Let’s Talk About Country Pricing

cost of livingThis morning, Maclean’s released an article titled, “Canadians pile up debt faster than anyone in the world“.

I don’t know about you, but I am so fucking sick of reading these sort of headlines.

Don’t get me wrong, I love reading Maclean’s, and they are not the only offenders. For months, every week there has been a new article published by a major news source about Canadians’ infatuation with debt. Painting Canadians as weak minded, impulse driven, irresponsible consumers who can’t get enough of our large homes, gadgets, RVs, clothes, and just general lifestyle inflation. I am sick of the victim blaming.

May I introduce to you, the concept of Country Pricing.

CBC News did a piece in 2013 explaining country pricing which is linked here, but country pricing is the concept that manufacturers can set prices at vastly different prices depending on what each country’s population is willing to pay for said item.

Here is the best example of Country Pricing. I grew up in the Niagara Region, and lived there until I was 18, and still travel there frequently. For years, (until our exchange rate became so poor), it was extremely common for locals to drive across the border to do their groceries. Hell, my husband even did this for years. Why? Because prices were significantly cheaper in the United States. However, it isn’t just groceries. One quick Google search and you can see that everything from clothing, electronics, household goods, cell phone costs, etc. are usually priced cheaper in the United States.

It is bullshit to put 100% of the blame on Canadians consumers for being in debt, when higher costs of living were not something we signed up for. Stagnated wages are not okay. There are higher costs of goods, just because companies can, and will do it. 

Fruits and vegetables, warm clothing, a cell phone, baby products are all necessities for me to live, unfortunately. And because it is a necessity, I have to pay any price that some goods sell for.

I didn’t want to rant and I also don’t want to be seen as an anti-government whack-a-doodle, however we need to stop talking about Canadians being in debt and being painted as irresponsible, when we should be discussing new ideas and how we can help consumers to create a better Canada. Of course there are always going to be some people who are reckless with money and have poor personal finance skills, but we need to look at the whole picture.

Personally? I’m also trying to purchase things second hand more, purchase some large ticket items with friends, (for example, you can share a lawnmower), and have a strong sharing economy within my social circles.

Let’s start discussing ideas instead of pointing the finger at Canadians who are just trying to stay afloat.

Reduce Your Daily Exposure to Advertisements

I love talking about personal finance and in my day to day life I really pride myself on being a saver. I pride myself that I can’t be pressured by sales people, or guilted by friends into purchases. It just doesn’t happen.

However, I’ve been thinking lately. The things that I do have to purchase… Cleaning products, consumables, children’s products, etc. How much of the purchases that I do make, have been swayed by clever marketing? How much have I been conditioned to believe certain brands are superior?

Last night while researching, I quickly found an interesting article in Psychology Today, linked here if you’re interested, which illustrates that it doesn’t matter how strong willed you believe you are, some of the marketers’ message is still being received. Even if it is just brand recognition, it’s still a win for marketers.

My immediate next question: “So what can I do about it?”

I have the joy of raising two beautiful little boys and I desperately want to instill good habits in them, so the following steps are what I am trying to do for my family.

(Fun fact: brand loyalty can start as early as two years old. This topic is more important than it may seem.)

Reducing Ad Exposure Digitally

  1. Unsubscribe from email lists as they roll into your account. Hit unsubscribe, and delete the original email immediately.
  2. Get a quality ad blocker on your computer. Some are free, some are not. This is really whatever you prefer.
  3. If you watch Youtube, unsubscribe from sponsored Youtubers such as lifestyle YouTubers immediately.
  4. Limit time on, (if not abolish completely), time spent on social media. Social media is awful on so many levels, but I’ll discuss this further in the future.
  5. Don’t mindlessly shop online. If you absolutely need something, great! Go nuts. But don’t window shop out of boredom.

