Garry Marr, Financial Post

It was a stinging rebuke. I took it on the chin last weekend as I waited in line for a ride with my child at an amusement park in Toronto.

 ”My dad has a BlackBerry,” the little monster gloated in front of my own boy as he looked at my bottom-of-the-line cellphone.

 I hate having a cellphone but my spouse says it is a must in case of emergencies. (I’m not sure how my mother ever got a hold of my father in emergencies back in the 1970s. He didn’t even have a walkie-talkie).

I tried to explain to the young lad that I spend as little money as possible on my cellphone, opting for a $50 piece of junk that lets me pay per call — something I don’t do much of usually.

“Don’t you know you can get a BlackBerry for free,” he said, looking at me as if I am the dumbest adult on the planet.

Of course, I don’t expect a child to understand that signing up for a “free” cellphone means a commitment to three years of payments that could easily add up to more than five times the cost of the phone that you got for “free.”

Adults understand the deal. They just don’t care. Everybody wants a free BlackBerry or next-to-nothing iPhone today if they can pay for it tomorrow.

The enormous debt levels in Canada, now 140% of personal disposable income, do not even include all the financial commitments and contracts we have from cellphones to car leases, says Doug Porter, deputy chief economist with Bank of Montreal.

“Most of the traditional measures are the classic borrowing on credit cards, consumer loans and mortgages,” says Mr. Porter. “In the early 1990s, debt was underestimated because it did not take into account the leasing of cars.”

Terry Leon, chief executive of Leon’s Furniture Ltd., proudly claims his company pioneered the whole “do not pay until” programs, which allow consumers to walk out of stores without putting up one cent.

“We are going on as long as 100 weeks in honour of our 100th anniversary,” says Mr. Leon, referring to the fact consumers can now buy something in his store and not pay for almost two years.

There is a difference from most debt with his store because Leon’s does not charge interest. That $1,500 couch is the same price whether you pay for it in full the day you buy it or wait the full 100 weeks before making your full payment.

On its anniversary, more than half of Leon’s customers decided not to pay that day. That’s not hard to understand. Why would you empty your pockets when you don’t have to?

Credit, or temptation, is still everywhere. Even after what has been described as one of worst recessions in history, I’m still being offered financing for everything from fixing my smile to buying a new television set.

I get an offer for a new credit card about once a week and the list of things I can charge on that credit card expands every day. If I was worried about that monthly cellphone commitment, all I have to do it is tack it on my credit card.

I was incredulous when a friend told me he was able to gamble on horses at the racetrack with his credit card. “It just comes up as a charge like it would if I bought something at the Bay,” he told me.

Not that I doubt my friend, but I went online to see if I could set up a gambling account with my credit card. It takes about three clicks, once you plug in all your information.

Scott Hannah is president of the Vancouver-based Credit Counselling Society, a non-profit group that helps consumers find their way out of debt. He notes a strong surge in demand for its services. “Compared to a year ago, the demand for our services is up 118% from last September,” says Mr. Hannah.

With debt levels as high as they are today, consumers have little cushion to deal with any downturn in the economy. “They just can’t handle any bumps in the road,” says Mr. Hannah.

Those bumps hurt a lot more when you have no cushion or savings.

If you’re going to be in debt, why not look for the best deal? The Financial Consumer Agency of Canada has a great website (fcac-acfc.gc.ca) that compares credit card benefits.

Credit:
Debt becomes us

The first step in developing an investment plan is to identify what type of an investor you are. Investor types are often determined by their stages in life. Here is a guide:

- Single person under 40 years old. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.

- Two-income married couple, no children, aged 20 to 40 years. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth.

- One-income family, young children, aged 20 to 40 years. Focus: Long-term investments, low to medium risk. Emphasis: compound growth.

- Single person, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.

- Married couple with adolescent or independent children, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth.

- All investors, aged 60 and over. Focus: Short to medium-term investments, low risk. Emphasis: Income.

The following are examples of investment portfolio mixes for the various types of investors.

Low Risk Investments:

Low risk investments are predominately cash, fixed interest and superannuation. This has the lowest risk of all investments but has also the lowest return – in today’s market, approximately 3% to 6% per annum. Fixed interest includes cash, cash management trusts and bonds. They return approximately 5% to 10% per annum, sometimes as high as 15% if you invest in global bonds in good markets.

