Gails Blog

There’s the Slow Cook trend, the Raw Food trend, the 100-mile trend. It seems there’s nothing new about trends in food. Organics are a phenomenon. Vegitarianism is on the rise, prompting one character in a hamburger ad to coin the term “Meatatarian.” But it’s the latest trend in food preparation that is most likely to surprise you: Eat At Home. Really. It’s becoming fashionable again to cook and eat at home. Who wudda thunk it?

I’ve been a big proponent of the Eat At Home approach to food. For years now I’ve been urging families to cut back on their take out and eat home-made food. I’ve sent my couples to meal planners. I’ve sent my couples to cooking school. I’ve even sent them to Get-the-meal-ready-ahead Shops like Supperworks, where the prepping has been done for them, so they can ease into the whole home-cooking thang gradually. I’ve urged them to shop with a list, to incorporate themes into their meals to add fun and excitement, and to get the kids involved in the process.

Well, the economy is in the tank and people are eating at home. Could it be that we’re getting wise to how expensive eating out really is?

According to BIGResearch, an Ohio-based firm that does consumer research, about 45% of Americans are eating out less this year to save money. IRI Consulting and Innovation in Chicago reports that sales of “center store” items in supermarkets — stuff like rice, pasta, canned goods, baking supplies and spices – are up. And according to USA Today, Bon Appetit  (not my favorite cooking mag) says newsstand sales in May 2008 were up 39% from a year ago and Amazon.com has seen double-digit growth in book sales in the food, cooking and wine category during this past year.

Okay, so cooking at home is hot. But how do you cope with the work involved in prepping, cooking and cleaning up after a home-cooked meal?

In my house, cooking isn’t a chore, it’s an activity. It’s something we do together. Even if I’m the one stirring the pot, the kids are there chatting their heads off, doing homework, or skylarkin’ with each other, and the whole thing is fun.

And let’s face it folks, if you can read a cookbook, you can make a meal. It’s not rocket science, particularly with the great instructions we now get in recipes. Anyone else remember when measurements were “a pinch” of this and “a dash” of that. Once you get really good, you can start improvising, and then the fun really begins. To this day, I don’t measure. And whenever my kids say, “This is great Mom” I respond with, “Enjoy it!” meaning it isn’t likely to happen just the same way again.

While many people take the job of grocery shopping and turn it into an Olympic event, rushing through the aisles, tapping their feet at the check-out, I consider grocery shopping to be an experience. I take my inspiration for my meals from whatever catches my eye as I browse the aisles. I’ve long been a fan of those centre aisles because there’s so much opportunity there. And I’ve never been afraid to combine cuisines.

So when I saw that The President had a fruity salsa on the shelves, I immediately thought how lovely that would be combined with some jerk seasoning over chicken. Dead easy and ready in no time flat. I’ve subsequently added a little apricot jam to the mix to sweeten it up a bit as a compliment to the fire of the jerk.

Then there was the day I wondered how jerk seasoning would taste mixed in with basil pesto. Hmmm. So I added a tablespoon of jerk to my Classico Basil Pesto, rubbed it on my chicken, and it was fabulous… particularly sliced up and served over a fresh salad of spinach, red peppers, oranges and nuts. Yummy!

Cooking at home doesn’t have to be boring, although many people make it so by sticking to the tried-and-true recipes they’re most comfortable with. My husband would say that when he was a child he always knew what day of the week it was by the meal at dinner.

And just because you don’t like a certain spice because you tasted it once and almost tossed your cookies, doesn’t mean you should write it off completely. My mother-in-law claimed to HATE curry. Hated it in its every iteration. After she came to live with us I – who am a huge fan of curries of all kind — cooked a curry that she not only enjoyed but asked for again. There she sat at 85 shaking her head as she ate because she’d always hated curry and here she was eating it with relish.

I’m teaching my children to cook. Alex is already quite the whiz with dessert – a good place to start kids in the kitchen because it doesn’t matter how crappy the end result, it’s sweet so they’ll eat it. And now she’s learning some savory alternatives that will stand her in good stead when she heads off to university. She’s not the KD Kid, so she better learn to cook or she won’t be happy.

