Golden Girl Finance | The Financial Voice for Women
Launched in 2008, Golden Girl Finance is Canada’s media leader in financial content for women. We create original and unbiased financial content to educate and inspire Canadian women about investing, personal finance, retirement, philanthropy, and the psychology of money. Follow this site and get content on how to manage finances and money.
It may not seem like much – maybe you’re paying a $15 monthly bank fee, $50 for a subscription of boxed beauty samples, but add your cellphone, internet and Netflix costs and, over the year, these relatively small bills take a significant chunk of your money.
If a service isn’t delivering the value it once did, or you’re simply no longer using it, perhaps it’s time to look into cutting it out? Even eliminating small fees can improve your financial picture.
Know why you want to cut the expense: Change is hard for most people, says Stacy Yanchuk Oleksy, director of education and community awareness with the Credit Counselling Society, so, before you start cancelling services or calling companies about your bills, make sure you’re clear on why you’re taking these steps. This will make the plan easier to implement and stick to.
Examine your cashflow: Unless you’ve tracked your spending, it will be difficult to know which fees can be reduced or eliminated.
“The act of writing it down actually clarifies for consumers very, very quickly where their money’s going. Maybe the issue isn’t actually cable, maybe it’s eating out,” says Yanchuk Oleksy, who recommends tracking spending for at least a month or two before making any changes.
Zero in on something significant: Once you’re familiar with your cashflow, it’s time to analyze the information, to see if there are overlaps or services you don’t use. Matthew Siwiec with The Friendly Financial Coach in Toronto suggests focusing your energy on the high-impact areas first. The savings you’ll see here will not only help you maximize the return for your efforts, but these expenses are also usually hardest for people to cut.
“They can be very difficult, especially if it leads to a lifestyle change,” he says. Some of the more common ‘high-impact’ areas would be groceries and eating out, or transportation such as vehicle ownership.
Meanwhile, cable and phone plans tend to be fairly expensive, says Yanchuk Oleksy. According to the CRTC, Canadians pay more than $200 per month on average for their communications services, including cellphones, internet and cable.
Cutting these fees usually takes a phone call, she says. Be prepared to say on-hold and be assertive about strategies to reduce your bill or eliminate services that overlap.
“You never get, if you don’t ask, so I’m always a big believer in asking for what you want and then, there’s probably room for negotiation,” says Yanchuk Oleksy.
Tackle the smaller fees: Once you’ve taken steps to slash a larger bill, Siwiec says, it’s time to look at some of the smaller fees. “Smaller expenses have a tendency to kind of linger in the background and some people don’t even realize that they’re paying for them, especially if it’s an automatic payment that comes out,” he says.
One of the more common small expenses are subscription fees – everything from Netflix to online games or other apps. “It’s very easy for these to get out of control,” says Siwiec. Fortunately, once they’re identified, cancelling or changing these can be just a ‘click’ away. Monthly bank fees are another smaller expense that can add up over the course of a year, says Siwiec, although, he cautions, that changing accounts or providers can be complicated.
Take your time: Reducing expenses can be time-consuming and overwhelming if you do it all at once. Yanchuk Oleksy suggests staging the process. “Maybe my goal is for the first quarter of the year is to track my expenses for one to two months, and by month three I’m doing an analysis,” she says. By month four, you’ll hopefully see some savings!
In the coming weeks, we’ll be busy collecting receipts, following up on t-slips that have been misplaced and wishing that we could have done a better job of our tax planning. Unfortunately, by the time we’re in the middle of tax reporting, it may be too late to do much tax planning.
If there’s one lesson, it’s: “Know your tax bracket limit and stay within it”.
Every dollar that falls into the next higher tax bracket is subject to higher taxation. Tax brackets shift with inflation and in response to federal budgets. You can easily find the 2019 tax tables by visiting https://www.taxtips.ca/marginaltaxrates.htm and selecting the appropriate table for your province of residency. If you find your taxable income approaching the threshold to the next higher tax bracket, try some of these strategies:
1. Have your employer deposit bonuses, commission income and any other income that you don’t receive regularly into your RRSP (within RRSP contribution limits, of course). Ideally, your household budget should not bank on these unpredictable income streams so depositing them into your RRSP should not affect your standard of living. Furthermore, this strategy will allow you to deposit the full, pre-tax, amount to your RRSP resulting in a contribution that could up as much as 30% higher than if you had received the funds, and then made the contribution yourself.
