April 28, 2011, 6:00 am

How You Can Prevent Money From Ruining a Friendship

by: MD    Category: Financial Cliché

Money and FriendsFriendship and money. Always a fun topic. As you work on growing your career, starting a side business, and trying to get out of debt, you’ll start to feel overwhelmed at times. We all know that there’s nothing like going out with friends to shoot the breeze and have a few drinks. What would happen if you lost your friends over money? What would you do if money ruined a friendship? These are all thoughts that we don’t want to think about. The reality is that we will friends over money issues.

I wanted to talk about how you can prevent money ruining a friendship and to look at ways to overcome awkward financial situations:

Loaning money.

I personally am totally against the idea of loaning money to friends. A financial loan between two long time friends or family members is always going to be awkward. You’re either going to have to be on the side where you swallow your pride and have to ask a friend for money or you’re going to be on the side where a friend comes to you to ask for money. Both sides suck.

My advice on this issue is simple and I feel that one question needs to be answered by both parties: how will this money be paid back? If a friend can’t pay you back the money for whatever reason this will cause obvious hardship on your friendship. This is why you need to come to an understanding right away before the money is handed over. There needs to be a plan for paying the money back and a deadline in place. If not, then you might not see your money for a long time, which would definitely kill the friendship. I also recommend that you loan an amount of money that you’re comfortable with never seeing again. There’s always the slight possibility that your friend won’t be able to pay you back. You don’t want this amount to be high enough to ruin your own financial situation.

Splitting the bill.

Loaning money will get odd and so will splitting the bill when you go to a restaurant that’s way out of budget for one of the people involved. It’s easy to get envious here. If you make $30,000 a year and your friend that you’re at dinner with just pulled in a new salary earning him $100k per year, the natural instinct will be to want them to cover the bill or to pay a larger chunk. They make more money than you, so they should pay more of the bill. This isn’t how it works though.

From my own experience I found that the best way to deal with splitting the bill is by deciding on the location in advance. Everyone should agree on the location in advance, instead of being surprised about getting dragged into an expensive place. If you’re budget is tight you really don’t want to get stuck in a restaurant where the main course is over $50. If you’re the friend that has a deep financial buffer, you don’t want to put your friends in a position where they’re spending way too much money on food. By deciding on an affordable location in advance you guys can all enjoy your evening with worrying about how much the dinner will put you behind on your budget.

At the end of the day there’s a solution to every awkward situation that will arise between you and your friends as it relates to finances. This is just apart of life. With that being said, it’s time for some general tips to help you not resent your friends for making more money and how you can benefit from hanging out with friends that make more money than you:

Don’t hate someone for working hard.

We have a friend that makes lots more money than us. The major caveat is that he works insane hours. I’m talking 18 hour days with no social life at all. I’ve heard others make remarks about him and how he’s so rich. It’s simply unfair to resent someone that’s willing to put in the long hours to earn more money. We all have different values in life. Some of us value money more, while others place a greater emphasis on the relationships in life. Either way, it’s not worth resenting anyone for holding different values than us.

Use this as motivation.

You have tangible proof that it’s possible to earn lots of money in life. Don’t fall behind in life by chasing false hopes and trying to get rich quick. Very rarely does anyone get rich quick or while slacking off all of the time. Being around like-minded people should motivate you to strive for more.

You should never let money get in the way of a solid friendship. Hopefully after reading this article you’ll be able to better deal with financial situations with your friends.

(photo credit: petroleumjelliffe)

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April 27, 2011, 5:00 am

Canadian Dividend Stocks

by: The Financial Blogger    Category: Canadian Dividend Stocks

First things first, if you are interested in dividend investing, I strongly suggest you to download your free copy of Dividend Investing: How To Build a Never Ending Cash Distributor from The Dividend Guy Blog. I’ve also created a unique resources about Canadian Dividend Stocks.

