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Friday, November 27, 2015

Stop Blaming the Rich

Posted by Tim Stobbs on September 22, 2015

Okay, are you sick of this never ending federal election campaign in Canada?  Goodness knows I am already.  Yet perhaps the single thing that is pissing me off the most during this campaign is the idea of ‘let’s blame the rich’ theme. Or really more actually I’m not terribly impressed that a few of the proposals out there are to roll back the latest TFSA limit increase since ‘only the rich can use them’.

I okay with general idea of fairness.  After all no one likes to be screwed over in life and it does make entirely sense to me to have progress tax brackets that increase as income goes up.  After all if I am earning more I can easily pay a bit more to help out those that don’t earn much.  I don’t consider that unfair, but rather practical.

Yet rolling back the TFSA limit increase because only the rich can use is a damn crappy reason.  Um, news flash people…those how have built business, got high paying jobs and actually save some money to get rich…the system wasn’t fair to begin with.

For example, RRSP contributions are based on last years income up to 18% (to a given maximum), so the reality is that is actually worse for lower income people.  Since the more you earn beyond perhaps $40,000 a year it gets easier to save that amount.  Meanwhile the TFSA limit is equally to everyone over 18.  Even when it means the lower income people can potentially save a MUCH higher percentage of their income as compared to a person making $100,000/year.  Case in point the $10,000 limit of $40,000 is 25% of their income, which is WAY higher than the RRSP percentage.  Yet for the $100,000 income person the $10,000 TFSA limit is only 10%.

Then when we get to investment gains those that save also get some extra breaks, capital gains are only taxed at half of your marginal tax rate and Canadian dividends also benefit from a significant tax break.  The dividends are such a good break that if you earn less than $44,000/year they actually end up being tax free.

The system is built around encouraging people to save and invest, so those that do are rewarded by paying less tax.  Fairly simple right?  Yet it amazes me that people want to blame the rich.  Did you ever consider the fact the ‘rich’ may have started off just like you but rather than spend their money they decided to save it instead.  They learned a bit about investing and made ever more money.  It was often a hard long road, but after a number of years and the miracle of compound interest they are doing well.

Compared to those at my age and savings I’m likely considered rich or top 20% at least.  Yet the money just didn’t appear in my accounts in a puff of smoke…I got a degree and then a good job.  Then I saved for a decade straight likely spending less money than you did last year…that is why I have a net worth of over $750,000.  So go ahead and take away the TFSA limit increase for all I care…just stop blaming me for your problems and perhaps start to save something yourself.

Putting On a Garage Sale

Posted by Tim Stobbs on July 12, 2015

Well after many years of ignoring the idea my wife finally convinced me to try running a garage sale.  Normally I’ve won this argument over the years with the simple statement of: we don’t have enough stuff to sell.  Yet because of my recent purging activities I dug my own hole on this one and finally agreed to put on a garage sale.  I really just wanted to sell a handful of things and toss the rest but my wife have having issues with tossing that much stuff so I gave in only after extracting the promise we would donate as much as possible for the leftovers but after that any left would be tossed.

Overall it was equal to a three solid days work of preparation the week before for the sale that ran over Friday evening and Saturday during the day.    It took that long just to set up the garage space, sort and price everything and put it all out on display.  We kept our pricing generally low in order to encourage sales (we were doing this more to get rid of things than make money) and we kept everything at easy to calculate amounts like $0.25, $0.50 and $1. That also included time to put together an ad and post it several different websites (for free of course).  Then I picked up some change from the bank for $220 in fives and change (which by the way was a bit too much, but you do use a lot more change than you would guess).

Our hours for the sale were Friday 3 to 7pm and were supposed to be 10 am to 6pm on Saturday.  Yet in reality we never made it that long.  We started to realize that the customer traffic on Saturday was so low that it won’t be worth keeping the sale open the full hours.  So about 2:30pm after less than 10 customers we started to clean up the garage and toss a few items in the trash and then put together a pile of stuff that we would try to donate.  Only three higher priced items were left that we will give a try to selling online.

In terms of sales honestly it wasn’t a good use of time.  We sold $253.50 in the first day and just $25.25 in the second for a total of $278.75.  A good lot of the sales came from a handful of items the two biggest ones went for $40 each and included an outdoor play structure and a crib.  Those two items sold in the first 30 minutes of the sale and I wasn’t even remotely surprised since I was answering email questions about those via our ads prior to the sale even starting.  So I learned that apparently having a few higher demand items is really helpful to drive some traffic into your sale.

Yet in terms of stuff, I have to admit that for getting rid of things it is a fairly effective way to do it especially if you want to see the get reused rather than just tossed into the trash. I would estimate at least 2/3 of our stuff sold and lots of the big things.  I understand my wife’s point of view on this one as the boys did a major purge on their toys so we have over half the items in the sale were just toys.  Those did very well for sales, one boy’s mom  bought a huge amount of our old Thomas trains.  I was also amazed about some of the things that sold.  I put out two old garage cans that I had from our previous house that I don’t use and both sold even when every person in this city has access to a large bid for their trash provided by the city.

