Gails Blog

Whether I’m in a shopping mall, a parking lot or the bathroom of my local theatre, there’s always someone who recognizes me (I’m learning to pee quietly) and wants to talk about how hard it is to make a budget. This seems to be the biggest stumbling block to financial success. If they could only make a budget.

Making a budget isn’t that hard. We’re shooting season six right now, and I’m making a lot of fams do up their own budgets. And on my website I have a budget worksheet and guide to making a budget and STILL people are stopping me to say that they just don’t know how to make a budget. Really?

Course, making a budget and making A Budget That Works are two different things. I just had a fam make up a budget and when I looked at it, it looked great. They had $4 left at the end. In the positive. Perfect. Then I started comparing the budget I’d created for them to theirs. First up, the mortgage: They’d written on their budget $1400. On my budget I had $1443. Hmmm. So I asked, “How much is your mortgage?” When we clarified, the mortgage was $1443. They’re in the negative and they didn’t even know it. That means their budget isn’t going to work simply because they were too nonchalant, too lazy, too vacant to do it right. What is it about a budget that makes people think they can GUESS?

And then there are the people who can’t add. I’ve seen it over and over. When I add up the numbers, my total is different from theirs because they ADDED IT UP WRONG!

Even the idea of using a budget makes people feel like they’re putting on cement shoes. As if a piece of paper and some numbers are going to RUIN THEIR LIVES. They’ll have no fun. The budget is punishment. GROW UP!

A budget is a plan for how you are going to spend your money. If you don’t have a plan, you’re dumb. It’s that simple. Since the absence of money can be a real bummer when it comes time to buy food or pay the rent, if you don’t have a plan, you’re dumb. And there are dozens and dozens of ways that people waste money when they’re not watching were their dollars are going.

I know a family that’s barely making ends meet. They eat atrociously. They are unhappy about being poor. He smokes and drinks a couple of cups of coffee a day from the local donut shop. OMG! How can you not have the money to buy fruit for your children if you have the money to poison yourself? Just how selfish are you?

Would a budget help? Darned right! Once you’d added up the $10 a day for cigs and $4 a day for coffee, totaled it for a year, and recognized that you were wasting over $5,000 a year, it’d make you sit up and think, unless both you and your significant other were total morons.

Speaking of your significant other, one of the big benefits of a budget is the fact that it becomes the reason why you do or don’t do things. The budget becomes the control point. If you’re trying to cut your expenses, it’s easy to get upset with a partner who seems to be spending too much. Do a budget together, and if either of you can’t buy that thing you want it’s because you didn’t budget for it. You’re not monitoring each other any more. The budget becomes the monitor. And since you both agreed on the budget, getting upset with each other doesn’t make much sense.

This works. It’s one of the reasons why my fams change so much when I arrive. As an outside force, they now have someone else to blame for why they can’t spend. By the time I leave (hopefully) they’re in the habit of checking with the budget before making a spending decision.

I’ve watched peoples lives change significantly because they’ve implemented a budget and no longer have a sense of NO CONTROL over where the money is going. I’ve watched their relationships change as they move from being a “parent and child” – as in, “you can’t buy that” or “you’re spending too much money” – to two adults sharing responsibility for their family’s financial health. I know it works. If you do it right. So take the time to do it right and see for yourself.

And remember, it’ll take some fine-tuning to get your budget working just right. Like a musical instrument, it has to be tweaked as you go to get the sound just right. Don’t cast it in concrete. Let it change to meet your changing needs. Keep your eye on it, make adjustments that make sense to you both, and keep an eraser handy. And get a calculator.

I’ve been swamped with questions recently, and many of them are far more sophisticated than I’ve been seeing up until now. Before I get to some answers, let me reiterate: If I’ve answered a question similar to the one you’re asking before, I won’t answer it again. You’ll have to search my site for the answer. See the How to Use This Site on the home page.  

Here we go:

Hi Gail, our mortgage will soon be up for renewal and we would really appreciate your advice: would you go for a plain simple mortgage (we’re considering President’s Choice PC points plus for a 5 or 10yr fixed term) or would you consider a ‘home equity diversification plan’ (through Investor’s Group) that replaces a mortgage with a home equity line of credit that consists of 2 sub-accounts, one for the mortgage and the other for investment lending to make regular investments into a non-registered portfolio of mutual funds that ’should be’ tax deductible according to the brochure we have. I do our own taxes and this one sounds kind of confusing to me but I would appreciate your advice. Also my 2nd question is do you recommend registered or non-registered investments? Thank you so much for your time in reading my email and we will wait for your response.

Okay, J, here’s the long answer. The product you’re being offered is one that allows you to use the equity in your home to secure a loan for investment purposes. Each time you build up some equity, the loan would eliminate the equity and the money would be used to buy investments. The upside is the interest on the loan for investing is tax deductible. The downside is if there’s a reversal in the value of your investments – if the value goes down – you’ll still be on the hook for the loan. And since you’re not building any equity in your  home, you have to “safety net” there. If it were me, I would go with the vanilla-flavoured plain old mortgage.

Now here’s the short answer: If you don’t understand an investment, or you’re not sure you should do something, THEN DON’T DO IT!

As for your second question: registered or non-registered. That depends on how close you are to retirement (the further away you are the more the RRSP works for you), and what type of investments you’re buying (interest-bearing investments are tax sheltered in an RRSP).

