Somehow we got it in our heads that our lunches should be tied up in a rag and secured to the end of a walking stick. We were Tom, Huck and pals headed off for another adventure. As we wandered northeasterly we knew we would eventually run into Lynn Creek, which would then lead us down to our destination -- the garbage dump. Ah the freedom-filled sixties: unsupervised, death defying play -- all day long. Six mischievous seven year-olds for eight hours.
In its wisdom, the District of North Vancouver had established the municipal land fill on the edge of a pristine salmon-bearing stream, just up from the mouth of the ocean.
The smell was disgusting, but the power of curiosity drove us from heap to pile, rummaging through sharp-edged metal, steaming kitchen waste and crushed everything in search of... something; actually nothing in particular. This particular day we tripped over an old GI Joe doll with a leg missing, and a discarded bag of aerosol paint cans. MINT!
Back down by the creek we ate our lunches, our filthy hands rinsed quickly in the running water, which itself must have had more than its proper parts per million of pollutants.
There was an old cement bunker at the foot of the dump on the edge of the creek. It was either an abandoned pump house or an old bomb shelter, I'm still not sure, but the walls were easily ten-inch thick cement, as was the roof, which had an escape hole in it. It was an excellent place to hide out and light a fire while we ate our lunch. Our fuel? Garbage of course!
Note to kids of all ages: Fire, children, enclosed toxic smoke and aerosol cans are an extremely unhealthy mixture.
KA-BOOM! An aerosol can exploded at our feet, nearly launching another land-fill in my pants. It sounded like near-death, and indeed may have been. Inside the bunker, the noise cannoned, deafening us.
RRRUNNNNN!!!
Out in the light of day we realized that none of us had lost a limb, nor any blood at all, but we dared not venture back inside to put the fire out. Cement, garbage and leftovers would smolder on with the rest of the refuse. Tom, Huck and company walked back up the creek, home to unsuspecting moms, one of whom is just reading about this for the first time, some forty-five years later... (hi mom.)
Now let's wrap our minds around some very simple, everyday financial terms which we would all be better off to know for their bad smell, or at the very least, manage and contain them in their proper place.
Interest
Interest is lost money. It calculates while you sleep. Better to earn it than pay it.
If you are a typical Canadian, you will probably take around twenty-five years or more to pay off your mortgage. In doing so at long term average interest rates (higher than the ones which prevail now) you will probably pay out as much in interest as the price of your home. Painful though it is, delaying gratification by living smaller than you can afford will benefit you by reducing the interest you pay and hugely pay off in later years.
Taxes
Even if you earn interest rather than pay it, there is a penalty. Tax laws benefit those who invest in instruments more likely to create jobs. Hence, an equity investment will produce more tax-efficient income than a straight interest bearing security like a GIC or a bond. Of course, the risks are vastly different as well, so keep the big picture in mind and do what makes sense for you.
Taxes are a legitimate use of our resources, and we should all pay our reasonable share. However, it is prudent to know how to manage where you direct your money to reduce them where it makes sense.
Depreciation
Although this is a tax deduction for a business, it is a very real expense and perhaps the most overlooked for families. A new family SUV can cost as much as ninety-eight thousand dollars. (Say what!) A five year-old model goes for less than one fifth of that price. That spells depreciation of more than fifteen thousand dollars per year or, say forty-five dollars per day for that new car smell.
If you can live without the spanking new functionality, consider buying a good quality used model.
Consumer goods like TV's and smartphones depreciate even more rapidly than vehicles. Be mindful of this when you see that new gadget. This is something mature savers have well in hand, but some younger spenders are still coming to terms with.
Restaurant Food
A person could retire several years early, and live better in those later years if he or she tucked away a few leftovers every day instead of buying a burger and fries.
All and all the accumulation of a few little savings here and there can make a great difference in our retirement age and lifestyle.
Mark Ryan is an advisor with RBC Wealth Management, Dominion Securities (member CIPF) and can be reached at [email protected].
