The Worst Financial Advice I Ever Received

The Worst Financial Advice I Ever Received

I’ve received so much good financial advice I barely know where to begin. I’m much more sure of the worst financial advice I ever received, however.

The year was 2008, and I was a struggling Realtor/mortgage broker. When I got into the business, I decided I was going to wear both hats as a value proposition to my customers. I’d use mortgage marketing to get them in the door, pre-qualify them, and then go show them houses in their price range.

It was a fine theory that didn’t quite work out, for a couple of reasons.

First, I was a really terrible marketer. To be successful at something like that, you need to spend thousands of dollars per month in marketing to bring in a steady stream of interested folks. I was barely spending $100 a month on a crummy little ad in the newspaper, which generated about four phone calls a year.

Second, people would only phone me when they had exhausted their options with their bank. Sometimes I’d be able to help them (usually by taking the mortgage myself), but most of the time these people had no money and a terrible credit score. I was just wasting my time even talking to them.

Related: living life with a terrible credit score is easier than you think

I was having a little more success actually selling houses, but not a whole lot. I went from working at a grocery store to selling real estate, and the first year I made about 75% of what I made at the store. That wasn’t really what I had in mind, but it wasn’t a bad result. It takes time to get established in the business.

This wasn’t fast enough for my broker, however, which lead to all sorts of innovative motivational techniques.

The worst financial advice ever

One night he took me out for dinner to try and teach me how to drum up more business.

He suggested a number of ideas to get my name out there, including walking around to every business in the downtown core to introduce myself and hand out candy canes, since it was close to Christman. He also recommended I spend an hour each day walking around and ringing doorbells in nice neighborhoods.

I would have none of this. The last thing I wanted was to, and I quote “act like a used car salesman.” I viewed a lot of that kind of stuff as despicable. Talking to randoms all day long was (and still is) my own personal version of hell.

Looking back on it, it’s easy to see why I was a terrible salesperson. I like talking to you guys through a screen. I would hate doing it on a person-to-person basis all day, every day. When I type, I can proofread and change stuff I don’t like. It’s hard to take back misspoken words.

In his haste to help me — and to help himself, since he got a portion of my commissions — my broker suggested the worst financial advice I’ve ever gotten. He said my problem was I had low expenses, and therefore had no motivation. If I created a bunch of new expenses, I’d have no choice but to hustle to meet my obligations.

His main suggestion? Replace my perfectly reasonable used car with a brand new, bigger vehicle, that came with a substantial car payment. Yes, this was said with a straight face.

It’s been a decade since I received that advice, and it still makes my head hurt. It is, by far, the worst financial advice I’ve ever received.

Minimize expenses, don’t create them

Us here at Financial Uproar (me and 46 pet rats) are big fans of maximizing our incomes. It’s the whole reason why I advocate investing in everything from trailer parks to blogs.

But in order to have capital to invest in these things, you have to create a huge savings rate. Earning more is a big part of that equation, but it also helps to minimize expenses. Do both and you’re laughing.

That’s exactly what I intended back in 2008. I took steps to spend as little as possible so I could focus on investing the biggest percentage of my income as possible. The only problem was the income didn’t come. Primarily because I was terrible at my job.

The solution to this wasn’t to add more expenses. Are you kidding me? The solution was something I figured out a couple of years later, when I became a potato chip salesman. I needed to find something I was good at.

I can think of very few personal finance problems that can be solved with increasing expenses.

What is the worst financial advice you’ve ever received? Comment away, yo.

 

The Problem With a DYI MBA

The Problem With a DYI MBA

I’m good with abbreviations. Like WTF RU asking that’s TMI. I’m also good at talking like a 12-year old girl and not making much sense.

Ah, the MBA, the better known acronym for the Masters of Business Administration course. According to the knower of all things, Wikipedia, an MBA is:

A master’s degree in business administration (management). The MBA degree originated in the United States in the early 20th century when the country industrialized and companies sought scientific approaches to management. The core courses in an MBA program cover various areas of business such as accounting, finance, marketing, human resources, and operations in a manner most relevant to management analysis and strategy. Most programs also include elective courses.

The MBA is a terminal degree and a professional degree.Accreditation bodies specifically for MBA programs ensure consistency and quality of education. Business schools in many countries offer programs tailored to full-time, part-time, executive (abridged coursework typically occurring on nights and/or weekends), and distance learning students, many with concentrations.

Basically, an MBA is a master’s degree in business. You take it if you’re looking to be a big player in the business world. Graduates of various MBA programs around North America are often well represented in management ranks of the best companies.

As is always the case, the effectiveness of MBA programs are up for debate. According to one study, the average MBA holder had a salary of around US$100,000 per year, which is much higher than even the average college graduate. But another study said first year MBA grads were barely out-earning their bachelor’s degree peers. So I dunno, but I would be willing to wager the average MBA holder is going pretty well.

