May 31, 2010, 10:43 am

Big Car Equals Big Money?

by: The Financial Blogger    Category: Personal Finance

I recently went out for beers with Mr. Genius and Mr. Conspiracy from my MBA program. Funny enough, I had started a MBA for 3 main reasons, one of them being to increase the scope of my network. Of all the 35 people in my class, I have since kept in close contact with just 2 of them…and I don’t really regret my choices ;-). So I guess we can say that I didn’t really enlarge my business network considering those 2 arduous years ;-). But the 2 friends I found there are worth infinitely more than a bunch of business cards littering my desk drawer!

While we were having a beer, Genius said something funny: “hey guys, we now have living proof that the MBA changed our financial status”. We looked at him knowing he was half serious and half joking.

“When we started, I had a mini van, Mr. Conspiracy had a beat-up jetta and the “Y” (me!) had a scrappy Mazda. Now I have a spaceship (a huge SUV to fit his 4 kids and wife), Mr. Conspiracy has an Audi and the “Y” has an RX-8 and a brand new Tribute”. We all started to laugh.

It was obvious that the MBA had nothing to do with our new cars but it was quite funny to see that the 3 of us have significantly upgraded our rides. But this fact definitely leads to an interesting question:

Do big cars equal big money?

Some people will say that people, like us, with big (expensive) cars are daft. That people, like us, are wasting our money big time on something that loses its value faster than the stock market surfing on a souvlaki. That a car should bring you from point A to point B. And finally, that there are rich people driving their old Fords (Fix Or Repair Daily) for years without changing it. You know what? I think they are half right.

I think that when you have an expensive car, it is a sign that you:

1- Really like cars or

2- You like being comfortable in a car or

3- You have money or

4- You pretend to have money or

5- Most of the above 😉

People that want others to think that they are wealthy will definitely lean towards more expensive cars as it is one of the easiest ways to demonstrate your status in public. A rich car is the equivalent of the stone-age hunter bringing back a mammoth bone on his back at the end of the day. It’s a trophy 😉

Driving a BMW doesn’t mean that you have money. But it is a pretty good possibility though! The funniest part is that people severely question the choice yet they don’t really have an issue with couples who blow $3,000 – $4,000 each winter for a week down south every year. They don’t talk about the guy who renovated his kitchen and sunk $25,000 on it, including granite counters. And they certainly won’t argue with the $5,000 home theatre system with a giant screen during the Superbowl!

When someone is successful (or pretends to be), I admit that I tend to look at what kind of car he drives. Why? Because if someone has to tell you that he is making money, he will surely want to prove it. Low profile millionaires driving around in old cars will never bother to tell you how much they made on their last deal. They are driving an old car because they like the anonymity and they don’t want too much attention!

In the end, driving a nice car is a only a matter of priority in your budget. It’s not a stupid or a smart move; it’s only an expense! If you really can afford the car you are driving, I don’t really see why you should be ashamed of it ;-).

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May 28, 2010, 6:38 am

Looking Forward: The Bank of Canada Prime Rate Decision on June 1st 2010

by: The Financial Blogger    Category: Banks and You

Next Tuesday, The Bank of Canada will announce the new (or unchanged!) Prime Rate. For several months now (since the credit crunch of 2008), The Bank of Canada has maintained its prime rate at the virtually lowest level possible; 0.25%.

We started to read about potential rate increase in late 2009 when Australia had increased its rate several months in a row. However, the Australian reality appears to be quite far from that of the Canadian economy.

Controlling Inflation

The most important reason why the Bank of Canada would increase their interest rate would be to maintain the inflation at an “acceptable” level. This level is currently set between 1% and 3% with a “ideal” rate of 2%.

Since we have been flirting with the 2% inflation rate for a while (currently at 1.9% as of April 2010), many economists have predicted that the Bank of Canada would start increasing its interest rate as previously mentioned by Mark Carney, Governor of The Bank of Canada.

There are more clouds in the sky than expected

The Bank of Canada was ready to stop the low interest rate party this summer but recent events in Europe might cause the Bank reconsider its strategy. Considering the economic problems stemming from the PIGS (Portugal, Ireland, Greece and Spain), the stock market has responded negatively.

Therefore, the economy may slow down again and reduce the inflation risk. Considering this scenario, there is no urge to increase the prime rate right away.