My husband and I are in a tricky financial situation–my husband is in a position where he has to change careers, which would necessitate us buying a house in a location where prices are EXTREMELY high. We are looking at having to spend approximately $350,000 for a moderately priced home that will suit our family. Our problem is this: we have extremely high credit card and line of credit debt, dating back to my being laid off from my job and going back to school. We foolishly kept living the same lifestyle on credit, thinking that my earning power once I graduated was going to be much better than it actually was, at least initially. Poor choice, I know!! Anyway, we are concerned because every mortgage calculation site we have visited has indicated that despite the fact that we have a combined monthly income of approx. $6500, our debt load is too high. We are working toward paying down our debt and have scaled back considerably in all areas (We watch your show, so w e knew just how to do it!). However, we may need to purchase a home in the very near future (renting here can be more costly than a mortgage, so it seems the better choice). Would we be able to get a consolidation loan, or put some of our debt on our mortgage even though it is unsecured debt? Please help!

S: The big problem with living life like tomorrow will be better is that life has a way of biting you on the ass! Carrying debt is one of the best ways to LIMIT YOUR OPTIONS. I’m sorry that you’re feeling squeezed and that your options are limited by your current debt load. Unfortunately, a consolidation loan doesn’t reduce your debt load, it just moves it – hopefully to a lower interest rate option. If you do consolidate, and end up paying less in interest, more of your payment will go toward paying down your principal. That’s a good thing. However, unless you find stuff to sell or find a way to make more money so you can get that debt paid down, in all likelihood, you won’t qualify for the size mortgage you’re looking act. Sorry to be a bummer.

Thank you so much for your show. I have learned so much. I find it hard to apply many of the ideas you present. I am a full-time law student. I work part-time during school and am working full-time right now. I get the maximum amount of student loans. Tuition is so expensive, as is my rent, that I still need to make up the shortfall with a personal line of credit. Before going to school I had no debt and fairly decent savings. I still have the savings, which I intend to use for a downpayment on a house in a couple years. But this living with debt over my head is a very unpleasant feeling. I know I am going to get a decent job once I graduate. I have some rather large expenses for things I would really like to have now. For example, I would love to get orthodontic work done while I’m in school. I could live without a car but really really don’t want to…and my current car is falling apart on me. Is it an absolutely horrible idea to bank on future income? The line of credit is at a decent interest rate. The student loan will take some time paying off, but once I start working it really won’t be a problem. Should I wait?

A: See my previous response and the mess S got herself into thinking that it’s okay to spend money you haven’t yet earned.

My husband & I have never used credit cards much, and we have raised our sons to be frugal, or at least thoughtful in their money habits. Now our oldest is 19 and has run his finances well for several years. He is eligible for a credit card and we are eager to see him begin to build a strong credit rating. Does a credit card have to be used to develop this rating, or is it enough to hold one unused — either in a safe deposit box or perhaps frozen in a block of ice as I have seen on a terrific TV show we all enjoy?

Kerry: the only way a credit card works to build a credit rating is if you use it and pay it off religiously. So, yes, he has to use it. And it is THAT experience – using it and paying it off on time and in full every month – that is the real lesson.

Love your show! My fiance and I are engaged and have been together for 6 years (living together for 5 of them). We have always had separate accounts/money except for our mortgage. We split the bills. We both have student loans and car loans. I feel it would be easier to have our finances become one (and maybe just reassuring to me to know exactly whats going on). I have goals to buy a home and have a family soon, but want to be sure we are financially ready. Am I being to controlling? What is the norm out there? It seems my friends who have joint accounts communicate better about finances.

T, there is no norm. But being able to communicate about money is a key part of being able to stay married for a long time. Go read the stuff under Getting Married on my blog. Then TALK!

I have been working on a plan in place to pay off all of my consumer debt (2 years remaining). All of my hard work is about to be thrown into chaos: my work has given me more responsibility on a lower pay scale, which has also changed my union. I am now making less gross ($3k/annum), paying double the union fees and this new union of mine is planning on striking in two months. I already had the financial struggle that my daughter is about to lose her job (in a month) and may be unable to continue to contribute temporarily.  How do you prepare for a financial disaster on such short notice? My emergency fund isn’t large enough to accommodate this many disasters at once.  

Karen: there’s no way to prepare on such short notice for so many changes at one time if you don’t already have an emergency fund in place. You’re going to have to buckle down and find a way to cut your expenses. Can you take in a renter? Can you (and your daughter) find part-time jobs? Can you sell something that will bring in some income?

I’m sorry I can’t be of more help. There are no magic strategies for this situation. You just have to get creative and find ways of cutting back or back-filling your budget. Good luck.

Hi Gail, I have been using your interactive budget since February and love it!!!  All but 2 categories make perfect sense to me: I understand the fixed expense category ‘Maintenance/improv/condo’ to cover expenses for the building/property you live in, such as paint, repairs, upgrades etc.  However, what category covers things like necessary home furnishings?  We recently needed to replace lamps and I’m not sure what category these fall under.  Also, would you elaborate on what the ‘Family/gifts’ category would include beyond gifts?  Thank-you so much for sharing your wisdom.  

S: furniture and other big-ticket stuff you want to buy comes under Capital Expenditures. As for Family/Gifts, that would cover presents for b/days and other holidays, and if you’re helping to support a family member, that’d go in here too.

My question is this, what are your thoughts on shopping at Costco? I like to shop at Costco because they have such good prices on food and I have tried making a budget for groceries, but it is hard to come out of Costco without spending under a $100 dollars. Do you recommend to people on Til’ debt us do part that stay away from Costco?  

M: I don’t tell people to stay away from Costco. I like the store. A lot. Their prices can be fabulous. I always go in with a list. I only buy what’s on the list. I never spend more than I plan to. That’s my advice.

When should you consider consolidation? I’ve been thinking it’s the best option for us but I often see you have folks try to reduce interest rates on credit cards instead. Is there a preferred method or does it vary? What questions should we be asking to help us understand what the next steps are? By the way, your show is very helpful and I try to watch it often. Our debt ratio is .2998, but we don’t’= have the best credit out there. No bankruptcy, or past dues (although we have occasionally been late on payments), but we have a lot of credit and are cosigners on both of our son’s student loans. I have not checked our credit score in over a year but it was not great then.

