Debt Relief Experts
Ellen Roseman, a columnist for the Toronto Star, author of many personal finance books, and a well known consumer advocate talks with Doug about the state of financial literacy in Canada, and Ellen is encouraged that Canada now has a Financial Literacy Leader (Jane Rooney, our guest last week).
While financial literacy programs are important, Ms. Roseman makes the point that
If I’m not in the market to buy a house, you can talk to me all you want about mortgages, but I’m not going to pay attention. You have to hit people when they are ready to listen and absorb information, which is usually when they are on the cusp of making a purchase.
Table of Contents
Where Do We Get Advice?
You have to deliver financial information at the right moment, using a “just in time” model, which is tricky. That’s why Ellen believes that we tend to get advice from people with a vested interest: the car salesman, the banker, the mortgage broker, and the real estate agent. The problem is that, as Ms. Roseman says, “they all have skin in the game”, so consumers need to find someone to give them advice who is not biased. Ellen Roseman hopes that the Financial Literacy Leader’s new database of information will help consumers find answers to their questions from unbiased sources.
But are there unbiased sources of financial information? It’s not the banks. Ms. Roseman says:
There are too many people in the financial literacy game who are biased. People have a lot of trust in the banks. The banks are biased. They support their shareholders over their consumer’s interests. They are always trying to return more money to their shareholders. That means that a lot of their marketing is king of gimmicky.
For example, bank’s sell “balance protection insurance” on credit cards to low income Canadians. What does Ms. Roseman think of that product?
They don’t need it. It’s not a good product. It’s sold by banks very sneakily, and it doesn’t even cover your balance. It only covers your minimum payment….You’ve got to realize that banks are not your friend.
Wow.
Sadly, it’s true. Banks are not your friend, but that’s true of all businesses. Businesses exist to earn a profit, not to look out for your best interests. So where can you turn for good advice?
Ellen Roseman suggests following journalists with large media organizations, who are not usually connected to any specific financial interest. Unfortunately they tend to be writing about issues that are “trendy and hot”, so they may not have the advice you need, when you need it. She also advocates reading articles by personal finance bloggers, who are ordinary people with an interest in personal finance. Their blogs generate lots of comments, so that’s a good way to learn important financial lessons, based on the experience of ordinary Canadians.
Ellen Roseman’s Practical Tips
So Ellen’s number one tip before you make a financial decision: Google it. Do your research from many sources, so you can form your own opinion.
Tip Number Two: when researching a company, search on Google for the “company name + complaints”. If a lot of previous customers are complaining, that’s a warning sign for you.
Tip Number Three: Always ask yourself “what’s the worst case scenario?” If you are hiring a moving company, the worst case scenario is that your possessions are damaged or lost in the move, so to protect yourself take pictures of your possessions at the start of the move.
Be Alert For Scams
By considering the worst case scenario we can also be alert for scams. Seniors often fall victim to telephone and email scams. Ellen’s advice:
You must be a lot more suspicious. Never say “yes” right away. Don’t buy from a door to door salesman until you have completed your research.
It takes time, attention, and work, but if you make a mistake it may take a long time to recover.
How Can We Improve Financial Literacy in Canada?
Educate consumers to consider the downside.
When you tell people “motherhood” stuff their eyes glaze over, but if you say “look at this person’s really bad experience, this happened for these reasons, it can happen to you to if you’re not careful” at least you will get their attention.
That’s what Ellen does in her column in the Toronto Star. She tells stories to educate consumers about the downside of bad financial decisions, so we can all learn from other’s mistakes.
Explain the downside. Explain the risks. Do your research. Be suspicious. Watch your money.
Resources Mentioned in the Show
Ellen’s Books, available on Amazon:
- Fight Back: 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery
- Money 101: Every Canadian’s Guide to Personal Finance
- Money 201: More Personal Finance Advice for Every Canadian
Other Resources:
Recent Articles by Ellen Roseman:
FULL TRANSCRIPT show #10 with Ellen Roseman
Doug Hoyes: Welcome to Debt Free in 30, I’m Doug Hoyes. My guest today is Ellen Roseman, a columnist for the Toronto Star and author of many books on personal finance. It’s Financial Literacy Month, so I invited Ms. Roseman on the show and started by asking for her take on financial literacy in Canada.
