Author: Mr. Cheap

Categories
Real Estate

Some Myths About Ontario Tenancy Rules

I’m often amazed at fundamental misunderstandings landlords and tenants have about the laws governing tenancy in Ontario.  I’m not a lawyer, but to the best of my knowledge the information in this post is correct (and if any commentators correct me, I’ll make corrections in the post).  This post shouldn’t be taken as the complete rules governing tenancies (please see the Residential Tenancies Act for more information).

Myth #1:  The end of the lease is the end of the tenancy

When I was coming up at the end of my first year where I’m currently living, I found out from the women who live upstairs from me that the landlord had offered to let them move into my unit.  After I got in touch with her, it turned out her assumption was that since I hadn’t told her I wanted to sign a new lease that I’d be moving out at the end of the year.  It took repeated communication, but eventually she realized that just because the lease was coming to an end didn’t mean I had to vacate.

The default condition if neither the tenant or landlord has given the other notice of terminating the tenancy is for a fixed period tenancy to turn into a month-to-month tenancy at the end of the lease.  I’ve never actually looked into the detail of HOW to structure a tenancy such that it ends at the end of the lease (I’ve wanted tenants to stay as long as possible), but I believe there are ways to do so (I’ve had friends get summer leases where someone else has already rented the place for Sept 1st).

She repeatedly asked me to sign another years lease or move out and I kept telling her that wasn’t how tenancy laws work.

Myth #2:  Landlords can increase rent when they want by whatever amount they want

Ontario basically has a fairly tight rent control in place.  There aren’t any rules on what rent you can charge when a tenant first moves in (it’s whatever the market will bear), but once a tenant has moved in they get quite a few protections.  First and foremost the rent can only be increased once per year (either 12 months from when the tenant first moved in or from the last rent increase).  A landlord must provide 90 days notice of the rent increase, and can only increase the rent by a set percentage (which varies each year, for 2010 it’s 2.1%).

In order to provide notice of the increase, an N1 form is provided by the province with the required information.

This only applies to older buildings.  For newer buildings it is possible for landlords to increase the rent however much they want (with 90 days notice, only once per year).  [See comments for more details]

Myth #3:  Tenants can leave whenever they want

Although it can be challenging chasing down (and getting money) from tenants who violate this, tenants are required to provide 60 days written notice when they want to leave a property.

Traditionally the 1st of the month is a popular day to start (and end) tenancies, but there’s nothing magical about this date (and if a tenant wants to give notice to move out mid-month they have every right to do so).  If the landlord is providing notice of the termination of the tenancy, it must be for the day a period of the tenancy ends (end of the month for a month-to-month tenancy).

Myth #4:  Landlords can’t enter the unit

Some tenants have the mistaken belief that during their tenancy the landlord can never enter the unit.  In addition to entry for number of maintenance and clerical task, the landlord can also legally enter the unit to show it to perspective tenants.  It is even possible for the landlord to enter the unit without notice in case of emergency.

Myth #5:  Landlords can’t evict tenants

It isn’t EASY for landlords to evict tenants (there are a LARGE number of rules that need to be carefully navigated), but it can be done.  There are some weird urban legends (one popular one is that tenants can’t be evicted in the winter:  they can be).

In a post a while back a commenter left a number of comments about his “air tight” strategy for preventing a landlord from evicting him.  With respect to the commenter, I don’t think he realizes that it will actually be an arbiter deciding how the rules are enforced (not him).  He seems to expect that he can demand any and all evidence he wants from the landlord.  The relevant clause refers to good faith, which I interpret as meaning unless there is evidence otherwise the board will take the landlord’s intentions at face value.  Ultimately, if a landlord really wants a tenant out and is willing to put the time and money in to make it happen, I suspect they can get the tenants out of a property.

Given the trouble and expense involved, if it’s possible to convince tenants to voluntarily move, that is certainly better (and even if they have to be paid a bit of money, it will probably be cheaper).

