Reminder to those who use TFSAs

It's almost end of the year, if you plan on withdrawing money out of your TFSA temporarily for a specific purpose, do it in December otherwise you will end up having to wait another year to get the contribution room back.

This is especially important for those of you that plan on paying your December credit card bills in January with money withdrawn from your TFSA. With all the holiday sales out there right now, it becomes very easy for us to end up spending more than what we have in the bank. It is little things like that sometimes that gets you! BUT since I know you are all such prudent folks, you will probably not need to take out money to cover your bills in the first place, because you would have kept enough floating cash in the bank. See, another reason to keep a safety net in your bank accounts.

How easy it is to end up in the above situation you ask? Easy enough, Johnny enters his nearby electronics store and sees a beautiful LED flat-screen. MSRP normally is $2,999, now it's on sale for $1,999. With such a great deal he bought it with his VISA card, it is now January 21st 2014 and his bill is due, combined with the typical monthly expenses and Christmas gifts he bought his bill is at $3,300. Although he keeps a $1,000 in the bank at all times and makes $3,200 a month after taxes, he only has $2,100 available after his car payments, insurance, and mortgage. Now we are looking at a shortfall of $1,200 ($3,300 – 2,100) that needs to be covered from somewhere.

-TT

P.S. - If you have not taken advantage of TFSAs, do it! It doesn't have to be an actual savings account!

The Ever-Present: Fraud

It is something we all hate to deal with, yet many of us don't seek to educate ourselves on it. There are of course many types of frauds out there and I won't attempt to list them all, criminals are so innovative these days I reckon there are probably several new schemes created everyday! Some of them are not so ingenious, they will simply try to trick you into meeting them and beat you with a baseball bat before taking your wallet. *cough cough* Kijiji... 

Most of the schemes are quite obvious, but some of them aren't. Here's a good website I came across loaded with information you should check out when you have time. I believe there is even a video interview in there with the Better Business Bureau (BBB) in one of the pages. They actually had a TV series at some point a few years ago.

http://www.fraudsquadtv.com/index.php

On a side note, unrelated to this page: beware of a new type of computer virus. This one mimics a legitimate Adobe/Chrome update and it looks quite real I must admit! As much as I hate giving them credit for their work ;) Read more/screenshots here: http://www.zdnet.com/fake-chrome-adobe-flash-updates-7000022123/

Key things to look for in a phishing type virus setup:

• Spelling errors
• URL or "address bar" may display an address contrary to the expected
• If it throws a bunch of error messages at you with messages that are meant to intimidate you into installing something
• Logo looks odd, like the fake Chrome logo in the above picture
• If you won simply by visiting a website
• If you have to open a document and it has an ".exe" file extension

Let's practice safe browsing!

-TT

FREE Course on Value Investing

Sorry for the long interval between articles folks, I have been extremely busy lately... to make it up to you all, here's a free course I found on Value Investing. The course videos will also introduce you to the idea of stock markets, how to evaluate a company to see if it's worth your money, along with other useful topics.

Here's the link, I have not gotten a chance to go through the whole course yet but it does work and all you have to do is set up an account with Udemy. No hidden fees as far as I know, and I don't make any money off this for those who may be wondering!

https://www.udemy.com/value-investing-code/?sl=E0IfdV5SVw%3D%3D

In case you haven't been paying attention to the market conditions, it seems the stock markets are rising and will continue to do so for quite a while. Sure there may have been speedbumps along the way with every announcement or minutes released from Bernanke in the past, but it always recovers each time. The market is clearly feeling more confident about the future. It is time to learn about stock investing! 

-TT

Clean, Super Clean, Ultra Clean...

Alright so I think it's time I start spreading the word out there, higher octane DOES NOT necessarily equal better performance NOR is it always equal to treating your car's engine! Use what your vehicle is rated for in its owner's manual.

What Is Octane Used For?

Long story short, it is used to prevent fuel from igniting too early and at the wrong time. Due to sophisticated engine technology nowadays, some are designed to operate under higher compression in order to get more power. A problem then arises, when the fuel is compressed too much it may ignite itself too early. When it ignites at the wrong time, you end up with a variety of problems such as blown pistons, "pinging" noises, and bent or even melted valves inside the engine! For those less technically inclined, it means major bad news! The higher the compression of an engine, the higher the octane it requires in order to resist unintended ignition.