As always, you can use studies to support whatever cockamamie theory you have. NEW STUDY SAYS KITTENS AND PUPPIES CAUSE CANCER. OH IT MUST BE TRUE.

One of the major downfalls of MBAs is the price tag. It’s rare to find a program with tuition of under $10,000 here in Canada, with MBAs from elite business schools charging close to $100,000 in tuition to complete the two year program. In the land of guns and terrible presidential races, top schools charge more than $150,000 for students to get that head start in the world of business, although these programs are clearly catered to really rich kids.

Because of how expensive the program has become, a bunch of alternatives have sprung up. Distance learning is always an option for students who don’t want to take time off work to get their MBA. These programs aren’t particularly cheap, but it does come with the nice bonus of not having to quit your job and the freedom to do the course from your mother’s basement. Many other people take advantage of part-time MBA programs, which both allows them to learn while working and spread out the cost over a longer period of time.

But that’s apparently not enough for you CHEAP BASTARDS, so a few enterprising people have lowered the cost even lower–to $0.

These people attest all one really needs to get an MBA is to learn the same things as those in the classroom. Sure, you could read the same textbooks and even take the same tests, but that’s all overkill. All you really need to do is learn the same lessons and you’re in business. And since fun business books are a much better choice than textbooks, these folks assert you can get the equivalent of an MBA education for about a buck fifty in late charges at the local public library.

36439-good-will-hunting

Why so angry Will Hunting? I wouldn’t know, I’ve only seen the first half hour of the movie.

Now I don’t want to discourage anyone from reading, because I do believe it’ll make you richer. I try to spend at least an hour a day reading books, and that doesn’t include listening to audiobooks while I huff and puff climbing a set of stairs on the elliptical. Reading a book is one of the best investments you can make.

But on the flip side, there’s no way anyone can equate reading even 100 books to getting an MBA. There’s just no comparison.

 

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The real advantage 

The real reason why people get MBAs isn’t knowing the information. It’s the connections they make.

Everybody is in the program for the same reason–to get ahead in the business world. Some might want to get into management of a Fortune 500 company. Some might be there to learn the ins and outs of business before going into investment management. And others might want to learn everything they can about the world before starting their own company. And some might have went to the wrong classroom and decided this was much better than sociology.

The world is filled with stories of MBA folk sticking together. In the amount of time it’ll take you to read this sentence, 14 MBA grads will have pitched 14 former classmates 14 different ideas.

Having a network of highly paid, highly educated, and highly ambitious people to lean on has all sorts of advantages. I used to think I was perfectly fine approaching the world alone. Now I realize the importance of having a vast array of contacts. You should too.

And you gotta admit, an MBA designation after your name on a resume or a business card will impress the average person. I’m not about to go back to college at my age, but if I did, the journey would likely end with an MBA.

In 2016, there are a number of ways one can get a “free” MBA. They can read a number of timeless business books. They can use free online courses to take actual classes from actual universities. And so on. But ultimately, much of the benefit of the program is the connections made. And you won’t get that staring at a computer screen or a Kindle.

Unpaid Internships Are For Suckers. Long Live Unpaid Work.

Say whattttttttt? Nelson, stop with the confusies. Your title is HARD.

Last week, Bank of Canada Governor Stephen Poloz made headlines for suggesting that the kids these days should BUCK UP AND GROW A PAIR by taking unpaid internships, especially if they’re living for free in their parents’ basement. Here’s his full quote for context:

… And the problem, of course, is the longer [finding a job after graduation] takes, then the more likely it is that a brand new graduate is more attractive to an employer and the folks that have been taking this thing hard and have not been able to engage in the workforce are scarred by it. And that makes it harder for them to engage with a good match where they’re most productive.

So we know that the labour market does not deliver its fulsome outcomes with a high efficiency, the high productivity matching until it’s actually running pretty hot. When it’s running cold like it is, it doesn’t.

So we have to be patient for that. And when I bump into youths, they ask me, you know, “What am I supposed to do in a situation?” I say, look, having something unpaid on your CV is very worth it because that’s the one thing you can do to counteract this scarring effect. Get some real life experience even though you’re discouraged, even if it’s for free. If your parents are letting you live in the basement, you might as well go out and do something for free to put the experience on your CV.

But anyway, our belief is that, over time, as the growth happens, there’s sort of a natural draw for those kids to get those new jobs. The vast majority of those jobs that new recruits get are in new companies, young companies. And we’re just beginning, I think, to have the right environment to get that. So we have to be patient.

(Notice how Poloz says “even if it’s for free” and get skewered for suggesting everyone should work for free? Way to overreact, everyone.)