Myth #6:  Withholding rent is a reasonable response to something bad the landlord does

Some tenants have the mistaken belief that if the landlord is doing something wrong, it entitles them to stop paying rent.  This isn’t how the legal system works.  Just because one side isn’t entirely holding up their end of an agreement, doesn’t give the other side immediate permission to drop their end.  Say a landlord isn’t making required repairs, the correct response is to lodge a complaint against them with the landlord tenant board, NOT to withhold rent.  If a tenant doesn’t pay rent, while the landlord may get in trouble for not doing maintenance in a timely manner, the tenant may also get in trouble for non-payment of rent (the maintenance problem won’t justify non-payment).

There are some more excellent highlights from the residential tenancy act in the comments of a previous real estate post.

Categories
Frugal

Things You Irrationally *HATE* to Spend Money On

Three years ago Ramit Sethi wrote a post that made me laugh and think of my parents (it also looks like it might have subconsciously been influencing my post last week).  In it he talks about how his parents are very generous with him, but they (and, according to Ramit, all Indians) HATE to pay for dry cleaning or shipping.  He claims that reluctance to spend on dry cleaning somewhat makes sense to him (same clothes, just cleaner), but he can’t understand the shipping reluctance.  To me it’s very similar (it’s the same object, it’s just in a different location).

It made me laugh because my parents live in fear of long distance phone calls and taxicabs.  When I was a kid a couple of times I wanted to order something or call somewhere long distance, and my mother made a *HUGE* deal of it saying I could make the call, but when the bill came in, I was responsible for the charges!!!  I made the call and ended up paying $0.63 or something.  Whee.  The only way I can make sense of their fear is that long distance cost FAR more when they were growing up (and maybe they haven’t internalized that it’s actually pretty cheap now).  I’m not sure what the problem is with taxis (sure public transit is cheaper and should be taken if possible, but it isn’t the end of the world to take a cab a few times a year).

My mother was once going to visit my brother when he was in England, and it happened that it was quite tough to get where he was living.  He gave her directions which involved flying to Heathrow, taking mass transit into the city, then taking a taxi to avoid a 50 minute walk to get to his place.  My mom said she’d just walk the last leg.  With her luggage.  After having just been traveling for well over 10 hours.

I suspect we all have a couple of things that it really bugs us to pay for.  There are a number of things that it kills me to pay for, but the biggest are probably:

Easily Prepared Foods at Restaurants

I find it VERY hard to order steak or lobster at a restaurant.  Not because of the price (I’ll have expensive meals out on occasion), but just because you pay such a premium and they’re *SO* easy to make at home!  It doesn’t take much to grill a steak to perfection, and the hardest part of cooking a lobster is not feeling guilty when you pop him in the boiling water.

It kills me to buy booze in a restaurant too: I can open a bottle of beer at home for half the price, thanks.

I *LOVE* getting Pad Thai, eggs Benedict, butter chicken and other, more difficult to make, dishes at restaurants.  If I can easily make it for myself at home, I’ll do so.

The flip side of this is, if a steak is what you feel like, get it.  If you’ll enjoy having a beer with your meal, who cares if it costs more than at home (your goal when enjoying a nice meal out should be to enjoy it, dammit!)

Expensive Rentals

In many ways renting a DVD is an incredibly cheap way to spend a night with friends:  for $5 you sit around in someone’s living room and watch a movie (compared to $12 per person to go out to the theater).  When you can BUY DVDs for less than $20, it kills me to give Blockbuster 1/4 of the price to borrow it for a day (as crazy as it is, I’d almost rather buy it and just watch it once, then give it to a friend).  I keep waiting for the $1 / day DVD rental kiosks to take off.

Intellectual Property

It’s bizarre, since almost any way I’d make money involves intellectual property or selling information (programming, publishing, teaching, etc) but I find it really hard to place a value on non-tangible goods.  What I’ve read suggests I’m not alone.  From music to television to movies to books to software it really kills me to pay for content when there’s an alternative way (such as lending libraries or black markets) to get it free (or so cheap that it’s next to free).

