It is called “cord cutting” and record numbers of Canadians are doing it every year. This year alone 247,000 households are expected to sever all ties with traditional cable packages. The idea of paying for a bundle of channels, most of which you won’t watch, is as outdated as renting a movie from blockbuster.

The savings from cutting a cable bill can be substantial. The cheapest “bundle” rogers offers (internet + TV) is $116.97 per month (regular price, not limited term promotion) pre-tax while a decent set of channels will run you $141.97. In addition, to get any decent movie channels you will have to shell out another $23.95 per month for the cheapest movie theme pack. Total average bill coming out to $187.49 including tax per month or $2,250 per year. That’s some highway robbery right there.

Assuming you don’t want to give up watching TV all together, what are the 100% legal options to avoid this? It turns out there are plenty, but I’ll start with the cheapest one, costing a total of $0 on a monthly basis.

Over-the-air(OTA) TV

Monthly cost: $0

All Canadian and US network TV stations are required by the CRTC to broadcast their signal in the same digital HD format as you get through cable. This requirement has been in place since 2011 and many of the broadcasters have since added digital sub-channels so they can offer additional content.

For example, the regular PBS channel broadcasts on channel 17-1 but a special PBS Kids channel dedicated to children’s programming is available on channel 17-3.

You can review a full list of channels available in the GTA by clicking here

The technology used to transmit the signal is essentially the same old “rabbit ears” technology you likely grew up with if you are as old as I am. However, none of the old issues exist, since the signal transmitted is now digital. There is no ghosting, synchronization problems, or quality issues. When the signal is available the picture is crystal clear and extremely smooth, and in some ways superior to the cable signal.

The only device you will need to purchase is a $50-$100 good quality over-the-air antenna and mount it on the outside (will get more channels but a bit more work) or inside (2 minute setup, ideal for condos or apartment buildings) of your house. Once you’ve placed the antenna you connect the cable that comes from the antenna into your TVs antenna input. That’s it, you now have 100% free HD TV!

The selection of channels available for free over-the-air surpasses the Rogers started package ($116.97), however, for most people this will likely not be enough. To get more than enough movies, shows and sports for a reasonable price, you will likely need get on-line.

DISCUSS LACK OF 4K and why it doesnt matter

Internet TV

The amount of choice available on the Internet for TV will more than satisfy any movie or TV buff and getting setup and going is easier than ever. An internet connected device capable of accessing these services is the first thing you will need is. The good news is, you may already have one.

Devices

Monthly cost: $0

Here are some ideas for devices you may already have floating around your house

• Your kids old gaming consoles such as the Playstation 3 or Xbox 360
• Your TV which may be a Smart TV  – all you need to do is connect it to the Internet
• Any relatively recent Android or iPhone – if you have a Smart TV capable of receiving screen sharing/mirroring just download the appropriate app. If not, connect the phone to the TV using the appropriate cable – I’m sure your child (or any neighborhood elementary/high school student) can set this up for you.
• Any halfway decent laptop – again, it just needs to be connected to the TV

I will not go into any further details on the above but there are plenty of internet articles on all the above options. If in doubt ask a friendly teenager.

Dedicated box options such as the Roku or Apple TV are also available, and while those have an upfront cost ($80-$200 depending on version), they do make it a bit less of a hassle to get setup.

One note of caution, I would be wary of the Android/Kodi enabled boxes as they tend to have low end hardware and the software is not actually supported by the companies selling them. The Kodi software is free so you are actually better of downloading and installing it on a phone or a laptop if this type of thing is in your wheelhouse. At least that way you understand whats going on and are able to fix issues yourself.

Also, though the most popular options such as Netflix are available on all devices, not all devices support all services. Therefore it’s a good idea to check if the device you are buying supports the service you want to use.

Internet Access

Monthly cost: $31

Internet access options have really improved in Canada thanks to a number of favourable CRTC decisions. This means you can get quality and fast internet for very little dough if you step away from the usual suspects.

