooops, sarcasm reflexively returned).

Jeff Bezos, Amazon’s founder and CEO, knows exactly what he’s doing. Bezos knows consumer behaviour inside out. He knows that the first two Prime Days (this year is #3), generated profits 4x greater than the typical daily profit haul. And he knows that getting consumers to pay $99 to become a Prime Time member is only part of the pitch.

Because internal research has shown that Prime members spend more time noodling around Amazon’s ecosystem of services, and they spend more money. All of which further cements Amazon’s retail dominance.

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Why I Shop At Amazon

More and more, I buy stuff at Amazon. At first, it was only books that I couldn’t find on AbeBooks (did I mention that Amazon bought AbeBooks in 2008?), because even if they didn’t offer a new book priced lower than competitors, they offered free shipping. And convenience. And reliability. And excellent customer service if a package got lost or was damaged during shipping.

Now, for all those reasons, I’ve been buying other stuff at Amazon. And, obviously, I’m not the only one, their reach now being far (think India and China) and wide (think decimated mom and pop bookstores, not to mention the once substantial, now deceased, Borders and Circuit City, and the recent acquisition of Whole Foods). Recent talk of Nike selling their products on Amazon was enough to boost Nike share price and drag down their competitors (Foot Locker fell 6%; Dicks Sporting Goods dropped 5.3%, Under Armour shed 1.5%).

The thing is, Amazon lives up to its name in breadth. The company is a huge distribution channel and only getting bigger, selling everything from clothes to cat litter to car parts. So other retailers want access to that connection to massive hordes of consumers. And not having that direct line to potential consumers is proving damaging as people continue to shop more online than in store. So damaging that some are closing up shop (for example, Sears is now kaput and Macys has shut 100s of stores).

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It’s Just A Store

Amazon makes shopping easy. And the prices are good. The sales even better. Fine. Still, it’s just a store. It sells stuff. You want to spend $99 to become a Prime Member? That’s your call. But don’t buy stuff just because its ON SALE or a GREAT DEAL or a LIMITED TIME OFFER. Don’t fall prey to the marketing jargon, the nonsense, the only purpose of which is to get you, the consumer, to open your wallet and fatten Amazon’s profits.

As for me, I’ll survive just fine without Amazon Prime and their promise of delivery within 2 hours or 24 hours. Sure, it’s a convenient service. But is my personal convenience really that important? Nope. I don’t need it. In fact, I don’t want it. Because I prefer not living life at high speed. I prefer anticipation. I prefer the wait. And I prefer not to buy more than I need.


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Enter Buddha

To be impatient is to be anxious, uneasy, even greedy. Patience, however, is alert, active, expectant. Patience is not dull, it is radiant. It is a flame burning bright.

 

Buy Substance, Not Image

Last week, my Apple MacBook gasped, wheezed, and hiccupped uncontrollably. Then there was silence. After more than eight years of devoted service, this was the machine’s way of saying goodbye. I said my thanks, expressed gratitude, and made arrangements for its various parts to be recycled. Moments later I was online at the Apple Store purchasing a replacement, a new MacBook Air.

And I didn’t think twice about shelling out a fair bit of dough for another pricey Apple laptop. Because the brand has earned my trust. Not owing to superficial matters such as the ‘cool, hip, styyyyllllish factor’, slick marketing or product packaging. But because my experience with Apple products has led me to associate the brand with superior quality, durability, reliability, and ease of use.

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Brand Power

Branding is important. It sells an image. From a consumer’s perspective, the brand communicates what the organization is all about. And it speaks to more than the utilitarian function or benefits of a particular product or service; it’s also intended to speak directly to each consumer, to make each consumer feel special, to tap into our emotional network for the purpose of bonding consumer with brand thus giving birth to Loyal, Repeat, Profitable Consumer.