What do you find it (irrationally) hard to spend money on?

Categories
Personal Finance

Total Cost of Ownership

One of Microsoft Windows’ competitors is Linux, a free operating system.  Beyond it’s low price, it’s a very stable, reliable system.  If I was playing a game or watching a movie, it’s easier to do so on Windows, but if I’m running a web server or an ftp server Linux is far better.

While competing, Microsoft faced the difficult challenge of going head-to-head with a free product.  The only way to beat them on price was to pay people to install Windows.  Instead, they brought up the concept of “Total Cost of Ownership” (as an aside, people have accused Microsoft of being very deceptive in how they presented TCO comparisons, which I agree with – that isn’t the point of this post).  Their line of reasoning went that although you may pay $400 for a Windows license (and be able to get a Linux license for free), once you’d paid all the costs that went along with running Linux on a computer you’d end up paying MORE than on a Windows system.  One of the big parts of the argument was that Linux system administrators command a higher salary than comparable Windows system administrators and, the line of reasoning went, what you saved on the license you’d more than lose on salary.

While this is an interesting business issue, I think this concept is also highly relevant in day-to-day life.  Often we’re sold things with a set price tag, or with a  set monthly cost, when there are actually a large number of hidden costs behind this.

A prime example is cars.  A Toyota Corolla is a decent vehicle, which can be had for $15,430.  Immediately when you click on the fine print, the cost doesn’t include freight, PDI (whatever that is), license, insurance, registration, taxes, levies and fees.  If we finance the purchase, we then need to add interest onto that.  Once we finally get it home, we get to pay gas, maintenance, and parking (both at home and at work).  Estimates of the total annual ownership cost of various models range from $6K to $16K.

Real estate agents love to advertise an affordable property as “cheaper than rent”.  Of course, the only things being compared are mortgage payments and rent, they conveniently omit maintenance (estimated at 2.5% of the property value per year), property taxes, utilities, insurance, etc., etc., etc.  When you take into account all the extra it would a VERY unusual situation where you could own for less than rent.

Real estate investors are often just as bad.  My post on “Tenants Paying My Mortgage” discusses at length one special case of a lesser price being substituted for the total cost of ownership.  Investors love to talk about “cash flow positive”, but it’s INCREDIBLY difficult to achieve, unless you fudge the numbers (such that you can convince yourself it’s cash flow positive, even when it’s not).

A boat is completely a consumer purchase (and an expensive one at that).  Beyond the purchase price, maintenance, gas and whatnot there’s also additional storage fees (which can be pricey in Canada where the water freezes over).  Many people want a boat, look at the ticket price and don’t think of anything beyond that.

A while back I read a newspaper article (which would make a good post) about how people who live in Barrie and commute to Toronto aren’t saving the money they think they are.  They get a house out in the ‘burbs cheap, and think they’re really benefiting from making a 1.5 hour commute each way 5 days a week, but when you add up the cost of the commute (gas, wear-and-tear on the car and time spent in traffic), it would more than pay a higher mortgage on an equivalent house in Toronto.

The way for dealing with total cost of ownership issues is to always be aware of follow up costs to a purchase.  Don’t be lulled into lazy thinking that you just pay the one price and that’s it forever – almost everything has follow up costs.  Thinking about things in terms of their cost per use, or cost per unit of time (e.g. how much to drive a car for 1 year) is often a more realistic perspective.  I read recently (on some blog or another) that clothes are good to be worn 100-200 times, and you should amortize their cost over the article’s lifespan.  This seems a little extreme to me, but it’s probably a good thing when looking at an expensive piece of clothing to realize you won’t have it for the rest of your life:  it has a number of uses before it’s worn out.

What things have you bought which turned out to have hidden expenses that exploded on you afterwards?

Categories
Business Ideas

The True Cost of Rudeness

I’m often struck by how rude people in customer service positions are.  I understand when people say “they have a tough job and they get fed up with it just like anyone else”, but ultimately if it’s the ENTIRE point of someone’s job to interact with the public, shouldn’t they stay nice (or at the very least neutral)?

