Dear Personal Finance World: We’re talking about money wrong

Dear Personal Finance World: We’re talking about money wrong

There’s something seriously screwed up about the way we talk about money.

On one hand it’s really hard to get people to have a conversation about it… an actual conversation… not just one about how there’s not enough of it.

And yet, away from the regular ‘every day’… the financial conversation is raging on. There are hundreds of blogs, dozens of shows, and tons of books filling the shelves on how we should be handling our money.

But most people honestly don’t care. They’re not interested in the conversation that’s going on… why is that?

Why, when money is a big part of everyone’s life, and… as the banks, bloggers, and other members of the financial world are so quick to tell us…. there is a ‘huge financial literacy problem’ in North America… why aren’t people looking for help?

“They should get involved!”

“Pick up a book. Read a blog. Log in to the latest twitter chat hosted by some big bank or another.”

“They should GET EDUCATED.”

It sounds like a great idea… except the problem isn’t them… it’s that the financial conversation we’re having is full of shit.

The New Guy on the Block

I’m sorry to put it so bluntly, but it’s driving me absolutely crazy.

I’m new to this conversation. I was one of those people that the financial sector was seeking to educate. One of those people who didn’t track their spending, didn’t save, didn’t invest, didn’t do any of the things I was supposed to be doing.

Then I hit my own financial rock bottom, dipped my toe into the personal finance world and two years later passed my financial planning certification exam.

I’m not a numbers guy.

I’m an opera singer.

But I have huge passion for the conversation we have around money. And it’s a conversation that isn’t serving a lot of people.

Serving money… not people…

I was recently messaging with a friend who was attending a conference this summer somewhere in Canada (I’m not being vague… I really don’t remember where). There, one of the big bank guys, a major curator of the conversation, stood up and said… clients only care about three things: investing, estate planning, and taxes.

Wait.

What?

This blew me away, because the people that I work with care about a ton more things than that. They care about affording education, and managing cashflow (whether they use the word ‘cashflow’ or not… and they probably don’t… because no one says ‘cashflow’), they care about matching financial resources to their values. They care about the life money can help them build… not really the making of more money.

But then I realized.

The ‘client’ the big bank guy was talking about isn’t a person.

The ‘client’ is the money.

Talking about money wrong - From Rags to Reasonable

When you take “the person” out of it he’s completely right. Money only cares about the things that will affect it. Investments make it grow. Estate planning keeps it from disappearing in a sea of taxes and probate. And taxes… well… tax is clearly the “client’s” biggest threat.

A major portion of the industry wants to serve your money…. and if you end up benefiting… that’s great. But ‘you’ are a side product… not a major part of the conversation.

What if people aren’t dumb… what if they just don’t care about what we’re talking about… or maybe… they just don’t trust us.

I’ve talked to so many people in and around the financial industry who honestly don’t understand why people keep making ‘dumb’ money choices.

  • Why don’t they just invest in index funds?
  • Why don’t they have the will power to stay out of debt?
  • Why don’t they understand why they need insurance?

They must need more education. They must need more articles about budgets and TFSAs vs RRSPs.

Or maybe they don’t need to change.

Maybe we do.

Maybe the whole freaking conversation needs to change.

Because the tools are great. Okay… they’re not great… but they’re pretty good. They can totally help people manage money, invest, protect assets, etc…

But the way that we’re connecting people to them… is messed up.

And they know it.

Talking about money wrong - From Rags to Reasonable

They see through the salesperson bullshit. They see insurance companies and banks worth billions that are charging more and more fees for simple services.

They see bloggers that only seem to recommend products that have affiliate programs.

Whether they can put their finger on it or not…they know that the general conversation isn’t about them.

It’s about money.

The people who don’t really care about money… they’re not going to participate in that conversation … and I really wish they would.

A different kind of conversation

I know I might sound like an angry hippy artist yelling about things I don’t completely understand.

You may think that the ‘conversation’ doesn’t really matter… people who don’t like it can look up other stuff on their own.

But it matters.

One of the major things I’ve learned from years in the arts is that it really matters how we talk about things.

It matters when the companies that create and sell financial products are also the ones that provide advice.

It matters when the only stats that we measure are based in asset accumulation and net worth building.

It matters when sources that people assume to be independent are heavily influenced by those same sellers of products.

It matters because people flat out don’t trust us.

And why should they?

We have not proven to them that they come first. We have not taken the extra effort to demonstrate that their goals and wants are much more important than finding the most ‘efficient’ solutions.

People aren’t supposed to fit into the tools available… the tools available should be changed and moulded to fit a person’s needs, values, and wants.

That isn’t the conversation we’ve been having.

There are so many individuals in the financial industry who passionately care about people. Who passionately believe in finance’s ability to make lives better, to protect their clients, and to empower those who work so hard.

I think we can all learn something from them, and change the way that we talk about money.

Maybe then we’ll start to see some change in those financial literacy stats that we all like to complain about.

Maybe then people will start coming back to the conversation.

Want to start getting control of your money? How can I help?

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact… I was a bit of a disaster. I remember (very clearly) what it feels like to be ‘financially out of control’.

And honestly, I still get stressed about money… that doesn’t stop… the difference is that now I have the tools to deal with that stress.

And those tools are what’s made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I’d love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

How to organize your money (when you’re an unorganized artist).

How to organize your money (when you’re an unorganized artist).

Who’s it for: Unorganized people who want to be organized.
What’s it about:
Building a money structure that actually fits your existing habits and behaviors.

You know who I find annoying? Really organized people.