2. Divert any non-registered funds to your TFSA or RRSP. Non-registered portfolios produce taxable investment income each year including interest, dividends and capital gains. The income can easily land you in a higher tax bracket than your employment earnings alone would. Using tax-exposed money to satisfy your TFSA or RRSP contributions means that you’re optimizing the annual taxation on your investment income.
**A word of caution: transferring assets between these accounts will be considered a “deemed disposition”. If any of those investments that have increased in value, this could trigger capital gains taxes.
To optimize the strategy, use depreciated assets for TFSA contributions and use appreciated assets for RRSP contributions. Depreciated assets should be sold prior to contributing the proceeds to your TFSA in order to crystalize the capital loss. Appreciated assets can be transferred in kind (i.e. in shares form or mutual funds units) and any capital gain crystalized will be covered by the deduction you receive for making the contribution.
3. Be strategic about claiming your RRSP contributions. The same way that taxable income will be subject to more tax if it falls into a higher tax bracket, an RRSP contribution will yield a higher refund if it is applied against income that is situated in a higher tax bracket.
Here’s an example. If you live in British Columbia and earn $120,000 per year and want to make a $10,000 RRSP contribution, the relevant tax brackets are marked below. (source: www.taxtips.ca). If you claim the full $10,000 RRSP deduction in one year, your refund would be approximately $3,985. However, claiming only enough to drop your taxable income to the 38.29% bracket ($6,494) and carrying the balance forward ($3,506) to be claimed in the 40.70% bracket again in the following year will add $315 to your refund.
4. Be strategic about harvesting your wealth. For those who are retired and using their wealth to supplement their federal and workplace pensions, the same principal can be applied. If you need to supplement your CPP, OAS, workplace pensions and minimum RRIF payments to cover your expenses, consider drawing the money from a combination of TFSAs and non-registered accounts. The withdrawals from TFSAs are non-taxable and withdrawals from non-registered accounts will be taxable to varying degrees; but are likely to be much more lenient than withdrawing additional sums from your RRIF. Furthermore, if your taxable income is likely to exceed $77,580 after implementing retirement income splitting, taking funds from your TFSA and non-registered accounts may also help you to preserve your OAS from being clawed back.
They say that there are only two certainties in life; death and taxes. I say, at least one of them can be controlled.
We all want to think better. Whether your motivation is to be sharper at work or ward off age-related cognitive decline, we’re asked two of Canada’s wellness experts to recommend lifestyle changes proven to boost our brain power.
Heart & Mind Matters
Healthy blood flow helps the brain function better. When the blood vessels in your brain don’t get the oxygen they need, thinking or memory problems can occur. So, to help your brain, start by helping your heart and circulation. According to the Heart and Stroke Foundation, there are five levers we can pull to make this happen, and they’re the usual suspects:
Maintain a healthy weight
Stop smoking (or don’t start!)
But what does “eating well” actually mean when we talk about brain health? According to Toronto-based naturopath Dr. Kristin Heins, the key is to focus on foods that decrease inflammation and act as antioxidants to optimize brain function.
Here are Dr. Heins’ “Brain Power Five”:
Fatty fish like salmon, trout and sardines Over half our brain is essentially fat, so diets higher in healthy fats are ideal. Fatty fish is especially high in omega 3 fatty acids and DHA—proven brain fuel which are associated with improved cognition.
Turmeric This powerful antioxidant spice contains the active compound curcumin and acts as an anti-inflammatory. Studies show that turmeric has the ability to cross the blood-brain-barrier.
Blueberries/ dark coloured berries These berries are powerful antioxidants and also low in sugar.
Pumpkin seeds Nuts and seeds in general nourish the brain but pumpkin seeds, in particular, are high in zinc and magnesium both essential for optimal nerve function.
Dark chocolate Yeah! Dark cocoa contains less sugar than milk chocolate and also has omega 3 fatty acids and DHA, along with small amounts of caffeine which boosts cognition. Find your optimal of these stimulants in order to avoid getting the jitters than can interfere with concentration and cause anxiety.
Crosswords and Sudoko are fun pastimes, but on their own they won’t improve your memory and cognition. “Essentially, you are doing the same exercise over and over and working the same part of the brain,” says Annette Vezina, co-manager of wellness at the Montreal Cummings Centre. Vezina, who runs brain training and fitness programs for seniors, emphasizes the importance of varied exercises for brain stimulation.