These comments caused quite the… uproar (tee hee hee) from youth who are oppressed, underemployed, or just plain angry. Various responses to Poloz’s comments said that unpaid internships suck, that a lot of youth don’t have the luxury of living in their parents’ basement for free, and pointed out that he didn’t have to work for free at any point in his life, even though logic would dictate that one of Canada’s top bureaucrats probably stood out enough as a kid to not have to worry about stuff like this. “Normal” kids don’t tend to become the head of the central bank.

So what’s the deal? Is Poloz right?

Yes. Well, sort of. Struggling youth should do work for free. I’m just not sure they should do it in a structured environment.

I’m about 80% through Steve Wozniak’s autobiography. It’s a pretty enjoyable read, even though it’s obvious that he was an engineering genius who just happened to stumble upon the right thing at the right time. If it wasn’t for teaming up with Steve Jobs during a certain point in history he’d just be a moderately successful guy who built things for Hewlett Packard. To his credit, Wozniak fully admits this.

Wozniak’s experience is useful to this discussion because of what he did as a kid. It was clear he was smart. When he was 11, he built an intercom system so he and all his chums could discuss going out in the middle of the night to commit shenanigans. That might be more impressive than anything I’ve ever built. And he was 11.

But he didn’t stop there. Woz spent years of his childhood building gadgets, designing computers on paper, reading technical journals, and so on. Those skills might have translated into him getting paid sometimes, but for the most part he did that work for free. By the time he was in his early 20s, he had the skills to get a job with HP, dropping out of college in the process. How much of his success would you attribute to his college education? I’d put that percentage pretty low.

Hell, even YOUR BOY Nelson did the same thing. I researched stocks on my own for a decade until people paid me to do it. I had an interest in personal finance for damn near 15 years before I ever earned a dime off it. Sure, I didn’t pursue it, but that’s not the point. I put in years of unpaid work before getting paid. Now I’m in the position of being able to make a decent living talking about something that I enjoy.

Do you see the huge difference between what I’m talking about and showing up at a company one day and declaring that you’ll work for free? With my plan you have complete control over what you’re learning, rather than going to get coffee for some VP who just enjoys having a moron go and get him coffee. What’s more valuable — learning the stuff you’ll need to succeed or a bland “we didn’t hate you” reference letter from some middle manager?

From a hiring perspective, would you hire the guy with the unpaid internship, or the guy who worked a retail job but spent his evenings and weekends immersed in some related project? If I hired for a bank, you better believe I’d hire the guy with a successful finance blog over the guy with the internship. If I was hiring a software engineer, I’d be more excited about a candidate that could show me things he’s accomplished on the side. In today’s world of everyone going to college, it’s not good enough to get a degree and think you stand out. Work experience will always matter, and unconventional work experience will always matter more.

Do I think you should work for free? You’re damned right I do. But, like I always preach, do it intelligently. Control your own work, and come up with stuff you can be proud of. Don’t expect employers to magically hand you a job after completing 8 weeks of unpaid busy work at your uncle’s friend’s company. Take the path less traveled. It’ll work out, even if it takes a while. It’s not easy, but things worth accomplishing rarely are.

 

Flight attendants earn approximately 0$ a month

Oh, hey kids. Another Thursday, another post from Vanessa, our friendly Thursday contributor. Have I said Thursday enough times yet? Joke’s on you, it’s actually Monday.

So you want to be a flight attendant? You want to work long hours, be away from home a lot, travel to new places in a metal tube listening to Sally yammer on about her boyfriend without a way to escape (uh, just headed outside to smoke!) and earn no money. Congratulations, you have picked a great career choice!

Aside from the spectacular outfits, you can enjoy things like dental and health insurance — things that you can’t possibly get at any other company in Canada. You get to sleep in an impersonal hotel room that’s “right by the airport, we swear”. You’ll be constantly jet-lagged, have to wake up at 5am or only arrive at your hotel at 1am and need to constantly ask people what the local time is. You’ll eat every single meal on the road or have to beg someone for access to their microwave to heat up the dinner you brought from home — two days ago.

Related: How I save all the money on hotel rooms by using the Hotwire.

You’ll earn a princely $23 an hour — but not for the time that it takes you to get through security, or boarding, or the mandatory 90 minutes before your shift that you must arrive at the airport. And if your hotel shuttle in Albuquerque is late, you’re standing at the airport, unpaid. Oh but, don’t worry — all of those hours are counted for consideration of your “full-time” position. Yup, you “work” 160h a month but actually only fly (and are paid for) 75h. Let’s see, $23/h x 75h = $1725/month (about 20k a year) . Before taxes.