Acanac (https://www.acanac.com/internet-ontario/) offers a $29 per month plan that works well for most people. The 15Mbs/175GB per month package is probably the best value assuming you do not need 4K video and watch a reasonable amount of content. HD quality video on Netflix uses approx. 3GB per hour which means 175GB gives you around 60 hours of video per month.

Teksavvy (https://teksavvy.com/en/residential/internet/dsl/high-speed-dsl-15-10) also offers a $30.95 per month plan that is more than sufficient for most people. The 15Mbs/200GB per month plan will allow you to watch close to 70 hours of HD quality video per month.

TV Shows and Movies

Monthly cost: $17.57

The number of options available to you for TV shows and movies will depend on the device you are using, however, the ones listed below are generally available on most devices

• Netflix – $10.99 per month – the heavy weight champion of Internet TV. The giant library of over 5,000 movies and TV shows will ensure you never run out of things to watch. The best part though are the Netflix originals. These are shows and movies available ONLY on Netflix and they of the highest quality. Institutions such as House of Cards, Stranger Things and Orange is the New Black rival anything HBO is able to produce. However, there are also tons of great original kids shows that your little ones will love, if you have little ones that is.
• Amazon Prime Video – $79 per year ($6.58 per month) – The up and coming challenger to the Netflix championship belt. The cost is lower, and if you do any shopping on-line, easily covered by the free shipping included on most amazon purchases as part of the deal. You are actually signing up for the Amazon Prime service, which has a ton of other perks, and just happens to include the Video. The selection of original shows is growing as Amazon is trying to go toe-to-toe with Netflix. It’s doing a great job too with critically acclaimed series such as Man in the High Castle, Transparent and the Grand Tour.
• Crackle TV – Free ad-supported – This is actually one of the oldest online TV services and one of the least known even though it contains tons of great content for the great price of FREE. It is mostly older shows such as Married with Children, Seinfeld and Firefly, but it’s a great trip back in time to classic ad supported content.
• YouTube – Free ad-supported – The original do-it-yourself video content provider has since tried to diverge a bit into professional produced stuff. However, it is still mostly just the MTV of the internet age, since music videos best fit it’s focus on short 2-5 minute clips.
• Cineplex – pay-per-view – The name of this service will be familiar to all Canadians. It offers the newest releases in a pay-per-view format and in high quality.
• Google Video – pay-per-view – Another pay-per-view option with staggering library of around 15,000 titles and all new releases.

If you are willing to spoof your location (more on that in the Sports section below) you can also get access to HBO Now and Hulu which are only available in the US. However, this requires a bit more work, and not everyone is comfortable doing this as it does violate the terms of service of the content providers. I think the above list is more than enough to be honest and it only costs $17.57 per month.

Sports

Monthly cost: $15 

Sports is an area where cable companies are making their last stand. Companies like Rogers are buying up sports franchises to guarantee their rights exclusive rights to provide live games. However, they are running into conflicts with the leagues themselves, since it’s in the interest of the leagues to get as much exposure as possible. This means despite their best efforts the cable companies have failed to stifle the move of sports to online. The number of stand-alone internet services providing live sports broadcasts is constantly growing and will continue to do so.

