If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 16  Investment Expertise is the Key to Good Money Management

In all things, you should start with the basics.

Reducing debt – pay off as much debt as possible.

Minimize Expenses – try to live on less than you earn

Develop a Savings Habit – saving to purchase, rather than financing saves you money.

Enhancing financial literacy – learning about investments, what to start with and what to avoid will help you.

The 80/20 Rule of Money Management

In most things in life and investing 80% of the benefit is derived from 20% of the cost or effort. In many businesses 80% of the profits is generated by 20% of the products and 80% of the revenue is generated by 20% of the customers.

(Last year of the 30 stocks in the Dow Jones Industrial Index 10 stocks drove 80% of the rise in the index. The other 20 instead of being at 25,000 the index would be at 21,620.)

Look at debt differently  if you owe money on a credit card, paying it down earns you a 18% return. You might want to examine VISA and MasterCard to own the stocks.

Myth 17 Budgeting is Essential for Financial Success

Budgets are great for tracking your expenses.

A suggestion by Mr. Hoyles is when you know your expenses, whenever you get paid set up automatic payments to the bills you owe. If you get paid every 2 weeks, then after the bills are paid, the rest of the money is yours to live off. There is no rule which states you have to pay bills once a month. For example the hydro bill, you can twice a month.

Myth 18   I am Immortal

Life Insurance – if you die tomorrow how will your family function? One aspect if you own a home is the mortgage so buying term life to cover the cost of the mortgage is often a good idea.

Will – if you have assets, you need a will to distribute the assets the way you want them after you die. If it is not in the will, you had to tell people before or feelings will be hurt.

Spouse – it is good to tell your spouse what you are doing.

Myth 19  Pay Yourself First

The goal is not to develop a savings account, the goal is develop good financial habits to managing your money.

If you have no debt, paying yourself first is a great thing. If you credit card debt at 20% and pay yourself a savings account of 1% are you better off? Earn 19% pay off the debt.

Myth 20   Joint Bank Accounts are Essential for Couples

For joint business, you should have a joint account. Each couple should also have their separate accounts for themselves. Most couples will have conversation about money, what is important? who controls? it is best to tell each other and also to have some degree of independence and control over yourself.

Myth 21   You Should always Help Your Friends and Family

Never loan money to family or friends – how do you get repaid? but if you do, ask

Can I afford to Help?

Will helping help?

How do I protect myself, if I help?

Myth 22  Life is Like a Box of Chocolates

Life isn’t always sweet…but it is predictable.

Plan for tomorrow – things tend to happen on a reasonably predictable curve, you can prepare for them. This year there will be December 25 again and you will have an urge to spend – start saving now for it. You may go over budget but you will have the savings to protect you.

Linking to dividend paying stocks, life is emotional and complicated, but investing does not have to be. Try to invest in profitable stocks which provide a dividend and the dividend can help you with your living expenses. If you invest in a fund, most funds provide a larger payment in December, which can help you with the Holiday expenses. It is possible to plan.

There are more questions than answers, till  the next time – to raising questions.

 

 

 

If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 12   Bankruptcy is the Easy Way Out

If you go back before WW II, most people had little access to credit. The banks were often reluctant to give out credit, there was no credit cards and the biggest credit was at the country store or convenience store where the merchant gave credit to farmers for he knew it would take a few months before the farm community received income to pay back the loans. It was not surprising the idea was if you borrow you need to pay back.

The first reality is if you do not have debt, you have more options. In Mr. Hoyles’ book he refers to a survey his firm does to determine the average person – they have $53,000 in unsecured debt that does not include car and mortgage payments. If you have that much debt, the likelihood of paying it all off is remote. Most people Mr. Hoyle works with have jobs, they just do not earn enough. They may be able to come up with extra money in one month, but every month for 4 years? just a little too much to ask for. Bankruptcy is an option.

Myth 13   A House is a Great Investment

A great investment is either one that gives you regular income and/or has good potential to increase in value. For most people, a house does not do that. Unless you rent out some of the house (which tends to be the exception) the house cost money and does not generate it. A house may not increase in value, it depends on many factors.

For the average person, the house should be considered as a liability – it will likely have mortgage payments, need repairs or renovation over the years. It is nice if it goes up in value and you are willing to sell. Remember if you sell, you have to move somewhere.

Myth 14   Owning a House Gives You Stability

It can be remember what used to happen is people went to work for one company and stayed there till they retired. In your workplace  – consider how many people are doing that or have they had more than one job? The answer tends to be more. Although it is possible to rent out your house, sometimes people do not want to move.