The general demand for resources is slowing down as the price of oil has dropped significantly. This will also have an important effect on inflation (even though they consider the inflation rate with and without the price of oil).

What is my bet on the Canadian Prime Rate?

I bet it will increase by 0.25% but I would definitely not be surprised if it stays at 0.25% until July. The only point I am quite confident of is that we won’t see an increase of 0.50% or 0.75% as some economists were predicting a few months ago.

It’s not that they were wrong in the predictions; it is just that today’s economy evolves so fast that your 5 year projection are probably right when you do them but they go wrong 2 weeks later ;-).

I hope to benefit from low interest rates till the end of 2010. This would help me stabilize my finances after my moving in June. This fall, I will seriously attack my mortgage so it starts decreasing faster than it has been for the past 2 years!

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May 27, 2010, 5:00 am

I Need Temporary Financing; 1.99% APR Credit Card to The Rescue

by: The Financial Blogger    Category: Pay off your Debts

As you may already know, I am moving in about 3 weeks. I already know that there will be cash flow chaos the upcoming month. I need to pay for moving, the notary (lawyer), I need to pay taxes and, to top it all off: I decided that I will pay back the loan from my parents right away. This is why I will apply for a Canadian 1.99% APR balance transfer credit card.
I have owed this money for the past 4 and a half years and I really don’t feel like waiting until the end of November to pay them back (especially since I recently bought another car). Even though the original agreement was to pay back the loan this fall, I just want to get rid of the debt and again feel free to spend my money as I want.
However, I don’t think I will have the money to do all this… I am currently spending a lot of money on several items (new car, my wife’s birthday, my friend’s wedding, and another wedding in the near future, my new house, etc. just to name a few). So I will need extra financing for a few months. I don’t really know for how long, but I know that I’ll be getting a nice bonus at the end of the year so I will leverage that certainty.

What kind of options do you have when you are looking for short term financing?

You can always rely on a line of credit or a personal loan. My problem is that no bank will lend me money in the short-term right now. How can I make a 6 figure income and yet I can’t get financing? That’s it; TFB is too stupid and spent all his money. This is why he can’t get financing. Sorry folks, it’s more complicated than that: it’s because there is a lot of money I make yet can’t prove.
My online company is paying for several expenses and my bonus can’t really be taken into consideration (even though it totals 40 to 50% of my annual income!). They claim that I may not be making this much every year so they can only base their decision on my base salary… reality sucks!
So if I can’t get money from the evil banks (and I don’t want to borrow from family or friends since I want to get rid of this type of debt anyways!), I have no other choice but to consider a low apr balance transfer credit card. The main advantage when applying for a credit card is that they qualify you based on your income and your credit bureau (both of which are pretty good in my circumstances) and not on your ability to pay 😉
This is why I ran through internet listings to look for the lowest interest rate on balance transfer credit cards. I was disappointed at first, having not found any credit card offering a 0% intro rate for balance transfer for Canadians. Therefore, the best rate I found was 1.99% on all cash advances and balance transfers.
There are a few issuers of those generous balance transfer credit cards. Among them, there is MBNA, a well known credit card company (known for their appetite for risk).
This is actually why I decided to apply to one of their 1.99% balance transfer credit cards (The MBNA Platinum credit card); because they are most likely to lend me more money than other credit card issuers ;-).
So here’s my choice of credit card:

I have applied for 3 main reasons:

  1. They offer the 1.99% rate on balance transfer

  3. They are more likely going to offer a great credit card limit

  5. The Platinum credit card doesn’t have fees!

I have applied today, so we will see how long it takes and how much of a credit card limit they will be willing to grant me. I’ll keep you posted!

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May 26, 2010, 5:00 am

Running a Company; Making a Plan

by: The Financial Blogger    Category: Alternative Income,Make Money Online

As you may already know, The Financial Blogger has been a major pillar in my online company. In fact, on my side of the partnership, this site is how I made my very first step to (hopefully) becoming a dotcom mogul one day! I started with no experience, average English writing skills but with a good dose of passion for writing and personal finance.