Ellen Roseman: Well we finally have a financial literacy leader, this was something that came out of the taskforce on financial literacy’s report a few years ago and just took forever to get started, but Jane Rooney is in that job as of last March and she is going really quickly in terms of consulting and putting together a financial literacy strategy and she’s focusing on groups that tend to be somewhat disadvantaged.
She started with seniors, people over 65. I got some criticism from readers saying seniors are very different and it’s true, the over 65 to probably 75 are much more active and connected than the over 75, and I think that’s where the real problems lie, with the over 75 group. Now she’s looking at newcomers to Canada and Aboriginals and all this is good. So she’s going to — as well they have a database of resources, so like a central clearing house where you can find all kinds of financial literacy tools and help.
As for Canadians’ state of financial literacy, I think it’s still hit or miss. I think the learning that people in the education field are realizing is that if I’m not in the market to buy a house you could talk to me all you want about mortgages but I’m not going to pay attention, you have to hit people when they’re ready to listen and absorb information, it’s usually when they’re on the cusp of making a purchase of some kind.
So you have to be delivering it at the right moments and that can be tricky and I think that’s a good reason why most people listen to advice they get from people with a vested interest, you know the salesman, the banker, the mortgage broker, the real estate agent. Those are the ones who are giving them information during the transaction and what they need to do is say, you know they all have some skin in the game, I want to find someone who is not into this transaction who can just give me objective information.
So that’s where I’m hoping the Financial Literacy Database will help you find good objective information about you know how to pick a real estate agent, how to pick a mortgage broker, what you should know about penalties if you take a five year mortgage and then you have to break it in midstream and so on.
Doug Hoyes: Do you think that’s possible? Do you think it’s possible that there can be unbiased advice? So I understand what you’re saying, there’s going to be this database with all these resources. So let’s say that me, as a bankruptcy trustee, I write an article about your credit report and how things work on your — I have no vested interested in a credit report, I don’t sell that service, it has nothing to do with me but then do I have the expertise to be putting the information out there? Is there really anybody who is both unbiased and yet also has the expertise to advise consumers?
Ellen Roseman: Well I think that you made a good point, that there are too many people in the financial literacy education game who are biased and people have a lot of trust in the banks. The banks are fully biased, they support their shareholders over their consumer’s interests, they’re always trying to return more money to their shareholders and that means that a lot of their marketing is kind of gimmicky.
I just got a report from someone who followed a bunch of low income Canadians around and they all have balance protection insurance on their credit cards. They don’t need it, it’s not a good product, it’s sold by banks very sneakily and it doesn’t even cover your balance, it just covers your minimum payment if you get sick or if you die. You know you got to realize that banks are not your friend.
So everybody has a bias of some kind, you’re probably better off if you’re dealing with journalists who are full time employees of you know the media corporations because they’re usually not connected to any specific financial interest, but then you know they’re looking at the stuff that is trendy and hot and will score well on the internet.
I like the personal finance bloggers, there’s quite a lot of them in Canada and they are just ordinary people who took an interest in their money and started writing about it and it’s not so much what they write, it’s the fact that the popular ones get many, many comments from other people and if you go through a couple hundred comments to somebody’s blog post from other interested citizens who have taken an interest in their money you start to get a sense of the truth and you get a sense of what to look for and what questions to ask.
I was at a financial literacy conference yesterday and there was someone there who did a lot of research with Canadians about money and he said there’s a big difference between people under 50 and people over 50. The over 50 tend to trust much more and when they go for advice they will get a couple of recommendations and they will sign up right away and then they’ll put their trust in someone and they will keep that trust there until the very end, unless of course they run into problems. They trust the media as well and I get a lot of those people saying you know, “whatever you say that’s what I’m going to follow”.
