Many of you need read no further. You’re already shaking your head and telling your computer screen, “Yes.”
Some of you might be intrigued by the topic, and want to know where this is all going.
Others will vehemently disagree with the stance I’m going to take in the following story about two potential renters I encountered last month who were completely, utterly unqualified to submit an offer to lease.
Let me begin today with a personal anecdote…
Oh, the irony of that photo. Am I right?
Here I am, about to lecture “young people” on financial literacy, and I’m so old that I think people still read books!
And they use “spectacles” too.
Well, I don’t own a Kindle, and I never will. There’s something about running my fingers down the page of a fresh book (not to mention inhaling that “new book smell”) that I love so much, as well as the bizarre sense of pride I feel when I put a finished book up on my shelf as some sort of trophy, as if to say, “I read that!”
I ran out of bookshelf space a long time ago. In fact, all of my books are in storage, because I have this other bizarre idea that when I move into a house with room, I’ll display them once again.
Now before I dive into today’s story, I want to ask a cynical, and seemingly-rhetorical question:
Do ‘kids today’ read anymore?
I’m serious. Does it happen? Or is every book turned into a movie with an actor named “Zach” or “Blake,” and kids just watch a reenactment of whatever high school textbook they’re supposed to be learning from?
When I was 19-years-old and had just finished my first year of undergraduate business school, I was working out at the old Dunfield Club on Eglinton Avenue, and I knew a guy there who I called “Big Mike.” He was actually short, but thick. You gym rats know what I mean.
Big Mike was old-school, both in terms of how he worked out, as well as how he perceived the financial markets, and personal finance.
Big Mike wore an inside-out, XXXL sweatshirt, cut off at the bottom. Gym rats – can you picture it? He wore a ragged ballcap with a leather strap at the back, and pants with a stripe. He was a throwback to the old days of weightlifting, when Lee Haney was young.
I was an up-and-commer, and by that I mean was a university kid who had so much time on his hands, he spent 2 1/2 hours per day in the gym. Some people throw a frisbee, right?
I’d see Big Mike at the gym in the afternoons, and we would only talk about two things: weightlifting, and finance.
In between sets – back when you took five minutes before your “big lift,” Big Mike would give me advice on schooling, career paths, investing, and personal finance.
One day he asked me, “What book are you reading right now?” I think I told him I was reading a fantasy football magazine to prepare for my upcoming draft, and he said, “You mean you don’t read?”
I told him that I read a lot, actually. More than most kids my age outside of school. That year I had read biographies on Muhammad Ali, Bruce Lee, Ken Shamrock, Arnold Shwarzenegger, and a few books on the human body, and health and nutrition.
Big Mike laughed and said, “Okay, well you seem to have a one-track mind. But why don’t you mix in some reading about the financial markets, investing, and personal finance?”
The thought had honestly never occurred to me. Even though I knew nothing, for some reason, I thought that was par for the course.
Over the course of the summer, Big Mike continued to quote books, over and over again. He’d tell me something about bollinger bands or exponential moving averages, and say, “Pring, have you read Pring?” even though he knew that I had not.
By the end of August, as I prepared to head back for second-year, I found Big Mike in the gym and said, “Okay, give it to me. Give me a list. You name a book, I’ll read it.”
And name them, he did…
Big Mike gave me the names of ten books to read, and I read every single one of them.
I can only remember nine of them off-hand, the last one escapes me. But here’s the list, as I’m sure many of you have read some of these as well:
The Intelligent Investor, Benjamin Graham (1939)
Technical Analysis Explained, Martin J. Pring, (1985)
A Random Walk Down Wall Street, Burton Malkiel (1973)
The Wealthy Barber, David Chilton (1989)
Rich Dad, Poor Dad, Robert Kiyosaki (1997)
Creating Wealth, Robert G Allen (1983)
Think And Grow Rich, Napoleon Hill (1937)
How To Be Rich, J. Paul Getty (1965)
Financial Peace Planner, Dave Ramsey (1998)
I can honestly say that I didn’t understand Benjamin Graham, and that I had to read Martin J. Pring’s book twice to even comprehend the subject matter. But I remember this book came with a “CD-ROM,” which was a big deal back in 1999!
Books like “Creating Wealth” were old and out of date, and you’d laugh if you read it now and compared it to the Toronto real estate market. I loved this guy – talking about flying to Dallas in the morning, buying a house that was cash-flow positive by a thousand dollars per month in 1980’s dollars, and then flying home in the evening.
But the takeaways from these books were phenomenal. And even if the subject matter is dated – like Napoleon Hill on personal finance in the 30’s, the ideas still make sense.
So what is my point to all of this?
I think many of you know where this is going…
Back in January, I started the 2018 year on T.R.B. by talking about debt.
