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How to rewire your brain to be better with money





Managing your money is common sense, right? Make a budget, do some math, spend less than you earn, and you’ll reach millionaire status in no time. Perfect, right?

Not so fast.

The problem is humans are not always logical with money. Rational Canadians would agree it’s sensible to save a portion of income while avoiding debt.

But with the national savings rate dipping to 3.4 per cent and our household debt at 171 per cent — meaning Canadians owe $1.71 for every dollar of disposable income — it appears that something is getting the better of us and our money.

While many factors are at play, the field of behavioural economics blames our brains and a series of cognitive biases for our lack of logical sense with money.

Behavioural economics is an interdisciplinary science that combines psychology, economics and neuroscience. It attempts to understand human behaviour and explain why we make “predictably irrational” choices in life.

Since my budget spreadsheets and own bias for compound interest calculators may not be enough to change your money habits, I spoke with behavioural scientist Michelle Hilscher, senior associate at BEworks. The management consulting firm specializes in applying behavioural science techniques in business to uncover cognitive biases, emotions and mental tricks to rewire your brain to help you better manage money.

Check your present bias and precommit: Debt is easy and saving is hard — this line of thinking comes from our tendency to focus on gratification in the present over a payoff in the future. This phenomenon is called “present bias” and it’s toxic to sticking to a financial plan, leading to decisions you’ll regret in the future.

“What’s been found is that you feel no connection, or very little connection, to your future self. It’s as if they are a stranger,” Hilscher says. “Therefore, you’re not really willing to make in-the-moment sacrifices on behalf of that person.”

To help counter present bias, Hilscher suggests we cut our brain out of the decision-making process with a precommitment device. This is a way to lock yourself into following a plan of action you might not want to do, but which you know is good for you.

So, for instance, precommiting a portion of your next raise to a savings plan with an automatic deduction directly from your paycheque could build savings because you’re not missing the money now.

“Maybe it’s a tax return, maybe it’s a bonus — the idea is to get people to precommit to saving some amount in the future,” she says. “They’ll save more if they think about it as being something that’s coming to them in the future.”

Stop being so optimistic — embrace mental accounting: Despite the negativity on display across social media, we humans have a tendency to be overly optimistic about our abilities while underestimating the likelihood of facing a negative event. One of those events might be running out of money.

“People are known to be very overconfident, and a lot of research is showing that we’re poor at estimating what we know, don’t know and think we’ll do,” Hilscher says.

To help counter this optimism bias, she suggests checking in with a financial professional who can assess our financial risk, and setting a mix of attainable short-term goals combined with longer-term goals.

“There’s lots of evidence to show that you’ll save more if you can earmark where the savings are going, and have not only different accounts, but also accounts that are tied to specific goals. Like a vacation, or retirement, or something more short-term, like a new bicycle.”

Since behavioural science suggests we have a tendency to separate money into different “mental accounts” (for example, we’ll treat windfall money differently by spending it on impulse purchases, but act more conservatively with our paycheques), Hilscher suggests we embrace this bias as a “nudge” to save more.

“People will want to make sure they are ‘funding’ each goal or account when they are putting money into savings, and will therefore tend to put more money, in aggregate, into three accounts than they would into a single account.”

By keeping your cognitive biases in check, hopefully managing money will make more sense.


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Victoria real estate agent disciplined for false advertising, encouraging cash deal to avoid taxes





A Victoria real estate agent is facing $9,000 in fines and a 60-day licence suspension after breaking several professional rules during the sale of her father’s half-million-dollar property, according to a decision by the Real Estate Council of B.C. 

Whitney Garside’s missteps — outlined this week in a disciplinary decision posted on the council’s website — included falsely advertising the property as being almost twice its actual size and advising the buyer they could avoid the property transfer tax if they paid cash directly to the seller.

The property on Burnett Road in Victoria was being sold in 2016 by the real estate agent’s father. That relationship was disclosed and isn’t among the reasons she has been disciplined.

According to the disciplinary consent order, Garside told the buyer — whose name is redacted — that by paying $42,000 cash on the side, the value of the property could be reduced to avoid paying the property transfer tax.

That cash arrangement was not shared with Garside’s brokerage, Re/Max Camosun, a failure that contravened the Real Estate Services Act.

The council also ruled that she “failed to act honestly and with reasonable care and skill” when she advised the buyer the property transfer tax could be avoided by paying cash directly to the seller. 

The council’s discipline committee also found that Garside committed professional misconduct when she failed to recommend the seller and buyer seek independent legal advice, specifically regarding the property transfer tax and the cash agreement.

Another issue the council considered professional misconduct involved the size of the property in question.

The council ruled that Garside published false and misleading advertising and failed to act with reasonable care and skill when the property was advertised as 8,712 square feet, when in fact a portion of the lot belonged to the Ministry of Transportation, and the actual size was just 4,711 square feet.

The discipline committee ordered Garside’s licence be suspended for 60 days, which will be completed Jan. 3, 2021.

She has also been ordered to complete real estate ethics and remedial classes at her own expense.

Garside was also fined $7,500 as a disciplinary penalty and $1,500 in enforcement expenses.

She agreed to waive her right to appeal the council’s discipline committee’s decision in September.

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Frisco apartment community sells to Canadian investor





A Canada-based investor has purchased a Frisco apartment community as part of a larger Texas deal.

The 330-unit Satori Frisco apartments opened last year on Research Road in Frisco.

BSR Real Estate Investment Trust bought the four-story rental community that was built by Atlanta-based Davis Development.

Satori Frisco was more than 90% leased at the time of sale. The property includes a two-story fitness center, a car care center, a dog park and a resort-style swimming pool.

The Frisco property sold along with Houston’s Vale luxury apartments in a deal valued at $129 million.

“BSR recently exited the smaller Beaumont and Longview, Texas, markets and also sold noncore properties in other markets,” John Bailey, BSR’s chief executive officer, said in a statement. “We are now using our strong liquidity position to invest in Vale and Satori Frisco, modern communities in core growth markets with the amenities our residents desire.”

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House prices on Prince Edward Island continue steady climb





Residential real estate prices on Prince Edward Island continue to climb at a rate higher than the national average, according to the latest report from a national organization. 

The Canadian Real Estate Association released monthly figures for November 2020 on Tuesday.

They show that the average price for a resale home on P.E.I. is about 21 per cent higher than it was a year earlier. 

Only Quebec had a bigger year-over-year increase, at about 23 per cent. Overall across Canada, prices were up 13.8 per cent year over year in the ninth month of the COVID-19 pandemic.

“For the fifth straight month, year-over-year sales activity was up in almost all Canadian housing markets compared to the same month in 2019,” the report noted.

“Meanwhile, an ongoing shortage of supply of homes available for purchase across most of Ontario, Quebec and the Maritime provinces means sellers there hold the upper hand in sales negotiations.”

That lack of houses coming onto the market compared to the demand means that in those provinces, there is “increased competition among buyers for listings and … fertile ground for price gains.”

There have been anecdotal reports for months that Prince Edward Island’s low rate of COVID-19 infection and looser rules around social activities have been encouraging people to buy homes on the Island. 

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