If this seems part science fiction, part Dr. Evil (cue Mike Myers), well … welcome to the mercenary underbelly of marketing (cue sinister laugh of Vincent Price – have a listen, and a laugh of your own, @ https://www.youtube.com/watch?v=fRamB30E9mU).

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Okay, maniacal chuckles aside, it’s time for a real life example: Nike (NYSE:NKE). The shoe manufacture of sizeable fame and fortune that takes its name from the Greek goddess of Victory.

The corporation that became known as the ‘Just Do It’ brand. And in bringing to life one of the most successful slogans ever, Nike knocked the socks off the advertising world. More importantly from a shareholder’s perspective, they gained millions of new, faithful, true believer customers, enabling them to sprint miles ahead of the competition.

Why has ‘Just Do It’ been so successful? Well, even though their primary product back in 1988, when the slogan first aired, was shoes, Nike didn’t position themselves as shoe sellers. Instead, Nike was selling courage.

Here’s what I mean: the slogan speaks to laziness. To varying degrees, happens to everyone, right? We get lazy. And laziness is our foe. That’s where magic shoes come to the rescue, shoes marked with a simple swoosh, shoes ushered into the public consciousness with a battle cry, shoes urging you to wrestle with your inner sloth, shoes beseeching you to suck it up, get off the couch and DO IT!

Do whatever it is that’s necessary to reach your goals, be they business or personal. And know that when you DO IT, when you engage in hard work and personal sacrifice, when you roar like a lion (or a highly paid athlete) you empower your self.

For close to thirty years, the Just Do It message has resonated with huge numbers of consumers worldwide and facilitated Nike’s continuing success.

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Whatever You Do, Don’t Identify With A Brand

That’s all well and good for Nike. But what about the consumer? Is it in the consumer’s best interest to attach them self to a brand? To be hypnotized by a swoosh? To believe that one kind of shoe or computer or car or anything else being sold in our hyper-competitive commercial markets is better or awesome or desirable simply because of a logo or a slogan or an all too common celebrity endorsement for those companies lacking the oomph! of a Nike slogan?

Frankly, it’s delusional on the part of the consumer to think this way. To think that marketing campaigns are anything but surface bluster, hype and showmanship the sole purpose of which is to stimulate sales, NOT to accurately reflect quality or value. Or to think that celebrity endorsements have any substantive value whatsoever when it comes to the worth of a product.

Ahhh, but mine appears to be a lonely voice in the wilderness (said with an Irish lilt).

Because brands, together with marketing campaigns, are powerful. Moreso because consumers want to believe the fanciful imagery being sold.

They want to believe that slipping into a pair of new Nike shoes will let them soar like Michael Jordan or slice and dice a tennis ball like Roger Federer. Consumers want to believe that dabbing on Chanel No. 5 will increase their sex appeal because Nicole Kidman is paid $4 million/year to shill for the perfume. Or sipping Nespresso, owned by Nestle (OTCMKTS:NSRGY), the $275 million consumer products giant, is fashionable therefore desirable because George Clooney takes home $5 million/year for being its poster boy.

Fascinating really. Actors, athletes … celebrities of all stripes, are people hired by for-profit organizations to capitalize on their ‘star’ power, to seduce wide eyed consumers. Consumers who spend too much money, sometimes more than they can afford, sometimes taking on destructive debt, sometimes losing or misplacing their sense of self, as a result of buying into the celebrity brand.

Why, is the question someone as naïve as myself asks? Why does the magnetic celebrity pull exist? Is it because the consumer wants to feel like the celebrity? Is it because the consumer admires the celebrity’s image (because that’s all the public is privy to – an image), and feels connected to the celebrity when wearing clothes or perfume that the celebrity endorses? And this makes consumer feel better about them self?

Hmmm. This is what I’m going with: bewitched consumers, having fallen prey to the misguided notion that in buying a product they are connecting with the ‘star’, feel a sense of belonging, camaraderie, and all around feel good.

An accurate understanding or not, what’s more important is for consumer to ask: what is the benefit, and what is the cost of my expenditure?