Here are a few current choices based on my own interests

• Sportsnet NOW – $24.99+tax per month – Interestingly Rogers leads the way in terms of multi-sport online only offerings in Canada. Sportsnet NOW is essentially online access to all the Sportsnet channels you can get through a cable subscription. The problem is it’s over-priced and does not give you consistent access to any sport other than baseball. This can get frustrating, as all other sports are shared with TSN, which does not have an on-line only offering, leaving you with some randomly picked games. However, since Rogers owns the Blue Jays and full rights to MLB games in Canada, it is a good (even if expensive) choice for Baseball.
• NHL Gamecenter – FREE or $149 per year ($12.42 per month) – If you already own a relatively recent cell phone plan with Rogers you get access to NHL Gamecenter for absolutely FREE. If not, then the full year subscription is still a pretty good deal since it works out to be $12.42 per month on a yearly basis. This allows you to watch all NHL regular season and playoff games, live or delayed, on virtually any device. My favorite feature here is the ability to watch a game from the start even while it is still in progress. I usually put my older son to sleep at 8:30pm, then turn on NHL Gamecenter, and watch the in-progress game from the beginning. Since I am skipping commercials and breaks along the way I normally end up catching up just in time to watch the last few minutes live.
• NBA League Pass – $64.99 per year ($5.42 per month) – This subscription is actually for 80 games across the regular season and playoffs so it may not be enough if you are a super-fan. You get 80 tokens, which you may redeem at any time for any NBA game. There are 82 regular season games in an NBA season, and a maximum of 28 playoff games assuming your team makes it to the final and plays 7 every single round. Personally I find this number of games to be more than I can handle watching in any given year. If you are a super fan and need to watch every single game a full league pass will set you back $145 for the season. DESCRIBE THE TOKEN PROCESS AND MISLABELING OF IT AS MONTHLY. ADD ABILITY TO START MID GAME
• DAZN – $150 per year ($12.50 per month) – This is an exciting newcomer to the live online sports stream space. The Germany company is making waves around the world offering fully independent and affordable multi-sport live stream access. They currently only support NFL, Soccer and Tennis in Canada but plan to eventually expand into every sport.

Now if we wanted to watch all these sports the costs add up quickly. Assuming a subscription of Sportsnet NOW from April to October (7 months) for the Baseball season the average monthly cost for all of the above services would end up being $46.81.

However, unless you spend 24/7/365 watching sports in front of your TV you probably don’t need all of these services. I like to enjoy the few warm days we call “summer” in Canada by spending as much time as possible outdoors, and therefore I rarely watch baseball on TV outside of late August, September and (assuming the Jays make it this far) October. I also find that the NFL games on US network channels (available for free over-the-air, see previous section) are more than enough football. In addition I happen to have a Rogers cell phone subscription which means NHL Gamecenter is free.

This all means my actual bill comes out to $5.42 per month for basketball and between $2.35 and $4.7 per month for baseball depending on how well the Jays are doing. Let’s call it a total of $10.12 per month for Sports.

There is a minor inconvenience though since NHL Gamecenter and NBA League pass won’t let you watch Toronto teams live if you are actually in Toronto. What do I mean by that? Well, if I am in New York I can launch my NHL Gamecenter and NBA League pass and watch Toronto teams without a problem. This means my subscription does in fact include these games, they are just locally blacked out due to licensing issues. You can watch Raptors games the minute they end and Leafs games 48 hours after they end. ADD A NOTE ABOUT LEAF GAMES THAT ARE BROADCAST ON NATIONALLY (either network or sporstnet) AND HOW THEY ARE OK TO WATCH

To get around this it’s possible to use a SmartDNS service ($5 per month) such as Unlocator to virtually travel to a different part of the world. This is a bit of a grey area since it does violate the terms of your agreement but is not illegal. It means the services could theoretically cut you off without a refund but I have never heard of this happening to anyone.

Summing it all up

Monthly cost: $63.57 – $100.38

Adding all the monthly costs brings us to a total of $63.57 per month or $762.84 for the year. This is a savings of $124 per month or $1,487 per year compared to a comparable Rogers plan!

The above calculation is based on my personal costs but even the full blown maximum cost combo comes in at $100 which is close to half the price of the Rogers package.

Best of all, there is no commitment needed to sign up for everything. Don’t like basketball? Don’t sign up for NBA League Pass. Not feeling the Amazon Prime shows, then just use Netflix, or forego both and do pay-per-view. The choice is entirely yours.

Also, let’s be honest, even if you are paying for cable you are likely subscribing to Netflix as well, to watch their exclusive content. This means Netflix is technically not even an additional cost.  When it comes to Amazon Prime, chances are you’ll save more than the $79 per-year (subscription cost) by using it to buy various other items at lower prices and with free shipping.

Thanks for reading, and if you enjoyed this content, please don’t forget to click the “like” buttons below or subscribe to mailing list on the right hand side.

I just watched The Big Short last night and became inspired to write this post. Having read the book years ago, I didn’t know what to expect, but I’m happy to say they’ve done an exceptional job. The movie offers the most accurate depiction of the years leading up to the 2008 financial crisis that I’ve seen. It doesn’t mean it didn’t take some artistic liberties, but far less so than many so-called “reputable” news outlets. I watched it with my wife and was impressed how it managed to keep her attention despite stories about my day job generally being her favorite natural sleeping aid. I highly recommend the movie to everyone, but I digress.