Looking for Canadian Dividend Stocks? I recently mentioned that I was working on a dividend investing website. As I was creating its content; I realized something; my top dividend stocks articles on The Financial Blogger were not exactly what you can call “Best Canadian Dividend Stocks”. They were indeed the highest yield dividend stocks on the Canadian stock market, but they were not necessarily what you can call “best investments”. This is why I have decided to upgrade the site and modify my 3 lists of “top Canadian dividend stocks”.

The problem with high yield dividend stocks

There are 2 major problems with what we call “high yield” dividend stocks:

#1 The dividend yield is too high

Have you ever heard the old saying “where there is smoke, there is fire”? This is the exact thought that should cross your mind when you see a very appealing dividend yield. In financial theory, there is one very basic principle; the higher yield comes with higher risk. So if the dividend yield is too high, this Canadian company is probably experiencing some financial difficulties or delivering poor financial results. The stock has either dropped significantly over bad news or the market thinks it won’t be able to sustain its dividend over the long run. In both cases, you should be cautious before buying this “high paying dividend stock”.

#2 The payout ratio goes in the same direction as the dividend yield; too high!

If a company has some financial weaknesses, chances are that its dividend payout ratio is heading higher than 75%. Which means that it won’t be able to keep paying its high dividend or it will have to finance it to maintain such high yield. Receiving high dividend payouts is always fun… as long as you can count on receiving it!

Define “Best Canadian Dividend Stocks”

This is when I came up with the idea of maintaining 3 lists of Canadian Dividend Stocks. But this time, the 3 lists have clear definitions:

Best 10 Canadian Dividend Stocks

In order to find the top 10 Canadian dividend stocks, I had to define important criteria for the selection of my stocks:

–          Dividend minimum yield: 3% (so I ignore low dividend yield stocks)

–          Dividend maximum yield: 7% (so I ignore abnormalities 😉 )

–          Dividend payout ratio: under 60% (so I make sure that dividends will be paid consistently)

–          Dividend growth: minimum of 5% annualized growth over 5 years

–          P/E ratio: under 15

With these criteria, I know I will be able to find the best 10 Canadian Dividend Stocks of the moment. This list will be now updated quarterly and showed on the side bar in the must read section.

Best 20 Canadian Dividend Stocks

In order to find more high quality dividend stocks, I had to loosen up my search criteria. Here’s how I have created the best 20 Canadian Dividend Stocks:

–          Dividend minimum yield: 3%

–          Dividend maximum yield: no maximum

–          Dividend payout ratio: under 80%

–          P/E ratio: under 20

There are obviously some overlaps with the top 10 but it still gives you more options with softer search criteria. The goal of this list is to include stocks that might be overpriced or having a higher dividend payout ratio due to specific and known situations. This can enlarge your scope and give you more options to include Canadian dividend stocks in your portfolio.

Top 50 Canadian Dividend Stocks

The top 50 Canadian Dividend Stocks will keep its original definition: this will be the highest Canadian dividend stocks on the market. These are obviously more risky for investors as the stocks will have abnormally high dividend yields and payout ratios over 100% most of the time. Trading is at your own risk in these cases ;-).

This post was a prelude to the launch of What is Dividend? Dividend investing is an amazing way for young investors to build a solid portfolio by taking less risk. This is why I wanted to create a site where you can learn all about dividends.  Stay tuned as next week, I’ll be explaining how I built my most recent niche website based on dividend investing. This time, I have created a very high quality niche website with no compromises ;-).

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April 26, 2011, 5:00 am

Teaching Finance In High School

by: The Financial Blogger    Category: Personal Finance


This is a guest post by Teacher Man from My University Money

Hello fellow personal finance readers.  I go by the pen name “Teacher Man” due to the fact that I recently graduated from university and am in my first year of teaching high school.  My partner and I have recently started up a website aimed at helping young people (with a specific focus on post-secondary students) who are dealing with ‘the real world’ of personal finance and money management for the first time.  The inspiration for our website came about when my partner and I were reminiscing about our time in university, and came to the conclusion that if we knew then what we know now, we would have been a lot better off.  Thus, My University Money was born.  Our goal is to help young adults and their families (or anyone for that matter) in their quest to learn how to succeed in their educational, financial, and career pursuits.  I have been a long time reader of TFB and would like to thank him for the opportunity to write a guest post and share some insights with a larger audience than our meagre following!