People that have a system for everything.

It’s not that they’re bad people, it’s that everything just seems so easy for them.

I am NOT a particularly organized person. My desk is a hot mess of old coffee cups and papers scrawled with thoughts I swore were brilliant at the time.

But I want to be organized. I feel like so many of my problems would be solved if only I could find the perfect system.

Maybe if I try that app? Maybe if I use this program? What if I just do exactly what that person does?

… but more often than not, it doesn’t work.

Except when it comes to my money.

Over the years, I have slowly become better organized with my money. I now have a system that actually works for me, and makes my life quite a bit easier.

And so that’s what this piece is about… How I built that structure, and how you can start building one for yourself.

Lesson 1: Don’t annoy your brain

I’ve been fairly organized with my money for years now. I pay myself a salary. I budget. I save for things that are important to me…

… but this summer I realized that I had kind of checked out of that system.

I wasn’t using my budget. I wasn’t keeping up with my savings.

At first I assumed I was just failing as a human.

“It was bound to happen”, I said. “Clearly I am a terrible adult and my hypocritical blog and financial planning practice must crawl into a hole and die an agonizing and lonely death.”

Luckily, I stumbled across a different answer before I had finished my death hole.

You see, it wasn’t the budget’s fault at all. It actually had nothing to do with my income or expenses.

The problem was that every time I sat down with my money I had to make 7 transfers to get things where I wanted them to go. I had to haul out the pen and paper and use the calculator app on my phone. I had to log in to two bank websites and go back and forth between them just to keep up with this ‘organized structure’ I had built for myself.

It was so annoying.

And so, even though I didn’t deliberately decide to, I just stopped using it.

My brain made an executive, behind-closed-doors decision to cut off this activity that only caused stress.

Lesson 2: In order to get somewhere… you need roads

Money structure.

People don’t talk about money structure very often. They talk about budgets. They talk vaguely about ‘organization’ or ‘keeping good records’. But not about basic structure.

Why does it matter?

Picture your country. Think about how much stuff gets shipped from one end to the other. Avocados from California, Lobster from Cape Breton.

What would happen if you replaced the interstates and major highways with dirt roads?

It would take longer to get things from one place to another. It would be more expensive. It would take more time.

And you probably wouldn’t be making guacamole nearly as often.

Your money structure is the way your money moves from place to place. If it’s well set up, then saving and spending is easy. If it’s not… it can be annoying and hard, and it’s another reason to ignore your money altogether.

Lesson 3: You have to start from the beginning

So money structure helps your money do what you want it to do.

What do you want it to do?

When I realized my structure wasn’t helping me I went back to ground zero.

I wanted to make sure that it was easy for me to do two basic things: spend and save.

So I took out that dreaded paper and pencil and started from the beginning. What are the tools I use everyday to spend and save money (see below).

Then I took a look at how I was actually using those tools. On what? How much did I actually use them? I pulled out the sheet where I track my spending/saving and made a note of which of those those tools I used for each transaction (see below). 

This is not an exercise about what you want to spend on, or save for. Structure is all about mechanics… the actual moving from place to place. And it can’t be based on some ‘ideal way of using money’.

It has to be based on how you already use money.

By taking a look at your day to day behaviour you can build a process that actually makes your life easier… instead of trying to change your day to day behaviour to match the ‘ideal system’.

Lesson 4: The best bank actually makes your life easier

Banks are KEY parts of any money structure, and if you’re serious about reworking the way you organize your money… you have to at least consider changing the bank that you use.

People don’t like to change banks and the banks like to encourage the thought that changing is ‘hard’ or ‘disloyal’.

Banks are a tool, and I want you to make sure that that tool lines up with how you want to use your money. It doesn’t have to have the most features, it just has to have the features that you use (and hopefully at a reasonable cost).

I have accounts with two banks: TD and Tangerine.

I had specific reasons for picking my banks: TD had the e-series investment options, which I used for long term savings, and Tangerine had no-fee accounts, lots of savings options, and free email transfers.

The problem was that when I looked at how I used my money, my banks weren’t helping me.

I was using Tangerine as my business bank, but it was also the place my partner and I had our joint spending and savings accounts. Which meant that Tangerine wasn’t all business… it was kind of a gray area mix of both.

It was also a key part of my ‘7 transfers a week’ problem.

When I looked at my spending/saving from lesson 3, I realized I had specific demands from my business and personal banks.

want to talk about how to separate your business and personal lives? Check out my free weekly office hours!

Low key (and FREE) weekly money coachings… but they’re limited so sign up NOW. 

My personal side needed:

  • easy transfers from my business account for monthly salary
  • ATM access for cash
  • easy transfers to joint accounts
  • easy payment of credit card
  • easy transfer to retirement accounts
  • easy method to transfer small amounts of money to friends 

My business side needed:

  • easy transfer to my personal acccounts for salary
  • cheques
  • a few e-transfers a month
  • easy payment of credit card
  • photo cheque deposit

Wait? Do I need two bank accounts for my business?

I use separate bank accounts for business and personal money (you can read more about why HERE), and I think it’s an excellent idea. It helps separate the two worlds. It helps collect income from a bunch of different sources and distribute some to personal needs, and invest the rest into your business.

But it’s not the only way.

If that seems like too much right now, that’s okay. Go through this process and make a system that works well for your spending and keeps things clear for the way you think.

More is not better. Having 11 savings accounts, 3 chequing accounts, 7 RRSPs, 4 budget programs and a cat might seem like a really professional thing to do… but it’s no better than having one account that makes total sense to you.*

*this all changes if you’re an incorporated business… if you are… talk to someone about how you need to be setting up accounts and keeping records.

