# Basic financial truths



## Just a Guy

I've been inspired by the thread about providing financial education. It's my feeling that there are some basic financial truths that even the majority of this board don't really understand, so let's bring up a few for discussion and education.

Let's start with a basic example where most people don't have any idea about the financial truth, the family home.

Even with this massive run up in home values over the last 20-25 years, very few houses make people money. 

Let's take a basic example with simplified numbers. 

You decide to build a new home for $500k, you've got your 5% down payment...so your "equity" is $25k right? Nope, you probably didn't factor in cmhc fee, bank legal fee, appraisal fee, etc. Which automatically got added to your mortgage. You also didn't factor in realtor fees, lawyer fees, etc. On the purchase side of things. All those costs usually get forgotten in the transaction so, for simplicity sake, let's just say you've got a $500k mortgage and no equity. 

So, you lock in your mortgage at 3.24% for 3 years, 25 year amortization, and probably agreed to buy mortgage insurance as well, since most people do. 

At the end of 3 you've paid down your mortgage by $41042.53 in principle. Building equity right? Not so fast, over that same time period you paid out $46373.75 in interest. If your place hasn't appreciated, you've built negative equity. 

Over those three years, have Ing been a new house, or even a new to you house, you've probably done some improvements or basic maintenance as well...build a garage, landscaping, painted, poured a driveway, etc. Then here are property taxes, several thousand dollars a year, insurance, etc.

Let's say there has been appreciation and you decide to upgrade and sell...a 10% increase in value in three years isn't unreasonable. So you sell for $550 and pocket 50k tax free right? Not so fast. Realtor fees are $22,500 on average (7% on the first 100k, 3.5% on each successive 100k). Then there is the lawyer fees, breaking your mortgage penalty (unless you sell right at renewal which rarely happens), mortgage discharge and bank legal fees, and let's not forget those upgrades and maintenance fees in the last paragraph, etc. Finally don't forget the $5k you paid extra in interest over the equity paydown. Chances are, you break even if you're lucky. 

Of course, most people only look at their equity, so their mortgage says they paid down their house to $459k, sold it for $500k and "made" nearly $100k in their pocket towards the purchase of their new, usually more expensive home, with higher costs.


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## Oldroe

1 year of home ownership. Are joking!


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## wibblydick

Agreed. You may get lucky occasionally but after several buy/sell cycles you are definitely better off with a handful of apartment REITS.


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## lonewolf :)

I view a house as a liability if it takes money out of your pocket. (anything that takes money out of your pocket is a liability)

I view a house as an asset if it puts money into your pocket (anything that puts money into your pocket is an asset)

Renting is a liability if it takes money out of your pocket

I always try to lower my liabilities & increase my assets

KISS want liabilities to be lower then assets to be financially independent


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## none

My investments effectively pay my rent so renting takes nothing out of my pocket


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## sags

I know lots of people who will never pay off their mortgage, don't intend to and don't care.

They pay their monthly mortgage payment for housing, borrow from the equity every few years to fund their lifestyle and life is good.

When they retire they will sell the house and pay off the mortgage and HELOC. Some will inherit money and will stay in their homes.

In any event, it works for them.


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## sags

As far as retirement funding is concerned, many expect the government will look after them and I suspect they are probably right.

GIS is costing the government billions more every year. As the mass of people retire there will be political pressure to increase the benefit.


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## olivaw

JAG, you may have a point but I don’t believe three years is an appropriate timeframe. My wife and I have owned our current home for almost 20 years and expect to stay for at least ten more.


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## milhouse

IMO, I see this thread going all over the place because of all the variables in the discussion. 

But a couple of comments for the original example:
For us, it was key to have a flexible mortgage to allow additional payments that went against the principle which also supported our plan to pay off the mortgage quickly but not at the expense of our core savings. 
While I realize a lot of people make improvements to their places, we haven't. However, we've obviously had the odd repair and maintenance done.
We haven't moved since buying our place. IMO, it's also key to try to buy the right place initially and not feel the need to upgrade since yes, transaction costs do add up. 
Why doesn't anyone ever mention renting part of the house a net positive financial aspect of the house? We know of many family and friends that are either renting their basement or taking on a homestay student, etc that generates income that helps pay for housing expenses. I think my niece is paying something like over $1k/month for her 1br basement suite. My friend's parents are renting their entire basement for about $2k/month. 

Personally, I'm happy with our single detached purchase which we do not view primarily as an investment and thus do not include it in many of our calculations. However, we're extremely lucky in that we bought in just before the run up in the 2000's that essentially hasn't stopped since, save for the 2008/09 blip. Our place has gone up about 400%. It's so much harder nowadays for people like my nieces and nephews to buy a place and for it to be financially practical.


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## milhouse

sags said:


> As far as retirement funding is concerned, many expect the government will look after them and I suspect they are probably right.
> 
> GIS is costing the government billions more every year. As the mass of people retire there will be political pressure to increase the benefit.


Part of the reason why the govt is beefing up the CPP program?


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## Userkare

That's probably true for someone who buys a house strictly for profit; I don't know what percent of people this applies to. I like that I own the place I live. I can change it to meet my whims and needs without asking for someone else's permission; no need to grovel to a landlord, or a condo board. I enjoy doing maintenance and repair tasks for the most part; I don't want to wait for someone else, who probably just wants to do it as quickly as possible and move on to the next job.

I have lived in a little box in an 18 storey stack of little boxes; I don't think I could ever live like that again. Next box I'm in will be 6' x 2'4" ! 

I don't even like living in a house surrounded by houses that are practically touching. I need a few acres. That's just me. It's worth the extra cost, if there actually is one; I've never tallied it all up.


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## Just a Guy

Love to see how people look for technicalities and ignore the bigger picture...Sure, three years is a short time frame (yet how many people would say, "look I paid down my mortgage by $40k, but ignore the fact that it cost $85k to do it), however the average Canadian moves every 7 years. I just picked three because that's what came up in the mortgage calculator. 

Let's say your abnormal though and stay in the house for the full 25 years. Any idea what you've paid just in interest to buy your $500k house? Even at 3.24% you'll pay more than 500k in interest. So your 500k house will have actually cost over 1M. If the interest rate goes up, expect to pay several times what you think you did for your house.

I wasn't talking about home ownership as an investment either, my point was people generally have no idea how much their homes have actually cost them. They think the purchase price is what is costs, and the selling price is what they make.


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## Userkare

Just a Guy said:


> Let's say your abnormal though and stay in the house for the full 25 years. Any idea what you've paid just in interest to buy your $500k house? Even at 3.24% you'll pay more than 500k in interest. So your 500k house will have actually cost over 1M. If the interest rate goes up, expect to pay several times what you think you did for your house.


You're assuming that the entire $500K is financed, no down payment? Did you consider doubling up monthly payments, or more frequent payments, or making lump sum payments within the terms of the mortgage? 

Also, let's say that $1M bought you a 4 bdrm house paid after 25 years; what would the rent have been for something like that for all those years ( $2500 x 12 x 25 = $750,000 ?? ); what would you have to show for it in the end?



> I wasn't talking about home ownership as an investment either, my point was people generally have no idea how much their homes have actually cost them. They think the purchase price is what is costs, and the selling price is what they make.


I hope nobody here would be so foolish as to not consider all the costs, if that's a concern. But still, what is your point? I think many people look at a house purchase as a place to live and raise a family; they prefer a private yard over a public playground. If they enjoy that lifestyle and are able to afford it, why rain on their parade? It looks like a "sour grapes" attitude.

Next, you can tell us at what it costs to buy a car vs. taking the bus.


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## andrewf

In this math you also have to account for rent avoided. We're all born "short housing" (h/t WCI), and many cover this short position by buying a house. Of course, the temptation is to buy more house than you might otherwise choose if you are renting.


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## fplan

so far people who did not use commonsense are winning.. unless RE comes down by 40% or more .. they will be still ahead of people who lived with in their means..if something goes very bad tax payers are there to bail banks in any way..


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## milhouse

If the debate is about whether one's net wealth gain is simply Sell Price - Purchase Price, I completely agree it's not as simple as that.

If the you're saying a "basic financial truth" is that very few houses make people money even with the run up in the last 20-25 years, I won't necessarily say it's wrong but it's very debatable especially in the Greater Vancouver area. 

We bought our place for about $400k under 20 years ago. It was last assessed at over $1.5M. From a sanity check perspective, our neighbour sold their way older house for over $1.3M last year. I would suggest most people in Greater Vancouver buying when we did would have had a similar experience. So, even if people ended up outflowing double their purchase due to interest payments, they're still coming out ahead. That's not even factoring a larger down payment than 5% and paying off your mortgage faster than over the whole 25 year amortization. I also think you also need to factor in the reduced value of those future dollars you're paying with over the 25 years. 

However, I completely agree it's a lot harder in today's environment of asset bubbles and wage stagnation and likely will be for the next decade at least.


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## milhouse

fplan said:


> so far people who did not use commonsense are winning.. unless RE comes down by 40% or more .. they will be still ahead of people who lived with in their means..if something goes very bad tax payers are there to bail banks in any way..


One thing that has stuck with me was in the Vancouver housing frenzy of early 2000's, condo pre-sales were really huge with people lining up to buy on spec. There was this news segment which covered a pre-sale that interviewed this woman that said "I buy three and my daughter buy two". It was completely ludicrous. On the Real Estate discussion board I was reading at the time, all the housing bears mocked the interviewed woman and said how irresponsible she was. I suspect that woman is now a multimillionaire.


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## Plugging Along

I was so excited about this thread title as I thought it would be good content to teach the young peo0e I deal with. However, it has become a rent vs own, or a cost of ownership. With some many differing opinions even here, no wonder some many who are less knowledgable confuse or not interested. 

Here what my family taught m6 about real estate, and they have a fair amount. Some of these lessons I learned when I was barely a teenager.

- save up up for a large enough downpayment so not pay cmhc and make sure you know all of the other fees, so at least another 5%. This would have been 30% of the house, we had more than that
- if you can’t come down with the above amount, you have no business buying house. Stop whining about and make the changes in your spending so you spend less and save more. You haven’t don’t anything special to deserve the house you want. When you save enough, then you earned it (a quote from my older siblings)
- you will only make money on a house if you plan to live there at least 10years, if yo7 don’t think you wil” stick around, then don’t buy the house.
- don’t upgrade unless you see above
- get a mortgage for no more than 2.5 times your salary (maybe 3 times now) If not, then save more or make more money
-pay off your mortgage in 10 years or less (my siblings did it in 3, but I thought that was in reasonable so said ten, I did it 7)

I thought these were pretty simple things my family taught me and They so far seemed to have worked.


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## Just a Guy

Too many people are missing the point of this thread. It's not a discussion about rent vs. own, it's not about doubling payments, it's not about I won the lottery by living in the right area.

This thread is about the basics of finance issues that the average person doesn't understand. Most people don't understand the basics behind a mortgage, they don't make hundreds of thousands of dollars each year, hey don't realize that they pay twice the cost of heir house at 3% even if hey pay it down every month.

Most people have no clue as to the actual costs involved, nor why things seem to cost more each month than they expect. 

People think 3% is nothing when it comes to interest yet, after 25 years it's more than half a million dollars. Imagine what happens at the historical average rate of 8%?

Also, many of he people here believe the myth that real estate always goes up. There was even a comment above about "unless it drops 40%..." well, sad truth it it has, and it can. Happened in the USA in 2007/8. Happened in Canada during the 80's and, all signs say it could happen again if interest rates rise (again though, that's not the point of this thread). 

The point of this bread is to explain the basics behind finances that the average person probably doesn't understand. I'm not looking at exceptions, I'm not looking to complicate the issues with complex number, so the examples are simplified. 

The fact is, using the rule of 72, you'll pay a lot more for your house than you think you do period. You probably won't realize it because you're making regular monthly payments, not understanding where that money is going (hint, a lot of it goes to the bank as the price for loaning you money, not towards equity). The average person doesn't understand this, or appreciates just how much money is involved.


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## Just a Guy

For the next financial truth, let's look at why mutual funds really have little chance of beating the market.

Mutual funds make money for the managers by taking what is called an MER fee right off the top, despite what the fund does. If the stocks in the funds goes down 10% and the MER is 2%, kiss 12% of your money goodby. If the stocks go up 10%, they'll only pay you 8%. 

Since an average represents normal, to get better than average results is harder to do. That's why getting a 90% average has a lot less people than getting a passing grade.

To get average returns in the market, a mutual fund needs to earn the MER amount above average. If you want 8% returns, and the MER is 2%, the fund needs to earn 10%. 

Of course, when you read the fund's returns on all their literature, they tell you the fund's performance based on its holdings, and don't take off the MER that they charge you. So, if the fund advertised it has a 10 year average return of 8%, and an MER of 2%, the people who own the fund only got paid 6% on average. 

While we're at it, let's talk about how losses are much harder to recover from. If you lose 50% of your money, you need to make 100% return on what's left just to get back to where you were. If you invest $1, you have the entire dollar working to get you money but if you lose half of it, you only have 50 cents working to recover your money. To get back to a dollar your 50 cents needs to earn another 50 cents. Hats a lot harder than earning 50 cents from a dollar.


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## Plugging Along

if we want to talk about finance basics, it starts well before mortgages and mutual funds. If you think about an 18 year old just getting out in the world, they are not thinking about mutual funds or houses. In fact think about the 14 year old (or however old the start these days) with their first summer job.

The finance basics are. 

-Differentiate between true needs and wants

-Buying something on credit and paying interest costs a lot more than you think. It doesn’t matter if it’s on sale. This is what starts a lot of people on debt and allows them to justified future debt. It starts with someone seeing a great sale on something, and not having the money. In order to ‘save’ they buy it on the credit card and start paying interest usually at between 12-18%. This cycle repeats. When they are still paying off their other purchases a house at ‘only’ 4% seems great. Teaching people about compound interest is the key principle. Forgot mortgages and houses, it’s the same as buying something thats a great deal on credit. 

- teaching about investments and mutual founds is not basic. First it’s about being able to save enough and living below your means. Teaching about you have two choices to have more, either spend less or make more. Budgets don’t make balance themself. 

- before talking about mutual funds, trenching more fundamentals about general risk vs return. Fees are only one part of investing. There also understand your incestment profile and comfort. The example about loses totally make sense, but when should they sell. He losing 50%is bad and takes a lot more to recover, but in realit6 when should they sell? When it goes down by 5%, 10%, 30%? How does one know. I still haven’t figured it out, I tend to still be a buy a hold. I didn’t know there was such a basic rule. 

I do think there needs to much more financially literacy, but it needs to be really basic at first. If it this was related to the Education thread, think kids who find the idea of house and mutual funds outside of their reality. What should teach the younglings?


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## milhouse

Just a Guy said:


> Too many people are missing the point of this thread. It's not a discussion about rent vs. own, it's not about doubling payments, it's not about I won the lottery by living in the right area.
> 
> This thread is about the basics of finance issues that the average person doesn't understand. Most people don't understand the basics behind a mortgage, they don't make hundreds of thousands of dollars each year, hey don't realize that they pay twice the cost of heir house at 3% even if hey pay it down every month.
> 
> Most people have no clue as to the actual costs involved, nor why things seem to cost more each month than they expect.
> ...


It sounds like you're basically saying this thread is about summarizing high level personal finance 102 concepts (ie a little more advanced than basic 101) but not about diving deeper into some of the more complex mechanics of what make the truths true and what causes exceptions. :friendly_wink:


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## milhouse

Plugging Along said:


> if we want to talk about finance basics, it starts well before mortgages and mutual funds. If you think about an 18 year old just getting out in the world, they are not thinking about mutual funds or houses. In fact think about the 14 year old (or however old the start these days) with their first summer job...


That's why I'd characterize this as Personal Finance 102 rather than 101.


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## twa2w

"Of course, when you read the fund's returns on all their literature, they tell you the fund's performance based on its holdings, and don't take off the MER that they charge you. So, if the fund advertised it has a 10 year average return of 8%, and an MER of 2%, the people who own the fund only got paid 6% on average." 


Sorry but you are wrong. Mutual funds returns are always reported net of MER. And any returns published, must be recent calculations of returns. ( IIRC within the last 60 days).
This happens to be the law.

There are certain pooled investments that are net of fees but fees are paid separately. And these are not retail funds so are offered differently.


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## Plugging Along

milhouse said:


> That's why I'd characterize this as Personal Finance 102 rather than 101.


Except if you don’t understand 101, its difficult to grasp 102. Then the thread 8s more than basic financial truths. To me basics and the truths are things that can’t really be argued. Even people here are arguing on some of the intpreations, so that tells me it’s not that basic.


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## JackJac

Plugging Along said:


> Except if you don’t understand 101, its difficult to grasp 102. Then the thread 8s more than basic financial truths. To me basics and the truths are things that can’t really be argued. Even people here are arguing on some of the intpreations, so that tells me it’s not that basic.


Indeed, I think an overlooked "basic financial truth" is that there is a degree of dumb luck when it comes to investing. If it was all so basic, there wouldn't be endless discussions debating every detail imaginable by people who are supposed to be "in the know". Smart people capitalize on the confusion and write books. Insightful people see most financial talk as smoke and mirrors, IMO. 

My advice: Work hard, smart, save your money, and be frugal; and good luck with any investments you choose to make.


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## Mortgage u/w

If you want the "basic financial truth", here it is:

ALWAYS SAVE MORE THAN YOU SPEND!

Most people don't realize that even if you put the savings under your mattress - you'll be better off than most investors who constantly strive to outsmart the market - be it in the stock market or with real estate.


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## Koogie

I thought Dickens had written the universal basic financial truth in 1850 ?

"Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. 
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."


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## STech

Plugging Along said:


> I was so excited about this thread title as I thought it would be good content to teach the young peo0e I deal with. However, it has become a rent vs own, or a cost of ownership.


OK so why not steer it in the right direction? Here are a few to get it going.


1) Bank "financial advisers" are sales reps for the bank. End of story.
2) Many independent financial advisers are solely commission driven, and have bills to pay. Tread carefully.
3) Insurance sales reps are commission based too.
4) There are no get rich quick plans. The inventor is the only one that gets rich off you.
5) Personal finance isn't rocket science, but you still need an education. Don't get your education from a bank or insurance company pamphlet.
6) Keeping up with the Joneses will leave you broke.
7) The Joneses are broke.
8) When it comes to investing, the day your cab driver tells you it's a good time to buy gold, that's the day you need to sell gold. 
9) No one cares about your money like you do (and should).
10) Fees are VERY important. An extra 1% fee will add up to 100s of thousands of dollars over the years. Keep fees to a minimum.


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## Just a Guy

Well, at least the debate is starting to get closer to the topic, I really don't care if you think my topics are too advanced, feel free to chip in with your own examples and explainations. I often found, when teaching, that the hardest thing to teach is "the basics" because I've been doing "the basics" so long that it's like breathing, you don't even think about it anymore (as an exercise, try to explain each and every muscle and action involved in breathing, but do it to yourself not here). 

Let's try why making minimum payments on your creadit card doesn't really work. 

The minimum payment is usually calculated as your interest owed (usually around 20% annually) plus 1% of the original money owed.

So, if you owed $1000 (I'll use 24% interest for simple math), your interest each month will be $20, and your minimum payment will be $30. Next month you still owe $990, your minimum payment will be very close to $30, and you'll only pay off about $10. So, it costs you nearly 3x as much as you pay down. This doesn't mean your original purchase costs you 3x, it's actually a lot more because, after a year of payments, you've only paid off about $120 (you've paid almost $240 in interest), and still owe over $880.


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## Just a Guy

I stole this one off the internet, it's a classic explaination of the tax system...


Taxes Explained…

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the ten now cost just $80 total.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men – the paying customers? How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 ( 25% savings).
The ninth now paid $14 instead of $18 ( 22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
“I only got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man,”but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!“
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!“
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!“
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.
For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.


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## sags

About 1/3rd the way through all this "teaching" the kids would be thinking of what they want to buy at the mall.


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## Just a Guy

Here's another one that explains why demanding raises doesn't always work (also stolen off the internet). 

Let’s go back to the simpler days of farm life…
Mother’s in the house baking a nice pie, while the whole family, including the extended family (Two Grandpas and 2 uncles), is out doing the harvest…
Supper time comes around, and the family comes in to enjoy a good meal and a slice of pie…
After dinner, the extended family goes home, but dad is a little miffed…he doesn’t feel, as the main breadwinner, that he got a big enough piece of his favourite pie…
The next day, mother decided to make two pies, but she only had the same amount of ingredients to work with, so she rolled out the crust until you could almost see through it, and put half the filling into each. As you can imagine, Father wasn’t happy with the results, and he thought the flimsy pies were insulting to his guests, not to mention they ate twice as many pieces anyway…
The next day, realizing that there is only enough ingredients to make one pie, father decides, he really doesn’t need the help of their parents with the harvest, and that would leave more pie for the rest…
Well, work too a whole lot longer, and by the time they got in, they were starving…even after getting a bigger portion, Father was still hungry, and was quite upset that Mother couldn’t produce more food in a single day. They had quite the fight, and Father and Mother went to bed angry.
The next day, Father realized that Mother was right, and there just wasn’t enough time to make more food in a day, so instead of inviting his two brothers over to help, he decided to do all the work himself and finally get enough to eat…
Unfortunately, the workload hadn’t changed, and it was very late by the time father got back in. By then, he was way too tired to eat and wound up falling asleep at the table…
Lesson: When there is only a limited supply (money) to begin with, and you want a bigger piece of it, the pie can’t miraculously grow bigger just because you want it to.


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## sags

One of the flaws in the internet story on taxes is the wealthiest person moved away to avoid taxes, but there are few places in the world that are tax free and anyone would want to live there.

Example.......Richard Branson lives on the Virgin Islands to avoid taxes. How did he make out during the last hurricane ? Home destroyed.........island devastated.


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## Just a Guy

He doesn't move away to avoid paying taxes, he freely paid more than his share, he moved to avoid being abused after paying more than his share because, despite paying more than anyone else, the others didn't feel it was "fair". 

A basic lesson that most animals learn, don't bite the hand that feeds you.


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## Just a Guy

Let's talk some business facts. Sears is in the news these days...employees don't get their severance, but what about all the sears suppliers? Sears usually doesn't pay for the goods you see in the store right away. They are on a net-X system where X represents the number of days they have to pay for the goods. Net-30 means you pay at the end of the month, net-60 two months, net-90 three months, etc. Of course, they usually pay distributors, not the manufacturers, and each of those works on a net-X system as well.

All these middlemen and manufacturers also have employees. Many more people are involved in supplying companies like Sears than Sears actually employs. When Sears goes bankrupt, and liquidates, the money collected from your bargain hunting goes to its creditors. Those aren't just wealthy banks like many people think, they are also all these companies expecting payment for their goods on the net-X system. 

Imagine what happens to all these small companies when they don't get paid, what happens to their staff? Most can't absorb the loss of inventory, they can't reclaim it because it's being liquidated, it's a cascade event. Many will close their doors, and lay off their employees as well. 

Go back and read the "pie" story to understand why everyone can't get what's owed to them now.


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## Mortgage u/w

When you lay it all out, the conclusion is clear that everyone, every business, small or big, is just a 'middleman' trying to take a tiny piece of the pie.

Its easy to look at the big picture and say "I want that too". But reality is that your take-home is actually smaller than a pixel of that picture.


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## hboy54

sags said:


> One of the flaws in the internet story on taxes is the wealthiest person moved away to avoid taxes, but there are few places in the world that are tax free and anyone would want to live there.
> 
> Example.......Richard Branson lives on the Virgin Islands to avoid taxes. How did he make out during the last hurricane ? Home destroyed.........island devastated.


The parable didn't say he moved away, it said he did not show up.

I have not shown up for about 15 years now and likely paid a half million dollars less tax than I would have if I had continued working.

My vet only works 4 days a week, other than emergency calls of course.

I have known doctors that only work part time.

Would some of these people work more if their MTR was lower? Pure speculation, but one has to wonder.

Hboy54


----------



## Koogie

hboy54 said:


> The parable didn't say he moved away, it said he did not show up.
> I have not shown up for about 15 years now and likely paid a half million dollars less tax than I would have if I had continued working.
> My vet only works 4 days a week, other than emergency calls of course.
> I have known doctors that only work part time.
> Would some of these people work more if their MTR was lower? Pure speculation, but one has to wonder.
> Hboy54


Add me to the list.. the interest in working harder, and being punished for it by paying a higher rate of tax, wanes more every day. Plus, part time work is more pleasant anyway.


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## RBull

sags said:


> One of the flaws in the internet story on taxes is the wealthiest person moved away to avoid taxes, but there are few places in the world that are tax free and anyone would want to live there.
> 
> Example.......Richard Branson lives on the Virgin Islands to avoid taxes. How did he make out during the last hurricane ? Home destroyed.........island devastated.


I guess you see what you want to see. As others have pointed our he didn't move away to avoid taxes. He didn't show up anymore wanting to go where the tax environment was more "friendly" and for good reason. 

Reviewing the last 2 sentences might be instructive. 

What does Branson's home have to do with the parable? If he lost his home he probably has insurance, or if not he can afford to replace it.


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## tygrus

As a business owner, I have no problem with paying taxes or even the rate we pay. What I have a problem with is where and how they are spent. My incorporated structure gives me a veto status on govt stupidity. When they do something stupid, I can shelter, defer, transfer, reduce, convert etc income into any manner I wish. 

Taxes should be used for essential services only, nothing else. Things like water, sewer, infrastructure, health, retirement, education, defense.

They should not be used for things like climate change schemes, transfers to 3rd world dictators, sports stadiums, Olympics, arts, illegal immigrants, paying a group of people to live in the stone age, paying another group to stay in canada, paying another group who are on EI all the time.


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## Mortgage u/w

tygrus said:


> As a business owner, I have no problem with paying taxes or even the rate we pay. What I have a problem with is where and how they are spent. My incorporated structure gives me a veto status on govt stupidity. When they do something stupid, I can shelter, defer, transfer, reduce, convert etc income into any manner I wish.
> 
> Taxes should be used for essential services only, nothing else. Things like water, sewer, infrastructure, health, retirement, education, defense.
> 
> They should not be used for things like climate change schemes, transfers to 3rd world dictators, sports stadiums, Olympics, arts, illegal immigrants, paying a group of people to live in the stone age, paying another group to stay in canada, paying another group who are on EI all the time.


Welcome to Democracy.


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## tygrus

Mortgage u/w said:


> Welcome to Democracy.


Until govt by plebiscite comes in, or responsible govt takes form, I opt out of this democracy with my wallet.


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## Mortgage u/w

tygrus said:


> Until govt by plebiscite comes in, or responsible govt takes form, I opt out of this democracy with my wallet.


I'm with you. We can't all agree with what the govt does. Democracy says that we elect by majority. So in theory, govt choices reflect the majority rule. So some will think the govt is responsible while others will think they're 'nuts'. Either way, we all need to protect our own pockets first. We should not rely on others.


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## sags

The title of the parable is " taxes explained" and I understand the failure of the person showing up at the pub as a taxpayer choosing not to pay taxes.

The parable implies and seeks to confirm it is logical that the wealthy will simply pack up and go somewhere where taxes are cheaper.

I take the concept one step further and simply ask...........where shall they go that doesn't collect taxes and is suitable for their lifestyle ?

Richard Branson is an example of a wealthy person who chose to avoid US taxes and now calls on the US to rebuild the infrastructure on the islands.

How ironic is that ?

It reminds me of people who retired to Lebanon and then wanted the Canadian government to come rescue them when bullets started flying.


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## Userkare

Just a Guy said:


> It's my feeling that there are some basic financial truths that even the majority of this board don't really understand, so let's bring up a few for discussion and education.





Just a Guy said:


> Well, at least the debate is starting to get closer to the topic, I really don't care if you think my topics are too advanced, feel free to chip in with your own examples and explainations. I often found, when teaching, that the hardest thing to teach is "the basics" because I've been doing "the basics" so long that it's like breathing, you don't even think about it anymore (as an exercise, try to explain each and every muscle and action involved in breathing, but do it to yourself not here).
> 
> Let's try why making minimum payments on your creadit card doesn't really work.
> 
> The minimum payment is usually calculated as your interest owed (usually around 20% annually) plus 1% of the original money owed.
> 
> So, if you owed $1000 (I'll use 24% interest for simple math), your interest each month will be $20, and your minimum payment will be $30. Next month you still owe $990, your minimum payment will be very close to $30, and you'll only pay off about $10. So, it costs you nearly 3x as much as you pay down. This doesn't mean your original purchase costs you 3x, it's actually a lot more because, after a year of payments, you've only paid off about $120 (you've paid almost $240 in interest), and still owe over $880.


I can't agree with your assertion that the 'majority' of CMF members wouldn't understand such simple concepts as compounded interest. The general public at large perhaps, but even then, the CC companies have to indicate right on the statement how long it would take to pay them off if only the minimum payment is made.

Can we maybe skip a few grades and get into the exciting complicated stuff ?


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## Mookie

Just a Guy said:


> I stole this one off the internet, it's a classic explaination of the tax system...
> 
> Taxes Explained…
> 
> For those who understand, no explanation is needed. For those who do not understand, no explanation is possible.


Thanks for sharing this one JAG, I hadn't seen that one before, but it's a great little story that anyone should be able to understand, although sadly it would seem that 9 out of 10 beer drinkers don't quite get it.