As I stated above, I have followed The Financial Blogger for quite a while now, and it was through this blog and a few others that I became aware of the Yakezie network.  This was a watershed moment in my journey through the world of managing my affairs as an adult.  The amount of knowledge and wisdom I have subsequently found on the blogs and comment boards of the Yakezie members is truly astounding.  It was only when I truly stopped to think about this that an idea came to me.

This is the first semester I have been fortunate enough to teach a business course in high school.  It is a grade 10 general business course and it gives me a lot of freedom to choose my own topics and focuses.  I had been looking forward to the opportunity because I thought that it would be easy to engage students with material that was obviously so relevant to their lives.  While it hasn’t been as easy as I expected, I have had some success.  When I first looked at the teaching materials for the course I was astounded to find the materials were terribly old, and the recommended curriculum was vague enough to be useless.  Unfortunately this is not uncommon in the education world.  At this point I set out to find some resources and put together a course that I thought would give students an introduction into the most important areas of personal finance.  Luckily my principal is very ‘hands off’ and is fine with whatever I choose to teach as long as it semi-related to business and the students are learning something!

One day after looking through yet another textbook I thought was ok, but fairly mediocre, I realized that just about every single blog in the Yakezie network held more relevant information and advice than these textbooks.  If I could somehow take out the most important ‘golden nuggets’ and channel the combined knowledge of the group, I figured I could put together a pretty comprehensive resource that was made by people more intelligent and well-educated than myself.  As a bonus, it would be a great spot for people to learn something new, and possibly debate the relative importance of certain parts of personal finance.

I have patterned my course in large part on many of the themes that TFB and the rest of the Yakezie group write about weekly.  I have also read a lot of personal finance literature and found that most personal finance books are more helpful than the textbooks currently on the market.  Perhaps the best model I have come across so far has been, “The Wealthy Barber” by David Chilton.  His chapters and general approach to teaching personal finance have been very useful to me.

Before I briefly outline what my course currently focuses on I should probably explain that if you haven’t talked to a group of grade 10 students lately you might be quite surprised at what you find.  The attention spans of today’s youth seem to be nanoseconds at times.  They are incredibly good at multi-tasking simple jobs, and equally poor at focusing on any single concept.  Without first showing them the personal connection to their immediate life you stand almost no chance of holding their attention for any length of time.  These parameters often limit the course from venturing into specifics such as the importance of mutual fund fees for example, so concepts must be general enough to be easily grasped, yet specific enough to be practical.  The eventual goal is to see just how all of you would organize the course if you had the freedom I have.  I am challenging TFB and all of his readers to put their stamp on the education of today’s youth instead of just joining the age-old chorus proclaiming that, “Kids these days don’t have any common sense when it comes to work or money.”

Here is a brief description of how I currently structure the course:

1) The Importance and Uses of Money

Money can be used to purchase things, as a store of wealth, or as capital to produce more money.  It is merely a tool.

2) The Fundamentals of Earning Money

What are the different ways people earn money?  We look at jobs, deductions from a pay cheque, taxes, renting, buying and selling for profit, and “Investment Income” which I leave pretty vague until chapter 4.

3) Budgeting and Basic Personal Banking

Sometimes I forget how taboo money is in a lot of families.  Many of these students have no idea how to manage money other than, “You spend until you don’t have any left and then you work harder to get more.”  Interestingly enough, if our government and certain individuals stuck to that basic premise we would be way better off than we are today!

The kids learn that just because a job advertises at $10-per hour, this doesn’t mean you will get $80 in your hand at the end of a work day.  They learn how to budget monthly and annually.  Finally, they learn how credit cards can be pure evil or great little tools, and we touch on some of the other options of modern banking.

