meandering wildly johnath in blog form

Everyone has seen the commercial where the progressive insurance guy tells you that people switching to progressive saved an average of $332 on their car insurance. Except that you see similar commercials from State Farm, Geico (albeit with a more fetching mascot) and probably several others.  How can this be?  Who really offers the lowest rates?

The fact is that none of these commercials tell you a damned thing about which insurance company will offer you the lowest rates. What they tell you, all they tell you, with remarkable consistency, is that it takes an average savings of $300 to get people to switch insurance companies.

They keep running these ads because they count on the public not to know math.  I’ve no doubt that this is a successful campaign for them too.  Hug a math teacher today.

So okay, you’ve got RRSPs basically figured out. The problem is that even once you understand that an RRSP is basically just a license to invest in whatever without paying taxes (at least, for now) there’s still a bunch of mystery there. It’s a very jargon-dense environment, and for someone who finds the whole topic sort of foreign, a “developing markets small cap hedge fund” is a great big barrier to entry. Besides which, you don’t know how you’re going to find any money to put into one of these things, or how much would be enough anyhow. In a way, you’re worse off for having read my last post (sorry about that) because now you get how simple things ought to be, and you’re STILL out in the cold.

In this post, which comes hot on the heels of the last one only because of the near-expiry of this year’s RRSP deadline and because I like you, I’ll try to give you some suggestions. But you have to promise you won’t sue me, because I might-just-might make actual recommendations, and they might not be right for you, so this is the part where you really have to make your own call.
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[I am, if not my worst critic, at least my most diligent, and so I am now quite convinced that my last missive on the subject of personal finance was sorely over-ambitious. There was enough there for at least 4 posts, and I crammed it all in. Instead, I’m going to try to lay this stuff out more smoothly, because I really do think it’s important. Let me know whether I’m making more sense.]

Cutesy giggles about not wanting to grow up notwithstanding, when you leave school and start working full time, I believe you reach a point where you can be reasonably expected to take some ownership over your life. Paying your own bills, washing your own laundry, these are the things that distinguish us from lemurs. There are, of course, plenty of good reasons to temporarily take a pass on these: people living with their parents to help save up for a downpayment are being relatively grown up about their lives, for example, even if they aren’t paying their own bills just yet. But in general, we expect people to sort of become adults. The problem with this expectation is that unlike driving, or parenting, or trigonometry, there is not a coherent attempt during most kids’ lives to teach them anything about money, and since the same was largely true of our parents’ generation (perhaps moreso), a lot of people get to be adults without knowing much about how to manage their money or how to save for the future. The problem is that this uncertainty evolves into embarassment, which becomes denial and refusal to do anything about it, and that’s no good because eventually someone has to pay the bills, and this thing where we just hike the Canada Pension Plan premiums by 5-10% every year isn’t going to keep working.

What I’m going to try to do here is just talk through the idea of an RRSP, in the hopes that you’ll at least come out the other side confident that you know what an RRSP is, so that you can start thinking about how you’re going to go about building one. There is good discussion to be had about the relative merits of RRSPs vs. other investment possibilities, but none of that can happen until we are working with some shared understanding about the ground rules, so don’t sweat that. As I mentioned above, I’m also not going to try to offer advice on which products to choose here, since it takes us back down the road of a post too long for any mortal to read. So here we go…

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Maybe it’s the Chianti talking, but I’ve got something to say about investing: get your plan sorted out because I have exactly zero interest in paying for your retirement. Every day you decide not to bother, or say you’ll think about that in a few years, or complain that other things are more pressing, is a day you’re leeching off my taxes, my CPP, my hard work.

And the worst part is: it’s not hard to be smarter than almost everyone. You can sit down in an hour and get yourself set up to do better than top-dollar money managers.

All you have to do, and it’s a tough pill, is get used to the idea that it’s not very exciting you don’t get to brag about it.

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