Bell is AWFUL as a company, and the worst experience I had was when no one showed up for a scheduled installation, I called their customer support and a mouthy representative kept obnoxiously telling me that it wasn’t in his computer system, so the best he could do was treat me like a brand new customer and schedule an installation 2 weeks later.  I finally had had enough of him, asked for a supervisor, and he refused!  Smoke was coming out of my ears at that point.  There are *SO* many reasons to hate Bell, but this one incident always comes to mind when I think of the company.  I suspect that the true cost of lost business is not realized by companies when a customer is treated rudely and never returns.

I ate at a local buffet restaurant this week, and was left standing at the door while one waitress told me to wait and then went to fill up water glasses (she continued to be abrupt with me throughout the meal) and the owner shoveled food down her throat and stared at me like I was some kind of science experiment.  Most of the food items in the buffet line were left empty while I was eating and I was left standing at the till waiting to pay.  At the end when I didn’t tip, the waitress looked at my credit card receipt, huffed and stormed off.  I’m never eating at this restaurant again.

I’ve gotten the MBNA Mastercard that Henry recommended and I LOVE it!  There was a problem with my first payment and I called up to ask them to reverse the fees and interest that was charged.  Ultimately I was at fault, so I would have been fine if they didn’t reverse them (but they did, thanks MBNA!).  The woman who reversed them was quite rude to me however, which seems to defeat the whole purpose of doing something nice for a customer (“We’ll give you a refund to ensure your loyalty, but I want you to know that I hate you SO MUCH.”)  All the work that was put into offering an outstanding card to the Canadian public was undermined by one rep having a bad day.

I get that no business WANTS their employees to be rude.  I think they turn a blind eye to it to a self-destructive degree.

I was out for coffee with some friends, all of whom had worked in customer service.  They related, with great mirth, stories of pretending to be one another’s supervisor for angry customers and how they would provide (or deny) services based on how nice the customer was to them.  Apparently it has gotten to the point that instead of reps behaving professionally to us, we have to suck up to them to get them to do their jobs.

For better or worse, customer service reps are the face of a company that the public interacts with.  It’s difficult for us to distinguish between one employee mistreating us and the company mistreating us.  I think the only way businesses get away with this is that it’s so pervasive that customers don’t have any alternative.  When it’s possible and an employee has been particularly unpleasant to me, I try my best to shop elsewhere.  Often I run out of companies to do business with.  If one company could keep their reps providing a consistent experience, eventually they would get all the customers like me.

One way I think a business should deal with this is to invest time, as part of the training, in the proper way to interact with customers.  Go through, in detail, what is an appropriate reaction and what isn’t.  After the training when the employee is working, monitor this interaction and correct them as soon as possible after they’ve been rude to a customer.  If a restaurant takes the attitude “Oh-well, she may be rude to customers but at least she shows up on time for work…” I think there’s a long term trend, as more customers get turned off, that will accumulate and become VERY harmful.  It’s kind of like reverse marketing, instead of getting new customers, you lose existing ones.

I watched a documentary Up The Yangtze (it’s great if you get the chance to see it) and there was one scene that showed how the cruise ship trained its staff to interact with Canadians.  I had a good laugh when they were told not to tell Canadians they’re fat or talk about Quebec.  Many workers in Canada would be offended if part of their training was interpersonal instruction that is this specific, but from my  shopping experiences it’s necessary!

I realize complaining about poor manners is more a sign that I’m getting old than anything.  So if nothing can be done about customer service reps, at least get those damn teenagers off of my lawn!!!

What sort of rude experiences have you had dealing with businesses?  Do you think putting up with it is just a part of modern living or can something be done?  What are your thoughts on “kids these days”?

