Wealthy Barber - Chapter Three intermission

Now, anyone who's been riveted by my ongoing Royston Notes version of the Wealthy Barber may wonder why I am choosing to have an intermission now, only two chapters in.

"Hurry up, I want to get rich!" I can hear you yell, some of you poised with a calculator and bank statement handy, waiting for me to distill the pearls of wisdom from this best-seller so you don't have to read it yourselves.

Slow down cowboys. Truthfully, Chapter 3 is boring as shit. It's about insurance and even I have to admit that trying to make any talk about insurance interesting is painfully hard. I've been trying to think of what to say in an entertaining way but uggg.. insurance. It's evil, like fake sugar evil. Sure, the argument can be made that, like cops, you will want it when you need it. Until then it just feels like you may as well burn your money that could be better spent investing. At least that's how I feel. I can guarantee I spent more on car insurance over my life than any amount I have had to pay out due to the accidents I have had.

The Wealthy Barber Crib Notes Chapter 2

An ongoing half-assed summary of Canada's most famous financial advice book.

Chapter 2: Create or update your will.

Especially if you are married, get divorced, have kids, own a house or have assets. Don't get a will if you have nothing of value.

Yes, you are going to die and your mortgage will still exist. Your car payments will still exist. Your debts will continue to exist and charge interest. Make it a bit easier on everyone by designating where your shit will be going and who will be taking care of it.

But what about insurance, you ask?  spoiler alert; Chapter 3 next!

The Wealthy Barber Crib Notes Chapter 1

For those with perhaps a passing interest in finances (pun intended), you may have heard of the book The Wealthy Barber by David Chilton. It's not quite a Finances-For-Dummies book but it became quite popular for bringing the highly complicated world of Finances (anyone seen The Big Short?) down to the Every-man level.

It's nothing ground-breaking in the literary world. In fact, it reminds me of a lot of similar self-help books that frame their lessons in the third person. The reader is simply an eavesdropper on a conversation based in a barbershop which conveniently avoids any other intrusions into these lessons. There are some bad jokes, stilted attempts at character development but again, it wasn't meant to entertain but inform.

It was written in 1989, back before the Internet, The Clintons and all that Y2K nonsense. However, the advice probably still applies today.

I say probably because I haven't finished reading it. I am on Chapter Three. But seeing as how I am morphing this blog from a mortgage-based to a financial-based, I am going to condense the chapters for you in The Wealthy Barber to simple one sentence summaries.

Chapter 1 Summary - Save 10% of your earnings.

That's it. I'm not going to get into how to save 10% other than to say you should have a savings account that you don't access for funds and then put 10% of your paychecks into it.

But what actually is 10%? someone might ask.

Take that net pay amount on your check and move the decimal point over one. If you made $100.00, 10% is $10. If you made $1354.00, put aside $135.40. You can also google 'what is 10% of 687.99?' and you will get an answer.

Technology can be great.

You can finally use that watch your grandma gave you
for your 10th birthday!

Anyways, that's lesson one. And like the Wealthy Barber says to his interested parties; come back next week and I will tell you lesson two.

2017 and still no rocketship Or Still broke after all these years.

It’s been an amazing year, pop culture news be damned. A lot of people died. A lot of people were upset and a lot of people never stopped being upset. Eventually, they will all die too as will those who weren’t that upset to begin with.

I finally got married the right way, finally pushed out of my comfort zone in work and leisure. I still found last year I was peculiarly preoccupied with proper lawn care, the SpaceX launches and how to save a buck or two on the smallest things. I continued to compare prices for groceries, popped in on the occasional garage sale and still went to wherever the price of gas was one cent cheaper. For me 2016 investing went as far as a quality pair of new sandals which I chickened out of wearing at my wedding, instead relying on a 10 year old pair of reliable work shoes that still had the sheen to them.

Missing my old 90s grunge boots...

I like to believe I’ve sacrificed nothing in trying to live within my means over the years; I’ve been fortunate to accomplish a lot of dreams that didn’t involve needing cash to do them. My latest accomplishment was falling in love and marrying the most amazing woman to share my life with, both the ups and downs, the highs and lows. We work hard together at providing the right atmosphere for our children as they grow and learn, no matter how empty our fridge has been over the years. For us, money is a means to an end and there is no end in sight.  

New News is Old News

There has been a slight panic in the mortgage industry in the first week of October when the Canadian federal government announced new regulations upcoming to make it A) harder for homebuyers to buy houses and B) more expensive for foreign homeowners to sell houses.

To put these two main points into consideration, here is my very simple explanation.

A) Qualifying Rate- Will now be based on the benchmark of a five year fixed rate. Benchmark rates are generally an average of lenders qualifying rates and typically are about 1.5% higher than the best rates a lender will give you. So, if you qualify for a mortgage at 4.5%, most likely you can get the loan for 3%.

What this means - Before, some lenders were only checking to see if you qualified based on the lesser number and rewarding you the mortgage. Now, all lenders will require homebuyers to be able to pay back a mortgage as if they were paying 4.5% interest. That doesn't mean you will have to pay 4.5%, it only means if the rates went up to 4.5%, you have to prove you could pay that at the end of your five year term.

What you can do - 1- after you get your pre-approval, don't go out and find the most house you can possibly afford. I tell this to all my clients anyways but most still do that. Look for what that suits you, not your pre-approval.

2- Haggle. ie; lower your offering price. Check out your local assessment website to see what the gov't believes the house is worth. Check out similar sales. If you qualify for $250K and the house you want is $250K, offer $220K. Real estate is not set in stone. Get the right price to hedge against future interest rate hikes. Too many times I've seen panic buying because someone 'really wanted that house'. We live in an impulse buying world right now but real estate, and the hundreds of thousands you will be on the hook for is not meant for impulse or panic buying.



B) Selling your Home - When you sell your home, which for most Canadians is their principal residence, you don't have to declare that income on your tax return and pay taxes on it. Now, if your home isn't truly your principal residence, you will be paying tax on the income received from the sale.

What this means - Before, foreign owners could purchase a home in Canada, say it was their principal residence and then sell it for a tidy profit because we, as Canadians, don't really check up on what exactly is considered a principal residence. If you might recall, this became a real issue for Mike Duffy, Conservative Senator, who listed his property on Prince Edward Island as his principal residence but actually lived mostly in Ottawa.

So, the loophole here was that foreign owners could buy a house in Canada, state it as their principal residence although they may only actually be in Canada for two weeks of the year. The house could sit empty for the other fifty weeks. They could then sell that house and not have to pay any tax on the sale. While this doesn't change the specifics of foreign ownership, it makes it no longer as lucrative for 'house-flippers'.


So, that's my quick takeaway from Monday's announcement. For most of you that read this, there is no real need to panic. I think as more people start to make offers better suited to their future income it might even bring real estate down a little. Not a lot, but a little. Which in the end, is good for home buyers.