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Who Do You Trust With Your Life Savings?

Financial institutions do their own form of branding.

Wealthsimple, one of the larger independent American Robo-Advisory companies, recently circulated a money focused article apparently written for them by Kevin Bacon, the actor (https://www.wealthsimple.com/en-us/magazine/money-diary-kevin-bacon). All I can say to this is that Bacon may not want to give up his day job.

Why would Wealthsimple want an actor to write an article about money? Straight up, they’re banking on his status to attract new customers.

Colonial Penn, an insurance company, uses Alex Trebek as their spokesperson. And why not? He has hosted the most popular television game show ever, Jeopardy, for more than 30 years. So, clearly he knows what he’s talking about when it comes to insurance products. Okay, sarcasm aside, Trebek is an excellent front man. Widely recognizable name, calm presence, pleasant on stage personality; everything about Trebek says he’s a perfect fit for a staid industry.

But does this mean you should do business with Colonial Penn? I really don’t know. Because I haven’t researched the company. That said, there’s no way I would make a decision based on a T.V. personality pitching their products. Because it makes zero impression on me, the fact that someone who earns their living playing someone who they’re not on an entertainment show is now their public salesman (because that’s what actors do, they play, and as they play, they sell an image void of authenticity; and this is what earns the public’s trust, an inauthentic image, and the more the public fawns over the image, the more the actor is paid for their role, the more this reinforces the actor’s inherent narcissism … and the public continues to buy in???).

What matters is substance, not image. If Colonial Penn, or any other company for that matter, backs up image with substance, then it’s all good. Apple backs up image with substance, with quality and value. So does Nike. As do some other companies.

For the sake of your wealth, whether your buying products or services, financial or otherwise, ignore the show, the glitz, the imagery intended to sucker you in. Instead, dig deep into the notion of value, fully understand costs and benefits before making the call or clicking ‘purchase’.

I mean, we’re all consumers of one sort or another. And in the consumer role, it’s always to our advantage to be fully informed.

Power to Robo-Advisors

The word is that Robo-Advisors are good for your financial health. Why? Because they offer similar services as the human kind of financial advisor at lower cost. If you’re paying less in management fees, your returns are higher, your portfolio fatter. That’s the dominant sales pitch. And with the nascent industry growing from $16 billion (USD) under management in 2014 to more than $160 billion today, there’s reason to stop and look at what a Robo-Advisor may do for you.

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Financial Giants Muscling Into The Game

As retail investors flock to Robo-Advisors (i.e., software programs using mathematical algorithms to generate investment advice and manage your portfolio), pioneers like Wealthfront and Betterment must now compete against big boys such as Charles Schwab, TD Ameritrade, Vanguard Group, and Fidelity Investments.

And the bandwagon keeps growing. Bank of America activated Merrill Edge Guided Investing earlier this year, Morgan Stanley announced that they’ll be launching Morgan Stanley Access Investing in the fall, 2017, and Goldman Sachs is gearing up to introduce its own Robo-Advisory services.

In Canada, several independent firms (i.e., WealthSimple, QuestTrade Portfolio IQ) offer Robo-advisory services with Bank of Montreal being the only bank having a firm foothold. With momentum and money on the side of robots, it would be surprising if Canada’s other big banks didn’t roll out their own Robo-Advisor in the next year to secure their slice of this particular money pie.

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How Does It Work, This Robo-Advisor Thing?

Robo-advisors are a third option for investing; doing it your self and full service financial advisory services being the other two options.

Robo-advisors are convenient (24/7 online access) and more accessible and affordable than hiring a financial advisor (you often need a minimum of $100,000-$250,000 to retain the services of a financial advisor; as for Robo-advisors, some do not require a minimum balance to open an account, others are as low as $500).

Depending on the specific Robo-advisor, they offer different degrees of automation: fully automated or a hybrid set up offering access to old fashioned humans for an additional fee.