Lesson 5: Your credit card points don’t matter

What credit card should I choose?

It has to be one of the most popular Google searches.. and also something that doesn’t actually matter for most of us.

Yes… you can get sweet cash back and travel points by using the right credit card. Yes, you can read a thousand articles about why this VISA will change your life.

It’s the wrong question.

Here are the three questions that matter when picking a credit card:

1. Is the balance easy to check and pay off?

    • I use the Tangerine credit card because it’s right there on my bank dashboard. Easy to see the balance. Easy to pay it off.

2. If you often hold a balance on your card, does it have a low interest rate?

    • This is the only number that matters. A credit card can be a really important tool for weathering the variable income storm. If you often have a balance on your credit card… get as low an interest rate as possible.

3. Does it work for where you spend?

    • There’s an AMEX card floating around with the best points system ever. I love it. The problem is… none of the places I shop accept AMEX. So it’s useless. Look at where you spend your money, and make sure your credit card works at those businesses.

Lesson 6: Simple sometimes doesn’t look simple

It was so interesting to go through this process.

Here’s what my money looked like before….

And here’s what I changed it to….

How does money come in? Business checking – allows photo deposit, allows e-transfers, easy to find ATMS for cash deposit. Paypal – linked to business checking (free transfers to linked account).

How I save in my business: Tax account – free transfer from checking. Emergency fund – free transfer from checking.

How I spend in my business: Credit card easily paid from TD dashboard, cheques are affordable (and I still have hundreds of them), e-transfers are easy (standard pricing).

Paying my salary: Free transfer between TD and Tangerine easily done through Tangerine dashboard.

How I spend from my personal account: Free e-transfers, access to ATMs, Tangerine credit card easy to pay from dashboard, debit card.

How I save from my personal account: Free transfers to joint accounts, free transfers to savings accounts, easy to open new savings accounts/TFSAs.

I realized that TD was a better bank for my business than for my personal finances. I realized that even though my retirement accounts were still there, I could easily just treat them like a paystub deduction (I automated the payment for the last day of the month) and then transfer the rest of my salary over.

Now I have one transfer between accounts. No pen and paper math. And my daily money use is just … cleaner.

On the surface the system doesn’t look any simpler, but now it actually matches my behaviour and makes the things that I do… much simpler.

Lesson 7: It doesn’t have to look like that

I really liked sketching out how my money looked. It helped me see it in a whole new way.

But it doesn’t have to look like that, here are a few other artists’ money structures.

This is one I drew for another opera singer based in Canada but who works in the US a lot.

This is one a friend sent me. He may insist he’s not an artist, but he’s a great writer and his system balances regular income with self-employed income in a really interesting way.

It’s also fascinating to see someone else’s way of drawing their money.

There’s no right way. 

And here’s a quick sketch of an artistic couple, and how they could potentially use separate and joint accounts to make their money work better.

As artists, sometimes looking at things in a new way can help us get the perspective we need.

If you feel like your money is a mess or you just can’t seem to engage with your finances… this might be a great place to start.

Sit down with a pen, or maybe some markers, and draw out your money structure.

It might never hang in a gallery, but it might be the most important thing you create this year.

want to talk about getting control of your money? Sign up for my free office hours!

Low key (and FREE) weekly money coachings… but they’re limited so sign up NOW. 

Want to start getting control of your money? How can I help?

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact… I was a bit of a disaster. I remember (very clearly) what it feels like to be ‘financially out of control’.

And honestly, I still get stressed about money… that doesn’t stop… the difference is that now I have the tools to deal with that stress.

And those tools are what’s made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I’d love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE by checking out my SERVICES page.

How you can save hundreds on fees when bringing money over the border!

How you can save hundreds on fees when bringing money over the border!

Who’s it for: People who move money between Canada and the US.

What’s the point: Using foreign exchange companies or Norbert’s gambit can save you significant money on fees.

This week we talked EXCHANGE FEES 101, and how to save a few bucks when you’re spending with cash or credit cards. 

Saving a few bucks is all well and good, but when you’re a freelancer doing some serious work in the states you’re trading cash on a different scale. 

If the bank takes a couple of percents as a fee off of 100 bucks worth of cash… it’s only a few dollars. That same fee taken off 10,000… starts to hurt a little more. 

So today we’re going to talk about a few ways that you can bring your money from the states to Canada that’ll save you a whole bunch of money. 

The happy side of a bad Canadian dollar

For those of you who have made some money in the US in the last year, you’re probably pretty happy.

A 70 cent dollar is terrible for anyone spending Canadian money in the states, but when you’re making US dollars… it’s like getting a 30% bonus. 

It’s basically the best. 

So why should you care about saving a few lousy percent on the transfer? 

Well, maybe you shouldn’t, but you could save (or make, depending on how you look at it!) hundreds of dollars… with only an hour or so of work… 

Interested? 

Today we’re going to talk about two methods, one simpler, and one crazy fancy one that I mainly included because it has an awesome name. 

  1. Using a foreign exchange company
  2. Using Norbert’s gambit

Part 1: Using a foreign exchange company: Your Knight(sbridge) in shining armour…

There are a lot of companies that offer foreign exchange services. Like I said in my EXCHANGE RATES 101 POST, banks and other currency exchange businesses make a ton of profit changing money over.

