What women want

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Today we add to the GreaterFool family of bloggers courageous (or reckless) enough to place their thoughts, beliefs and best advice before the rabble this pathetic site has attracted. Tatiana Enhorning works as a Financial Advisor at Turner Investments, where she builds and maintains portfolios. She has extensive experience in the asset management business, on both the institutional and retail sides. – Garth

   By Guest Blogger Tatiana Enhorning
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According to DeBeers, it’s diamonds. According to your gym, it’s men with muscles and according to your mom, it’s a successful husband and a bunch of babies. These might be true for some. Being financially literate wouldn’t usually jump to mind.

My late grandmother was fortunate in many of these areas. In addition to having the idyllic life of a respected doctor’s wife, she had four healthy children, money was plentiful and they spent winters down south. She was university educated, fluent in several languages and truly the woman behind the man. My grandfather revered her and conforming to traditional marital roles worked for them. She was adept at taking care of business at home while he built his career and took care of business outside the home, which included their finances and investments. And what’s wrong with that? She wasn’t interested in the finances, she was far too busy anyway!

Well the answer is nothing was wrong…until everything was wrong.

My grandfather spent his life providing for the family and building wealth, so that his wife would never want for anything. But when he passed, my grandmother suddenly found herself in charge of a mountain of financial documents she had never dealt with before. Life happens. Most of us know someone who has suddenly found themselves without their life partner. The average widow is now only 56 years old and widowed women account for 45 percent of all women over age 65, according to Statistics Canada, and senior widows outnumber senior widowers by four to one.

We can’t prevent life events from happening, but we can prepare for them. Division of labour within a household is necessary but managing the entire family’s financial future is not just another household task. Unlike mowing the lawn or doing laundry, if you’re not used to dealing with money, let alone investments, it’s hard to pick up on short notice.

Once she was on her own, my grandmother often expressed that she couldn’t buy something at the grocery store because she “didn’t have enough money”. This shocked me — they had always had enough! When I looked at her assets, I was surprised to see a disconnect. From a financial standpoint, she had more than enough to live comfortably. Yet the ample assets on her statements were not making her feel secure. It was excruciating to see her not only in mourning, but also anxious about money. Nothing her family said could reassure her and it became very clear to me that having a large nest egg does not necessarily equate to financial comfort. A number on a page can be rendered meaningless if it has no context. My grandmother was very intelligent, but she was not financially literate, so she couldn’t extrapolate how long her money would last or whether she could continue to live comfortably. She was, therefore, left worrying she could run out of money at any time.

Of course, I cannot say what every woman wants. But I imagine not having to stress about money would be desirable for most people.

Whoever you are, as a reader of this blog you have likely learned many things over time which could benefit someone you care about — especially those who may not find finance as interesting as you do. Countless clients have told me over the years that it’s common for women in particular, not to get as involved in the finances because they feel they don’t have enough knowledge or don’t know where to start. If you know anyone like that, then sharing your knowledge and encouraging them to play a more active role can help ensure they achieve what everyone wants — to be financially free and comfortable throughout their life.

It may not be riveting to learn, but we can’t avoid it forever. Understanding the fundamentals and how one’s finances can be used to achieve long term goals can be very powerful in gaining a sense of overall financial wellness. Not everyone needs to be an expert, but everyone should get involved.

Cover the basics:

Get organized
Gather financial documents and ensure you can access all accounts. Make sure wills, executors and power of attorney documents are updated and in a secure place. Compile the contact details of all family financial advisors, accountants, bankers and lawyers. Hope for the best, while being prepared for the worst.

Get educated
It’s not necessary to follow the markets every day or take financial courses to make sense of personal finances. Get to know your financial professionals, attend the meetings and get used to how the investments work. Get curious and get your questions answered. Clarify the jargon, understand the fee structure and whether or not the risk is right for you.

Get advice
If the above seems daunting, ask a professional Financial Advisor for help. Money can be very tough to talk about, so finding someone who is trusted and easy to talk to is important. Like the relationship with your family doctor, the more trusting and open the lines of communication, the better and more personalized the advice can be. The right Financial Advisor can help you make a plan, understand the securities that will work best for your goals and guide you through the many transitions life may have in store.

My grandparents hadn’t realized how critical financial literacy would become to my grandmother’s overall wellbeing later in life. But if they had, I’m sure she would have endeavored to build a general understanding of their assets and how they work. If she had this financial knowledge base ahead of time it could have, at very least, reduced the acute and overwhelming stress she was thrust into.

By starting now and increasing financial literacy progressively over time, women can achieve and maintain the financial comfort and confidence everyone wants.

Tatiana Enhorning is a Financial Advisor with Turner Investments. She builds and maintains portfolios for clients across Canada, and has been in the business as an asset manager for more than a decade.

 

Regret

Tim and his squeeze Shelley (…“just don’t call me ‘the wife’”, she says…) bought their first home in early March in Cambridge, a bluish-collar kinda place. It’s a withering 100-minute drive to DT Toronto on the Death Freeway (401), and about an hour from where Tim works in southern Mississauga.

