Diary of an Angry Financial Planner

Welcome to the first official post of ‘Finances for the Everyday Canadian’.  I thought about calling it ‘Diary of an Angry Financial Planner’ but thought it better to stay positive and keep my blood pressure down so my wife doesn’t nag me.  The reason this is being posted for the everyday Canadian and why I’m angry is because I feel Canadians aren’t being educated on their finances.  Canadians are not being taught how to preserve and grow their wealth.  I truly believe that the current financial system is run by the greedy elite and is structured to hold the everyday Canadian down, sucking people dry and making them little more than slaves to the elite and our governments.  What’s worse is that we don’t even realize it because the only financial education we’ve received is from these very slave-drivers.  Ask yourself: What did I learn about finances while at school? From my parents? From the banks?  Is it the same financial education that the wealthy receive?  We’ve been conditioned to expect little, procrastinate, fear “risk,” and give up on our dreams.  A baby elephant in captivity has a chain put around its ankle and a large spike nailed into the ground so it can’t get away.  Then, when it reaches adulthood, because it has been bound its whole life, whenever it feels the tug of the chain on its leg, it stops; its mind says, “No, you can’t,” even though this powerful animal has the strength and ability to break free anytime.  And it’s the same with us! By the time we have been brought through the system, we don’t see past the “spike in the ground” (See Napoleon Hill’s book “Outwitting the Devil”). 

Now you might be telling yourself: “Wow ... Tyler, those are some strong words!”  I know, I know.  And I will try to tone it down a bit, but sometimes my passion for financial education can bring out fighting words! Stay with me here and you’ll see why.

Have you ever felt like no matter what you do or how hard you work you never seem to get ahead financially? I know I felt that way for years; I was even working three jobs for a time and just ended up owing more taxes; it felt like the harder I swam, the faster I sunk.  If you have ever felt this way, this blog is for you. 

Over the next thirty days, I’m going to try and hit as many topics as I can and then every Friday afternoon I will post something meaningful and practical for you and your personal finances.  Then YOU will have the weekend to build a plan and implement it in your own financial life.

Whenever I sit down with a family, the first thing I ask them is: “Have you ever heard about the ‘one-percenters?’” Most of them have no idea what I’m talking about but in the world today about 1% of the population have all the true wealth and the rest of us “99-percenters” fight over the crumbs that drop from the table.

Please don’t take this as an exact statistic, but you get where I’m going with this; most people don’t have real wealth in this world, even in Canada, arguably the richest and most abundant country in the world.  We as Canadians are always topping the charts as the most desired place to live, the most stable banking system, the friendliest people, etc, etc .... Oh Canada.  But then why have so many fallen through the cracks?  The answer to that question, in my opinion, is with another question: Do you think the 1% think the same way about money as the 99%?  Almost everyone says no, hopefully you did too.  The third question then is do you think the 99% get the same advice and information about their finances as the 1%?  Almost everyone says no again.

The real divide between the middle class and the wealthy is not money ... it’s knowledge.  We have sayings like “they come from old money.”  How did money age?  The Canadian mint almost always takes old coinage out of circulation!  What the saying means is that for generations the wealthy have been able to pass on their wealth to their heirs and more importantly, they have passed on their knowledge about how money works and wealth is generated.  The most important thing the wealthy teach their heirs is how money can WORK FOR THEM.

How many of you have stayed up late worrying about money? Worrying about how you’re going to pay those bills? How can I work harder to earn more money?  There lies the problem.  You’re wondering about how YOU can work instead of wondering how your MONEY can work.  It’s actually a philosophical problem that you have, not a money problem.

We have all heard that ‘Knowledge is Power’ but as a mentor of mine, Ed Mylett, told me: this statement is false; knowledge is not power – knowledge is potential power but if no one acts on that knowledge then nothing is released into the world and no power comes forth.  Therefore, ‘Knowledge is power when actualized.’  Knowledge becomes power when people take action with that knowledge!

Sorry – I got a philosophy degree before I became a financial planner so hopefully this isn’t boring you. Hopefully, it’s inspiring you to become more knowledgeable and then act upon that knowledge.

DISCLAIMER: READ NO FURTHER UNLESS YOU AGREE TO THIS:

I listened to Kevin Trudeau’s ‘Your Wish is Your Command’ CD series.  Yes, Kevin is controversial, but he makes a lot of sense when he talks about the “teachability index.”  The teachability index is a multiple scale from 1 to 10 based on two principles:

1.       First, you need to have the ability or yearning to learn.  The desire for knowledge.  On a scale of 1 to 10 how much do you desire knowledge on building wealth? Hopefully 10.

2.       Secondly, you need to have an ability to change.  Albert Einstein said the definition of insanity is: “doing the same thing over and over again and expecting different results.”  Have you changed nothing in your financial practices but kept hoping something would give?  Have you gone to the same job day in and day out hoping your paycheque gets bigger?  Do you feel now that might have been insane?  Sometimes we get stuck in such a rut we don’t see the daylight anymore.  We don’t see how to get out, so we just keep plugging away hoping things will change or work out.  Guess what?  That never happens.  Knowing this now, what would you say your ability to change is on a scale of 1 to 10? Hopefully again it is a 10!

