The Newsprint
Written by Josh Ginter.

Having the Dreaded Money Talk

Thursday, May 14, 2020

I often say to my wife that her and I are each in careers where everyone else knows better than we do. Nutrition? You can find 2.6 billion experts on Facebook (that’s Facebook’s entire user base as reported in 2019). Personal finance? Walk through the self-help personal finance section at the bookstore and try to keep your head from spinning.

Commenting on either of these two topics is sure to yield a firestorm, especially if you’re not “an expert”.

I attribute the volatility of these two categories to a few different factors:

  • Everyone enjoys eating food and everyone enjoys having money, so there are bound to be opinions.
  • There are an endless number of ways to prepare your food and an endless number of ways to build your personal finance structure.
  • There is no single one-size-fits-all approach to ensuring your body receives the healthy nutrients it needs, nor is there a one-size-fits-all approach to generating, earning, saving, and spending money.

As a result, people gravitate to plans of action that claim to provide all the benefit without all the hard work. Fad diets come and go by the week (day, perhaps?) and get-rich-quick schemes spread faster on Facebook than the flu in spring. There isn’t a Monday that goes by that our office doesn’t have to talk someone off a financial cliff because of a conversation they had around the campfire on the weekend.

One of the most unique lessons my wife works to instill in her clients as a registered dietitian is to have a healthy relationship with food. Our relationship with the food we eat defines what we want to eat, and therefore, we look and act upon incentives to allow us to eat the food we want to eat. Changing that relationship and changing the incentives is key to finding a healthy nutritional balance.

This relationship is instilled from our very beginnings as infants and toddlers. How often have you heard the phrase “If you eat your broccoli, you can have cake for dessert”? Or “If you finish your meatloaf, you can go outside to play”?

What do these comments instill in a young child? What do they incentivize?

My wife’s approach to fad diets is another worth emulating. There are far too many fad diets to talk about individually, but nearly all of them promise instant benefit so long as you wholly and fully cut out “X” — “X” being sugar, or salt, or carbs, or calories, or alcohol, or… air?

I kid, but really.

Her lesson: eat in moderation. If you cut out sugar entirely from your body,1 you are bound to give in to a craving somewhere down the road, resulting in a sugar binge that puts you in a worse place than if you had just kept eating the way you always had before.

I absolutely love these nutritional lessons, and they are perfectly applicable to the money world as well.

In fact, we’ve adopted these same two lessons in our financial lives, and we’ve found a modicum of success. There are always hiccups along the way, to be sure, nor would I pretend these methods (among others) will answer the world’s financial problems.

There is a chance though, however small, that these methods could help other people. And that’s what it’s all about, right? Helping other people.

But first, some meta talk.

This blog has been around in some shape or form since 2013, and while I’ve linked to other financial articles or written a few short blurbs in the past, the site probably isn’t on Google’s rankings as a “personal finance” website.

Second, I have worked to keep my J-O-B job (to steal Myke Hurley’s quote) somewhat separate from my work online. Every now and then, the two will intermingle. But, if my finger is on the pulse, anyone who follows me on the Twitters, who follows this site, or who reads my work on The Sweet Setup likely thinks of me as a photographer, potential Apple iDevice nerd, and/or (I may puke in my mouth) a Canadian political commentator.2

So, am I an “expert” worthy of being listened to regarding financial topics? I have essentially no written portfolio on the topic, nor do I have credentials at the end of my name.3 I’ve spent the last nine years of my life working in the financial sector, the last seven years working in an accounting and tax office, and the last five years studying and working through my accountancy designation. That’s a far cry from being able to call myself an expert.

But.

I have been taught lessons by some very smart people who have found high levels of success, both in finding and maintaining a financial balance in their lives. I have witnessed individuals pull themselves out of a terrible financial situation. I have seen those who build wealth incrementally each day after starting with nothing. I have seen those who have built upon their parent’s legacy after receiving an inheritance.

And I want to share some of those lessons with you.

Take these thoughts for what they’re worth. Ponder them. Give them a shot. See if they work in your life. Like our unique bodies, there are no two financial situations that look the same.

Maybe some of those lessons can help improve some of those unhealthy, fad diets out there. It’s worth a try.

Theoretically, this means all fruit and juices, but I don’t think people understand how much sugar is in the foods they associate as “healthy”. ↩

That last one is embarrassing. Trust me, I’m working on it. ↩

Another one of those “I’m working on it” aspects. I aim to be designated in May 2021 after 10 hard years of school. ↩

Supported By

In Theory●

Wednesday, May 13, 2020

This blog post from Matt Gemmell might be my favourite blog post in years. It has everything that has made Matt Gemmell one of my favourite online writers (and novel writers) in the last 10 years: eloquent prose, honesty, some abrasive elements, and in the end, pure transparency. I had shivers and a tear drop by the time I reached the end last night.

In reality, I doubt Matt and I would get along in real life. He doesn’t appear to have much respect for a few elements of life that I hold dear — namely faith and family (though the latter may be changing soon for him, perhaps?) — but that doesn’t stop me from wishing I could join him for a beverage to pick his brain. There are smart people on all sides.

I want to comment on two specific things.

First, Matt’s comment:

I’ve never wanted kids. My professed position was ambivalence, and my interpretation of that position was that there are really only two answers: Definitely Yes, or anything else which equated to No. Perhaps that was naive.