Categories
Announcements

Canadian Experience

One of the things that drives me nuts and seems to have been getting more common in recent years is “Canadian experience”.  For those who haven’t encountered this, an applicant might get rejected from a job with the explanation “lack of Canadian experience“.  This euphemism could refer to the applicant having a strong accent, making some cultural “faux pas”, an unusual smell or in some other way being “too foreign” for the interviewer.

I certainly accept that when you move to a new country there are cultural expectations that you must adapt to.  In Thailand it’s considered very offensive to point the sole of your foot at someone (so crossing your legs in public is a no-no).  I did this, was told that it was rude, then I stopped.  It’s inevitable that mistakes like this are going to happen to someone in a new setting.

Where I think it gets offensive is when it’s used to reject someone outright from a job that doesn’t rely on a mastery of local customs.  Perhaps in sales it’s important to have a good understanding of local standards of behaviours, but does an engineer desperately need “Canadian experience”?  Is there no way for co-worker to make allowance for someone new to the country as they learn those standards?

A government run school provides training for new Canadians by simulating an office experience and having them work for 40 hours a week for 3 months or more.  To me this just seems crazy.  A *MASSIVE* amount of labour is being wasted.  For people who are highly skilled coming into the country there are better ways to help them get up to speed with local customs than getting them to play work for hundreds of hours.

Slightly better than this but still sub-optimal is an expectation that new comers volunteer to get Canadian experience.  Giving back by volunteering is a wonderful thing, but is someone who is newly arrived in the country, hoping to make a better life for themselves, really the person society expect to work for free?  I once found a particularly obnoxious posting where a man wanted newcomers to come work at his business for free, and he “generously” offered to lie and act as a reference saying they had double the experience they actually did (so if they’d work for him for 3 months, he’d claim they’d been there for 6 months).

Welcome to Canada!

I’ve talked to newcomers to Canada and they seem to be quite accepting of this.  If I was being treated this way in a country I’d recently moved to I would be VERY, VERY annoyed.

I don’t think there should be a law against this sort of thinly veiled discrimination (in my experience the law is a very crude instrument).  Instead, I think there’s a real opportunity for companies that are willing to look at the bigger picture.

If, after an interview, someone seems highly skilled but lacking in culture-specific graces, make them a job offer that reflects that.  Obviously someone who could effortless interact with co-workers and customers is worth more to the company, but the newcomer isn’t worthless:  offer them a salary that takes this into account (less than market rate, more than $0).  Make it clear to their co-workers that they’re new to the country and not to take offence at slips.  I’ve had Chinese friends tell me I’m fat MANY times, and it’s been explained to me that in China this type of honesty reflects a close friendship and a concern for someone (it isn’t considered as mean as it is here).  Try to create a culture where the established employees help get the newcomer up-to-speed and where the newcomer is receptive to suggestions on ways to interact more appropriately in the new country.

If, after time, the person shows no interest in adopting cultural specific behaviours and is causing problems with people they interact with, fire them just like (hopefully) any other jerk would be let go.  If, instead, they get more polished in their social graces, raise their salary towards market rate.

The company should hopefully be able to tap an overlooked labour market, once the employee is up-to-speed they should hopefully be more loyal than normal (since the company hired them when everyone else was showing them the door), and the company should develop a more global outlook (which will be helpful if they’re doing business in other countries).  I work with people from all over the world at my university and it’s FUN!  It’s a MUCH better environment then it would be if it was 100% Canadians.

For the workers, they get to work and actually get paid.  Imagine that!

Categories
Business Ideas

Middlemen

Eliminating the middleman is never as simple as it sounds. ‘Bout 50% of the human race is middlemen, and they don’t take kindly to being eliminated.

-Malcolm Reynolds (Firefly)

The Internet removes middlemen.  In many ways, this is the core of the wealth it has created, by putting buyers and sellers directly in touch with one another (and removing intermediaries each wanting their cut), sellers can dramatically increase their volume and buyers can dramatically decrease their price.  Industries such as publishing, entertainment, the news media and real estate are undergoing a dramatic and fundamental change as they risk being sidelined.