To change up your crossword habit, Vezina recommends these books for ideas:
The Complete Brain Workout – Marcel Danesi, PhD
Brainpower Game Plan – Cynthia R. Green, PhD
Beef Up your Brain – Michel Noir, PhD & Bernard Croisile, MD
Brain Bustine, Mind Twisting, IQ Crushing Puzzles – Frank Coussement & Peter de Schepper
What about all the online games, apps and training tools like Luminosity that claim to make us smarter and boost our memory? Do they work? According to 69 of the world’s leading cognitive psychologists and neuroscientists and the Stanford Centre for Longevity, claims promoting brain boosting are frequently exaggerated and, at times, misleading. So far, there is no compelling evidence that brain games offer a scientifically proven way to reduce or reverse cognitive decline.
Please Don’t Stop the Music
Albert Einstein rarely went anywhere without his violin. He once said, “If I were not a physicist, I would probably be a musician. I often think in music. I live my daydreams in music. I see my life in terms of music.”
Music may have been a sideline for Einstein, but recent research from Simon Landry and Francois Champoux at the University of Montreal, revealed that musical training helps you respond better to multi-sensory stimuli and integrate inputs from various senses. As a result, musicians have faster reaction times. So, pick up that violin, guitar or flute and make some music!
Brain Spa = Bedtime
There’s nothing better than a good night’s sleep. Not only do you feel great but sleeping repairs your brain. A neuroscience research team from Brown University found that brainwaves consolidate learning while you sleep. Essentially, you get smarter as you sleep, so treat your brain to naps and regular, uninterrupted sleep to help it repair, recover, and regenerate its awesome power.
If you’re from my demographic cohort, you’ll either chuckle or be offended by the fembots featured in the 1997 film, Austin Powers: International Man of Mystery. Their lethal weapons were no match against Austin Powers’ charms.
Less amusing and more dangerous than Hollywood femme fatales, is how robots are impacting women’s careers. According to new research published by the International Monetary Fund (IMF) last October, 180 million female-dominated jobs are at risk of being displaced by automation in the next two decades. (11% of the female workforce, versus 9% of the male workforce.)
Automation will dramatically alter job opportunities for both men and women however it’s women who are at higher risk of losing their jobs to automation than their male counterparts for several reasons.
First, relative to men in the same occupation, women continue to perform more routine tasks than men. These are the roles most likely to be replaced by automation. Less well-educated, older female workers and those in lower-skill clerical, service and sales positions are at most at risk.
Second, women remain underrepresented in sectors of the economy that are growing, including the STEM (Science, Technology, Engineering and Mathematics) and ICT fields (Information, Communications Technology). So, not only are there fewer women in these vital sectors of our economy, but those employed are four times more likely to be in a clerical or service role rather than in the value-added positions where human judgment is required.
Third, gender imbalances continue to exist in the educational system, with fewer than 20% of computer-science graduates in OECD countries being women.
Fortunately, women are less at risk in certain sectors including healthcare and social services where there are smaller gender gaps in managerial and professional positions and where women are performing more of the non-routine work than men, such as nursing. With demographics pushing demand for these services in the decades to come, they continue to be areas of opportunity for women, provided they continue to keep pace with the technology and educational requirements needed in these evolving roles.
The IMF research recommended a number of policy initiatives designed to ensure that women are the beneficiaries of technological change, rather than the victims of automation. These include bringing more women into the workforce, particularly in developing countries, with policies and infrastructure enabling them to participate.
Training and higher education are required to ensure that both men and women have the necessary skills to transition and succeed in the new economy. The study highlighted that the risk of automation is less than 1% for female workers with a bachelor’s degree versus 50% among those with less education.
Reaching out to youth early is also critically important in order to present alternative career opportunities to young women in high school when educational choices can still be made easily. Further, lifelong learning will also be essential for all members of the workforce, as both women and men will need to continually re-tool and upgrade their knowledge and skill set in our rapidly changing economy. Employers must ensure that women are represented equally in re-training programs, which has not been the case in the past, but is critically important given the higher risk of job loss facing women today.
Women around the world have big ideas that range from writing their first novel to building a global company to patenting their Big Idea so that others won’t steal it! Here are the three dominant categories:
Carpe Diem: Ideas that demand immediate action to capitalize on opportunities such as a current trend or a gap in the marketplace.