M: I recommend people consolidate to a) reduce their interest cost, b) get one single monthly payment and c) limit the amount of time it takes to repay their debt. If you don’t have a good credit history, in all likelihood you won’t get a good (low) interest rate, since your history is part of what goes into setting your interest rate. So you should be working at negotiating with creditors to reduce your interest rates on the individual cards.

Hi Gail, I love your show and would love to be on it unfortunately it is for couples only. My question is: At present I have approximately $8ooo of student debt remaining. I am interested in buying a condo or a townhouse and am wondering if it is the right time seeing as I have only recently begun saving more. Should I wait until I have at least 10000- 15ooo$ before I consider buying or it is feasible to do so at this point? Any input is very much appreciated.

Monique: I can’t tell you if it’s the right time to buy. That depends on whether you qualify for a mortgage, and how much, and whether you can manage the responsibility of home ownership. I have a number of articles on the site about this, so go read them.

I’ve read your articles about kids and money, and think they are great, but we are having trouble with the idea of $1 per year of life with our 9 year old. Currently, all he uses his $3 pocket money for is candy, we make his lunches (there’s no cafeteria at school). Could you expand a bit on what things you think a 9 year-old could and should be paying for?

Hi Andrea. I define an allowance as, “The money you would normally spend on your child, put in your child’s hands so he/she can learn to manage it.” If you son likes to watch rented movies, he could use his allowance for that. Or for buying software for his computer/gaming device. Or to buy books. Whatever you find yourself laying out money for, he should be buying (not the necessities of life). Over time, as he needs more money to meet his needs, you can increase his allowance, or give him the opportunity to work for more money.

My other half is very reluctant to take any financial risks as a result of seeing his parents make some very costly errors for which we are now picking up the pieces. This becomes most noticeable when we discuss buying a home. He has a number of reasons against this: 1/ it’s too expensive compared to rent, 2/ if something ever happens (such when his father got cancer or if one of us were to lose our job) we could move according to our new requirements much more easily. On the other side I’m afraid of still having to pay a mortgage when we retire. I understand that there may be an argument for renting over buying a home but I think it requires a very disciplined saving strategy. How can we get on the same page on this? Should I accept that buying isn’t for everyone? It seems it may come down to emotions rather than finance as no matter how much we talk his fears remain the same. Thanks so much for taking the time,

L: you and your husband are going to have to sit down and hash this out. There’s no right or wrong answer on the own versus rent question, it’s a matter of what suits you. But your differing objectives could be a point of resentment later if one or the other is forced to do something that goes against the grain. So you’re going to have to work it out. Maybe if you went to see an advisor who could show you the black and white of it (or use some of the tools on line), that would help you come to a consensus.

My husband came to Canada in 1998, the first 7 months we lived with my parents. We saved up money towards a downpayment on a condo. I got pregnant and that’s when our debt started building up. Now, I happy to say that we moved house and debt free (excluding fixed mortgage). Several years have passed and managed to save some money. My question is that the money saved is just sitting in the bank. How can I convince my husband to start thinking about our family’s future and make the money work for us? I believe that he still feels scared that we will go from black to red. Please reply back with some suggestions. Thank you

A: Same as above. There’s no right or wrong way to invest. But you have to come to some kind of agreement.

My husband will be living on his own in another province for a new job. My son and I will be joining him in a couple of months. How do I set up a budget to keep track of both households?

Deena, the same way as you would if you were living in the same place… you’ll just have much higher expenses

I have a department store card, which I rarely use. I always maintain a zero balance as well. Recently when I went to use the card I was informed that the department store cancelled the old card and replaced it with a new card (new number) since it had not been used in over a year. How will this affect my credit report? If this does negatively impact my credit history what steps must I take to rectify the situation? Thank you for your kind assistance.

C: you need to check with the credit bureau to see if it had an impact. Perhaps not. I’d be more concerned about the company issuing me credit I hadn’t signed up for.

I am carrying a balance of $18,000 on my line of credit with an interest rate of prime plus 1.75%. I currently earn $58,000 a year and have not savings. I am 40 years old. Between paying mortgage, condo fee, living expenses (food, gas, etc), and paying towards debt repayment. I find that I don’t have any extra cash for savings or needed extras (like clothes for work). These expenses go onto my credit again. Since I’ve bought my condo, the value has increased about $30,000. I’ve been thinking about adding my credit line balance into my mortgage, — re-financing my mortgage, to add in my line of credit balance. This will leave me without “consumer” debt and I would have cash flow every month for savings and buying things with cash. Is this a good idea?

M, this is only a good idea if you save the difference and BUY NOTHING until the $18,000 is paid off

We are now faced with a decision: we declare bankruptcy or go with a proposal offered by BDO Dunwoody Ltd. Are they promoting themselves or is this really in our best interest? Very desperately yours

AM & M: I doubt that the company is “promoting” itself, but if you’re in doubt, get a second (and third) opinion. I have worked with several people who have been given bad advice when it comes to declaring bankruptcy or using a consumer proposal. I don’t know your circumstances, so I can’t comment. You could read up on the bankruptcy rules to see if that would be better for you. (Go to bankruptcycanada.com).

HI Gail! I have a question that has been on my mind for quite some time: we are a one income family with young kids, our yearly income is about 55k. We’re still renting, but planning to buy a house very soon. We will have about $30.000 for the down payment (in-laws are giving a “pre-inheritance”). We have 2 credit cards with zero balance, and a LOC with about $4.000 on it. Our credit score is very good. My question is, should we call the banks and ask them to lower our limits (one is at $12.000 and the other $ 9.000)? I think those amounts are just ridiculous, but will lowering the limits affect our mortgage at all? If we should ask them to lower them, what amount do you suggest? Should we cancel the other card altogether, and just have one credit card? Thank you in advance, you’re my hero!!