But there’s a group of companies that have decided to make it their business to undercut that bank fee that we talked about yesterday: instead of charging between 2 and 3 percent on the deal… they’ll do it for just a half of a percent. 

How can they afford to do it? Because they trade in huge volumes, and then pass (some of the) savings on to you and me. 

But Chris… I don’t trade in huge volumes. I just want to take my 2000 dollars that I made on a gig in the states and bring it back to my Canadian bank account. 

This is the thing that I didn’t realize… you don’t have to be trading huge amounts to take advantage of these companies. Actually, lots of freelancers already use services like this for the exact kind of modest paycheques that you’re talking about. 

Let’s take a look at one of those companies now: KNIGHTSBRIDGE.

They’re a Toronto based currency exchange company that does exactly what we’ve been talking about: exchange your money for a lot less than the banks. 

I talked to the fine folks at Knightsbridge over the past week and got the scoop on how this would all shake down:

How does Knightbridge work? 

Fee: 0.5%

Minimum Amount: 2000 dollars

But…how does it work:

  1. Make an account online (takes about 2 minutes)
  2. Call in to their centre to get a locked in exchange rate (Locked in is great. It allows you to know exactly what you’ll be receiving. Less risk. Less variability.) 
  3. They’ll send you an email with the details
  4. You send them US funds (either by wire, or debit account to account transfer… whatever makes most sense with your bank. They’ll help you figure out exactly how to do this, it’ll be different depending on which bank, and which country you’re working from.)
  5. In 4 – 5 days you have the money sitting in your account

Is it safe: 

  • They say yes. If you’re not sure check out their site. They’re regulated by the government, your money can be traced electronically with a confirmation number, and if you’re really unsure they say they’ll put you in touch with other customers who’ll tell you how it all went down.

There are other companies that do that same thing, I’m just using Knightsbridge as an example. It’s also worth noting that this exchange works both ways (US dollar to Canadian OR Canadian to US). If you’re looking at getting a larger amount of cash (or setting up a US float, like we talked about in the last post…) you can use the same process. They also handle other currencies… but that’s not what we’re talking about right now.

What can you actually save (and is it worth it)? 

2 percent. You could save up to 2 percent, and that’s the price difference that was quoted to me when I talked to them. 

But is 2 percent worth the hassle? Even though it’s not a super complicated process, it will take some time… especially the first time you’re doing it. 

Let’s look at a few examples: 

Billy is a freelance writer who just completed a corporate campaign for an American company which earned him a cool 2000 dollars. He’s looking for a way to bring that money back to Canada. 

  • If he uses his bank (assuming a 2.5% fee, which is what my bank was charging) he’ll end up paying 50 bucks in extra fees to the bank. 
  • If he uses Knightsbridge (or a similar company) he can save up to 2 percent (their fee was quoted to me at 0.5%). He’ll end up paying 10 bucks in fees.

Billy saves 40 bucks. 

What about Chuck? He’s been working as an actor on Broadway for 6 months, and saving his tail off. The contract ends, and he’s got 20,000 American dollars he can’t wait to bring back to Thunder Bay (that’s in Canada).

  • If he uses the bank (assuming the same 2.5% fee) he’ll pay 500 dollars in fees. #yikes
  • If he uses Knightsbridge (assuming the quoted 0.5% fee) he’ll pay 100 dollars. 

Chuck saves 400 bucks. 

Part 2: The gambit that is Norbert’s

When I activated the personal finance bat signal and asked for help on exchange rates, I was answered with a question mysterious enough for any batman storyline:

… how intriguing is that reply? 

A short side step for those of us (and there must be a ton of us) who have never heard of Norbert’s gambit. How cool is that name? What does a guy have to do to have a ‘gambit’ named after him?? 

I will be taking suggestions for potential namesake gambits, please leave them in the comments below. 

Are you an american living in canada?

Listen to cross-border finance expert Julia Chung talk about the complications of existing on both sides of the border. 

What is it, and how does it work? 

Norbert’s gambit is a completely legal way to bring american money over to Canada while completely ignoring all the institutions that charge you fees. All of them. 

Sound good? 

I will not go into insane amounts of detail on how it’s done. If it intrigues you, I’ll leave you with some resources to check out instead.

One of those great resource actually comes from the guy who sent me down this rabbit hole to begin with: Holy Potato, the author of “THE VALUE OF SIMPLE” a great resource on DIY investing in Canada (seriously, if you want to learn about investing … it’s a great place to start). 

He explains the gambit thusly: 

“One way to think about Norbert’s gambit is to visualize the physical case: if you were in Windsor, Ontario and wanted some American dollars, you could go to your local bank and they would charge you a premium for them – though the exchange rate might be at par, the bank would charge you 1.02 Canadian for each American dollar you bought. To avoid that, you could buy something that’s easy to sell for a universal value on either side of the border – a gold coin, or a share of stock – with your Canadian dollars, walk across the bridge to Detroit, and sell it to get American dollars at the fair exchange rate, avoiding the banks fees. That is pretty much what you’ll do in Norbert’s gambit, but with units of an ETF, and you never have to leave your desk.”

He then goes on to explain exactly how to do it with a TD or Questrade account. 

I’m not an expert in that stuff, so I’m going to avoid the details to make sure I don’t mess something up (although I’m looking forward to learning more). If you’re interested, check out ‘The Value of Simple’ HERE, or THIS ARTICLE by the Globe and Mail which explains more. 

You can also get a complete guide to Norbert’s gambit HERE.

If you are already trading ETFs, and know some investing basics, Norbert’s gambit is not that hard to do. But if the letters ETF mean nothing to you… don’t worry about this right now. 