Myth 15  The Bigger the Mortgage, The Better

This myth concerns leverage. If you want to keep up with “the Jones” then buying a bigger house than you need and can afford is a great idea. For most people, buying less is better, because the reason you bought was to live in the house for a number of years not necessarily to sell. It is wonderful when you are ready to sell and the price has gone up, but real estate markets go up and down and you may not be ready to sell.

A larger house tends to mean more stuff in the house and it may or may not be the stuff you can afford. If the mortgage costs is 35% of your budget, then add car expenses and house maintenance, child expenses. The house can be too much for your budget, when you buy ensure your eyes are open to all the other expenses and lifestyle choices when you buy. If your neighbors are travelling to cottages, vacations, you will be pressured to do the same.

Linking to dividend paying stocks, these stocks have an income attached to the purchase, if the companies are not profitable and not paying a dividend you do not own them. There are many choices in the stock market, the idea of not losing your money which is the first rule of investing is to ensure there are easy methods to determine when to get out. If you buy a dividend stock and the dividend goes down, that is very good signal to move. A recent example is GE, it was good but is not restructuring. You may like it, but watch it for a time as it produces results then you consider buying again.

There are more questions than answers, till the next time – to raising questions.

If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 8  Pay your small debts first. It will give you a feeling of accomplishment and then you can pay the larger ones

Better

The highest priority would be the debts with the highest interest rates

The next is callable or secured debt.

The interest rates imply the rule of 72, pay the highest off and you save money. Callable debt is a demand debt such as a line of credit. Remember all financial institutions does a soft credit check on their borrowing customers quarterly and with more artificial intelligence and use of big data, many more often.

Myth 9   Cash in your Registered  Money to Pay off your Debts

If you have assets in registered funds for your retirement they are locked in and unless your income has fallen because there are income tax considerations to take into affect when taking money out of registered money, it may be better to leave it. The collection agencies can not get the courts to unlock your registered money to pay the bills.

What a bankruptcy court can take is

Tax free savings accounts

Registered education savings plans

Investor accounts

Bank accounts

Contributions to your registered accounts in the last year.

If you went into bankruptcy, you need to know what accounts can be and cannot be touched. If you are going to lose them, take the money and pay down the debt. If not perhaps the answer is to wait.

Myth 10  Payday Loans are a short-term fix for a temporary problem

Other than a loan shark (who will break your legs if you do not pay), a payday loan is the most expensive form of borrowing there is. A charge of $18 per $100 borrowed for a year cost 468%. The conventional wisdom is a payday loan to tie you over to payday, but the reality is 83% had other outstanding loans and are repeat customers. The real issue is high debt being carried by many people so they have very little option except to go to payday loans.

Myth 11   There is Good Debt and Bad Debt

The truth – debt is neither good nor bad, debt is a tool.

Linking to dividend paying stocks, unlike debt which people can make moral judgements about, dividend payments means the company is profitable and shares its earnings with its shareholders. There is no morality there, it is better to invest in profitable companies and if those companies stay profitable for a number of years your investments based on share price and dividends (total return) will be secure and be good. The more you receive the more options you have to do what you think is right.

There are more questions than answers, till the next time – to raising questions.

 

If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 5   The Most Important Number is the Monthly Payment

The notion that only the monthly payment matters is ridiculous and the worst myth in these segments. If you only worry about the payment (and you can) the interest on the item will be much more than the cost what you think you will be. For example a $30,000 car at 7% stretched over 72 months will cost $36,825. Remember the reason to have a car is to drive it which includes insurance, gas, maintenance, the cost of the car increases from the low monthly payment.

It might be better to drive a less expensive vehicle, then buy another one in a few years.

Myth 6   Bank at only one Bank

Many of the people working at the bank are nice people, they are also sales people.

Watch for fees – once you are a customer they have less incentive to give you the best rates because it is hard to switch because many people have preauthorized payments or deposits to their accounts.

You lose control – best solution – have your income deposited a one bank and pay your bills from another bank. In this manner, if you have a credit card at a bank, they can go into your account (even if you did not authorize it, to take the minimum payment).

Myth 7  When a collection agent calls, always pay up

To understand collection agencies, you need to understand the process in which they operate:

1. all is good, you are paying your bills on time.
2. something happens and you are unable to pay the minimum (remember 50% of US consumers said if they had an unexpected bill of $1,000 they would be behind). The first stage is a letter is sent to you.
3. The next month is no better, the phone calls start, the people are understanding and nice asking if there is something you will be doing or can do?
4. By month number 3 the friendly approach is over. The bank will suspend your card and demand full repayment.
5. The collection agencies pay their people less than at a bank and their commission tends to be 20% of what is collected. A letter from the collection agency starts and you will be called daily for about 2 months.
6. The time has passed and they do nothing, no letters or calls.
7. A new collection agency has your file and the process begins again but the commission has changed to 40% of what they collect.