M, great question. Yes, the amount of credit to which you have access does affect your ability to qualify for more credit. Go get those limits lowered!

Hi Gail, My girlfriend of 2.5 years recently told me that she has $40,000.00 worth of credit card/line of credit debt. This year I was planning to propose to her, but with this debt and the fact that I am just learning about it despite several attempts on my part to ask her about her money situation, everything is in doubt. I want to help her with this, but can’t help but feel angry that she lied to me (or withheld the truth…same thing in my books). Any advice on how to navigate this situation?

D: I think you both need to come clean on your finances. And you need to tell her how you feel about her “secret.” She may have simply been embarrassed. But people who love each other don’t need to worry about embarrassment, right. They just need to worry about honesty. So sit down over a nice dinner, with all your paperwork in hand, and tell each other the truth.

I loveeeee your show and practical saving methods. My husband and I just bought a vehicle and purchased it through our line of credit. The dealership wanted to charge us 9.5% interest because it wasn’t a new vehicle. I harassed them asking what happened to 0% financing, but they wouldn’t budge and told me good luck on getting a better rate. Anyhow, we purchased the vehicle and used our line of credit. Because we were able to increase what we could borrow from our line of credit, we lowered our interest rate from prime plus 3 to prime plus .5. I thought it was an ok deal, but obviously the bank is still making their 2 cents worth and then some. My question is, currently we’re paying 5.75% with 41,000.00 owing and 5.2% on our mortgage, which we’ve only had for 1.5 years now. When we have extra money, what makes more sense, to pay the mortgage because we owe more or the line of credit to get it out of the way? We pay on our line of credit every 2 weeks and will be increasing the payment close to 100.00+ extra due to my husbands promotion. I just want to pay where it will count!!

D, pay off the line first. It’s the debt with the highest interest rate.

Hi Gail, I got married about 6 months ago & the only debt my husband & I have is his car loan. We pay $482 a month & have about 37 months left. We are currently renting my mom’s basement apartment & would like to purchase a home in 3-5 years. Would it be beneficial to pay off the loan from our savings & start from scratch? Thanks for your help……

J, if paying off the car loan will save you a bag of interest, yes. Then you can put the money you were using to pay the car loan towards your home downpayment savings. Make sure you set up an automatic savings program so that you aren’t tempted to skip the savings.

My husband and I bought a timeshare in the states and we live in Canada. Its a loan. At the time we thought it was a good idea to get it but now really thinking about it, not really. Now we just added more debt to what we already had. We would like to sell it but not sure how to do it. What would you recommend?

K, sorry, I don’t know squat about timeshares. Anybody else know anything?

How do you get out of debt when students loans are out of control? My husbands student loans are extremely high, he can’t get a loan for anything and when we bought our house 6 mos ago it had to go in my name only because the interest rate would have been higher if his name was on the house?? Just so lost and financially whipped that there is nothing to save?? Don’t know how to pay of his loans and we have collection agency calling about him almost everyday now. Should I consult a financial advisor to help us out and put us on a budget?? Any advice would be appreciated watch you show when I can am a big fan of yours.

T, there’s no magic to getting out of debt. You have to find a way to get the money to pay down the debt.  You can cut expenses. You can make more money. You can sell something. Them’s your options.

Y’all have heard me say, propound, shout, that you need an emergency fund. There’s nothing worse than having worked hard to create a stable financial life only to have the whole thing toppled by an unforeseen whatever. The roof starts to leak, but your maintenance account was just wiped out by your scheduled house repainting. Your car coughs and heaves and you discover the trannie’s gone. Your plan to get pregnant next year took a leap forward.

Okay, so nobody’s arguing with the fact that having an emergency fund makes sense. And how much to have is a pretty standard rule:

You need the equivalent of three months’ income or six months’ expenses, whichever is greater.

Fine.

Or not fine. It can be overwhelming coming up with a huge dollar amount when you look at it as a HUGE dollar amount. It can be so overwhelming, in fact, that many people just don’t bother.

No matter how often I say, “Don’t worry, just start saving… even $50 a month gets you closer to your goal,” people still resist because the idea of accumulating thousands of dollars is so alien to them they think it’s impossible.

So here’s another idea for getting your emergency fund together.

List each category of expense you would have to keep covered if you hit an emergency. That may include rent or mortgage payments, food, medical costs, insurance, child-care, car payments, gas, and whatever else is ESSENTIAL.

Go back over your list and cut out anything you’ve kept that’s not ESSENTIAL to keeping body and soul together. Let’s face it, if you’ve just gone from two incomes to one, you CAN give up your cable, telephone, entertainment and everything else you wouldn’t die without, at least in the short term. Your Emergency Expenses should cover the essentials of life.

Now write in the average monthly amount for each of your Essential Emergency Expenses (EEEs). Then put six check-boxes beside the amount.

Pick the first expense you want to have covered. Most people pick either the roof over their heads or the food in their bellies. Let’s go with food for our example, and say you need a minimum of $400 for food each month.

How much can you save every month? Ten dollars? $25? $100. Whatever it is, open up a savings account somewhere where they’ll pay you a decent rate of interest and ask that the amount you’ve designated be deducted from your regular account to this account every month. In our example, we’ll say you can save $50 a month.

First you’re going to save your first month’s worth of food expenses. So when you’ve got your first $400 in your EEE Savings Account, you’re going to put a check-mark in one of your boxes. There. You’ve done it. One month’s worth of food money at the ready, just in case.

One of the decisions you’ll have to make is whether you’ll save all six months’ worth of food money before you start on your second category, or if you’ll check the first box for each category before saving more food money. That’s your choice. My choice would be to put a check-mark in the first box of each category, and then move on to save my second month’s worth of EEEs.

