You’ve Got to Go

It’s mere days away. But it’s not too late to register. QuickBooks Connect. Downtown Toronto. Dec three-to-five.

You’ve got to go.

Why? If you’re a number-cruncher. A tax preparer. An IT type. If you have clients that rely on you. Then you need to be at QuickBooks Connect.

Our profession is changing. It’s transforming. Listen, I’ve been at this game more than twenty-five years. And never, never, have I seen our profession evolve. Never like it has in these last two, maybe three, years.  You’re a seasoned pro? You remember the dawn of the PC age? Think that was big? That’s nothing compared to today.

The dust has settled. Cloud is in. Cloud won.

The way we deal with data. The way we interact with clients. The tools we use. Our internal practice-management tools. Our client tools. Communication. On-boarding. Payment, Billing. It’s all changed.

You still keeping timesheets? You still using cheques? You still have legacy desktop software? Backups and software-versions? Well, that’s why you need to be at QuickBooks Connect.

Times have changed. Time are changing. You need–we all need–to keep up. Or get left behind.

QuickBooks Connect. You’ve got to go.

Shareholder Woes

So you just incorporated your business? Congratulations!

As you might already know, there are a number of advantages to incorporating a business (and if you’d like to know more about those advantages, click this blog post for a brief explanation).

If, prior to incorporating, you were operating a proprietorship  (just a fancy name for an unincorporated business) you might remember that any personal cash you withdrew (or advanced) to your business was treated as a draw or a contribution, and that those funds really had no impact on your bottom line.

With a proprietorship, your business income is effectively included on your personal tax return and, provided you’re paying tax on that income, CRA generally won’t kick up a fuss as to the amount you’re withdrawing from your business.

Knowing how a proprietorship works, the temptation, for many recently-incorporated business owners (let’s call them shareholders), is to continue to withdraw (or contribute funds) through their corporation’s bank account, to continue to ignore the actual balance of the draws and contributions, and to record every “in and out” in a Shareholder Loan account. In other words, shareholders will often lend money to their corporation—crediting that Shareholder Loan account—and when they themselves need cash,  they’ll just “borrow” it from the corporation—this time debiting that Shareholder Loan account.

And that’s where things can get ugly.

Unbeknownst to most shareholders, unlike a proprietorship, CRA views an individual and a corporation as two distinct and separate taxpayers. And as such, CRA takes a very different, very narrow, perspective on what a shareholder can and cannot do via a Shareholder Loan account. Though CRA’s rules can be somewhat arcane, here are some important principles to keep in mind.

  • While a shareholder can “borrow” money from their corporation, it’s crucial to know that CRA has specific rules that address not only time-limits, but also the allowable purpose of those shareholder loans. And there have been countless instances of shareholders, unaware of CRA’s regulations, finding themselves on the receiving end of very severe (and very expensive) penalties.
  • Because CRA views a shareholder and a corporation as two distinct taxpayers, any amount a shareholder regularly receives from her corporation should usually, in one way or other, be treated as taxable income by the shareholder.
  • The balance, not to mention the series of transactions that contribute to the balance, of the Shareholder Loan account cannot be left unattended and ignored.
  • If a shareholder inadvertently expenses personal amounts in her corporation’s books and, if CRA—via an audit—discovers the error, CRA might, regardless of the Shareholder Loan balance, impose tax on both the shareholder and the corporation.

Though there are exceptions to the rules mentioned above, those exceptions, (like the rules themselves) are somewhat complicated. As such, whether you are now (or about to become) incorporated, we strongly recommend that you get in touch with us so that we can discuss CRA’s rules regarding Shareholder Loans.

Pay Me Now, Or Pay Me (A Whole Bunch More) Later

CurrencyTo the casual observer, our friends over at the Canada Revenue Agency (CRA) sometimes make head-scratching policy decisions. Just one example of CRA’s puzzling policy deals with deadlines for small business corporations. Were one to look it up, one would discover that a small corporation has six months from fiscal year-end to file a corporate tax return. So you’d probably understand how a business owner would automatically put that year-end task on the back-burner. And you’d also excuse her or him for thinking that they’ve got CRA covered, as long as the tax return is filed within six months.