In fact, I wrote two blogs on the subject:
One of the themes presented in the 200-something comments from TRB readers was that, perhaps, financial literacy is at an all-time low.
If you haven’t read the blogs, I encourage you to read them. Not just for my stories about personally witnessing consumers and how they handle debt in 2018, but also because of the readers and their observations and opinions.
The one mistake that I made in both those blogs was having the assumption that every man, woman and child out there today is financially literate.
As the readers pointed out, there is no “Personal Finance” course in school.
And as others argued, and as I would agree, the public education system in Ontario has been bastardized to the point where kids aren’t taught any true responsibility or accountability, nor do they suffer any repercussions for their actions (or inactions).
And it’s getting worse, folks! Don’t believe anything to the contrary.
Here’s an excerpt from an internal high school memo that I recently read:
….among the recommendations is to phase out the Grade 9 math test, as well as the Grade 10 Ontario Secondary School Literacy Test, which is currently one of the requirements to earn a high-school diploma.
Instead, the report recommended implementing a new Grade 10 assessment that is not a graduation requirement to assess literacy, numeracy and other skills.
Set the bar even lower now.
I mean, why would we want kids to be literate?
Just implement an “assessment” that is not a requirement for graduation. If they all score zeros, we still drink fruit punch and eat cookies!
On the same day I read that internal memo from a Toronto high school, my brother told me that his 8-year-old child had five upcoming exams at her private school in England.
How in the world do we expect today’s young adults to be financially literate, and responsible, if we never teach it to them?
I had a recent listing for a King West condominium, listed at $2,400 per month.
Sadly, this is now what a 1-bed, den, 2-bath unit costs, but the market is the market, and it’s not my job to play social worker to the tenant-pool.
One of the offers that I received on the condo just blew my mind, and not in a good way.
Not to be overly dramatic here, but it made me wonder how the next generation is going to survive on their own.
The application was from a young couple, who were offering the full $2,400/month list price.
And they were so far from being “qualified,” I just didn’t know what to make of it.
She worked for minimum wage. No exaggeration – it was in her job letter. Assuming $14 per hour, over 40 hours, and 52 weeks, that’s $29,120 per year.
He was self-employed, but showed no income. That’s right – no job letter, no income verification, no pay stubs, no bank statement. Nothing.
He had $486 per month in student loans payable.
She had a credit score of 634.
He had a balance of $1,900 on his $2,000 credit card, $8,000 on his $10,000 line of credit, and $9,000 on his $15,000 line of credit.
And here they were, trying to tie up a $2,400 per month rental.
Folks, tell me I’m unsympathetic, but why in the world are these two trying to lease a condo for $2,400 per month, plus hydro?
That’s $30,000 per year in rent and utilities, for two people who, by all accounts, make a combined $29,120 per year.
I know, I know – he is self-employed, and likely makes something. But it’s curious that he chose not to show any proof of income. The application said $3,000 per month, so even if we take him at his word, that’s $36,000, plus her $29,120.
$65,120 of combined gross income, trying to rent for $30,000 per year.
These guys are going to spend 46.1% of their gross income on rent?
Let’s assume that the self-employed gentleman is making $25,000, since anybody that says they’re making $36,000 and provides no proof of income would be lucky to be making $25,000.
Now they’re looking to spend 55.4% of their gross income on rent.
An acceptable GDS ratio is in the 32% range, so what in the world are these two thinking?
I know the answer – they’re not thinking.
They found a pretty condo in a cool area that they like, and despite having a GDS ratio of 55.4%, and paying back $486 per month in student loans, and having almost $20,000 in combined credit card and line of credit debt, they felt this was a solid move.
And this line of thinking, I do not understand.
You can tell me I’m a cold-hearted capitalist, or that I’m an asshole real estate agent that doesn’t know what people in this city go through, or something else, and something else after that.
But I’ve always maintained that I am a realist.
And realistically, these two should be looking for a 1-bed, 1-bath basement apartment for $1,200 per month, so they can get out of debt, pay down their student loans, and save some money.
They should not be looking at a $2,400 per month King West condo.
Wow, I feel like I’m parenting these two. I might be far closer to 20 than I am to 60, but it sure doesn’t feel that way.
Is this really the future of this generation?
You want what you want, and you’re just going to go for it? Balls-to-the-wall, Y-O-L-O and all that?
Forget financial responsibility, let alone financial reality.
Financial literacy is a thing of the past.
I understand that this city is expensive, but unfortunately not everybody gets to rent a King West condo.
Perhaps this is a generational thing. Perhaps these two represent a small segment of a maturing part of the population.
But what if it’s not?
Will we ever look back and admit that taking accountability and responsibility (not to mention the times tables) out of the public education system was a recipe for disaster?
Honestly, folks, when did it become uncool to be financially literate in today’s society?