So that’s not the best approach. They said people under 50 are much more sceptical, they do realize that there’s no one truth, there’s many truths and they do a lot of searching on the internet before they even start looking for a financial advisor. So they’ll go to maybe five or ten or 15 different sites and check out what’s going on and what the articles are all about and what the comments are saying and then they’ll start looking. So they’re at least comparison shopping online, which doesn’t take all that long and can really equip you much more and make you less trusting because I think in today’s world you can’t be that trusting.
The people who write to me get into trouble because they’re not that trusting and they don’t do their online research. The ones that really upset me are when they deal with companies that I know of that are just scoundrels and you know they lose their money, sometimes they can get a refund on their credit card, but they’ll write to me and they’ll say “Boy oh boy I wish I had checked your website”, because I’ve got a few of those on my website, or “I wish I’d gone online and seen that the Better Business Bureau gave them an F and then there’s an alert”.
They do it afterward, they don’t do it ahead of time and there’s lots of information on the internet. So you have to always just try to avoid that speed and impulse to you know do it quickly, get it over with and do the research ahead of time instead of later and then realize how much warning there was on the internet that you didn’t pay attention to at the time.
Doug Hoyes: So your number one tip then for people is Google, is that kind of what you’re saying?
Ellen Roseman: Yes, yes very much so. I know that for certain older people they’re not that used to the internet and it’s hard. But with a tablet it makes it so much easier and what I always put in my searchers is “company name + complaints” and that usually brings up complaints and those are worth reading. And then go to the Better Business Bureau, see what kind of grade they have, if it’s anything to do with the home go to homestars.com where they have ratings out of ten.
Go to the Ministry of Consumer Services in Ontario, they have a consumer beware list and they also have lots of information about shopping and what your rights are and just get a little bit more acquainted with the information online. There’s another interesting site, I don’t go to it often but it’s called Gripevine and it was started by Dave Carroll, who is a Canadian musician, who did this amazing YouTube video a number of years ago called United Breaks Guitars.
Where the airplane threw his guitar onto the tarmac and damaged it and then wouldn’t pay him back and he got so many views on YouTube that he became a celebrity and went around the world and now does customer service stories and did a book, and Gripevine is his idea and there’s a few of these around where they try and bring the consumer and business together online to resolve their problems. So that’s another one to look at.
Doug Hoyes: Well I’ll put those links in the show notes then because I think those are good resources. So really it’s up to me as a consumer to do my own thinking, my own research in advance. That’s the bottom line on what you’re saying.
Ellen Roseman: Yeah and you know it depends on the size of the purchase too. If it’s a $50 purchase you’re not going to put as much time into it. But I get people, like somebody wrote to me about a move where they’d been in a house for 40 years and they were taking everything out of the house and the moving company was packing it and they were moving it somewhere else and she was upset.
Well first of all this is an older woman, she got the name from friends who were happy and she said that nothing was damaged but she found that some of the items that were in her basement didn’t make it to her new place and she had no proof. She didn’t take any photos, she didn’t seem to have you know any way of proving that stuff that was in her old house didn’t move to her new house and I thought what kind of trust did she have?
You know it’s always good to try and think ahead, like the other habit of mine is to say “what’s the worst case scenario”. When I’m moving my entire household the worst case scenario is either things get damaged or they disappear so how can I avoid that, well I’ll take photos of everything. It’s not so hard you have a cell phone now with a camera and just keep photographing things.
So always think what’s the worst thing that can happen before you go ahead because especially with anything to do with your home bad things happen. So when they say “give me 100% of the money because I got to buy my supplies”, you say if I pay you a 100% I have no leverage if things go wrong and I can’t bargain with you because I paid you the entire amount so I’m going to keep my down payment as low as possible. So that kind of habit of mine helps a lot.
Doug Hoyes: Yeah those are very good pieces of advice and they’re practical things too. We’re going to take a quick break. I have a few more questions with Ellen Roseman right here on Debt Free in 30.