Imagine their surprise then when CRA’s assessment includes an interest charge. Why is there interest if the tax return is filed on time? Because there’s a second component to that “six-month” rule. An important clause that says; even though the return is due six months after year-end, the actual tax is payable within no more than three months. So, our fictitious business owner isn’t onside at all. Yes, the tax return was filed on time, but the tax payment was late. Hence the interest charge.

Yeah, I know head-scratching.

To make matters worse, if that same business owner owes more than $3,000 in income tax (or HST for that matter), then CRA further requires the corporation to estimate and remit, every three months, an amount owing for next year’s tax too. Those prepayments are called quarterly instalments and if the business owner forgets to pay up, and if there is tax due next year, then CRA will once again assess an interest charge.

And what’s even more head-scratching for most business owners is that CRA won’t automatically send out a notice, or a reminder, that those instalments are due. In other words, the onus is on the business owner to verify, calculate and remit payments as required, and at the right time.

And, given that most business owners are much too busy thinking about other things; sales & marketing, product development, staffing, overhead and expenses (you know, the not-so-mundane stuff), it’s not uncommon to see an HST or income tax instalment go unpaid. Or sometimes get overpaid.

What this all mean is, in today’s increasingly complex world, business owners need more than a once-a-year-accountant. They need someone who will keep track of these things. Someone who will keep them onside, and on the right side of the tax and instalment game. In today’s world, business owners need an on-going relationship and a reliable service from a trusted advisor.

And we’ve got just such a service. One that we’re calling Concierge. And with our concierge offering, among all the other services it offers, it also makes sure that you pay CRA the right amount right now. Rather than a whole bunch more later.

Eggs and Baskets

Eggs and basketI was chatting with my young son, a millennial you see.
He’s telling me how different things are for people his age.
He’s saying; even though there’s no shortage of part-time work, that good jobs—real jobs—are hard to come by.  And those part-time gigs, most of them are menial, low paying positions.

It reminded me of a conference I attended, earlier this year. One of the themes dealt with something called, Millennials in the Workplace. It surprised me to learn that the number of self-employed millennials is, compared to previous generations, uncharacteristically high. I also learned that the reason so many millennials are self-employed is that there’s no other choice. In other words, the job market is bad, so bad that these kids have to carve out a living in some other way. Via-self employment.

But you know what?
In my mind, that’s not a bad thing.
And the reason it’s not a bad thing has to do with eggs and baskets.

When it comes to saving and investing—when it comes to money—who hasn’t heard that age-old maxim, “Don’t put all your eggs in one basket.”

Years ago, I had the brilliant, or so I thought, idea of investing in nothing but bank stocks. My rationale? Great dividend, stable client base, well-managed businesses… What on earth could be wrong with that strategy?
I remember bringing up my idea with a couple of high-powered advisors—one of them a well-known investment journalist.

I still remember one fellow’s (a stock analyst) harsh reply, “You’ll get killed.”
The other guy, the journalist, was somewhat kinder—more gentle.  Shaking his head, he said, “You need to diversify. You just don’t put all your eggs in one basket.”

History, by the way, has proven that those investment know-it-alls knew their stuff. It wouldn’t have been, to put it mildly, a brilliant move.

So yeah, keep your financial eggs in multiple baskets. Wise words. Words I heed to this day.

And yet, and yet. When it comes to careers, why do so many of us want one single job? Talk about eggs in one basket. If you have one employer, you have one source of income. If you lose that employment position, you have zero sources of income. You’re on your own. With no eggs; no basket.

Contrast that to someone—a consultant or a carpenter say—who has three, four, ten clients. One client disappears and, unpleasant as that might be, they’re at least not left standing there. Holding an empty basket. No eggs.

So maybe, just maybe, millennials, whether by fate or by design, are actually onto something. Maybe, with their multiple revenue streams, they’ll have at least one or two eggs. Maybe they can scramble them, boil them, fry them. And naybe, hopefully, they, at least, won’t go hungry.

Retirement. From someone who knows

HammockLast summer, at a BBQ, me and this retired fellow–let’s call him Tom–we stood chatting. Talk turned to investments, to the stock market and, finally, to retirement. When I pondered if retirement was as expensive as the so-called experts warned, Tom sort of chuckled. We talked some more, until I asked him if he’d jot down some common-sense, real-life thoughts about his experience.