And Malcolm, who is 12 pushing 13, has just begun his lessons. Home made pizza on pitas to start. And salmon (because if you can cook one fish, you can cook ‘em all.)

Okay, it’s your turn. What’s your most creative invention in the kitchen?

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Here comes another beautiful summer weekend and you probably have a place or two to go. So pack up your car and have fun. Speaking of your car, in my experience, car-owners fall into one of two categories:

• there are the people who loooooovee their cars. They name them. They treat them like babies. They’re obsessed with polishing them and adding accessories, and
• there are the people who no nothing ’bout cars. I fall into this category. I think the dirt is fine since it’s probably holding my car together. I don’t sweat the dings and bumps. And the inside of my car always looks like I’ve just come back from a long car-trip with a band of wild children.

Sadly, both these groups of people may be wasting tons of money with their cars. Look through the following list and see if you’re doing anything wrong that you can cut out and save yourself some cash.

1. You pay to have someone wash your car. I can’t believe what a carwash costs. Every time I drive through the gas station that offers a car wash and see what they’re charging I shake my head. If you’ve got a bucket and some soap and water at home, why would you fork over $10 or more to have some machine wash your car. Why not turn it into a family affair, bathing suits and all, and have a car-washing-soap-and-water fight with the kids.

2. You never put air in your tires. Tires that need air use more gas and wear out more quickly. Don’t over-inflate though. That can be dangerous since not enough rubber hits the road to keep you safe.

3.  You buy premium gas.  Rumour has it if you use only the best gas your car will need fewer tune-ups and get better mileage. Yes, if you’re driving a high-performance vehicle, you need super-de-dooper gas. But most of us don’t, so don’t waste your money. According to them that know, the difference between 87 and 93 octane is so small that you won’t get better mileage or see lower maintenance bills.

4. You don’t bother to maintain your car or keep records. According to Natural Resources Canada Office of Energy Efficiency Auto$mart Thinking program, a well-tuned engine alone can improve fuel economy by up to 4% while a poorly maintained vehicle can increase fuel consumption by up to 50%. And if you aren’t keeping records, how will you know when someone’s trying to talk you into something you don’t need?

5. You haven’t raised your deductible on your car insurance. You wouldn’t make an insurance claim for less that $1,000 so why not raise your deductable that high and boost your emergency fund.  Make the call to your insurance company and see just how much you could save.

6. You’re a speed demon. Cars are most economical at about 100 kph. Driving faster uses up more gas.  According to one European study, rapid starts from traffic lights and hard braking consums 39% more fuel. And accelerating and braking is not only hard work on the car, it’s tougher on you as a driver. So relax, which brings me to…

7.  You’ve never turned on your cruise control. I love my cruise. It keeps my pace even, eliminates my sometimes leaden foot and makes my ride that much more comfortable. Just don’t turn it on when it’s pouring since there have been problems with cruise control causing hydroplaning.

8. You “warm up” your car. Really? You let your car sit there burning gas going nowhere. So you don’t think your mileage is crappy enough? According to Transport Canada, if every Canadian motorist reduced idling time by just five minutes a day, carbon dioxide emissions would be reduced by 1.6 million tonnes per year. Whew!

9. You never ask for directions. I know more than a few people who fall into this category. Okay, so if you get lost and end up driving around for an extra ten minutes, you don’t think that affects how much you’re spending on gas? Hmmm.

10.  You refuse to turn on your air conditioner because it wastes gas. Yah, A/C makes extra work for the engine, increasing the amount of gas you burn. But air conditioners are very efficient so around-town driving using the A/C will reduce fuel economy by about a mile a gallon. The highway is a different kettle of fish. Since driving at higher speeds with the windows down greatly increases drag, using your A/C is the more efficient choice.

11.   You don’t plan your trips. You need milk, you jump in the car. Your kid has hockey practice, band practice, skating practice, you jump in the car. You forgot to get the gezunta that goes with the whatchumacalit, you jump in the car. Since trips of less than five kilometres don’t usually allow the engine to reach its optimum operating temperature, particularly in the colder months, you burn more gas.

12. You drive around with your trunk full of crap. For every extra 45 kg (100 lbs) you carry in your vehicle, your fuel efficiency can drop by 1-2%. If you’re not using your roof rack, take it off. Not only is there a weight factor, it affects the aerodynamic efficiency of your vehicle reducing your fuel economy by as much as 5%.

