Category Archives: Saving

Nearly Everything I Learned About Investing I Learned From My Father, Revisited

Happy belated Father’s Day to all the Dad’s out there. This is an older post that I have edited, expanded, and added to.

My father is not an investor or “bank guy” by any means. But thinking back upon childhood and beyond, I realize that a good amount of the things that are important to investing, are the same simple life lessons my father tried to instil in me when I was young.

They are tidbits of wisdom that seem to have limitless application. Here’s a few that come to mind:

Use the right tool for the right job

Whenever my dad caught me trying to hammer something with the handle of a screwdriver, or unscrew something with a butter knife, he used to stop me and tell me to use the right tool for the right job. Taking the 30 seconds to grab a hammer was far better than breaking the screwdriver and being out the time and money that it would take to replace.

The same can be said about investing. We have a variety of products we can choose from, and several of them have their specific purpose. Use a TFSA if you want to save up for a car, not your RRSP. Use an RESP to save for your child’s education, not your un-registered account. There are benefits to using the right tool for the right job, and penalties for not.

knife for the peanut butter, spoon for the jam

I think this advice was brought to the both of us from either the Flintstones or Sesame Street, but my dad would repeat the jingle if we were going to make a peanut butter and jam sandwich. It’s a simple life lesson: be cleanly and organized.

If you are in the fortunate position to have “extra” cash to play with, or if you “have a hunch” that a stock is going to move, hey, more power to you. Take the plunge, if you see fit. But don’t get your ultra-risky speculations mixed up with your legitimate investments that should be the foundation of your savings.

Simply put, don’t take the money you are planning to use for a down-payment on a house and put it all in the latest IPO. If you can take a gamble, set up a separate account and keep only a small portion of your wealth there.

More importantly, it is linked to the “use the right tool” section above: It is important to keep certain accounts separate, even if you don’t invest in individual stocks. We need to remember time horizons when investing, and use the appropriate vehicle.

Do it right the first time

Nothing upset my father more than when he asked me to do something and I did it half-heartedly. Inevitably, he would make me re-do it. It taught me to put the effort into getting it right the first time.

This doesn’t always work with investing; we all make a bad decision from time to time. But if you can make the effort to make sound decisions, you won’t have to try to make up lost ground in the future.

Creating an investing plan for yourself, deciding an asset allocation, and following the plan is far more important that finding the next Microsoft. The fact of the matter is that most of us will never find the next Microsoft early enough, nor would we sell it when it should be sold. But following an asset allocation plan is something that we all can do… easily.

Keep your head up

This was a hockey lesson. I remember forgetting this advice once, and skating full speed into another kid behind the net. My tailbone hurt for a week.

If you are a do-it-yourself investor, then you will have to keep on top of things, especially if you are investing in individual stocks. Buy and hold is a legitimate strategy, and one that I tend to follow. But if you are not reading up on your companies, then you may be left holding some useless Enron stock, which may hurt more than your tailbone.

For indexers, it is important to keep marginally informed, and take care of re-balancing when your holdings get out of whack by a decided percentage, or at decided intervals.

Another day another dollar

More than advice, this is something he would say (still says to this day, in fact) when he got home from work and I would ask how his day went.

I’ve said in another post that I view my human capital as my most important asset, and it really stems from this saying. As long as you can keep working, you can keep earning, which means you can keep saving. It also means that you can spend when you need to, knowing that you have this powerful asset in your portfolio.

I prefer Steve Martin’s version, though: “All I’ve ever wanted was an honest week’s pay for an honest day’s work.”

Do as I say, not as I do

Probably the most frustrating to have to hear, but one of my favourites now, I would get this line thrown at me when I caught him in some sort of seemingly questionable situation where he told me one thing, but wasn’t following his own advice.

This is as important in investing as it is in life. There is a lot of good advice and wisdom out there from several people who know a lot more than you or me. It doesn’t mean that we need to do exactly what they are doing, especially when scale is an issue.

Warren Buffet is very good at recognizing value in stocks and whole companies. But he has said that the majority of investors would be better off by buying a basket of index funds.

Check your base

Living on a farm, ladders were constantly in use. Whether it be for changing light bulbs, painting barn doors, re-shingling the roof, cleaning the eaves or picking cherries, we were always up on them. No matter how many times I would climb the ladder,  he used to always tell me to check the footing before climbing, and then again on the first rung or so.