Here’s Tom’s take on retirement…

Retirement

Knowing nothing of business or finance, my only tools for life or retirement were common sense and discipline. Paying $2 for an item that could be bought for $1 was wasteful but, when I reviewed my earliest spending habits, I found I was doing just that more often than I cared to admit. A little discipline improved that dramatically. “A dollar saved was worth much more than a dollar earned”.

My first instinct on receiving my first pay was, understandably, to go out, celebrate and spend. But then, I considered what costs had to be met before the next pay. I opened a bank account. The rise of its balance was slow and erratic. Banking charges of $200 – $300 annually were eating away its progress. Once I learned that banks would forego those charges if I maintained a minimum balance of about $2000, that became my first financial goal. It was a 10% to 15%/yr return on investment and “savings were the road to life’s goodies”, retirement was just a vague concept of a distant future.

Later, I got a credit card and treated it like accident insurance, something you want in case of emergency but hope never to need. I used it sparingly for things I was sure to pay off within the month, just to keep it active. I knew I’d be working for the bank otherwise, paying 20%/yr. or more on it. It wasn’t long before I wanted a car but resisted the urge to buy a new, exotic, or showy one. The most common car on the road would be most familiar to mechanics and their parts would be most readily available. I borrowed the money from the bank because it would cost less than my account would save once my first goal was met. A car is not an investment, it’s an expense. The best investment is a house, which I bought years later. It saved rent and its value increased. I do the maintenance and most of the repairs on both, being more willing to use my hands than my wallet. Services, even then, were consuming an increasing portion of incomes.

After seven years work, I got a job with a major corporation that had a defined benefit pension plan in which the company matched a portion of my contributions. It was invested for growth as a hedge against inflation, which historically averages, say 3%/yr. Supporting a young family at the time, I didn’t take full advantage of that opportunity until much later.   

We were spending about $5000/yr. at the grocery store. They, like most retailers, offer endless sales. If a non-perishable item bought monthly went on sale at 10% off, we bought six instead of one, which becomes a 20%/yr. return on investment, more than most investors make on the stock market. A freezer paid for itself in no time. The lessons, here, were that I should anticipate and buy in advance. Procrastinating to the last minute inevitably cost us more.

It seemed that personal finance and especially family finance required significant safety margins and flexibility. When (not if) something happened, my creditors wouldn’t be sympathetic nor would the government bail me out. Life’s risks had to be managed. Irrational fear would only drive me into the open arms of insurance companies willing to eat up my savings, which would otherwise increasingly become my insurance.

By the age of 50, down-sizing was creating havoc in the workplace; I was becoming less enthusiastic about my job and started to think more seriously about retirement. I started maxing out my allowable RRSP’s at the bank, first with GIC’s then Mutual funds. By 55, I jumped at a moderate but reasonable bridged retirement offer. My wife wanted to continue working to build her pension and we only had one daughter left at home, who was in her last year of college. I was able to put most of the termination package into RRSPs, but by leaving the company, I was then responsible for managing my pension, which until then I had mostly ignored. Fortunately, I had a friend who, not having a company pension, had started his own self-managed RRSP and showed me the ropes. I felt we could manage it.

The first year was tight with one daughter still in college. With my friend’s help, my improving understanding of finance started to pay off and, by 60, the Quebec Pension kicked in. I had signed up to the bank’s web service, which allowed me to follow my investments (or any other I may be interested in) on the market in almost real time. More importantly, it offered tools to analyze what the market was doing so I developed a more informed view of what’s going on.

Managed Mutual Funds had been costing me about 2% annually. If they earn the stock market’s historical average, say 8%, I would get 6%, which becomes 3% after inflation. Unmanaged ETF’s cost me about 0.5%, followed the open market on which they’re traded, and didn’t threaten penalties for early redemption. The difference between 3% and 4.5% net over time is tremendous. Active management can then yield another 1.5%, raising the net to 6%, double what unmonitored mutuals would. The combination of this and the termination package brought my RRSP’s back to where they should have been. Close monitoring and timely trading were the keys. In 2008 I lost 10% instead of 40% then, recovered much more in Canada’s quick recovery afterward. I’ve been lucky enough not to dip into my RRSP’s. In fact, since the advent of a retiree’s next best friend, TFSA’s, I’ve been able to max them out.