This might be one of those situations where paying a half a percent fee is totally worth not having to spend hours learning how to trade ETFs. 

But for those of you who are looking for any edge, or who do a bunch of work in the states and bring home large sums… definitely check it out. 

Think of how cool it would feel to say: 

“I don’t use the bank for my foreign exchange… I’m more of a Norbert’s gambit guy.”

#cool

** Just a note, although you avoid foreign transaction fees, Norbert’s gambit isn’t free. There are some brokerage fees involved in actually trading the stock. 

Which pennies are worth squeezing? 

 So what do you guys think? Are these services that you’d be interested in using? Or will you probably just stick to the convenience of your bank? Are any of you using any services that I didn’t mention? 

Personally, Norbert’s gambit seems like a bit too much hassle for me right now, but using a foreign exchange company like Knightsbridge just makes sense. 

Maybe with a bit more research I’ll change my mind. 

What do you think? 

Want to start getting control of your money? How can I help?

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact… I was a bit of a disaster. I remember (very clearly) what it feels like to be ‘financially out of control’.

And honestly, I still get stressed about money… that doesn’t stop… the difference is that now I have the tools to deal with that stress.

And those tools are what’s made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I’d love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

Exchange Rate 101: How to save money on a terrible Canadian dollar

Exchange Rate 101: How to save money on a terrible Canadian dollar

A few weeks ago I bought several pairs of socks. 

I needed socks. I’ve needed socks for quite some time. And so I thought I would capitalize on a a great sale. High quality, fun coloured socks for a mere $3.23. 

Cha. Ching. 

Except that’s not how the story ended. 

Those socks ended up costing me almost 5 dollars a pair. 

How?

Because of this: 

1 Canadian dollar = 70 cents American (and it’s now… probably even worse by the time you read this)

The best advice for saving money on a bad Canadian dollar (and why it may not work for freelancers)

I bought those socks when I was in New York visiting my girlfriend. She’s a freelancer who does about half of her work in the states. 

When I got back, I was a man on a mission… there must be some way to save when the dollar is this bad. There are so many smart finance people in Canada, surely one of them would have an amazing tip for me. 

The best tip came from Rob Engen, blogger and financial advisor at Boomer and Echo:

Stay home”

……

Can’t really argue with that. And honestly, if you’re not a freelancer, or someone that HAS TO travel to the states for work, or relationships, or some other unavoidable reason… you can just stop reading this right now, because that’s really solid advice. 

But for a lot of us, ‘staying home’ isn’t an option. So how do we weather the storm that is a terrible Canadian dollar? How do we keep our already thin profit margins intact over the next few years (because most people agree that this is not going to get better anytime soon)? 

So this week I’m going to put out a couple of posts about managing the US/Canadian exchange rate.  Sorry to my wonderful non-Canadian readers, but don’t be distraught. To you I offer this advice: come to Canada on vacation and live like kings.  

For the rest of you, over the next few days here’s what we’ll be looking at: 

Part 1: Exchange rate 101

The first thing that you need to know about the business of exchange rates is that people make a butt ton of money changing money between
currencies. 

You don’t need to understand all the ways they do it, but you do need to know that the average person (like me) isn’t ‘making’ money off of exchange rates… we’re paying. Exchange Rate 101 - From Rags to Reasonable

You also need to know that the rate you see plastered all over the TV and the yahoo homepage is NOT the rate that anyone will actually pay you either to get US dollars, or to trade them back in for Canadian ones. 

If 1 Canadian dollar = 71 cents American you can bet your buttons that those 71 cents are going to cost you a bit more than that. And if you’re trying to change American money into Canadian… you can bet those same buttons that they’re not going to pay you as much as they should. 

Rule one of currency exchange: there is always a fee. 

The thing that you need to decide for yourself is: do you care?

The personal finance community likes to talk about fees like they’re the worst thing in the world. But fees are sometimes completely worth it for the convenience of a service. 

Like anything in the world, there are always ways to ‘save money’, but you decide if it’s worth the hassle. Do you want to be the guy who barters with the teller at Walmart? You may think you don’t… but that guy just got 2 BBQs for the price of one… 

The point isn’t to avoid fees at all cost, it’s to understand them and then make an informed decision. 

Where does that fee come from? 

So how do the banks make money? I called them to ask a few questions and it went a bit like this: 

  • Bank: *insert polite greeting*
  • Me: *responded politely. Mentioned the weather. Blah blah blah. Canadian comments*
  • Bank: What can I help you with? 
  • Me: I had some questions about exchange rates… mainly about the fees that you charge on exchanging money. 
  • Bank: We actually don’t charge fees. 
  • Me: What?
  • Bank: No fees. We set a daily rate and that’s what we pay. 
  • Me: Okay… and does that daily rate include some kind of … fee?
  • Bank: I’m just given the daily rate.
  • Me: Okay… but there must be a fee. You’re a bank. It’s okay… I’m not mad, I just want to know what I’m paying for. You know, so I can be an informed customer. 
  • Bank: NO FEEEEEEEEEEE!!!!!!!!

*The following was a dramatization of a conversation that happened a while ago… the details are clearly not exact, but the subject matter is spot on. We talked for a while and the bank weirdly refused to use the word ‘fee’ or tell me how they made money on cash currency exchanges.

Exchange Rate 101 - From Rags to Reasonable
 
I called again this week (the same bank). 