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## RBull

sags said:


> The title of the parable is " taxes explained" and I understand the failure of the person showing up at the pub as a taxpayer choosing not to pay taxes.
> 
> The parable implies and seeks to confirm it is logical that the wealthy will simply pack up and go somewhere where taxes are cheaper.
> 
> I take the concept one step further and simply ask...........where shall they go that doesn't collect taxes and is suitable for their lifestyle ?
> 
> Richard Branson is an example of a wealthy person who chose to avoid US taxes and now calls on the US to rebuild the infrastructure on the islands.
> 
> How ironic is that ?
> 
> It reminds me of people who retired to Lebanon and then wanted the Canadian government to come rescue them when bullets started flying.


The failure was with the others who paid tiny amounts of tax and did not understand that they were paying less than their fair share and that the one person paying most of the taxes wouldn't keep doing that forever, when other more attactive options (like moving) are likely available. Not choosing NOT to pay taxes. Why is this hard to see and why try to invent things for the parable that aren't there? 

Richard Branson owns his own island Necker Island which has been turned into an expensive resort. It is part of the BRITISH VIRGIN ISLANDS where there are no taxes, not the US Virgin Islands and he has lived there the past 7 years. His efforts I found were to repair damage in these same British Islands and his charity is working to raise funds. If he is avoiding US taxes and lobbying the US to repair damage to their islands I did not find this. Perhaps you can clarify.

He earns a "small income" of $11M doing speeches/not for profit ventures and donates all of this through his charity. His operating companies continue to be domiciled in the United Kingdom (not the US) paying taxes - hundreds of millions over the years and continue to. I suspect this has been very helpful to the UK's economy and employment for a lot of years. 

From looking into this I have difficulty seeing anything ironic about it.


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## Danny

STech said:


> OK so why not steer it in the right direction? Here are a few to get it going.
> 
> 
> 1) Bank "financial advisers" are sales reps for the bank. End of story.
> 2) Many independent financial advisers are solely commission driven, and have bills to pay. Tread carefully.
> 3) Insurance sales reps are commission based too.
> 4) There are no get rich quick plans. The inventor is the only one that gets rich off you.
> 5) Personal finance isn't rocket science, but you still need an education. Don't get your education from a bank or insurance company pamphlet.
> 6) Keeping up with the Joneses will leave you broke.
> 7) The Joneses are broke.
> 8) When it comes to investing, the day your cab driver tells you it's a good time to buy gold, that's the day you need to sell gold.
> 9) No one cares about your money like you do (and should).
> 10) Fees are VERY important. An extra 1% fee will add up to 100s of thousands of dollars over the years. Keep fees to a minimum.


Great post STech you summed it up well.


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## STech

Danny said:


> Great post STech you summed it up well.


Thank you Danny. I tried to make the content match the thread title. Knowing the audience is half the battle, otherwise, like Sags said, most newbies/young adults will be turned away/off half way through the first page.


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## Just a Guy

sags said:


> The title of the parable is " taxes explained" and I understand the failure of the person showing up at the pub as a taxpayer choosing not to pay taxes.
> 
> The parable implies and seeks to confirm it is logical that the wealthy will simply pack up and go somewhere where taxes are cheaper.


Sags, I know from your past posting that your a big fan of giving away other people's money, but maybe if you'd read the line right above the one that says the next night the 10th guy failed to show up, you would have read this line...

"The nine men surrounded the tenth and beat him up."

He was never unwilling to pay originally, when a refund was offered, those who contributed less suddenly wanted to be treated equally (they didn't want to be treated equally when they had to pay mind you). 

The 10th guy didn't begrudge them getting he benefits from his paying either. Only when the people beat him up did he fail to return. It's got nothing to do with avoiding taxes, it has everything to do with feelings of entitlement from those who don't contribute, or only contribute a little.

For all we know the 10th guy is at a different bar, with a better group of friends, still paying more than his fair share.


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## Just a Guy

New truth for the day...

Government money isn't "free money". 

When you get a tax refund, it means you sent too much money to the government over the year and basically gave them an interest free loan. Combine that with the fact that you've probably been carrying a credit card balance over that time period and think about how much that money cost you.

It's better to pay taxes at the end of the year.

Government cheques you get, or rebates for thing like climate change, cost you more money.

To process a cheque when I worked for government, cost about $30 (thats paying the people to enter the information, print the cheque, and send it out...probably included their pension contribution as well). Any cheque issued for less than $30 dollars (like a lot of rebate cheques) actually costs more to print...think about the waste.

Next, rebates inspire price increases. A few years ago, before the Eco-retrofit grants, I had to replace my furnace. It cost me $3500 for a trane high efficiency one, no rebate (mid efficiency was still common). About two months later, the government announced its rebate program (you had to hire a company to evaluate your home both before and after, at a cost of around $350) which "saved" you $1000. My neighbour took advantage of this, and hired the exact same company to install the exact same furnace, but he got $1000 back from the government. Only problem is, because of the government grant, the furnace companies had jacked up their prices to $6500 (don't forget the $350 inspection cost). 

The government rebates, like a lot of their programs was a make work project. My neighbor had no idea what a furnace cost, most people don't, but the government turned it into a cash cow for he industry. 

Btw, your tax dollars (which everyone complains is too high) paid the $1000 rebate, so you paid for furnace companies to overcharge and make profits. Not only that, but a large number of people were very happy about it. 

If you own a condo, same thing applies. Your condo fees are not "free money". They don't get secret funds from the government. The money, all of it, comes out of your pocket. If you want to lower condo fees, don't call them out to do small repairs "because I pay condo fees". They have to hire a company, which charges company rates (usually with a minimum call out charge) to do the repair. I know a person who wanted the condo to pay to fix their screen door latch, a $7.50 part available at any hardware store and required two screws. It would have cost $75 for the condo to have it repaired.

As a last point, which should get our resident socialists in a tizzy...programs like universal basic income are a great idea on paper. Everyone in Canada (all 35 million) get a living wage (say $2000/month). Only problem, which everyone ignores, where doesn't the $70,000,000,000/year come from? Canada's federal budget is currently $330B and we are already spending $30B more than we are taking in (meaning we'd need to cut $30B just to pay our bills). 

Canada complains about the massive amounts of consumer debt, but they can't balance a budget to save their lives...lead by example?


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## Just a Guy

Next truth, the media reports things to get a reaction. 

There is a big difference between Return on Investment (ROI) and actual numbers. Banks and big businesses are often vilified when they report "record profits" in the millions. What's ignored is how much money was involved to generate those "record profits".

The truth is, most banks have an ROI of less than 5%. Meaning, they are earning less than 5% on the money they invest. Sure they may make $5M in profits, but they had to invest $100M to do that. Not a great ROI, most people want to earn more than that. 

Of course, there is some accounting going on, which lowers the numbers, but then people do this all the time too, it's just you're dealing with smaller numbers...same ratio. Banks and big businesses aren't profiting off he poor...unless you carry a credit card balance and they certainly aren't forcing you to do that.


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## kcowan

Just a Guy said:


> ... The average person doesn't understand this, or appreciates just how much money is involved.


I agree! There are 4 elements associated with RE purchase:
1. Frictional costs
2. Opportunity costs
3. Cost of renting money
4. Any net after tax capital gains.

Renting avoids 1, while the financial decision rests on rent being less than less than 2+3 - 4. This ignores the emotional benefits and forced saving attributed to owning. 4 is often just speculative.


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## sags

_The truth is, most banks have an ROI of less than 5%. Meaning, they are earning less than 5% on the money they invest. Sure they may make $5M in profits, but they had to invest $100M to do that. Not a great ROI, most people want to earn more than that. _

I would accept a 5% return on other people's money all day long.


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## sags

Some people think government money is distributed and then shredded or something.

All the government spending goes to someone (business, person)........ and is taxed, spent and circulated through the economy creating jobs and economic growth.

The next Canadian budget will reflect the fact that government spending, including the increased child benefits, was spent and increased government revenues.

The question is one of balance. Too much spending isn't good and too much austerity is worse.


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## Just a Guy

Government spending generally increases costs. How many contractors salivate at gettIng a government contract. It’s like winning the lottery. 

There’s nothing fiscally responsible about it.

Would have been a lot better for people not to have rebates on their furnaces and have them pay $3500 instead of $6850 for the same thing. 

As for getting a 5% return, how about buying some BMO stock, they pay nearly a 5% dividend and have capital gains. Not exactly a hard thing to do.


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## like_to_retire

Just a Guy said:


> New truth for the day...
> 
> It's better to pay taxes at the end of the year.


No, it's better to defer taxes. 

ltr


----------



## Userkare

Just a Guy said:


> New truth for the day...
> 
> Government money isn't "free money".
> 
> When you get a tax refund, it means you sent too much money to the government over the year and basically gave them an interest free loan. Combine that with the fact that you've probably been carrying a credit card balance over that time period and think about how much that money cost you.
> 
> It's better to pay taxes at the end of the year.


Mostly we have no choice; our employer deducts an amount that's supposed to net "$0" at tax time. After telling my employer that I was retiring at the end of April, I asked if they could adjust their deductions to reflect that. They couldn't/wouldn't; I had to wait another year to get my over-payment back.



> Government cheques you get, or rebates for thing like climate change, cost you more money.
> 
> To process a cheque when I worked for government, cost about $30 (thats paying the people to enter the information, print the cheque, and send it out...probably included their pension contribution as well). Any cheque issued for less than $30 dollars (like a lot of rebate cheques) actually costs more to print...think about the waste.


I have two words for you..... Direct Deposit. :smug:



> Next, rebates inspire price increases. A few years ago, before the Eco-retrofit grants, I had to replace my furnace. It cost me $3500 for a trane high efficiency one, no rebate (mid efficiency was still common). About two months later, the government announced its rebate program (you had to hire a company to evaluate your home both before and after, at a cost of around $350) which "saved" you $1000. My neighbour took advantage of this, and hired the exact same company to install the exact same furnace, but he got $1000 back from the government. Only problem is, because of the government grant, the furnace companies had jacked up their prices to $6500 (don't forget the $350 inspection cost).


Ain't that the truth!!!! The government fails to understand that when you "chum the waters", sharks will appear. Do you remember the home insulation rebates that spawned insulation companies popping up like mushrooms? They did faulty work, and poisoned people's homes with urea-formaldehyde. Next, the gov't grant was to pay to remove that insulation. Suddenly there were lots of new insulation removal companies.


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## Mortgage u/w

Userkare said:


> Ain't that the truth!!!! The government fails to understand that when you "chum the waters", sharks will appear. Do you remember the home insulation rebates that spawned insulation companies popping up like mushrooms? They did faulty work, and poisoned people's homes with urea-formaldehyde. Next, the gov't grant was to pay to remove that insulation. Suddenly there were lots of new insulation removal companies.


LOL! How about when everyone ran out to buy $10 light bulbs because of the Energy Efficiency rebate?


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## Just a Guy

like_to_retire said:


> No, it's better to defer taxes.
> 
> ltr


True, but people with paycheques generally can’t do that and we’re talking basics.


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## fplan

nice discussion.. 
you might have already read this:

You need to be thanking the super-rich- London Mayor Boris Johnson 

https://beta.theglobeandmail.com/li...15486982/?ref=http://www.theglobeandmail.com&


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## Mortgage u/w

Just a Guy said:


> True, but people with paycheques generally can’t do that and we’re talking basics.


Don't RRSP contributions defer taxes?

I believe the next basic truth subject should be about RRSPs; when, how and why one should or shouldn't use them.


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## Just a Guy

On the RRSP reality (sorry not the idea you wanted mortgage u/w), let's look at why governments like them...

Let's say you put away money for your RRSP, save a little every year and save up $250k over your lifetime. With interest, which you were lucky with, you have $1M in your account when you retired, so you did really well. Unfortunately, if you take out too much, you'll be heavily taxed, especially as most of it is interest income which means he government could potentially take half of what you earned.

So you decide to live modestly, taking out only the amount you need to survive and avoid paying taxes...at least your heirs will benefit from years of self sacrifice...

Only, assuming you have a will, upon death, everything is considered "sold" and taxed at that date. Your $1M will be "cashed out" and the government will take its share based on a $1M income for that year, interest income. Say goodbye to probably 50% of your estate.

Of course your kids are happy, they got a half mil for doing nothing. The government is ecstatic, they also got half a mil for doing nothing. And your return on investment was pretty pathetic in the mortgage end for your family. 

As the boomers start to die off, look for government spending to go through the roof as they collect on all their "deferred income". Wouldn't surprise me if this becomes a major source of income for the government.


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## Just a Guy

How about the price of education.

Kids are expensive, I've got a bunch, I know. Yet, if you can't afford to have them, you probably shouldn't have in the first place. Parents should be able to feed and cloth them until they are 18 with their income and without government support. So, what should you do with the "free" government bonus cheque you get every month? Most of us dream about giving our kids a better life, but the cost of post secondary is prohibitively expensive, there's no way a lot of people can afford it right? But there is that government cheque...

Why not put it into an RESP? You don't even need to put all of it into the account, only $2500/year. The Feds will then chip in another $500 and the various provinces will also chip in a little. In 18 years, without interest, you'll have $55,000 to send them off to post secondary school which cost you absolutely nothing. 

Of course, it's easier to spend small amounts every month than it is to save it. Small amounts spent today, means large amounts won't be available later on. 

Maybe we should lobby the government to provide "free" post secondary education. The way they do it today no one understands, if we (the tax payer) pay for it twice, maybe it'll be cheaper.


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## Mortgage u/w

it actually is the idea I wanted - I'm not a fan of RRSPs either.

Government loves them because they get to save a ton of money. That measly old age pension they pay out all comes back to them + more. As JAG mentioned, you may think you did well with that RRSP growing to $1m, but the one who really did well is the one who created it!

I hate the bank reps who push RRSPs. They are so brainwashed by their unattainable sales objectives that they will push RRSPs to just about anybody. The people who need RRSP the least are low income earners - remember, the Canadian income average is under $30,000 so there are a lot of low income earners out there. High income earners may seem like they benefit at year end, but I would rather pay my taxes in today's dollars than in tomorrow's inflated dollars.


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## Userkare

Just a Guy said:


> Only, assuming you have a will, upon death, everything is considered "sold" and taxed at that date. Your $1M will be "cashed out" and the government will take its share based on a $1M income for that year, interest income. Say goodbye to probably 50% of your estate.


Not just if you have a will; even if you don't, it's reported on the final tax return for the deceased as income .... unless.... it is rolled over into the RRSP of the beneficiary who is the spouse, dependent child, or dependent grandchild.

There's no black/white here, i.e RRSP good/bad. With proper planning, an RRSP/RRIF could be used to supplement CPP/OAS up to the top of the lowest tax bracket; you must take into account what the minimum yearly RRIF withdrawal will be. Sure, it might be foolish to have all of your retirement savings in RRSPs if you're in that $1M zone. 

You could also retire earlier and defer CPP/OAS while you draw down the RRSP ( at the lowest tax bracket ) before it becomes mandatory income from RRIF. There are options to use RRSPs to one's advantage. It's not always the case that you saved all your life, die, and the taxman takes half away while twirling the ends of his mustache.

Sometimes only talking about 'the basics' might mislead people into not fully investigating all the pros & cons of any financial plan. Once again. I can't believe there are any CMFers who are so clueless that they need to be told this. I have two words.... "Microsoft Excel" :witless:


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## can_84

I love it!


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## Nerd Investor

The dislike/mistrust of RRSPs is actually the bigger misconception I find. 
They are almost always a superior solution for middle/higher income earners (depending on your definition of "middle income"). They'll focus on the fact that almost half of their balance may be gone at death, but ignore the fact that those investments are potentially twice as large as they otherwise would have been in a non-registered account.


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## Userkare

One of my most basic financial truths is what I call the "potential vs. ability graph". I devised it when I was in the final weeks before retiring, in response to my younger co-workers' questions.

Without actually drawing the graph, maybe I can explain it....

The X axis is your age, from 20 to 100. The Y axis is "potential", and "ability"; it's not quantifiable, just representing a relative level.
There are two lines on the graph. One is potential to accumulate disposable income, the other is the ability to enjoy the fruits of disposable income.

In the 20's the potential to accumulate disposable income rises slowly as you settle into working for a living. The ability to enjoy disposable income is a much higher line, out of reach for most. If you could afford to take vacations in singles clubs, buy fast boats, sports cars, etc etc you would be able to really enjoy all of that.

In the 30's & 40's with kids, that potential to accumulate disposable income levels off and even dips as you have to feed, clothe, educate, and pay for kids activities. The ability to enjoy that disposable income also starts to decline. Now, vacations are to Disney World, not Club Med, and you're driving a minivan instead of a sports car.

In the 50's, at some point, hopefully, the kids will have gone out on their own. The potential to accumulate disposable income really starts to rise. You're probably experienced enough at your profession to have moved up to higher paying management positions. The ability to enjoy that disposable income has now sharpened its decline. Buying fast boats, and sports cars just makes you look mid-life-crisis foolish. The only vacations you want is to sit on your ***, and stuff your face on a cruise ship.

At some point in the 60's, the two lines cross. Potential to generate disposable income will soon exceed the ability to enjoy it. That's the "hot spot"; time to retire.

In retirement, the potential to generate disposable income flat-lines, while the ability to enjoy it continues to decline.

By the 90's, the ability to enjoy disposable income has declined below the noise floor; you're just happy that today is "pudding day". So what good does disposable income do for you then?

The lesson is.. spend it while you can enjoy it, but hold on to enough of it that you can look forward someday to a weekly pudding treat.


----------



## Eclectic12

Just a Guy said:


> On the RRSP reality (sorry not the idea you wanted mortgage u/w), let's look at why governments like them...
> 
> Let's say you put away money for your RRSP, save a little every year and save up $250k over your lifetime. With interest, which you were lucky with, you have $1M in your account when you retired, so you did really well. Unfortunately, if you take out too much, you'll be heavily taxed, especially as most of it is interest income which means he government could potentially take half of what you earned ...


YMMV as my co-worker would happily take the double digit tax discount that the $1 M RRSP would give him. Another co-worker would end up with lots of taxes, along the lines you are thinking.

Probably it is worthwhile to keep in mind that the last article I can recall that talked about $1 M + RRSPs, it was less than 1% so a median or average value RRSP may be more generally applicable.




Just a Guy said:


> ... upon death, everything is considered "sold" and taxed at that date. Your $1M will be "cashed out" and the government will take its share based on a $1M income for that year, interest income. Say goodbye to probably 50% of your estate ... *The government is ecstatic, they also got half a mil for doing nothing.*


Aren't you getting carried away to make your point?

There should a some tax that is being deferred by the gov't, where they would have collected the tax had the RRSP contribution/deduction from income was skipped. 

Otherwise, I'd love to hear how someone having so low an income that they pay $0 in taxes can have $250K to contribute to the RRSP.
A gift or inheritance might take care of the $$$ but without earned income, there won't be any RRSP contribution room to put the $$$ into the RRSP.


Cheers


----------



## fplan

Just a Guy said:


> Why not put it into an RESP? You don't even need to put all of it into the account, only $2500/year. The Feds will then chip in another $500 and the various provinces will also chip in a little. In 18 years, without interest, you'll have $55,000 to send them off to post secondary school which cost you absolutely nothing.


small correction max grant from govt will be 7200 per kid . if you contribute 2500 per year for 18 years , you will have 52200 without interest, still lot of money..


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## Just a Guy

Some provinces chip in as well, plus I like round numbers to keep things simple. Technically, all the money comes from the government, you could put the entire child benefit in and have even more. 

The main point was, none of this money is coming out of your pocket.

As I've said before, these examples are simplifications. They are designed to explain things like governments tax interest income at the highest rates possible, so after working 40 years to save up $1M in rrsps only to have the government tax away your "earnings" giving you a lousy return may make you want to explore other ways of making money.


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## Just a Guy

Time to talk CMHC insurance.

Most people pay a small fortune to get cmhc insurance when they buy a house. First off, you usually never see this payment as it gets thrown into your mortgage. Next, you pay a lot of interest on it because it's amortized over the life of your mortgage (usually 20-25 years), so the amount is at least double what you think you paid once you include interest (you can use the rule of 72 to see how often your amount doubles if you want to be technical, but 3% should double the payment in 25 year). 

Finally, while it technically is insurance, it's not there to cover you, the homeowner, it's there to protect the bank.

If you default on your mortgage, the bank forecloses on you, sells the property, making its "best effort" to get the highest market price. If that amount is higher than the mortgage amount, you may get some money back after "fees and expenses" incurred by the bank. 

More likely though, the property will sell for less than the mortgage. This is where cmhc insurance comes in to compensate the banks for the loss. Well, at least you have insurance right? Not so fast.

Cmhc will then determine if it's worth the effort to try and come after you for the loss (only two provinces still have non-recourse mortgages meaning you can walk away and just lose the house). Cmhc may sue you, the homeowner, to recover the loss as well as "fees and expenses". 

Oh yeah, should we get into an economic disaster like what happened in the USA during 2007/8 where the mortgage industry melts down overnight...the taxpayer is on the hook to back cmhc.

Oh, one final part...CMHC is run by the government...a little while back, they declared a "special dividend" and gave the government a large amount of money (tax?).


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## ian

I find that people fall into three categories. Those that are doomed, those that just bump along, and those that truly 'get it'

The doomed ones can be identified by one statement (usually multiple maxed out credit statements)...'I can't afford this but I am going to buy it anyway'. Big trouble when that groups reaches retirement...especially if they have outstanding mortages, consumer credit balances, and HELOC balances. And usually they have at least two out of the three, often all three.

The second group gets by. They don't realize how much further ahead they would be if only they spent as much time working of their financials and their investments as they spent looking up what TV or car to buy on Consumer Reports. The banks absolutely love, love these folks. Great customers, huge interest, service & mortgage fees, and management charges that feed the bottom line and enhance the bank stock price.

The third group gets it. They never pay a dime in consumer interest. They are aware of the MER's on their mutual funds, and they re-assess all aspects of their finances on a regular basis. Spending less than they earn is a inbred way of life. They often get to retire early. Groups and two often refer to them as lucky. Perhaps lucky enough to have the basic amounts of smarts and the willingness to put a little effort into researching financial aspects that are important to their well being but of which they may not be aware. And they feel no shame if their car is six years old while all their friends and neighbours have later models.


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## Just a Guy

Earning money and taxes.

My sister's kid once told me all the ways he knew of to make money...

He could get a job, ask his parents, or try to find money other people had lost (like checking in the change compartment of a vending machine). 

Funny thing is, hen people grow up, they seem to have a similar attitude. They can get a job, ask their parents or the government, or maybe play the lottery.

My idea of making money comes from the three ways I know make money.

Get a job (probably the most work and worst tax advantages)
Invest (this can be stocks, bonds, real estate, businesses, etc. The possibilities are virtually limitless)
Start a business. 

The last two are "tax advantaged" and, while those earning a paycheque may think it's unfair, they don't really understand how taxes work.

Taxes are only partially about money, another part of them is about control. The government controls people by incentives. You want people to use less energy, give rebates to lightbulbs, furnaces, etc.

In the case of investing (where money goes into the economy to create paycheques for people who'll pay taxes) or starting a business the government wants you to do this. Employed people are happy.

Of course businesses and such get "tax deductions", but this doesn't mean they get to keep the money for themselves. You have to spend money to get a tax break. The difference between a business owner and a paycheque person isn't he amount of money spent, its on the ability to choose where the money is spent.

For example, when a business files taxes, it is allowed to deduct the fees charged by an accountant. The business doesn't get to keep the money, they paid it to the accounting firm, helping to pay salaries, rent, utilities, etc. All which stimulate the economy (what the government is supposed to do). If you didn't hire an accounting firm and helped the economy the government would take that money from you and "stimulate" the economy as they see fit. 

So, as a business owner, you can decide where your "tax" money gets spent you can buy things, hire people, etc. But you don't get to keep it. Of course, you can benefit more (hiring an accountant gives you more personal time that doesn't have to be filled filing taxes for example), but then again you're doing more for society as a whole than he paycheque person.


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## Just a Guy

ian said:


> The third group gets it. They never pay a dime in consumer interest. They are aware of the MER's on their mutual funds, and they re-assess all aspects of their finances on a regular basis. Spending less than they earn is a inbred way of life. They often get to retire early. Groups and two often refer to them as lucky. Perhaps lucky enough to have the basic amounts of smarts and the willingness to put a little effort into researching financial aspects that are important to their well being but of which they may not be aware. And they feel no shame if their car is six years old while all their friends and neighbours have later models.


There's a few things missed in this quote.

First off, "spending less than they earn". I've heard this a lot (David Chilton loves saying this) however, I've found that this isn't actually the way successful people think (not even David if you look at how he made money). The real way of thinking is slightly different...

"Earn more than you spend". It's a subtle, but very important difference. Your statement is limiting, my statement is empowering. 

Robert kiyosaki, despite most of his work being fluff, once told a story about how he wanted to buy a new Porsche. His wife said fine, as long as you find some way to pay for it. Instead of putting off the purchase and saving, or asking for a raise (being self employed doesn't make that easy), or going into debt, he instead bought a new apartment block which increased his monthly income to the point where he could soon buy the car. He increased his earning power to solve his want.

From this, I'd also argue about "never paying consumer interest". Debt is a tool, just like an axe. Used properly it can build you something amazing, used improperly it can kill. People who "get it", as you say, realize this and use it wisely. Debt isn't good or bad, any more than the axe is. Personally I pay a lot of consumer debt with my mortgages, I just make sure I earn more than I pay.

The third group also doesn't tend to ever "retire" either. They may not work as hard, perhaps give up what looks like a job, if they ever had one in the first place, but I find they usually are heavily involved in volunteer work, watching over their affairs, involved in politics, etc.


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## kcowan

The other thing worthy of note is that some people progress through the phases. Initially working for the man to pay mortgages then investing when you can afford it then moving into not paying interest unless it earns more than it costs.

I have moved through all the phases. My only bad decision financially was getting a divorce late in life. But it has been an amazing lifestyle decision.


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## Mortgage u/w

ian said:


> I find that people fall into three categories. Those that are doomed, those that just bump along, and those that truly 'get it'
> 
> The doomed ones can be identified by one statement (usually multiple maxed out credit statements)...'I can't afford this but I am going to buy it anyway'. Big trouble when that groups reaches retirement...especially if they have outstanding mortages, consumer credit balances, and HELOC balances. And usually they have at least two out of the three, often all three.
> 
> The second group gets by. They don't realize how much further ahead they would be if only they spent as much time working of their financials and their investments as they spent looking up what TV or car to buy on Consumer Reports. The banks absolutely love, love these folks. Great customers, huge interest, service & mortgage fees, and management charges that feed the bottom line and enhance the bank stock price.
> 
> The third group gets it. They never pay a dime in consumer interest. They are aware of the MER's on their mutual funds, and they re-assess all aspects of their finances on a regular basis. Spending less than they earn is a inbred way of life. They often get to retire early. Groups and two often refer to them as lucky. Perhaps lucky enough to have the basic amounts of smarts and the willingness to put a little effort into researching financial aspects that are important to their well being but of which they may not be aware. And they feel no shame if their car is six years old while all their friends and neighbours have later models.


Great sum-up and on point!


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## Just a Guy

Not sure if I should talk about this financial truth, as it can be very dangerous if used...

"No" doesn't mean no.

Many people go to the bank for a variety of reasons only to be told no. Fortunately for them, most people take it at face value and give up at this point.

Banks really aren't in the business of saying no, they'd love to lend you money, the more the better because usually they set things up so there is no way for them to lose in the long run. Want a mortgage you can't afford, sure, we've got CMHC to cover the loss, or a 20%+ down payment. We've got lawyers who'll ensure you'll probably work the rest of your life to pay it off, etc.

There are however, rules in place designed to protect the foolish. Unfortunately, you can't legislate away stupidity. There are very smart people out there who know how to find ways around the rules without actually breaking them. Hence the reason why the rules are constantly changing...people try to legislate away stupidity, smart people look for ways around the rules...it's a never ending cycle.

Of course, like all rules, here are people affected by unintended consequences. People who are self employed, people with high net worth, etc. Who can get caught in these rules which weren't actually meant to protect them. For these people, finding those smart people at the bank can be useful. They are the ones who can help you find the way around the initial "No". 

Unlike an expensive secondary lender often, when a bank says no, you don't have to go to them and pay more, you just have to go back to the bank and find the right person.

In my experience, to take mortgages for example, there are at least 5 different divisions in each bank, and probably credit unions, which have different lending criteria for mortgages. There may even be more, but I know there are at least 5 depending on how you "sell" the deal to the bank. That means each bank can actually say no to you at least 5 times based on different criteria.

Also, it's good to know that a lot of mortgage application people get paid on commission to set up mortgages. The number one reason why people get told "no" isn't because they won't actually qualify, it's because the work involved for the harder cases isn't worth the money the person will be paid to get you qualified for the mortgage. Face it, if you can get someone qualified in 10 minutes and another one would take a week of work, both paying you the same amount of money in the end, you'd rare want to do the ones that take a week unless you are desperate for money.


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## Just a Guy

Most financial experts are required to take courses throughout their careers. A majority of financial experts work for banks, or bank-like institutions (such as insurance companies). A majority of heir upgrading courses are designed and provided by these institutions.

While the pretext of these courses is to inform them of new ways to make money for their clients, the reality is he people who designed these courses have designed them to make money for the banks and institutions first, then the clients.

So, when you go talk to your financial advisor, they probably are fairly genuine when they try to sell you their latest mutual funds, insurance products, or other investment vehicles. They've probably spent many hours being told how beneficial it'll be and how much it'll help their clients. In fact, it probably wasn't even mentioned much how much money the banks will profit from their fees and service charges. 

So you probably shouldn't blame your financial advisor when you don't do as well as others who don't follow the common advice given by financial advisors. They are all drinking the same type of Kool-aid. 