The Formula

I think the movie illustrates that we as people are very bad at estimating and properly weighting risk, both in our day-to-day lives, and in our investing. Therefore I want to introduce a simple and powerful way of thinking about risk through the following formula:

Beyond finance

I recently had a conversation with a friend about whether cycling in downtown Toronto is more dangerous than driving in downtown Toronto. His argument rested on the fact that there are fewer bike accidents than car accidents per year, making biking safer. He focused in on “# of times bad things happen” part of the formula.

Why is this incorrect? There are even fewer “accidents” resulting from getting trashed and trying to frogger yourself across the QEW.  It doesn’t mean it’s a safer thing to do.

In order to truly assess risk you need to know more than the number of accidents cyclists got into (# of times bad things happened). You also need to know how many total bike trips have been taken as well as how badly the cyclists were hurt when they got into accidents (impact of outcome).

Let’s say that cyclists get into accidents every 100 trips they take, but cars get into accidents every 50 trips taken. Which is safer?

Probability of bike accident = 1/100 =1%
Probability of car accident = 1/50 = 2%

Cars are riskier right? Actually the above tells us nothing about the relative riskiness of the two methods of transportation. We need to consider the impact of having an accident. Let’s say that cyclist’s get three times as badly hurt (on average) as car drivers when they do get into an accident, what is less risky in that case?

EVbike = 1/100 * 3 = 3%
EVcar = 1/50 * 1 = 2%

When taking into account and quantifying the impact, it is now cycling that appears to be the more dangerous of the two modes of transportation.

Before I get a bicycle helmet thrown at my head I just want to point out these are not real stats. I actually have no clue which mode of transportation is safer. In fact I doubt anyone really does because it’s hard to get a reliable estimate on the number of cycling trips taken. I’m just debunking the idea that comparing the number of accidents gives us any indication of risk.

Investing

While sometimes difficult to use in everyday life, this formula is a great starting point of any investment analysis. To illustrate let me go back to a scene in the “Big Short” movie when the Cornwall Capital guys decide to short (that means profit from the demise of) AA mortgage bonds (relatively stable) versus BBB mortgage bonds (far worse quality). They make this bet despite the fact that the latter are far more likely to fail. Why did they make a bet on the far less likely outcome, rather than take what seemed to be the sure thing? The movie does not address this well, but it comes down to the EV formula above.

The guys would get back 5 times their money if BBB bonds failed, but they would get 20 times the money if AA bonds failed. If the probability of BBB bonds failing was assessed at 90% and probability of the AA bonds failing at 40%, which bet would you take?

EVaa = 40% * 20 = 8
EVbbb = 90% * 5 = 4.5

According to EV logic you should actually take the AA bet, despite the fact that you are less likely to be right, because it has almost double the expected value of the alternative.

Investing with non-binary outcomes

The above analysis works because there are only two possible outcomes and one of them involves losing everything. If the guys are wrong about the mortgage market, and none of the bonds fail, they lose their entire investment regardless of the bet taken. This is what’s meant by a binary outcome, you either win or lose everything, but nothing in between. In reality most investments offer a fluid set of possibilities. However, in many cases an initial analysis can still be done using a multi-part EV.

EV of investment = EV of good outcome – EV of bad outcome

Let’s say you believe all the news stories about the housing market in Toronto flattening out. This means you would expect prices to start stagnating or rising very slowly for a number of years. In this scenario, after taking into account mortgage and other ownership costs, you should expect real returns on house investments to be somewhere between 0 and 1% a year. You assign this scenario a 95% probability.

EVgood = 95% * 1% = 0.95%

Let’s say that you also believe there is a very slight possibility that there is a bubble and it’s going to burst. Given that rates cannot go below 0 (at least not much), the Bank of Canada would be powerless to stop the decline of prices by lowering rates, likely leading to at least a 30% decline. You assign this scenario a 5% probability.