  • Bank: *insert polite greeting*
  • Me: *responded politely. Mentioned the weather. Blah blah blah. Canadian comments*
  • Bank: What can I help you with? 
  • Me: I had some questions about exchange rates… mainly about the fees that you charge on exchanging money. 
  • Bank: We charge a 2.5% conversion rate on top of whatever the exchange rate is. 
  • Me: … 
  • Bank: Does that help?
  • Me: Yes…yes it does…

He then gave me a bunch of comparable rates, told me to be careful because they change every 3 minutes and we parted ways. Score one for customer service.

Fact: People hate fees. That’s why the bank doesn’t really like to talk about them. Instead what they do is take the ‘real’ exchange rate (the one that you hear about on the news), add their fee and make a new rate that they offer to people. So you don’t see: exchange rate + fee. You just see: increased exchange rate. 

With credit cards it’s a little more cut and dry. They’re fairly straight forward about their fee. When I called my credit cards it was also a 2.5 foreign transaction fee that they applied on top of whatever exchange rate they were charging (although he became very confused when I asked him how they set their exchange rate… I guess you can’t have it all). 

I’d like to pause for a moment to say: this is not a definitive post/list on foreign fees. I have not called all financial institutions, or credit cards. I talked to the banks that I work with, and checked out a few others online. It’s meant as a place to start. If you’re curious about your exact rates: call your bank/credit card and ask (but here’s a hint: if they say they don’t charge fees… they’re not really telling you the truth). 

Okay… back to the banks and their fees. I don’t know… banks charge fees. Banks make money. So do credit cards. They’re also a super convenient way to get cash, and spend cash. The question is still, does it bother you? And if it does… how can you save some money??

Exchange Rate 101 - From Rags to Reasonable

Part 2: Saving money on da fees!!

There will always be fees. But if they really bother you, there are ways you can save a bit of money. 

  1. Get the best rate
  2. Unavoidable fees VS avoidable fees
  3. Using the right credit card
  4. Setting up a float

Like always, it’s up to you to decide whether it’s worth the time and the effort to save a few bucks. But for those of you who travel and work in the states a lot… it might be worth it to investigate. 

Getting the best rate: 

It’s basic advice, but different banks and organizations have different rates. I spent 10 minutes hopping to a few banks and places that deliver cash to your door and definitely found some differences: 

  • Travelex – buying 1000 US dollars = cost 1515.38 CAD
  • TD Online – buying 1000 US dollars = cost 1464.40 CAD
  • RBC Online – buying 1000 US dollars = cost 1472.20 CAD

These rates change all the time (and these prices don’t include delivery fees, they’re just the original quoted prices), but it might be worth it to look around for a few minutes before grabbing some cash. 

I think it’s interesting to note that a few travel sites talked about the advantage of changing cash in the destination country instead of in Canada (they weren’t writing specifically about the US) so I thought I’d try a US bank. 

  • Bank of America – buying 1000 US dollars – cost 1520.22 CAD

*These are not definitive or foolproof experiments… just information. Do your own research. 

Unavoidable fees VS avoidable fees:

It seems to me there’s a basic rule of money: 

If you think ahead you can save money. People love to profit on your forgetfulness. 

Exchange Rate 101 - From Rags to Reasonable

You can’t avoid a bank fee (at least not completely), what you can do is avoid paying the higher fees that you’ll find in the airport at those little currency booths. 

This article from investopedia simplifies it nicely: 

  • Worst rates: the airport
  • Bad rates: those currency exchange stores you see in touristy areas
  • Good rates (or at least you best options): ATMs and local banks. 

I will throw out a word of caution about ATMs. They can really hose you with fees. They’re all different, so it’s tough to break down, but it’s good to understand. Sometimes you can end up getting charged by multiple banks and service providers… which is not super fun. 

I bank with TD, and it’s really nice when I go to the states (especially New York) because they have American branches everywhere. The American TD and the Canadian TD are NOT the same bank, BUT I can use their ATMs without a fee. Which is really nice. 

Using the right credit card:

I have a great travel card. I collect points. It’s got good travel insurance, and some other tasty travel perks. 

It also has a nice little 2.5% foreign transaction fee. This is something I kind of knew… but hadn’t given much thought until the dollar got absolutely terrible and I started writing this article. 

If you travel a lot, you might be interested in getting a NO FOREIGN TRANSACTION FEE credit card, of which there are shockingly few. 

Personal finance blogger and travel guru Barry Choi breaks them down HERE

  •  Amazon Rewards Visa Card
  • Marriott Premier Rewards Visa
  • Rogers Platinum Mastercard

It’s interesting to me that there are so few credit cards with no foreign fees, so let me know if you know of some that aren’t on this list. 

The only one of the three without an annual fee is the Amazon card, and they all have different perks which may or may not sound tasty to you. 

Just remember, you might be hooked on your card that gives you 2% cash back, or a couple of travel points per dollar spent, but if you’ve got a foreign transaction fee you could be losing all of that when you travel anyways. 

$2 cash back MINUS 2.5% transaction fee = you’re losing money… not gaining it. #thinkaboutit

Setting up a US dollar float:

This might be my favourite method, and it’s especially useful for people who work in the states quite a bit. 

Don’t spend your Canadian money in the states. Keep US dollars available for when you go down. 

Exchange Rate 101 - From Rags to Reasonable

If you believe some of the crazy doomsday predictions for the Canadian dollar in 2016, things are not going to go well. They’re talking about it dipping to a value lower than 60 cents to the US dollar. 

So why not set yourself up now, to avoid that pain? 