As I see it there are two main types of middlemen, one of which will survive, and the other which will be (thankfully) made to work a little harder for a living.

1.  Middlemen Who Add Value

In a comment a while back, after I’d mentioned hiring a painter through Sears, commenter Adam responded:  “All Sears does is outsource the painting job to a private contractor, that you can hire privately, and charge you a premium for it. They are like Rona\Home Depot etc. They take a cut by being the middle man. Save yourself some money and find out who they hire locally to do the work, hire them privately and negotiate a better deal.”

On the face of it, Adam makes an excellent point.  Sears is subcontracting, so instead of letting them earn 20% for putting me in touch with a local painter, go to him directly and get a better deal (which I could have done).  The assumption here is that the paint job will be equivalent in both situations.  With respect, I disagree.

First off, I had talked to other painters, and found the prices they were quoting were comparable to Sears (so the 20% seemed to be coming out of the painter’s profit margin rather than my cost).  Secondly, they weren’t equivalent jobs.  Sears guarantees their paint jobs for a set period afterwards (I forget how many years it was for, but at least for 1).  Even if “Billy Bob’s Discount Paint Emporium” offers a guarantee, it’s not as reputable as Sears’.  Thirdly, a painter working with me directly has a small vested interest in keeping me happy (for referrals and repeat business).  A painter who is getting 60% of his weekly business from Sears is less likely to want dissatisfied customers running to his primary referral source and complaining about him.

2.  Middlemen Who Don’t Add Value

In economics rent-seeking refers to individuals who manage to control something important to other people’s ability to do business or live their lives and charge them to do so (deriving income without contributing anything).  Examples include Ticketmaster (which controls many performance venues and earns money by being the only one who can issue tickets), real estate agents and the MLS system (they have a monopoly on, what has been, the primary method for advertising residential real estate), corrupt government officials and record labels.

It is perhaps human nature when you have something in your control to profit from it (and fight tooth-and-nail to keep control of it).  There’s a massive cost associated with having parasites attached to the chain of commerce.  Simply, it makes the transaction more expensive, so less activity occurs.  If I have a $500 budget for widgets, and a middleman doubles the price, I make do with the number I can get.  If I could actually buy them at the proper price, either I could free up that money to do something more valuable (good for me), buy more (good for the seller) or some combination (good for us both).

Transitions

The Internet (and the information economy) relentlessly makes things more efficient, which has been good at identify middlemen who aren’t adding value and squeezing them out of the deal.  Those being squeezed out can a) use their resources to futilely fight these forces and try to keep their position, b) go do something more useful with their time and energy, or c) become middlemen who add value.

To take real estate agents as an example, Mike and I have pointed out many valuable things we think they bring to the table, and I think there are a number of additional services they could offer which would keep them relevant.  The industry’s desperate attempt to hold on to 5, 6 or 7% commissions will be obvious and ridiculous to everyone in the next few years and it will disappear (I’ll go on the record as saying if anyone is still paying these kinds of commission in 2015 I’ll drink one of Mike’s beers!).

What experiences have you had with middlement who add value and those that don’t?  Have you seen, in your lifetime, middlemen that have been driven out of the marketplace?  Any new types you’ve seen appear?

Categories
Book Review

Book Review: Nudge

“Nudge:  Improving Decisions About Health, Wealth and Happiness” by Richard Thaler and Cass Sunstein is a book about how presenting choices in a different way can lead to widely differing proportions of people making each selection.  At the very beginning they present an experiment where a nutritionist running cafeterias wanted to provide student with the full range of options, but encourage them to make healthier choices.  She found that simply by having carrot sticks (or a similar nutritious item) FIRST in the line increased choice of these over options like french fries by 25%.

The rest of the book presents numerous case studies where, through actions as simple as the order food is presented in a cafeteria line, the choices GROUPS of people make can be massively swayed.  They don’t make any claim (or express any desire) to change the decision of one person.  Instead their focus is on shifting the number of people from choosing one option to another.