A solid base to a portfolio should be able to avoid (or lessen) the impact of a hard fall from market heights. This helped me when the market was approaching 15,000 (I put the brakes on at about 14 and change in June of 2007). The ladder started to feel wobbly, so I stopped climbing, re-checked my base, stockpiled cash, and had a nice cushion to fall on.

If the ladder starts to feel unstable, check the base, or grab another ladder. High stock prices may offer a great time to move some money into bonds, for example.

Don’t waste Your Money

Kids always go through phases and fads. Often these fads cost money. Whether it is video games, rap music, Pokemon cards or BMX bikes, the truth is that most of these things will be forgotten 10 years out.

My father’s words (and disappointed eyes when I wasted my money on something foolish) have had a lasting impression. I don’t often buy shiny things, and save a very healthy portion of my income.

Put your things away

Whether it was my toys when I was little, tools on the farm, or the jars and packages after making a sandwich, my father always insisted that I put things away when I was finished with them.

Not exactly investing, this mentality has left me with a very organized system for recording income, expenses investments, dividends etc. Good accounting practices are very helpful come tax season.

I’m sure there are several more of these little gems that can be found. Feel free to add some in the comment section.


Scholarships, Bursaries, and Used Books

I studied at university for a total of seven years, earning two degrees in three fields, and a few letters to put behind my name.  I have perhaps only two regrets from my university days: I didn’t make full advantage of the scholarships and bursaries that were available to me, and I didn’t buy used books for the first two years.

From e-mails I have received, I know some of my readers have children that are either at or near university age.  I understand that tuition fees have been on a relentless charge upward (even during my time, tuitions fees were up 90% from my first year to my seventh) but there are ways for students to either gain or save a few bucks.

Buy Used Books

My first mistake was buying all my textbooks new from the university bookstore. I think my first year I paid about $400 for general textbooks ranging from theatrical theory to psychology to astronomy. By my second year I had switched to a double major in English literature and psychology, and my university bookstore bill had ballooned to about $800 –  buying $80 to $100 textbooks on abnormal or applied psychology (plus all the supplemental reading), as well as a few shelves worth of American, Canadian, and modern literature.  I think the Norton Anthology of English Literature alone  set me back about $150.

By my third year I had clued in to the fact that buying used was the way to go (which was ironic, actually, because the majority of my personal/leisure library was bought from used book shops). Buying used cut my book bill by at least half, depending on the courses that semester. As long as there wasn’t a new edition of a psychology text, I could buy it for about half price. For my English lit. books, I bought a used copy from the university store, or went to a used bookshop in town. There is no reason to buy a fresh copy of Shakespeare or Swift, as they haven’t made any revisions recently.

(Edit: I have been reminded by a close friend that I bought the above mentioned astronomy text used… from him. So I guess I was slightly on the ball in my first year.  I have also received an email from another close friend who happens to be an English professor. She makes a valid point that there is much to be had from revisions to the introduction or commentary on literature; there is always new research and theory. So quite often it is a good idea to have the same edition as the course requires, especially if it is a translated work… but you still might be able to find it used.)

Apply for Scholarships and Bursaries

My second mistake was not applying for a wealth of scholarships and bursaries that I could have possibly received. Usually when one says “scholarship”, we think of exceptionally high grades as being required. That is not always the case. I received several scholarships through my program for having an average over 80%, but I never had to apply for these awards. That meant the only work on my part was to earn the grades. But there was much more that I should have been on the ball about.

Quite often you can find small bursaries from alumni of, or local residents around, the university. Many of these bursaries may have a certain grade requirement, but others merely stipulate the student must be in need of financial aid. Take a look at this not-so-randomly selected list of Donor Awards from Brock University. Some are related to grades and program, some are related to grades and varsity sport, others are awarded based on parental employers or the student’s high school.

It is these awards that can really help offset the cost of a university education. (One donor scholarship, for example, is worth $17,600 over four years. The requirements? An average of over 75%, financial need, and meet some residential requirements.) The competition for these ‘application required’ awards and bursaries was often quite low, as students either didn’t know about them, or didn’t get applications in on time.

Because of this, it could be a good idea as a parent to take a look at your child’s university website. Take a look at what your child could be eligible for, and get them to fill out the application. It will only take a few minutes, and it will be in both of your financial best interest.

Do It Yourself

My mother-in-law has slowly been growing a jungle leading up to her front door. Since it has been a slow progression, it hasn’t been something that has stood out. But recently, we’ve noticed its greatness – especially since my wife’s sister had a baby, and one must move away the plant-life to get the stroller past.