No one will ever be as interested in your money as you are. The financial advisor isn't really interested in your financial well being, they are interested in their own, what's worse is they're not even educated to think for themselves usually, nor are they compensated for selling you the "best for you products". If you're going to blindly trust others to look out for your best interests, your way to trustful.


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## sags

Edited....I am thinking some people are ridiculously happy while poor and knowing nothing about finances, as others are who have lots of money.


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## off.by.10

Just a Guy said:


> No one will ever be as interested in your money as you are.


Oh they're interested in your money all right. Just not the way most people think they are. You're making great contributions to this thread  Let me add one:

Credit cards and rewards (points, cashback, whatever). They're not gifts. You're paying for your own gifts through increased prices the stores have to charge to cover the credit card fees. What's more, it's a huge racket as they get all the customers to pay for the rewards, even the ones not getting them because they don't use credit cards. The whole thing should be illegal IMO. Especially as, as far as I know, the merchants are forbidden to charge more to people who use a credit card. Wouldn't want them to learn the truth after all...

The net result is that it is profitable for an individual to get the reward card as they start collecting money from the larger pool instead of just contributing to it. But collectively, this serves to increase the number of CC transactions and boost CC company profits, which is money directly taken from customers through increased prices. A variant of the tragedy of the commons, I think. And definitely the best scam I've ever seen as most people are not even aware they're getting scammed. In fact, they're *happy* about it.


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## Mortgage u/w

^^ Reward credit cards are indeed the biggest scam that's been going on, yet no one seems to care.
I refuse ALL reward cards. Not interested in saving 3 cents by spending 10$.


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## Userkare

off.by.10 said:


> The net result is that it is profitable for an individual to get the reward card as they start collecting money from the larger pool instead of just contributing to it. But collectively, this serves to increase the number of CC transactions and boost CC company profits, which is money directly taken from customers through increased prices. A variant of the tragedy of the commons, I think. And definitely the best scam I've ever seen as most people are not even aware they're getting scammed. In fact, they're *happy* about it.



That's me! I *have *to buy groceries, gas, home supplies, et al. so I use my no-fee, cash back C.C. Always pay it in full every month; haven't paid a penny interest in over at least 30 years. Every once in a while, the cash-back reward buys us a dinner out. Oh my God what a scam! 

Sure, everybody pays for my meal, just like property taxes pay for everybody's services. I don't feel at all guilty when I put my garbage at the curb.

Edit: Oh, and it's not just CCs. I use my Costco points to pay for my membership, and P.C. points to buy groceries ( $700 in the last year ). I am so evil! :shame:


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## Mortgage u/w

Userkare said:


> That's me! I *have *to buy groceries, gas, home supplies, et al. so I use my no-fee, cash back C.C. Always pay it in full every month; haven't paid a penny interest in over at least 30 years. Every once in a while, the cash-back reward buys us a dinner out. Oh my God what a scam!
> 
> Sure, everybody pays for my meal, just like property taxes pay for everybody's services. I don't feel at all guilty when I put my garbage at the curb.
> 
> Edit: Oh, and it's not just CCs. I use my Costco points to pay for my membership, and P.C. points to buy groceries ( $700 in the last year ). I am so evil! :shame:


I think the point is that we are paying a premium for our groceries and gas etc to compensate for all these rewards cards that are out there. The merchants pay the credit card companies a lot more to charge a points card than a regular bank card. Since they can't charge user fees (its against the law), they simply increase the prices on goods to compensate.

I assume you must be just as happy paying a premium on your groceries when you check out with your "no-fee" credit card.


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## Userkare

Mortgage u/w said:


> I think the point is that we are paying a premium for our groceries and gas etc to compensate for all these rewards cards that are out there. The merchants pay the credit card companies a lot more to charge a points card than a regular bank card. Since they can't charge user fees (its against the law), they simply increase the prices on goods to compensate.
> 
> I assume you must be just as happy paying a premium on your groceries when you check out with your "no-fee" credit card.


I don't think it's 'against the law' if a company wanted to give a discounted price for cash; most likely it's part of their agreement with the card issuers not to. I have encountered businesses that don't accept credit cards; they're few and far between.

Of course I'm not happy to pay a premium, but what good would stubborn indignation do in the face of something that's not going to go away? This is a fact of our financial system; customer loyalty rewards of some kind or another have been around a long time. Would you decline Canadian Tire money because it leads to higher prices? I might just stuff it in the charity box, but it's my choice to or not.

Some banks would charge fees for me to access my own damn money; I don't use them. Should I refuse to use no-fee banks because I feel some misplaced moral obligation that the bank's borrowers might pay a slightly higher interest rate to make up for it. Should I avoid the higher interest rate savings accounts of on-line banks because they don't pay rent to someone and don't hire tellers?

Given the situation, I don't understand why someone would pay an annual CC fee with no cash-back rewards if they're paying it in full every month, and can't take advantage of any of the other 'benefits' the fee provides.


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## Mortgage u/w

^ How do you justify a discount for paying cash instead of credit? If you can't justify it, then its most likely against the law. No retailer is allowed to charge a separate fee for accepting credit cards. Its tempting because the retailer pays a lot of fees to the credit card companies to allow consumers to shop there. And they pay a lot more for the rewards cards. Don't you find it weird that ever since Tim Horton's started accepting credit cards, their price of coffee went up? 

I agree, its hard to go against what we commonly know.......but that is why its important to talk about it and spread awareness. I won't lie, I use a cash-back credit card too. I refuse to pay bank fees so I charge everything on my credit card and pay it off at the end of the month. Like you, I get paid to shop which gives me a hefty sum at the end of the year. Doesn't make it better, but its hard to go against giants like the banks and credit companies.


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## off.by.10

Mortgage u/w said:


> ^ How do you justify a discount for paying cash instead of credit? If you can't justify it, then its most likely against the law. No retailer is allowed to charge a separate fee for accepting credit cards. Its tempting because the retailer pays a lot of fees to the credit card companies to allow consumers to shop there. And they pay a lot more for the rewards cards.


I know of one place where there's a "cash" discount of 3% or so, which includes debit cards. They've been doing it for well over a decade.

There was some grumbling a few years back: https://globalnews.ca/news/1652367/visa-mastercard-canada-agree-to-lower-transaction-fees/ And I seem to remember more recent talk of legislating some limits to the fees but can't find what it was. A legal limit to fees is the only way we're ever going to get out of this IMO.


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## Userkare

It's not a matter of whether I can justify it or not. Although there may be laws against surcharge I don't believe there's any law that says you can't offer discounts to customers for payment types. I would prefer to get a 3% discount up-front for debit or cash rather than accumulate 1% and 2% CC rewards.



Mortgage u/w said:


> I won't lie, I use a cash-back credit card too. I refuse to pay bank fees so I charge everything on my credit card and pay it off at the end of the month. Like you, I get paid to shop which gives me a hefty sum at the end of the year.


Oh, I must have misunderstood...



Mortgage u/w said:


> I refuse ALL reward cards. Not interested in saving 3 cents by spending 10$.


 :wink:


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## Eclectic12

Mortgage u/w said:


> ... No retailer is allowed to charge a separate fee for accepting credit cards.


The authority this Gov't of Canada web site quotes is "Visa, MasterCard and American Express merchant rules".
https://www.canada.ca/en/financial-consumer-agency/services/merchants/credit-fees-merchant.html




Mortgage u/w said:


> ... How do you justify a discount for paying cash instead of credit?
> If you can't justify it, then its most likely against the law ...


The Code of Conduct for the Credit and Debit Card Industry in Canada is listed as enabling discounts as "merchants may choose to offer discounts for different payment methods, but they are not required to do so."

Justification or not, if there was legislation involved - that would more likely be the authority, not an industry code of conduct.


Cheers


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## ian

A retailer can give a discount for cash. Especially if it is cash, off the books. Granted the last part is a no no but I think that there is nothing illegal in giving a discount for cash.


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## Eclectic12

off.by.10 said:


> ... And I seem to remember more recent talk of legislating some limits to the fees but can't find what it was. A legal limit to fees is the only way we're ever going to get out of this IMO.


Apparently it was the CC company rules that prevented merchants from tacking on a surcharge for the more expensive fee rewards CC's. Part of the class action lawsuit settlement, one and a half years after the provincial courts approve the settlement, new rules will allow merchants to tack on a surcharge but will have a surcharge cap.
http://www.huffingtonpost.ca/2017/06/15/credit-card-surcharge-canada_n_17124288.html


Cheers


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## Just a Guy

New truth

You should always do the math.

I've had many tenants over the years who do "rent to own" furniture. Often they'll get easy payments let's say $1000/month for three years. They can afford $1000, what they ignore it the total payments add up to $1000x12 months in a year x 3 years = $36000 for basic furniture. 

I've seen this often with car sales as well. One guy I knew got a used minivan (book value $6000) for 36 months at $1000/month. 

I should point out that doing the math is always important, not just for the poor. I know people who purchased a new car for $X (I don't remember the exact amount) but, when the salesman came back with the paperwork, the monthly payment was off...he'd added in an extra $1500 to the total price (when it was broken down over monthly payments it was only a few dollars different, hardly noticeable unless you checked.


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## Ollyward

my mother calls building a home a dead investment. you are just putting in money on something that won't be of value after a few years. of course, if the land is yours, then, the value of the land may appreciate, but other than that, nothing to earn on a house.


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## kcowan

On the original topic, Wood Gundy published an analysis of home ownership, and concluded that, over 5 years, the ROI is actually 5% less than the apparent ROI. Still averages north of 2% pa.


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## Just a Guy

Speaking of houses...many people think of them as a good way to get into the landlord game. Not true.

A home is different from an investment in most cases. When calculating ROI (return on investment), there are a lot of people who fudge the numbers in numerous ways to make their "profits" look much higher. Some people only look at their downpayment for example. I put in $10,000, I make $1200/year in "profits", so my return is 12%. Or they do other things like...I bought the place for $300k, put down $150k as a downpayment, and rent it for $1500/month so it cash flows. 

In both these cases, the people in question ignore the borrowed money and the "dead" money in their calculations. Sure, borrowed money technically isn't yours, but it is potential money that could be working for you. Banks will only lend you so much, if it's all tied up in one property hennthats all you get. For example if a bank will only lend you $300k you could buy one place for $300k (as above) and rent it for $1500, or you could buy 3 places for $100k each and rent them for $800 each (making $2400) with the same amount of borrowed money.

"Dead" money is your money not earning anything. In the example above with the $150k downpayment, that $150k is just sitting in the bank not doing anything for you, and offering the bank a health guarantee should real estate prices collapse. 

When I do my calculations for real estate, I put everything into my purchase numbers. Price of the property, legal fees, renovations to make them look good initially, if I ever got CMHC, which I don't, I'd have those in there too. So, if I could buy a place for $75k which needed $5k of renovations, and had $2k of legal fees, for a total of $82k, I'd want to be able to rent it for around $820/month, especially in this low interest economy.

Now, let's look at your typical home, most people don't live in a house which would rent for about 1% of its value. Notice I said value too, not mortgage remaining on it, not purchase price, rather current market value. That is your potential money available for investment, no point in wasting it.

I'd also warn that being a landlord is a tough business emotionally to begin with. Renting the "family home" ca make that a lot harder. Imagine coming in to your former house, where your kids grew up, and seeing the place trashed, not just messy but literally trashed. Garbage everywhere, the smell of cat urine, rotting food, holes in the walls, where once you had family dinners...

Better to sell the home and buy places specifically for rental purposes which would cash flow like a rental.


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## rebel_ins

kcowan said:


> On the original topic, Wood Gundy published an analysis of home ownership, and concluded that, over 5 years, the ROI is actually 5% less than the apparent ROI. Still averages north of 2% pa.


That analysis is on page 4 of this document.


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## Mukhang pera

Just a Guy said:


> A home is different from an investment in most cases. When calculating ROI (return on investment), there are a lot of people who fudge the numbers in numerous ways to make their "profits" look much higher. Some people only look at their downpayment for example. I put in $10,000, I make $1200/year in "profits", so my return is 12%. Or they do other things like...I bought the place for $300k, put down $150k as a downpayment, and rent it for $1500/month so it cash flows.
> 
> "Dead" money is your money not earning anything. In the example above with the $150k downpayment, that $150k is just sitting in the bank not doing anything for you, and offering the bank a health guarantee should real estate prices collapse.


I am not sure I follow the notion of $150k “just sitting in the bank”. The purchaser took $150k out of his bank, or his coffee tin, and made a down payment of $150k and borrowed $150k from the bank. Where do we end up with $150k just sitting in the bank? I am probably displaying my ignorance here, but I might as well get educated.

As for the 1% rule, I have posited this question a few times before on cmf and never had an answer. The question relates to the unruly rental that misbehaves and refuses to adhere to the 1% rule over time. 

I have given the example of a triplex I bought in Kitsilano in Vancouver back in the 1970s. I paid $70,000, lived in one unit and rented two (yes, I know, a cardinal sin buying a duplex or triplex, exacerbated by living in it myself.) The basement rented for $200/mo., the top floor for $350 and the main floor I retained was larger in floor space and by one BR, so could easily have been rented for $400, thus the property fell comfortably within the 1% rule.

However, that $70,000 house has turned into an economic disaster by having the temerity to increase in value to about $2.4 million today (according to BC Assessment online). The house is still the same worn out 1914 house, now assessed at $45,000 for the structure (the millions are in the land). I’ll bet dollars to doughnuts (an expression less meaningful today cf 50 years ago) that the whole cannot be rented out for $24,000 a month. I suppose Vancouver rents are high, but not that high). 

So that house now stands in egregious breach of the 1% rule. Que faire? What is the hapless landlord confronted with that revolting situation to do? I suppose to ask the question is to answer it. The only sensible solution is to sell that sucker for $2.4 million and look to buy 24 houses for $100,000 apiece that will pay obeisance to the 1% rule. One might pick up a few in Chetwynd, one or two in Spuzzum, maybe a few in Pouce Coupe, and others in Churchill, Port aux Basques and some other interesting places.

Perhaps I am making a bit light of a serious topic, but I am earnest in asking this question. We read all the time here on cmf what a “real investor” does that distinguishes said investor from the vast majority of folks who are mere pretenders, soi disant investors living in states of perpetual delusion. I should be slow to admit this, but I would probably continue to sit on that improvident Vancouver “investment”. Will someone kindly call the Public Trustee for me? I should probably be involuntarily committed under the Mental Health Act.

I have before recited here on cmf the story of the refrigeration mechanic who came to me to draft a prenup. Then in his 30s, he had, over time, accumulated about 8 single-family dwellings on Vancouver’s west side. All were rented. Average acquisition cost was probably in the range of $130,000. They perhaps then rented for something close to 1%/mo. The average market value today would be in the order of $3 million apiece. That means they would each have to rent for $30,000/mo. to be keepers. I suspect they won’t fetch that. I sure hope that guy had the good sense to dump the whole lot before they went rogue and increased in value in unbridled fashion. Better to be dead than left sitting on $24 million in dead money.


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## Just a Guy

For the first example, the $150k is not sitting in the bank, it's basically illiquid equity on the home. He only earns money on it if the value of the house increases. If the value of he house decreases, it's comes out of the equity portion first.

As to your example of a kits house, as I've said before, this is a basic course and there are always exceptions to the rule. Sure Vancouver and gta went through the roof but those are two cities out of how many in Canada? It's not the rule by any means.

As for what to do with your 2.4M house which is maybe earning what $3k a month? If you can't see that selling a 2.4M asset and just buying a GIC would give you a better return on investment then I doubt anyone could give you financial advice...unless, of course, you think that property will continue to grow at the same rate and one day be worth say 24M. 

You also don't have to buy 24 properties instead (by the way Canada is a very large place and does exist outside of Vancouver and Toronto where more and more reasonably priced properties are coming on the market every day after years of drought), you could, for example, buy a small walkup apartment say in the 20-30 unit range for that price. You could then easily get back to that 1% rule and still own a single building.

Of course, it you prefer to only earn only $36k before expenses on 2.4M who am I to tell you that you could easily be doing better. You got lucky with your investment and hit a home run, through no work of your own, congratulations. I, on the other hand, have to work at my investments I prefer to invest with a repeatable system. I have to continually find new peoperties which will cash flow going forward, I doubt you can buy a second property in Kits today and get repeatable returns. 

To be fair, I should admit I rarely sell my properties even when they increase in value. I'm a buy and hold investor by nature. I do however refinance older holding in order to buy new ones so my money isn't really sitting around tied up in equity...certainly not to the point of 2.4M in a single property. If I were you, I'd keep the Kits property, leverage it and buy some more properties to increase the cash flow from the equity. You could refinance and buy a 20 unit apartment with the cash (it being clear title) and earn 20-25k/month, then mortgage the apartment and buy a 10 unit place and earn another 10-15k and so on...it's called leverage and it's where the real money in real estate comes from. With $2.4M you could have the earning power of close to $250k/year by leveraging 24M in real estate earning 1%)


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## kcowan

The problem with being property rich in Vancouver is that you can only cash in by leaving town. This is what is happening to children whose parents cannot afford to give them the cash to afford a home.


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## Just a Guy

This goes back to that earlier post of mine...leverage the house, buy a revenue property use the income from the revenue proeprrty to pay the mortgage on the second house in Vancouver. 

It's the difference between living below your means and increasing your earnings to what you need.

Technically you'd be safer than trying to finance it yourself. If you finance it yourself, you have one income paying the bills. If you have a small apartment (say 20-30 units) you have 20-30 incomes paying the bill plus your own.


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## Just a Guy

New truth

Use math when buying stuff.

Food is often sold on a price per unit of measure (chicken is sold by he kilo, pop is sold by he liter, etc.). The problem is, the confusion, thanks to marketing, over the prices and value of what you are buying.

I was recently in a store where they were selling chicken breasts in a package for the flat price of $10/pack. Upon closer inspection, the amount of chicken (the weight of each package was printed in small print on the label) the amount of chicken in the packages ranged for around 800g (which works out to $12.50/kg) to 1.2kg (which works out to $8.33/kg) for the same meat. 

I watched a number of people pick up chicken for a while, not one even looked at the package weight, they just grabbed one. 

I've seen the same thing with cheese. Slap a "sale" or "special price" sticker on them and they outsell the same product which may be cheaper sitting right next to it.

Pop, and other various kinds of sugar water, do this all the time. I've seen people buy a single 500ml bottle and pay more Han a six pack of 500ml bottles from the same store. I understand not buying a 2L bottle when all you want is a portable drink, but I've seen cans selling for more than 2L bottles, sometimes even those half cans they now have. Remember, we're talking in the same store, not having to go to some place across town. 

Of course, we won't even get into asking yourself "do I really need this right now, despite the price?", after all this is the society that needs instant gratification...heaven forbid we went without for a little while in order to be better off financially...


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## Mukhang pera

JAG,

As I said in my post, I was being just a bit tongue in cheek. But, I was being somewhat serious in asking whether those who try to follow the 1% rule conduct periodic reviews of their RE portfolios and cull those properties that have increased in value with rents not keeping up. You have, I gather, a portfolio of probably dozens of properties and I have wondered if you can reasonably monitor rent to market value on a regular basis and is there a point at which you decide it's worth it to incur the costs of selling and going back into the market with the proceeds to acquire properties that will provide a better return. You have answered that question, saying that you buy and hold, but you might leverage some of your older inventory to acquire more. I dare say you have succeeded at this game in spades. I doubt anyone else who hangs out here on cmf has a fraction of the value or income that you have achieved. You are the one deserving of congrats.

BTW, the Kits house is long gone. But I have exchanged it for another property with very much the same characteristics. Yes, that property has a lot of idle equity sitting in it. It's not throwing off 1% as it should. More like .7%. I am missing the boat, for sure. But this is where I part company with many here. My needs are modest. I consider myself largely retired. To be honest, I no longer have the ambition to strive for more than what i have. A weakness, perhaps. After all, the reason for the existence of cmf is to compare notes with others on how to gain more, more and more. Me, I am content to coast. Actually, another motif here on cmf is how to retire before finishing high school. 

My financial goal has been to have sufficient means, without having to expend much effort, to live out the rest of my days as i do now. There is really nothing more that I want. More money will not make me happier. I have also wanted to make sure that my younger wife will have sufficient resources when I am gone that she can maintain a lifestyle commensurate with the way we now live. In the last few years, I have managed to put together a few investments and a plan that will see her through, without having to sell her home or reduce her standard of living. It should see her through comfortably, but not lavishly. I suppose I could be more diligent now about investing to try to leave her in a position of having greater wealth than we enjoy today. But she grew up poor and seems to think we have more than enough. 

It is perhaps that you are much younger than I JAG, but I admire your horsepower. You own an enviable real estate portfolio, a few active corporations involved in divers business endeavors, you are active in any savvy about the stock market. Whew! Makes me weary just contemplating all of that. Perhaps you have a handful of trusted lieutenants who bear the brunt of day-to-day management, but then they must need some management, do they not? Back when I had a private law practice, I found it quite enough just to manage all that went with a downtown Vancouver office - dealing with support staff, leases of premises and equipment, etc. all the while maintaining decent annual billings and stroking clients. But that must pale in comparison to running all you have going. Or have you come up with a method by which the whole ball of wax runs itself and you can sit on the verandah with a mint julep in hand, pinky extended and planning your next trip abroad?

I recently mentioned here someone I know who passed, leaving an estate valued at about $40 million. I knew this guy fairly well. Few would guess his pockets were that deep. It did not manifest in his lifestyle, not at all. He lived in an ordinary house in a smaller city. He went to his office to his dying day. He was always doing deals, investing, worrying about deals, his investments, etc. What was the point? 

Come to think of it, the only difference I spotted in what my well-to-do friend had and how he spent his money was when he made business trips to Vancouver. If I were there, he’d on occasion call me to meet him at his hotel. He usually booked a suite at the Hyatt at Granville and Burrard. My office was in the next office tower. I did always notice that he booked not just a room, but a suite, and quite a sumptuous one at that. Now that’s an indulgence I have never allowed myself. Perhaps something I could afford once in awhile, but the frugal part of me would put the brakes on. For this fellow, it was routine. Even if it was just a pleasure trip, I expect the company paid the bill so it was paid with pre-tax dollars, which would reduce the outlay. When my wife and I now make the occasional sortie to Vancouver, we stay at the Sandman on Davie St. A different snack bracket.


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## Mukhang pera

Just a Guy said:


> New truth
> 
> Use math when buying stuff.


Another common trick is to trade on people's view that if you buy in the larger size, you save money. You mention sugar water. That's a good one. We buy little for our own use to begin with, for health reasons, but we buy on occasion, particularly to have some around for guests. We have not bought any for awhile, but the last time I bought soda at the Superstore, many of the cans were offered in 12-packs or 24-can flats. Now you'd think you'd get a bit of a break for buying the flat. Wrong-O! Check the price and you see that it was cheaper to buy 2 boxes of 12 than one flat of 24. They change that up once in awhile, just to keep you off balance. Many other items are the same. Check unit prices..per ml., gram or whatever. Sometimes it costs more to buy more.


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## Eder

Mukhang pera said:


> JAG,. When my wife and I now make the occasional sortie to Vancouver, we stay at the Sandman on Davie St. A different snack bracket.


mmm Davis St in the early 70's had much to offer young boys other than the Sandman lol.


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## Mukhang pera

Eder said:


> mmm Davis St in the early 70's had much to offer young boys other than the Sandman lol.


Perhaps some education in how to fund an early retirement?


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## Just a Guy

I used to be heavily involved in my first company, long hours some days, carried it on my shoulders kind of thing. 

Then I got injured and couldn’t work for several years. The company barely survived without me. 

While I was injured I took up investing since I couldn’t physically do much and investing is more a mental game. Because my income was non-existent and savings nearly depleted, I couldn’t really afford to be wrong. I realized it wasn’t overnight success, but I couldn’t afford to lose what I had invested. 

As I recovered, I realized the mistakes I’d made with the first company, so I first got it stable again and then put systems in place to make sure it didn’t rely on specific people anymore. Same with my other companies and real estate. 

I built up a network of people to do the work for me and designed the system that it runs under. Now I have a lot more freedom as well as various streams of income. I spend a lot of time volunteering or with my kids. Once in a while I get involved with specific projects because I like working. I do spend time looking for potential properties to acquire because I like that part of the game. 

I haven’t really had to work very hard for several years unless I want to.


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## twa2w

kcowan said:


> On the original topic, Wood Gundy published an analysis of home ownership, and concluded that, over 5 years, the ROI is actually 5% less than the apparent ROI. Still averages north of 2% pa.


What horribly flawed numbers. As I can see from the source it seems as if they put itvtogether to be used as a marketing tool to sell stock investing and convince people RE is a horrible investing. 
Ok but at least make your comparisons and numbers realustic and accurate.


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## ian

Very difficult to tell on real estate. Depends on the market at the time of purchase and sale. Also on the home-location etc.

We always preferred a smaller home in a good area. We always bought with a view to subsequently selling.

We have always done well on our homes. But, over the past four-five years we have been much better off renting than if we had bought. Our home value would have been flat, our home expenses and taxes much higher. Instead, our home equity was invested in the market and grew substantially. This of course would not have been the case in Vancouver or Toronto.

We ended up as empty nesters in a home was far too big. We rattled around in it. Taxes, upkeep, heat, etc. were all so much higher than we needed. Glad we sold, rented, and then downsized.

We owned homes for 30 plus years. Then rented for four. Now we own again. There is a lot to be said for renting even though society seems to favour ownership. Not so good if you buy a condo and then end up with a huge assessment as did our former landlord.


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## Just a Guy

New truth.

Generally, if you try to copy someone else, you'll probably fail.

Every investor is unique. The banks tried to quantify this by having you fill out your investor risk profile, but I think they miss the point with it.

Investing isn't about risk tolerance, it's about your personality.

You may very read about many investment strategies that are out there and wonder "how could these all possibly work?" The truth is, they probably all do, for the right person. Many people on this board are afraid of day trading. It's a high risk strategy which many avoid like the plague, but does that mean you can't make money at it? It depends on your personality in my opinion. I know plenty of successful day traders but, even though I know how it's done, and know people who can coach me, my personality definitely doesn't lend itself to day trading. I'm lucky if I check stock prices once or twice a month, I just don't want to even though I've got money in the market.

I'm not saying that you can't be successful investing against your personality, but it is a lot easier to be successful if you aren't fighting your natural urges. Once you discover your personality, I suggest you stick with it, trying to copy someone else probably won't work long term since you're not really "invested" in the process.


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## Just a Guy

New truth, gift cards are like printing money for many stores.

How many of you have unused gift cards lying around your home? In my family, if not redeemed within a week or two of receiving them, they generally sit in a drawer forgotten and unused.

Businesses love them for two reasons, first they got paid up front. You never use the card, that's free money in their accounts. Second, I believe, though I could be wrong, that you don't need to claim the income from a gift card until they are redeemed, meaning the income is, at worst tax deferred and maybe, if they never get redeemed, potentially tax free.

If you own a business, think about donating gift cards for charity events, chances are you'll get a tax receipt for the donation and probably won't have to redeem the goods for it in the end.

If you get gift cards, have a policy to use them up right away.


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## Just a Guy

New truth.

Opt-out "services". 

You see these options everyday. Get a "free trial" to a service or product. All you need to do is to provide a potential on-going payment method and, after the free trial period, remember to tell them you no longer want to continue.

It may be something simple, like a magazine subscription, or something more complicated, say managing your finances for a year.

The truth is, while it may seem simple to get out of these "deals", often it's not easy. First off, you probably should read the "fine print" on the deal. I've seen some of these having the most ridiculous terms you have to meet in order to fulfill your termination requirements. Next, you need to actually remember to cancel the service, some may only be a week long, but others may be a year later and you've probably forgotten that you signed up in the first place. In fact, most people only find out when their payment method expires (so don't give direct access to your bank account) and the company calls to get an updated credit card number. Finally, there may be other "fees" involved to get out of he program, like a transfer fee to get your money back after it's been managed for you for a year.

Some of these programs go a step further and refuse to cancel your service. With theses, you'll have to go through the hassle of trying to get the credit card company to terminate payment. That's not as simple as it sounds in all cases. They have rules and regulations they need to follow (you can't just say "stop payment", you need to provide a reason and proof). At best, it'll eat up some time, at worst you may kiss your payments already charged goodbye.


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## Just a Guy

Another new truth...

Figure out where the money actually comes from.

I remember reading this article a while ago, so I decided to share the link. I've recommended the site before, mostly for learning the basics of real estate, but he also has a bunch of good essays on financial education.

http://www.easysafemoney.com/how-you-can-sell-things-cheap-and-make-a-profit/


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## Just a Guy

New truth.

Inflation is a lot higher than you think.

The government likes to post that we are in an era of low inflation, however there are ways to hide inflation in plain sight.

A few postings ago, I talked about how you should buy stuff based on the amount you get and a price per unit. The government however, when calculating inflation usually takes the price of the object, say a loaf of bread. One way to hide the true inflation is to shrink the size of the loaf. What used to be 500g, is now 450g (10% less) but the "price of a loaf I'd bread" has remained the same...no inflation (except you're getting 10% less for the same money). 

It really showed up today when I looked at my kid's candy haul...one piece of liquorice (I got 4 in a pack when I was a kid and it was longer), a peanut butter cup the size of what used to be considered a mini cup, my kid actually got a 16g package of chips (I think it had 3 chips in the same sized bag), etc. When I bought candy, I never looked at how many bars I got in the package, I looked at the package weight and then the price per kilo. Imagine the profits on 25 16g bags of chips.