Okay, so now you have a plan to build your Emergency Fund. All that’s left is for you to start DOING it and stop THINKING about it. Go ahead, pick up a pencil and a piece of paper and start making a list of your EEEs. NOW!

Over and over I meet families who are spending thousands of dollars a year eating out. And over and over I challenge them to give up buying lunches and coffees and substitute food made at home. It’s often a hard sell. I’m not sure why since I love my own cooking much more than the food I can buy in a fast-food joint, though there are times when I have a hankering for something I don’t make particularly well (like Chinese hot and sour soup that I’m still trying to master). But, on a day-to-day basis, my food is waaay better than what one of my fams referred to as, “outside”food.

A couple or so ago, I handed a chick a lunch box with my face on it and told her to use it. While her hubby was the primary cook in the family and would often make her lunch, she’d leave it behind spending between $8 and $12 a day on food at work. Hello! $12 a day, multiplied by 5 days a week, multiplied by 50 weeks a year equals $3,000 a year. That’s right, THREE THOUSAND DOLLARS.

Creating a lunch for work does take some time and planning. The first thing out of most people’s mouth is, “I don’t have time in the mornings!” Really? Then get up earlier you Lazy! Are you telling me it’s not worth $3,000 a year to you (in after-tax dollars) to get up 15 minutes earlier in the morning? Give your head a shake.

Ken and I pack lunches for the kids  – yes, I still do this for my children even though they’re old enough to do it for themselves because I LIKE TO DO IT! We get up at 6 a.m. so we have time to shower, pack the kids’ lunches, and make Malcolm pancakes before school. I want to make sure they both have a healthful lunch, which brings me to my next point.

Another great reason for bringing your own lunch to work is so that you get to make healthier choices about what you eat. You control the ingredients. You control the freshness. You can be as creative as you want to be. One of our favorite salads is lettuce, red pepper, watermelon, and feta cheese. No dressing needed because the watermelon is so juicy. Yum! You’d be hard-pressed to find a more healthy or delicious salad.

Then, of course, there’s always the sandwich. My daughter hates soggy sandwiches so we end up packing each ingredient separately so she can assemble it at lunchtime. My son is mad about fruit so we pack him two or three different fruits every day. To keep everything cold we either freeze a juice box for the lunch bag or include a cold pack. In the summer, I fill a water bottle half way up and freeze it, then add fresh water to the top before adding it to the lunch bag. You can do this with homemade ice tea or iced-coffee too.

Salads and sandwiches, of course, are easy. But there are lots of people who want a hot lunch but don’t have a microwave at work or are on the road.

Hey, ever heard of this marvelous invention called a thermos? They’re brilliant. Soups, fried rice, chili, lasagna, just about anything can go into a thermos, so you can make extra at dinner and pack the leftovers for your next-day’s lunch. Alex used to complain that the food wasn’t really hot so I now pre-heat my thermos by pouring boiling water in first for a few minutes, then dumping the water out and adding the food that I’ve reheated really well. No more complaints.

Some people say they buy lunch because they love the social aspect of eating out. Hey, I’m as social as the next guy. But being social and going broke is DUMB. So pick one day of the week when you’ll eat out with friends and give yourself something to look forward to. Maybe you’ll choose Wednesday (hump day), or Friday to celebrate the end of the week. Whatever day you choose, lunching out once a week instead of five will cut your spending a ton.

Better yet, start a Lunch Club at work and pick one day a week when you each bring something to contribute to a group lunch. Or challenge each other to find the cheapest good food in your area, and take advantage of the Lunch Special. All-day breakfasts at $2.99 can’t be beat for value.

Be creative. The idea is to have a great life and save some money, at least until you’re debt free. Hey, if you don’t owe nobody nuttin’, then you can swallow your money to your heart’s desire. But if you’re in hock, then you owe it to yourself to use all the tricks at your disposal to get back into the black.

Wedding season is around the corner. Girls are going to be strutting their stuff in dresses that cost a bagful of money, and boys are going to wonder what all the fuss is about. The equivalent of a home downpayment will be spent on flowers, food, booze, and myriad other must-haves for the Big Day. Some people will spend DAYS getting married, hosting family and friends, and maxing out their credit.

Natasha, who does my makeup on the show, also does weddings and is looking forward to a banner season. Since we’re shooting on Tuesdays and Wednesdays this year, she’s free Fridays (Friday is the new Saturday) to make up all the brides and bridesmaids who need her skillful touch. And some won’t be satisfied with having her do the deed on the day; they’ll want a dry-run to make sure they’re happy. Money’s no object.

If there’s one theme running through the stories of the newly weds I’ve worked with it’s that a wedding that takes FOREVER to pay off is dumb. People will do the darndest things on their wedding days, or in the month’s running up to it. I worked with one woman who spent far more than she could afford just to prove to her much-despised family that she’d made it. Hmmm. Great way to start a new life with your partner, huh? Another couple I worked with had to invite half of Europe to keep the parents happy. But the parents weren’t kicking in to have all the family and friends flown in. Whazzup with that? Whose day is this anyway?

When you’ve been married as often as I have, you not only get good at wedding planning, you’re pretty determined to do it just the way you want. When I married my keeper-husband, Ken, we created our own vows and we were married in a park. It rained, an auspicious sign I was told. Convention was nowhere in sight.

Whether you’re getting married for the first time, or you’re jumping into the breach yet again, you’ll want the perfect wedding. But perfect doesn’t have to be expensive. It just has to be fabulous. So why are people prepared to take on gobs of debt to have a party that meets a bunch of other people’s expectations?

Your extraordinarily happy day doesn’t have to be the most expensive day of your life. Perfection comes at a price - not only financially but emotionally. You only have to take a gander at some of the Brides-Gone-Berserk TV shows to see just how off the rails you can go.