What Happens When You Put A Higher Octane Than Required?

Very likely you will get LOWER performance, because it is now harder to ignite the fuel since high octane fuel is designed to operate in a higher compression situation. You may feel like your engine is smoother, but that's because the ignition isn't as powerful as it should be. To add insult to injury, your electrical system takes a toll because the car's computer has to force the spark plugs to work harder to make that ignition happen, by sending more electricity to the spark plugs. Oh and of course, your wallet suffers too because it means you spent a whole lot of extra money for nothing.

But Isn't Higher Octane Fuel "Cleaner"?

Reality is, all grades of fuel have enough additives to keep your engine clean based on standards set by the Canadian General Standards Board (CGSB). If you are in the States, the same holds true due to requirements by the U.S. Environmental Protection Agency. Basically, there is no need for "cleaner" fuel and what you should be concerned about is not whether it cleans, instead you should be concerned about whether it has the octane rating you need given the compression of your engine to prevent damage (see your owner's manual).

Please don't buy into those marketing hype folks, it truly is a waste of money! Still not convinced? Want a legitimate source? Here you go

http://www.consumer.ftc.gov/articles/0210-paying-premium-high-octane-gasoline

http://www.cbc.ca/marketplace/episodes/2012/11/pump-facts.html

Have a great weekend!

-TT

Looking For A Job? Beware Of Scams!

This article was actually inspired by something I read from the Metro paper yesterday, and it reminded me of a few of my friends back in our high school and just-entering-university days. A few of us actually came across positions and job agencies that were legitimately advertised in the paper and online but turned out to be hogwash. Note: This article is probably more appropriate for newcomers in Canada or for the younger generation trying to obtain their entry level positions.

Of course, none of these scam artists are going to give you a clear disclaimer of liability, so here are some hints and telltales:

1. They ask for an upfront fee: In many cases, legitimate service providers will not charge you upfront. Most of them will charge you based on the pay rate you get from the job they successfully setup for you. In some of these cases, the fee is hidden because the way it works sometimes is that employers use these service providers and will offer to pay a set price per hour, but then the employment agency will turn around and give you a lower rate per hour, thereby pocketing the difference as their service fee. Either that, or they charge a percentage of what you have earned during the first year or other similar arrangements.
2. They ask for referrals before successfully getting you a job, indicating they will pay you a referral fee. Hmm, starting to sound like a pyramid scheme doesn't it?
3. If you were hired as a salesperson, and they want to charge you for their demo kit or demo products of which you require for sales meetings. Essentially they are just forcing people to buy their products.
4. This one is a given – If they have terrible ratings on employer rating/review websites, and negative feedback on online forums.
5. Management have a hostile attitude, taking the approach of scaring you into not voicing your concerns to them. They figure by bullying you and having you afraid of them, you won't bring up concerns over being short hours on your paystub. That brings me to another point, ALWAYS keep a log at home recording all the hours you have worked, preferably with exact sign in and sign out times. This will come in handy when you need to discuss with management over short hours.
6. The agency promises suspiciously high payouts: Keep your expectations grounded and you should be able to avoid this one. Don't expect $55,000 starting if you have just graduated high school, those kind of jobs are almost non-existent. Though I have heard being a miner pays a lot out in rural areas...hmm. 

Anyway, if it seems too good to be true it probably is. Keep your hopes high, but keep a level head and don't get caught up in their promises. ALWAYS BE SKEPTICAL, a lot of legitimate ones out there but there are bad apples. It's like buying a used car, you don't know which one is a lemon so you will have to assume they all are until you have evidence proving otherwise ;)

-TT

Wakeup Call...

For those who are considering using debt to make your next big ticket purchase, think again! Just found a video from the Financial Post, showing you just how much the cost of debt really is. The problem is, financial institutions/retailers will implement all these tricks like introductory rates, smaller minimum payments, and even tell you that you don't have to pay for the first X number of months just to make a sale. What they don't make obvious, is the fact that the interest on the principal you owe is being compounded and you're paying a lot more interest than you have to because of the smaller minimum payments! Those plans sound more attractive than they really are.