It's not just the Halloween candy either. Try buying a 2L pack of ice cream these days, which used to be the "standard", the package looks the same size, but it contained significantly less. Most food has stayed the same price on a package level, but you're paying a lot more for the air in the packages these days.


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## Just a Guy

New truth

Read your bills.

For many people, the cheapest part of your utility bills is the actual usage. There's a lot of environmentalist talk about reducing your usage and saving money however if you read your actual bill, you'll see the amount you pay is relatively small compared to all the "fees" that are attached to your bill. Some of these fees are a fixed cost too, not attached to usage. 

This applies to many bills, not just utility ones. You'd be surprised at how many hidden taxes and fees you get hit with every month.


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## Just a Guy

New truth,

Basically a version on earlier truths...

Beware of service charges.

Saw an add for a payday loan company..."$15 gets you $100". What a deal 15% for a two week, maybe a month long loan. I suspect many payday loan customers are also lower wage employees, so let's put it into perspective, how long do you need to work just to borrow the $100?

If you're falling behind on your payments now, imagine what happens when you now have to give up future income (the income you spent to borrow money) to pay last month. It starts off small, and quickly grows.

Let's give an example. You get paid $15/hour. You get paid $1500 each payday. You need $1600 after the first paycheque.

Pay 1 $1500, borrow $100, $15 fee
Pay 2 $1385 (payday loan came out), borrow ($200 (let's say you have to borrow in $100 increments), $30 fee)
Pay 3 $1270 (loan came out), borrow $300, $45 fee

Notice you're not really borrowing "extra", we're just trying to get back to your $1500 income, yet each month you fall further and further behind...all for an initial $100. 

The ironic part of all this, you think you got a "free" loan, they never charged you interest, only a "processing fee". Sort of like the government isn't "taxing" your bills, they are adding "rate riders", "municipal access fees", "administration", etc.


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## sags

Payday loan companies are a manifestation of much bigger problems.


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## Userkare

Just a Guy said:


> New truth,
> 
> Saw an add for a payday loan company..."$15 gets you $100". What a deal 15% for a two week, maybe a month long loan. I suspect many payday loan customers are also lower wage employees, so let's put it into perspective, how long do you need to work just to borrow the $100?


Is this in response to today's iCash SPAM ( if it survives moderator wrath ), or just great timing? http://canadianmoneyforum.com/showthread.php/124146-Cash-Advance-Payday-Loans-Online-!-iCash

Borrowing more money when your expenses consistently exceed your income is like drilling a hole in the bottom of a swamped boat in order to let the water out.


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## off.by.10

Userkare said:


> Borrowing more money when your expenses consistently exceed your income is like drilling a hole in the bottom of a swamped boat in order to let the water out.


Like this? http://disney.wikia.com/wiki/File:The_cold-blooded_penguin_9large.jpg

The thing is, people always justify the borrowing with an "emergency". As if they did not know their car was going to need maintenance at some point. Or the house. Or that the kids would need new shoes.

Perhaps another truth: you don't have emergencies, you have a lack of foresight. 99% of the time anyway.


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## sags

Stagnant wages for 40 years. Stagnant family incomes for 20 years.

If wages and incomes don't start to rise the whole economy is going to collapse.


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## Just a Guy

Userkare said:


> Is this in response to today's iCash SPAM ( if it survives moderator wrath ), or just great timing?


Just coincidence, I don’t read every thread on here, only the ones that interest me. 

Nice to see people are reading this thread though, I was beginning to think I was just posting to myself and annoying people.


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## Eder

I'm appreciating your effort JaG...please carry on.


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## Just a Guy

New truth.

Being cheap isn’t always the cheapest. 

As a landlord, I deal with a lot of construction materials. There are many ways to cut costs for example I could buy really cheap flooring materials (say 7mm laminate). 

The only problem is, while cheaper initially, I’d probably be replacing it after every tenant. Thin laminate doesn’t last long. Paying a little more for thicker stuff really pays off in the long run. 

Now, to bring it close to home for non-landlords, food is another good example. I’m a food snob by nature, so I’m really fussy about food. Even when I was dead broke, I never compromised on the quality of food (it doesn’t mean I paid full price, it meant I shopped effectively looking for quality on sale). 

This doesn’t mean I avoid “no name” or “store name” products because they are cheaper than “brand names”, I’m not foolish about always paying for marketing, there are good quality discount foods, but there is also poor quality stuff. 

Trust me there is a big difference between AAA beef and “ungraded” beef (yes, I’ve seen ungraded beef sold in stores). There is also a difference in “prime” chicken and cheap chicken, and don’t get me started on frozen “seasoned” meats...

The last time I had to move, I was traveling a lot between my two houses. For convenience, my family and I are a lot of fast foods for about a month. Most of us had never felt so sick. Again, there are better and worse fast food places (and they certainly aren’t cheap for the most part)

Furniture is another good example. Quality furniture lasts a long time, cheap furniture breaks down quickly. Of course, if you have young kids, cheap furniture may be a good way to go until they get older and stop destroying everything. 

Cutting corners to save a few bucks today can have long term expenses that are much higher.


----------



## Just a Guy

New truth

Try learning before paying. 

Often, when confronted with a “problem”, we immediately try and seek out an “expert”. We abdicate any responsibility and put in zero effort. Many times we pay a small fortune for this reaction. 

Some examples that come up often...

Basic legal matters. 

We’ve been taught to go see a lawyer for relatively simple things. Incorporating a basic company, probating a simple estate, small claims, etc. 

Many times these are very simple tasks anyone can complete themselves without a lawyer. 

Basic repairs

Many plumbing, electric, or construction tasks aren’t all that difficult to do. 

Car maintenance is another one. YouTube often has step by step videos what can walk you through the process. 

Appliance repair

Many times these are pull and plug parts, you may have to undo a few screws but not much more. 

Spending a little time doing some research may really open your eyes as to how silly you’ve been about calling an “expert” first.


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## Just a Guy

New truth.

There is a big difference between wealth, and paper wealth.

Many people love to calculate their personal net worth. Of course, depending on how far you go, you can really adjust that number... people list houses, cars, investments, maybe the number of socks they have, all in an effort to feel like they are winning the game, bumping up their numbers.

Truth is, most of that stuff really doesn't count. Can you really sell your car and get by without one? Is your house really worth what you think it is? Reality usually sets in around the time you actually need to sell the items in question. If it's an emergency situation, you can bet it'll go for less than you think, as these things don't sell quickly in a usual situation.

I know a bunch of "paper millionaires", most of it locked up in illiquid items like their personal home or vehicles. They may borrow against these items, to fund their lifestyle, but they really don't have much wealth anywhere but on paper.

To me there are a variety of ways to calculate net worth. Your illiquid assets certainly do have value, but it's not really accessible, so don't treat it the same as cash on hand or short term investments. The best way to think about it is, should something happen to you, how much money do you have to live on should you no longer have income. As someone who lost his income for several years, that is the only number which really matters. If you can borrow against your assets to produce income, then the income is part of your net worth, the asset you borrows against is more insurance for the loan as it's not putting money in your pocket when you need it.


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## olivaw

Just a Guy said:


> Basic repairs
> 
> Many plumbing, electric, or construction tasks aren’t all that difficult to do.


Very true this. Many electrical repairs and upgrades are easy. Just make sure that your work meets basic building code. e.g. You have to connect the correct wires to the correct screws when you replace receptacles. 

IMO, it may also be frugal to invest in appropriate tools, even if you seldom use them. A sub $10 receptacle tester will make sure your new receptacles are wired correctly.


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## Eaglyeye

Just a Guy said:


> New truth.
> 
> Being cheap isn’t always the cheapest.
> 
> As a landlord, I deal with a lot of construction materials. There are many ways to cut costs for example I could buy really cheap flooring materials (say 7mm laminate).
> 
> The only problem is, while cheaper initially, I’d probably be replacing it after every tenant. Thin laminate doesn’t last long. Paying a little more for thicker stuff really pays off in the long run.
> 
> Now, to bring it close to home for non-landlords, food is another good example. I’m a food snob by nature, so I’m really fussy about food. Even when I was dead broke, I never compromised on the quality of food (it doesn’t mean I paid full price, it meant I shopped effectively looking for quality on sale).
> 
> This doesn’t mean I avoid “no name” or “store name” products because they are cheaper than “brand names”, I’m not foolish about always paying for marketing, there are good quality discount foods, but there is also poor quality stuff.
> 
> Trust me there is a big difference between AAA beef and “ungraded” beef (yes, I’ve seen ungraded beef sold in stores). There is also a difference in “prime” chicken and cheap chicken, and don’t get me started on frozen “seasoned” meats...
> 
> The last time I had to move, I was traveling a lot between my two houses. For convenience, my family and I are a lot of fast foods for about a month. Most of us had never felt so sick. Again, there are better and worse fast food places (and they certainly aren’t cheap for the most part)
> 
> Furniture is another good example. Quality furniture lasts a long time, cheap furniture breaks down quickly. Of course, if you have young kids, cheap furniture may be a good way to go until they get older and stop destroying everything.
> 
> Cutting corners to save a few bucks today can have long term expenses that are much higher.


Really appreciate your efforts here JAG , keep them coming i would say :eagerness: 

I literally just changed my decision on buying a new sofa after reading "Quality furniture lasts a long time, cheap furniture breaks down quickly. Of course, if you have young kids, cheap furniture may be a good way to go until they get older and stop destroying everything " :joyous:


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## off.by.10

olivaw said:


> Very true this. Many electrical repairs and upgrades are easy. Just make sure that your work meets basic building code. e.g. You have to connect the correct wires to the correct screws when you replace receptacles.
> 
> IMO, it may also be frugal to invest in appropriate tools, even if you seldom use them. A sub $10 receptacle tester will make sure your new receptacles are wired correctly.


Yeah, it's all too easy to miswire something and create a safety hazard even though it still works. I've seen it in several places in our house by the previous owner who thought he could do it all. For that reason, I would not advise people to do their own electrical repairs unless they have good background knowledge. Electricity is not something you can eyeball like a new floor or coat of paint.

Plumbing is somewhat less critical. You might still cause expensive water damage but you're unlikely to kill anyone unless you somehow plumb a water heater to blow up.


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## nathan79

I see a lot of quality furniture in thrift stores. Families get rid of it when a relative dies, kids don't want it, etc. May not be the latest contemporary styles, obviously. (Goes without saying that the same people who need everything "new" and "in style" are the people fleeced of their money the quickest.)


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## Just a Guy

off.by.10 said:


> Yeah, it's all too easy to miswire something and create a safety hazard even though it still works. I've seen it in several places in our house by the previous owner who thought he could do it all. For that reason, I would not advise people to do their own electrical repairs unless they have good background knowledge. Electricity is not something you can eyeball like a new floor or coat of paint.
> 
> Plumbing is somewhat less critical. You might still cause expensive water damage but you're unlikely to kill anyone unless you somehow plumb a water heater to blow up.


Electricity is fairly idiot proof for the most part (white wire goes on the white (silver) screw, black wire goes on the dark (gold) screw ground goes to the case or green screw. Of course, many people still seem to screw it up.

Too many people don't want to think about what they are doing, the benefits of teaching people to be button pushers instead of understanding how he button works and what it does.


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## Just a Guy

New truth.

This one was inspired by a recent tenant.

Understanding the system can save you money. I recently gave a damage deposit back to a tenant. They immediately went off to cash it and stopped at one of those cheque cashing stores. Not sure what it cost them to cash it, but I know it wasn't free. 

Now, I understand that not everyone has a bank account but, if you take the cheque to any bank (other than the one who issued the cheque) they'd probably want to hold the cheque for a few days. This is because any other bank doesn't have the ability to see if there is any money in the account and they don't have any contact for the account holder. However, if you take it to the issuing bank, they can instantly see if there is money in the account and call the account holder if they want to ensure they should be cashing it. All this can be done for free. Most banks have branches almost as common as the cheque cashing services too. There's no excuse to throwing away money like this.

This can also be applied to many other things. For example, if you apply for mortgage when you buy a property the purchase price is the main factor in determining he "value" of your property. So, you buy a place for 100k, the bank sends out the appraiser and magically the appraised value is pretty close to the purchase price (usually +/- 10k I find.

However, if you somehow purchase the property and pay for it (say off a line of credit), you can go to the bank the next day and apply for a mortgage on a "clear title" property. The system is different in that case. For that scenario the appraiser must look at comparable properties to determine the "value". You purchase price, even if it was yesterday, doesn't really factor in. So, let's say that property you bought for 100k was a deal and other properties were selling for $150k, suddenly that same house qualifies for a much larger mortgage as its appraised value is now $150k, not $100k. I rely on this all the time when I buy my rental properties.


----------



## Just a Guy

New truth.

You need to take an interest in your money.

Many people give their money to others to manage, hoping they'll make the best decisions for you. This could be your investment broker, or your condo board, or your company staff. Trust is all good and wonderful, until it isn't.

If you have several hundreds of thousands of dollars invested in your condo, why not spend a couple extra hours every couple of months to be on the condo board? Instead, other people make decisions about how to spend your money. These people are usually just other owners, no more knowledge than you have, maybe even less. They trust the advice of the management companies and may be being scammed (it happens a lot). Even being the devils advocate could reveal problems with the system. Asking questions instead of going along with the crowd can reveal issues.

The longer you spend on a board, the more you'll begin to understand and figure things out. Same with finances. We're not talking about getting a degree in finances, just apply a little common sense...of course that's not all that common, but if it smells bad to you, there may be a reason for it, so ask.


----------



## STech

Just a Guy said:


> Electricity is fairly idiot proof for the most part



With all due respect, but this statement is outright dangerous. 

I'll agree that it's not rocket science, and a homeowner can wire his entire house (provided you pass inspection), but with a cavalier attitude like that, you're very likely to create some seriously hazardous situations. 

If a person is mechanically capable, has good common sense, has a good aptitude and desire to learn, and doesn't take short cuts, then with some proper teaching aids and good tools nearly all electrical work in a house can be accomplished. But remember, you'll very often get only 1 chance to get it right with electricity.


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## Just a Guy

True, I'll admit I've been doing it for a long time, and passed many an inspection so I may have forgotten how "difficult" it is. However they have tried to make things as obvious as possible.

As for plumbing, I don't think you know how complicated it's become with all the new venting rules. The stacks now look like Christmas trees. It used to be simple, but the new rules even confuse the professionals. Common sense doesn't work there anymore either. For example you can no longer use 90s anymore in most cases, you'll need two 45s.


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## STech

Just a Guy said:


> True, I'll admit I've been doing it for a long time, and passed many an inspection so I may have forgotten how "difficult" it is. However they have tried to make things as obvious as possible.
> 
> As for plumbing, I don't think you know how complicated it's become with all the new venting rules. The stacks now look like Christmas trees. It used to be simple, but the new rules even confuse the professionals. Common sense doesn't work there anymore either. For example you can no longer use 90s anymore in most cases, you'll need two 45s.


I have no doubt that code is always getting more complicated, and new materials will always add to the equation. But the nice thing with plumbing is that you have a chance to go back and do it over again, or if you screw up, chances are the damage is localised. Not to say you can't create a serious hazard with an over-pressurised water heater for example, or having unfiltered water at your kitchen sink. 

But back to your main point about DIY. I fully agree. I'll try my hand at absolutely anything and everything. What better way to satisfy a thirst for knowledge, and save a bundle. I'm not afraid to learn and try anything, but know my limits well and stay within. The Internet has made DIY remarkably easier than even a decade ago.


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## STech

olivaw said:


> IMO, it may also be frugal to invest in appropriate tools, even if you seldom use them. A sub $10 receptacle tester will make sure your new receptacles are wired correctly.


Not to derail the thread hopefully, but I highly suggest you don't rely heavily on that outlet tester. It's great for quickly checking an outlet, but it'll never give you any indication that you have loose connections, and are getting half the voltage at the outlet (which will start a fire in the not too distant future). Learning how to use a multimeter is a fantastic skill, and you'll amaze yourself how many home and auto problems you can diagnose with basic multimeter skills.


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## STech

JAG, sorry if you've mentioned it already, but I haven't read this whole thing. 1 lesson I can personally add, is that a university degree isn't all that it's cracked out to be. And when you step back, you'll realize universities are businesses as well.


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## olivaw

STech said:


> Not to derail the thread hopefully, but I highly suggest you don't rely heavily on that outlet tester. It's great for quickly checking an outlet, but it'll never give you any indication that you have loose connections, and are getting half the voltage at the outlet (which will start a fire in the not too distant future). Learning how to use a multimeter is a fantastic skill, and you'll amaze yourself how many home and auto problems you can diagnose with basic multimeter skills.


I disagree. I have owned a variety of multimeters over the years, including for professional work. I still own a fairly good model but have used it maybe twice in the last five years. I think multimeters are great for certain tasks but overkill for simple tasks like replacing receptacles. IMO, people can get themselves into trouble misusing tools that they are not familiar with. That is why I recommended a simple tool that is readily accessible to anybody.


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## Just a Guy

New truth.

Some old conventional knowledge really isn't worth following.

Sorry to say but the days of having a savings account are costing you money. 

In order to actually make money, you need to earn more money than inflation. With taxation the highest on interest income, this has been virtually impossible to do, even with "high interest" savings accounts, for a very long time.

Even if we take the government inflation rate of 2% (an earlier post shows how this number is fake), you'd need to earn upwards of 4% to just break even after taxes. If you're not earning 2% after taxes, each year your savings are actually growing smaller in its buying power.

To be fair however, for every dollar in your savings account, the bank lends out a multiple of it (usually at least 10 times as much, but it varies) so while it may pay you 0.5% for your dollar, it can lend out 10 dollars and charge you say 3% interest on that for your mortgage (60 times what it pays you), or think of those 25% credit cards...so your savings are really adding up, for the bank.


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## STech

olivaw said:


> I disagree. I have owned a variety of multimeters over the years, including for professional work. I still own a fairly good model but have used it maybe twice in the last five years. I think multimeters are great for certain tasks but overkill for simple tasks like replacing receptacles. IMO, people can get themselves into trouble misusing tools that they are not familiar with. That is why I recommended a simple tool that is readily accessible to anybody.


What does using a meter only twice in 5 years have to do with anything? I bet most people replace receptacles even less. 

The outlet tester is good, but it can give you false security as well. A multimeter has endless uses, and quite more accurate. 

How would you know if you had a loose connection with the outlet tester? Also, what does it mean when all 3 lights are on the tester? The paper in the tester doesn't say anything about it.


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## sags

People spend a lot of money and years becoming educated in a profession or trade. 

Assuming it is equivalent to watching a few You Tube videos is very doubtful.

As my doctor asks some of his patients.............."what did Dr. Google tell you ?".........LOL.


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## off.by.10

Just a Guy said:


> True, I'll admit I've been doing it for a long time, and passed many an inspection so I may have forgotten how "difficult" it is. However they have tried to make things as obvious as possible.


You probably just have not seen all the dumb things people can do and thus are overestimating their common sense.

One example in our place: the guy wanted to get power from an existing outlet for a new one. So he opened a narrow strip in the wall (no so bad) and drilled a hole in the side of the box (WTF?). There were clear signs his install shorted at some point (black marks on the box) and it was left in a dangerous state (someone pulling the cable from the other end could cause further damage to insulation). I did not even have to reopen the wall to push out the cable and pull it back in from the proper hole at the bottom of the box so it could be held safely. So surely he could have done so with the wall opened up. It's hard to figure out what went through that idiot's head when he drilled that hole.

Then there's people who run new cables behind baseboards. Loose black/white conductors (without the cable's outer shell) in walls. Ungrounded installations. Sockets without covering plates. etc.


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## kcowan

We see all kinds of unskilled work done in Mexico. Eventually the repair is just to put it right.


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## Just a Guy

New truth.

You can make money doing anything, you just may not be able to make it in the way you originally think.

Contfronted with a field of rocks, you may, at first, think "what the heck could I ever do with this land, it'll never grow food". A poor man continues to look at the land and despair, a rich man looks for alternatives like selling the rocks for landscaping materials. A truly rich man, takes an individual rock, puts it in a small box, cuts out some holes so that it resembles a small animal carrier and sells it as a "pet rock" and becomes a multimillionaire.

I truly believe that, with a little creativity, you can literally make money doing anything, even selling rocks (a great Canadian band, "the arrogant worms", once sold boxes of dirt as a promotional item and people bought them), you just may not be able to do it the way you originally wanted to. Those who adapt and are flexible in their thinking will probably be successful. Those who try to do thing "their way" or "the way it's always been done" are likely to fail eventually.


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## Just a Guy

Just because someone, even an expert, thinks it can't be don't, doesn't mean it's true.

This may be a variation on various truths I've already said. If you really think about it, you'll see how it applies to many things beyond the original example I'll present.

Over the years, I've earned a lot about the banking system. In fact, in certain respects, I know much more about how the system works than many bank employees. Some of my banking has become quite complicated. Some of it, while looking relatively simple on the outside, has been very difficult to achieve. Many times, when I first approached the bank to do things, I was initially told it was impossible to do but, with my persistence, we've found a way to achieve my desired results.

Later, when I need to repeat the results, I've often had to talk the new banker (even managers) through the process. Just because they are exposed to the business every day, doesn't mean they know everything about the business. Some things aren't done very often, so people don't know those proceedures. If people never ask for it, how would they know it's possible. Remember too, people are lazy. It's easier to say it can't be done than it is to take the time to figure out how to do it, especially if there is no incentive for them to figure it out. 

As I said, this applies to much more than banking.


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## Just a Guy

Just because you want something to work, doesn't mean it will.

There are many tired and true, proven investment strategies out there but that doesn't mean you can just pull it off the shelf, dust it off and make a small fortune.

Many strategies, Graham's for example worked and will continue to work...given the right environment. It the market is overvalued however, then Graham's method won't work. You'll be required to wait until the right conditions return. If you change the method to suit the environment, it's no longer the same strategy.

The same applies to everything. This is why I usually don't recommend real estate investing today even though I'm a big real estate investor. Sometimes you have to wait for the right property to come along, and that can be years, not just months. Sure, you can jump in today and overpay, you may even pay down the principal enough to survive the coming correction if it comes as I think it will, but would you have made any money in the end? Could you have been better off not investing and waiting until after the correction happens? I don't have a crystal ball, but I do know that if you try to force a system in the wrong environment you shouldn't be surprised when it doesn't work.


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## peterk

Just a Guy said:


> Those who adapt and are flexible in their thinking will probably be successful. Those who try to do thing "their way" or "the way it's always been done" are likely to fail eventually.





Just a Guy said:


> Just because someone, even an expert, thinks it can't be don't, doesn't mean it's true.


Along these lines, I think a hard truth to learn is that relying on or taking advice of successful, smart, role model types, is _mostly likely_ useless and a waste of time.

The difference between success and failure relies so little on "method" and so heavily on sequence of events, circumstance, individual intelligence, health of mind and body, opportunity, creativity, which cubical you got sat in when you were 23 - infinite factors in infinite sequences - none of which are repeatable or predictable in the slightest.
Sure, following someone else's advice, methods and steps might _slightly_ increase the chances of your life going in a direction you want that it otherwise wouldn't have and lead to "success". But whether you end up being a slacker all you life and retiring at 40 with $10M or working hard and having your life shatter into a million pieces is still vastly out of your or anyone's control.


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## Just a Guy

It's easy to blame outside circumstances for your success or failure. I was in the wrong cubicle at 23 so now I'm a bum. The choice to change ultimately comes from you, not circumstances, not environment, not your siblings or parents.

When I look back at my childhood I've got very fond memories, I thought I'd had a very normal life. Looked at it another way, my background was very bad (worse than many people who claim victimhood). Heck, I didn't even start investing until I was severally injured and on the verge of going dead broke and living on credit cards. I don't regret my background, or the things that happened to me (sure, I'd like to be pain free today but, without the injuries, I wouldn't be who I am today or have the things I do). 

I've bought places from people who had similar experieces, I've had tenants who've had similar experiences (when you own a lot of places, you see almost everything). I often see how my life could have been had I let it. I chose not to go that path. I wasn't always successful, heck this year alone hasn't been a bed of roses, but I deal with it instead of giving up and blaming outside circumstances.


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## Just a Guy

Back on topic

People you think are rich often aren't as well off as they look. People who are rich often don't look like what you think.

Every city has the "rich" desirable area of town. People grow up dreaming of living there one day having finally made it. Truth is, a lot of people who live in big houses, have multiple expensive cars in the driveway, lots of toys and go on exotic vacations a lot often aren't as financially secure as you think they are. Many times these people are heavily in debt just like the majority of people, they too are living paycheque to paycheque, just on a larger scale.

Many of the wealthy people I know live in modest homes, drive high quality older vehicles, and dress the way they want, usually not in an Armani suit, but rather something they find comfortable.

The game of keeping up with the Jones' is flawed from the beginning since the Jones can't afford their own lifestyle. People are, by nature and our current society, fundamentally insecure. If you aren't comfortable in being who you are, you'll never achieve the comfort by spending more money.


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## peterk

I think it's right on topic, thank you very much.

When a "basic truth" is only a minority factor in the outcome you are seeking, it is quite a stretch of the imagination to call it a "truth".

But my point maybe was convoluted... I didn't mean so much from the aspect of "working hard and making good choices" isn't a good thing to pursue, more that relying on "following the advice and steps" from the hindsight of successful people is more likely than not to leave you disappointed.


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## Just a Guy

My comment was to myself getting back on topic as opposed to discussion of your point. No offence intended.


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## Eder

Following advice and mimicking habits of successful people will get you on the dance floor.


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## olivaw

sags said:


> People spend a lot of money and years becoming educated in a profession or trade.
> 
> Assuming it is equivalent to watching a few You Tube videos is very doubtful.
> 
> As my doctor asks some of his patients.............."what did Dr. Google tell you ?".........LOL.


LOL, so true. I remember in the early 80s, it was widely believed that every 16 year old with a home computer was a computer genius. Some companies even hired 16 year olds to write computerized accounting systems to run on Commodore 64s. The kids would work on it for a few months before realizing that they were in way over their heads. 

Confidence is great, but not without competence.


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## peterk

olivaw said:


> LOL, so true. I remember in the early 80s, it was widely believed that every 16 year old with a home computer was a computer genius. Some companies even hired 16 year olds to write computerized accounting systems to run on Commodore 64s. The kids would work on it for a few months before realizing that they were in way over their heads.
> 
> Confidence is great, but not without competence.


Sure but the experienced vs teen employee isn't the apt comparison, their motivations and attention to the task are roughly in the same ballpark.

The advantage of Dr Google or Mr. Plumber Google is that he has unlimited time and motivation to solve the problem and get it right, because it's his own consequence if he can't do it.

The inexperienced but motivated and dedicated self doctor and self plumber vs. the 90 second assessment of a "professional" who just wants to get the job finished good enough and collect the bill... It's a tricky comparison, the better choice is not clear.


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## peterk

Just a Guy said:


> My comment was to myself getting back on topic as opposed to discussion of your point. No offence intended.


I'm just being difficult.


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## olivaw

peterk said:


> Sure but the experienced vs teen employee isn't the apt comparison, their motivations and attention to the task are roughly in the same ballpark.
> 
> The advantage of Dr Google or Mr. Plumber Google is that he has unlimited time and motivation to solve the problem and get it right, because it's his own consequence if he can't do it.
> 
> The inexperienced but motivated and dedicated self doctor and self plumber vs. the 90 second assessment of a "professional" who just wants to get the job finished good enough and collect the bill... It's a tricky comparison, the better choice is not clear.


Fair enough. It wasn't the best example. 

It really depends on the scope and importance of the task at hand. I'll use Google to find out how to perform simple repairs around the house. I'd never use it to self diagnose a medical ailment and develop a course of treatment. 

On a professional level, I supervised some pretty smart people when I worked. The experienced folks would use Google but they recognized when they had reached the limit of their expertise and ability. The less experienced employees tended to underestimate the complexity of a particular task and overestimate their ability to complete it on time or at all. The trick is to figure out when you can do it yourself (or in house) and when you need to call in a professional. 

IMO, when it comes to home repairs, nobody wants their work to be showcased by Mike Holmes. 

When it comes to medical treatment, the best skill to have is to know how to advocate for yourself. Sometimes the squeaky wheel gets the surgery.

(FWIW: I am a big fan of self managed investments but that is because very few professional money managers deliver value. It's why I read all these threads on CMF.)


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## sags

There is a lot more to it than wanting to succeed or working very hard.

GM, Sears,............lots of companies went bankrupt who wanted to succeed.

Target is very successful in the US. They had to leave Canada. 

Same management skills............different circumstances.


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## Just a Guy

Prepaid charge cards are a good way to lose money.

Similar to the gift card idea presented earlier, gifts of prepaid charge cards have become rather popular. The only problem is, they have a monthly service charge attached to them. The service charge starts from a certain time period from the date of purchase (they call that the activation date, not the date you actually start using it) as my kids recently discovered. They'd been saving up their cards to make a bigger purchase only to discover most of the cards are now empty because the monthly service charges ate them all up.

Some gift...the company that managed them got it though.


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## Nerd Investor

Just a Guy said:


> Prepaid charge cards are a good way to lose money.
> 
> Similar to the gift card idea presented earlier, gifts of prepaid charge cards have become rather popular. The only problem is, they have a monthly service charge attached to them. The service charge starts from a certain time period from the date of purchase (they call that the activation date, not the date you actually start using it) as my kids recently discovered. They'd been saving up their cards to make a bigger purchase only to discover most of the cards are now empty because the monthly service charges ate them all up.
> 
> Some gift...the company that managed them got it though.


I believe (in Ontario anyway) this is illegal now, at least for gift cards to a particular store/restaurant. I think the prepaid Visa cards and similar ones might still be skirting around it though.