For debts under a year, the banks tend to keep the debt but the commission rate for the collection agency gets larger because it is profitable for the bank to keep the debt. If debt is older, then it will be sold to gain something for the bank.  This is the reason why it is hard to make a great deal with the collection agency. If a buyer paid 5 cents on the dollar and you pay half back they make 10 times their money. If the collection agency does not own your debt, then they are less inclined to do a deal because they lose money.

Depending on the size of the debt, if the collection agency says it will sue, they will almost never sue. Why logistics? The case would be in small claims court, the collection agency lawyers cost money; you could either self represent or have legal aid; and even if the collection agency wins what do they get? The person likely has no assets.

Often the collection agency will ask for partial payments. If you have not paid in 2 years, do not make partial payments it only resets the clock. A partial payment means the collection agency has another 2 years to contact you. A small payment helps them not you.

Linking to dividend paying stocks, similar to all industries there tends to be a process. In every large organization their is a process for everything, so people are protected. For your investments you need to know what their process are – how does the business work? what are the cycles? what actually affects the profitability of the company? After you know these then you can determine if the company is in good shape or not.

There are more questions than answers, till the next time – to raising questions.

 

 

 

1. re all aaaaaaaa

If everything we do we try to make things simple, eventually myths come up and for those outside the industry, it is accepted as truth. Sometimes the myths are not correct, in some ways they are not necessarily wrong, but conventional wisdom is not always perfect. Doug Hoyles is co-founder of a large personal insolvency firm and wrote a book called Straight Talk on Your Money published by Milner and Associates, Toronto, 2017.  Mr. Hoyles is reflecting on his years of practice and offers advice on how the system is structured.

Myth 1   Humans consider the acts and make rational decisions.

If you are truthful, you will say we can rationalize any decision, but most we take from a non rational decision. The example Mr. Hoyles uses is your toothpaste. The brand you bought you likely have bought before, how much time did you spend analyzing the new benefits of the toothpaste the manufacturers do every year? If you are reasonably normal, you did not. You may have no idea, but you like the brand and use it. Is there a better one? do not know.

The solution is when you make major decisions, depending on the money involved take an extra week or paycheck to decide – that might be an extra week or two depending on how you get paid.

Myth 2  We are the architects of own lives. We make our own luck or it’s your fault

Some reasons why your financial woes may not be your fault:

Aggressive and Sophisticated Marketing by the financial institutions – they want to make fees or interest from you.

Job Loss or Unemployment – almost 1/2 of the bankruptcies are filed because of job loss or loss of income. If you worked or a company which paid you reasonable and it went bankrupt or moved its operations is it your fault? If you are paid less or are underemployed, sometimes what is good for the company is not necessarily good for the employee.

Illness – you are healthy, until you are not and then you find out how much your medical insurance really pays.

Divorce – separation of the assets

Student Loans – the government does not allow the debt to be written off or forgiven.

Solution – it is possible to change the future. It may not be easy, but it is possible and opportunities can arise to help your situation change.

Myth 3 We live in a complex world we need the advice of experts.

All experts have a bias and are generally fee based. If you do not believe it – pick the dealership of your vehicle, if you went in and asked about the best vehicle – do they believe the best on their lot or the best vehicle for you which may not be their brand?

For financial planners follow the money, how do they get paid? would they recommend a low fee mutual fund or one that paid them more commission?

Myth 4    A high credit score is proof that you at a good money manager

Ever wonder why the credit card is called a credit card rather than a debt card? In marketing terms credit is good, debt is bad.

In terms of the credit score – it is only a measure will you continue to pay the payments or it is measure of risk to the lender which is of benefit to the lender not you. If you have $1,000 limit and carry $200 you have the ability to borrow $800 and more than likely will which makes your credit score higher. If you carry no debt on your card, you make no money for the companies so your credit score is lower.

Rule 72  or Compound Interest    Take 72 divided by the interest rate and you will get an approximation of the number of years it will take for the amount to double. If you purchase something at 18% and pay the minimum payments in 4 years you have double the cost of your purchase. This is great if you own the stock in the credit card; if you do not own the stock then it is good to know if you owe money.

The Credit Score Scam – if you want a high credit score, you need to have debt. Worrying about your credit score is not good because FICO score is owned by FICO (Fair Isaac Corp). If a company uses FICO they pay a fee to FICO, so the credit reporting agencies use similar information but not directly FICO? What does your financial institutional use?

Get a Free Credit Score? just understand free means you are on a list and the companies will try to sell you other products.

Best Advice:  be prudent with your spending; work to improve your income; save money; and do not borrow excessively.  The strategies improve cash flow and reduce debt and that is good for you.