I applaud Matt for throwing in that last disclaimer clause. I’m not sure if anyone could rationally want children — they are incredible disruptive, time-consuming, patience-testing, virus factories that rock every core bone of your body and life. I don’t think I wanted to blow my life to bits when Jac and I decided we wanted a family.

But having a family is one of the most selfless acts one can perform. The day your child is born, you go from living for yourself to living for someone else. You mature from living for now to living for tomorrow. You transition from working for me to working for legacy.

Children have this way of bringing out the most loving elements of even the coldest people. This little story from Dale Carnegie’s How to Win Friends and Influence People is perfect:

Dr. Stephen K. Sproul, a veterinarian in Raytown, Missouri,…He told one of our classes: There were six or seven clients waiting when a young woman came in with a nine-months-old baby and a kitten. As luck would have it, she sat down next to a gentleman who was more than a little distraught about the long wait for service. The next thing he knew, the baby just looked up at him with that great big smile that is so characteristic of babies. What did that gentleman do? Just what you and I would do, of course; he smiled back at the baby. Soon he struck up a conversation with the woman about her baby and his grandchildren, and soon the entire reception room joined in, and the boredom and tension were converted into a pleasant and enjoyable experience.

Children have a way of lighting up one’s world. They are some of the greatest gifts from God. They will change who you are, for the better.

Matt finishes his post thusly:

Miracles don’t happen — they don’t exist, after all — but life is complex enough to allow for some flexibility every now and then.
It can happen. It does happen.
It did.

I certainly don’t agree with the premise of this statement, but that doesn’t mean there’s even an ounce of malice when I say this:

Congratulations Matt and family. I simply could not be more happy for you and your wife. May you be blessed with happiness and health, both now and when your wonderful package arrives in September.

A Trick for Saving Interest on Your Mortgage and to Pay Off Your Mortgage 3 Years Sooner

Saturday, May 09, 2020

One of the easiest tricks in the book to pay off your mortgage faster is to make bi-weekly payments instead of monthly payments. Any mortgage calculator will show this and, since most people are paid either bi-weekly, it makes a lot of sense to match your mortgage payment schedule to your income schedule.1

Here’s another method my wife and I are using to pay down our mortgage quicker:

In short:

  • Everything flows into our main bank account: payroll, other income, gifts, etc.
  • That same bank account makes all the bill payments, all the transfers, etc.
  • Our mortgage is held at a different financial institution than our “operating” bank account.
  • The mortgage is paid out of a bank account held at the same institution as the mortgage.
  • Transfers are made every two weeks from our operating account to the “mortgage” bank account.
  • Our mortgage bank account is not easily accessed; we do not have a debit card for the account, we do not have quick or easy online access on our phones to the bank account, and the bank account has usage fees if we complete any transactions other than mortgage payments.

Based on the graphic, you can probably figure out the rest of the story. Our mortgage payment is $XX and is paid out of the mortgage bank account every two weeks. The transfer we make from our operating bank account to the mortgage bank account is $50 more than the required mortgage payment. And all these transfers are pre-authorized transfers which require signatures and paperwork to change.

After a year, it’s easy to see how a balance of $1,300 builds in that mortgage bank account. At the end of the year, we take the $1,300 and make an extra, principal-only mortgage payment. And then we start all over.

On a $250,000 mortgage, this additional $50 in the bi-weekly transfer dramatically cuts down on mortgage costs in the long run. As per the Government of Canada’s Mortgage Calculator, the $1,300 additional annual payment results in (assuming a 3% interest rate on a 5-year term amortized over 25 years):

  • Savings of $13,191.55 in interest costs over the course of the mortgage.
  • Mortgage payoff 35 months sooner.
  • Savings of $407.52 in interest costs over the course of the first 5-year term.

“OK, Josh. Great idea,” you say.

“But why not just make your mortgage payment higher? Clearly you can afford more.”

Aha! Great question.

The point is that you are locked into a lower required cash outflow on a bi-weekly basis than if you made larger mortgage payments. Larger mortgage payments will pay off your mortgage faster and will result in greater interest savings in the long run, to be sure.

However, should a crisis strike, having a lesser required cash outflow may be nice to have. That extra $1,300 is exactly that: extra. It’s not required. You could use the $1,300 and invest it in the stock market. You could save it in a Tax Free Savings Account and use the money to purchase an investment property down the road. If you have children, you could put the money into an Registered Education Savings Plan and receive the 20% RESP governmental grant on top of it.

Whatever you choose to do with the $1,300 is up to you. Extra mortgage payments simply provide a guaranteed return.

I was updating all our personal finances the other day and completely forgot about the fact that we have an extra $50 transferred every two weeks. Seeing the accumulated balance was a nice little revelation; there’s nothing quite like the rush you get when you stumble across “found money”.

And I figured, perhaps, this could help some other folks to get ahead of their mortgage a little quicker.

In fact, I mostly think it’s best to match your payment schedule to your payroll schedule for investment-type purchases in general. If you are paid in big lump sums, then pay for things with cash! But if you are a wage-earner or are paid on a consistent schedule, it makes a lot of financial sense to use debt to make the investment, pay some tax-deductible interest, and use the asset to earn a return greater than your interest rate. ↩