Ronna Sieh, Founder of The Coding School in Manila, Philippines
“A World Economic Forum study showed that when today’s primary school students graduate from college, 65% of today’s jobs will no longer exist. We will need to overhaul the Philippine education system to address this fast-changing world. This creates an opportunity. I am going to scale an educational platform that teaches Filipinos to code. This will prepare each student for the new future.”
Self-Actualization: Ideas that are about realizing or fulfilling one’s talents and potential.
Maria Javiera Contreras Abarca, Lead Partner, Transaction Advisory Services at Ernst Young, Santiago, Chile
“In today’s world, tax advisors need to be ever more sophisticated. They can’t just provide tax advice. As an advisor you need to completely understand the big picture – the language (finance/tech/robotics, etc.). My latest big idea was to invest in myself and do my MBA at night. My Mom sees me running all day with three kids, a husband, and a big job and about this decision she said to me, “Are you sure?” It has taken me a while to realize that my energy level is a differentiator. I never really get tired mentally and I always have a hunger to discuss ideas!”
The Greater Good: Ideas that will benefit society by promoting health, children’s welfare, gender equality, or other forms of social justice.
Funda Akpinor, Founder of Mutlu Panda Montessori Kindergarten in Istanbul, Turkey
“After an amazing career in the world of finance I became a mother at 41 and, over time, I noticed that my child was having trouble socializing. I did a lot of research on early child education and then I decided to start a “Toddler Montessori Classroom.” My daughter became a student and just one year later her therapists couldn’t believe she was the same child. I wanted to share these tools with more people, so I partnered with the ergotherapist that I met and together we have developed an app for training parents in child development.”
How long did it take them to get started?
Once they have their Big Idea, two thirds get started on it right away.
Sieh from Manila: “When I decide to spend time on something, it has to be something that will move the needle and that will create jobs. This dream is beyond myself and I can’t stop when there is fire in my belly.”
Where did they come up with their idea?
Most come up with their Big Ideas while they are busy at their ‘official job’ or while reading.
Abarca from Santiago: “My mother would hand me various clippings from the career section of the newspaper and one day I saw one that had the general description of “multinational clients.” I immediately thought, “I want that.”
What was the dollar amount they personally invested?
Over 25% of the women surveyed spent $100,000 or more on their Big Idea.
Akpinor from Istanbul: “I have invested a significant portion of what I have saved throughout my career on this Montessori Kindergarten idea. My husband kept asking me, “Are you sure you want to do this?” Yes, it is expensive, but I am sure I want to do this and now I feel that I have a social responsibility to do this and to do it right. This will be a game-changer in Turkey!”
What’s the big idea?
Today we have a powerful combination of digital tools and motivated women with a high tolerance for risk. It is incredibly exciting to hear about the speedy execution of their Big Ideas. Whether they are driven by an opportunity in the market, self-actualization, or working for the greater good…smart women are taking action.
The Chinese New Year started on February 5th, marking the official Year of the Pig. After the economic zaniness of the previous Year of the Dog, especially during December, what can we expect from this farm animal? Bottom line: Pigs are positive for financial matters.
Every year, David Rosenberg, chief economist at GluskinSheff+ Associates presents his prognostications for the year ahead. This year, his talk at Rotman School of Management in Toronto was aptly titled: The Year of the Pig (Lipstick Won’t Help). Here are some highlights:
Inflection Point? Old Rules Meet the New Rules
As investors, it’s easy to get wrapped up in short-term events and miss out on the bigger picture. Yet, simply looking at the performance of the S&P 500 over the past two years shows us that something is afoot.
In 2017, (Year of the Rooster), the S&P 500 returned +19.4%. A very robust number courtesy of the “Old Paradigm”, according to Rosenberg. Last year (Year of the Dog), was much less kind to investors, especially near the end with a total return on the S&P 500 of -6.2%. This could be a harbinger of the New Paradigm: lower returns, more volatility.
Pay More, Get Less
Looking back from 1949 to 2018, the average price/earnings ratio (p/e) was 16.7. (That means investors were willing to pay $16.7 for each dollar of corporate earnings or profits.) During the current bull market from 2009-2018, the average p/e is 16.6. So very close to the long-term average.