APR% rates are frequently advertised but most will not show you the effective annual rate nor the sample interest calculations. To demonstrate how costly these payment plans can be, here's a video with numbers:

http://www.youtube.com/watch?feature=player_embedded&v=FGCAKyuXR6A

We all use debt every now and then, in varying amounts...hopefully neither of us will ever have to use those ridiculous minimum payment plans! The only way I would say use it, is if you actually have the money to make the purchase immediately but you are choosing to borrow because you are fairly certain that you can make more with your investments than the interest you are paying.


-TT

Fuel & Tires - Round And Round We Go!

Fuel economy seems to be the biggest rave lately. We have seen crazy ideas in the past few years, everything from low rolling resistance tires to a hybrid Porsche! (Porsche 918 Spyder for those curious individuals out there) There's even been studies conducted that shows you would save more gas using the A/C instead of opening the windows once you exceed 80 km/h (about 50 MPH) due to wind resistance.

Going back to low rolling resistance tires though, are they really worth the extra dollars? If you look at my chart below, the Michelin Energy Saver All-seasons cost a whopping $230 more than the regular OEM-equivalent replacement all-season tires - Bridgestone Insignia SE200's. For the purposes of comparison in this article, we will be looking at the prices from Canadian Costco only. The MPG figures are based on a 2009 Toyota Prius, fuel economy data were grabbed from a report on Tirerack.com (a reputable online retailer of tires and car parts/products based in the USA, link below). I have made my best guess for the missing numbers based on the Tire Rack numbers, these estimated figures are denoted with a "?" after the number.

The short answer is, yes the low rolling resistance tires do offer you enough of a benefit to offset the extra costs in purchasing the tires. Performance of these low resistance tires is also not a problem because the difference won't be noticeable if your driving is not too "spirited". It's been said that the earlier generations of low resistance tires encountered poor wet surface performance, based on the reviews and articles on Tire Rack it seems to have been fixed in later editions of low resistance tires.

Here's the chart from my calculations based on the prices ($CDN) from Costco and the test data from Tire Rack:

  * Ignore the grey...it's just the extra information not used

  

Please be aware that the last two rows are regular all-season tires, the first three rows are the low rolling resistance tires. The Bridgestone Ecopia EP100 is a summer low resistance tire, and the EP422 is the all-season version. The Bridgestone Insignia SE200 is the tire I used for base comparison, since it is a regular all-season tire just like the Goodyear Integrity I have assumed the MPG figures for those two will be the same if not very similar. I had to use the Insignia tires for my calculations because unfortunately Costco in Canada doesn't carry the Goodyear's. Ideally I would've used the Goodyear for my calculations because that's the tire used in the Tire Rack tests.

Focusing on the last two columns in my chart – highlighted in green, you will see that the fuel savings over five years far exceeds the extra costs for the tires. The time frame of five years was chosen because either one of two things will happen: 1) the treads are worn, or 2) the rubber is near the end of its useful life and large cracks are presents.

Wait! These fuel consumption numbers are from a Prius, will it apply to other cars?

You can use the same calculations but make sure you keep the ratios the same. So in here we see that the Michelin's fuel consumption is 0.892 times of the regular Bridgestone Insignia all-seasons, use that same factor for your car's current fuel economy data (e.g. 7.5 L/100KM) and recalculate the litres per year and dollar amounts. The conclusion should be the same and actually, the less fuel efficient your car is compared to a Prius, the bigger the net savings you should realize because the price of the low resistance tires are fixed but the fuel savings will grow with fuel consumption. Don't believe me? See the chart below. The fuel consumption numbers highlighted in yellow are the extrapolated numbers. Now the ratio method of extrapolating data isn't as accurate as real test data done with your car but you likely won't find data specific to your car online, this is the most logical method given the constraints of information.

 * Ignore the grey...it's just the extra information not used

Well there you have it folks, get low rolling resistance tires the next time you replace your tires!

Tire Rack test figures: http://www.tirerack.com/tires/tests/testDisplay.jsp?ttid=121

Have a wonderful weekend everyone, sorry I haven't been able to update this blog as frequently...things have been quite busy lately.

-TT