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People often tell me they can’t find the money to save. Some can’t even find the money to get started using the Magic Jars. Hmmm. Let’s start with the second point first.

The money that goes into the jars isn’t “extra” money, so I don’t understand why you’re “looking” for it. It’s the money you always have — always spend — divvied-up so you can stick it in the jars.  If you usually spend $100 a week on food (and your new budget says you can afford to) then you stick $100 a week in your food jar. Ditto transportation, which holds your gas and repair money. Clothing and gifts may have nothing in it, as may the “other” jar. And you should put a little something into entertainment. Okay, that’s out of the way.

So the other thing people can’t find money for is savings. Really? Not even $1 a week? I don’t believe you. I think if you put your mind to it, if you really, really want to save, you can. Here are some tips:

1.  Get started.  I don’t care if you use an envelope, a coffee can or a old jam jar. Pick an amount and stick it in your container every single week. Whether it’s two dollars or ten, the trick is to do it religiously, never count it and don’t spend it. EVER. Under no circumstances. You may have to hide it from everyone else so they aren’t tempted to dip into your stash of cash.

2.  Live on your pre-raise income. If you get a cost-of-living increase or a performance raise pretend you didn’t and save the extra money you’re bringing home each pay.

3.   Like to hit the fast-food outlets or drive-through windows? Keep a container in your car and every time you pick up a coffee, grab a burger or hoe through a muffin, drop a buck in your bag. This will be your Fast Food Tax. Hey, if you can find the money for the coffee, you can find the money to save too!

4. Just paid off a big bill like your car payment or credit card. Assuming you’re out of the hole, add half the bill amount back into your budget and save the other half. You’re already used to living without that money, so save some.

5.  Put away your “savings.” This is one of the things that drives me crazy! People tell me how much they SAVED on sales, using coupons, or just by being a smart shopper and then I say, “So where are those savings?” They look at me with a dazed expression. They laugh and shake their heads. Hey, it’s nothing to laugh about. If you just saved $6 at the grocery store by being a savvy shopper, take that $6 and stick it in your SAVINGS container at home. If you don’t, you’ll just spend it somewhere else and then you won’t have saved a penny.

6. Reward yourself. If you have the discipline to use a credit card the pay off your balance every month, use a card that gives you cash back or a useful reward. My credit card earns me grocery money. And I just cashed in points from another reward program for coupons for the drugstore and a grocery store. That’s over $600 I can stick into my savings.

7.  I know lots of people who use a change jar to save for a holiday. Now, I don’t consider this savings since you’re going to spend the money. But if it’s money you’re not going to carry as a balance on your credit card, I’m all for it. If you don’t have an emergency fund, this is a GREAT way to get one started. And if you super-charge your change jar by dropping in a fiver at the end of every week, you won’t believe how fast that money grows.

8. Swap a bad habit for a good one.  Love candy? Can’t walk by the coffee shop without dropping $3 for a caffeine boost? Smoke, drink pop or booze, or chew gum? Start giving up your bad habit slowly, and reward yourself with a good one as you do. Go from smoking 20 cigs a day to 15, and drop the 20¢ you didn’t send up in smoke into your GOOD HABIT jar. Walk past the coffee shop just once and you can add another $3 to your GOOD HABIT jar.

9. Cut your communications bill. Here is one area where people routinely overspend: telephone, cell phone, cable, internet. Cut your bill by $10 a month and now you have enough to start a savings plan. Cut it by $30 and you’re three-times smarter.

10.  Save your extra pay cheque. Most people set up their budgets to accommodate two or four paychecks a month, depending on their pay schedule. Sometimes you get an extra cheque in the month. Save it.

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.

When was the last time you went through your bills? I don’t mean just paying them. I mean sitting down and reading them to see what you’re spending your money on. I can’t believe the number of people with whom I work who don’t have Clue One where they’re spending their money. Man, we work so hard for it you’d think we’d take better care of it. But we’re lazy. We fall into habits and then never look for ways to break them, even when they’re bleeding us dry.