4) Saving and Investing

What is the difference between putting your cash in a mattresses and putting it in a chequing account or savings account?  The kids then learn about the intense power of compound interest and how it can make them rich, or poor forever.  We briefly look at average return on investment rates of each of the asset classes.  Everyday I drill home the, “Pay yourself 10%” mantra that is cliché for good reason!

I also like to do an interesting exercise where we look at how much a pack of cigarettes a day costs.  We take the money that we would have spent on cigarettes and put it in various types of investments.  The kids are always amazed to see that they could be a millionaire by 60 if they juts put their smoking money into basic bonds.  I don’t really let them in on the dirty secret that due to inflation that million isn’t what they think it is, I prefer to focus on the anti-smoking, pro-saving lesson.

5) Insurance

How insurance works and the principles of shared risk/risk management.  We go into detail on life, car, house, disability, medical etc.

6) Macroeconomic Basics – Supply and Demand and Inflation

This is where you start to lose a lot of kids.  I just try to give them a very superficial understanding of economics so they can begin to understand the world around them.  My theory is that if I can give them the terminology, and some essentials, then learning about more complex economic issues, or just reading the business section of the newspaper won’t seem so intimidating.

7) How a Business Works

We try to look at a lot of case studies.  I live in a rural area so farms usually make for great examples of logistics, sales versus expenses, borrowing to invest, economy of scale, marketing, world demand, payroll, capital costs and some interesting tax situations.

8) “Through the Eyes Of an Entrepreneur”

As a treat (usually on Friday afternoons) the kids get to watch various episodes of Dragon’s Den (Canadian version).  I will pause the show when the initial pitch gets made so the kids have to figure out the valuation of the company and make some predictions.  This has unwittingly become a great teaching tool because the kids are so engaged!  The end of the year project is going to consist of them coming up with a product and business plan of their own, to pitch to 5 teachers/dragons.  I have really high hopes that the kids will get some ‘authentic’ learning from this that they will actually remember because of the hands-on experience.

Ideally I would like to get into some more macroeconomic stuff, but that gets pretty tough with grade tens.  I would also like to show them more about how the stock market works, but again, it seems students really have a tough time grasping it.  It’s appears too abstract to them.

So, now is your chance to directly influence the financial education that someone will be receiving!  Let me know what your suggestion is and why it is so important, and I guarantee it will be taken into consideration.

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April 25, 2011, 7:00 am

Best of Money Carnival: Spring Edition

by: The Financial Blogger    Category: Financial Rambling

Spring finally showed up a little this Easter weekend. Between chocolate with the kids and family reunions, I was pleased to enjoy some time outside… with no coat on! As the sun and the cool weather are back, we all feel the urge to fix things up. Spring, in its own way, plays the role of a new start. Let’s all get our finance back on track with this Best of Money Carnival: Spring Edition – in which I’ve gathered some thoughtful spring quotes with my favorite submissions for this carnival.

#10 “It’s spring fever.  That is what the name of it is.  And when you’ve got it, you want – oh, you don’t quite know what it is you do want, but it just fairly makes your heart ache, you want it so!” –Mark Twain

If you spend your money on anything just because you got spring fever, you are sure to be in trouble later on! How about spending money on what you value the most? What exactly money is meant for to you? Crystal at Budgeting In The Fun Stuff goes through the question Spending on What We Use the Most.

#9 “An optimist is the human personification of spring.” –Susan J. Bissonette

Being optimistic is almost always a good thing… except when it means keeping your head in the sand thinking things will work out by themselves. Having good finances ask for optimism but most of all for proactive decisions that will keep problems away. Jim wrote Most Common Credit Report Errors on Bargaineering.

#8 “All the flowers of tomorrow are in the seeds of yesterday.” –Unknown

This season is also a good time to think about the future of Ms. Earth and what will be left behind us for our kids and grandchildren. Gen Y shows us how to think green and save money at it with her post The Ridiculously Long List of Ways to Go Green to Save Money on Gen Y Wealth.