Superannuation returns and risk profiles vary from institution to institution, however the best and safest usually return on average 10% per annum.

Medium Risk Investments:

Medium risk investments include property and non-speculative shares. Diversified funds, which invest in a range of asset groups, are also considered to have medium risk profiles. Average returns from these types of investments will range from 8% to 15% per annum.

I also like to include the broad spectrum of mutual funds, to be discussed later, in the range of medium risk investments. Some can return up to 25% and more depending on the fund type and managers.

High Risk Investments:

High risk investments include all speculative shares, futures and any other type of investment that is purely speculative by nature. Because with these types of investments we are betting on whether the price will go up, or sometimes down, I often classify this as a form of gambling. Accordingly, the returns are unlimited but so is the ability to lose the total money invested.

Read more:
Investor Types and Risks

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 Kim Kiyosaki is the wife of Robert Kiyosaki – who wrote the best seller "Rich Dad, Poor Dad". Kim Kiyosaki is all about empowering women and helping them take their financial future into their own hands. Pick up her book Rich Woman and start your journey toward real freedom.

~ Stephen Key ~

Robert Kiyosaki’s best-selling book, Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money – That the Poor and Middle Class Do Not!, has sat on my nightstand for a number of years.

Within it, Kiyosaki advocates bold entrepreneurship and personal conviction as a means to achieving financial success and freedom; simply working as an employee will never generate significant wealth. Rich Dad, Poor Dad has been enormously successful. What advice does Kiyosaki have to give now?

“There’s an assumption that once one has achieved a certain level of success, everything is easier. Not true! I face the same dilemmas and struggles today I did 30 years ago.

It’s only the paradigm that has shifted. The way I perceive these problems is different; there’s a different sophistication level. But the lessons I learned as an entrepreneur working on a Velcro and nylon product decades ago are still relevant,” Kiyosaki explains.

Before becoming a best-selling author, Kiyosaki was a product developer. He counts his inexperience and naivete at that time as a blessing. “If, at the time, I knew how much I did not know, I would have never started. I would have stayed in the Marine Corps, done my 20 years, and collected a paycheck. It’s a great thing I didn’t know,” he says with laughter.

It’s the fearless acceptance of the mistakes he made (and, according to him, continues to make) as a result of that naivete that has allowed him to be so successful. “I blundered along then and I often feel like I’m blundering along now. What’s changed? I have smarter advisors,” he reveals.

But as intelligent as they may be, Kiyosaki’s advisors aren’t responsible for his willingness to try and try again. “The biggest skill I have is making mistakes. I’m pretty much an expert now. In the corporate world, if you make mistakes, you’re fired. But in the entrepreneurial world, if you’re not making mistakes, you’re not learning. I enjoy making mistakes. As far as I can tell, every mistake is accompanied by a priceless lesson. I’ve built my life around these lessons.”

While most people avoid fear rather than seek it, Kiyosaki adheres to a different principle. “If I don’t have butterflies in my stomach, there’s no sense working,” he says.

Kiyosaki can explain his perspective on failure and fear in numerical terms. Simply put, the number of failures you experience is a reflection of the degree to which you’re putting yourself out there. And having the courage to put yourself in a position to fail will ultimately lead you to success. If you never try, you’re never going to fail. But more important, you’re never going to succeed.

“The biggest problem wannabe entrepreneurs have is believing they’re going to ‘do what they love’ — but really, a big part of being a successful entrepreneur is doing what you don’t want to. And failing is part of that.”

Although Kiyosaki admits that the economy is “terrible,” he doesn’t view it as an impossible climate. “If you don’t make someone else money, they’re not going to give you their money. This principle is true in any economic climate. Show your client how you’re going to make them money. It may not be as easy now, but it’s possible. Get creative,” advises Kiyosaki.

But don’t, he says, talk too much. “Most people overpitch. We have two eyes, two ears, and one mouth. Observe body language and act accordingly. Most salespeople talk too much — don’t.”

More here:
Robert Kiyosaki: “The biggest skill I have is making mistakes.”