As I mentioned yesterday, we have sold Gather Little by Little and it is now time to move on to something else. We are currently working hard on Green Panda and on Intelligent Speculator; they both have a new design, Green Panda is now part of the Money Mavens Network and Intelligent Speculator has launched it’s Premium Investment Newsletter. The guy is a trader on a desk, trust me, he knows what he is doing 😉

However, if we keep going this way, we will still continue to slowly grow our blogs without really having a direction. After a while, you get into your day-to-day routine and you risk forgetting about your ultimate goal; making enough money to reach financial freedom. I guess it is human nature; we want the chaos to stop so we can sleep like babies at night. I think this is the problem with most projects; we get all motivated when it starts, we work like sled dogs on it and we have a tons of ideas. But once it is launched, when it is going well on its own, we simply ride the boat instead of adjusting with the sails to pick up the wind again.

This is why we are making a plan!

Most people think that plans are useless. In fact, I think they are right in 90% of cases. Why are plans useless? Because they are never applied, because they were  written on clouds instead of going back to the basics. If you want a good plan, you have to come down from the clouds and get down to the ground level. You need to have a global vision but nail your plan with practical actions.

What are we going to discuss during our weekend

We are taking a weekend at the end of May to leave for another city and concentrate on our company for 2 days. Big companies do it and their employees take this time off to have a solid drink on the house. I can’t say we won’t have a drink, but I can tell you can we will also work like animals ;-).

For the upcoming months, we will shoot ideas back and forth and make a list of the points we will discuss. It is an important year since we have to look at crucial elements for the survival of our company such as:

–         What happen if one of us gets sick or dies?

–         We need to calculate the insurance needs so the surviving partner can buy the other partner’s shares

–         We need a shareholder agreement (was not necessary at the beginning)

–         The direction of each blog and how we will make it through

–         The new projects we want to put in place with a schedule and practical actions

–         The parameters required to buy a new website (yup, we are on the roll again!).

–         A global plan to know where we will stand in 12, 36 and 60 months.

I really have the feeling this weekend will be the additional push to get ourselves outside our “comfort zone” and start working for real. Enough with the routine, now it’s time to make some serious money!

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May 25, 2010, 5:51 am

Levels of Competency

by: The Financial Blogger    Category: Business,Career

I recently had lunch with Mr. Consipiracy from my MBA program. While I was having a delicious General Tao (I’m a sucker for saucy fried chicken) and he was making me jealous (and feeling guilty) with his Thai vegetable soup, he shared another one of his great theories. This one was regarding the different levels of competency an individual may attain.

In fact, there are 4 levels of competency and I must agree that his theory is right on the money as you can indentify any individual in of the 4.

Unconscious Incompetence

This is probably the most dangerous type of individual; those who don’t know much and aren’t aware of the fact.  Therefore they think they are on the ball! I’m sure you can point to several people in this category.   Some say “Ignorance is Bliss”.  There is a psychological phenomenon explaining this; we usually tend to ignore anything that could affect our self esteem. Therefore, when you are not good at something, some people just quit and some people keep doing it and reinforce the fact that they feel they’re capable and good at it. Strange isn’t?

The worst part is that we are all unaware & incompetent at something. We just don’t want to hear about it 😉

Conscious Incompetence

This is when you put your self esteem aside and decide to face the truth. You acknowledge that you are not good at something and you try to either improve your skill or never do it again. If it’s at your job, you are better off improving your skill 😉

For example, I am not good at handyman-type chores. I barely know what to do with a screwdriver and a hammer. At least I know that I am incompetent so I either pay the rent-a-husband to do the manual stuff or try to learn from others.

Conscious Competence

This is when you are good at something (for real) and you know it. This is a bit tricky because when you feel that you are good at something; you are either good at it or you are unaware of your incompetence (remember above). Since most people are polite, nobody will ever dare tell you!

I guess that if you succeed over time, you can presume that you are competent in something. However, some fields are more difficult than others to evaluate (such as being a parent for example!). On the other hand, if you are good at your job and people recognize your work, then you become conscious of your competence.

This is a level where you gain confidence and you can use  your knowledge to help others. For example, I can do this at work as a financial planner.

Unconscious Competence

We call these folks “naturals”.   They are gifted and tend to be modest perhaps naïve about their abilities who are unconscious of their competence. A famous example would be Tiger Woods. At a young age, he was winning every golf tournament in site. He was born to be the most prolific golfer in history. However, his golfing techniques were not that good and his coach had to change it over. But he was so naturally good that he was still able to win every game he played.

Some people are born with a true gift. Unfortunately, many of them are not aware they have such gift. Sooner or later, they will discover it. In the meantime, they are just part of the common folk, generally unaware of the talents acting like regular goofs around the table 😉

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