There was a bidding war for the $1.2 million fixer-upper, storey-and-a-half, 60-year-old pile. So T&S shelled out $1.385 million, no conditions with 20% down ($277,000 – half coming from parents) to avoid CMHC insurance. Closing was last week. But close, it did not.

First, they flunked qualifying for a $1.1 million mortgage, so Shelley’s mom had to co-sign. Then the bank appraisal came in light. Way light. The property, its report said, is now worth $985,000. The maximum to be loaned is 80% LTV, or just under $800,000. “We don’t have another $300,000 to do this deal,” Tim says. “We’re first-time buyers with no house to sell, so this is just effing insane.”

Third, Cambridge is in a kind of free-fall. Like K-W, Whitby, Caledon and King. The local realtor cartel says the average for a detached in February, when the kids were battling for an accepted offer, was $1.09 million. Last month it was $880,000. This month, brokers say, sellers will be lucky to get anything with a eight-handle.

“We paid too much,” Shelley writes, simply. “We can’t afford it. Now we can’t finance it. Our parents have nothing more to give us. The sellers won’t renegotiate the deal and we just got a nasty letter from their lawyer demanding we close or our lives will be ruined. Garth, what can we do? Please help!”

It’s turning into a common story. Bunnypatch prices collapsing. Buyers walking. And in the city scads of investors who bought pre-con condos never intending to close, but to flip, now can’t find buyers for their assignments. The only happy guys have LLB or JD after their name.

Before we get back to the newbies, consider how fast things are unwinding as the Bank of Canada prepares for a massive rate hike in a couple of weeks. Our astonishing new inflation stat (7.7%, on its way past 8%) means housing affordability is collapsing, says a new RBC report. As the central bank tries to douse high prices with reduced credit, the pandemic froth in real estate is being blown off.

This defies logic: it now takes 111% of average pre-tax household income to afford the average detached in Vancouver, even with a huge 25% downpayment. So just imagine how impossible it is to swing this with after-tax dollars. As mortgages pass mid-5%, then 6%, this barrier increases.

In and around Toronto, households need to spend 75% of their pre-tax income (or 100% of after-tax earnings) to effect a property purchase and shoulder ownership costs. “The Bank of Canada’s ‘forceful’ interest rate hiking campaign will further inflate ownership costs in the near term, putting RBC’s national affordability measure on a path to worst-ever levels,” says the bank.

What’s the fix, if the young are not to be perpetual renters? “We think the factor most likely to move the needle is a price correction.”

No kidding.

Here’s another fresh poll done by a real estate outfit, asking houseless people in Ontario if they think owning will ever be possible, even as prices drop. The result: 57% say they’ll never own in the city or town they now inhabit. In the GTA, it’s 61%. In Toronto, 74%. Areas to be hardest hit as the market erodes: “Bancroft, Chatham-Kent and Windsor Essex.”

Oh, and here’s another kick in the Millennial/Z groin. A survey done for HOOP, the huge healthcare pension outfit, says the kiddos “are headed for a perfect storm on retirement insecurity.”

“Well over half of Canadians expect these factors to cause financial challenges and force them to retire later. At the same time, funding retirement through the sale of a home is becoming a less viable strategy for many individuals.”

The problem is simple: increasingly Canadians have opted for a one-asset strategy. Buy a house. Pay the house off. Sell the house to finance retirement. Along the way, save and invest little (who can save when paying for a $1.8 million home?), and end up with a crappy mutual-fund-based group RRSP from work, plus CPP/OAS. So without that real estate to dump at 65 or 70, you may be pooched (unless you read this blog and learn about B&D).

Back to Tim and Stacey.

The first option is to renegotiate. Clear the lawyers and realtors out of the way and talk straight, seller-to-buyer. The vendor will lose if they have to resell in a collapsing market with few buyers. The purchaser will lose if whipped and sued. Everybody can still get something if the price comes down.

Second, ask the vendors for a VTB. They can take-back a mortgage for a few years to bridge the amount the bank would not cough up. The vendor gets an income stream on several hundred thousand. The buyers get the house and don’t lose their deposit. Even the realtors get paid. Only the lawyers suffer.

Third, T&S can try to find conventional bridge financing through a broker. They get the house, and avoid being sued (for damages, costs, plus the difference between their offer and the new selling price). But this is very, very, very pricey money (double digits).

Fourth, worst, walk. Feel like a victim. Lose the deposit. Have a judgment levied. Face the potential of garnisheed wages until you’re 82 or (shudder) chose bankruptcy, screwing your credit for years and possibly your employment options.

The times are a-changing. Makes you wonder. What were we thinking?

About the picture: “I’ve been reading you ever since a much older wiser man led me to your blog and all it’s Dogglyness way back in 2017,” writes Ben. “So far I’ve enjoyed getting the team’s insight and I especially like your writing. Since catching on things have improved for me bigly- thanks for all you do educating us who are mere money knowledge mortals. Here is my Bella Coola sidekick, Alice. She only lived the the exact time I spent in my property in Bella Coola, where she was in charge of the property. She especially loved her roses.”