Segment Two
We’re back to continue my conversation with Ellen Roseman, a columnist with the Toronto Star. In the previous segment we were talking about seniors and in the whole aspect of financial literacy you mentioned that Jane Rooney in her new role this year, seniors was the first area that they focused on. You wrote an article back, I guess it was middle of October, October 21st, the title was Let’s Protect Seniors From Being Exploited.
So this is kind of the theme that you’re talking about here and as I said you know last week we had Jane Rooney on the show and she was talking about her efforts on behalf of seniors. So we know it’s a serious problem. You ended the column and the last two sentences were, “Financial literacy is crucially important, but it’s not a panacea. Let’s put money into enforcing consumer laws and protecting the vulnerable from tricksters”. So what are the things you’re worried about there, what are you advocating there?
Ellen Roseman: There’s a lot of fraud and scams aimed at seniors, both online and telemarketing. I hear those complaints all the time and every time you think that you know what the scams are, there are new ones that come up. I once spoke to a group of retired teachers and someone said “you know I was really I thought pretty smart about things but then I got this call from someone saying that they were from Microsoft and they thought my computer had problems and it could crash and I would lose my photos and I was so grateful I thought “that’s great, now you’re helping me”, and then you know that’s a well-known scam but she just hadn’t heard of it.
They’re very clever at playing on your fears and your needs and again you have to just get a lot more suspicious and if somebody calls you or sends you an email, you know never say yes right away. Hang up, do some research, ask for a phone number and call them back, sometimes they never want you to call them back so they won’t even give you a phone number, and a lot of that people come to your door as well.
There are, maybe not so much in London, but in Toronto door to door sales people are just relentless and they have all kinds of ways that they can talk their way into your house and then put something in your basement, a water heater and now they’re trying to rent you a furnace as well, which is a horrible economic proposition because you probably pay double or triple the cost of the furnace over a 15 year period.
You just have to be you know firm, say “no if I want a furnace I’ll call you back, I’ll let you know” and don’t get into any kind of a relationship with a door to door seller, a phone seller or even online. And now a lot of companies are telling you they want you to pay your bills electronically and they’ll send you an email saying your new bill is ready.
So the scammers are getting into that too and they’re pretending to be the bank or the phone company and saying “your new bill is ready and by the way your last two payments didn’t go through and click here so we can update your account”. So again just be really cautious and there are a lot of tricks going on.
Doug Hoyes: So you’ve got to be suspicious, you’ve got to be sceptical but ultimately it’s up to you because I guess really what you’re saying is there’s a new scam every day, you can’t sit around waiting for the government to protect you because the government isn’t going to be able to protect you. You really have to have your eyes open and that transcends every area of finances, right. If I’m going in for a car loan I’ve got to think about that too, maybe I’m not being scammed but I better know what the numbers are going in.
Ellen Roseman: Yes, yes exactly and do a little bit of shopping first and find out, you know, what are the various deals that you can get on car financing. It all takes time, it all takes attention, it’s no fun but if you make a mistake you know it can be so long till you dig yourself out of your mistake and if you’re not lucky it ends up on your credit record and there could be a collection agency involved.
I think the internet is still a pretty good source of scams. Often people will see free trial and it’ll be a cosmetic or a drug or vitamins and so they sign up for the free trial and then they’re told there’s just some shipping costs to Canada and they need your credit card to cover the shipping costs, which are under $10.
But then in the course of giving them your credit card they slip in some sneaky language that you probably didn’t even see saying that it’s actually a monthly subscription and there you are caught getting these monthly packages in the mail that cost about $75 or $80 each and every time you try and cancel you get a new package and it can be just horribly annoying and scary and hard to get out of. So the internet is probably a breeding ground for very many things that can take your money away.
Doug Hoyes: It’s almost as if you’re saying that if you were the head of you know financial literacy education in Canada, and I’m putting words in your mouth here but tell me if I’m wrong, you’re almost saying that it’s not just about understanding how the math works, it’s really about taking that big step back and saying I’ve got to be sceptical, I’ve got to be suspicious, not in a bad way but I’m the only one who can protect myself, no one else is going to be able to do it so yeah it’s going to take some work.