Reducing Ad Exposure in Real Life

  1. Cancel cable. For every 1 hour of television, 13 minutes and 25 seconds are ads. Plus, is it just me, or is product placement everywhere nowadays?
  2. Opt for reading books instead of magazines.
  3. Shop for whole foods on the outskirts of the grocery store, (fruits, vegetables, bulk foods, fish), and avoid the processed foods in the aisles.
  4. Or, if you can, grocery shop online to avoid this dilemma altogether!
  5. Make more things from scratch at home. (Like, soap for example). Bonus points for using a glass container, with no labelling on it.
  6. Listen to audiobooks, podcasts or music while in the car instead of the radio.
  7. Go to war on physical junk mail and do your best to stop it from reaching your doorstep. The book, “Zero Waste Home”, outlines steps you can take in order to stop your home from receiving junk mail. Check it out at your local library!
  8. Don’t take free products just because they are free.
  9. Avoid wearing clothing that has a huge brand logo on it. You are not a walking billboard.

If anyone has any other tips on how to reduce exposure to advertisements in day to day life, I would love to hear them. 

You Don’t Need a Brand New Vehicle

I need to get something off my chest.

The average Canadian does not need to purchase a brand new vehicle.

We as a society need to get it out of our heads that purchasing a vehicle new is better, safer, more economical, etc. It is so incredibly wasteful for not only your wallet, but also the environment.

1. Vehicles are not an investment.

It’s no joke that vehicles depreciate the second you drive them off the lot. Without getting into the specifics as it varies heavily from vehicle to vehicle, look into the difference between a 2018 model vehicle of your choice vs 2017. Below is a handy graphic just to illustrate my point:

Vehicle Depreciation

2. You are not technically the owner of the vehicle… Yet.

If you purchase a vehicle from a dealership lot, it is likely you will have a lien holder on the vehicle, so the vehicle is not really yours. Just like with a mortgage, it belongs to the bank. To put it in perspective:

“A lien becomes the legal right of the creditor to sell the collateral property of a debtor who fails to meet the obligations of the loan or other contract. The property that is the subject of the lien cannot be sold by the owner without the consent of the lien holder.” 

In addition, any insurance settlements would go immediately to the lien holder before you see a dime. For example, if your vehicle is written off, and your insurance company gives you a cheque for $3000. However, the remaining loan on your vehicle is $4000. You don’t receive any of the money because the bank takes it and pays it to the lien holder immediately. In addition, you still owe the lien holder the remaining balance.

I cannot stress how often this scenario happens. 

For example. My vehicle is worth approximately $8000, while my remaining loan is approximately $14,000. In the event your vehicle is deemed a total loss, your insurance company gives you the Actual Cash Value of your vehicle. Not what remains on your lien. 

3. Used vehicles can save you so much money in the long run.
Used vehicles depreciate slower than new vehicles and the insurance tends to be cheaper because lower actual cash values means a lower risk. (Don’t forget to shop around for insurance however). Of course there is always the risk of purchasing a lemon, but make sure to buy used from a reputable dealer. Buying a vehicle online, can pose a lot of risk when the seller doesn’t have a reputation to uphold.

4. Most people buy bigger vehicles than they need.

Unfortunately many Canadians do tend to purchase vehicles that are bigger than what they need. It’s easy to fall into the, “what if?” trap.

What if I go camping? What if we have more children? What if I need to lug a 300lb bear in my trunk?

However, if you are able to purchase your vehicle outright, (in my opinion), you are more likely to purchase a vehicle that suits your needs.

Thanks for sticking around until the end! Before you think that I’m crazy. Imagine for a second how nice it would feel to not have a monthly car payment (and the interest associated with it). Imagine how nice it would be to not have to carry collision coverage because you don’t have a lien holder on your vehicle. Imagine not paying an arm and a leg for gas!

I know I would enjoy having an extra $400/month. How about you?

10 Steps I Am Taking to Control My Finances

I haven’t posted in a while because I have busy with studying for my first exam through online university and writing exams. I am finally done! And I highly recommend Athabasca U to anyone who is considering pursuing a higher education but just can’t commit to a tradition 4 year program.

Anyways! I have been thinking a lot about my determination to get out of consumer/student debt and I have compiled a list of the 10 steps I am personally taking in order to get out of consumer debt.

Step 1: Writing down all of my debts, the amount they carry and interest rates.

Step 2: Tracking all my monthly expenses for an entire month and onwards. Also, seeing what I can get rid of in order to lower my monthly commitments. (Started in October 2016)

Step 3: Tracking all variable expenses over 3 months to see where I can trim the fat. The biggest difference was my husband’s boss actually had a spare coffee maker and we’ve both started making coffees at home! I’m already amazed at the savings. Also, children’s activities can be extremely pricey, so I’ve had to start planning better.