EVbad = 5% * -30% = -1.5%

You can then combine the two events to determine whether you should invest:

EV = 0.95% + (-1.5%) = -0.55%

Since the overall EV is less than 0 you should not make this investment even if you think there is no bubble and prices will not fall. The near certainty of modest returns in the future is more than offset by the small probability of a severely bad outcome.

While I used only two scenarios, you can use this same process to come up with as many as you like, and add them together to come up with an EV value for the investment you plan to make. You can also calculate EV values for a number of competing investment options to help you decide which offers the best risk/reward balance.

Conclusion

I know it’s hard or near impossible to accurately quantify the impact and/or probability of an outcome in many cases. This is why assessing risk is something that requires years of practice and a good intuition. However, making decisions without taking into account all the factors represented in the formula is extremely dangerous. The expected value formula is simple starting point to anchor my thinking. It is the minimum that I consider when making important decisions under uncertainty.

I hope the above is relatively clear and you’ll find it helpful in your decision making. I know it has helped me make the right decision many times when the choice that seemed superficially obvious was the wrong one. Not to mention, thinking this way also has the added benefit of completely frustrating my wife and friends. Can’t wait until my boys are old enough! They’re going to love this!

Something amazing happened on June 25th, 2015. His name is Alexander and he is the reason why I haven’t had the time to write any new blog posts.

I’ve been off work pretty much since the day he was born and it’s been a wonderful, but yet, incredibly exhausting time. I am savoring every moment, thinking how lucky I am to be able to spend all this time getting to know him, and helping my wife by taking care of our other 20-month old little terror.

Given how busy I am with both of the boys I keep wondering how other parents do this. Few couples have the kind of time and support my wife and I are blessed with. With both of us at home and both sets of grand parents close-by to babysit my older son 3 times a week, it still feels like more than a full time job. My full respect to all the mothers out there who somehow manage to juggle two little ones with their husband at work. Same goes for all the fathers out there who barely get any sleep helping their wives with the newborn, and still get up in the morning for a full day of work.

I fully realize that few parents have the luxury to take two months off when their babies are born. I do hope that reading this blog may help some of you planning to have a family prepare for this day financially, so you too can choose to spend the summer with your newborn. Believe me, your spouse or partner will love you for it!

A friend messaged me recently after seeing some of my articles to tell me that, while interesting, the advice is not something he can practically use. In his particular case this is absolutely true. I spend most of my time on this blog discussing how to make better financial choices with whatever existing income stream you might already have. This post is a bit different in that I want to make clear there are cases where it really is impossible to save without fixing the income part first. Let’s start with a little background on myself.

I grew up in a government subsidized building with at least one of my parents unemployed a large percentage of the time. The building was a new one and it was one of the first to be built in a residential home area as part of a government initiative to integrate us “poor people” into middle class society. The thing is I can’t with good faith complain about the living conditions. Sure we did not have a dishwasher, or even a washing machine, and you can forget about a dryer. OK, so once I did wake up to a bomb squad SWAT team knocking down the door to a unit on the floor above me. However, whatever was provided worked well, and it wasn’t a big problem to take your dirty clothes to the laundromat downstairs in the building. There were 3 bedrooms so me and my sister did not need to share a room and the square footage was adequate enough to fit a dining table, sitting area and a TV in the living room. Everything one could possibly need, what would be considered luxury living in the vast majority of the world, and yet most people in Canada would thumb their nose at this as inadequate. Most importantly the building was kept clean and well maintained and the rent was very affordable.

While my friends were getting driven around to hockey games and got their parents to buy them the newest snowboard and ski equipment I was working a paper route to pay for mine. I bought my own baseball glove and paid the league fee myself to join a baseball league. The skis I learned to ski on were from play-it-again sports and were over 2 meters long with old style straps instead of brakes. Those of you that ski will recognize how ridiculously difficult it was to learn on these things!

Once when I told a friend the story of how I bought my own equipment and paid my own fees she remarked as to how sad that is. It caught me by surprise, I’ve never though of it as sad, and I don’t regret any of it today. The lessons I learned during those formative years are the reason why I am the person I am today and I wouldn’t change any of it. I may have had horrible ski equipment but I still made the ski team, and once I got better skis, I was actually able to ski far better than if I had gotten high end equipment to start with.