Another example they gave is the default choice (what people are assigned to if they don’t choose anything).  In most situations, regardless of how important the decision is, the default choice will get a disproportionate number of people selecting it (a number won’t get around to making a choice and will just leave it as is).

This has always made me angry in the university environment.  At both schools that I’ve attended there were a number of “optional” fees that were charged to your account, then you were given a window of time to submit paperwork to get your money back.  Even if someone got a refund every term, the next term the funds would be automatically be deducted from their account and they would have to take action to get them back (again).  The people running the show wanted to benefit from the default option (leaving the cash in their pockets, not yours).

A running theme in the book is contrasting what they call Econs (think ultra-rational decision makers like Mr. Spock on “Star Trek”) with Humans (think Homer Simpson on “The Simpsons”).  Many policies are designed for Econs, then all us Humans make choices that are bad for us.

This was one of the most dense economics-style books I’ve read in a while, and it took me a bit longer to work through than most books do.  It was very well cited and provides a lot of information, but someone picking it up should realize that they’re getting something closer to a textbook than a pleasure read.

At the end of the book they summarize that the book is about two things, choice architecture (offering choices such that people have the full range of options but will be pushed towards one option) and what they call “paternal libertarianism”.  By this they mean, offer the full range of choices (libertarianism), but use the power to push towards the option that best helps people (paternalism).  I found this element of the book (if sincere) quite naive.  People architecting choices will, as I’ve seen at my universities and every other situation I can think of, “nudge” people in the direction that’s best for the NUDGER, not the NUDGEE.  I’m certain the people setting up the fee structures at my universities had rationalizations for what they’d done, just as I’m sure businesses and governments can easily rationalize “Nudges” they put in place for their own benefit.

I wonder if the authors introduced this element to the book just so they wouldn’t be accused of writing a Machiavellian book on ways to control groups of people (which, make no mistake, this is in part).

Overall I greatly enjoyed this book.  If you’re at all involved in determining how choices are offered to people (even by something as simple as designing a form, being in sales or administering a company benefit plan) this is a book that is well worth reading.  If you find the general ideas enticing, I think this is a solid book with some good meat to it.  Consumers are certainly being manipulated by techniques detailed in it (and have been since LONG before it was published), so if you’re the type of person who doesn’t like being pushed into a decision, it’s probably also worth reading just so you’ll be more aware of ways this is done to us.

To order this book:

From the United States then please use this link for Amazon.com

If you are from Canada then please use this link for Amazon.ca

Categories
Opinion

Our Readers Ask: A Financial Intervention For My Parents?

We recently got an e-mail (summarized below) from a reader asking for advice about a situation with her parents.

“My parents have worked hard their entire life but never saved a dime.  As they approached retirement, they worked as the resident managers for an apartment building.  They have very minimal savings, and the small amount they have (X-mas bonuses or RRSPs) they cash in for consumer purchases such as a La-Z-Boy chair, new Jeep or a string of campers.  They’ve recently bought into an expensive timeshare style campground membership.

My brother and I had a meeting with them, talked about our concerns and offered to help set them up with a small building they could manage for us.  They said they’d be happy to live there, but didn’t want to be involved in operating a business (because of bad experiences in the past) and wouldn’t take any action to help set up something to take care of their own retirement.

They joke about living in my driveway in a camper as their retirement plan.  Both seem concerned about retirement at times, but won’t change their behaviour or do anything to plan for it.  They didn’t help us with out schooling and have lived the good life, so it doesn’t seem fair that my brother and I will have to support them in their golden years (they’ve had far more, nicer trips than I have over recent years).  We both have kids we’re planning to send to school and our own financial obligations.

What is the best response in this situation?  My brother has given up on them and I want to confront them!

Since the e-mail wasn’t addressed to Mike or I specifically, our lucky reader gets a two-for-the-price-of-one response!