However, here’s where things get interesting. When we examine the average nominal growth in GDP from 1949-2018, it’s 7.1 (before inflation) vs. only 3.8 during the current bull market. That’s a big gap in economic output. Does this mean that investors are willing to pay more to get less? Food for thought.
There are a number of factors contributing to slower growth. Sanctions and tariffs are usually a lose-lose proposition because they pinch profits. Corporate balance sheets are not in great shape. Any meaningful uptick in interest rates will increase the probability of loan defaults. More than half of corporate debt is rated BBB, the last tranche of investment grade before junk status. Most companies will do whatever they can to avoid falling into junk status because this results in a higher cost of capital for them. Investors will want a better return for taking on riskier debt. One way that companies stay out of the dog house is by spending less to shore up their wobbly balance sheets. Lower spending leads to slower growth, less hiring, and lower returns.
Okay, So What Are the New Rules?
We’ve had a long bull market and most analysts agree that we’re in the last innings. The bull market can certainly continue for several more years—or end tomorrow. No one really knows. However, this is good time to recession-proof your investments.
Just like every bull market is different, so is every recession. Judging by the last recession, here is the median return of several assets who performed admirably, from 6 months prior to the recession up to 3 months after:
Dividend aristocrats (total return including dividends)
Government bonds (total return, interest and capital gains)
Investment Grade Bonds (interest and capital gains)
If the old rules were “risk-on”, the new ones are “risk-off”. According to Rosenberg, “boring is the new sexy”. Consider investing in stable companies with clean balance sheets, and where your long-term return will come mostly from dividends. Einstein considered compounding the “eighth wonder of the world”. (Just as an example, during the last financial crisis from 2007-2009, Wal-Mart returned 7% while the S&P 500 tanked -57%.)
Going forward, our returns may be more modest, so it’s wise to remember the Wall Street adage: “Bulls make money, bears make money, pigs get slaughtered.”
When we are obsessed with a person, an idea, or a thing we don’t make rational decisions. It’s human nature.
The role of the investment advisor is to be the voice of reason. Trust me, in volatile market conditions even seemingly normal people can be prone to panicking. They might want to spontaneously change strategies or even go to 100% cash. But what’s the most common impulse even when market conditions are not volatile? People fall in love with a stock (or sector) and invest a disproportionate amount of money in their beloved.
These are some of the typical rationales:
“I really understand the business.”
“The new CEO has the best reputation.”
“This company is changing the world!”
These may all be true but that isn’t necessarily relevant. The point is, anything can happen at any time to any company. As investors we need to either a) reign in our passion for the sake of maintaining a sensible portfolio, or b) be clear that putting all or most of our eggs in one basket is in fact making a decision to speculate, not invest.
The consequences of this kind of obsession can be dire. Here are three real-life sob stories of people that paid the price for being overly passionate about their stock picks:
A “widow-and-orphan” stock story
In 2000, I met with a senior executive of an infamous Canadian telecom company whose entire investment portfolio consisted of $10-million worth of stock options in his own firm. He knew that he should diversify at some point— but he had been worried about what the perception would be within his peer group if he exercised options and started selling stock. So, he continued to be tied to the stock price of one company for not only his paycheque and his career, but also his family’s financial future.
When the company’s stock price went to zero, his investment portfolio was 100% demolished.
Not as advertised
The CEO of an advertising company had $2 million invested all in one high-flying stock in 2002: an international conglomerate in his industry. He felt that he was sufficiently diversified because his own firm’s business dealings were local, and this company was a multinational.
It isn’t uncommon for experts to feel they have a better understanding of their industry than the general public. While that is undoubtedly the case, this knowledge doesn’t always predict or protect them from stock price movements. The problem of course is that if advertising revenues are down in general, all stocks in the same sector are likely to be vulnerable. (A falling tide lowers all boats.) When his stock holdings suffered a 50 percent drop on some bad news, he decided to lock in his million-dollar loss by selling, instead of creating a properly diversified portfolio in the first place.
All that glitters isn’t gold
This one is a glaring example of how emotions can interfere with logic. One of my older clients had invested wisely his entire life, but in 2014 he became depressed and he was disenchanted with world politics. On a whim, he cashed in his entire retirement account and used the proceeds to buy a single gold stock. He felt strongly that this was the best way to protect his wealth and put his affairs in order. Unfortunately, not only did gold have a bad year as an asset class, but his particular stock was the worst of the lot. His portfolio declined in value by 70 percent, and then—surprise— he, too, decided to go to cash. Only now it was much, much less than the amount he started with.