But maybe what we need to do to promote financial literacy in this country is to show everyone the downside, like you said earlier, here’s the risk of making that decision. If that’s what all our education was directed towards, here’s all the bad things that can happen if you sign that piece of paper, I wonder if that would wake people up more than having online calculators or something. I don’t know if that would work or not.
Ellen Roseman: Yeah, I agree. I think that when you tell people motherhood stuff they turn off, their eyes glaze over. But if you say look at this person’s really bad experience, this happened for these reasons it could happen to you too if you’re not careful. At least you get their attention, at least you get them reading it and tell it in the form of a story. It might be hard for the government to do that but I certainly try to do that in my column and people learn a lot they say because they remember these stories and some of them are incredible.
Like I just did one the other day about a woman who bought a car and she had a loan for the car and she was paying it faithfully and then a bailiff shows up at her door and he’s collecting for another bank and he says you know “I’ve got the paperwork that shows you in default on the loan” and she says “you’re not even my bank”. So afterwards someone said she could have fought the bailiff but she didn’t so they towed her car away.
Then it turned out that the dealer had briefly sold the car for a very short time to someone else before she had it, the person never actually took possession or anything else, but they reused the same form and the bank got confused and went after the vehicle that this woman had instead of the other woman’s vehicle. So that’s kind of stuff people remember and they just think, “what will happen if it happens to me?”
So you’ve got to be careful and you’ve got to be suspicious and you’ve got to stand up for your rights. This woman spent two days, taking time off work, just chasing the dealer and chasing the bank and trying to get them to stop selling the car at an auction, which you know she’d never get the car back and then she’d never repay the loan because she wouldn’t even have the vehicle anymore.
Doug Hoyes: Yeah and I read that article you wrote and I guess the message there is if you’re buying a vehicle, and you wouldn’t think you need to do this when you’re buying a brand new vehicle, but you can go to Service Ontario. I think you mentioned it in your article, you can do a lien search, a PPSA search on the vehicle if you have the VIN number and you can see if there’s anything registered against it.
There shouldn’t be any need to do that in the case of a new car but here you go, there’s a classic example. So that’s what it comes down to I guess, that’s what it comes down to and I think you’re right, the articles you write in the Toronto Star a lot of them are, “well here’s what happened to this person”, this is a real story, it’s a warning flag for everyone else to not fall into that trap.
Well I think there you go, we’ve invented a new theory of financial literacy education here today and that is explain the downside, explain the risks in the form of a story, that’s what we’re going to remember a lot more than me giving a lecture on proper budgeting techniques. That’s what people are going to remember.
Ellen Roseman: Yes that’s right and you can budget all you like but if you’re wasting money through not paying attention to your consumer purchases you’ll have much less money to save in the future. And so yeah you have to look at the future, but you also have to look at what you’re doing with your money on a day to day basis and are you paying too much, are you not doing your research, are you falling for tricks.
And it’s probably helpful for people to spend an hour a week maybe calling some of their suppliers and asking them “do I have the best deal, do you have a better deal for me, what am I paying for, do you have new plan that’s come out since I got my current plan?” and often that can save you some money that you can then put into RRSP.
Doug Hoyes: I think those are fantastic, practical pieces of advice. I really appreciate you being here, thanks very much Ellen.
Ellen Roseman: Okay, thanks Doug. Bye.
Doug Hoyes: Great, thank you.
Third Segment
Doug Hoyes: Welcome back. It’s time for the 30 second recap of what we discussed today. My guest today was Ellen Roseman who believes that financial literacy is important but also believes that we often go to biased sources for financial advice, like the banks, and that can lead us to buy products we don’t need. A better source of advice is independent journalists and personal finance bloggers who share advice from their own personal experience.
That’s the 30 second recap of what we discussed today. So what’s my take on this? I fully agree that financial literacy education must be more than just discussing budgeting techniques. Ellen’s column does a great job of sharing stories so that we can learn from the mistakes of others and ultimately I believe that’s the best way to promote financial literacy.
