Of Government Shenanigans and Other Soggy Summer Happenings
Here’s a story about a dude named Dennis who had had a busy summer. To start, a few random financial tidbits he discovered.
In one survey of Canadians aged 35-44 90% agreed that it was important to have a financial plan in place at age 35. How many of those respondents actually walk the talk? Less than half did.(1)
Only one third of Canadians who were allowed to make RRSP contributions in 2008 actually did so.(2) Less than 28% of private sector employees have an employer sponsored pension plan.(3)
Most pension plans are now defined contribution plans where the responsibility for managing the portfolio has been passed from expert, educated professionals to the inexperienced, time deprived individual investor.
However, the really important development that Dennis was interested in was the imposition of the harmonized sales tax (HST) on July 1, 2010 in Ontario and BC. Dennis’s uncle comes to Alberta from BC to buy his favorite confections to avoid paying the extra tax. Even though some of Dennis’s friends said â€œbig deal so whatâ€ Dennis knows better. The fact is that most mutual funds companies’ headquarters are in Ontario. Therefore ALL Canadian investors will be paying HST on their investments. Despite intense lobbying at the company and association level the Ontario government has refused to exempt investments from the HST. They did not budge even when several companies threatened to move their headquarters to a non HST province.
Keep in mind that the HST also involves the federal government. Dennis has a financial planner friend whose clients agreed to each sign a letter to their MP. She also wrote her own letter on behalf of her clients. After a long while she received a lengthy email from the Secretary of Pension Reform, that although detailed did not address her concern at all. The Prime Minister did reply, by saying he would refer her concern to the Minister of Finance. Mr. Flaherty has still not responded.
Dennis’s financial planner friend is still quite upset over this because the federal government’s claim to be concerned about Canadians’ retirement is more hollow than a Halloween pumpkin. One solution the government has proposed is increasing CPP contributions. This is financial punishment for workers and will be a drag on productivity, seeing that in three decades there will be only 2.5 workers for every retired person. Presently there are 5 workers for every retired person. (4)
The imposition of the HST is a big slap in the face to all diligent savers. The only reason the government has escaped censure is that most Canadians are unaware of how skewed the system is. Increasing awareness would be a first step but unfortunately there is a lot of apathy on Canadians’ part. Dennis is disappointed that so many Canadians are indifferent.
Which leads in nicely to the next point. Many people Dennis knows retire or will retire in less than ideal circumstances. He wonders if they ever reflect and ask themselves: How did I get here?
Maybe an analogy would help. One day Dennis’s cousin Horatio whose wife was at work pulled some meat out of the freezer and decided he’d cook supper. Now he’d recently been diagnosed with high cholesterol which he could control with a careful diet.
Unfortunately the meat wasn’t labeled but he decided to proceed anyways. After it had thawed he discovered it was succulent pork spareribs a deliciously fatty meat. He decided he’d proceed anyways and made a mouthwatering curry with lots of thick gravy which he enjoyed immensely even though his wife scolded him.
What’s the point of this analogy and what does it have to do with personal finances? As in finances it really is the little things that matter. At any point in the chain of events Horatio could have made another decision. He could have put the meat back and chosen another. He could have eaten less he could have avoided the gravy. This event by itself would have little consequence. But over time it could lead to his doctor telling him he would have to go on medication to control his cholesterol.
Businesses also fail to consider how small actions add up over time. Consider a well known car dealer. If they fall short in service promises such as: forgetting to inform a customer they have moved locations, keeping a customer waiting for their car for an unacceptably long time, or tell them when they arrive for an appointment â€œSorry there’s no technician available to do the workâ€ what is that customer going to think when it’s time for a new vehicle?
Those little actions cost the company tens of thousands of dollars, not even considering the bad public relations they will get when the dissatisfied customer tells all their friends.
Dennis wished that people would take the time to map out the consequences of each action then there would be less wishing they could press the rewind button.
To look at this concept from the positive side consider this quote from Canadian businessman Robert Herjavec of Dragon’s Den and Shark Tank fame. From a penniless and bullied child he became a millionaire. He says â€Success is in the million little things you do every day. That’s what makes business hard, it’s not a one time thing you do but a lot of stuff you have to keep doing every day. Buts that’s how you build a successful business with a million well considered actions and decisions.â€ (4)
If you are thinking that doesn’t apply to you because you aren’t running a business think again. Your personal finances ARE your business.
Dennis will leave you with a provocative thought: Financial fraud exists because of impatience. Every last trouble in money is due to impatience. Let me know if you would like this discussed in a future newsletter, or if you have a real life example
1. BMO survey summer 2010 2. Statistics Canada 2009 3. TD Financial 2008 4. C. Ragan. Professor McGill University March 2010 5. Costco Connection 3rd Quarter 2010