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Hey, Guys… Do You Plan for the Future? How?

I don’t want to stress anyone out but… do you have a financial plan for the future?

No, really, enlighten me. This is a candid question. I’m not introducing sponsored tips or financial advisory services, I’m just brainstorming.

Frustratingly brainstorming.

Adulting, chapter 401(a)

Welcome to adulting, chapter 401(a), “money management.” You can support yourself financially, you’re not drowning in debt (or you have a plan to get yourself out of it), and you balance your budget better than most world leaders. Please accept a “good job!” sticker, this is an achievement in itself.

But apparently, we’re not done. We need to plan for things we’d rather not think about—major unexpected expenses, periods of unemployment and old age.

This could keep me up at night if I didn’t invariably pass out in bed way too late.

In Canada, most people use their savings or credit cards for emergencies. At least, unlike our southern neighbours, our emergencies are usually not medical emergencies—we’re covered by Canada’s universal healthcare system. We also have access to Employment Insurance (EI) temporary benefits if needed, capped at $562 per week, from 14 weeks up to a maximum of 45 weeks.

We don’t have much of a safety net but it should be okay as long as I have a job, as long as I can do it.

But how about when society and/or I, either in agreement or unilaterally, decide I’m too old to work?

From what I’ve seen around me, the key words are “shit, I’m screwed.”

But wait… that’s what pension plans are for, right?

I’ve heard about this mythical thing called “pension plan.” The story goes that, one day, your long-time employer decides you’ve done enough and you’re very happy with the news because you know you will get money to replace your income. Your co-workers RSVP to the lunch break retirement party and you find yourself in a beige conference room cutting the sheet cake Karen brought, assuring the intern that indeed you’ve been working here for that long and accepting a politically correct yet witty present with fake surprise (in fact, you accidentally saw the group gift email). Then you collect your long-service award and leave, promising to stay in touch even though you know you won’t.

I attended a few retirement parties when I worked in an office environment, but my relatives all fall in the “is there such a thing as retirement?” category—the one full of people for whom the system doesn’t work. Maybe you saw them protesting or showing up at the local food bank. They are the people who, for the most part, worked all their life but fell through the cracks—giant cracks that feel like traps.

Indeed, the employer pension plan system only works if you’re a full-time employee or work a regular schedule and if you stay with the same employer for a long, long time. Like, don’t quit and don’t get laid off. Don’t have kids—women pay an unofficial “pregnancy and motherhood penalty.” Start working as young as possible even though most jobs require years of experience and education.

So yeah, plenty of people can’t count on a pension even though they worked hard all their life.

Wait, now that I’m thinking about it, how do McDonalds’ employees, Amazon pickers or Walmart associate retire? Minimum-wage employees rarely go from flipping burgers to an executive position—they are stuck at the flipping burger stage for a thousand of reasons and the top one isn’t laziness or lack of ambition. How will gig economy workers retire? Is it fair to end up with no pension plan and no savings because you were paid minimum wage all your life?

Wait a second, gonna burn capitalism, I’ll be right back.

Graffiti on Laurier Street, Ottawa, November 2019
Graffiti on Laurier Street, Ottawa, November 2019

When a pension plan becomes plan P, what should be plans A and B?

Funny how our relationship with money change with the years. In our twenties, when Feng and I had managed to save a lot of money, like $2,000, we would just go travelling and come home broke without a care in the world—big deal, it’s just money, we can get a job and save again!

Nowadays, we’re fairly responsible with money. We save some, for real. We have to.

We’re both self-employed, which means we get basic health benefits through OHIP, the provincial system (we pay taxes, of course). Of course, we’re not eligible for EI or any employer pension plan. I’m okay with that. I don’t want to count on a pension plan. Too many people got screwed already. We’re probably better off self-employed.

So far so good, with expected ups and downs.

However, we’re both fully aware that we don’t have a safety net and we have to save for the future.

Again, it gets tricky. Like, what am I supposed to do with my savings?

Capitalism taught me that invested wealth grows over time, hopefully faster than inflation.

I beg to differ and also, “investing” is hard.

Investing in real estate is not an easy solution. First of all, I don’t have the budget for it. Second, it’s not as simple as “rental income covers mortgage.” You need plenty of money for unexpected expenses, namely renovations, maintenance and potential tenant issues. From what I saw around me, it can turn into a money pit.

The second solution is to invest into our awesome, strong and too-big-to-fail financial system. Ah, ah. Keeping in mind I’m willing to learn but I don’t have a background in finance, I had a few appointments with bank advisors over the years. CIBC and Scotiabank are both respectable Canadian institutions but advisors seem barely more qualified than me, even though they do calculate faster. They invariably promote the latest financial products but I doubt they have my best interest in mind—and why would they?

Bottom line is, after trying the alphabet soup of GICs, TFSAs and more, I can report you don’t make any money whatsoever. Interest rates have been very low since the 2008 financial crisis. Currently, my “high interest” saving account offers 1.5%. If I had $100,000, I’d get $1,500 every year. Twenty years later, that’s $30,000 interest earned. It sounds like a lot of money, except, you know, inflation. And also, good luck making $30,000 last more than a year or two.

So what the hell am I supposed to do as a responsible adult?

Mark’s saving solution actually looks pretty wise to me.

Ottawa, November 2019
Ottawa, November 2019

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