The first step to making your wedding work is to set some realistic expectations for what you want from your special day. You and your better-half-to-be should talk about what’s most important to you and your families. The next, and equally important, step is to establish a spending plan within which you will work. These two steps are closely tied together. What you want from your wedding will set the tone for how much you spend. And how much you have to spend should guide you in setting some realistic expectations. Making your dream wedding a reality shouldn’t mean digging a debt hole that will strain your new marriage; far better to eliminate some of the less important things. With a little creativity and some legwork you can make the day memorable in the most charming ways without a hangover of unmanageable bills.

If you invite the world and his uncle to your wedding, you’re going to be on the hook to attend a b’zillion weddings (and buy presents) when your friends and family reciprocate and invite you in return. I’ve just worked with a couple that, in the first year of their marriage, went to seven weddings. She was very embarrassed as she told about writing out a gift-card that included a cheque she knew would bounce. Wow! Why would people do that to themselves?

Everyone wants a visual record of this special day. But photographs or video can cost a small fortune: $1,200 to $5,000. If that’s out of your budget, get creative. Provide your guests with disposable cameras. Everyone taking pictures of everyone else having a fabulous time will create a memorable record of the event. If you have a friend who is especially good with a camera, request her services as a wedding gift. 

Spend $350 on a limo, or hitch a ride with mom and dad.  Spend $500 - $1,000 on a wedding dress, or let a friend or relative make it for you. Better yet, go retro and borrow a dress from a girlfriend, aunt or your mom. There now, you’ve taken care of the “borrowed” category (as in something old, new, borrowed, blue.)

Choose seasonal flowers rather than imported or green house flowers in your bouquets and centrepieces. Flowers that are not in season send costs up, up, up. Use your bride’s maid’s bouquets to adorn the head table and use the aisle flower arrangements from the ceremony as table centerpieces at the reception.

The reception is another good place to cut costs. For a small gathering of 30 people or so, have your reception at a restaurant - just don’t book it as a wedding reception. Reconsider the time at which you’re having your reception. A lunch, afternoon tea, finger-foods in the early evening or desert table will be far less expensive than the hip-of-beef-approach. You don’t have to offer every alcoholic beverage available under the sun. Stay away from mixed drinks. Go with a couple of wines (one white, one red) and a couple of beers (one domestic, one imported) and you’ll save tons.

While this last tip might not save you any money, it may save your sanity. Be ready to delegate jobs when people ask, “What can I do to help?” Write every job that needs to be done on index cards. Then when people asked what they can do, give them a card. Also consider naming a friend as your Wedding Director. On the big day, any questions, problems or complaints should go to the Director so you’re free to enjoy your wedding.

Review your spending plan frequently to keep yourself on budget. Here’s a simple budget worksheet that’ll show you the average spent, which you can use to manage your expenses.

It’s really easy to let enthusiasm spiral into huge costs. But with a little creativity and a willingness to do it yourself, at least in some areas, you can have the wedding day you’ve always dreamed of without having to promise away your first born.

You know that old adage that says if you want to sell your house, bake cookies. It seems when a house smells wonderful - be it fresh, warm bread or hot, chocolately cookies - people are more attracted to the home.

Well guess what. It doesn’t just hold true for house sales. It seems that what whets our appetites also influences us to be more impulsive when it comes to buying other stuff. Aromas affect us on a subliminal level - which is one reason we often underestimate their power. We can recognize close to 10,000 odors. And we breathe about 30,000 times a day, so there’s lots of opportunity for those scents to hit our limbic system — an old area of the brain relating to memory and emotion - where they can be turned into motivation.

According to the Journal of Consumer Research, in one experiment, the aroma of cookies influenced tightwad women to spend more on clothing. Go figure. Now we’re going to have to walk around with clothespins on our noses to get out of the store with our budgets intact.

Then there’s the case of the shampoo that went from last place on general performance to “easier to rinse out, foamed better and left the hair more glossy,” when only the fragrance had been changed.

In another experiment, the fragrance of sweet citrus was pumped into the mall’s air for a week in amounts so small that shoppers couldn’t tell the scent was there. But the shopkeepers could tell when they watched their sales jump by $55-90 per customer, even though the experiment was done in a traditionally slow sales period and stores were instructed not to offer special promotions.

But it’s not just smell that grabs us by our purse-strings. It seems that our exposure to visual influences on our appetite reduces our ability to defer our gratification. In one experiment participants played the role of magazine photo-editors, choosing among either appetite stimulating pictures of food or non-appetite stimulating pictures of nature. All the participants were then asked to participate in a lottery that would either pay them less money sooner or more money later.

Those exposed to the food photos were 20% more likely to choose the lottery with the chance of a smaller, more immediate payoff than those who were exposed to the photos of nature. It seems, with appetites at attention, we cannot wait to be satiated.

Even our ears can be used against us. Did you know that music in a major chord make people buy more than music in a minor chord? Uh-huh. Some obsessive marketer actually measured this, and now when you’re listening to all that music as you shop, you can be sure it’s been designed to engage your buying impulses.

Sigmund Freud suggested that we are motivated by conscious and unconscious forces. The next time you’re bopping down the aisle and you slow down to examine a new product or attractive item, keep in mind you’re marching to some marketer’s drummer. Yup. Certain beats of music will slow shoppers down, making them dawdle in front of goods on display. Combine that with the right visual stimulation and a scent that moves your to feel relaxed and open to new ideas and you don’t stand a chance of getting out the door without blowing your budget.

I received a question yesterday that I’ve received before about the Magic Jars and how to get started with them. Rick wrote:

We are starting the money jar system tomorrow since it is the first of the month. We are behind on our bills going into the new month. How do we start the money jar and continue to play catch up at the same time?