Mike’s Response

“Your parents are stupid, selfish and screwed. You are screwed as well unless you can disown them (which is unlikely)”. 🙂

Mr. Cheap’s Response

There are a number of perspectives on this.  I think the first two can safely be dismissed, and the later two are worth your consideration.

1.  Legal

Except for a small number of very isolated cases, there usually isn’t any legal obligation to financially support your parents.  I am not a lawyer, but my understanding of whether you support them or not in their old age isn’t a legal obligation.  You don’t mention this, but one of my friends once worried about inheriting her father’s bad debts.  This sort of Dickensian thing doesn’t happen anymore (as long as you don’t co-sign on the loans, lenders won’t be able to make you responsible for your parents financial mistakes).

2.  Cultural

I briefly dated a woman of Kenyan descent and she talked about how her parents would hit up her and her siblings for things like building a new deck on their house (hardly a necessity of life).  Even though she was working a low-paying job, the expectation was that the children would kick in to help the parents live a more comfortable life.

While your parents clearly aren’t good with money, did your dad teach you to ride a bike?  Did your mother read to you when she tucked you in at night?  Did your dad take you out to a bar for your 19th birthday and tell you why men were no good and you should steer clear of them?  Did your mom watch “The Bachelor” with you and make catty comments about the contestants?  Parenthood is about more than just paying university bills.

The obligations in Western cultures are almost entirely FROM the parent TO the child.  Some might argue that by virtue of giving birth to you and your siblings there is a debt that isn’t absolved by your parents making bad choices.

3.  Ethical

Friends and family make bad decisions for themselves.  It’s torturous when you see the problem coming from a mile away, you warn them and they tell you to mind your own business, then you’re expected to pick up the pieces when your prediction comes true.  Since you’re a mother, I’d bet you’ll have many opportunities to go through this again with your children as they get older! 🙂

Your parents are adults and should have planned for their own retirement.  It isn’t fair that they’ve dumped this responsibility on you, their children.  Instead of having a comfortable apartment, treating the family to the odd meal out and taking the grandkids on a memorable trip to Disneyland they’ve set up a situation that is going to be unpleasant for everyone involved.

Setting aside whether it is “right” to help your parents out or leave them to sink or swim on their own, imagine your OWN future.  Say it’s 20 years from now and you’re thinking back on your parents (who have since passed away).  Would you prefer to have the memory of them being a financial burden on you in their golden years or of them living an impoverished life isolated from their family? Rather than determining what’s “right” it might be worthwhile to consider the situation from the perspective of what will lead to the least personal regret in the future.

One other thought is that having your parents live with you might not be the burden you expect.  Contrary to public perception, people don’t become instantly and completely useless the instant they turn 65.  If they’ve been resident managers, your parents have a set of skills that might make them very welcome guests in your house (cleaning, light repairs, contacts with tradespeople, etc).  Even having two trustworthy, loving people to help take care of the kids might be a welcome addition to the household.

I suspect that, of these two evils, having your parents be a financial burden for a few years would be the lesser evil (which, hopefully, your siblings would share with you).  I’ve never regretted kindnesses I’ve performed in the past, even those that have cost me significant (at the time) amounts of money.

4.  Pragmatic

The entire situation may be a moot point, as Canada has a pretty nice social support system.  For an elderly person with no money, they won’t be living a lavish lifestyle but the necessities of life will probably be covered by old age security and whatnot.  While they are in good health, this should cover rent and groceries.  Once they are in worse health it should cover a retirement / nursing home.  If having your parents live with you is too great a burden for you and your siblings, government programs will cover their lifestyle (and you shouldn’t feel guilty about letting your parents use these).

For your (and your parents’) peace of mind it may be worth researching this and letting them (and your siblings) know what a realistic future looks like for them:  it won’t be sipping drinks on a golf course in a tropical destination, but it won’t be living in your driveway and eating cat food either.

If, in this situation, you had a little extra money to treat your parents to cable TV in their room or to take them out to a restaurant occassionally it would be generous to do so, but not an obligation.

What are your feelings about the situation?  Any advice for the writer?