Buying newspapers is a habit. Sure, you need something to read on the way to work. Borrow a book from the library. Picking up magazines at the check-out counter is another habit. Again, go to the library, or, at the very least, subscribe and save 50%. Better yet, split your subscription with a friend and save 75%.

Okay, so we all have habits, and not reading your bills is one of the worst. People don’t read their check-out bills at the supermarket and spend a lot they don’t even know they’re spending when there’s an error. And they don’t read their bills at home either. They just pay them. Blindly.

When was the last time you looked over your phone bill? Yet you’re prepared to lay out hundreds of dollars a year on your land line. Never mind what you’re spending on your cell phone. Ditto your electrical bills, your gas bills, your credit card statements, your bank statement. I’m willing to bet you dogs to donuts right now that you can’t tell me what you paid in service charges on all your bank accounts last month.

Here’s today’s challenge: Spend one hour going over ALL your bills so you’re completely familiar with where your money is going. That’s right, gather them all up, get yourself a highlighter pen and start familiarizing yourself with where your money’s going. If you find places where you’re surprised at what you’ve been shelling out, it may be time to re-evaluate what you’re getting for what you’re spending.

Keep in mind that if you have auto payments set up, you may have to go online to get the itemized bill to see where you racked up those charges. Don’t wuss-out. Do it.

Are you paying to have movies piped in, but never seem to watch? Axe it.

Are you buying services at a premium? Move to a lower level of service.

Paying for membership at a gym that you haven’t visited in six months? Lose it.

Paid even $1 in banking machine fees? Stop it!

Got a renewal for a magazine subscription you never have time to read? Don’t just automatically renew it out of habit.

Look for all the things you pay for, but seldom use, and as you chop, trim, slice and dice, make a list of the money you’re saving.

Eliminate just $50 worth of monthly spending, and you’ll have $600 to add to your savings this year. Take that $600, invest it in an RRSP at an average return of 5%, and REINVEST your tax refund every year to make your RRSP contribution grow and in:

20 years you’ll have $29,610
25 years you’ll have $37,485
30 years you’ll have $45,360
35 years you’ll have $53,235
40 years you’ll have $95,424

… all from a measly little $50 a month. Can you imagine what you could do with $100?

Can’t find anything to trim? Really? Did you look really hard? Well good for you. It means you’re running a tight ship.

Okay, I’ve done it. A Woman of Independent Means has been updated, edited, uploaded…

and now it’s ready to be purchased. You asked for it, so BUY IT!

 

When I started this website a half-year ago, I promised I’d answer one of your questions every week. I’ve been inundated with questions, and have been responding to two a week. But there are times when I’ve got so many great questions that need to be answered, that I just take a couple of hours and fire-through them. Here’s what I have for you today.

rinkrat_hockeymom wrote:

One of my employers is not taking enough tax from my paycheck. I have been having an extra $50 a pay taken out to cover this since the beginning of the year. I was telling a friend about this, and he suggested it would be more beneficial to take that $50 and put it into an RRSP and I would get thed same result, plus be able to save my own money instead of lending it to the government for a year. Is he correct?

Not quite. While every dollar you put in your RRSP is not taxable, you’d have to put the entire income you’re earning from your second employer into an RRSP to achieve the result your friend is suggesting. I’m all for that… but I don’t think that’s what you’re trying to achieve. So you’re doing the right thing.

If you want to calculate your tax exactly, you can go to Taxtips for a really thorough calculator. If that one makes your head spin, here’s a simpler one that will give you a basic of idea of how much tax you should pay.

 

L from B.C. wrote:

I have just come into to some money — $35,000.00 — and I am wondering what I should do with this money. I currently don’t own my place (renting) and just finished paying off my line of credit ($25,000.00) at the bank as well as my credit card ($25,000.00). I have been working as a cashier for six months at $10.00 an hour. I am looking for a better paying job right now. Can you give me any advice for this $35,000.00. Should I invest this money or maybe put the money into an ING Direct account at 4.5%? I don’t think I am eligible for a mortgage just yet…?