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## Just a Guy

New truth.

Timing is everything in investing. You usually make your money when you buy your investment, not when you sell. This means your purchase price really matters. If you buy when everyone else is, the price is probably already high based on the rules of supply and demand. So, when you hear about a company on the news, or because everyone is already talking about it (it could also be because people are talking about an investment product like mutual funds, or an investment strategy like value investing, or becoming a landlord) the time to do that type of investment has already passed.

Of course, there are infinite ways to invest. When everyone is talking about say Apple (aapl) it doesn't mean the stock won't continue to go up for a bit, or even continually, but it does usually mean the easy money has already been made. When people stop talking about Apple, then it may be time to look at it. In the mean time, there are literally thousands of other stocks out there to look at.

In real estate, everyone is talking about it today. That's because we've gone through 20 years of unprecedented growth. The prices of it, in my opinion are 40-60% overvalued based on historical numbers, yet prices still go up, people continue to make paper profits, and many are clamouring to get on the bandwagon (either through home ownership or investment properties), driving prices up further...until the bubble bursts (or not, I could be wrong, but this is how bubbles work). 

In the 90's mutual funds we're doing well, everyone started to throw money into them. The only problem is, there really is a limit to growth in companies no matter how much money you throw at them. If people continue to throw money at it, the prices begin to rise just because of demand, not actual growth. Everyone wants returns, prices get higher because of the mo key being thrown at it, but he underlying investment can't produce...then one person realizes the truth and cashes out at the peak, reality sets in, everyone try's cashing out all at once and the house of cards comes down. 

You can't protect yourself with stop loss trades if no one is buying in a free fall either.

Long story short, your unlikely to do well if you do what everyone else is doing (though it can look like that initially). If you're successful, people will copy you and destroy your investment strategy. You have to be independent in your thinking, do what others won't. In saying that, one of the easiest methods on paper is contra investing (do what others aren't). Of course, blindly following a strategy, without actually looking at the things you're investing in is plain silly but, buying good companies that are falling because everything is falling isn't a bad strategy. Of course, buying a stock then everything is in free fall, even a good company, takes incredible mental strength. Just like buying real estate that has been foreclosed on, or in a crash, seems stupid to most...but that is when there is value, not after the price has already gone up.

For the value investor however, the hardest part is sitting around and not investing when everything is going up. People are still making money all around you, yet you're sitting on the sidelines. You weather believe in your strategies or you don't. When you don't, you usually get into trouble because you'll cut corners.


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## Just a Guy

New truth

While there are literally infinite ways to make money, anyone can develop a good strategy. There isn't only one way to do it.

Many people say, I'm not smart enough to make money. Investing is too complicated. People go to university for years to learn finances, how can I be expected to compete?

Does anyone know how he motley fools got started? Today they are some quasi-investment firm but originally they were a forum on aol. 

The discussions mainly focused on personal observations for example, people who lived in the area of up and coming companies would drive by on a regular basis. When hey started to see full parking lots (a sign of hiring), people started to take interest. When the parking lots started filling with fancy new cars, they knew they were onto something.

Want to know if the iPhone X is going to be a success? Take a look at what people are using over the next few months, if you see it everywhere you know it was a hit. 

Do you use a brand of soap, toothpaste, cleaning product, etc? Do all your friend too? Have you noticed that they've updated the packaging? None of this is rocket science, if you like it, your friends like it, chances are the company is doing quite well.

Sure, there are plenty of complicated trading algorithms out there, things that try to analyze the market, completely ignoring products and companies. There are special products out there that promise high rates of returns with little risk (mortgage backed derivatives anyone?) but, if you don't understand it, you should probably avoid it. Heck, even he financial wizards didn't understand mortgage backed derivatives, so don't feel bad. They lost money too.

S your knowledge grows, you can expand your systems if you want, but sticking to what you know can be very profitable, it's a proven strategy anyone can implement.


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## peterk

Just a Guy said:


> Do you use a brand of soap, toothpaste, cleaning product, etc? Do all your friend too? Have you noticed that they've updated the packaging? None of this is rocket science, if you like it, your friends like it, chances are the company is doing quite well.


Can you remind my Under Armour stock that I've seen lots of cool kids wearing their stuff, so if it would please stop crashing it would be much appreciated. Maybe the Under Armour needs to ride around more in BMWs to raise its profile. :biggrin:


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## Just a Guy

New truth

Success is more dangerous than failure.

Let's say you bite the bullet, lay down some money on an investment and hit a home run out of the gates. Are you a genius or just lucky? The future will tell the tale. A successful investor can replicate results time and time again.

A lot of scams are based on this principle. They give early investors excellent promised returns, maybe even taking a loss up front, in order to get people hooked. Then you pour even more money in later, as well as bringing in friends and family. In many Ponzi schemes, as long as the money is flowing in, everyone is doing well on paper, until it collapses.

Of course, it doesn't have to be a scam. People who pick a penny stock once, try it again and again, never quite getting the success they came to expect.

Heck any investment can do this, and it's not limited to individuals either. Many companies who experience rapid growth or expansion often aren't prepared for the success that ensues. Read up on how Wendy's "where's the beef" campaign almost shut the company down. Target's expansion into Canada is another example, they tried to grow quicker than they could support the expansion costing a lot of money. 

My kids play a lot of sports, I've seen teams go undefeated all year, I've seen teams that lose every game...the ones who always win tend to rely on what works. They think everything they do is perfect, that they have nothing to work on...until it no longer does. Then they find it very hard to change, they still want to go back to what worked in the past.

The team that lost everything, keeps trying new things, they work hard to improve as oppose to he winners who tend to coast. You learn more from losing than you do from winning. Losing isn't a bad thing. I've seen many "perfect" seasons end with defeat in the playoffs (in fact, I saw one team do that exact thing three years in a row, perfect season, loss in the playoffs to a "weaker" team), I've seen more teams with losses under their belts win championships, and I've seen teams who lost every game win a championship the very next year.

If you do well in your investments, I'd suggest you always remain humble, if you don't, life has a way of humbling you.


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## Just a Guy

Peterk,

Thanks for the idea.

Not every strategy will work every time, even if it's built on sound principles. That doesn't mean you should abandon the strategy. There are always exceptions to the rule.

Now, it would probably help to look at the company's financials before buying a stock and doing a bit of due diligence. Just because something is popular doesn't mean it's a good price. Look at rental properties, a lot of people use them, but houses are still overpriced today.

That being said, even if everything checks out, it doesn't mean a company will be successful. That doesn't mean every company will also fail. If the companies you pick all seem to tank, then you probably should look at a different strategy. Maybe short the companies you think are winners, you seem to be good at picking losers in that case.


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## sags

I am reminded of an old financial adage...........the markets can remain irrational longer than you can remain solvent.

Sometimes markets move based on fundamentals and sometimes they just move. 

It wasn't that long ago that markets always went up because bad news was considered better than it could have been.......lol.


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## peterk

THOMAS:
You got to speculate to accumulate. Hadn't you heard?

O'BRIEN:
No. But I know the one about neither a borrower nor a lender be.


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## Just a Guy

peterk said:


> No. But I know the one about neither a borrower nor a lender be.


Loved that episode of Gillian's island.


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## lonewolf :)

Just a Guy said:


> New truth
> 
> Success is more dangerous than failure.


 A good trade is when you follow your method that gives you an edge & you make or lose money

A bad trade is when you dont use your method & you lose money.

What is a real real bad trade ?

answer next post try to answer before looking


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## lonewolf :)

lonewolf :) said:


> What is a real real bad trade ?


 When you dont follow your method & you make money


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## Just a Guy

A really bad trade is when you follow your previous method thinking it can't fail, and you lose everything.


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## Eder

Just a Guy said:


> New truth
> 
> When the parking lots started filling with fancy new cars, they knew they were onto something.
> 
> 
> Do you use a brand of soap, toothpaste, cleaning product, etc? Do all your friend too? Have you noticed that they've updated the packaging? None of this is rocket science, if you like it, your friends like it, chances are the company is doing quite well.


This has worked for me many times...everyone has Harvest wieners in the fridge...Premium Brands . Why can't I park anywhere close to these restaurants?...Cracker Barrel Why are there so many ships loading logs in Nanaimo I can't even navigate around them?....Western Forest Products.


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## Just a Guy

New truth.

Everything goes down eventually, except taxes.

This one everyone claims to know, but nobody believes. As people if real estate is overpriced today, most will say yes, but few believe that a correction is possible. They may believe a slowdown is coming, but a correction, not likely or small at best. The same could be said for the stock market, or most companies. Rarely do people admit things can go down.

The truth is, all these things eventually go down a significant amount. It may be temporary, it may be permanent. The funny part is, when it does go down for an extended time, people rarely believe it'll go back up again.

As for taxes, well let's just say the government has a spending problem. How often do you hear government managers saying "if I don't spend my budget this year, they'll cut it next year", no thought or concern that the money has to come out of everyone's pocket. That also goes for companies who get government contracts and think they've hit the lottery. To many people view government money as "free money", it's not.


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## Eclectic12

Just a Guy said:


> ... How often do you hear government managers saying "if I don't spend my budget this year, they'll cut it next year" ...


The trust is that this is a defect in accepted management training. Working for private companies, I hear this frequently.

Another one was paying less to a co-op high school student or employee on overtime is too expensive with no acceptable rationale ... paying an electrician 4x plus is okay because there is an acceptable rationale.

Cheers


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## Afp

Thank you "Just a Guy" for making this thread. 

This is one of the most useful thread that I have seen in this forum in years. I've bookmarked this URL. If I ever have kid(s), I will make sure they read every single post of yours in this thread.


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## Just a Guy

New truth.

Finances shouldn't be a taboo subject, using it as a yardstick should be.

I like to cook, I'm a self admitted food snob, so it's natural that I taught my kids to cook. I started from the day they could reach the counter with age appropriate tasks. Guess what, they're all growing up good cooks, who enjoy cooking. They don't know every recipe I know, and I certainly don't know every recipe on the planet (truth be told we rarely use a recipe for more than inspiration), so why do we treat finances any differently?

Don't we want our kids to grow up to be good at finances and enjoy it? Yet, somehow, we tend to "protect" our kids from the harsh realities of life. 

My kids have been exposed to finances from the beginning, at age appropriate levels. They always go shopping with me, so they have a good idea of what things should cost. They understand monthly bills, they understand how the taxes work. They've been exposed to running a business (both as their own projects and from my of larger corporations). They see what different jobs are, and the difference in payment. They've been exposed to passive income, and understand the work involved in various forms of it. As typical kids, they still have no idea what they want to do, but they are far better equipped to handle the future than their peers. For us though, I don't think my kids know our net worth. It has no relevance to anything. They have been taught to value things and to always work hard. If they thought they were "rich" they'd probably act very differently from what I've seen.

I enjoy talking about finances, teaching others what I've learned, however I don't need to compare net worth with anyone. There are people with more, there are people with less. Bragging serves no purpose, but then neither does envy.


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## 319905

Just a Guy said:


> New truth ... The truth is, all these things eventually go down a significant amount. It may be temporary, it may be permanent. The funny part is, when it does go down for an extended time, people rarely believe it'll go back up again.


Never mind ...


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## Just a Guy

New truth.

Everyone loses money when they invest, usually when they begin. Even the greatest investors like warren buffet have made bad trades or investments and lost money. When that happens, the way you react will influence your entire future. If you give up, to scared of losing more, you'll never have a chance of making money through investments ever again. If you learn from your mistakes, you still have a chance to make money in this manner.

People rarely talk of the times they lose money, unless they've given up afterwards, then that's all they ever talk about (how "risky" investing is). Investing isn't a zero sum game, for you to "win", others do t need to "lose", but I've never met anyone who always "wins", you just need to "win" more often than "lose".


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## sags

The truth is to get ahead in this world.........be a crook.


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## Mukhang pera

New truth.

If your mother didn't have children, then you won't.


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## james4beach

One basic financial truth: the key to building your wealth is to spend less than you earn!

As Mortgage u/w said upthread, even if you stuff this under your mattress, you are better off. The act of saving is far more important than investing. Similarly, adjusting your earnings & savings has a FAR greater payoff than micro-optimizing your investments.


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## nathan79

Just a Guy said:


> New truth.
> 
> Everything goes down eventually, except taxes.
> 
> This one everyone claims to know, but nobody believes. As people if real estate is overpriced today, most will say yes, but few believe that a correction is possible. They may believe a slowdown is coming, but a correction, not likely or small at best. The same could be said for the stock market, or most companies. Rarely do people admit things can go down.
> 
> The truth is, all these things eventually go down a significant amount. It may be temporary, it may be permanent. The funny part is, when it does go down for an extended time, people rarely believe it'll go back up again.
> 
> As for taxes, well let's just say the government has a spending problem. How often do you hear government managers saying "if I don't spend my budget this year, they'll cut it next year", no thought or concern that the money has to come out of everyone's pocket. That also goes for companies who get government contracts and think they've hit the lottery. To many people view government money as "free money", it's not.


Old truth.

The best time to invest was years ago; the second best time is right now. Timing markets is almost always a futile endeavor. You could be waiting years for a correction, but the "corrected" price may actually be higher than the price you turned down when you decided that thing was overpriced.

Many people were saying a correction in Vancouver real estate was imminent back in 2013. It was just as overpriced back then as it is today, but there has been no correction (or at best a minimal one). There may still be a correction *sometime* in the future, but that correction would need to be in the order of 40% just to bring prices back to 2013 levels. How likely is that?

If you're not comfortable with the price, then maybe that investment is not for you. If you're still unsure, then try investing a small amount every month -- that guarantees you will catch any upside, while minimizing the the risk of investing a large amount all at once. You'll be investing at various price points, which will include any future corrections.

I still need to remind myself of this truth.


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## Just a Guy

Mukhang pera said:


> New truth.
> 
> If your mother didn't have children, then you won't.


Can't be a "mother" without children, especially can't be "your mother".

P.S. Nathan79, a 40% correction is possible and has happened in the past. A correction of similar amounts happened in the USA during 2007/8 for example.


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## Just a Guy

james4beach said:


> One basic financial truth: the key to building your wealth is to spend less than you earn!
> 
> As Mortgage u/w said upthread, even if you stuff this under your mattress, you are better off. The act of saving is far more important than investing. Similarly, adjusting your earnings & savings has a FAR greater payoff than micro-optimizing your investments.


Actually I personally disagree with this one. I prefer the idea of earning more than you spend. There's a subtle but important difference in the two ideas.


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## lonewolf :)

I kinda like the idea of focusing on reducing spending then on increase in earnings to spend less money then earned. 

Even if I focused 100 percent on earning as much as possible over 50 years in less then a day without 100% effort to spend as much as possible I could spend 50 years worth of earnings in a day.

I think it takes a lot more work to earn a million dollars then to spend a million dollars.


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## Just a Guy

There are many ways to earn. When I want to buy some sort of luxury item, I often think about ways I could buy an asset which would give me the money to buy the luxury item. For example, I could buy a new revenue property which could increase my income, paying for the luxury item. The bonus part is, the income doesn't stop after I get the item either so my earning power has increased permanently.

People who think about spending less than they earn look at the restrictions they must live under. People who think of ways to increase earning instead have no restrictions being self imposed. How many paycheque earners are bound by golden handcuffs? Thinking of all the things they can't do because they don't earn enough. If all you have is a hammer, all the world looks like a nail. In reality there are thousands of tools and many things other than nails out there.

Personally, I took it one step further and looked for ways to increase passive income so I wouldn't have to work as much. I developed systems to manage my endeavours without need for my constant personal supervision. I'm always looking for ways to reduce my work while increasing my earning power. It lets me spend time with my family, volunteer stuff, and just enjoying life. I didn't want to wait until I was old to maybe start to take advantage of things,


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## Eclectic12

Just a Guy said:


> james4beach said:
> 
> 
> 
> One basic financial truth: the key to building your wealth is to spend less than you earn!
> 
> 
> 
> Actually I personally disagree with this one. I prefer the idea of earning more than you spend. There's a subtle but important difference in the two ideas.
Click to expand...

For me, it depends on one's situation.

Skipping spending that frees one up to earn more isn't good ... just as earning more then "rewarding" oneself with an expensive item that puts one further behind.


Cheers


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## lonewolf :)

Just a Guy said:


> There are many ways to earn. When I want to buy some sort of luxury item, I often think about ways I could buy an asset which would give me the money to buy the luxury item.


 JAGuar No matter how creative you are to make money if your luxury item you want is to buy is a new wife that lives to spend Other peoples money as fast as possible I do not think anyone could make enough money


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## Userkare

Just a Guy said:


> When I want to buy some sort of luxury item, I often think about ways I could buy an asset which would give me the money to buy the luxury item. For example, I could buy a new revenue property which could increase my income, paying for the luxury item.


Basic financial truth... There aren't many people who, when considering buying a new luxury car for example, can afford to go out and buy a house to generate the revenue to afford the car. :wink-new:


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## Just a Guy

That’s because people don’t understand how the system works. I’ve taken the time to learn ways to finance properties 100%. So, buying a property doesn’t cost me any cash. (No, this isn’t some infomercial scam method either, but a legitimate easily understood method)

To be fair, you need good credit to do it the way I do, but most people who want to buy a luxury car probably have that. 

So, as a new financial truth

Just because you don’t know how to do something doesn’t mean it can’t be done. It only means you don’t know how to do it. Part of making money in unstandard ways (say no paycheque) means learning to do things using on-standard methods. 


P.S. if your interested, there is a book for beginners in real estate that follows a similar method to my own that can be found on www.easysafemoney.com which shows I’m not the only guy to have figured this out.


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## off.by.10

Userkare said:


> Basic financial truth... There aren't many people who, when considering buying a new luxury car for example, can afford to go out and buy a house to generate the revenue to afford the car. :wink-new:


 And of those who can afford it, there are even fewer who know how to make it work. It's certainly not an easy skill to acquire or everyone and their dog would be doing it. Many try and fail.


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## off.by.10

Just a Guy said:


> Just because you don’t know how to do something doesn’t mean it can’t be done. It only means you don’t know how to do it.


As a counterweight to this, I would state that just because someone else is doing something does not mean you can learn to do it too, at least not in a useful time frame. I don't want to understate the work you've done to get there but we all have different abilities which makes some things vastly easier or harder.


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## Just a Guy

off.by.10 said:


> Many try and fail.


Not compared to the number that don’t even try.

I’m curious, and don’t take offence to this, but how many of these “skilled tasks” have you actually attempted?

I’ve taken on many over the years and, as I posted in an earlier post on this thread, found many of the tasks most people call in experts for were actually not that difficult to perform and learn. Of course we’re not talking brain surgery, but I’ve done a lot of legal, mechanical, electrical, plumbing, construction, banking...the list goes on and on.


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## Mortgage u/w

Just a Guy said:


> Actually I personally disagree with this one. I prefer the idea of earning more than you spend. There's a subtle but important difference in the two ideas.


Yes, but to earn money, you'll have to save money first.

How did you acquire your rental properties if you didn't save your down-payment?

But I understand your point as well.


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## off.by.10

Just a Guy said:


> Not compared to the number that don’t even try.
> 
> I’m curious, and don’t take offence to this, but how many of these “skilled tasks” have you actually attempted?
> 
> I’ve taken on many over the years and, as I posted in an earlier post on this thread, found many of the tasks most people call in experts for were actually not that difficult to perform and learn. Of course we’re not talking brain surgery, but I’ve done a lot of legal, mechanical, electrical, plumbing, construction, banking...the list goes on and on.


True, although in this case it working for some people like you depends on most people not doing it. We can't all own dozens of income properties, there would be nobody to rent them.

I can and do manage electrical, plumbing, minor construction (ie. I've poured a concrete slab for a shed, assembled the shed on it, installed and finished drywall, etc). I can do my own tax report, does that count as banking?  I know a handful about electronics (enough to build or fix some basic stuff). Most of that is because I like to learn and some of the skills carry over.

On the other hand, I'm fairly certain I could never learn to manage people properly, which I think would make me lousy at running a business (what you appear to do). There are plenty of other things I don't know how to do, either because I have no interest in them (ie. legal) or limited ability which means much more work than the average person to end up with similar skill (eg. singing). There's also the matter of efficiency: I can build my own furniture but I'll get a whole lot more if I spend that time earning money and buy the stuff already made in a factory. Sometimes I choose the inefficient way because I like doing the work but I can't afford to do that all the time.


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## Just a Guy

Mortgage u/w said:


> How did you acquire your rental properties if you didn't save your down-payment?


Ever think of borrowing the down payment?

I know a guy who got his rental by taking it as a down payment on his property that he was selling. 

I know another guy who swapped a vehicle for the down payment. 

There’s three alternates right off the top, I could come up with more if I actually thought about it.


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## Mortgage u/w

Just a Guy said:


> Ever think of borrowing the down payment?
> 
> I know a guy who got his rental by taking it as a down payment on his property that he was selling.
> 
> I know another guy who swapped a vehicle for the down payment.
> 
> There’s three alternates right off the top, I could come up with more if I actually thought about it.


Absolutely. But we're talking 'basic' financial truths. 

Before you trade in a car, borrow off another property and so on, you need to acquire it first.


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## Just a Guy

Getting back on topic, with a nod to off.by10 for the idea...

Sometimes it’s cheaper to hire people to do things for you. Time is money, many people forget this. How many people truly value their own time. They play lip service to it, but in reality they often don’t. 

Many startup businessmen mess this up. They try to save money by doing their own books, filing their own taxes, doing the janitorial stuff, etc. All of these are not making the company any money. Of course, they justify their decision based on the idea that they are “saving” the company money. 

The truth is, while he skilled person is doing these jobs, they aren’t making any money for the company. Every hour they spend doing these things (which presumably cost less than the company generates in the same time period) costs the company potential income. Businesses need to focus on being efficient, that sometimes means spending less money on people to do non-business related tasks so that the business can earn more money. 

This, of course, doesn’t just apply to businesses, but also people in general. The business example just illustrates it easily. I’m sure you can think of examples around your own life as well. 

Also, as a side note, consider the “value” of your time doing important, non-payed jobs. For example would you rather paint your house yourself and save some money, or hire someone to do it so that you can spend some time with your kids?


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## Just a Guy

Mortgage u/w said:


> Absolutely. But we're talking 'basic' financial truths.
> 
> Before you trade in a car, borrow off another property and so on, you need to acquire it first.


Ever read about the guy who started with a paper clip and traded it up for a house?

Sure, not everyone can do it, but someone did. 

The basic financial truth of this is the fact that if you keep thinking conventionally, you’re not going to see the possibilities. 

Whether you believe you are capable of something or not, you are right. 

If you don’t think it’s possible, you’ll never achieve it, it becomes a self fulfilling prophecy.


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## Mortgage u/w

Just a Guy said:


> Ever read about the guy who started with a paper clip and traded it up for a house?
> 
> Sure, not everyone can do it, but someone did.
> 
> The basic financial truth of this is the fact that if you keep thinking conventionally, you’re not going to see the possibilities.
> 
> Whether you believe you are capable of something or not, you are right.
> 
> If you don’t think it’s possible, you’ll never achieve it, it becomes a self fulfilling prophecy.


Yes, i did hear about the paperclip trade. But I think we're going off-track and talking about 2 different things. I don't see how that story makes you disagree with the statement that you should save more than you spend vs earning more than you spend. 

And again, I'm not disagreeing with your statement - I just think they are 2 separate analogies.


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## Just a Guy

Both those statements are fundamentally simillar (have more money than you spend). My viewpoint is, instead of looking at the problem (I don’t have enough money) and then cutting back (because it’s “easier” to do), instead look for ways to solve the problem and get what you want. 

It’s not just people who do this either, many businesses and charities do this all the time until
Hey slowly wither and die. When I get on boards, I usually vote for initiatives which spend more money to make the venture more relevant and successful, then it’s my job to figure out ways to make these increased cost at least self funding or, better yet, profitable. 

It’s more work than simply cutting back, so most people don’t want to do it and thus limit themselves and slowly wither and die from the wrong attitude.


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## Userkare

Just a Guy said:


> Sometimes it’s cheaper to hire people to do things for you. Time is money, many people forget this.


For some people, not everything is about money; it's the satisfaction of an accomplishment and having it done right. Typically, the only time I call in an 'expert' is when there could be far-reaching ramifications if things aren't done exactly right. Getting a lawyer to do a real-estate transaction, for example, is money well spent. On the other hand, hiring a plumber to fix a leaky sink isn't. In some cases, the hired expert has quoted a fixed price, in which case it's in their best interest to do the job as quickly as possible. If corners can be cut, they will. I prefer to do it right.

Case in point... I just finished changing the oil in my car and swapping the summer wheels for the winter wheels. The last time the wheels were off, it was at the dealership for a brake job - sure, I can do those myself too, but I got lazy. The wheel nuts were on so tight that my impact wrench couldn't budge them; I had to use a long bar. No way that the mechanic used the proper torque recommended by the manufacturer when he put them on! When I put the wheels on I clean off the caked-on mud inside, dig out any large gravel pebbles stuck in the treads, put a little grease on the part that contacts the hub so it doesn't rust, and always use a torque wrench when tightening the nuts. Do you think you'd get that attention to detail at any auto shop?


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## Mukhang pera

Just a Guy said:


> Also, as a side note, consider the “value” of your time doing important, non-payed jobs. For example would you rather paint your house yourself and save some money, or hire someone to do it so that you can spend some time with your kids?


Unless my kids are very young, I would probably prefer to paint my house with the help of my kids. We get the time together, I save the cost of a painter, and the kids do some learning as well.

That's how I was raised. My father did a lot of work around the house. He always included me, once I was old enough to make any contribution at all, however limited. As time went on, I was able to do more and more. Eventually, I was doing more of the work than he did. As it should be, in my book.


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## sags

As Red Green said.............._if the women don't find you handsome they should at least find you handy._


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## Just a Guy

New truth.

The only one who can change your situation is you.

No amount of money, government intervention, parent's nagging, education or anything else can change your situation. Lottery winners are often back to their initial, if not worse, situation within years of winning. Drug addicts remain drug addicts no matter how much outside intervention, until they decide they need to change. 

If you don't like the lifestyle you're living, the job you have, our financial reality, whatever the only person who can change it is you.

So, if you're sitting around hoping for that promotion, inheritance, government program, lottery ticket, or whatever to come in and rescue you, then nothing is going to change.

An old joke I once heard exemplifies at least the basics.

A blonde was in real financial trouble, so each week she prayed to god...

"Please god, let me win the lottery"

Yet every week, she didn't win and her financial situation got worse.

Finally, she'd had enough and the next time she prayed she said...

"I don't get it, every week I've prayed to you to help me in my time of need, yet every week you ignore me and my life gets worse. I was taught you were a benevolent god, one who helps those in need, now I think you're just a fraud, likely you don't even exist..."

But then, unexpectedly, god actually spoke...

"Listen", he said in his bold dramatic voice, "I have heard your prayers and seen your plight my child, I would like to let you win the lottery, but..."

"COULD YOU AT LEAST MEET ME HALFWAY AND BUY A BLOODY TICKET FOR ONCE?"


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## Just a Guy

New truth.

The world is a very complex thing. Many things influence us everyday that we don't ever consider. People need to simplify the world model they use, but they forget that this is just a best guess situation, not the way things really work.

For example, it's easy to look at a wage chart spanning several decades and conclude that wages haven't increased so, either wealth isn't being created or someone is unfairly profiting. The only problem is, the information in your chart is missing a lot of other, probably relevant data that you probably never considered. For example, population growth. The world has more than doubled its population in my lifetime, which means there is more than twice as many people "of working age", has the wealth generation more than doubled over that same time period, or is there more demand keeping wages low? Other influences may be benefits (sick days, holidays, parental leave, etc.) that certainly aren't the same today as they were decades ago. People want products at lower costs and got them (tvs, cars, furniture, computers...it's all way less today than before) but with lower costs comes lower profits, lower wages.

Start thinking about the "bigger picture", sometimes it can show you the road to investment profits, other times it may just give you an understanding of why "knee jerk" solutions never seem to work.


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## Parkuser

Personally, I like to live my life according to the Life’s Little Instruction Book by H. Jackson Brown Jr. Judging from the front cover it was given to me a quarter century ago by the Giga-tron Associates. Google says they are still in business, so there. 

Sometimes it is difficult or impossible. The first instruction is
#1 Compliment 3 people every day. 
#393 Learn to operate the Macintosh computer. 
and the last
#511 Call your mother.

Other instructions can be misunderstood in the current social climate:
#127 Wear audacious underwear under the most solemn business attire.
#226 When someone hugs you, let them be the first to let go.
#267 Lie on your back and look at the stars.

But here are some which fit very well in this thread. For example:
#92 Never invest more in the stock market than you can afford to lose.
#103 Use credit cards only for convenience, never for credit.
#140 When starting out, don’t worry about not having enough money. Limited funds are blessing not a curse. Nothing encourages creative thinking in quite the same way.
#168 Resist telling people how something should be done. Instead, tell them _what_ needs to be done. They will often surprise you with creative solutions.
#176 Read carefully anything that requires your signature. Remember the big print giveth and the small print taketh away.
#229 Never pay for work before it’s completed.
#249 Hire people smarter than you.
#326 Remember that winners do what losers don’t want to do. 
#370 Do business with those who do business with you.
#494 Never discuss money with people who have much more or much less than you do.

There are more -as you can imagine- important instructions, like:
#228 Have impeccable manners.
#230 Keep good company.
#366 Don’t flush urinals with your hand-use your elbow. 