Now to see how teachable we are, multiply your two scores: desire for knowledge X ability to change = teachability.  If you had 10 X 10 = you are 100% teachable.  If you had 5 X 5 = your only 25% teachable.

I would say if you are anything under 75% teachable you should seriously stop reading this blog and wasting your time.  You need to go and figure out how to work harder for your money and then keep doing the same thing over and over again.  Reading this would be a waste of time because man, you are going to be busy!

If you are still reading then maybe you will be ready to implement some ideas into your financial planning.  But first we have to understand why we need to have a financial plan.

Another mentor of mine Xuan Nguyen loves to say: “people don’t plan to fail, they just fail to plan.”  Let’s be honest, how much time have you really spent learning or planning what your financial future will be?  Have you ever thought of how you will pay the bills and keep up your same quality of life once you retire?  Woody Alan said, “Showing up is 80% of life;” so many of us have just failed to show up to the financial planning party.  The everyday Canadian spends more time planning their summer vacation than they do for their entire financial future.  That being said, even if we give our 80% by showing up, the other 20% isn’t even taught to us and when it is, it’s a myriad of bad advice (most of it fear based) that keeps Canadians stagnant in their financial positions.  But don’t be afraid!  We’ll get there together.

Evelyn Jacks, president of the Knowledge Bureau, teaches her future financial planners that there are three main documents you need to focus on for your financial future:

1.       Your Notice of Assessment: this is the bad boy you get in the mail after filing a tax return.  It has a number of stats on it like how much RRSP and TFSA room you have available and most importantly how much tax you have paid.  (The goal of this document is to stop paying taxes! Legally, of course.)

2.       Your Financial Plan.  When you were planning that great vacation down to Disneyland for the kids, did you just jump in any plane without worrying about where it was headed?  What if you ended up in Siberia instead of sunny California?  I’m sure the borscht is great there but - come on - it’s not going to be fun for the kids (my heartfelt apology to any Siberians I may have offended).  But as Canadians we don’t want to be impolite, so far be it from us to demand more from our financial planners and banks and accountants.  We just jump in any old plane dangled in front of us and hope it will get us there.  What did Albert Einstein say again? ....

3.       Your Net Worth sheet.  This is the terrible piece of paper where all your assets are on one side and all your liabilities on the other.  Pretty simple math one minus the other and let the proverbial chips land.  Assets good, liabilities bad.  You want this number to be positive and to have it keep going up positively each year.  So stay positive and we will get you there!

Have you ever heard of the X-curve? Again this is one of my mentor’s (Xuan Nguyen’s) favorites:

This is the basis of all financial plans.  So let me explain what you are looking at:  The green line at the top is basically your standard of living: it’s the vacations, the house, the car, the movie channel, etc.  However you choose to live your life, you need to have the income to support it.  In fact, right now you are working your arse off in order to keep up to that green line.  The red line would be if you had no income and lost it all.  It would be like a bad country song.  So no matter what, you need to make sure there is something there paying you to keep your life style up at the green line and avoid making any country albums; unless of course that’s how you make your income.  But for the rest of us, that often means making sure there is a plan in place to catch us when we’re down.

Now the blue arrow is the Law of Decreasing Responsibility: presumably you pay off your mortgage and other debts, the kids move out and are educated, life hopefully slows down a bit and the pressure is taken off; big time.  Now you don’t need as much as when you started out.

The grey arrow is the Law of Increasing Wealth.  Finally, the sweet spot!  We need to make sure that while those responsibilities are being taken care of, we are growing wealth so that one day we won’t have to worry about ANY responsibilities and they will all be taken care of.  You see on the far right it says wealth and Net Worth – that means that over time, your net worth sheet has shown that your liabilities have gone down and your assets way up! Won’t that feel amazing?

Congratulations!  Now that I’ve taught you about the three most important financial documents and the X-Curve, you now know more than the average Canadian about financial planning.  Scary isn’t it?

I know you are reading this feeling, “Thanks a lot Tyler!  All you’ve told me here is WHY I need a financial plan you haven’t told me HOW to make a financial plan and get to all my lofty goals and dreams.  Relax, young padawan.  The road to the lightside of finances is long and requires discipline.  The darkside is easier but less powerful and you usually end up in a dumpy government subsidized apartment working as a Walmart greeter, **enter the Simpsons shudder** uhhhuhhh...

We need to understand the WHY before we can learn the HOW; because if we don’t know the WHY, we can’t make the tough decisions of HOW, and we soon lose focus.  In fact, I challenge you to write down WHY you want to become more financially literate.  WHY you want to achieve certain goals, WHY you want to retire, WHY you want your money to work for you instead of you working for it, WHY you want to think and act like a “one-percenter” and have wealth rather than acting and thinking like the other ninety-nine.  WHY is the only thing that will move us through the HOW.  Because the HOW can be a lot of work.

Tomorrow find out how the banks and major corporations are raping and pillaging your savings and how to end it.  The Vikings have nothing on the banks; just look at the old Capital One commercials.  We will arm you to the teeth!

If you would like to speak with me more in-depth about building a financial plan, please click here.  But don’t waste my time or yours – only click here once you’re ready to move forward; both of our time is valuable!

If you aren’t quite ready to move forward with a plan, scroll down and subscribe so you can read the next blog on finances till you’re ready to move forward.