Linking to dividend paying stocks, all industries have myths and ideas which others believe are true. Some of them are meant that way to rationalize the fees people pay seemingly willingly. If you believe the myth, then why not pay? If you do not believe the myth, then you might look around, do your homework and then rationalize. You may or may not pay the fee. For dividend paying companies, they would prefer you stick with them for a long time but remember it is your money.

There are more questions than answers, till the next time – to raising questions.

 

 

 

Just before Christmas, the Commerce department released a report which stated US single family home building and permits surged to more than 10 year highs in November. It has taken about 10 years from the collapse of the housing market for the cycle to push up housing prices. According to Lucia Mutikani of Reuters the rate of housing units was 930,000 units.

Builders have struggled to meet demand which is being fueled by labor market near full employment. (one might wonder how an economy which is near full employment will gain a even greater growth, but the President knows) Land and skilled labor have been in short supply and lumber prices are increasing. At the moment, there is a glut in multiple family unit buildings or apartments which means rent increases have slowed.

Linking to dividend paying stocks, two of the biggest companies to consider in the home improvement and building business are Home Depot and Lowe’s, both stocks have registered gains this year. The economy is based on services and consumers spending which means every home owner has to fill up their home. It may be expensive for the average consumer but the overall economy benefits.

There are more questions than answers, till the next time – to raising questions.

Every holiday season, phone companies bring out new models and they have every new feature possible. It is relatively easy to stay with an older version which works well for you. Until you begin to have problems and then you check the internet to see if others have the problem. Apple has X or 10 out, but people with 6 and lower are having problems with their phones. Most consumers buy a phone and expect it to last for a long time and considering the average usage it should, just before Christmas Apple notified its customers the all lithium-ion battery degrade and has problems supplying the big bursts as they age and accumulate charging cycles. Apple tried to minimize the problem by reducing power which has the affect of slowing down the processor demands. The solution is to replace the battery.

In this case, consumers and Apple were both right and wrong, Apple was slowing down the older iPhones but it was for the right reasons as defined by Apple. However, it took a lot of evidence from dedicated users before Apple admitted to doing what it was doing.

Linking to dividend paying stocks, Apple has terrific margins and many people will continue to very loyal customers. It benefits from the lower tax rate because it makes profits as well as has billions of dollars in offshore accounts and benefits from the tax bill to bring the money back to the US. Apple is major beneficiary of the President Trump’s tax bill and expect earnings to be higher without doing anything more than what they did last year.

There are more questions than answers, till the next time – to raising questions.

In the northeast from a consumer stand point at this time of the year, we wonder about oil prices for it heats our homes and cost of driving to work. According to a report in Bloomberg News by Jessica Summers, Alex Longley and Christopher Sell the direction of oil prices will be decided in Texas.

Analysts are expecting oil to average about $60 a barrel currently the price is in the $64 range, for us consumers it should be around where the price is now. The US production is where analysts have a differing view, some believe although the Energy Information Administration says US crude will surpass 10 millions barrels a day, the growth rate in the Bakken basin in North Dakota area and the Permian Basin in Texas may slow down. If there is a slowdown then more oil from outside the US will be needed and prices will move higher. If production remains good, then prices will be relatively stable.

The other consideration is demand, while more and more energy projects are moving to renewables, there is still a long way to go and the country’s need for oil is ongoing.

Linking to dividend paying stocks, in all commodity based stocks the price of the commodity will do more than any management can do. If the price is low, then hanging on to higher prices is the order of the day. If the price moves up, then a variety of options are available including easily paying dividends. If you own commodity priced companies, part of your homework is to see if the price is stable or moving in one direction or another.

There are more questions than answers, till the next time – to raising questions.

Just before Christmas, President Trump signed the Tax Bill which he believes will make America Great Again. It may, but not likely for the effect on those below $80,000 income is marginal at best. Now for the wealthiest people, they have more to invest in the market and for corporations they will pay less tax. The money the corporations do not pay will eventually go to shareholders through dividends and share purchase plans. Very little will trickle down, not with standing the above criticism the largest banks in the country are receiving a massive Christmas gift.

It is expected the Earnings per Share will climb anywhere from 8 to 17% according to research by Citigroup Global Markets Inc. The benefits come from both domestic operations as well as lower repatriation rates for cash held abroad. The major reason for the additional increased in EPS is the corporate tax rate fell from 35% to 21%. However, ever since 2009, the banks have been complaining about regulations (which were to designed to ensure the banks did not fail), they thought they needed less of them. The tax bill does lower some of the ratios so the banks can lend more money.

Linking to dividend paying stocks, except for when the economy meltdown in 2008, the banks are dependable dividend payers and if you do not own them individually an ETF which owns the major banks is a good thing to own .President Trump has been good for the big banks and as long as he is President it is a good holding.

There are more questions than answers, till the next time – to raising questions.