Either way, getting started involves you answering some questions about your age, assets, financial goals, risk tolerance, investing time horizon, etc. Moments later, computer algorithms propose a cookie cutter portfolio most suitable to you.

Available investments typically include a range of exchange traded index funds. The software continually monitors your portfolio and periodically buys and sells to maintain your stated risk tolerance and financial goals.

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Hype or Substance?

Despite impressive growth of Robo-Advisors in a relatively short period of time, $160 billion is no more than a few drops in a financial industry bucket worth somewhere around $20 Trillion. Still, this niche is expected to continue growing thus more players entering the market.

So … should you bite?

That depends.

  • If you have less than, say, $100,000 for investing, and you want some guidance, then definitely give it a go.
  • If you prefer interfacing with computers rather than humans, again, Robo-Advisors are for you.
  • If you’re currently working with a financial advisor and are not entirely satisfied with the value they bring to the table, then consider opening a Robo-Advisor account to see if it better suits your needs (this may include intangibles other than fees such as guiding you on debt reduction issues, divorce, house purchase, loans, estate planning, and any other financial issues not directly related to investing).

Well, what if your advisor places you in passive funds? They’re still charging you 1 or 2 points. Why pay high fees when an effective Robo-advisor portfolio may be built for less than half the cost?

  • Back to value, let’s give a little more space to fees.

Depending on your robot of choice, we’re talking management fees in the neighborhood of 0.25 – 0.50% for a Robo-Advisor.

Compare this to financial advisors of the human variety who typically charge between 1.0 – 2.0%.

Seems like a small difference in fees? It’s not. Fees matter.

Consider a simple example: your portfolio is worth $500,000. Fees are 2%. Total fees for the year equals $10,000. For simple illustration purposes, if your portfolio remains at $500,000 for 30 years, that’s $300,000 in fees paid. Compare that to 0.5% fees that results in annual fees of $2,500. After 30 years, the final tally is $75,000. Either way, that’s a whole lot of dough toward fees but the 75k is much more palatable than 300k.

Of course, you could slash fees even more by avoiding both humans and robots. Instead, open a discount brokerage account, buy exchange traded index funds, and pay the $5-$10 transaction cost for each buy and sell.

But … what if you’re not the do-it-yourself type when it comes to investments? What if you don’t have the time, knowledge or inclination to manage your investments solo?

Well, then a Robo-advisor would be your next best choice.

 

 

 

 

 

 

The Rabbi, The Monk, The Money

I know, the headline sounds like the beginning of a well-worn joke or a film title that’s trying too hard to be irreverent. But here’s the thing: this post is really about a Rabbi, a Monk, and Money, as odd as the title may seem. Then again, this is BuddhaMoney. And we’re known to sprinkle spirituality into the money mix, you know, for the sake of leading you toward a balanced, fulfilled life. Because, hey, this is who we are and what we do.

Digging deeper than the snappy title, this post is about whom you choose as a financial advisor, mortgage broker, or anyone else hired to care for money related aspects of life.

That said, it’s not that you need to choose folks of the cloth for financial guidance. And, anyway, it’s not like there’s a whole lot of spiritual gurus out there who double as profit seeking money experts. But there are some. Or a few, anyway. Um, well, let’s say four that I’ve come across. Still, regardless of scarce availability of sage-turned-crackerjack-financial-pro, we can learn from the ones who do exist.

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Does Money Matter? Oy! Do You Really Need To Ask Such a Question?

There’s this guy named David Frankel. Frankel works as a mortgage broker in Philadelphia. His previous gig included, among other responsibilities, officiating at weddings and bar mitzvahs as a Rabbi.

Like other quality mortgage brokers, Frankel knows the ins and outs of mortgage related issues. And he surely does his best to secure the lowest possible rate on terms most favorable to clients.

Okay, sooooo … what differentiates Frankel from competitors? Given that there are other quality brokers out there, what makes Frankel a guy you want to hire? Does his rabbinical knowledge and experience translate to a business edge?