Most banks have US dollar accounts that you can open. They allow you to keep some of your money in US dollars. That means that if you changed a few hundred bucks over now, and the dollar goes down another 10 cents… it matters less. On your next trip to the states, you’re spending US dollars. 

This works especially well for people who are working in the US and getting paid in US dollars. It’s really tempting right now to bring all your money back to Canada and take advantage of the sweet side of this crazy dollar… but it might be a good idea to keep some of it in the states. 

The idea of setting a ‘float’ is having an account with US money in it that you can use instead of being a slave to the variable dollar. 

When you’re a freelancer, any way that you can cut out some variability is sanity in your pocket. 

*It’s important to note that exchange rates are really variable and impossible to predict. No matter what the ‘experts’ say today, it may change tomorrow. A float can be a useful tool, but there is always risk when you’re transferring between currencies. You CAN lose money. 

Are you an american living in canada?

Listen to cross-border finance expert Julia Chung talk about the complications of existing on both sides of the border. 

Part 3: Is it worth it? 

I don’t know. 

You can definitely save some money shopping the market, thinking ahead, getting the right credit card and setting up a float. It takes time, though… and maybe for the small amount of money that you change over it doesn’t matter. 

But if you’re in, and want to squeeze the value out of every dollar made, then take a look at some of these tools and start saving. 

 I know that I’m going to look into getting a no foreign transaction fee credit card in the new year, as well as looking at setting up a US dollar float. 

What do you think? Is it worth the energy for you to save a few bucks? How do you save on the bad dollar or does it even matter to you? Share your wisdom (or just your frustration in the comments!!).


Don’t miss PART 2! When we talk about two ways to save hundreds in fees when you’re bringing larger sums across the border!

Want to start getting control of your money? How can I help?

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact… I was a bit of a disaster. I remember (very clearly) what it feels like to be ‘financially out of control’.

And honestly, I still get stressed about money… that doesn’t stop… the difference is that now I have the tools to deal with that stress.

And those tools are what’s made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I’d love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

HOW I MET MY BANK: AND HOW TEN MINUTES SAVED ME HUNDREDS OF DOLLARS

HOW I MET MY BANK: AND HOW TEN MINUTES SAVED ME HUNDREDS OF DOLLARS

How I met my bank 2I’m sure there was a time when I didn’t have a bank account, but I don’t remember it… so therefore it doesn’t exist (a statement which may have just shown off an extremely flawed world view … I’m gonna roll with it).

But even though a bank account is something I always remember having, I don’t think I’ve ever actually given any real thought to which bank I would pick.

I have made all of my banking decisions purely based on proximity.

Closest one wins.

That’s how I picked my first bank (although on the prairies, sometimes the closest bank is still an hour away), and that’s how I ended up with TD when I moved to Toronto.

But what’s the problem with that? The big banks may all have different names, but they pretty much offer the same situation.

Does it really matter where you bank?

I didn’t think so… until I found the one that changed it all (and ended up saving me a few hundred bucks, just this year). (more…)

HOW I SURVIVE ON A VARIABLE INCOME: SEVEN STEPS FOR LIVING ON LESS… THEN MORE… THEN NOTHING

HOW I SURVIVE ON A VARIABLE INCOME: SEVEN STEPS FOR LIVING ON LESS… THEN MORE… THEN NOTHING

Variable income. Such a nice way of looking at it. Variable brings up thoughts of income coming soon, or maybe… simply that it varies a bit every once and a while from the norm.

But those of you who have lived on ‘variable’ income know that sometimes it means ‘low’ income, or even ‘no’ income.

It’s feast or famine in today’s freelancing world, and sometimes no matter how hard you work you’re left sitting with nothing on the horizon wondering how you will possibly be able to eat this month.

I have been in that place.

I’m kind of in that place now. That no-income place.

The nice way of putting it is I’m just in a bit of a dry spell… and then people give that sympathetic nod, before trying to change the subject away from my clearly flagging career.

But even though I’m currently in a three month ‘dry spell’, I know that I have a system in place to sustain my basic living costs. More than that, I have money set aside to take weekly lessons and coachings, money for the gym and the odd concert. I have the tools I need to both decrease my ‘no income’ stress and to use this time off productively: namely, to do some reworking and development on the trusty vocal chords.

How do I do it?

One big tool that I started using this last fall is paying myself a salary.

Yup. That’s right.

You’re currently talking to the reigning employee of the month of the Christopher Enns Tenor company. Now, before you get distracted by the fact that I put the word ‘company’ after my name… no, I am not incorporated. There is no fancy paperwork that you need to fill out in oder to set yourself up this way.  You just need to make a mental shift.

So let’s take a look at this 7th-grade-science-project style (because why not make a personal finance blog just a little more nerdy..):

microscopy-148139_1280PURPOSE:

To create stability when living on a variable income stream.

HYPOTHESIS:

By separating your business and personal accounts, your business can pay you a monthly salary thereby creating the feeling of stability even though your income stream is still variable.

MATERIAL:

You will need:

  • 2 bank accounts.
  • An idea of your basic living expenses
  • Optional: Pipe cleaners (cause they’re fun)

PROCEDURE:

Salary Procedure Step 1

It’s probably best to use two chequing accounts. Separate banks are fine. The same bank is fine. Just remember that if you bank with one of the big banks, opening another account will probably come with more fees. So poke around a little to find a solution that costs you the least.

I use separate banks. One of them is TANGERINE, which has no fees associated with its accounts. PC financial is another no-fee option.

