Weekend Reading: CBC Marketplace Edition

I had the honour and privilege to work with the CBC Marketplace team in Toronto last month to put together a story about Air Miles and its unpopular expiry policy. But then, just a day before the episode was to go live, Air Miles backed down and cancelled its expiry policy effective immediately.

The CBC team scrambled to re-write the ending and put together a fantastic show that perfectly captured the frustration of Air Miles collectors:

What viewers didn’t see was a lengthy discussion we had about how Air Miles owner LoyaltyOne, and its parent company, Texas-based Alliance Data, routinely discussed “pulling levers” to keep the level of reward redemptions within a profitable range. These levers may have included intentionally frustrating Air Miles collectors with a slow, hard to navigate website, and under-staffed call centre.

Over on Rewards Cards Canada I revealed what you didn’t see on Marketplace: The People vs. Air Miles. What collectors can expect next is to see Air Miles increase the number of reward miles needed to redeem for both cash rewards and dream rewards.

That’s why The Globe and Mail’s Rob Carrick says this is no victory for Air Miles collectors, despite demonstrating “some of clumsiest brand management ever seen in this country.”

This Week’s Recap:

On Monday I looked at Ontario’s proposed bill to ban rewards points from expiring in much the same way the Consumer Protection Act prevents gift cards from expiring.

Wednesday’s post was about preparing for retirement and understanding new spending patterns in retirement.

And on Friday Marie continued her financial planning for couples series with a look at starting to invest.

Weekend Reading:

Speaking of investing, Preet Banerjee started a video series for people who want to learn about investing, starting from the very basics:

Investing is all about good behaviour and Inc.com lists six cognitive biases that are messing up your decision making.

Too many workers are out to lunch on defined contribution pension plans, with employees expecting an average rate of return of 17.3%!

The Canadian Couch Potato has a podcast! The inaugural episode features Justin Bender and the two chat about their DIY investing service. Hats off the the segment on “bad investment advice”.

Ron Lieber asks one money question to rule them all: How much is enough?

Appropriate for the holiday season – here’s five ways to hardwire children for a lifetime of giving.

Carl Richards says to stop spending based on other people’s wealth:

“We base our decisions about how we spend our money on how we think our income compares with those around us and what we’ve spent in the past. But unless our neighbors have shared their tax returns, we don’t know their real income. Our financial decisions could easily be based entirely on fiction.”

Michael James shares his thoughts on the real reason why a big mortgage is a bad idea.

Should I start CPP early? The Findependence Hub shares some real-life examples.

Cable companies are having a laugh at our expense after CRTC forced them to offer “skinny basic” packages and now pick-and-pay channels that nobody wants.

An incredible story about how a wealthy businessman somehow hid $400M from his wife as they were about to divorce.

Rob Carrick argues in favour of ditching your car after listing several rising costs including toll roads, gasoline prices, car loans, and changing technologies. The crazy car loans stuck out for me:

“A shocking 56 per cent of new vehicle loans today have a term of seven or more years.”

Finally, top personal finance experts share their best and worst tips to budget for the holidays. I’m with Preet, tally up the amount you spend on Christmas and divide it by 48. There’s your weekly savings target for next year.

Have a great weekend, everyone!

Financial Planning For Couples: Starting To Invest

You should by now have spent some time as a couple prioritizing your goals and using the appropriate savings vehicle for your short and medium term goals. How far you need to go (your goal), and how much time you have to get there will determine the most suitable vehicle within your level of tolerance for risk. For your retirement goals you need to consider long-term investing.

Make sure your financial house is in order first

1. You have created a budget. How will you know how much you can invest if you don’t know where the money is coming from and how much you can consistently save?

2. You have eliminated your “bad” debt. If you are still paying off credit card debt that’s carrying high double-digit interest rates, it makes no sense to begin investing until you have at least brought it down to a manageable level.

3. Do you have an emergency fund in place? If your furnace breaks down and needs replacing, you don’t want to have to raid your investment accounts to buy a new one. Make it a priority to put aside some money in a high-interest savings account that you can tap into.

Financial Planning For Couples: Starting To Invest

Where do you start?

Start with learning all about equities and fixed income products – stocks, mutual funds and ETFs; investment strategies, diversification, risk and fees. Are you comfortable picking your own investments, or do you prefer to let a professional manage your portfolio? Even if you rely on an investment advisor, one of the most important rules about investing is to understand what you own and why you own it.

The more knowledgeable you are about your investments, the less likely you are to make irrational decisions by letting your feelings get in the way of your common sense.

What is your risk tolerance?

Investing success also means identifying the level of risk you’re willing to take.  There are lots of risk tolerance questionnaires online, such as this one from Get Smarter About Money (this site is also a great source for financial education) – or pick one up from your bank. Sit down with your partner to identify your individual attitudes towards risk.

You may not have similar risk profiles and you might think you can just invest according to your own tolerances. However, even though your RRSP, TFSA and pension accounts are only registered in the owner’s name (not joint ownership), the ultimate goal is a shared one, i.e. providing you with future retirement income.

If you are too divergent in your risk tolerances – one is super conservative only investing in HISAs and GICs, and the other the total opposite gambling with leveraged and high risk stocks – you may benefit from having a discussion with an investment advisor who can advise on a more balanced strategy.

How much should you invest to start?

Your objective should be at least 15% of your gross income, using the pay yourself first principle. You can certainly start with a lower amount that you know you can easily put aside and then adjust as you go along. By reviewing your budget and getting your priorities straight you can make headway on increasing your savings rate.

Make time your friend

The earlier you start investing, the more time works in your favour. Procrastinating turns time against you. It’s easy to put your retirement goals on the back burner for more pressing shorter term needs. You don’t want to end up working in your seventies because you spend too much today.

On the other hand, attempting to time the market is a foolish proposition. Investing when the “time is right” is a great strategy if you can see the future. Even professionals rarely get it right.

Investing strategies

What are the right investment products for you? What strategy should you use? Everyone is different and what is comfortable for one investor makes another lose sleep at night.

When you open a RRSP or TFSA you often have a range of investment options to choose from – stocks, bonds, mutual funds, and exchange-traded funds – and it can become confusing. This is where your investment knowledge comes into play.

You have the choice of making and monitoring your basic investments yourself with an online brokerage account. If you don’t like research and analysis, you’ll want to keep things simple with a low-cost “couch potato” strategy. You may want to hire a financial advisor to help you, especially as your portfolio grows.

There is no “best” investment strategy except the one that works for you.

Further reading in the Financial Planning for Couples series:

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