You will, of course, get a per diem, but it’s not much. Directly from Air Canada’s website, you’ll see that FAs receive an “annual compensation [starting] at $25,000+ based on a minimum of 75 hours per month, including per diems, overtime and benefits after 6 months of work”. INCLUDING BENEFITS. Oh and you can’t really get a second job until you’ve been at the company awhile because, as the bottom ring of the totem pole, you’re on call — 24h a day.

Sure you’ll fly to lots of exotic places — in between trips to Detroit, Milwaukee and Calgary. Oh boy, exciting Calgary! And yes, you’ll get free flights to anywhere in the world, provided you work for a big enough airline that you can trade shifts with other FAs in order to get the time off — otherwise you’re stuck flying to Prince George 6x a week and having the chance to get away once a month. Plus, to be fair, what type of vacation can you have when you earn 20k a year? Visiting Grandma?

But it’s ok! You’re used to living at the poverty level — you’re a PF blogger after all! Good thing though because, before you even start earning your amazing 20k salary, you’ll have to fork over money to get a passport, security clearance, first aid certification, study a training manual (unpaid), pass various tests to see if you’re physically able to be an FA, complete a 5-6 week training program at the minimum wage, and, for Air Canada specifically, complete “a week long training session that usually takes place in Orlando, Florida. […] candidates are responsible for paying $1,750 towards incidental fees for the training in Orlando. This will be repaid at a cost of $50/month throughout the first 36 months of your employment”.

Fly the friendly skies for free! Just don’t expect to have any money to spend once you’re there.

This entire post has been written through a ton of experience applying to various airlines, reading benefits packages, talking to flight attendants that I know and a bit of internet research.

The Surprising Benefits of Low Paying Jobs

Everyone welcome back Vanessa, our usual Thursday contributor. HEY! HANDS OFF! Welcome her with your words. 

When I was fresh out of college, I thought that I wanted to work in a fancy office. You know the type — fancy shoes, gobs of perfume, nice dresses and a big paycheque. After a stint working in the legal department of the provincial government and a close roommate working at one of the Seven Sisters law firms, I am so happy that I get to work in a less formal environment with my low paying job. Here are approximately 6,519 reasons why.

Clothing

Right now at work I have a dress code — black pants and shoes, a plain coloured shirt and a blazer. I have to look conservative, not trendy or fashionable, and, seeing as I talk to (mostly) different people every day, I am able to have a smaller repertoire of outfits and need not worry that a client will see me in something twice.

When I was working in the government, I would see new clients each day but the pressure from my colleagues to “one up” each other was incredible. My roommate, at a fancier firm, felt the pressure even more and spent a good $1000+ one Saturday to bolster her wardrobe after a disastrous first week on the job. Girls are mean. My clothing costs are essentially $0 a year — save for maybe a pair of pants or shoes that I’ll have to eventually replace.

Food

Mmmmm, who doesn’t like good food?

Sure fancy offices have catering brought in occasionally but is this food that you can count on? Wouldn’t you like to eat fancy hotel food every single day? Wouldn’t you prefer Starbucks coffee and unlimited fresh fruit and fancy pastries brought to your desk for free?  So you have to sacrifice a few thousand dollars a year in pay — you don’t need to pack a lunch every day. Or snacks. Or dinner. At $10 a day for lunch and $4 a day for coffee, you have effectively saved yourself over $3500 on food costs a year.

(Nelson’s note: giving staff free food should really be more common in the hospitality and fast food industries. It’s a cheap way to reward workers, and it keeps them around during their lunch break just in case you need anything.)

Perks

What perks do you have working at a fancy law office? Free notarial services? Discounted legal fees? Yay, I can have my DUI settled for cheap and THEN BE OUT OF A JOB.

How about hotel perks? Hotels know that their good employees can work elsewhere and make more money and so we have to be enticed with perks. Free gym membership, swimming pool access, hotel rooms? Discounted stays abroad? Industry rates on everything? Early check-ins, free upgrades, food discounts at other hotels? YES PLEASE!

Plus (and OMG is this the best), flexible schedules that allow me to sleep in until whenever I want and take as much time off as I can afford. A 50h, spur of the moment trip to Toronto is possible — and without using my vacation time. Flexible time off and perks allow me to travel on a whim and take advantage of awesome last-minute deals!

Education

Perhaps the best part of working in the hospitality industry is that you need ZERO post-secondary education to get started. In fact, some of the best workers at my hotel don’t have formal hospitality training but rather, a desire to work in the industry and work as hard as possible to move up the corporate ladder. Starting to work as a front desk agent at 18 instead of going to university means that you’ll save about $40 000 in education costs and, by the time you’re 22, you’ll definitely be netting more money with your “low paying job” than a recent grad and have had four-years of income to boot.