My advice? No matter how compelling the idea, it’s always a bad idea to fall in love with a stock!
Rita Silvan, editor-in-chief of Golden Girl Finance talks to Melissa Leong, resident money expert on The Social (CTV) and author of Happy Go Money, about how to invest in happiness.
GGF: Melissa, I really enjoyed reading your book. It’s not often that finance books are so witty and funny, as well as useful.
GGF: We all know that our early childhood experiences influence our money attitudes later in life. How did your parents influence you?
ML: My parents were immigrants. They came to Canada with a mentality to sacrifice and work hard for every dollar. My Mom internalized that in a way that translated into extreme frugality. From her, I learned that it was better to sacrifice happiness to save money. That’s the opposite of my husband’s philosophy, by the way.
My father is not a risk taker and is always very well prepared for the future. He’s very generous and likes to give gifts, including monetary gifts. He enjoys his money but in a very careful way. I’m extremely generous like he is. That’s my love language, too. But I do think I’m more like my mother in terms of my financial attitudes.
GGF: How have your attitudes changed since you were young?
ML: I give myself a spending account that gives me the freedom to buy things that make me happy. I married someone who values the now. He feels free to spend on things that he enjoys. At first that created conflict in our relationship. Having the planning in place allows me to treat myself. For example, I love planning events. My best friends and I used to exchange a lot of gifts. Now, instead, we plan events around someone’s birthday. Every month we allocate a certain amount of money to a new activity. In the past, it’s been archery, wine tours, visits to trampoline parks or playing dodge ball. Lately, we plan “escape room” challenges. That costs around $25-$30 for a great night with friends and then another $20 for the meal together to reminisce about our experience. This creates bonds and great memories.
GGF: If you could meet your 25-year-old self, what advice would you give her about money?
ML: Money is not your enemy.
GGF: In Happy Go Money you mention how different you and your husband’s attitudes to money are. How do you think your life would be different if you had married someone with very similar money attitudes and behaviors to your own?
ML: We’d have less stuff! And, I would be less happy. My husband has taught me to value my money in a different way. He’s taught me to see money as a tool and to see myself as a valuable generator of money.
Before I was focused on my passions, on my work, and the money was something that would come but I had to work really, really hard for but it. My husband is an entrepreneur, and also from a family of entrepreneurs, and he taught me different ways to advocate for myself regarding money.
GGF: From the “joy ninja” explorations you did after your husband’s illness, what are the practices that have stayed with you the most?
ML: I don’t’ want it to sound like happiness is work but it takes effort to move your happiness setpoint. For example, when I put my son to bed, I ask him what made him happy that day. I also try to be more grateful. If feel negative, I counter that with something positive.
GGF: What have been your best and worst financial investments so far and why?
ML: The best money I’ve invested has been to ensure that my husband and I have a strong foundation for our marriage. I’ve invested in pre-marital therapy, couples counselling, in preparing for the birth of our son, on romantic dates and sharing new experiences that will bond us. One of the greatest detriments to wealth is divorce and greatest asset to happiness is your partner. I’m happy to invest in that.
I suppose the worst investment would be that I rolled the dice on cryptocurrencies. But I don’t see it as a bad investment because it was money I could afford to lose and sometimes you are curious about something and want to try it out. Lesson learned.
GGF: What advice would you give investors on how to maintain peace-of-mind in the face of market volatility?
ML: Having a long game plan will address some of the anxiety that can come with investing in the market. The truth is the market goes up and down. If you’re older, you’ll remember 2008 or the dot-com bust, times when the prices dropped 40% or more. In recent times, the younger generation would have only experienced a bull market; they may not be prepared for a bear market. My advice is, have a long game plan and mitigate risks by diversifying. Know your own risk tolerance. I would suggest, don’t look at your portfolio every 2 minutes. Having a game plan gives you a backdrop when markets drop.
GGF: The old saying goes, “If money doesn’t buy happiness, then you’re spending it wrong.” What did you buy recently that made you very happy?
ML: I spent money on my book launch party. I spent on my wedding. We had a budget. I didn’t go into a debt. My husband and I always talked about that day. It was great, great experience. I also felt that way about this book launch. I spent money to thank the people who were supportive in my life.
GGF: If aliens blew up the world tomorrow, what would you regret—financially speaking?