The effects of playing the market, like gambling, can be encouraging, even infectious, and you could go on to broader portfolios of stocks, buy on margin or become a day trader. That and more is possible and “potentially” more profitable but, the purpose was to maximize retirement savings not start another career. If finance interests you, occasional trading provides a light pastime, security monitoring of your investments and can provide extra income right through retirement. I watch the market and make a little while my wife watches the flyers and saves a little and everything works out nicely.

In retrospect, the cost of a child’s education or marriage should be provided for before retirement. Retirement shouldn’t be burdened with them, a mortgage, car payments or credit card debt. Credit costs money and is best suited to increasing incomes not diminishing incomes. And, retirement is best spent empty nested. That’s not something to lament over. Your children’s successful departure is your graduation as a parent. A 3 or 4-bedroom family home is not appropriate. It becomes too much work. Depending on your finances and interests a 2-bedroom single level bungalow or condo is more appropriate. If that’s a real-estate downgrade, it’ll provide a little more money for retirement. We had a 3-bedroom bungalow that I converted to two bedrooms, which we still find more than necessary. And, a comfortable car is more appropriate and cheaper than a family van or SUV.

Sipping on a half priced senior’s coffee, I can tell you that retirement living costs substantially less. It still amazes me how much was spent on clothes, gas, lunches and coffee going to work, never mind the unending stream of birthdays, weddings, babies and retirements that had to be celebrated there, or the ambushes for tickets and donations. I can’t say what the value or percentage of saving is. That would depend on your circumstances but, it’s consistently more than most think beforehand.

What price happiness? Apparently it’s $75,000

Cash RulesJust the other day, via LinkedIn, I happened upon another one of those studies. You know, the ones that correlate income and happiness.

And just like most others, this analysis once again reinforced that the relationship between money and happiness is very reminiscent of that movie with Meryl Streep and Alec Baldwin,

It’s complicated.

Before getting to the refreshing–and perhaps just a little bit complex–twist that resulted from this particular research, let’s revisit a position that all these surveys arrive at. And that position is this: while more money might make you more happy, it only does so up to a certain limit.

And that limit is, apparently, $75,000. According to the folks who did the research, earning more than $75-large might make you wealthier, but it won’t make you any happier. Hard to believe, perhaps, but consistent, nonetheless, with every other study that I’ve read.

So why bother? Why bother earning more than $75K? Well, it appears that earnings above that bracket might bring you something else. Something I found intriguing, not to mention something that’s a little more nuanced, a little more complex.

It appears that while you won’t be any happier from a salary above $75,000, you might, however, from an intellectual perspective, feel better about your life.
And the study calls that intellectual assessment “life evaluation.”
Which is not to be confused with happiness or, as the authors call it, “emotional well-being.”

And so, the choice is yours.
Do you want an intellectual evaluation of your life? (Hey I’ve done well. I’ve got status, I’ve got net worth, I’ve got stuff).
Or do you prefer an emotional assessment? (I feel happy. I feel fulfilled.)

If it’s the former, then run your income up as hight as you can.
If it’s the latter, well, put the brakes on once you reach $75.000. Cause going above that won’t leave you more fulfilled.

If you’d like to learn more, here’s a link to the full research paper

Signature

 

Retiremyth

Unicorn

I’m a boomer.
And boomers, most of us anyway, always bring up the same thing.
Retirement.

Some of us count down the days until that magical moment,
“I’ve only got four years, twelve months and thirteen days.”
Others fret about finances,
“My advisor says I need a million bucks, I don’t think I’ll make it.”

And then there are others, the half-full type, who talk of how much fun they’ll have, “It’ll be like a vacation. Each and every day .”

Retirement’s a Myth
Sorry, to break the news, but.
It just ain’t so.
Retirement, at least the one touted by the banks and mutual fund companies—those retirement and financial experts (so called)—is a myth.
Why?
Why is retirement a myth?
Well, a whole bunch of reasons, some good and some bad.

The Good News – The Bad News
For starters, the bad news is it’s not going to feel like a permanent vacation.
As retirement specialist Denise Loftus explains,  “People have a certain degree of fantasy about retirement. After a few months they realize it’s still important to have some purpose and meaning in life… You just don’t play golf and fish endlessly for the rest of your life.”