#7 “No matter how long the winter, spring is sure to follow.”  -Proverb

No matter how long you work, retirement is sure to follow! (Well, it surely will for me ;-)) But the path to retirement and the retirement itself do not have to look like winter. Mr. Money Smarts presents “Working” Retirement: Make Money Doing What You Love at Smart on Money.

#6 “In the spring, at the end of the day, you should smell like dirt.” –Margaret Atwood

Finding wealth never comes at the glance of an eye. To get out of debt or to save more is always the result of working hard on your finance. Spring is fun, but it is also a time to get to work! Matt from Matt About Money wrote Radicals Ways to Accomplish Your Financial Goals.

#5 “If we had no winter, the spring would not be so pleasant; if we did not sometimes taste of adversity, prosperity would not be so welcome.” –Anne Bradstreet

After the hard economic situation we faced, is it time to enjoy the taste of better times? The worst is over but we can still smell fear all around. How does it look like when it is time to buy a house? What will your bank ask for? Nathan wrote What Is A Good Credit Score To Buy A House in 2011 at ComplexSearch blog.

#4 “April prepares her green traffic light and the world thinks Go.”  -Christopher Morley, John Mistletoe

Like you read above, we all have the urge of fixing things up when spring comes. Just like with plants, car cleaning or healthy food, some actions to get our finance on track are better than others. Peter at Bible Money Matters suggests 10 Steps On The Road To Financial Stability.

#3 “Spring shows what God can do with a drab and dirty world.” –Virgil A. Kraft

If God gave us the beauty of spring, now is the time for us to get ourselves prettier with healthy habits! Tired of the mess ruling your lifestyle and money? MD at Green Panda Tree House presents Healthy Everyday Habits to Save Money Later.

#2 “Spring is sooner recognized by plants than by men.” –Chinese Proverb

Days or maybe even weeks before you noticed spring was coming, plants started to grow flowers and leaves back. When it comes to finance, waiting is never a good idea. Take advantage of the spring to clean it up before you notice too much dust! Joe suggests Spring Cleaning Your Finances at Personal Finance By The Book

#1 “Spring is nature’s way of saying, “Let’s party!”” –Robin Williams

To me, another good reason to party is having money put aside for retirement or rough times. What about the opportunity to have employee stock options in the company you work for? How does it work? Is it a good way to save money? Tom at Canadian Finance Blog explains How Stock Options Work?

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April 22, 2011, 6:00 am

Yakezie Challenge Time

by: MD    Category: Financial Rambling

The other day we went over the idea of blog prices going up. Are blogs the next investment vehicle for 2011? Over the past few years more buyers have emerged when it comes to buying up blogs. Have you considered buying a blog?

Let’s look at the Yakezie links:

1. Money Saving iPhone Apps @ Yes, I Am Cheap.

2. What is Portability in Estate Planning? @ MJTM.

3. Credit Card Delinquency on the Decline @ Free From Broke.

4. All About a Health Savings Account (HSA) @ BITFS

5. The European Debt Crisis is Still Alive and Kicking @ Financial Samurai.

6. Using Ebay to Teach Kids About Business @ Money Reasons.

7. One Debt Down… @ Canadian Finance Blog.

8. Saving Money and Eliminating Chemicals At the Same Time @ Everyday Tips and Thoughts.

9. Fake Credit Cards – 10 Examples of Real-Life Counterfeit Credit Cards @ Credit Card Chaser.

10. First Comes Love, Then Comes Money Review @ Couple Money.

11. Do You Use Your Credit Card Correctly? @ Saving Money Today.

12. Will we be repairing our iPods a hundred years from now? @ ERE.

13. Royal Wedding, Barbara Walters, T-Mobile, and Blog Tips @ Buck Inspire.

14. I can’t pay my taxes. What can I do? @ Wealth Informatics.

15. Why I won’t be filling out a T1213 for my Tax Return @ Young and Thrifty.

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