ML: I would regret not giving away more. Because moments before the world ended, I would have wished that I had made the days better and happier for people.
GGF: Why is saying “no” important in how it relates to happiness?
ML: When I was a young reporter at the National Post, I developed a reputation as the “yes” girl. I would do any work that was given to me. I wanted to climb the ladder and to not disappoint anyone. That cost me in two ways: my happiness, and my actual value in the workplace. You have to learn what you’re worth and to say “no” to work that’s not up to your standard. Otherwise, you wear yourself very thin.
GGF: If you had a superpower what would you change about the way women, especially younger women under 30, handle money?
ML: Make everyone confident about money. If women felt more empowered with their finances, they’d do better. I would spread financial confidence.
So, you’ve been working with a financial professional and you’re on your way to achieving your investment goals with a tailored plan. But wait! You just heard about a hot stock tip from a friend at lunch and now the seed of doubt has been planted. What if you’re missing out on some big returns?
It’s common for us to discuss some of our investment ideas with our nearest and dearest. One 2018 study reported that three out of four people ages 28 to 39, and half of those 40 to 52, talk finance with friends. A 2014 Yale study found that both social learning, (finding out that your friend is planning to buy an asset), and social utility, (keeping up with the Joneses’), significantly influence financial decision-making. Almost 93% of study participants who were told that a peer was planning a particular asset purchase bought the same for themselves.
“The people I work with see how their friends are living and they have conversations about bitcoin and cannabis stocks and they succumb. Often these things can be at the peak of the bubble when the majority of people on the retail side tend to get involved,” says Naheed Gilani, a certified financial planner with Conscious Wealth in Calgary, Alberta.
Although a hot stock tip or news of higher returns elsewhere may make you envious or uncertain of your own strategy, says Monique Madan, lead financial life strategist at Upotential in Toronto, there are a host of reasons why someone else’s portfolio may theoretically be doing better than yours at a certain point in time. More context is needed in order to make an accurate comparison, she says, and to know whether the return being touted is realistic, or whether that particular investment is appropriate for you.
“I was counseling a client recently who called me to say, ‘I’m not getting 5%; my brother-in-law is getting 5%.’ However, the brother-in-law could have a much higher risk tolerance than my client, and perhaps he hasn’t mentioned the times he may have lost 20 or 30%. Or he may even be exaggerating.”
When faced with investment tips from friends or family, Madan says, it’s key to know your limits and values and work within them. She also recommends having regular contact with a financial professional who isn’t tied to selling products. The advisor should be able to provide recommendations based on what’s best for the client, as well as an affirmation that they’re “on the right track.”
Gilani adds: “When Uncle Bob gives you a stock tip or suggestion at dinner, his wealth situation and plans for the future are very different from yours. So, don’t take advice from people who have a different vision and experience level from yourself.”
Investment goals can also be affected by family in other ways. For example, a couple may have an open financial relationship, but there’s a difference between giving your partner access to financial information versus giving them full reign to do transactions which may or may not be a good fit with your risk tolerance.
“I think online access to accounts has worsened this because it allows you to trade more frequently for cheaper. It’s also easier to gain passwords and access a spouse’s accounts and trade on their behalf, whether or not you have trading authority or power of attorney,” says Gilani.
While keeping separate access codes is crucial, especially if you have different investment objectives, Gilani adds that another key to keeping plans on track is to have financial conversations early in the relationship.
“Have the conversations so you can set some boundaries and know what each person is building towards,” he says.
Excerpted from the book Happy Go Money by Melissa Leong
When I was young, I tackled trick-or-treating with tenacity and strategy. I plotted a map for maximum door knocking and allowed for a mid-evening candy drop-off to reduce weight. I cut across lawns to save time. I brought my manners and my jokes to the door and then sprinted off. I would’ve donned a new mask and doubled back to the houses that gave chips if my dad would’ve let me. At home, I’d lay the loot out and sort it in order of preference and expiration (because back then, we’d eat anything including the cling-wrapped brownie). I’d make my haul last until the following October 31.
Even as a kid, I was a planner and into spreading out the joy. Were you like me? Or were you like Mofo [my husband], hoovering your candy within the week?
When it comes to how we approach our money, some of our behaviours and habits are innate while others were learned. To be happy with your money, you need to understand what your default is and how you feel about spending, saving and risk.