And here are the ones I am struggling with at the moment:
#121 Resist the temptation to buy a boat.
#167 Don’t scrimp in order to leave money to your children.


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## ian

People can change. My daughter did. She was always spend, spend spend and wanted the labels. Married and husband in business. I just about dropped dead when she told me they were dropping several lines in the wholesale end of their business because the margins were too low and some customers who purchased had sketchy credit. She buys no name clothes and is the Amazon queen of shopping. But in Fort Mac. there is not much other than shopping on line.


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## sags

When you understand the status quo is not an option, previous unsuitable solutions suddenly become suitable.


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## kcowan

Parkuser said:


> Personally, I like to live my life according to the Life’s Little Instruction Book by H. Jackson Brown Jr. Judging from the front cover it was given to me a quarter century ago by the Giga-tron Associates...


Great list. I know socks have taken over from underwear. Must be easier to show off!


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## Just a Guy

New truth.

It's always better to try and go to the source.

Many people don't really know how to do research. They may pick up a newspaper, or read something on the internet, but a majority of this information can be edited to show a publishing bias. Just leaving out a single word, let alone sentence or paragraph can dramatically alter the meaning or intent of the message.

In today's world of instant information, many false stories get repeated all over the internet mainly because of two things, first, anyone can publish legitimate looking information and second, no one bothers to check.

So, many scams, false news, etc. Float about all the time with many people reading and believing what they see.

While difficult, you should strive to track the source of information back to the beginning and find out where it started. Then try to understand the actual information as it was originally presented. This second task isn't always easy either, many times financial information about a company is very confusing. To me, this sparked a rule, if I don't understand something, it's probably not a good idea to invest in it. True, this may leave me missing serveral opportunities but, at the same time, it's probably saved me from a couple of disasters as well.

One more note to think about. If it's already hit the mainstream news, the opportunity has probably already passed.


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## Just a Guy

New truth.

No one cares about your expectations.

Not to pick on him, but happy guy just set up his first investment, picked a low risk couch potato investment strategy and threw in $10k just the other day. From the little research he did, he was certainly not ready mentally for what happened next...the stock market went down and he lost money on paper. He, like many people, have an expectation that they will only make money. They don't want to lose money.

Reality is, no one cares about your expectations. There is no ultimate investment that always goes up (even government bonds can be defaulted on, though it's rare). There is always a chance (especially these days where the markets and real estate are trading at near all time highs) where the markets will go down and you could lose a lot of money (yes, even with a conservative investment).

To me, there are two ways I've found to deal with this.

1) treat invested money like "spent" money. Pretend you used it to buy a cup of coffee, it's gone after that. If you can't afford to spend the money and have it gone, don't spend it in the first place. You wouldn't buy a coffee if you couldn't afford it, don't buy investments if you can't either because once you do, that money is gone from your life. 

2) don't watch your investments. Investments are long term, trading is short term. If you're an investor, you should be thinking long term as in years before expecting a payout. In real estate it generally takes 7-10 years just to break even on all the costs associated with buying and selling a property, so 10 years is short term in real estate to give you some perspective. If you think a decade is a long time, don't get started in real estate investing, in stocks you may be okay only thinking about a decade, but not usually in real estate unless you add value like in flipping.

Investing takes mental discipline to handle on a daily basis. When happy guy lost money, he panicked. Had he made a lot, he may have become reckless and dumped in more money he couldn't afford, only to lose the next day when the market reversed. 

The nice thing about treating investments as "spent money" is then you aren't relying on it. If it does go to zero (and yes, it can go to zero always remember that) you won't be in any hardship. If it grows however, you'll likely be better off down the road.

Also, be comfortable with your investment choices. There are always strategies which will perform better than yours, you can't regret that later. Remember, there are also other investment strategies which will perform worse than yours. There's no point living in the past.


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## lonewolf :)

Just a Guy said:


> New truth.
> 
> 
> 
> 
> 1) treat invested money like "spent" money. Pretend you used it to buy a cup of coffee, it's gone after that. If you can't afford to spend the money and have it gone, don't spend it in the first place. You wouldn't buy a coffee if you couldn't afford it, don't buy investments if you can't either because once you do, that money is gone from your life.
> 
> 
> 
> 
> 
> 
> .


 History shows best way to use market is for hedging & not speculating. Not only should be able to lose money invested in market. The market should be used to increase the odds of financial independence not decrease the odds of financial independence. I would say I am in minority putting max 2% on the table.

The commercial hedgers make the money from the specs most of the time.


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## Just a Guy

New truth.

Most people will spend more time researching a "big" purchase (say a new TV, computer, cell phone, or appliance) than they will spend on heir investments or home. 

Truth is, research is research. Looking up company informs is the same as looking up the specs on that same company's TV sets, yet one is considered "too hard" and "too complicated to understand" (unlike hdmi/av/wifi connections, complex interfaces, integrated software, etc.). 

The only person you're hurting by lying about this is yourself.


----------



## Mortgage u/w

Speaking of cell phones - rather than focus on the best plan, features, cost, etc., focus on buying enough stocks of the same cell phone provider that it's dividends pay for your plan. Example: 400 shares of Rogers earns you close to $800/year in dividends - equivalent to a $60/mth plan.


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## milhouse

Article in the G&M on Five Unpopular Personal Finance Truths by Ryan Modesto of 5i Research. Some good points but nothing earth shattering. 


*You need to invest.* You need to not only save your money but you need to grow your money.
*You need to be able to save.* You've got to set up your finances/cash flow to be able to save in the first place
*Personal finance is not fun (for most).* Because personal finance is such a key topic that impacts everyone in a big way, there needs to be more structured solution to having everyone take interest in learning more about it. 
*Personal finance is rarely black and white.* Different strategies work for different people. 
*You have to treat yourself.* Because you can't take it with you.


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## Just a Guy

New truth.

While I don't particularly like this idea for fiscal responsibility reasons, I may as well present it.

Many people leave a lot of money on the table when it comes to money. There are many government programs, grants, scholarships and bursaries out there. Each year many of them go unclaimed because people are too lazy to go through the steps to claim it. Some people only claim a small portion of what's available as well.

For example, if you have kids you probably get the child benefits but, if you took the time to put $2500 of it each year into an resp, you'd get at least another $500 free (some provinces offer up even more). Do that for 18 years and your kid could probably go to post secondary for free (maybe not the most expensive programs, but at least a degree) and we're not even talking about what you earn on that money over the 18 years by investing. 

With google, learning about these programs is easier than ever, yet still few people bother to capitalize.


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## lonewolf :)

Now days on average one comes out further ahead financially by not spending money to go past grade 12. The focus on learning with memorizing & repeat instead of independent thinking does not make for a powerful mind


----------



## yyz

lonewolf :) said:


> Now days on average one comes out further ahead financially by not spending money to go past grade 12. The focus on learning with memorizing & repeat instead of independent thinking does not make for a powerful mind


Good luck out there with a grade 12 education.


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## Just a Guy

Great lead in to a new truth.

There are many ways to make money other than a paycheque.

Go to school, get a good job, then retire. Is the old adage, but the truth is I don't know many people who've ever lived it, at least not in the modern world.

Get laid off, go back to school and retrain...except, that doesn't seem to work either. Many people who retrained either went back to their original work, or got a new job in a different field but now have student debt to pay off again.

We are so geared to getting a job, trained from birth almost, that that is the only opportunity most people see as an option.

The truth is, there are infinite ways to make money. Starting a business (and there are endless possibilities here from selling things at a farmers market to becoming a Fortune 500 company, in any field), or investing and developing passive income can open doors for people of any physical ability or even education levels (I know many high school drop outs who were successful businessmen). 

The limiting factor is, of course, you. These aren't easy paths to fame and fortune, but they also aren't necessarily any harder than the traditional "get a job" route. 

People fear these paths because they lack stability, but I think people just try to deny how unstable their current lifestyle actually is. When you are working or investing for yourself, you have a lot more control over your life than those who work at the whims of others. It doesn't guarantee success, but neither does going to school and getting a job.


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## lonewolf :)

Just a Guy said:


> People fear these paths because they lack stability, but I think people just try to deny how unstable their current lifestyle actually is. When you are working or investing for yourself, you have a lot more control over your life than those who work at the whims of others. It doesn't guarantee success, but neither does going to school and getting a job.


 Reminds me of old school ski school when ski instructors wanted wide, hip width stance so the student could ski with golf cart stability with lack of balance & performance.

Skiing is not a stability sport it is a balance sport by having feet together the skier can easily transfer weight from right foot to left foot or to booth feet very quickly. A wide stance is good for stability when the instructor tries pushing you to one side or the other telling you wide stance is good.

Narrow stance with vertical separation = high performance. Wide golf cart stance = poor balance & golf cart performance.


Thinking & learning are not the same just as balance & stability are not the same. There are just to many things to learn. If one learns how to think to be able to distinguish truth from falsehood they will perform better then learn & memorize with no understanding. Schools do teach falsehoods i.e., man causes global warming, snakes can talk (religious schools)


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## Eder

My dad had grade 4 education ...I had grade 11...my kids have masters degrees...both kids are working for the man...dad & I were the man.


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## sags

I trained as a shoe cutter in 1967. A lot of good that did me..............lol.

My best employment advice is...........get a job with the government.


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## Just a Guy

New truth.

This goes back to the reason I don't really support government programs in my previous post. When it comes to "free" government money, it always costs a lot more. If your financial stability strategy is counting on government funds, remember that each dollar they hand out costs someone a lot more than a dollar. For every government paycheque, someone else working in the real world has to give more.

Governments, by design, are not about efficiency, or fiscal responsibility. They are trying to "stimulate" the economy or spend on things no one else would normally spend on (some of those things are useful such as roads, some let's say are less so...say art). This is not to say that government programs are all bad just that, left unchecked, they are designed to consume more than they create, unlike anything in the private sector which needs to profit or it'll implode and shut down.

Of course, eventually governments also tend to fiscally implode in the long run but, like most drugs, "free" money is addictive and hard to give up.


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## lonewolf :)

The tax loop holes & government programs are set by the lobbyists that go to capital hill with deep pockets full of money.

The simple flat tax Trump wants will be as hard to implement as cutting off the hands that feed the politicians.


----------



## sags

Taxing all income the same would be a good place to start to address tax fairness.


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## Just a Guy

New truth.

If you wouldn't do it, chances are nobody else would either.

This goes to the heart of scams. No unknown Nigerian prince, long lost relative, Facebook friend, or anyone else wants to give you money.

In these days of 3% mortgages, no legitimate company is going to give you double digit interest for a short term, or long term loan.

True, some people actually get these kinds of returns, usually for small amounts of money, or on paper but the vast majority of these will probably wind up as just a hook to get you to invest even more money and wind up as scams where you lose everything.

If you're not willing to give away your money to strangers, chances are no one else is either.

Funny thing is, many "honest" people would truly take money from others if offered...this is what scammers are counting on.


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## Just a Guy

New financial truth

Just because it costs more, doesn't make it better.

Generally, you need to pay for quality but that's not always the case, sometimes you're just paying for the store you shop in.

The best example of this can be seen with everyday grocery products like say a 2L bottle of coke. No one can say that different stores have better or worse quality of 2L bottles of coke, yet the price can vary from $1-$4 for that same bottle depending on where you shop.

The truth is, it's not just limited to everyday items, high quality items can also vary. Many people like to shop at high end stores thinking they're getting high end products. Sometimes this is true, but you'd be amazed at how often you can find the exact same product somewhere else at a much lower price, just a different label.

Of course you have to be diligent. There are plenty of forgeries, knock offs, and other such goods flooding the market but this isn't always the case.


----------



## Just a Guy

Another truth.

You're paying to advertise for companies.

In the old days, companies used to pay people to advertise for them. This was called endorsements. 

Today, the world has turned on its head. In an effort to prove how smart, good looking, intelligent, fashionable, or whatever you want to call it people now pay extra to have a company logo printed boldly on their clothing. Most of the time the logo isn't even very attractive (think the Nike swipe, the polo guy, the alligator, tommy hillfigure's name, addidas, etc.). 

We no longer buy clothes because they are comfortable, serve a purpose, protect us, instead we buy them to be personal billboards for mega companies. Think about that the next time you spend extra money for that logo to be emblazoned across your chest. You could buy a generic, high quality piece for less but instead you choose not to.


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## JackJac

Just a Guy said:


> Another truth.
> 
> You're paying to advertise for companies.
> 
> In the old days, companies used to pay people to advertise for them. This was called endorsements.
> 
> Today, the world has turned on its head. In an effort to prove how smart, good looking, intelligent, fashionable, or whatever you want to call it people now pay extra to have a company logo printed boldly on their clothing. Most of the time the logo isn't even very attractive (think the Nike swipe, the polo guy, the alligator, tommy hillfigure's name, addidas, etc.).
> 
> We no longer buy clothes because they are comfortable, serve a purpose, protect us, instead we buy them to be personal billboards for mega companies. Think about that the next time you spend extra money for that logo to be emblazoned across your chest. You could buy a generic, high quality piece for less but instead you choose not to.


I think this was more relevant around two decades ago. There has been a significant shift away from being a walking billboard. I think it is actually perceived as highly unsophisticated and dorky to walk around with brand names visibly plastered all over one's clothing. 

However, the fact remains that much of that brand name clothing is well made. Therefore, it is advisable to purchase such apparel on a good discount (black Friday anyone?). Just use some taste and buy something that doesn't have the brand name in giant letters in neon coloring or something.


----------



## kcowan

Just a Guy said:


> New financial truth
> 
> Just because it costs more, doesn't make it better.
> 
> Generally, you need to pay for quality but that's not always the case, sometimes you're just paying for the store you shop in.
> 
> The best example of this can be seen with everyday grocery products like say a 2L bottle of coke. No one can say that different stores have better or worse quality of 2L bottles of coke, yet the price can vary from $1-$4 for that same bottle depending on where you shop.
> 
> The truth is, it's not just limited to everyday items, high quality items can also vary. Many people like to shop at high end stores thinking they're getting high end products. Sometimes this is true, but you'd be amazed at how often you can find the exact same product somewhere else at a much lower price, just a different label.
> 
> Of course you have to be diligent. There are plenty of forgeries, knock offs, and other such goods flooding the market but this isn't always the case.


Plus there has been numerous studies that show you can buy cheaper steak in poor neighborhood grocery stores but they pay more for hamburger and vice versa. You do not get what you pay for!


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## kcowan

JackJac said:


> However, the fact remains that much of that brand name clothing is well made. Therefore, it is advisable to purchase such apparel on a good discount (black Friday anyone?). Just use some taste and buy something that doesn't have the brand name in giant letters in neon coloring or something.


Yes the name brands exercise some control over their manufacturing plants in China and Vietnam.

My wife bought a Belgian watch in Belgium but I am willing to bet the innards were Seiko.


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## Koogie

JackJac said:


> I think this was more relevant around two decades ago. There has been a significant shift away from being a walking billboard. I think it is actually perceived as highly unsophisticated and dorky to walk around with brand names visibly plastered all over one's clothing.


You must not spend much time in Yuppie havens like Oakville. Captains of Industry and their "wives who lunch" swathed in Arcteryx, Lululemon, The North Face, and other brands I'm to poor to know about that are "on trend", etc... 

I swear they must have factories hidden in the backstreets somewhere. If ever a crowd considered itself sophisticated and non dorky...


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## Just a Guy

If you think the billboard trend has vanished, you haven't gone by a high school in ages then. The next generation who's parents, as pointed out above wear lululemon and such, are well indoctrinated to carry on the tradition.

Speaking of buying meat, you've got to love BBQ season at Costco. I see people buying multiple packs of cut New York strip, when they could buy the entire piece, vacuum packed, and save 1/3 the price (not to mention have the ability to cut to any desired thickness). It's not even complex butchering, just a single slice.

Or people who buy stew meat (leftovers by the butcher, or cuts no one would normally buy) any pay quite a bit more than say a vacuum pack of top sirloin (of course you'd be tasked with cutting it into chunks yourself, but you'd get better meat and save money). 

People are too focused on what they want (steaks, stew meat, car, fitting in, etc.) to actually think a little.


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## Just a Guy

New truth

If you want to succeed in life there is one skill you could develop which will ensure you'd never go hungry; sales.

A good salesman would never go hungry, but that doesn't mean you have to be a salesman growing up, at least not professionally. 

Sales is useful all over day to day life...

When you apply for a job or a promotion, you're selling yourself. 
When getting into a relationship, same thing.
Meeting with clients, etc.

Sales has a bad name, thanks mainly to the "hard" sales techniques of used car salesmen, but there are many different sales techniques. Still many people don't want to learn how to sell, don't like the idea...and they also tend to struggle and complain about their lot in life while others succeed around them. Sometimes, if you want to succeed, you need to be willing to leave your comfort zone. Life gives you the opportunity to succeed, but not always on the terms you want, you need to be willing to do something.


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## Just a Guy

New truth

Many people I talked to want to start their own businesses for the wrong reasons, based on precived myths.

Some of these myths are...

1) you don't have a boss

Technically true, you don't have "a" boss, you have a lot of bosses. Every client you serve is actually your boss.

2) you don't have to do job interviews and apply for jobs all the time.

Every time you go after a new client, you are technically in a job interview. 

3) you can do what you want.

True, as long as you can figure out how to make a profit doing that...if you can't, you can lose your shirt.

4) it's risky and unstable.

This depends on you and your ability to adapt to the situation. I've technically been employed by he same company most of my life now, which is certainly different from the majority of my peers I know who have jobs.

5) you don't have to do what you don't want to do.

Not true in he least. Suddenly you discover that bathrooms don't clean themselves, if you run out of pens the stock room doesn't reorder automatically, etc.

6) you'll make a lot more money because the company charges you out for a lot more than they pay you.

Until you discover overhead (remember those pens, the janitor, now add lights, heat, furniture, equipment, times when you don't have a client, etc.). 

7) my buddies and I work well together.

Partnerships are a good way to lose friends. Money and other pressures have a way of straining relationships. Next, you also will be spending a lot more time together, its more like a marriage than people think. If you would marry your friends, you may not want to be in business with them either. 

I'm not saying owning a business is bad, I'm just saying there are many discoveries people have on starting one that contribute to the high failure rate.


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## TomB16

Nice thread. I'll share a truth (hope it hasn't already been covered).

It's better to present smaller than you are than it is to present larger than you are.

It seems natural instinct to exaggerate when presenting one's position in life but this causes an instant and universal desire in listeners to want to reduce you to their position. I have a vague idea of why people do this but it is detrimental 99% of the time.

By shrinking your position, you make a lot less enemies. If you have the strength to adopt it as a lifestyle, you will discover how ridiculous it is watching people explain how wealthy they are.

It's detrimental to everyone, when people think, "Why should he have that?" Instead, they should be thinking, "How can I have that?" Unfortunately, the former is universal and the latter is confined to investment minded folks like us.


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## Just a Guy

New truth.

If you try to copy the successful people you see, it doesn't mean anything.

In a different thread there's a list of 32 things the rich do differently from the poor. It's an interesting couple of videos which outlines a number of relatively easy thing you could probably change about your lifestyle. These include things like don't watch sports, get up early, take care of your health, etc. The videos do acknowledge though that just doing these things aren't going to make you rich or successful. 

To be a memeber of the 1%, it means you can't act just like those who are average. You need to find the opportunities that 99% of the population doesn't. If you seek the opportunities everyone else does, then expect average results. 

Most of the things talked about in the videos aren't things that will make you successful, but most of them revolve around giving you more time and increasing your knowledge. These, in themselves, won't make you successful it's what you do with your time and knowledge that is important. Look for the road Les taken.


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## kcowan

My son was a coach for a girls soccer team (He has 2 daughters). He also enjoy watching the NY Giants. He will not be part of the 1%, but he has a balanced life that he enjoys. On his gravestone, he will not mention his net worth. He will mention that good times that he has enjoyed.

While the videos are extreme, I suppose that is needed to get attention.


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## Just a Guy

If it makes you feel better, I'm in the 1% and I watch sports. Mostly my kids playing but also some professional stuff. My life isn't balanced at all, it's heavily weighted towards spending time with my family. Having the financial freedom allows me to do that. To do that however, I had to develop systems and a network to manage my affairs.

I think sports are important for kids, it can really build up their self confidence. Of course, I've seen both sides (bad coaches who've destroyed the love of sports and the confidence for kids too).


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## sags

People should know the truth, and to do that they should watch videos like Saving Capitalism with Robert Reich and read reports on wealth inequality.

Ignoring the truth doesn't make it go away. There are many rich people who agree the current system must change or it will collapse.

Some say the election of Donald Trump is a forebearer of what is to come.


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## lonewolf :)

Just a Guy said:


> I think sports are important for kids, it can really build up their self confidence. Of course, I've seen both sides (bad coaches who've destroyed the love of sports and the confidence for kids too).


 It would probably best to get rid of parent organized sports & coaching. Let the kids do it & figure it out. When I was a kid we the kids played all kinds of sports none of it organized by parents & coaches. There were more kids out playing now kids are on cell phones


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## Just a Guy

New truth.

Your "rights" may not be worth the time and effort.

In a different thread, an employee may have been wrongfully dismissed. Every year chances are I will probably have to evict a tenant who has fallen into arrears. There are many scenarios out there where you have the "right" to seek compensation, that doesn't always translate into a benefit to actually do so.

For example, if a tenant is evicted due to arrears, you have to go to court to get a judgment against them. Courts cost money and, no surprise, they want to get paid. They demand you pay the court costs up front but promise to add these costs to the settlement if you win. The reason they do this and don't bill the defendant directly? Because if the defendant is being sued for not paying, chances are they don't have the money to pay the courts and the courts want to get paid. Once you win, you still need to collect, this can involve even more money. Now, technically the debt will follow the person for a long time, unless they declare bankruptcy, but chances of ever collecting what is owed is often small and not worth the effort or money involved.

Same thing with the job example. If you're working minimum wage and only were employed for a year, the amount of money you'd be "owe" probably wouldn't be worth the effort of perusing, especially when you factor in the time you could be working and actually making money.

It's the same reason why many businesses don't prosecute every employee who steals office supplies, every shoplifter, every vandal, etc. The costs to do so just don't make it a sound business decision.

Now, that doesn't mean it's okay to do these things to people, landlords or businesses, it just explains why not everyone always bothers to enforce their "rights".

Often, the only people to make money off of your "rights" are the lawyers who convince you that you've been "wronged".


----------



## lonewolf :)

Was listening to an audio on internet few months back cant remember name of the site. The site was set up to avoid legal fees in divorce. 

Down load the data needed the site will divide the assets fairly allowing both parties to come out further ahead by reducing fees.

It will also figure out how to proceed to reduce taxes when assets are divided


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## Just a Guy

New truth.

How many people would brag about paying twice the selling price of an item? How about three or four times what it's worth? What about 10 times? Sounds silly right? Only an idiot would ever do that. 

The reality is however, a lot of people do this all the time without knowing it. How many Canadians pay off their credit cards each month? Not many. For those who don't, you're agreeing to pay upwards of 25% interest on your borrowed money. So that "bargain" you just got (but couldn't really afford) or that latest trendy outfit you just needed to have (big screen tv, latest cell phone, whatever) is costing you more and more each month. If you make minimum monthly payments, it can take more than a decade to pay off that item (adding 25% each year to the purchase price). 

Even home owners are caught by this. Many homeowners love to brag about how they bought the house when prices were low, had a low interest mortgage...but the rule of 72 will show that you'll eventually pay more than double for that home even at 3% with an average mortgage. 

Credit is a very powerful tool if used correctly. However, if you can't afford to use it properly, you can unknowingly get into a lot of problems by what you think of as "saving" money by buying things you can't afford to pay for right away (even if they're on sale).


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## Just a Guy

New truth

Government debt works the same way as credit card debt. For every dollar of government debt that is created, it costs a lot more than a dollar by the time it's paid back, especially when you consider the fact that the government hasn't even tried to pay down the debt and has consistently been adding to it each year.

The government likes to talk about how every dollar spent creates more than a dollar in economic return (debatable at the best of times) but they never talk about the fact that every dollar not paid off definitely costs more than a dollar to repay.

Think about that the next time you vote for a government who promises to bribe you with your own money. Every benefit they give you over a balanced budget will cost you even more in the long run.

Remember too that, even with the tax rate approaching 50%, the government can't balance the books.


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## lonewolf :)

If all debt was paid back it would be Waterloo for the economy as there would be no money in circulation. We are getting late in the cycle all the gold & silver has been removed from the currency. Not sure if any time in history if gold & or silver were ever put back into the money after it was taken out. Usually gold & silver is taken out of the money governments then keep spending & spending with no intentions of ever paying back default on thier bonds or print money until currency becomes worthless.

The safe play is to hold major currencies from the 4 corners of the world Europe/Africa, Asia, Oceania & America with a bit of gold & silver the Swiss Franc, US dollar, New Zealand & Singapore dollar along with a second passport. The CP portfolio of Canadian stocks & bonds that is the standard is high risk


----------



## Just a Guy

New truth,

A tax refund isn't free government money, it's an overpayment you made to the government over the year. Each month you have taxes automatically deducted from your paycheque. For most people the calculation is geared in the government's favour (so they get an interest free loan for most of a year). At the end of the year, you calculate what you should have paid and get a refund (or you have to pay in some cases). 

For most people, they are very happy to get a tax refund at the end of the year. For people who understand what's really going on, it's better to not have any refund (since you could put that money to use during the year it's sitting in government coffers). Of course, most people don't use the refund in a productive manner anyway thinking of it as a "bonus" instead of the money you've already worked hard for.


----------



## GreatLaker

A guy I used to know set up his employment deductions as if he was single, although he was married, in order to get a bigger tax refund. He would say "that's just like money in the bank!". Yeah... the government's bank and the government kept the interest.


----------



## Mortgage u/w

In my experience, its rare that the government is overpaid. The taxes withheld from the employer are usually the bare minimum. Add any interest, dividend or rental income at year end, and the bill gets bigger. 

Getting a refund means you most likely deffered taxes owed - usually by an RRSP contribution.


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## Just a Guy

New truth. 

Most people have no idea where money comes from. 

It doesn't come from a bank.
It doesn't come from the government.
It doesn't come from a paycheque. 

Money comes from the creation of goods and services. Without the creation of new goods and services, no new money can be created. Every paycheque only exists because the company is producing more goods and services than it pays out.


----------



## kcowan

It also comes from taxes that companies and employees pay that are then paid to civil servants.


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## peterk

Just a Guy said:


> New truth.
> 
> Money comes from the creation of goods and services. Without the creation of new goods and services, no new money can be created. Every paycheque only exists because the company is producing more goods and services than it pays out.


Exactly - But with too much intervention from government people can't provide services to others as they desire to do and prices aren't what they ought to be under a free market. Add in an inflating money supply where only a small amount of the inflation is absorbed the people and the great majority floats to the top, and you realize that it's not just the money that's being skimmed away it's everybody's hard provided goods and services and human energy.

Throw in 5000 job descriptions for everything under the sun, a "broad" economy, and it's impossible to identify who's providing a service and if they are under or overpaid for it. More and more there are private sector workers providing vast amounts of value and holding this whole world together who are being underpaid, and government workers or regulator-required private sector workers providing unclear, unobvious, unmeasurable value who are being overpaid. Though I'm sure there are thousands of lengthy papers and documents (written by different government workers of unclear value) that use large unintelligible words to describe and justify all those government worker's services in a manner that makes it seem like civilization would collapse without them.


----------



## sags

What about the multiplier effect of spending money ?

Also, when the government gave people the retroactive child benefit one July, it had a positive effect on the GDP.


----------



## Just a Guy

Sorry people, the government takes money from those who create it and redistribute it. They do nothing to create new money. 

In fact, they take a portion of what they give usually so, if hey kept up the cycle, eventually they'll take it all back.

For example. I make $100 and pay 50% tax. The government hires a person for $40 and redistributes $10. Of that $40 in pay and benefits, it taxes back 50%. It now has $25 to pay and redistribute...not enough to pay. It needs to either tax more or go into deficit spending (meaning you'll have to pay more later). Creating debt doesn't create money, as it needs to be paid back. 

Raising taxes only takes more money from those who actually create it. If they take too much, it's not worth it for those who actually do the creation. 

If they print more money, they just devalue the money already in circulation, so prices go up to compensate for it.


----------



## Dmoney

sags said:


> Also, when the government gave people the retroactive child benefit one July, it had a positive effect on the GDP.


Nominal GDP, sure. Real GDP, absolutely not. By definition, real GDP measures the gross value of domestic output of an economy (goods + services). Cutting a cheque to anyone with a kid simply redistributes who can purchase said output. Over time, real GDP may increase as a result of higher demand, but only once demand is matched by increased production. The government can't magically buy real GDP growth by cutting a cheque. Reality gets in the way.
Initiatives that put more people to work drive real GDP growth. Increasing the child benefit (ie. incentivizing people with children not to work) does the exact opposite.
That said, not all policies necessarily target economic growth. There are larger social objectives that are perfectly valid. But GDP growth is not one of the outcomes of the child benefit.


----------



## peterk

sags said:


> What about the multiplier effect of spending money ?
> 
> Also, when the government gave people the retroactive child benefit one July, it had a positive effect on the GDP.


Well of course, it was _new (borrowed) money_. If the government had to raise _my_ taxes directly and in real time to give more money to a single mother in Ontario what would the GDP do then?

In the mean time, there goes another young woman from the marriage pool who might inspire a young man to work extra hard and drive a thriving economy for the benefit of his lovely wife and children... Thank God he can now not work so hard and focus on the things that really matter: playing video games, HBO, drinking more beer and taking trips to Mexico while his female counterpart gets bailed out by Trudeau for making irresponsible decisions. 