Earlier this month, my mother-in-law went on a trip to Korea. When my wife asked one day “What do you want to do today?” I quickly answered that I wanted to tame the jungle. We went over and I took about 30 minutes to clip the craziness that had grown over the walkway.

When my mother-in-law got back, we all went out, and she thanked me. She followed up by saying that she wanted to get rid of it all, and that she would get some landscaping company to come in and take care of it.

I told her not to make any calls because I was about to come into some vacation, and that I would take care of it.

When I started the job I quickly realized that it was more than I had planned for; the company that she hired to remodel her kitchen 2 years ago had left, not only the wooden pallets, but also her old counter-top. They had craftily slid that memorabilia between a shed and a stone wall. So I had to take care of the jungle, and, of course, the refuse of another company.

All-in-all, from start-to-finish, the job took me about six hours spread over four days. Her walkway is now remarkably wide (who knew) and free of anything resembling the Amazon, save for one nice hanging plant.

And finally I get to the financial part: Had I been swift, I would have called in a company for an estimate before starting. Since I didn’t, I have to ballpark on my own salary. Given my average hourly rate and the time spent, I would have received (if teaching) about $300.

I cut away all greenery, but as I had to take each pot one-by-one down the road to an empty lot to shake away the dirt, I will assume an extra $10 for disposal. I will minus $30 with the assumption that having a disposal vehicle would reduce the working time, and we are left with a (roundabout) number of $280.

So here’s the thing: my mother-in-law could have paid (let’s say) anywhere from the equivalent of $250 – $350 to make her walk way as beautiful and accessible as it is now, but instead, I was able to give some time and do it for her.

The totals?

I spent about $15 buying the following: work gloves, a hacksaw and blades (there was also a set of old blinds that I decided to deal with), a short handsaw, garbage bags, a few litres of iced tea.

And for doing all the work my mother-in-law took my wife and I out for dinner this past weekend. (My wife got the better deal by far, as she sat in front of a fan and cheered me for about 2 of the total 6 that I worked)

So what’s my point?

The point is simply this: if you can take care of things yourself, you should do so. I was able to save my mother-in-law (a guesstimate) of at least $150, and all she had to do was take us out for dinner (her suggestion). And I was able to get in some great exercise, a good sweat, and the satisfaction of a job well done.

Now, as I have realized that it is full of unnecessary things, all I have to deal with is the shed.

Re-Post: Inquiring Minds Get Paid

I am on vacation for a few days and unable to update the blog. I thought I would take the opportunity to re-post a few old posts that I like. I originally posted this in March of this year.

In January I noticed I had an interest charge on my brokerage account of about $15. It was for one month at 21% per annum. Worse than a credit card.

At first I thought it was due to my transferring some stock to another account, but the more I thought about it, and the closer I looked at my transaction history, the more I realized that that couldn’t be the case.

I called them tonight to inquire. At first, they said the charge was due to an outstanding balance for the time period. I knew there was no possibility of me having and outstanding balance, so I asked the call representative to look into it.

After about 5 minutes he came back to confirm my suspicion that the brokerage had made an error. He apologized and said my account would be credited accordingly. I thanked him and asked a dollar amount. It was the same amount that was taken from my account incorrectly.

I had two choices at this point:

  1. Accept the return of my money.
  2. Accept the return of my money and raise a stink.

I chose path two by pointing out the fact that they saw fit to incorrectly charge me 21% per annum on one month’s balance, yet were only willing to compensate me the original amount, even though I have been out that money for two months. I should be paid interest for those two months.

Let’s take a pause to point out the fact that I was asking for the same terms… which on $15 would work out to about 53 cents.

He came back about a minute later to offer me a “good will gesture” of a rebate on my last stock commission in addition to my returned money. At $19 savings, that was about $18.50 more than I was looking for.

It just goes to show ya… it never hurts to ask. You just might get more than you were hoping for.

Re-Post: Gender Imbalance and Chinese Savings Rate

I’m on vacation for a few days and am unable to update the blog. I thought I would take the opportunity to re-post a few old posts that I like. I originally posted this in May of this year. 

In my quest to fill the void left by Tom Keene and Bloomberg on the Economy, I’ve been listening to a variety of other podcasts.  The majority of them are bland, boring, and lack the wit and one-liners of Keene.

One good show (though hard to find on podcast) is the Hays Advantage, anchored by Bloomberg’s Kathleen Hays.

On her February 18th show, she interviewed Shang-Jin Wei, a researcher at Columbia University, who has looked at the savings rate in China.

