Posted by Tim Stobbs on March 6, 2013
There was a comment left on my one post that had a line that has been running around in my head.
I visit weekly and find it hard to swallow this post because I’m not sure you realize how lucky you and your family are.
Well yes, I’ve had some luck in my life. I won’t deny that, but at the same time I’ve realized something a while ago that perhaps some people don’t entirely get: it isn’t all luck when you are playing with a stacked deck.
Pardon!?!? Sorry, but it is true.
The fact of the matter is I know I’m playing with a stacked deck and have been doing that for a long while since I came to an important realization: the world is built for rich people and business. While people have this odd delusion that their governments are in control, the fact of the matter is they really are not entirely. Business has ( and has had) a disproportionate influence on our governments for a long time…thus the legal system, the tax system and frankly most systems are geared toward their benefit and not the average person.
So by paying off all my debt and investing those systems are slowly fighting me less and now more often working for me. For example, but investing more I get dividends which get taxed at a fraction of the rate of my normal income. While this is good for me as an investor, the real beneficiary of this is the businesses in Canada. On a personal basis the government estimates in 2012, they lost $4.24B of tax income, meanwhile on the corporate side they avoid $6.295 billion in taxes according to the Federal government’s table of tax expenditures. This is just one little example.
If you really want to get to the heart of the matter just look at the federal governments 2012 budget estimates, which show they expect total income tax revenues to be $163.3 billion (from Table 6.5). Guess how much of that is paid by corporate income tax…perhaps half? Not even close, they pay about $32.4 billion or UNDER 20%. This isn’t surprising since businesses get to deduct their expenses prior to calculating their tax and a slew of other options. Personal income tax meanwhile is expected to be….drum roll please…$125.4 billion or 77%. Yep, not to mention individuals are paying the lion’s share of the GST which brings in another $30.9 billion on top of our income tax.
So yes, the deck is stacked, but rather than getting upset I decided to join the winning side and make the systems work for me, while I’m not rich, I can invest more like them and get more income from our small businesses. Also by avoiding debt I now get people to pay me to borrow my money rather than the other way around. It’s not perfect, but it’s better than depending solely on luck.
How about you? Has it been more luck or playing with a stacked deck in your life?
Posted by Tim Stobbs on December 7, 2012
“Oh, it’s perfect! You should really get even if it costs a bit extra.”
“Dear Santa: I want a beach ball, IPAD, …”
“It’s just for stocking stuffers.” “That will be $278.43″
I’ve heard or read all of the above statements in the last week or so and what concerned me the most was the idea that because its Christmas it is ok to spend a lot of money and go into debt. News flash: Canadians are drowning in personal debt, so adding more debt for ANY reason for MOST people is a BAD idea. It’s sort of like drinking too much at the office Christmas party, it might seem fun at the time, but the hangover and fall out from it can be painful.
Ok, I know I’m odd that we save starting in January every year for the holiday season, so I pay off my entire credit card balance on January 1st with cash (dear savings account: I love you on that day!). Yet what do you do when you don’t have any cash saved? Well rather than waiting until next year to start behaving I’m going to make the following suggestions to get started right now.
- Rein In Expectations – Sit the family down and have a talk that you are fixing this crappy cycle of over spending and paying it off after the fact. That will mean keeping this holiday a bit lower key this year. Less spending now means you can get off this ride as soon as possible. Think about actually NOT dreading opening your credit card bill in January and how wonderful that could feel. That is a good present for yourself.
- Don’t Buy EVERYONE a gift – The mailman, your hairdresser, your children’s teacher….DO NOT NEED GIFTS. Unless you are really good friends with them skip it. Slash your list down to close friends and family.
- Start Gift Exchanges – Talk with your extended family about reducing gifts for the adults and focus on the kids….heck if the kids are getting older you might want to start a gift exchange for them. It’s better to buy one or two nicer gifts and skip the other six, not to mention better on your wallet.
- Consider Going Digital for Christmas Cards – Unless you have a real need to send out cards consider trying using Facebook to post your Christmas Letter and scan in the pictures there. Or try one of the many digit card options out there…heck some of best cards I’ve gotten in the last few years were online.
- Go Potluck for Parties – When attending or hosting a party consider doing a little potluck to keep your costs reasonable…not to mention you often getting much more interesting food that way. In my family the person the hosts Christmas day supper does the turkey, stuffing and gravy…everything else is brought over by the other families (way less stress to prepare the big meal).
Then for the most adventuresome consider proposing the more radical approach…no gifts at all. Or limit it to handmade gifts…pick what ever works for your family. I know I’ve kept our Christmas budget the same for five years and never once went over…the secret? Tracking the spending, so if I go over on one gift, I have to go under on the next one. It works for us.
Recall the Christmas is about being generous (but that doesn’t have to include your wallet). Give others what they really want: your time. Consider making an effort to visit with family and friends, host a sledding part, do a board game night…make the season a fun time without the stress. Trust me they will love it.
So how do you avoid the debt hangover? Or what do your family or friends do to make the holidays fun?
Posted by Tim Stobbs on November 16, 2012
In my next article I wrote for Moneyville (which I don’t believe has been published yet), I comment on the fact that right after you pay off the mortgage there is no immediate impact to your life. The reality is you still need to go to work the next day and nothing changes until you start seeing your paycheque without those big payments coming out. Well that train has finally hit.
Yesterday was my first cheque without the mortgage and it finally has hit how very little of that money I need to pay my bills for the next month. Actually it works out that I can get by with just one of my two cheques every month to pay the bills. Yes that means we can now save over 50% of our take home pay. Life is good!
So I’ve already submitted some paperwork to do an extra lump sum contribution to my pension plan which should consume nearly all of my next paycheque. You might be wondering why I would bother with making an extra contribution to a plan where I can’t touch the money until I turn 50. Well I found out that really isn’t entirely true. While about 2/3 of the money is truly locked in, the remaining 1/3 is considered voluntary contributions and I can transfer those to an RRSP when I leave the company without the age restriction. Also my plan is so bloody big the fees with it come out to be comparable to ETF fees (aka dirt cheap).
Overall I’m off to work on a Friday with a big smile on my face. Have you ever had that issue with delayed reaction to a big change in your life? How long did it take to sink in for you?