Step 4: Kept all grocery and food related receipts for two months so I could take an honest look at my spending habits. This step was actually the hardest because it forced me to be extremely honest with myself and my snacking habits and how much they were actually costing me. I had to accept that you know what? I LOVE popcorn, so I’m just going to buy the Costco sized bag at the beginning of the week and accept who I am.

Step 5: Honestly had to figure out what was important to ourselves as individuals and the family. I realized some of the things I care about and are willing to spend money on are: pet food, vitamins, quality shoes, contact lenses, etc.

Step 6: We made a budget! I don’t like categorized budgets; they just don’t work for us. So we took our projected (monthly income * 0.85) – monthly expenses = monthly budget. I also update a whiteboard in the kitchen every morning so my husband and I can both easily see how much we have spent per month and how much we have left. Also, although I’d like our savings to double to 30%, that is unfortunately a goal that will take time as our debt total is too high currently.

Step 7: We went through the home and sold/donated what didn’t bring us joy, what we didn’t use, etc. We plan on doing this a few times but I’ve sold children’s clothes, maternity clothes, a makeup bag (?!), baby carrier, longboard, motorcycle jacket, etc. It’s incredible what people will buy. Bonus points if you put extra money earned from selling possessions directly on your debt. We plan on doing this seasonally to try to discourage clutter.

Step 8: We are planning for our upcoming expenses. Christmas, husband going back to trade school, and upcoming home ownership are all things that have to be prepared for.

Step 9: We are still saving an emergency fund. Since we don’t currently have 6 months worth of expenses in a savings account (yet!), I am currently putting 10% of monthly income into savings which will inevitably be the emergency fund, and 5% of the savings directly onto debt. For clarification, we are using the Debt Avalanche Method in order to get out of debt. This may change in the future but for now it works.

Step 10: Remembering our why. Actively trying to get out of debt takes a lot of emotional effort and it takes a lot of sacrifice. For us, it just comes up naturally (a lot!) but I can’t wait to get out of debt so I can have the financial flexibility to a small town, have a garden, solar energy and a dog.

Rewards Programs Aren’t That Rewarding

loyalty-rewards-cardsThere are very few absolute truths in the world; death, taxes, and everyone likes free things. This would explain why 90% of Canadians have loyalty reward cards, and a surprising 40% have at least 4 rewards cards! While it can feel great to see your points add up, and the bliss you experience when you can finally collect a reward – I don’t personally use them because I feel that the cost does not equal the reward. Here’s why.

Loyalty reward cards encourage consumerism. In my personal experience, loyalty reward cards encourage spending. This is particularly problematic because they encourage spending at one single location. Take groceries for example. I have heard people say countless times that they shop at X store because of Y benefits. But if you commit to this mentality – how likely are you to shop around for deals? Read flyers? Find the best price? You’re not.

The benefits typically aren’t that great and you can easily lose more money in the long run. From what I have seen on the Canadian market, the rewards you can receive aren’t that great and not worth the hassle. It can take months, possibly even years to see any sort of benefit. For example, with Shoppers Optimum points, you earn 10 points per dollar spent… However, for the first tier of rewards, you need 8000 points (aka spend $800), in order to save a measly $10. It’s just not worth it.

They’re often tied to credit cards. Full disclosure: I loathe credit cards. I have one in the event that I need to rent a car/hotel/parking/etc but they’re awful. I feel that even the most disciplined people can struggle with using a credit card correctly (ie paying it off in full and never carrying a balance) – which is why I personally feel that it’s better to ignore them altogether. Plus, who in good conscience can charge consumers 19.99%+? Pure robbery.

The “rewards” can change at any time without the consumer’s consent. Remember the Air Miles fiasco that happened a few months ago? In 2016, Air Miles realized that it was bad business having unpredictable liabilities as they couldn’t predict when consumers would cash their “miles”. To combat this, they implemented a rule that miles expire after 5 years… And Air Miles consumers collectively lost their minds. And even worse, a lot of people ended up with garbage they would not have wanted in the first place. Unfortunately, rewards programs can change without notifying the consumer which could lead to a headache later on.

All of this being said: I’m definitely not perfect. I have 3 rewards programs cards currently in my wallet right now. But personal finance is about progress and not perfection, right?