On average the Chinese savings rate is quite high. Many economists point to the fact that China is an export nation, and blame government and businesses for not spending enough in the global economy. Wei, however, points to a more basic human desire as the reason for personal high savings: marriage and gender imbalance. 

In his research (synopsis available here) he found that 30 years ago the gender difference was quite natural – about 105 boys born to every 100 girls. After China implemented the “one child policy” in about 1980, however, things began to change: the gender imbalance widened and savings shot up.

In China, boys are traditionally more valued than girls. Being limited to only one child, many parents will do what they can to ensure that their one child is a boy, whether that be the abortion of girls (technological improvements in ultrasound over the corresponding timeframe have helped this) or infanticide after birth.

After 30 years the results are startling. On average, there are currently 122 boys born for every 100 girls. Mathematically speaking, this means that about 1 in 5 men will be unable to marry in the future.

How does this affect savings?

Wei theorizes, and shows evidence, that parents are trying to make their sons more attractive to female prospects by giving them wealth – essentially building a dowry for them. To do this, parents forego spending on themselves, which drives savings up.

On the flip-side, it seems families with girls can spend on themselves, and those girls will have a lot of choice in the future.

His evidence is compelling. He compares the savings rate of not only parents with girls compared to parents with boys, but also the rates of similar families in different imbalance densities. (ie. a family with a son that lives in an area of 110 boys to 100 girls compared to a family with a son that lives in an area of 130 boys to 100 girls).

If this is the case, no amount of belly aching from governments will change Chinese savings.

Change Cards… Not Accounts

Banking can sometimes be a lot like baking. Change an ingredient and you change the result.

Sometime ago I changed my bank account to reflect my usage. I changed from a monthly fee to a free, pay per debit charge plan. The side-effect was that the fee on my credit card was no longer waived. The annual fee was less than the total monthly fees on the bank account, but it was still annoying.

I didn’t want to close my credit card account, however, because it had a 12 year history, and removing that would affect my credit score, which is something I want to keep relatively intact.

What I then thought about, and confirmed through a phone call, is that changing cards on the same account keeps the account in tact, so does not affect your score. Doing so keeps the same account active, and the information still flowing to the reporting agencies.

To clarify, your credit card is merely the piece of plastic. Your credit account is broader, and dates back to when you first applied for credit with a particular provider. In my case, I have had 3 credit cards on the same account. The first was a student card, the second was the normal version of the previous card that I switched to after graduation, and now a third card. However, my account is the same 12-year-old account.

You may not be able to switch from, say, a point card to an airmiles card, or a gas point card to a cash-back card (check with your provider), but you should be able to switch to a similarly structured card with the same provider. I switched to a no annual fee card that has the same point system (though it accumulates at a slower rate), so I can still use my points toward my RRSP or TFSA. I also ended up getting half of my last fee credited back to my account. The change also gives me some better travel insurance, and extended warranty of products bought with the card.

When it comes down to it, unless you are putting a lot of purchases on your card to justify the annual fee, you are probably better off with a no-fee card. Calling to change cards on the same account will save you money and leave your credit score untouched.

Changes to Canada Savings Bonds

Yesterday’s post reminded me that I saw that there were some changes made to the Canada Savings Bonds Program which will take effect later this year.

1. Sales period shortened by two-thirds: Since 1998, CSBs have been available for purchase between October of a certain year and April of the following year.

From October of 2010, however, the time will be shortened to two months – from October to December.

As for why, the information page states that 95% of bonds are purchased during these two months.

2. No new Government sponsored RSPs or RIFs: Up until now, if you selected the RSP option when buying a CSB, it would be RRSP eligible and held in a Government sponsored account. From this year, however, this option will no longer be available.

This will not affect investors who already have a Government sponsored RSP or RIF account. Those accounts will continue to exist. It is only new customers who will be affected.

As for how to keep your interest tax deferrable, CSBs will still be able to be held within a self-directed RRSP plan.

Both changes have been made in order to “help streamline the Program and ensure its long-term sustainability,” which means… save money.

If the overwhelming majority of buyers buy between October and December, and if there is a lack of interest in the Government sponsored plan (as stated on the FAQ page), then I think these changes are probably for the best, and will help out the program.

I stumbled upon this information while looking for something completely different, but it was the first I had read about it. This is one of the setbacks of living half a globe away – I don’t have the opportunity to see posters in the bank or commercials on TV.

It would be interesting to hear from any readers in Canada if this was well advertised.