The good news, on the other hand, is you won’t need a million bucks.
Actuary and retirement expert Malcolm Hamilton says that you don’t need anywhere near $1 million to retire, nor should you be targeting 70% of pre-retirement income either. Per Mr Hamilton, 50% is likely more than enough.

And the even better news is, if you really want to, you can retire right now.
OK, if you want to fully retire—right now—and you don’t have much money, you’ll probably have to move. Where to? Well, check out these six countries where you can live for as little as $1,000 a month

The most important thing
Here’s the thing, the important thing. Retirement is a personal affair. So personal that it can’t be packaged and sold like your basic smart-phone plan. And that’s the biggest peeve I’ve got with most financial planners and retirement advisors. All they do—most of them—is ask at what age you’d like to retire, and then they put you into some mutual fund. As if that’s all there is to it.

Put it all Together.
JugglingRetirement is important. It’s that crucial next-phase-of-life. And it’s something you’ll want to plan. Carefully. But where do you start? How do you start planning for life’s next phase? Well start by looking at those scenarios above. Odds are you won’t want to move to Thailand; you won’t have a million bucks; and you won’t want to be bored. Odds are you will—both now and in the future—want a meaningful life. So for starters, take the three scenarios above, and toss them around. Juggle them. Mix and match them so that you can start to arrive at your own very own, fully customized, fully personalized retirement strategy. Think about purpose and meaning. Think about passion. Think about how you can perhaps make a few bucks—just a few—doing what you love. Think about foregoing the whole retirement thing. Think about semi-retirement. Think about working two or three days a week at something you like. Think about living in a lower-cost location. It doesn’t have to be another country. Oftentimes another neighbourhood, or another type of home, is a great way to cut costs. Think about your income and your expenses, both now and in the future. Nail down your cash-flow. How much do you spend each month?  Then, from there, estimate (or work with someone who can help you forecast) how much you’ll really need to live on in 5 or 10 or 15 years.

Read Up
Retirement—your version of it—truly is the next phase. And, to my mind, it’s an exciting phase too. Retirement is when obligations disappear, and responsibilities evaporate. Retirement is all about you. And what you want to do. So it’s important that it’s not to left in the hands of your financial planner or investment advisor. It’s so important, in fact, that you should do some of your own digging. So, here are a few resources for you. 3D Book Cover #3 I’m sure you’ll find them, not only informative, but entertaining too.
The Blue Zones by Dan Buettner
The Real Retirement by Fred Vettese & Bill Morneau
Why Swim with the Sharks? by Diana Salomaa and Henry Dembicki
The Net Present Value of Life by Michael Di Lauro (OK OK, that’s me. I still think you’ll enjoy it though. Even if I did write it).

Last Thing
Take a vacation lately? What about a party? Did you recently throw a party? How much planning did you put into it? Well, retirement—your version of it—needs, at the very least, an equitable level of commitment and thoughtful consideration. Heck, it’s only the rest of our lives we’re talking about.

Signature

 

 

Going for broke

Searching for Sugarman  In the span of a month, two compelling, not to mention unfortunate, tales caught my attention.

The first, captured in an Oscar-winning documentary called Searching for Sugar Man, portrays the life of a gifted, prolific songwriter named Sixto Rodriguez. With talent rivalling that of Dylan’s, Rodriguez toured the club and concert circuit, which led to a modest following and, more importantly, to the support of music insiders and heavyweights, which culminated in the release, in the early seventies, of two record albums. Each of which went nowhere.  After which Rodriguez quickly and completely disappeared.

Not wanting to give it all away—in case you’re keen on watching the movie yourself—let’s just say the next 40-odd years of  Rodriguez’s  professional life were somewhat less attractive—doing hard labour in construction and renovation.

Success, however, did not elude him forever. Thanks to a string of fortuitous events, transpiring half a world away, Rodriguez-the-artist eventually reappeared, and he finally found the fame (and yes, fortune too) that his prodigious talent demanded.

But here’s the thing. Despite the increased exposure, despite the increased fame, and despite the massive increase in income, Rodriguez continues to live a simple life, in the same simple house, in downtrodden Detroit. And he shuns money, giving all of it away to family and friends.

And that, for the purpose of this discussion, closes story one.