Salary Procedure Step 2This is more of a mental step. Your business account doesn’t have to be an actual business account at the bank. I tried this originally, but found that it was just a bunch of extra fees for services that I didn’t use. Those business accounts are set up for people who are making tons of deposits in a week, or who need to have several people access the account; Services that aren’t all that necessary to your average artistic freelancer.

Salary Procedure Step 3

No more mixing business with pleasure. When your business makes money it all goes in to the business account.

This separation is great for all kinds of reasons, not just for paying yourself a salary. By keeping business transactions and personal stuff separate your records are clearer for tax time, and it can also be a good tool for separating out finances as a couple.

CHECK OUT: DR ARTIST AND MR CHRIS: SEPARATING YOUR BUSINESS AND PERSONAL SELVES

Salary Procedure Step 4


FREQUENT QUESTION: How much should your salary be? That’s something that may take you a while to figure out. I recommend finding out what your basic living expenses are.

Rent + Food + Basic Utilities (heat, water, internet, phone) + transportation (Transit, bike, car) + medical/health needs

After you get that number, see where you’re at. Obviously that doesn’t include any cash for entertainment or fun, or personal savings like retirement or that big fancy house you’ve been dreaming of.

I take those basic expenses, add a few bucks for spending money, add a fixed amount that I tuck away for long term savings, and that’s my basic salary.

Of course it can fluctuate. If your business is doing well you can give yourself a raise! But remember, the point of this is to keep your personal income dependable, and absorbing the variable thing in the business account.

Need help figuring out your 'salary'

I made you a worksheet to help you figure it out!

Salary Procedure Step 5Yet again. It doesn’t have to be separate but it can be. It can be a budget category on your spreadsheet, or you can open up an actual savings account (watch for fees again!). What ever helps you separate out this money in your mind.

Salary Procedure Step 6I try to aim for 4 − 6 months of salary just hanging out in that account. It can take a while to get there, but any amount is helpful when you don’t have money coming in. I think that when the job market is as crazy as it is, the more you can have stocked away the better.

Salary Procedure Step 7Here’s where it all pays off: I have no income coming in, and yet I can still pay all my bills, keep my savings goals going, and even eat occasionally.

Thereby achieving complete personal stability even though there is tons of variation on the business side.

EXPERIMENT:

I’m living this experiment!

I’ve been using the “pay yourself a salary” method for the last 6 months.

I opened a separate business account with TANGERINE (no-fee banking rules!!), and kept my old TD account for my personal banking.

INTERESTED IN A TANGERINE ACCOUNT: IT’S EASIER TO OPEN THAN YOU THINK…

All the income went through my Tangerine account and I started paying myself on the first of every month.

Budgeting got a whole lot simpler, at least on the personal side. Almost a little boring, which is nice.

January has been the first time I’ve had to dip in to my payroll fund, and even though I’m making next to no income this month, the same ‘boring’ payments keep on coming through.

DATA ANALYSIS:

For some people this system might take a while to put in to place. A payroll fund might just seem like another thing to save for, or worse… another thing that you can’t afford.

But you don’t have to worry if you can’t plunk down 6 months of salary. Even just putting a few of these ideas in place will really help:

  1. Separate your personal and business funds
  2. Figure out what a good salary would be for you. First calculate your most basic expenses: that’s the lowest salary you could live on. Then add a few things that make it actually livable. And hey, presto! Your ideal salary! Knowing this number is an incredible tool… seriously… I’m gonna talk about it all the time.
  3. A plan for when money does come in. It’s tough when you get a few thousand dollars in a week to not go crazy and spend it immediately on shiny things. If you have a plan for how you want your business and personal finances to work (the plan is above… see pictures) then you know where you can funnel that money.

DO NOT WAIT UNTIL YOU HAVE ENOUGH MONEY TO START BUILDING THE FRAMEWORK. BUILD IT AND THE DOLLARS WILL COME…. Or build it, at least… so you’re ready if they do come.

want to take your variable income to the next level?

Check out this spreadsheet I made – it lets you compare variable income AND expenses over the course of a year. 

CONCLUSION:

It’s so hard to create stability, to make a normal budget when your income is all over the freaking map.

There are other ways to handle variable income, but paying yourself a salary is clearly a really great tool for getting the job done.

With just 7 steps you can make a system that allows you to:

  1. Separate business from personal income and expenses
  2. Create complete stability on the personal side, by receiving the same amount every month (it’s so much easier to budget)
  3. Make budgeting way simpler. By separating out your business from your personal, you keep a lot of the crazy variable purchases (1000 dollars in plane tickets in November, a tuxedo in December) off your personal books. So you can keep all the nice normal, regular things in one account and budget, and keep all the crazy, variable, artist stuff over on the other side. 
  4. Weather the dry times by creating a payroll fund that can keep the paycheques coming, even if the business isn’t making any dough
  5. Take the power away from variable income. Reduce stress. And live a happier, healthier life.

IN JUST 7 STEPS.

It’s basically magic.

Want to start getting control of your money? How can I help?

Chris Enns

Chris Enns

Financial Planner/Opera Singer

Money never came naturally to me. In fact… I was a bit of a disaster. I remember (very clearly) what it feels like to be ‘financially out of control’.

And honestly, I still get stressed about money… that doesn’t stop… the difference is that now I have the tools to deal with that stress.

And those tools are what’s made it possible for me to build a life full of the things I want: art, creativity, travel, family and more.

If you want to start getting control of your money I’d love to help. You can start with THIS QUIZ, visiting my GETTING STARTED PAGE or by checking out my SERVICES page.

EMAIL ME