The *immediate* removal by the new government of the previous income splitting family benefit structure in favor of this new, increased, child benefit structure was nothing more than blatant social engineering designed to create more government dependents and more lifelong liberal voters.


----------



## sags

_Canadian families with school-age children are now receiving a new child benefit, a stimulus measure that will influence household balance sheets and the country’s economic growth._

https://www.bnn.ca/canada-child-benefit-not-a-game-changer-for-economy-bay-street-1.529512


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## Dmoney

sags said:


> _Canadian families with school-age children are now receiving a new child benefit, a stimulus measure that will influence household balance sheets and the country’s economic growth._
> 
> And now the benefit will be indexed it will continue to increase it's contribution to economic growth.


Oh, well then. The government press release said it so it must be true. 
It is a reallocation of purchasing power. I'm not arguing whether this is right or not; rather just clarifying that cutting a cheque to a segment of the population does not create GDP. Nothing new was produced; different people can now buy more, while others can buy less. 
Do with that what you will, but don't confuse it with real GDP growth, which by definition requires increased production.


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## Just a Guy

Please try to understand money redistribution is not money creation. Yes, they may buy goods from someone, using money that may have been saved by he people who actually create it, but they do nothing to actually create money.


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## peterk

sags said:


> _Canadian families with school-age children are now receiving a new child benefit, a stimulus measure that will influence household balance sheets and the country’s economic growth._
> 
> https://www.bnn.ca/canada-child-benefit-not-a-game-changer-for-economy-bay-street-1.529512


Right, obviously. With "new" money, borrow from the future. We get that, it's pretty simple. Show me how that doesn't screw up a country long term.


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## sags

Canada..........our debt to GDP is the same as it was in the 1960s.


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## peterk

And thank God the USA was there to drive the productivity and growth that the rest of the world was able to ride the coat tails of for the last 50 years as all other western nations turned into "successful" socialist countries.

Sure debt can be spent wisely to drive growth and innovation, in certain areas. Giving it away to pay for people's necessities to keep them off the streets because the employment and social structures of society are broken is not a good use of money.


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## off.by.10

Dmoney said:


> Initiatives that put more people to work drive real GDP growth. Increasing the child benefit (ie. incentivizing people with children not to work) does the exact opposite.
> That said, not all policies necessarily target economic growth. There are larger social objectives that are perfectly valid. But GDP growth is not one of the outcomes of the child benefit.


True short term but perhaps not long term. GDP growth is tied to demography and we have a dire lack of children. Incentives to have more, even inefficient ones, will likely have a positive long term effect.


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## Just a Guy

New truth. 

It never hurts to ask.

Had to buy a stove today for one of my properties. I had my eye on one for a while that had been sitting in the clearance section. It was initially around $1300, marked down to about $900. Since it had been sitting a while, I decided to just ask if they could do anything about the price. I initially thought they'd give me 10% off just because I asked (usually what happens if you're nice to them) but the guy pulled up the computer and it turns out it had just been marked down (not in store yet) to $650. Because it's clearance, the store was unlikely to ever update the price until management noticed it had been sitting a long time and then checked with the computer. 

Often times, if you ask nicely, stores will give you a discount. If you go one step further, and build up a relationship with the upper staff, you can get even more benefits. I often develop relationships with bank managers, business owners, etc. Even when I'm not looking for their services. It makes life a lot easier when I do need their services later.

P.S. In talking to the people I learned that many people try to bully their way into getting a discount. While the stores generally do still give the discount, hey really don't appreciate being treated that way and certainly won't go the extra mile they would to polite people. The bully may have gotten 10% off after the guy checked the computer, there is no requirement that the store mark it down all he way to $650.


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## Just a Guy

New truth.

If you don't know where the money is coming from now, chances are it's not going to magically appear later. 

This ties in a lot of basic financial truths, don't buy it if you don't have the money for it, credit is a tool which if misused can do a lot of harm, knowing wants vs. Needs, etc.

For every purchase you make, you should know in advance where the money is coming from. Don't just say "my next paycheque" either because you need to account for every other item that you've already committed to that paycheque as well.

This is why a lot of credit councillors make people pay cash for everything. Once the cash runs out, there is no more money no matter how much you want that next item.


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## ian

You either have the discipline or you do not. You either care more about conforming to your friends and neighbours than you do about you own financial well being. I know someone in their early sixties (with zero retirment funds and a mortgage to boot) who has lived this way for years, despite a personal bankrupcy in her/their early twenties. For some very odd reason she feels that praying will solve her financial problems. 

But all is not lost. They have two late model vehicles in the driveway.

I think that very few people change, or have the will and the determination to change. And change while they still have an opportunity to 'catch up' as it were.


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## sags

Sometimes I think I should be more frugal, but then I wake up and go buy me something.

The truth is that living "frugal" really sucks and those doing it don't like it when others enjoy spending to have a good time.

Let's face it though.........who wants to live in a shack in the desert eating grasshoppers and bugs like that Mr. Moustache guy.

Not when we can go to the casino for the weekend buffet instead.


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## nathan79

I had a co-worker who liked going to the casino. He was always quick to talk about the $400 or $600 he won that day. It seemed like almost every week he had some big winnings. He never mentioned losing a dime, yet for some odd reason he never seemed to have any money left a week after payday. Can't quite figure that one out... but he sure did seem to enjoy himself. 

Nothing wrong with having fun as long as it's kept in perspective. People think I'm gambling with cryptocurrencies, but they could all go to zero tomorrow and it would have no effect on my lifestyle... though it would still sting a bit... okay a lot.


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## james4beach

nathan79 said:


> Nothing wrong with having fun as long as it's kept in perspective. People think I'm gambling with cryptocurrencies, but they could all go to zero tomorrow and it would have no effect on my lifestyle... though it would still sting a bit... okay a lot.


Don't let it get to you. Many people on CMF are gambling their retirement on the stock market, but they think it's not gambling just because they happened to coincide with the North American bull market up to now. We have some people here who are more than 75% in stocks approaching the start of their retirement... the stock market will either make, or ruin, their retirements.


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## hboy54

james4beach said:


> Don't let it get to you. Many people on CMF are gambling their retirement on the stock market, but they think it's not gambling just because they happened to coincide with the North American bull market up to now. We have some people here who are more than 75% in stocks approaching the start of their retirement... the stock market will either make, or ruin, their retirements.


I guess I am one of these gamblers LOL. My wife will be starting her pension later this year at about $30,000 PA. Our net dividends after margin interest are on the order of $54,000 PA. I think we will be all right, but thanks for your concern.

Of course the main reason my wife can retire early, and I retired at 40 is because I spent the last 35 years "gambling" in the stock market. If I had spent those 35 years half in less productive asset classes, gold and fixed income, we would be high 6 or low 7 figures poorer, with the resultant reduction in dividends of $20 or $30K PA.

No, if this is gambling, then I must be one lucky SOB to have kept this up for 35 years. What is more likely, my investing success is based upon 35 continuous years of good luck (where this "good luck" included 6 holdings that went bankrupt in the aggregate amount of about $100K), or maybe, just maybe I understand and work with the nature of stocks (and included in this is the nature of people) and harvested what logically follows from that understanding?

No, James at this point, the stock market can neither make nor ruin my retirement. The only unsettled issue is given we survive another 30 some years, what the stock market grants us on the continuum of no estate to low 8 figure estate.

hboy54


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## Just a Guy

New truth. 

The difference between investing and gambling.

To some people, the two are synonymous. Those are mostly people who are scared of doing the first and often try the second, failing miserably.

For the most part, investing is the process of working to figure out the likelihood that the investments you choose have a likely tendency to improve in value over a timeperiod. This time period could be as short as a few seconds (day trading) to, more commonly, years. 

Gambling tends to be picking random products, or trusting someone else to pick products for you, with no knowledge about your investments and hoping they will appreciate over time (could happen). 

Investors tend to know a lot about their products. Let's take real estate for example since it's easier to show an example. You can know the average selling price of a building, you can know the rent, you can know the area, demand, historical information, interest rates, taxes, maintenance costs, etc. You can also have some idea of trends in the industry. Given enough information, you can make an educated choice as to the worthiness of a potential investment. 

To illustrate, a property selling for $500k, which generates $1500/month and costs you $2500/month probably won't be a good investment. One can't say for sure that it won't be, the property could have a capital gain which will make it profitable but, if you are just hoping that will be the case and don't know that a major development is likely to be announced in the area soon and will actually drive up the price of the property, then you are gambling. 

If however you find a place for $75k, which rents for $1000/month in a high rental demand area, chances are you are onto a good potential investment. 

The same thing can happen with stocks, bonds, businesses, etc. There are products which are likely to increase in value over a time period and there are those products out there that are unlikely to succeed. Knowing the difference is what usually separates an investor from a gambler.

You'll note that I point out this is usually the difference. The real test is if you can repeatedly be successful. No one is going to be right all the time, the "test" is those who are right more often than they are wrong. This doesn't mean you have to repeat the exact same strategies every time, especially if your strategy is wrong, it's the ability to adapt, to make adjustments in order to achieve long term success.


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## Just a Guy

New, timely, truth. 

You don't need to "show your love" financially. 

In this season of overspending, it's time to cut through the marketing hype and reveal the truth that you probably don't need more junk, and those around you are probably in the same boat. Yet, year after year, many go out, run up the credit cards, buying "something" just to show we care about others. Many of these gifts wind up sitting, collecting dust only a few months later. 

There are better ways to show your affection for people. 

P.S. This also applies to many other occasions...for example big fancy sparkly rocks on a band of gold. Diamonds really don't have much value in most cases...don't believe me? Try to sell one and see what you get for it. Sure people pay a lot for them initially, the secondary market is much less gullible.


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## Just a Guy

New truth.

There is a story that says Joseph Kennedy (father of John F. Kennedy and all the other political children) decided to sell all his investments when he overheard his shoe shine boy talking about getting into the markets. A few months later, the 1929 stock market crashed. 

More modern examples, I remember sitting around a food fair with a buddy of mine and overhearing people talking about Nortel. I knew a heavy duty machanic who was bragging about getting in on BreX. I knew similar, non-investors, who all talked about Enron, worldcom, and similar companies...how could they not? At the time it was always on the news (a short time later, they'd always be on the news for completely different reasons). Older people may remember the "new" economics of the dot com bubble where profits and cash flow weren't important. 

When the mainstream media starts to discuss investing things (remember the hundreds of shows on flipping houses?), and people who have no prior investing experience start talking about a particular strategy, more often than not people are about to lose a lot of money. 

This doesn't mean every high flying company is a dog (Apple has been a stellar performer for years and, while the products it produces are always in the news, no one really talks about its stock price over dinner). I find though that, if the news is getting excited about a company, and people are jumping on the bandwagon (think bitcoin and weed stocks today) it's usually a good sign that a bubble is building. If you get out before it bursts, you can make a killing, but few ever do and wind up getting killed.


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## lonewolf :)

Just a Guy said:


> .
> 
> P.S. This also applies to many other occasions...for example big fancy sparkly rocks on a band of gold. Diamonds really don't have much value in most cases...don't believe me? Try to sell one and see what you get for it. Sure people pay a lot for them initially, the secondary market is much less gullible.


 Diamonds are a good moveable tangible they are small wont set off metal detectors in times of war when fleeing is needed


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## Eder

You get 10% back if you buy retail, anything under 1 caret and perfect clarity is pretty worthless.


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## Mukhang pera

I agree. Diamonds come out of the ground by the ton and tend not to wear out and do not have a whole lot of practical uses. People have been sucked into seeing them as having value.

One day I expect that will happen to gold. Someone will wake up and see how silly it is. One article I read awhile back put it this way, in part:

_The closest in rarity to gold is ruthenium, which sells for $42 an ounce. Like gold, it has few industrial uses and is mainly used in electrical contacts and electroplating. Rhenium is another point of comparison. Rhenium is rarer than gold, and has a little more industrial uses than gold, yet sells for $70-80 an ounce. If gold were not a store of value, it would probably be around $40 an ounce.
_
Another person commenting said:

_If everyone decided that owning gold merely as a store of value was irrational, it would have a dramatic loss in value, it might drop to $100/oz. It would be unlikely to drop much further because people still love gold as jewelry and it does have significant value in certain industrial applications. As its cost drops for manufacturers, they will choose to use it in areas where the substitutes are lower quality. Once people have abandoned gold as a store of value, there would be a huge overhang in the market, a billion ounces or more, as people realize that it costs money to own gold if you have no purpose for its use.

Gold might cost roughly $200/oz. if it had never been a store of value because no one would have paid for the mining of expensive to extract gold nor would there be more than a billion ounces of gold sitting unused in vaults._

These are just random comments on the web and perhaps dead wrong. But I have long considered the idea of gold as an "investment" as irrational. But then, I am not rich and, as my mummy used to say, "If you're so smart, why aren't you rich?" I suppose she had a point.

I would rather invest a million dollars in real estate than in gold. Real estate you can live on, grow food on, rent it out, etc. The acreage my family and I live on can sustain us even if we are broke. We cannot live in or eat a bunch of gold bars. They won't keep us warm. Not sure what is the rental value of gold. If you buy $100,000 worth, will it pay heed to the 1% rule and rent for $1,000 a month? Or do you have to pay to store it. Or keep it in the nightstand beside your .357 Magnum? Or does that constitute the offence of careless storage?


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## sags

When the financial collapse began where did the money flow...........US Treasuries.

Despite trillions of dollars in debt........where does the money flow...........US Treasuries.

What are all assets and currencies (gold, bitcoins, real estate) valued in..............US dollars.


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## lonewolf :)

The bubble has been in none moveable i.e., real estate, debt i.e., bonds & virtual currency.

The complete opposite would be to invest in the moveable, cash, tangible money

complete opposite of none moveable is moveable i.e., diamonds, gold & silver,

opposite of virtual currency would be tangible currency i.e., gold, silver coins, 

cash is opposite of debt, gold & silver coins are a form of cash

Though a deflationary crash could bring everything down first


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## Just a Guy

New truth. Understand the sound byte.

Many news outlets love to spout of negative sound bytes. We love negative sound bytes. In fact, there once was a newspaper called "the good news" which published nothing but good news, it soon went bankrupt. 

He problem with negative news is, while technically not incorrect, it can be very misleading. It often leads to sewing mistrust between classes, races, or just people in general. I remember sitting down with my inlaws as they told me about their childhood days when the gypsies came to town. They were all under strict instructions not to interact with them as they were all thieves and such...when I asked if they'd ever had anything stolen by a gypsy as a child the answer, of course, was no. We wonder where prejudice comes from...

Anyway, when you hear news, there are often many ways to spin the news. For a company's earnings for example, you can report the raw numbers (the amount of money they actually made) or you could put the numbers into context (such as explain how much money that company invested to get those raw numbers). Numbers, out of context, are often misunderstood or misinterpreted. For example, many banks often report "record profits" which sounds really bad, especially in a down economy. Ever wonder how banks can keep reporting "record profits" nearly every quarter? It turns out the Return on Investment (ROI) for a bank is actually very low (historically around 3%). This means, for every dollar invested by the bank, after expenses, it only makes about 3% return. 

Of course a 3% return doesn't sound very good, and it's not really, unless you're doing it with really large numbers. I wouldn't mind 3% of a billion dollars given to me personally for example, since that's a really big number 30,000,000,000 but I personally also wouldn't be to happy if my investments only made me 3% each year. 

When you only make 3% and work with large numbers, it's not very hard to make "record profits" on a fairly consistent basis. For example, if you're lucky and your billion dollars makes 3.1% return, you now made 31M in profits (a new record). If you invest 1.6b dollars and only get a 2% ROI, you wind up with 32M in profits (a new record, even with losing 1/3 of your earnings. 

Any data, without context, is pretty much useless. You need to understand what the "news" is actually saying, ironically many of the newscasters probably don't even understand the information they are relaying. I see that when a newscast proudly touts some fad stock of the day reporting "less than expected losses on no earnings" as good news.


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## ian

hboy54....could not agree with you more. IF we had focused on fixed income instead of equities over the past 30 years we might not be retired now. Plus, the after tax returns on fixed income instruments would probably not have even kept up with inflation-meaning we were going backwards. Our aim was steady growth and capital appreciation. Our benchmarks were after tax return and return in excess of the rate of inflation.

Clearly one should adjust the mix as one approaches retirement based on financial position and risk aversion.


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## lonewolf :)

ian said:


> hboy54....could not agree with you more. IF we had focused on fixed income instead of equities over the past 30 years we might not be retired now. Plus, the after tax returns on fixed income instruments would probably not have even kept up with inflation-meaning we were going backwards. Our aim was steady growth and capital appreciation. Our benchmarks were after tax return and return in excess of the rate of inflation.
> 
> Clearly one should adjust the mix as one approaches retirement based on financial position and risk aversion.


 When interest rates were high anyone that bought annuities or bought & held the 30 year bond 30 years ago made out like bandits compared to the stock market the last 30 years


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## Just a Guy

Leading into a new truth...

If you look at any market, out of context with the greater world, you're bound to make mistakes. 

Real estate has been in a 20+year bull market. That's approaching an entire generation of people who've lived through nothing but increasing real estate prices. 

Over that same time period, interest rates have been in a steady decline. Meaning bonds have been doing steadily worse for an entire generation. 

There is an entire generation that, based on their experience, would suggest bonds are a terrible investment and real estate is an excellent one...and they have 20+ years of "data" to back it up.

Unfortunately, what they ignore is the root cause of those two trends...interest rates. We are now approaching a time where interest rates are no longer going to decline, nor stay flat but rather increase. This means that bonds will start having a viable yield and real estate will most likely decline or remain flat (if not suffer a major correction). 

If you're going to be a successful investor, you need to know the outside, driving forces which affect your investments. The above example is very simplified, as it only takes into account one variable, there are many others which affect both investments. People who watch the "trends" of investing, without understanding what is driving the "trends" are often going to miss the early warning signs.


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## sags

Yea, but real estate is very local and can't be compared to the huge bond markets. There must be good reasons corporations park vast sums of capital in bonds rather than real estate.


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## Just a Guy

There is, most huge corporations are not geared to running a real estate empire. That is a completely different style of business from what they are focussed on most likely. It the same reason most corporations don't invest in other companies, they try to remain focused on their business, not the business of others.


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## Mukhang pera

Just a Guy said:


> Leading into a new truth...
> 
> If you look at any market, out of context with the greater world, you're bound to make mistakes.
> 
> Real estate has been in a 20+year bull market. That's approaching an entire generation of people who've lived through nothing but increasing real estate prices.
> 
> Over that same time period, interest rates have been in a steady decline. Meaning bonds have been doing steadily worse for an entire generation.
> 
> There is an entire generation that, based on their experience, would suggest bonds are a terrible investment and real estate is an excellent one...and they have 20+ years of "data" to back it up.
> 
> Unfortunately, what they ignore is the root cause of those two trends...interest rates. We are now approaching a time where interest rates are no longer going to decline, nor stay flat but rather increase. This means that bonds will start having a viable yield and real estate will most likely decline or remain flat (if not suffer a major correction).
> 
> If you're going to be a successful investor, you need to know the outside, driving forces which affect your investments. The above example is very simplified, as it only takes into account one variable, there are many others which affect both investments. People who watch the "trends" of investing, without understanding what is driving the "trends" are often going to miss the early warning signs.


So JAG, is your message here that real estate should no longer be considered as an investment? For how long? Does your crystal ball tell you when and at what level interest rates will top out? And can you then gaze more deeply into your crystal ball and say where will be the bottom of the grim consequence for real estate?

I feel constrained to point out that you must be looking at real estate markets out of context with the greater world. If real estate has enjoyed a 20-year bull market (a somewhat doubtful proposition to begin with), it can only be in a few markets such as Toronto and Vancouver. I doubt even those locales were wholly unaffected by the circa 2008 widespread financial meltdown. They have recovered. 

But the whole world (or even the whole of Canada) is made up of more than Toronto and Vancouver. I can point to places where real estate prices were on a tear leading up to 2008, then went into sharp decline and have yet to return to 2008 prices. I see little room in some of those markets for the "major correction" you have long predicted.

As for interest rates, they have actually been on the rise since April 2009, when most conventional lenders' prime rates bottomed out at 2.25% and are now at 3.2%. And yes, they will continue to rise, probably returning so something most of us will recognize as normal, around 8% or so. But will that be the end of the world? Unlikely. 

I do not profess to know what lay behind it, but I have pointed out on cmf before that one of the "bulliest" real estate markets ever seen in Vancouver (and probably a few other places) occurred in the 1980s. In that decade, the prime rate hit 22.75% early in the decade and was back down to about 12% at the end of that decade. The house I bought in Vancouver in 1979 for $110,000 was worth about $275,000 by 1981, then was cut to about half of that within a year, then started to recover. I sold in 1989 for $525,000. The house was a tear down when I bought and when I sold. Just land value. There was nothing unusual about that deal. That was just the Vancouver market in those days. I would call that a bull run not seen since. Almost a 5-fold increase in about 8 years. Makes the recent run look pretty anemic. Yet it occurred in a time of record high interest rates.

The current BC Assessment value for that lot is now about $3 million. The newer house on it is assessed at $2 million. If the owner of that property had bought at the crazy market peak of about $275,000 in 1981, do you think he now cares? Yes, he should have predicted (easy to do when you know the driving forces) the retreat to a price of $140,000 in 1982, and bought then, but, in the overall scheme, his error was not that egregious. 

It strikes me that there is a certain tension in advice handed out here on cmf. It seems to be trite, at least with the stock market, that one should not seek to "time" the market. Instead, unless I am misreading, it seems the standard advice is along the lines of buy and hold quality stocks and plan to stay in for the long haul, measured in years. Following that advice is said to reduce to insignificance any concern about what you paid when getting in. 

Should not the admonition against seeking to time the market apply to real estate as well? It appears that you have been sending out dire warnings against getting into real estate for some time now, suggesting interest rates will take off and the markets will "crash", "plunge", "skid", "collapse" and all those things that people who write about such things say they will do. But I am guessing that a few people have quietly got in (and maybe out too) in the intervening period, to their financial benefit.

I would not buy back into the Vancouver market today. But if I were young and had the bucks, I just might. While today's prices might look frothy, I'll wager that in 40 years, no one will believe they could have been that cheap. I am reinforced in this view by what I read in another thread here on cmf about plans for a Canada with 100 million unfortunate inhabitants. Is has long been the case that most Canadians live within 100 miles of the U.S. border. That won't change. So Toronto and Vancouver will end up at maybe 20 million apiece. Might be a good time to take into account that broader world context and load up on Toronto and Vancouver real estate now. 

Anyway, decided to make my comments, recognizing my peril, my impudence in appearing to question the wisdom of JAG, who has already forgotten more about investing in all of its modes than I'll ever know. A one percenter whose net worth is probably greater than that of all cmfers combined. My temerity as a presumptuous upstart is probably worthy of rebuke. It kinda' reminds my of a story my daddy told me way back. He was a Toronto businessman who did business with some nice people in Detroit. I suppose his due diligence into their provenance was a bit deficient. They were indebted to him and brushed off repeated written and telephone requests to have their account brought up to date. So dad drove to Detroit and decided to drop in at the office of the chief debtor, thinking he would be less likely to be turned down by making a personal entreaty. However, the boss with whom he spoke was not accustomed to such insolence, and said, quite plainly: "You silly fool. You come here demanding money. Don't you know I could have you bumped off before you hit the bridge?" That debt got written off. Lesson learned.


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## Just a Guy

I was talking about Canadian real estate.

As for interest rates, this chart seems to disagree with your version of interest rates rising since 2009.

https://tradingeconomics.com/canada/interest-rate

I don't presume to have a crystal ball that works any better than anyone else's. Also, I have pointed out that, in real estate, there are always opportunities in any market. That, however doesn't mean that all markets represent a good time to enter it. There are times when the market has more opportunities and times when they have less. Also, real estate in Canada has a lot more than the two anomalies of GTA and Vancouver. Right now, I personally feel it's not a good time to be reckless in buying real estate, it hasn't stopped me from buying places that meet my criteria, but I'm being very picky these days. 

I do know that the fed has pre announced that rates will go up a number of times next year at least and has plans to continue doing so thereafter. Interest increases means debt financing becomes more expensive, since people tend to buy a style of house (not many multimillionaires want a one bedroom condo in the slums) not a house of a certain price. So, when interest goes up, it's logical that prices for houses will go down. 

I'll ignore your other childish jabs, I got sucked in by olivaw and sags last month. I present my information here for free, so take it for what it's worth. I really don't care if you agree with me or not. No one is forcing you to read what I write, feel free to ignore it.

BTW, since you seem to have missed it, I don't view the world as black or white. There is no right or wrong time, now or never, this way or the wrong way, etc. I would think a lawyer, of all people, would know that.


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## Mukhang pera

Just a Guy said:


> I was talking about Canadian real estate.
> 
> As for interest rates, this chart seems to disagree with your version of interest rates rising since 2009.
> 
> https://tradingeconomics.com/canada/interest-rate
> 
> I don't presume to have a crystal ball that works any better than anyone else's. Also, I have pointed out that, in real estate, there are always opportunities in any market. That, however doesn't mean that all markets represent a good time to enter it. There are times when the market has more opportunities and times when they have less. Also, real estate in Canada has a lot more than the two anomalies of GTA and Vancouver. Right now, I personally feel it's not a good time to be reckless in buying real estate, it hasn't stopped me from buying places that meet my criteria, but I'm being very picky these days.
> 
> I'll ignore your other childish jabs, I got sucked in by olivaw and sags last month. I present my information here for free, so take it for what it's worth. I really don't care if you agree with me or not. No one is forcing you to read what I write, feel free to ignore it.


Actually, your chart bears me out. The accompanying explanation says, in part:

_The Bank Rate is correspondingly 1 1/4 percent and the deposit rate is 3/4 percent. Interest Rate in Canada averaged 5.91 percent from 1990 until 2017, reaching an all time high of 16 percent in February of 1991 and a record low of 0.25 percent in April of 2009._

Does that not mean that today's BoC rate is 1.25% and the low was .25% in April 2009. That looks to me like a rise of 1% since 2009, not a steady decline until now, as you suggest.

I am not sure why you have got your shirt in a twist about my post. You presented what appeared to be a rather dogmatic view about real estate and I was suggesting that there just might be other perspectives. 

As for "childish jabs", I was being self-effacing. Yes, couched in somewhat jocular prose, I was being sincere in my admiration. You are recognized as one of the gurus on this site and, by your own writings, it is patently clear that you have, all on your own, and in the face of some adversity, created tremendous wealth that I doubt few here, if any, can hope to emulate. You are the E.P. Taylor of cmf. So yes, I have to consider carefully before I post anything here that would seem in any way disrespectful to you or your teachings. Perhaps it was earlier in this thread that someone suggested you write a book. Maybe that person is unaware that you have done so already. But it shows the following you have here. I certainly don't have that force here. I am but a bit of flotsam on the cmf sea. But with the clout you wield, comes a certain responsibility, I am sure you will agree. Many who read here (and I include untold numbers of non-members) hang on your every word, you must know. They aspire to become you. In this case, I saw your post as presenting a rather narrow view, not quite up to your usual standard of excellence. My comments were not intended as an insult or calumny.


----------



## Just a Guy

Really? I wrote a book? Good to know. The things you learn on this board. 

I do know people who wrote books, heck I even know a couple of people in Canada who've lived similar lives as I have (funny who you meet when you're going through rehab for decades). It doesn't mean they are all me. I remember when I wmas thought to be another poster on here called Donald.

By the way, to me here is a difference between rising and remaining relatively flat at the bottom of a trend. Let's look at the chart in a few years and see what it looks like. 

Please remember that this thread is, like most examples, extremely simplified to get across basic truths. No one can expect to realistically have the entire knowledge of investing in real estate summed up in a couple of paragraphs.


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## Mukhang pera

Just a Guy said:


> Really? I wrote a book? Good to know. The things you learn on this board.
> 
> I do know people who wrote books, heck I even know a couple of people in Canada who've lived similar lives as I have (funny who you meet when you're going through rehab for decades). It doesn't mean they are all me. I remember when I wmas thought to be another poster on here called Donald.


I suppose I was mistaken in drawing certain conclusions in finding the book you used to tout on this site years ago is said to have been written "by simply a smart man who embarked on the mission to replace his income by investing in real estate. The impetus for this life change occurred after an accident left him injured and in need of generating an income to support his family during his recuperative period."

Obviously written by one of those who has lived a similar life (in the same province, too, I believe) and, who wrote of himself: "Please bear in mind that I’m just some guy, much like yourself. I write all this stuff, in hopes of educating you, in my free time." Also, it would seem, that same author, like you, engages in some trendsetting business consulting. Life is full of coincidences.


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## Just a Guy

Yes, and mr. Matt who produces YouTube videos also in my style of investing...though probably much younger. I still recommend that book for beginners, I've often said if I wrote a book, it would be very similar. He does run a graphic design company, one of my companies is a marketing company...similar, but not the same (we tend to hire graphic designers, but then again a proctologist and a brain surgeon are both doctors so basically the same right?). He was in a car accident, I was in a workplace one. I have lived in several provinces at one time or another, he lives in Alberta and I believe he just invests locally (that may have changed). I did correspond with him quite a bit years ago, that's how I know about him and his situation. He wrote his book because people kept asking him how to do things, he started his blog as a form of self therapy to overcome depression.

I respect what he did. I agreed, for the most part, with what he said in his book and I promote it (means I don't need to write the same book basically, and I'm lazy by nature), just like I do mr. Matt's YouTube channel and the guy who wrote the other real estate book I used to recommend until the website and blog shut down. 