Story two, so well captured here, is an even more troubling tale. One of a lady who, after winning a $10 million lottery, proceeds to, over only nine years, blow it all away. Resulting in her now being as broke as a pauper and having to support herself and her six children with part-time work.

As Jonathan Chevreau so thoroughly explains here, she made many (and, I suspect, many all too common) cash management mistakes. Chief of which: she should have sought the services of a professional financial adviser.

And yet. And yet. I can’t get over another side of both these stories that haunt me still.

The question that always pops up (for I’ve seen similar, though much more subtle, cases creep up elsewhere) is “Why?”

Why do some people, faced with the opportunity of comfortable money, do everything they can to deny themselves of that opportunity? Why do they spend it? Shun it? Give it away? Blow it?

What process causes someone to go from poverty to wealth and then back to poverty again?

Yes, one can call it mismanagement. One can call it lack of financial acumen. One can call it irresponsible or downright stupid even.

But my question is, is there something else at play here? And if so, is there something we can learn from it?

Lets face it, money plays an important role in each of our lives. And as with other important aspects of life (religion, family, politics, etc. etc.) we all have strong views, and stronger opinions, about money.

And I wonder if those opinions—those beliefs and attitudes—might at times lead us lead us to perceive money in perverse ways, leading us to, therefore, behave in irrational ways.

For instance, take someone who, subliminally or not, buys into the theory that “money is the root of all evil”, or take someone else who adheres to an “easy come, easy go” philosophy. Might they, unconsciously or not, incorporate strategies to ensure money doesn’t touch, taint or otherwise adversely complicate their lives?

And the reverse is true too.

Take, for example, a person who equates money with security. One who believes that ever-greater amounts of money result in more and more security. Or take one whose overriding desire is to leave a legacy, to be remembered fondly, and to be spoken of—long after they’re gone—with respect and reverence. Wouldn’t they do everything in their power to amass an excessive amount of capital? Sometimes at the expense of so much else that life has to offer?

One more question that always pops up, by the way (and one that, for now, I’ll leave unanswered): why are we so quick to criticize the former example and compliment the latter?

People are complex, emotional beings. As much as we want to think otherwise, the fact is that logic and rationality don’t always prevail. And many of us, especially when faced with life’s momentous affairs, veer too far away from reason and analysis, and too close to emotion and sentiment. (And if you don’t believe me, just ask any advertising expert about the truth of that statement).

And so, let’s not be quick to judge the action of others. Let’s not use our logical minds to explain someone else’s seemingly irrational behaviour. Instead let’s explore our own beliefs and attitudes about money, just to see how the former impacts on our habits with the latter.

The truth about car: redux edition

So, last week I told you I was an incurable car nut. And I also promised to share some (hopefully insightful) nuggets about the true cost of car ownership.

Well, without further ado, here they are—the nuggets of course. (Click to zoom)

Anual Ownership Costs
A couple of details:

  • In the interest of consistency, I standardized the cost of fuel and financing, pegging the price of fuel at $1.22 per liter and imputing 5% financing for each vehicle (financing costs were imputed even for those cars actually bought outright);
  • Also, remember that, depending on factors such as age, geography and other assorted demographics, your actual costs—including insurance and such—may differ from those denoted here.

OK, so.  What does the data reveal?

Start by taking a peek at the total annual costs. Notice that, if you exclude the Sienna, the difference in ownership costs for the remaining three cars is relatively insignificant. Only $925 per year (just $77 per month).

Why?

Notwithstanding that one car was purchased new and two were previously owned (the Accord was 7 years old and the Mazda just 3 when purchased), what they share in common is:

  • They are inexpensive cars;
  • They are highly rated in terms of reliability;
  • They all have four cylinder engines;
  • They tend to stick around for a long time (only the Accord has since been sold).

Bottom line then—if you don’t like to spend a ton of money on cars—consider those four aforementioned bullets as your car-purchasing mantra.

Which means that your ownership costs will clock in at $5-6K. Each and every year.

Yeah but, I want more

Oh, so you want something bigger, something comfier?

Oh my, so roomy!

Well look at the Sienna’s cost analysis and you’ll find that there’s a price to be paid for bigger and more comfortable. Even though it stayed “in the fleet” for more than eight years, the Sienna’s cost averaged about $8,000 for each of those 8 years. That’s a lot of dough. Comparatively speaking. And it would have been higher still had the car been disposed of earlier.

