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My God, your understanding of money is so conventional!

April 1, 2010

I sit at the Hillside Mall and read the Business Section of the Times-Colonist, Wednesday, March 31st. My God, it’s worse than I thought. Almost all Canadians believe that Canada does not have enough investing options for decent retirement. Here is what’s true psychologically:

1. Many Canadians just don’t understand how to evaluate different investing tools for retirement, so they think that there aren’t enough options.

2. Government options are so complicated that some people can’t find them, don’t consider them, or just give up.

3. The chasm in Canadian society between customers and providers of service got so big that even a basic option such as designing you mortgage or retirement plan is left to the “professionals.”

4. The educational system is so conventional that it produces people who don’t learn to think outside the “box” where the best financial options are.

For example, some of the common mistakes that customers and providers of service love to make when buying a home (they don’t know these are mistakes) are, (i) selecting the wrong amount of down payment, (ii) ignoring economic trends when selecting a Variable or a fixed mortgage, (iii) selecting the wrong amortization size, (iv) selecting the wrong amount of mortgage loan, (v) trying to pay off the mortgage as soon as possible, (vi) emphasizing the wrong information, e.g., “what’s my future earning?” instead of “what’s the conversion penalty?” and (vii) using the wrong financial institution to finance a home. Actually, for most people the whole business of behavioral financing is skewed. It boils down to conventional thinking versus behavioral thinking – choosing debt consolidation later instead of  best loans earlier!

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