Once it was time to choose a university to go to I made sure that the school I chose had a co-op program. I knew I could not take any money from my parents as they were already tight as it was. I applied and got some student loans to get me through the first 2 semesters but after that the school was paid for from my own pocket and some bursaries I was able to dig up. Sure I couldn’t go party as much as some other kids and I had to actually hold down a part-time job. Is that such a bad thing? I don’t believe it is and once again the lessons I learned were invaluable. In addition feeling the cost of that education in my own pocket, I never took it for granted, which made me work harder to make sure it wasn’t a waste. I even got into credit card trouble one semester and had to live on bread and instant noodle soup for the last few weeks of the term to make the money last. This taught me the danger of overusing high rate credit and I paid off the entire card through my co-op term earnings over the summer.

I know many of you want to give “more than I had” to your kids, but the fact is I believe my parents helped me a great deal despite not giving me much monetary support. They gave me a free place to live when I was working co-op terms in Toronto and they set the example of how to live on very little income. They helped me understand what was essential and what was just fluff and I thank them for this every day.

I want to emphasize that this entire time I NEVER felt like I was poor. I guess at some level I knew that my friends driving expensive cars and buying expensive toys without actually working were “wealthier” than me but it never bothered me in the least. I didn’t feel inferior to them or bitter like so many other people in my situation would and that inadvertently helped me keep these people as friends. No one likes an envious person and jealousy is a quick way to kill any friendship. I again credit my parents for this and the fact that they instilled values in me that raise personal character, humility and intelligence above material wealth.

I am able to afford some more spoils these days and I do indulge but I make these choices knowing they are choices and not necessities. I know I can live on far less than I do currently I just choose not to and I make sure my finances are balanced without short changing my future. It is this understanding of it being a choice that I believe is the key to achieving financial Independence rather than just pure frugality.

What does all this have to do with the title of this post?

The friend I referenced at the beginning of my post truly does not have a choice. He makes far less than the 70K median family income in Toronto and has children to raise while his wife can’t work. Yet he gets through every month and is working hard on improving his situation. If you are in this situation it’s incredibly tough and your first step is to find a better source of income with saving money a far distant priority. I don’t want anyone out there thinking I’m making light of a truly difficult situation such as his. However, for most families at or above the median family income, living paycheque to paycheque likely is a choice.

I’m not advocating extreme frugality here such as that advocated by some other bloggers who live on 25K in total family costs a year (it IS possible, just google it!). I am advocating taking a serious look at the discretionary choices being made and not ending up like this now famous house-poor couple. If you are in this type of situation you need to get angry. You need to say average or adequate is not enough. Just because everyone else seems to be living paycheque to paycheque too does not mean you can’t do better. Average choices, by definition, can (at best) only lead to average outcomes.

If you own a house that you mostly don’t use because there are only 2 of you remember that’s a choice you made. If you decide to buy in the “hottest” area of the city that is also a choice. Private pre-school? a choice, brand new car, a choice. Buying a second car, a choice. Living in a place with no public transit access, a choice. Driving everywhere instead of walking or biking, a choice. Doing that second degree or pursuing a masters, a choice. Going shopping at that artisan organic grocery store, a choice. Buying a new wardrobe every season because the old stuff is out of style, a choice. Redoing your kitchen to the latest style and installing exotic marble counter-tops? Most definitely a choice.

None of these choices are bad in and of themselves. There are real reasons why people make these decisions and I do respect those reasons. There are benefits to making many of these choices, but are those benefits worth the cost to their future? Not in all cases will the answer be “no” as peoples’ preferences and values are a personal thing. The key is to do the calculation and then decide which of these choices are most important to you and which and how many can you afford without jeopardizing your future.

I think I needed to outline my background before being taken seriously when I say the following: once both costs and benefits are analysed there are probably some relatively painless CHOICES that most people can make to save money. They might not seem like choices, but this is where I hope this blog can help.