People seem to have difficulty figuring out where the money for the jars comes from. It’s as if they think this is “extra” money, not money they would have been spending all along. So…

First off, the money that goes into the jars is the money that you would have been spending on things like gas, food, clothes, entertainment and medical costs - all your “variable” expenses. It’s not EXTRA money.

And the place to start in changing your money management is not with the jars. It’s with a balanced budget. You can’t actually make the jars work for you if you don’t start by making a budget that balances

Crap! Really! I have to do the math

Darn tootin’. You’re going to have to do some hard work before you can clean up the mess you’ve made of your money. If you skip this step you’re lazy, uncommitted and looking for an easy way out. There is no easy way out. You’ve muddle up your money and now it’s time to do the detail to sort it out. So get out copies of your bills, a pen, a piece of paper, a calculator and get ready to do the math.

Go to Gail’s Interactive Budget and the instructions, Gail’s Guide to Building a Budget. They’re on the right hand side of this page, under Gail’s Other Pages. Follow the instructions and make a budget that balances. You can’t have a negative number at the bottom. It has to be positive or zero; the budget has to balance.

If you can’t make it balance, you have a problem. Either your expenses are too high or your income is too low. Start by cutting out EVERYTHING that isn’t essential to keeping body and soul together. This may include cutting back on fixed expenses. Cable, cell phone and telephone bills are one place to look. Turn down your thermostat and put on a sweater to save on heating costs. Get rid of a car you simply can’t afford to keep. If that’s not enough, then you’re going to have to find a way to make more money. (Am I starting to sound like I’m repeating myself yet?)

Once you’ve balanced your budget, the Interactive Budget Worksheet will tell you how much is going into each of the jars. I’m sorry, you can’t store this budget, but you can print a hard copy for on-going reference, and I recommend you do so.

Okay, now we come to the jars. This money is your “variable” spending. Assuming you’ve balanced your budget you now know how much to pull from your bank account each week for the jars. Some jars, like “clothing and gifts” or “other” may remain empty until you’re back in the black

All the rest of you money stays in your bank account and can be used to pay your bills. Your mortgage/rent is a fixed expense, and assuming you’ve balanced your budget, the money is in the bank to pay this bill. Ditto your car payment, insurance, childcare - everything that’s at the top of the Interactive Budget under the titled “Fixed Expenses”.

Two more things: First, if you can’t figure out how much you should be putting toward debt repayment, use the Own Up to Your Debt Worksheet (on the right hand side of this page, under Gail’s Other Pages) to determine how much should be going toward your debt repayment.

I know the budget says it should be 15%, but if your hole is deep - as is the case with many of the fams I work with - you may start off budgeting 30%, 35% or 40% of your income to debt repayment - whatever it takes to get you out of the red within three years or less. If it looks like it’s going to take longer, or your debt repayments are throwing your budget off kilter, you only option will be to MAKE MORE MONEY.

Second, you can’t sacrifice savings in the name of paying your debt off faster. Sorry, that’s cheating. You have to set aside some money each month for emergency and savings (which is long-term savings, not saving for a car or a vacation), so that you’re working with a balanced plan.

I know there are those who believe you should pay off ALL your debt before you start to save, but I don’t agree. If you have nothing set aside in an emergency fund, the first time you run into a problem, you’ll go back to using your credit; very defeating emotionally.

And if you don’t start the habit of long-term savings TODAY, you won’t ever start.

Ever heard of inertia? That’s the thing that keeps a body that’s at rest at rest until something acts upon it. It also keeps a body in motion in motion. If you aren’t saving today, you’re a body at rest. I am the force that has been sent to act upon you to get you moving in the right direction.

Lots of people are using the jars all over the world. I’m really surprised that such a simple - and really old - idea has caught on in such a big way. I think it’s because it’s a way to make money management really concrete. When the jar’s empty, you’re done spending.

And the jars really work. I haven’t worked with a single family to date who haven’t had money left in the jars at the end of my time with them, despite my having cut their budgets by 50%, 65%, or 85%! Wow! So y’all can live on less, if you’re determined to change your circumstances.

Course, determination is a big thing. If you’re at all wishy-washy about what it’ll take to get you out of debt, if you just can’t work up the guts to do things differently, it won’t be the jars that failed.

The single biggest reason why people can’t live on a budget is their failure to plan for inevitable expenses. Sometimes people refer to these as “unexpected” expenses - I’m not sure why, since some of the things they include as “unexpected” aren’t unexpected at all, just irregular.

“Unexpected” is really just another way of saying, “I don’t want to have to think about it.” Be honest. Did you really think you were going to get through the year without your seven-year-old car breaking down at least once? Did the fact that you needed new tires really come as a surprise? Did you actually think the window that got broken last summer was going to mysteriously heal itself?

Home maintenance is one of the areas where people act all surprised when the bill comes due. I tell people they should be budgeting between 3 and 5% of the value of their home for annual maintenance. So if your house is worth $200,000, you need to be setting aside a minimum of $500 a month to keep it in ship-shape. People just about choke when they work it out for themselves. A couple with a $400,000 home informed me there was no way they could afford $1,000 for home maintenance. Really? Your most important asset? You can’t afford it’s upkeep? So you have people paying through the noses on their mortgages watching their homes crumbling around them because they don’t want to have to deal with the realities of home maintenance. That’s how the new roof becomes an “unexpected expense.”

The same holds true for household appliances. Do you have an appliance replacement fund? Are you saving up for the next electronic item that will fizz out, or will it be an “unexpected expense?” How about the new snowsuits the kids will need next winter? It’s not like these things aren’t inevitable, it just that no one wants to think about them, so we act all surprised when we’re faced with the expenses. And then we whine about not having any money.