I get a lot of notes like this with people asking for advice on what they should do with a lump of money that’s just fallen into their laps. I like to tell people to:

1. Take care of past mistakes,

2. Have some fun in the present, and

3. Plan for the future.

So, L, on the Take Care of Past Mistakes front, congrats on getting all that debt paid off! Wow! You’re one determined young woman. You’re in a much better place now and you should be very proud of your accomplishment.

On the Plan for the Future front, you’re right when you say you aren’t ready for a mortgage yet, particularly in your neck of the woods.  But you are ready to set up an emergency fund, start an RRSP, even with just a couple of thousand bucks, and begin building your downpayment. As for where to invest the money for your downpayment to grow, you’ll need a financial guide for that. Ask friends/family for a referral to their GREAT financial advisor. Don’t settle for anything less than GREAT!

Using a high-interest account is smart. Making sure you know what you want to accomplish with the money is smart too. So ask yourself what’s important to you and by when you’d like to achieve that goal. Plan from there.

As for my number 2 point: have some fun in the present, don’t go nuts, but take some of your money and treat yourself and someone you love to a Nicey: Dinner out, a fun weekend of movies, a new piece of furniture you’ve been wanting, or a lovely new dress. Or you could decide to set up a Mad Money Account, putting $500 or $600 aside that you can spend on anything you want whenever you want, just for the hell of it.  Have a ball.

 

On a similar theme, K wrote:

I have an inheritance if 60,000 and wondered if I should double up on my mortgage payments each week (that is the maximum allowed) or wait put the money in a high interest account until the mortgage is up for renewal this December 2008 to bay off a chunk of the 120,000 principle?

The faster you put the money to work against the mortgage, the more you’ll save in interest. And any interest you earn is taxable, but the interest you save is not. So double-up and then use whatever is left to make the principal pre-payment at the end.

 

Carman wrote:

What is your opinion for a person to use RRSP savings to pay down debt? We have enough RRSP savings to pay off our debt (excluding Mortgage). Thanks for all you teach on your show, I think everyone could learn something.

I’ve answered this one before, but I’m going to answer it one last time since I get this question every week. Really.

The answer is: DON’T DO IT! I know there are some people who say this is a good idea, but it’s a terrible idea. A really terrible idea. First, there’s the tax you’ll end up paying on the withdrawal from the RRSP, and then there’s the tax you’ll owe because the amount withheld won’t have been enough.

If you’re determined to get rid of your debt, then you’re going to have to bite the bullet, tighten your belt and put your shoulder to the grindstone. If that’s not enough metaphors for you, I have plenty more!

 

T wrote:

hi gail i watch your show all the time and i was just wondering i am 17 and still going to school and planning to go to university soon i am extremely good with money and saving and i have about 7000.00 in my bank account right now. would u recommand when i turn 18 to get a credit card and always pay it off in order to get my credit rating started. i would never spend more than what i have or even come close to spending all i got so i dont think it wud be a problem but just asking for ur advice.

T, if you swear on your Mom’s head that you’ll never spend more money than you have, then I say getting a credit card to build a credit history is a good idea. I’ve seen a lot of kids (and elders) start out with the best intentions and then fall into the carrying-a-balance trap. But if you promise not to be one of the dopes, then I’d say go for the card, Bud, and build yourself a fabulous financial history.

 

Sarah wrote:

My husband and I love your show - yes I said both of us - you’ve got us talking about our finances - YAY! Our question is in regards to student loan debt. I’m in the process of finishing my PhD and my husband and I each have 3 degrees. Our combined students debt is $62,000 (not bad considering) and we have a new mortgage of $120,000. So many of our friends have just followed the plan offered by the bank/government - but 12 years to pay it off??  We gross $76K a year but we’re going to be starting a family soon and our plan right now was to add $200/month as a prepayment to our mortgage. What do you suggest - balance pre-payments and extra student loan payments? Should we make one a priority over the other (student loan interest is prime +1, mortgage 6.3 locked for 10 years)?  We would really appreciate your advice - the bank always says “follow the plan, then you have more disposable income” - yes and they make more money in interest! love your show and your kick-butt attitude.

Ah, yes, there are those Pesky Bankers again, telling you to keep more disposable income so they can rake in more interest. Hmmm. Is it any wonder Canadian’s don’t trust their advisors?