Finally, and the most telling difference, I've never claimed to be a smart man and don't think I've ever been accused of being one either...but other than that, we're probably twins, triplets? Maybe I'm all 4 of us. In fact I believe berubeland, who also believed this conspiracy theory, called me a troll just trying to sell a book full of garbage and nonsense or something to the like. 

You might say that the odds of finding someone with a similar background is 1 in a million but, with 35 million people in Canada, that means there is likely around 35 people who shared a similar background. 

And I thought I was going to be Derek Foster...he wrote a lot of books, has a bunch of kids is married, travels across Canada...

Or maybe Hilliard MacBeth, Edmonton author, warning against real estate...consultant to businesses and self described investment guru. 

For your reading pleasure, getting injured in Canada isn't that hard to do...

https://www.statcan.gc.ca/pub/82-624-x/2011001/article/11506-eng.htm

Not all of them are permanent injuries, but it's not as uncommon as people think. Of those who have permanent injuries, most have to find some other way to live. Many figure out ways to start businesses, invest, or find uncommon ways to make money because the common ways are no longer available to them. As I said before, you meet a lot of interesting people when you are attending therapy. For long term users, they tend to become self help therapy groups where you share ideas and stories. These groups aren't full of self made millionaires, but there are a few very successful people that I've met over the years.


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## Just a Guy

Getting back on topic. Fad investing seldom ends well and most people hold on way to long. 

A classic book, http://www.gutenberg.org/ebooks/24518?msg=welcome_stranger tells the tale, if somewhat exaggerated, about many early fad investments.

They continued on through time (dot com, BreX, Enron, worldcom, Nortel, etc.) some bubbles are big, some less so, but the all tend to end the same way, implosion.

Today we may have several going on, weed stocks, popular tech companies with no revenue, maybe even real estate in Canada, etc. Only time will truly prove which were bubbles and which were legit. 

If you study the history of fad investing though, you begin to see some trends in the investors and the investments which may point to their real identity (fad or real). I suggest one takes some time and do a little reading. The investment you make in time may save you a lot of money.


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## lonewolf :)

Bob Farrell rule #4 Exponential rapidly rising or falling markets usually go further then you think but they do not correct by going sideways.


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## Just a Guy

New truth

Find where the money comes from.

Was just watching a commercial where someone bought a new iPad, TV, whatever for pennies on the dollar off some web bidding site. How can this be true? Can people really make money selling stuff at a loss? Well, when you look at the terms of the site, yes they can and they are making a killing at it probably. 

It's not the price of the item that makes them money, it's the number of bids. People not only pay the winning bid amount, but they also pay each time they make a losing bid. Bids can go up by minuscule amounts, but only the winning bid gets the item. Each losing bid, no matter what the increment, pays the company. 

Let's say they charge $1/bid and the bids go up by $0.25. That means the auction site make $4 for every $1 the item goes up. It sells for $100, the company makes $400 plus the $100 sale price. What if the bids go up by $0.05? That would be $2000 for an item that sells for $100. Plus the company gets the $100. 

Sure it looks like a steal of a deal but, in reality, it's the company making out like bandits.


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## Userkare

Just a Guy said:


> New truth
> 
> Let's say they charge $1/bid and the bids go up by $0.25. That means the auction site make $4 for every $1 the item goes up. It sells for $100, the company makes $400 plus the $100 sale price. What if the bids go up by $0.05? That would be $2000 for an item that sells for $100. Plus the company gets the $100.
> 
> Sure it looks like a steal of a deal but, in reality, it's the company making out like bandits.


Kinda like a lottery, no? If enough people are willing to 'gamble' a small amount for the chance to win a larger amount, then the losers are not too disappointed, the winner is happy, and the organizer is very happy.


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## kcowan

Userkare said:


> Kinda like a lottery, no? If enough people are willing to 'gamble' a small amount for the chance to win a larger amount, then the losers are not too disappointed, the winner is happy, and the organizer is very happy.


I have tried it and I concluded that you have to spend a lot of time learning about bid strategy and timing. I was not prepared to do that.


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## lonewolf :)

kcowan said:


> I have tried it and I concluded that you have to spend a lot of time learning about bid strategy and timing. I was not prepared to do that.


 A few years ago I seen a site where bids had to be bought then bid on the product when I did the math the total amount of money the seller was making compared to selling on line or in a store was multiples higher. 

So I just walked away if the odds were in my favor & less money was going towards purchase then buying in stores or online it would have caught my attention. 

I never buy lottery tickets because odds are against me if the lotto gave out more money then it took in then I would consider playing.


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## Calmoney

It all reminds me of a timeshare. A guy I worked with proudly told me that he had just purchased a timeshare on Maui. A condo about 700 sqft, he enthusiastically said it was only $20,000, and he was guaranteed he could use it for a week every year, if he also keeps up with some sort of yearly fee, not sure how much that is. After USA conversion, it was more like $26k CND. What a deal for the developer, almost insane profits. The basic math, if in US greenbacks. 52 weeks x $20,000 = $1,040,000 that the developer is basically getting for that one unit. A similar complex to this one sells their units outright, brand new as well, for $450 - $600k, depending on size.
Stay far away from timeshares!


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## Just a Guy

New truth

Understand the “deal”. 

In a different thread there is a discussion going on about a 0% credit card offer. While it sounds good on the surface, often times these “deals” have a lot of built in “gotchas” in the fine print. 

Many of these temporary offers have things like a transfer fee, limitations on how to access the 0% rate (like it’s not on a purchase) or that the low interest rate gets paid off first (meaning, if you have any new charges, hey rack up the full interest rate and they only way you can pay down that balance is by paying off the 0% loan first). 

Too many people are sucked in to “deals” that are often more “financial nightmares” because they don’t look past the big headlines. Make sure you read the fine print, often you’ll find these deals aren’t worth it in the end.


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## findingthebalance

*MEMOIRS OF POPULAR DELUSIONS and the MADNESS OF CROWDS*

For those who like audiobooks.
youtube com/watch?v=mzAFF9gZQ9M
MEMOIRS OF POPULAR DELUSIONS and the MADNESS OF CROWDS Volume 1 By Charles Mackay -
This was mentioned in earlier post.


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## Just a Guy

New truth,

If someone else has to tell you how great the product/service is and how life changing it will be, chances are is won't be.

Think of timeshares, car sales, vacuum salesmen (once had a guy try to sell me one for my house which was all hardwood/tile), suit, jewelry, expensive complicated investment strategy, you name it...

If you can't see the long term benefits yourself, and need someone else you tell you, then the chances are you won't see the long term benefits after the salesman is gone.

Many of these salesmen are selling the dream, the problem with that is we're living in reality.


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## Just a Guy

"Hard choices, easy life. Easy choices, hard life.” Jerzy Gregorek

I remember a time, not so long ago, when I was broke, living off credit cards. I had taken on debt to start investing before the banks realized I had no income, nor any chance of making any for several years. My investments weren't all liquid assets, but they had started to bear fruit. I remember wondering do I sell the investments and get rid of my debt, or do I believe in my system and continue to build up debt. 

At the time, my investments would have probably covered my debts but, if I sold, all my earning power was gone and I still had expenses every month. There were, of course, other issues like where to get food, how to get the kids what they need, emergencies which always seem to crop up...you need to find solutions. Those kinds of decisions aren't easy to make, especially when you've got a family to support. They cause sleepless nights and push you into depression. 

I've had a lot of tenants over the years, and I've seen a lot of lives. Some have hit it pretty bad, but not many make the hard choices when required. For those, they often continue the downward spiral. Sleepless nights, depression, substance abuse...there are a lot of times when you have a chance to travel a difficult path which may turn things around, but it's a lot easier to take the smooth road that's going in a straight line...even if the destination isn't where you want to be.


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## Just a Guy

All that stuff you were taught in high school isn't useless, it's just taught out of context.

Many people graduate high school thinking they just wasted a lot of time learning things they'll never use. Math, is often sighted, which I find stunning since almost everything to do with money comes down to math but there are also many valuable lessons in the other subjects. English is the basis for proper communication. Use a term incorrectly and you create misunderstandings. Put a comman in the wrong place and completely change the entire meaning.

Social studies covers a lot of history which could prevent you from repeating the mistakes of the past...let's put our defences here because no one would ever invade through belgium...okay, they did last time, but won't do it again...

Or maybe some of the things like Maslow's pyramid of needs. Which teaches you some great investing strategies...invest in "needs" not "wants". 

Philosophy teaches you how people think.

Science teaches you to question.

Unfortunately most teachers don't show you how these things could be used to make you money...if they did, you'd probably have paid more attention. In reality, the teachers probably don't even realize how powerful their knowledge could be if put into the proper context.


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## 319905

Teachers, DB pension, $$s. As I say to my cynical stepson who just doesn't get it, school trains you, life teaches you ... teachers, DB pension, $$s ...


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## Just a Guy

New truth. There's no point in being jealous of other people.

Instead of wasting your time complaining about other people and how they are doing, spend your time figuring out ways to change your situation.

I've always taught my kids, forget focusing on the problem, focus on finding a solution instead. No matter how much you envy what others have, it's not going to change your situation. Be happy for them achieving what they have and use them as inspiration to achieve more in your own life.


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## Just a Guy

I heard someone talking the other day about how "flat taxes" are unfair, that the rich can afford to pay more, and thus should, as that would be "fair". 

Let's look at what really happens with a flat tax of say 1%. 

Income $10,000 taxes $100
Income $100,000 taxes $1000 (ten times as much)
Income $1,000,000 taxes $10,000 (one hundred times as much)

Now, I may be blind, but if one person pays $100 and another "rich" person is paying $10,000. I'd say the math says one person *is* actually paying more than the other, significantly more. I'm not sure how the "new" math works, but i can't figure out any way to say that the rich aren't paying the same amount as a 100 people who earn $10,000. 

Now, there are those who advocate that $100 is a lot more money to someone who only has $10,000, but there are a couple of things to remember...when your kids were given something, did they always treat it with respect? Did they value it as much as say something they'd had to save up their own money for? The things my kids had to partially pay for were much better treated than the things they were given I found, at least until they grew up. 

As for the $100 itself, many financial advisors, including the wealthy barber, have quoted studies which show that you can easily curb your spending habits to absorb 10% for the purposes of saving without noticing, no matter what your current income. People grow into their incomes. If you get a raise, you tend to increase your spending to match your raise. It's harder to cut back later, but you've already proved you could survive before the raise happened.


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## Nerd Investor

Just a Guy said:


> I heard someone talking the other day about how "flat taxes" are unfair, that the rich can afford to pay more, and thus should, as that would be "fair".
> 
> Let's look at what really happens with a flat tax of say 10%.
> 
> Income $10,000 taxes $100
> Income $100,000 taxes $1000 (ten times as much)
> Income $1,000,000 taxes $10,000 (one hundred times as much)
> 
> Now, I may be blind, but if one person pays $100 and another "rich" person is paying $10,000. I'd say the math says one person *is* actually paying more than the other, significantly more. I'm not sure how the "new" math works, but i can't figure out any way to say that the rich aren't paying the same amount as a 100 people who earn $10,000.
> 
> Now, there are those who advocate that $100 is a lot more money to someone who only has $10,000, but there are a couple of things to remember...when your kids were given something, did they always treat it with respect? Did they value it as much as say something they'd had to save up their own money for? The things my kids had to partially pay for were much better treated than the things they were given I found, at least until they grew up.
> 
> As for the $100 itself, many financial advisors, including the wealthy barber, have quoted studies which show that you can easily curb your spending habits to absorb 10% for the purposes of saving without noticing, no matter what your current income. People grow into their incomes. If you get a raise, you tend to increase your spending to match your raise. It's harder to cut back later, but you've already proved you could survive before the raise happened.


The irony is, most people that I have seen argue in favour of a flat tax rate would actually be paying more in taxes than under the current progressive rate system.


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## OptsyEagle

It's not about how $100 is worth more to a low income earner then a high income earner. It is about the fact that the high income earner could not possibly have earned that money without the help of living in a society with all the low income earners. In other words, without the low income earners there would be no high income earners. Therefore the high income earner can and should contribute more.

That is what makes the graduated tax system fair.

I have mentioned many times on this board and others that you cannot have the rich without the poor. Wealth is the simply the difference between the rich and the poor. It is nothing else.


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## Eder

Math is hard lol.


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## hboy54

Eder said:


> Math is hard lol.


You noticed too LOL.


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## Mukhang pera

Eder said:


> Math is hard lol.


I take it you refer to the fact that 10% tax on $10,000 would be $1,000; on $100,000 it would be $10,000 and on 1 million it would be $100,000. I think JAG is using the "new math".


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## gardner

Just a Guy said:


> I heard someone talking the other day about how "flat taxes" are unfair, that the rich can afford to pay more, and thus should, as that would be "fair".


The desire for flat tax rates puzzles me.

I think most average folks would be pretty unhappy with a "flat tax" that raised the same overall income for the government. Since the richest folks earn most of the money they would also pay most of the tax anyway. But a flat tax would ALSO shift the tax burden down the food chain, so folks who now pay 20% would have to pay 40% just like me. I think people who imagine they would like a flat tax are at the top of the food chain hoping to get their 50% marginal rate down to 40%, not the people at 20% wishing they could pay 40%.


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## potato69

The math behind a flat tax really doesn't work


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## OptsyEagle

The desire for a flat tax is all about making the system less complex. Unfortuneately in order to make it fair it ends up getting more complex.

Now fair is in the eye of the beholder so lets not get bog down on that discussion, but observe the fact that it is in the desire to make the system fair that has caused it to get so complex. If you make it less complex it will become less fair.


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## Just a Guy

gardner said:


> The desire for flat tax rates puzzles me.
> 
> I think most average folks would be pretty unhappy with a "flat tax" that raised the same overall income for the government. Since the richest folks earn most of the money they would also pay most of the tax anyway. But a flat tax would ALSO shift the tax burden down the food chain, so folks who now pay 20% would have to pay 40% just like me. I think people who imagine they would like a flat tax are at the top of the food chain hoping to get their 50% marginal rate down to 40%, not the people at 20% wishing they could pay 40%.


So, “fairness” in your opinion would be to have one person (1M earner) pay $500,000, one person (100k earner) pay $40,000, and one person (say 10k earner) pay only $2,000. This is your definition of “fairness and equality”?

Maybe the person earning 1M should be taxed $990,000 so that he only gets $10k like the lowest paid person. They can afford to pay that unlike the person who only earns $10k to begin with.


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## potato69

I think society would benefit from having someone who takes home 500,000, another taking hom 60,000 and someone living in poverty shouldn't have to pay taxes at all. No ones wins when you're practically living on the street.


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## gardner

Just a Guy said:


> So, “fairness” in your opinion


I did not use the word "fair" in what I said, nor did I say anything regarding fairness. I made no opinion on that dimension of the question, and I think you are dishonest for implying that I did.


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## Just a Guy

It was asked with the intent of getting clarification.

You didn’t like a flat tax as it passes the costs down, implying an unfairness, or at least something that doesn’t sit well. 

You made a statement implying that a progressive tax system is better and thus more “fair” for society. 

I admit the interpretation is mine, thus you can clairify...however, instead you chose to worry about the word, as opposed to the topic.


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## lonewolf :)

potato69 said:


> The math behind a flat tax really doesn't work


 Not for the politicians & their families that receive monetary incentives for different tax loopholes they provide for those willing to pay


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## Mortgage u/w

A flat tax would never work. 

Those who make little, will complain that their taxes will increase.
Those who make a lot will be happy their taxes decreased.

And everyone will be unhappy that services are cut.


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## Just a Guy

The topic wasn't about if it would work or not, it was to debunk the people who claim the "rich" don't pay more in a flat tax than the "poor". The "poor" always complain they pay too much and that the "rich" don't pay their "fair share" while, at the same time, the "poor" use more of the government programs than the "rich". 

People in favour of a progressive tax system usually say something along the lines of "the rich can afford to pay a little more...", ignoring the fact that the rich will always pay a lot more no matter which system you use.


----------



## gardner

Just a Guy said:


> the "rich"


We're using "rich" as a shorthand for high-income-earning. Canada (thank the stars) doesn't have an actual wealth tax -- unless you count municipal property tax or probate fees.



> the "poor" use more of the government programs than the "rich".


Maybe. But rich folks get a lot more out of civil order, national defence, courts and most of the infrastructure the nation builds. The inherent value of civil order to a street urchin is low compared to its value to a pharmaceutical director, because the director has a lot farther to fall.


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## Just a Guy

I'd question the benefits of our national defence...mostly provides employment for people. WWII surplus doesn't make me feel protected from anyone. 

As for overthrowing the "rich", history shows that doesn't really work out all that well, not even for the "poor". It also doesn't stop people from rising up to replace the "rich", and others falling to become the new "poor", or just remaining there. 

Take a look at any communist country if you don't believe me, China is a good example.


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## Eder

Anyway we are giving the masses legal dope so they will continue to get dumber & lazier. Good way to make sure no one gives a s_it about politics & whether the government is squandering our money.


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## gardner

Just a Guy said:


> As for overthrowing the "rich", history shows that doesn't really work out all that well


On average, not. But some folks would say the French and American revolutions worked out.

In any case, just because insurrection or civil disorder is not, on average, a win, that does not mean insurance against the possibility (police, courts, military etc) is worthless. It STILL is worth more to the haves than to the have-nots. Major civil disruption is not LIKELY to elevate a peasant to a prince. But it COULD WELL demote a prince to a peasant, or worse. Those who have more to lose generally get to pay more towards sustaining the system they are vested in.


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## Just a Guy

Except the military usually draws its ranks from the have nots.


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## gardner

Just a Guy said:


> Except the military usually draws its ranks from the have nots.


It exploits the poor people alright, but it does not necessarily serve their interests. As a rich person, I find investing in the military a good deal, since it keeps some poor people busy marching around and it intimidates the other poor people into staying out of my way and cooperating with the means I have for exploiting THEM. All in all, it's a worthy investment.


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## lonewolf :)

gardner said:


> It exploits the poor people alright, but it does not necessarily serve their interests. As a rich person, I find investing in the military a good deal, since it keeps some poor people busy marching around and it intimidates the other poor people into staying out of my way and cooperating with the means I have for exploiting THEM. All in all, it's a worthy investment.


 Unless you get a crazy leading the military & all those in the military want to do is follow


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## ian

Our Nation Defence does have value. 

What would Mayor Mel Lastman have done a few years ago when Toronto had a relatively minor dump of snow had the Canadian Military not been called out?. Who else could he call on to solve this emergency situation?


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## Just a Guy

It does make you wonder how the settlers survived. Or the people for 100's of years after.


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## sags

The first settlers (Pilgrims) were socialists. Maybe that helped them succeed, and of course the other socialists......native Americans, helped them survive the winter.

Thanksgiving is a socialist concept.........giving thanks for the harvest by the community (commune).


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## Just a Guy

You really need to study real history, not the fantasy stories that used to be taught.


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## sags

Most people who don't like capitalism are poor people,.......... which is about 99% of the world population.

Most poor people live under a capitalist system..........and they don't like it.

If it wasn't for the native Americans (socialists), the Pilgrims would have died the first winter.

America was founded on socialism and every Thanksgiving celebrates it.


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## sags

Yip Harburg wrote the song lyrics for the Wizard of Oz and was a self proclaimed socialist, who was blackballed during the McCarthy era.

He added the song........Over a Rainbow to the movie to hint that a better way than capitalism was possible and perhaps preferable.

He also wrote the lyrics to a song of the Great Depression..........Brother, can you spare a dime.

_ “Once I built a railroad, I made it run, made it race against time. Once I built a railroad; now it’s done. Brother, can you spare a dime?”_

America is more steeped in socialism than most people even realize. It was built on the sweaty brow of unionism and blue collar labor.

Highways and bridges, cars and steel, skyscrapers and energy......representing the best of America and stamped "made by union workers in the USA."

http://www.peoplesworld.org/article/yip-harburg-wizard-of-oz-songwriter-socialist/


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## Just a Guy

Not like socialist countries hav a good track record, or people wanting to live under their system...think Russia, Cuba, china, Venezuela...


----------



## Just a Guy

Here's an interesting quote from Robert Kiyosaki. I personally think 90% of the stuff he says is designed so that you give him money, or is just empty fluff, but once in a while he gets a hit. 



> Poor is forever. Broke is a state of mind.
> 
> That is what rich dad told me. He said that poor people are poor because of the way they think. The way they let fear control them. Or the way they let comfort control them.
> 
> Isn’t that a unique thought?
> 
> Rich dad said that the greatest enemy of success was being comfortable.
> 
> So, if you are poor...
> 
> Is it because you are afraid? Is it because you are comfortable?
> 
> Being broke is NOT poor.
> 
> Broke is a state of mind.
> 
> This means that broke is temporary. It means you are going to fight your way through it. You’re going to take the time and energy and money to get educated to the point you break out of broke.
> 
> So, are you broke? Or are you poor?
> 
> If you are poor, I can’t help you. I can’t save you. No one can. You need a life disaster. You need to hit rock bottom and then question if you are worth fighting for.
> 
> If you are poor and anyone tries to help you, including me, you’ll just end up blaming me, or anyone else for your pre-planned failure.


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## sags

I am guessing his snarky advice was given before he declared bankruptcy ?


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## Just a Guy

You may notice he didn't stay bankrupt...kind of proves the point. But then, no one can tell you anything, and you just wind up blaming everyone else...


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## sags

Of course he continues on..........he is a grifter and that is what grifters do.

Never hear the fable of the scorpion and the frog ?

_A scorpion asks a frog to carry it across a river. The frog hesitates, afraid of being stung, but the scorpion argues that if it did so, they would both drown. Considering this, the frog agrees, but midway across the river the scorpion does indeed sting the frog, dooming them both. When the frog asks the scorpion why, the scorpion replies that it was in its nature to do so._


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## Just a Guy

Those in glass houses, shouldn't cast stones...


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## Karen

As others have said, everyone's situation is different when it comes to the cost of owning a house. In my case, there is absolutely no question that home ownership has been an excellent investment (although I never think of it as an investment - it's my home). My late husband and I bought this house 28 years ago for $180,000, and paid cash for it with the proceeds from the sale of our previous house. Yes, I've paid property taxes every year and have spent some money over the years for maintenance (new roof, painting, new fence), but the house is now worth at least $1,000,000 and there's no doubt in my mind that if I were to sell, I would come out well ahead of what I've spent on it. Mind you, I live in a suburb of Vancouver which no doubt explains the huge price increase.


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## Just a Guy

Investing is about repeatable results. If I buy something once, can I buy something similar and get similar results later using the same strategy. If you can't, then you're gambling. Congratulations on hitting the home lottery but, unless you can find a $180k house today which will grow to $1M in 28 years, all you were is lucky. Many people who buy houses today may find them worth less than they paid for them in the future if the market goes through a correction like the USA in 2007.


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## off.by.10

Just a Guy said:


> unless you can find a $180k house today which will grow to $1M in 28 years, all you were is lucky.


By the way, that comes out to 6,3% annual growth. Once you consider the property taxes, insurance, maintenance, etc... well I might add another basic truth: always do the math. It's easy to get the wrong impression from large (or small, like that daily coffee) numbers otherwise.


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## Just a Guy

Real estate tends to keep up with inflation historically.


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## Karen

off.by.10: You're ignoring the fact that I would have had to live someplace for these last 28 years, and it no doubt would have cost me more - a lot more - than it has to live in and maintain the house I own now.

And Just a Guy: Of course I was lucky - and that's what I meant by acknowledging that the main reason I did so well is that I bought in the Vancouver area.


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## Joe Black

Just a Guy said:


> Investing is about repeatable results. If I buy something once, can I buy something similar and get similar results later using the same strategy. If you can't, then you're gambling. Congratulations on hitting the home lottery but, unless you can find a $180k house today which will grow to $1M in 28 years, all you were is lucky. *Many people who buy houses today may find them worth less than they paid for them in the future if the market goes through a correction like the USA in 2007.*


You can say the same thing about those who had invested in stocks. That doesn't mean that either type of investment was bad. It's how you behave during the inevitable corrections that matter. Those who kept up with their mortgage payments, even though their house was at the time worth less than they paid, are likely back in a good position again (based on the reports I hear that presently there is a shortage of houses for sale in the US). Just as the stock investors who didn't panic sell at that time are more or less better than ever.

So I don't think that is a valid argument against someone who plans to live there for the foreseeable future.


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## Just a Guy

I've often said there is a big difference between a home and an investment. The two shouldn't be confused. I have no issues with home ownership personally, but they aren't investments in most cases. They are, at best, hope and pray investing whereas the two bedroom condo I just picked up for 65k from an estate, which should easily rent for $1200/month. The assessed value is over $100k, but the people wanted their money quick, so I got a deal. I can, and have been, buying similar properties for years as investments. I'm sure you can see a difference.


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## MrMatt

Just a Guy said:


> Investing is about repeatable results. If I buy something once, can I buy something similar and get similar results later using the same strategy. If you can't, then you're gambling. Congratulations on hitting the home lottery but, unless you can find a $180k house today which will grow to $1M in 28 years, all you were is lucky. Many people who buy houses today may find them worth less than they paid for them in the future if the market goes through a correction like the USA in 2007.


Sorry the world changes, results aren't necessarily repeatable.
You simply can't get similar fixed income returns to those in the past, does that mean people buying government of Canada bonds are investing?

Look at the stock market, since it goes up and down by your definition that's gambling, is there anything that meets your definition of investing?


I must be missing the point, of what you're trying to say.


IMO the difference between Investing and Gambling is the attitude and types of things you're investing in.
I think investing is simply purchasing an asset that is intended to return more than the initial investment, be it real property, stock, or a debt contract.

Gambling doesn't fit this since it isn't intended to return more than the initial investment.


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## hboy54

Hi:

My idea of gambling vs. investing is based upon actual or estimated expected value. If EV is < 1 one is gambling. If > 1 then one is investing. Of course I am not much interested in EVs a bit over unity for margin of safety reasons. I look for 2 or more.

Most other people call something gambling if there is any chance of loss. So many define stocks to be gambling.

hboy54


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## sags

Basic financial truth..........

Real estate prices are falling. Buyers are trying to cancel deals. I wouldn't jump into real estate until the dust settles.


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## ian

We put off buying for that very reason. Renting for four years paid big dividends in terms of financial savings, ROI on funds that would have otherwise been sunk into real estate, selection of properties on the market, and our ability to structure the right deal.

The market in Calgary was hot hot when we returned to town. We quickly realized that the time to buy was when everyone was selling,not when everyone was buying.

Same has always been true.


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## Just a Guy

MrMatt said:


> Sorry the world changes, results aren't necessarily repeatable.
> You simply can't get similar fixed income returns to those in the past, does that mean people buying government of Canada bonds are investing?
> 
> Look at the stock market, since it goes up and down by your definition that's gambling, is there anything that meets your definition of investing?
> 
> 
> I must be missing the point, of what you're trying to say.
> 
> 
> IMO the difference between Investing and Gambling is the attitude and types of things you're investing in.
> I think investing is simply purchasing an asset that is intended to return more than the initial investment, be it real property, stock, or a debt contract.
> 
> Gambling doesn't fit this since it isn't intended to return more than the initial investment.


First off people who buy government bonds are basically guaranteed to lose money to inflation and taxes over their hold period. If you consider guaranteed losses to be investing than I can't really help you. At the end of the day, your spending power will be less. 

As for the stock market, there is a big difference between picking random stock symbols (gambling) and doing significant research on specific companies to discover which ones are likely to increase in the long term. It is not a sure thing by any means, but it's a lot difference than hope and pray. 

When it comes to real estate, as you are well aware, there is a big difference between buying a rental property at a price that cash flows and a 500k+ property which may generate $1500 rent. My last property (closed last week) was a 65k, two bedroom that should rent around $1200. Now, could the market correct 40%, yes it could, but I bought the property more than 40% below market value so that risk was eliminated. Could rents drop? Yes they could, but I can easily drop my rents down to $650 and still cash flow. The risks have been mitigated, it's not gambling. There could, of course, be a nuclear war that wipes it out, but then I think we'd have other things to worry about. 

Gambling is, to me, not having any control or idea of what's going to happen. Investing mitigates many of the risks and leaves you with a pretty good idea of where things are going.

P.S. you'll note I didn't say you could do the exact same thing and get repeatable results, I said you could do similar things and get repeatable results. Once a certain stock has run up, it's hard to buy it again and have it run up a second time. Instead you need to buy a different stock using your strategy and get a different run up. 

This is different than hitting a home run and thinking you're an investing genius.


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## kcowan

Just a Guy said:


> This is different than hitting a home run and thinking you're an investing genius.


+1
You can say it but the gamblers will not accept or believe it.


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## MrMatt

hboy54 said:


> Hi:
> 
> My idea of gambling vs. investing is based upon actual or estimated expected value. If EV is < 1 one is gambling. If > 1 then one is investing. Of course I am not much interested in EVs a bit over unity for margin of safety reasons. I look for 2 or more.
> 
> Most other people call something gambling if there is any chance of loss. So many define stocks to be gambling.
> 
> hboy54


Can't say it better myself.
For me the carrying costs of my home are less than rent. including the cost savings of housing (and higher quality of life) I'm likely to come out ahead.


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## Karlhungus

sags said:


> Most people who don't like capitalism are poor people,.......... which is about 99% of the world population.
> 
> Most poor people live under a capitalist system..........and they don't like it.
> 
> If it wasn't for the native Americans (socialists), the Pilgrims would have died the first winter.
> 
> America was founded on socialism and every Thanksgiving celebrates it.


TIL india and china are capitalist


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