So why? Why did the Sienna cost two grand more per year than the next most expensive car?

Two reasons. Mostly.

  • Depreciation is reason number one. Look at the costing table, $3,000 per year in lost value. Each and every year. What would you do if your investments lost $3,000, every year? Yeah, I know. I’d scream blue-murder too.
  • Then there’s fuel. With its six-cylinder engine and its hefty curb weight, the Sienna is much thirstier than all the other cars here.

So, let’s get this straight. It costs $8,000 per year to own a $30,000 car? And maybe $5,500 to own a smaller, less expensive car? That’s, like, an extra $2.5 grand a year?

In a nutshell, yeah.

Wow, just imagine what a $40 grand car would cost. Or a $50, or 60, or 70-grand car!

No, no. I said “More!” Not, “More expensive.”

Yeah, but… What if you don’t want to drive what some might consider a “penalty box”? What if you don’t want to be seen in—heaven help us—a bleeding mnivan.  What if you want something a little fancier, a little snazzier or a little less likely to break down?

Valid questions, I suppose. Especially that final one, as a quick peek at the Accord’s repair history will attest. (It did, after all,  require almost twice as much service as any other car on the list).

And, what if you want all that, without raiding the kiddies’ piggy bank?

Cash Rules

Alright then. If small, to you, means even smaller pleasure (now, now, don’t let your mind wander too far on that one, OK?). If a minivan, to you, equates with uncool.  And, if visits to a service bay are as enticing to you as that annual visit with your tax accountant (hey wait a minute! That’s me!). Then consider these two options.

Option 1

We said fancier, we said snazzier, right?
OK.
Then lease.
Yes, I said, “lease”.
Check this out.

Kia Optima

You can, right now, lease a brand new, base-model Kia Optima for four years for only $325 per month. By my calculations—all in—that car will average $6,900 per year.
Plus, it’s brand new. Plus, it’s got a warranty.
Not bad, eh?

But, then what?
Then, when the lease expires, lease another one. Or lease something else for that matter. If you’re not big on brand loyalty, odds are that you’ll find another lease—spanking new by the way, please don’t ever lease used—for about the same price.
That way, rather than being an owner, you simply become a renter. All for pretty darn close to the same price anyway.

(Caution! If you do go the leasing route, be aware of all the terms and conditions, especially regarding lease returns).

Option 2

But what if you are, like me, a lifelong gearhead? A 100% bona fide addict?
Then do your homework, shop around, visit a lot of dealerships, and wait for one of those, “They made me an offer I couldn’t refuse” type of deals.

That’s what I did when I landed my most recent purchase, a prior-model-year-but-still-almost-brand-new BMW, with only 300 clicks on the clock. Hey, we’re car nuts, right? And as a car nut, I’m sure you agree that everyone should, at least once in their life, own a BMW.
What? You don’t?
Oh never mind. Just read on.

Bimmer3

Per my calculation, this sweet-running 3-series will cost me $7,004 per year. Which is, you know, only $100 more than the leased car under Option 1.

Why only $7K per year? Well, because of certain provisos, not to mention certain benefits. Which are:

  • At time of purchase the car still had its original manufacturer’s warranty;
  • The purchase price included a two-year extended warranty that kicks in after the the original one expires;
  • The car comes with four years’ service. Absolutely free.

And lastly, the provisos. Which are:

  • I pretty much have to commit to the car long-term.
  • Meaning ten years.
  • At least.
  • And, I have to dispose of the Mazda. Or the Matrix.
  • Or both.
  • Not sure, yet. But, one of them, at least, has to go.

And if it is the Mazda, well, after its faithful (not to mention, exuberant) service these past eleven years, that will leave me somewhat saddened, if not downright brokenhearted. But as they say, back in my hometown, “No use crying over spilled Labatt 50.” (Yeah, we say that, but we say it in French).

By the way, if you are looking for a vehicle of the used persuasion, contact me, about either car, and I’ll send you the deets.

So, dear reader.
As the great Howie Meeker often said, “Keep your stick on the ice.”
Which, to me, simply means, “Drive a nice car, yes. But never, ever, overpay.”

(Yeah, I know. Tenuous. At best.)