Sarah, leave your mortgage payments as they are, and use all your extra money to pay off your student loans, which is your more expensive debt. Once that is paid off, you can balance mortgage prepayment with long-term saving. As for starting a fam soon, have a great time with that. And while you’re preggers, live on the one income you’ll have during your mat leave so that you

a) get used to having a smaller income, and

b) have a nice pool of savings set aside for when baby gets here.

 

Kerry wrote:

I am a 21 year old full time worker. I graduated with a 2-year diploma in Bus Adm (major accounting) and have taking Intro to Financial Planning as well. After graduating from college with WAY MORE DEBT than I ever imagined from 2 years of school, I have got myself back on track by my own means and would like to offer a credit/debt counseling service outside of my full time job (which I love). I want to educate people before they make the same mistakes I did, and/or repair the mistakes already made. Only problem I have found in my plan is, how do you charge a fee when your clients are already living paycheque to paycheque? PS your show and outstanding way of making the obvious PAINFULLY obvious has changed my life and influenced my (hopefully!) future career path immensely!

Hey, Kerry, that’s a darned good question. Some people who work in debt management affiliate themselves with a company that will allow them to do debt-counseling. Credit counselors, for example, are often not-for-profit organizations that help clients consolidate their debt and set-up repayment plans. And I do know of at least one private company that builds their fee into the “consolidation” loan. You might want to look at that as an option.

So, all you debtors out there, what would you be willing to pay to have someone dig you out of a hole, and how would you come up with the moolah?

 

Mercedes wrote:

I am a 24 year old university student living on my own and paying all of my bills yet have still managed to save about 15000.00 in the past 2 years. I have no debts and am wondering what to do with this money to make it grow for the future. I feel as though it’s just sitting there. How much should I set aside for a rainy day/emergency fund? Thanks!

Okay, all you student debtors who tell me you can’t possibly save any money while going to school, heads up to this.

Mercedes, you are a shining light. Congrats!

As to what to do with the money, set side at least $5,000 in a high interest account for emergencies. Ultimately, you want to have 3-6 months’ worth of living expenses covered. As for the rest, it’s time to learn to invest. Read about investing. Choose a couple you think might work for you and watch them for a while to develop a comfort level. When you think you’re ready, take the plunge. Don’t be too aggressive too quickly. And never invest in anything you can pronounce or don’t understand.

 

Carrie wrote:

I am currently on mat leave with 2nd baby. We figured out if I return to work I will be contributing 2/3 of my take home pay to working expenses and only contributing 1/3 of my take home pay to the household. Does this make it worthwhile for me to return to work? Or is the smart thing to try to find a part time job to make up the money we are short? Or, with only about 6 years left on our mortgage, should we reduce our mortgage payments in order to live, until I can return full time in about 5 years?

You seem like a clear-thinking girl. You’ve certainly outlined your options well. Here are my answers

Does this make it worthwhile for me to return to work? Yes, if you need the 1/3 to make ends meet.

Or is the smart thing to try to find a part time job to make up the money we are short? Really? This is a question? Work less to make the same? Where’s the question?

Or, with only about 6 years left on our mortgage, should we reduce our mortgage payments in order to live, until I can return full time in about 5 years? This, too, is an option, if you’re prepared for the extra interest cost over the life of the mortgage. You don’t say how old you are, but how old could you be with a second baby just here? So you have lots of time to get this mortgage paid off.

Now, the question is, what do YOU think you should do?

 

S wrote:

I work part time as a nurse, so I actually bring home more money per hour with my liue of benefits. Is it better for me to work full time and “bring home” less money, but have job security, sick time and vacation? I am 41 married with two school age children. Thanks and I love your show-your sense of humour really makes it!

It’s hard to answer this question when I don’t know how much less you’d be bringing home, or how that would impact your cash flow. Assuming you don’t NEED the extra for essentials, then the security of full-time with benefits would be a huge blessing, particularly with young kids. However, if the extra money you’re bringing in is essential to your budget, then maybe not. What do you think?

 

Erin wrote

On your show, you give your clients an “office in a box” with all kinds of file folders and coloured tabs. I tried making my own and it doesn’t look as nearly detailed or full as yours. What categories do you have in your box?

Go read 12 Steps to Getting Financially Organized and the blog Paper Chase.

