A Money Coach in Canada

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It’s not precisely economics, but the news of the day is pretty interesting:  a Facebook group takes on HSBC

So apparently HSBC offered graduate students in the UK interest-free lines of credit … then changed their policy, after the students used the loc’s.   Whamo – a bunch of grad students are feeling the pain.  Students + feeling ripped off + Facebook = pr nightmare for HSBC.

3600 students have joined the anti-HSBC group and it’s growing by the hour.
An live protest event is being organized via facebook on Sept. 8th.

This is the first clear story I’ve heard about social networking via FaceBook resulting in challenging a company.

Most of us do what we do, in part because we need to practice what we preach. I’m no exception. I deeply desire to be as wise, savvy and strategic as possible with my money. And authentically help others to be so.

For me, part of this means being physically organized.

True confession: my receipt bin has gone all to hell, and the more full it gets, the more I avoid dealing with it. Over August, I must have accumulated at least 7 – 10 hours of work.

In short, I’ve been procrastinating.

One of the things I’ve learned from a marvellous book titled “The Now Habit” (to which I’d link, on abe.com, but don’t want wordpress to mistake this as a commercial blog!) is a trick to stop procrastinating. It’s this: instead of focussing on the end result (in my case, a cleaned out receipt bin) which can be overwhelming right off the bat, we can focus on various entrance points. For instance, one starting place could be to separate my business from personal receipts. Another entrance point could be just diving in for 15 minutes today. Another entrance point could be sifting through for the important stuff.

ExhuberanceSo, I’m committed to diving in! (I’m moving on the 3rd choice if anyone’s interested).

What are you struggling with procrastination on?

Care to join me in a “Getting Started” week?

This isn’t really a case study, but CNN Money. did such a terrific – dare I say, elegant – job in coming up with 20 timeless money rules, that we’ll hold off on the case study til next week, in favour of this. Note it’s not the usual stuff. The various rules are by the likes of Cervantes, Confusius, Coco Chanel and Augustine.

For example, here’s rule #14 based on a principle of Eleanor Roosevelt:

14. Just do it

It takes as much energy to wish as it does to plan.–Eleanor Roosevelt

Financial planning is an unnatural act. The brain is wired to make us undervalue long-term goals and exaggerate the cost of short-term sacrifice. Yet studies show that people who do even a little retirement planning had twice the savings of those who did almost none. Heed the words attributed to Mrs. Roosevelt by doing the following:
Set concrete, attainable goals. “I’ll pay an extra $100 a month on my credit card” is more likely to succeed than “I’m going to get my act together.”
Then commit. Tell someone your plan and agree to a penalty–you’ll do your spouse’s chores for a month if you haven’t saved $10,000 extra by June.

(and if you want some help on keeping your financial goals, send me an e-mail at nancy at your money by design dot com)

For the rest of the rules, visit 20 timeless money rules.

Piggy BankThanks to Natalie Dee for this!

HouseI spoke with Beatrice Scott, a Vancouver mtg. broker with Invis about the whole subprime mess. What is a subprime mortgage? Why did it cause my portfolio to tank? (grrrrrr….). Here’s what I learned.

When a person qualifies for a mortgage, the bank of course looks at the person’s credit, profession, income and downpayment. When a person doesn’t qualify for a mortgage (usually because their credit rating indicates they struggle to make their debt obligation payments) they can sometimes turn to other companies for a sub-prime mortgage.

A sub-prime mortgage is one that charges higher interest rates (sometimes significantly higher) in exchange for taking the risk with the individual. They are usually floating interest rates, that started at 4%, but now with interest rates having risen in the States are at 8%. You can imagine the pain of having your mortgage payments double, in under 5 years!

Note: I (Nancy) personally nearly got sucked into one of these when my mtg was up for renewal. I had just started my new business 4 years ago, and (erroneously) figured a bank wouldn’t be interested in me. I saw a couple very attractive sounding adverts on TV by non-bank mortgage companies who pretty much guaranteed I’d get my mortgage. It sounded reasonable, until (money coach that I am) I read the fine print carefully. OUCH! It was, in my opinion, nearly criminal. There were all kinds of hidden fees and the way the interest was structured would have left things pretty shaky for me. Thankfully, I got a mortgage broker and discovered I would indeed qualify for a terrific mortgage through a bank.

Not everyone was so lucky. In the US 20% of all people who have mortgages had a subprime mortgage as compared to 5% in Canada. There are some significant differences in the US and Canada in terms of qualifying for a subprime mortgage. The differences are the tighter rules in Canada for this type of mortgage.

In the US last year, subprime mortgages accounted for 1 Trillion dollars. These subprime Mortgages were sold to different companies all around the world. Now, those companies are in dire straights because their clients are not able to meet their payments and are defaulting. It also means the US housing market has deflated significantly, and caused a global credit crunch – ie., institutions are less likely to lend out money, since they can’t recoup their previously loans.

Case in point: The US Federal Reserve Board decreased their lending to commercial banks by half a percent.

What is surprising is that the effect on the stock markets world wide isgreater than the actual financial implication. Investor’s emotions have played a key in their reaction to the collapse of the US subprime Mortgages.

An interesting effect here in Canada was the increase in the dollar. We had our biggest gain in the Canadian dollar since June 2006. It increased all the way to 94.22 cents.

Currently Canada’s prime lending rate is at 6.25%. Before the US subprime collapse, Canadian economists were predicting that the Bank of Canada would increase it to 6.50% in September. It is now predicted that we may not see that quarter point increase.