Posted by Robert on August 23, 2010
A coworker told me a story about paying cash when buying her takeout lunch. She handed a $5 bill to the young man at the till and he handed it back. “I can’t take this, it’s fake,” he told her. She was pretty upset to think she might have a counterfeit bill, so she took it on her next deposit to the bank. When she asked the teller, she was told that it is missing the metallic strip down the left side, but not to worry. It was printed before 2004, when the Royal Mint added that security measure. It was indeed real. In Canada, it seems almost everyone uses plastic for payments, either credit or debit cards. We use cash so rarely, that someone working retail didn’t even recognize an older bill.
There are benefits and drawbacks to not using cash. Few people feel comfortable carrying large wads of cash, and worry about losing it or having it stolen. Credit and debit cards are a little safer, since fraudulent purchases can be disputed. They also take up less space in a wallet. But for keeping track of spending: cash is king.
I lived in Taiwan for two years. We didn’t even consider getting a credit card for two reasons: we were unlikely to be approved and no one else seemed to use one. We were never even paid by cheque. Either we would receive a cash transfer in our bank account or we would be handed an envelope of cash. It was not uncommon to walk into the bank with $4000 for deposit.
This made it extremely easy to control our spending. Once a week, I would withdraw enough cash for the week. When we ate out, went shopping, or took a taxi we would pay cash. If we wanted to know if we could afford something, we could look in the wallet to see if there would be enough money. I also noted spending in a simple spreadsheet, to keep track of where the money went. And, because everyone carried cash in the same way, we weren’t concerned about safety. Because of our experience controlling our spending, we developed good habits regarding what we would and wouldn’t spend money on. We also developed a sense of where our money was going and how long it would last.
Now, in Canada again, we use credit for almost all purchases and debit on rare occasions. We almost never use cash. My six year old and three year old sons have very little concept of money. Whenever they get a little money, they want to immediately take it to 7-Eleven and buy candy. I take them, and help them count out the candies so they can get an idea of the value of their different coins. When they get “five bucks”, they get extremely excited and want to buy “one hundred candies!” It’s fun and it’s a good start, but it will take time for them to scale their understanding to larger things. When we explain that we aren’t going to buy something large because it’s expensive and we aren’t going to spend our money on that, they say: “Just go to work, Dad, make more money and put it on the credit card. Then we can buy it!”
I plan to start the kids with a small cash allowance. We’ll help them understand the value of money, and the choices that come with spending it. From there, we’ll teach them about saving some for the future. We have the hope that by starting out using all cash, they can also develop good cash management habits before they get the inevitable credit cards.
So how do you teach your kids about money? Do you use an allowance for them or even yourself?
Posted by Canadian Dream on August 19, 2010
Depending on how closely you follow investment news you might have heard that Manitoba Telecom Services (MBT) cut it’s dividend from $0.65 down to $0.425 per quarter (or 35% cut). My wife owns that stock and as you might has guessed my initial reaction: S*%$!
At first I thought we only lost a little bit of income, until I realized I was looking only at a quarter not the year. Overall we lost $180 in dividend income and of course the share priced tanked as well. So you might think I’m still a little pissed off by this, but I’m not. Why?
Well I did a little math to realize even with the cut back wasn’t really that bad given my wife picked it up at a decent price. So even with the lower dividend her original investment is still yielding about 5%, which is acceptable to me. Both our portfolios carry a few high yield, but risky stocks so I fully expect a couple of them to cut back over the years. We are indexed for the majority of our investments so when this happens we don’t panic as these stocks are the high risk part of the portfolio.
When we go shopping for a stock I typically have a range of yields that I try to stay within which is 4 to 9%. Yes that is high, but this is the high risk part of the portfolio. As we age I’m going to drop down the range and seek to reduce the risk in that section of the portfolio. But for now we have over ten years horizon and I accept we might get burned once in a while. As long as after the reduction we are still within that range I’m ok with the reduction.
To ensure diversity we try to arrange it so no one stock provides more than $500/year in dividends or distributions. Thus limiting the damage a single stock can do to our investment income as MBT did. In the long term we are going to try and hold more than one company in a given sector and try to keep to sectors that typically see monthly billing to their customers like: banking (your mortgage), utility (power bill), or oil & gas (natural gas and gas for your car bills).
So that’s how we have setup some of our investments. Is it perfect? No! But it does function rather well over all for us. So have you been burned on a distribution or dividend cut? If so, did you keep it or sell it?
Posted by Canadian Dream on August 18, 2010
I typically don’t bother with a book review for career/small business books but I had to make an except for The Anti 9 to 5 Guide: Practical Career Advice for Women Who Think Outside the Cube by Michelle Goodman. First off, yes the book is directed at women, but 95% of the advice can apply to anyone who ever thought “There has to be more to life than just this job.” Also Michelle makes the book funny, but still manages to pack the book full practical advise about dropping down to part time, starting a sideline business or planning a full blown career change. Beyond that she also give some good advice on working in the non-profit sector and how to swing travel and work.
Michelle’s story is a good example of what not to do. She started freelance writing with no plan, no contacts and no savings. With a lot of mistakes she has eventually made it work, yet to spare us the same pain she offers lots of practical advice on what do do when you want a life outside of the standard cubical job. Given that I’m running a side business now and just got a more flexible work arrangement I’ve found lots of useful tips to help make things run smoother like batch your admin tasks (filing and inputting expenses) weekly to avoid having them build up. Or updating your resume frequently if you do a lot of writing work.
Yet perhaps the most useful section I found in the book was: how do you figure out what you love to do? Here she offers some advise on feeling out new career options without leaving your job. Her suggestions include doing information interviews with people in the field, take classes on the field, do some research with books or even volunteer in it. Explore you options to find out what going to actually make you excited about work.
Michelle also provides some solid advice to anyone on writing or any self employment: there will be crappy days. Like it or not it happens in all jobs, so suck it up and keep moving forward. Just because you are the boss doesn’t mean you get to slack off all the time, so set up some regular working time and get it done.
So if you find this one at your library and you are thinking about shifting jobs, going part-time or even looking at a side business you will want to give this book a read. You will very likely laugh out loud a few times and learn a thing or two while reading it.