The following oversights can also have a big impact on your budget:

Annual costs. It’s easy to forget about the annual car, home or life insurance coming due this month if you don’t have it built into your budget as a monthly amount. Ditto your car licence, your health club membership, and the kids’ soccer fees.

Then there are your property taxes, if you pay them directly. And if you’re self-employed or working on a contract basis, you should also be setting aside the taxes you’re going to have to come up with next April.

You may be able to wear your jeans until the bum is bare, but the kids will outgrow their clothes before they wear them out, so you should have some money budgeted for them on a monthly basis.

Pet care cost are predictable till Poochie gets sick. If you don’t have pet insurance (I’m not convinced of the value of this, but am willing to entertain arguments), then you should have a little set aside monthly in your budget for your inevitable trip to the vet.

People don’t budget for gifts. Whazzup with that? In January, I start setting aside the money for birthdays and Christmas. I love buying presents, but always do so knowing I’ve got the money to cover them sitting in my savings account.

Medical costs. Yes, I know we have universal medical coverage, but not everything is paid for, no matter how “universal” it is. So if you aren’t budgeting for things like glasses, the dentist, cold medicine and pain killers, and all the other stuff you’ll end up buying, you’re bound to run into some “unexpected expenses”.

There are a whole bunch of things in your budget that are going to get more expensive over the next year. Some big signals include the cost of heating, gas and, eventually, food. If you’re not building a buffer into your budget to take these increased costs into account, your budget will fail, yet again. So add a 10% buffer to each category. That should take some of the sting out of future higher costs and keep your budget on an even kilter.

Y’all have been very patient, waiting for the numbers I promised at the beginning of the week. When you worked out what you’ve been spending, were you surprised? Think about how you have been managing your money for a minute. Have you been keeping track? Are you aware of where your hard-earned bucks are going? Do you know exactly how much is going where?

According to The Stats Man, the average household spends $53,160 a year. For y’all who don’t make that much, I don’t want you to just shut down and go away. We already know some people make more - and spend more - than others. This is an average. But we also know that how much we make has very little to do with how much we spend; not since the advent of credit.  So keep reading.

If you’re a member of a family with two grumps and children, you’re spending even more: $72,030. If you’re a lone female parent, you’re spending $42,060. If you’re a couple over the age of 65, you’re spending $40,390. And if you’re a singleton, you’re spending $29,680.

Surprised by the numbers? Hey, I don’t make ‘em up, I just report them. Since these are averages, there are people who will be below these numbers. But there will also be people who are above - which is what “average” means, right?

So what do you think the average family spends on food? On clothes? On shelter? Do you spend more or less on transportation if you’re a renter? Some of the numbers are counter-intuitive - they’re not what you’d expect. Some just make me scratch my head.

BTW, people are always asking me what they should be spending on food and my answer is always the same: I don’t know. I don’t breakout for these categories because they’re so dependent a whole bunch of other considerations including how much you make and what you’re spending in your other categories. The big breakout I use is for LIFE, into which all these things fall. On LIFE, you should be spending no more than 25% of your net income - unless, of course, you have no consumer debt, in which case you can scoop the 15% from debt repayment and add it to your other categories. See, there’s huge benefit to being consumer debt free: You get to spend more money on the stuff you want. 

People are always scratching their heads about where their money goes. I know because they tell me. And because I’ve only worked with one person out of 130 on the show who actually knew what she was spending. Imagine. That 0.76% of people who knew what they were spending. Astounding.

So, do you know what you’re spending every month?  Guess what Statistics Canada says the average Canadian spends a month (based on 2005 numbers).  Go ahead, guess. No, I’m not going to tell you yet. I want you to figure out what you’re spending first, and then I’ll give you the average, and how it differs for couples with children, lone parent female families, and one person families. 

Don’t even know where to start? Grab your last month’s bank statement(s), credit card statement(s), and line of credit statement(s). Now, break every transaction into one of the following categories:

• shelter (mortgage, rent, hydro, heat, taxes, maintenance)
• services (cable, telephone, security, home-cleaning, cell, internet, childcare, health, pets) 
• food (everything you put in your mouth and swallow, including restaurants)
• Shopping (any STUFF you bought for yourself and anyone else — EVERYTHING)
• transportation (car payment, gas, repairs, highway tolls, taxis, bus, train)
• entertainment (movies, books, magazines, hobbies, gym, club, sports)
• bank fees (service charges, ATM fees, NSF fees, DON’T INCLUDE INTEREST)
• interest costs (from everywhere)
• debt repayment (don’t worry about splitting out interest and principal, just add all your debt repayment amounts together)
• savings

Don’t want to be bothered spending the time figuring out where your money is going? Go away then. That’s right. Scram! Keep on digging yourself into a hole. When you’re ready to put some effort into making things right, you’re welcome to come back. I’ll be here, and I’ll be happy to help. 

Of course, once people figure out how much they’re spending, they might find they’re just not making enough. Which brings me to my next point. I got a question this week from a woman who writes:

I would love to hear about people’s second and third jobs. I need to be able to work from home evenings and weekends as much as possible, but I want legit employment! I am not interested in starting my own business (I would need a really good idea; none yet). So I need options! I used some of my holidays for a second part-time and temporary job last year, but that opportunity may not present itself this year. I agree that if you want to spend it, you gotta earn it!

What a fabulous question. I’ve watched lots of people work from home in some pretty unique ways:

• medical or legal or other types of transcription,
• online data entry
• at home fast-food order processing
• sales: think clothing, toy and houseware parties website creation
• freelance writing
• dog-walking
• house-sitting
• meal preparation for shut-ins
• personal shopping
•  on-line board hosting

Since I’m not the keeper of all the good ideas, I’m opening this one up to y’all. Write your best ideas for this chick and let’s see if we can get her some more work!