To provide motivation for all this work we decide in advance that all the cash from the sale was going to be spending cash for our vacation and because the boys were helping haul stuff up from the basement for the sale and sort all their toys we promised them some of that money to spend during our vacation.

In the end, I’m glad it is over and I personally never want to do it again, yet my wife pointed out that will be at least one more sale…when she closes down her daycare for good when she retires we will have a huge sale prior to downsizing the house.  I suppose I could put up with that if it means she joins me in early retirement.

So do you ever put on a garage sale?  Are they worth the effort?  Or do you just shop at them?

Musings on Power

Posted by Tim Stobbs on May 20, 2015

I was watching the first Harry Potter film the other day with my kids and I was struck by a statement made towards the end of the movie when Harry is confronted by Professor Quirrell “There is no good and evil, there is only power and those too weak to see it.”

The first time I read that phrase it stuck in my head a bit, but at the time I considered it typical bad guy drivel to justify what they have done.  Now that I’m a bit older and cynical I have to admit…he is actually very accurate in that phrase.  Pardon?!?

Ok, bear with me for a minute or two.  You see the use of any power (political, economic, hierarchy…you get the idea) is only limited by two main factors: the morality of the user of said power and the potential consequences of the action.

The first limit of morality is basically only a construct in the mind of the user which may or may not align with your particular version of morality.  So this is why you have some managers who inspire their staff and try to improve the outcomes of the people under them and other managers use their power to inflict suffering on others.  In both cases, the user of the power feels justified in their actions by virtue of the morality that only exists in their own head.  As such, there really isn’t any universal good or evil but rather instead only your particular perception of those concepts.

For example, would you accept the idea that killing another human is a evil act?  Ok, let’s say you agree.  So if you then killed someone while defending your wife and children from an attacker, is that evil?  I would guess you would think not, but again consider that initial sentence…if killing someone is evil does the context of the act matter to make the act good?

Now consider if we can muck up something that should be straightforward as murder, just image how much grey area exists in the rest of the world.  For example, is any of the following behaviours good or evil?

  • Taking a second serving of dessert.
  • Picking up money off the street.
  • Feeding a homeless person.

The answer in each case depends on the context of the situation and your personal morality.  I can easily imagine in every case where the action could be evil or good.  For example, feeding a homeless person might be considered an easy good action, but what if you are enabling the person to continue their drug habit and beat their spouse and children.  Do you still feed them?

In the end, good and evil are simplistic constructs that only exist in our heads.  They don’t have any existence in reality other than what we imagine them to be.  So the first part of that original quote by Professor Quirrell is correct: there is no good or evil.

Now we move on to second limit on power: the potential consequence of the action.  Since good and evil only exists in our heads we decided to try to direct other’s morality by writing it down into law or in some cases we use social acceptance to drive certain behaviours.  Yet there is a flaw to this line of thinking…after all, it is nearly impossible to find someone who at some point has broken a law?

For example, have you ever in your life jay walked?  Odds are yes, and yes it is illegal, but you still did it.  Why?  Because you likely at the time you thought the potential consequence of the action was so minor there was limited risk of getting caught.  Or when was the last time you went just 1 km/hour over the speed limit?  Yesterday, last week by accident…regardless you broke the law, but just didn’t care about the consequence or didn’t think you would get caught.

Therefore the risk of getting caught and punishment are drivers in your mind on your actions and a limit to any power you wield.  Yet the irony of this is in fact the odds of getting caught on most things are actually fairly damn low.  There are not cops on every street corner handing out tickets to jay walkers, they only have so many resources and thus focus on other things first.  The same exists just about everywhere…so if you don’t fear the consequence of your action you don’t have a limit to that power.

For example, at your job they get to direct you to do lots of things (when to show up, when to leave, how long to work on something…etc), but they have very few options of actual consequence to motivate your actions.  They can only really:

  • Assign you undesirable tasks
  • Offer disapproval for an action
  • Alter your rate of compensation
  • Fire you

That’s it.  So when you cease to be fear those consequences the power they can wield over you becomes almost non-existent.

So now that you are free of your fear of the consequence of your action (or at least of getting caught in many cases) and you are free for your notion of good and evil since it only exists in your head in the first place…you start to agree that there really is: only power and those to weak to see it.

In effect this is what having enough retirement savings grants you: economic power.  At which point your application of that power is only limited by your imagination (what is possible and what is good/evil to you) and the consequence of the action.  If you no longer need your job, you can tell them to go screw themselves.  Or if you want to live somewhere else you can move.

Yet there is a downside to this power.  Once you realize the limits of it are largely self imposed, you options to wield it become nearly limitless and your choices in life become infinite.  But a large number of choices makes it harder to pick an action or result, so using that power becomes actually fairly damn hard to do.  It takes considerable effort to think about a larger number of options and narrow them down to a more manageable scope.  Often this is where your fear of change kicks in and people get stuck in the one more year of work syndrome…they are in effect trying to delay change to avoid making that final decision to quit.

So what do you think about power?  What changes have you noticed in yourself as your economic power has grown?