Lets answer this by turning back the clock to the middle / late aughts. Remember 2007-2009, when the financial world imploded? And the building blocks for the economy busting meltdown were constructed with unsavory, immoral, dishonest (I’m being kind here) people and institutions intent on making a buck for them self any which way they could?

There was something missing from these kind of people, the kind who didn’t think twice about taking part in the Get-It-While-You-Can-Get-It-While-Its-Hot festival of selfishness and greed. What was missing? How about a crazy little thing called Integrity.

And this is Frankel’s edge. Integrity. In an industry where self worth is measured by net worth, this is where Frankel, and others (spiritually learned or not) with equal parts Integrity excel. These are the kind of people who stitch together the fabric of society. These are the kind of people, truthful people, who you want to hire for money matters.

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In the mortgage business, people like this do not try to provide you with the largest mortgage possible (so the lender may make more money) nor an elephant size Home Line of Credit (so you may be tempted to borrow more against the equity in your home thereby increasing your debt so, again, the lender may make more money). Instead, their purpose is to provide you with nothing more than a mortgage that suits your needs and fits your financial circumstances.

And before rushing through paperwork and sending a bucket of money your way, they patiently learn your needs through asking questions. And listening. And caring. And encouraging you to consider what a home means to you, what money means to you. And when all is said and done, the person with Integrity is just as satisfied with a fair transactional profit as they are with knowing that you, their client, is equally satisfied.

Frankel, and people like him, are the kind of people you want to deal with. Genuine people whose actions are guided by honesty, compassion and a sense of fair play. Guided by a crazy little thing called Integrity.


 Chewy Bit

For a riveting ride inside the minds that cratered Main Street and Wall Street, read The Big Short. It’s a movie too but the book offers way more detail and is equally fascinating.


Suffering Prevention Specialist

The basis of some religious teachings is something along the lines of … ‘suffering exists; we will teach you how to overcome suffering.’

Doug Lynam, former Benedictine Monk, current Financial Advisor, sees himself as a Suffering Prevention Specialist. (Gotta love the job description!) Like Frankel, Lynam truly cares about his clients, saying that his work “requires all of my mind, heart, and devotion”.

Specifically, he’s focused his efforts toward reducing suffering among schools and their employees. Seems that there have been too many schools farming out employee retirement plans to incompetent, or even negligent, money managers. The result being the blowing up of later in life dreams through depletion of pension assets.

Lynam’s response? Instead of smoke billowing out his ears or filing a frenzy of lawsuits, Lynam calmly steps up and takes action by devoting him self to helping schools build more effective retirement plans. Because it wouldn’t be enough to only sympathize with the plight of those who have suffered financial wrongdoing. The sympathy, the compassion, has to be combined with mindful action that helps people.

And together with other caring people working at LongView Asset Management (including a Hindu Nun and a Buddhist Chaplain), Lynam takes action not only through constructing and implementing sound financial plans. He also walks the extra mile for clients … because that’s who he is.

In this sense, Lynam helps people work through other issues loosely related to finances:

“Perhaps one of the cardinal sins that I see the most, though it’s not a popular one to talk about, is sloth.

Some people are afraid but also a little lazy, and they don’t really want to do the hard work of facing their mistakes or lack of organization and knowledge on these subjects and take responsibility.”

Here, Lynam recognizes the life challenges and difficulties people experience. And he does what he can to educate, guide, and help people alleviate their suffering.

Well, I wouldn’t be going out on a limb here in saying that Lynam is certainly not your typical financial advisor. But he is the kind of financial advisor from whom most everyone would benefit.

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Integrity Is Available For All

Like I said earlier, there aren’t a whole lot of spiritual gurus out there who double as money experts. But there are others plying their trade in the financial industry whose principled, stand up values inform their work and their approach to business relations. These are the kind of people you want to do business with; people who show by their words AND actions that they care about you and your family. People with Integrity.