Scott and Bethany Palmer, co-authors of The 5 Money Personalities, say our money tendencies are baked into us at birth. “We are totally convinced with all of the research that we’ve done that your money personalities are cooked into you,” she says. They identified five money personalities:
Saver: You take pleasure in saving, in discounts, in spreadsheets, in being frugal.
Spender: You have no problem parting with your cash.
Risk taker: You’re a gambler. Driven by optimism, you like the thrill of the chase.
Security seeker: You’re risk averse. Financial security and planning are your number one and two concerns.
Flyer: You fly by the seat of your pants and don’t think too much about money. Often, relationships are more important to you than money.
Palmer says people are often a combination of two of these traits (a primary and secondary) and many times those traits can be opposing forces.
“We knew our kids’ money personalities at ages three and four. The way you can tell is the way they handle Halloween candy,” Palmer says. “A saver is going to want to save all of their candy. A spender is going to want to eat it all. A risk taker is going to want to trade it. A flyer could care less and give it all away. A security seeker is going to make their candy last a year.”
In addition to our innate money habits, we come from different families and histories and will inevitably learn about money from those influences. My dad meticulously plans our family finances and prizes security. He reads the fine print. He doesn’t take risks. He fretted about me going to Taiwan because I was risking my full-time stable job (stability in journalism, ha!). Meanwhile, he is generous with money and he will not scrimp on things that he enjoys. I remember an argument that my parents once had because my father bought the expensive toilet paper and my mom deemed it to be a waste. I vividly recall the anger and the declaration of what my dad’s butt deserved.
Conversely, my mom shops for sport. But she needs sales like she needs air. She will spend four hours in one store, looking for the best deal, and she considers her time well spent because she found a purse for 90% off. She’ll do anything to save money. She is infinitely creative — sewing clothing, bedding, upholstery, anything — to get beautiful things for less.
I am a sum of all of these parental parts.
Like my dad, it actually hurts me to gamble. I once received a free $10 voucher at a media event to bet on a horse race. Rather than lose (or win), I cashed out and spent the $10 on poutine for my best friend. And like my mom, I get off on discounts. I’ll eat the expired jam to save a few bucks and I would spite my ass with construction-paper-like tissue.
If you’re a security seeker, what will make you happy is putting money aside for your priorities. But don’t get so caught up in making sure that every plan is safe that you don’t act and you say “no” to opportunities. If you’re a flyer, you’re content and you’re not motivated by money, but as a grown-up, you need to think about money (you need to file taxes!) and looking up in the clouds could result in you falling into a money hole.
You have to know you. Then you have to work with that.
“Knowing your two money personalities and how they work together gives you clarity about your past; it gives you clarity about your present because you can think clearly about how to approach your money decisions and it gives you direction for your future,” Palmer says.
Too cheap for your own good.
Some of you are uber frugal. Even though that description sounds wonderful, like a smart, minimalist Ikea shelf, it might mean you are robbing yourself of joy by not investing in other priorities or hurting your relationships by being cheap. For hardcore savers, spending can also come with unnecessary pain. Every time we pay, it’s okay to feel a pinch, a sting, but not a cramp. We pay for a lot of things and if you fret every time, the surge of cortisol and other stress hormones through your body will have ill effects.
Here are a few tips to lighten the hit.
Every time you pay for something and you feel like crap, think of everyone who benefits from your purchase. If you’re buying groceries, feel gratitude about taking care of your family. Feel happy about supporting farmers and workers in your community. Feel proud that you’re buying from a mom-and-pop store or an ethical company. (Okay, if you’re shopping somewhere that employs underpaid children, then I can’t help you with this.) But feed your brain some positivity. Announce in your mind (out loud if you have no shame),
“This purchase is in line with my values.”
Designate a fun fund you’re comfortable spending each month that won’t compromise your larger goals. (More on this in an upcoming chapter!)
Adopt an abundance mindset as opposed to a scarcity mindset when it comes to your money. My entrepreneur friend Christa announces, “There’s more where that came from.” With the scarcity mindset, you become tunnel-focused on what you don’t have. You fixate on the short term because of your limited resources. The alternative is to approach things with an abundance mindset, the thought that the world is your oyster and there are enough opportunities, resources and successes out there for everyone. It builds confidence which inspires your behaviour, opens you up to look for new money opportunities and encourages you to collaborate with others rather than compete. There’s more where that came from, indeed.