For every financial decision you make, ask yourself “what’s the downside?”, “what are the risks?”, then do your own research from independent sources and make an informed decision. That’s our show for today. You can find full show notes with links to everything we discussed today at hoyes.com. You can also subscribe to the show on iTunes or any other podcasting service. Thanks for listening. Until next week, I’m Doug Hoyes, that was Debt Free in 30.
Bonus Segment
Welcome back. My guest today is Ellen Roseman, a columnist with the Toronto Star and she’s already given us some great practical advice and some thoughts on how to improve financial literacy in Canada. I don’t think it’s an exaggeration to say that she wrote the book on financial literacy in Canada. In fact she wrote two books specifically on that topic, Money 101: Every Canadian’s Guide to Personal Finance; and Money 201: More Personal Finance Advice for Every Canadian.
Her most recent book is Fight Back: 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery. I’ll put links to all those books in the show notes. The radio show portion of Debt Free in 30 is only 22 minutes long so I had to edit out some great practical advice that Ellen gave. It’s great advice, easy to do with virtually no cost and it could save you a lot of money. So here’s more practical advice from Ellen Roseman.
Before the break we were talking about some practical things you can do and Ellen your comment was, hey if I’m hiring a mover to move all my stuff, and this applies in every facet of your financial life, think about what the worst case scenario is and protect yourself for it, one thing you can do then is take a photograph of all the stuff that’s being moved so you know that it ends up where it’s supposed to be. Where else does taking picture make sense you know in the financial world?
Ellen Roseman: It makes a lot of sense with your home insurance policy where they advise you to do an inventory every year. Now I know all of us have a lot of stuff in our house and if you’re going to write it all down it could take you weeks and weeks. So do a photograph of all the major rooms, you know taking pictures of the things in the room that tend to be more valuable. Some people now use the video feature and they just do the video and maybe talk a little bit about here’s this and here’s this and here’s this because if there’s a fire in your house, all of a sudden you have no memory anymore of what it was in every room, so it’s good to have.
Doug Hoyes: That’s great additional advice from Ellen Roseman, and that wraps up the bonus segment here on Debt Free in 30.
The message today is that financial literacy is a lot more than just learning how to balance a chequebook or make a budget. That’s obviously important, but even more important is to develop the mindset that you are in charge of your financial life.
Be suspicious. Be skeptical. Think. And do simple things like take pictures of your stuff on a regular basis, for insurance purposes, or before you move. It’s easy to do, and it make save you a lot of time and trouble in the future.
Thanks for listening. I’ll be back next week with a new edition of Debt Free in 30.
I got a lot out of your discussion with Ellen, thanks Doug.
While the FCAC has said that they will work towards showing low-income seniors how to maximize their government entitlements, right now practical resources are limited. We can go to the Service Canada website that describes OAS, GIS and other government plans but the portal doesn’t show seniors how to optimally arrange their affairs.
Would government entitlements be something that a bankruptcy trustee would discuss? For example, applying early for CPP at age 60 could make sense for a low-income senior since the total payout is arguably greater (until you’re about 100 years old, I’ve read). Taking out RRSP income after age 65 would reduce the GIS payout, so are RRSPs right for low-income people? Poverty expert John Stapleton says contributing to an RRSP after 65 makes more sense since it will increase GIS amounts by 50 cents for each dollar contributed to the RRSP by lowering taxable income. I’m pretty sure these concepts aren’t regularly discussed at my bank branch.
I know that Hoyes-Michalos has published some great stats about how indebted Canadian seniors are, so you’re keenly aware of their money problems. In practice are government entitlements something a bankruptcy trustee would address or would they refer clients to other resources?
Hi Daniel. Excellent comment. As bankruptcy trustees we are not experts in the myriad of retirement funding options available, so in general we would not be qualified to offer advice on issues such as taking CPP early, and the other points you mention. We would generally refer people to other resources or experts in those areas, although I agree with you that those other resources are limited.