 

For Lynn who wrote:

How long should you keep your paperwork, such as bill statements, payments and income tax forms

Ditto

 

A wrote:

If I have a defined benefit pension plan with my employer, do I really need to contribute to an RRSP? Also, how do I figure out my “tax bracket” as I am planning to withdraw $10,000 from my RRSP to pay down debt - if the withholding tax is 30% then how do I estimate the additional tax I will pay next April - my gross income is about $60,000…

A, you likely don’t need an RRSP if you have a defined benefit plan. I’d be very surprised if you have much contribution room at all. If you do, then I would use it up, but not break your neck to do so. As for writhdrawing money from your RRSP to pay off debt: DON’T DO IT!

 

Tammy wrote:

I have 2 children: a son who is 20 and has finished 3 years of university and a daughter 19 who has finished 1 year of college. We have paid for the tuition and book for the 3 years for my son and paid the 1st year of college for my daughter and have enough to pay for her 2nd year, her course is 2 years long. I do not want my kids to finish school and owe money but my husband and I find that most of our money goes to the kids and there is none left over for us. We have been putting a lot of things for them on our line of credit and it just keeps going up, I know I need to stop but I don’t want to see them acquire any debt but I just feel that my husband and I are sinking further and further into debt and we have been arguing over the money spend on the kids. If you any suggestions on how we can work this out I would really appreciate it.

It’s nice that you don’t want your kids to graduate with debt, but you’re accumulating debt and that’s no good either. I hope your kids are contributing to their own education. If they are not, that’s the first place to start. There is no such thing as a free ride in life, and 19 and 20 are plenty old enough to start dealing with life’s realities. Help your kids. That’ great. Don’t do yourself damage in the process. That’s dumb!

 

Victoria wrote:

Hello. Congratulations with the show. I have been watching it daily for some time now. I have put my husband on a $200 a month budget. This money includes his gas and extra spending. We have been using the jars for three weeks now. So far so good. I am currently on maternity leave and working one day a week that I am allowed. I am making $430 every two weeks. I am trying to save this for our vacation at Christmas. Do you think it would be better to put this money onto the line of credit and then take it back out when we need it? Also, we just did a balance transfer on our one credit card. We have an interest rate of 1.9% until November. Should we penny pinch and put every last cent on it so it is paid off by then? Thanks so much and keep up the great work.

First the credit card question: Absolutely pinch every penny so the card is paid off before your great rate expires in November.

Now the line of credit question: Yes you should put it to the line first, and then take it back off when you need to, to minimize your interest costs. But I don’t think a fam on mat leave with a balance outstanding on their line of credit should be prioritizing a holiday over debt repayment. Once you return to work full time, I can see saving the money for a holiday. But while you’re living on a reduced income, and have debt, your focus should be on getting out of the red.

Are you sorry you asked?

 

M wrote:

My husband says that it’s not smart to start a RRSP because I owe $50,000 in student loans, which I am paying the minimum right now. I work part time as a RN and I have 2 kids. I’m 38 years old and I feel that I have to get started. What should I do?

You should get started, you’re right. But your husband is right too. Since you’re only working part time, your marginal tax rate isn’t high, and paying only the minimum on a $50K student loan is stupid. You’ll pay way too much in interest. So:

1. Up your student loan repayment amount to an amount that’ll have you debt free in five years or less, and

2. Start contributing $200 a month to an RRSP.

If you don’t have enough to do both, you’re going to have to find a way to make more money.

 

S wrote:

I would like to know if there is a way to save money on a disability pension.

I’m surprised by how often I get this (or a similar) question. There are a lot of people out there trying to make do on disability income, which should be a heads-up for all the people who don’t yet have disability insurance. As for this question, the answer is quite simple: If you have extra money after all your basic needs are met, you can save some. If you don’t, you can’t.

I’m sorry that there seem to be so many people living a marginal life on less income than they need. It’s a tough haul and you have my admiration for making a go of it.

 

Another M wrote:

My wife and I are a one-income family and even with a very tight budget our expenses are always more than our costs every month. I have mentioned taking some of the equity from our home (either re-mortgaging or a straight loan) to ease some of the expenses until my wife gets back to work. So, I was wondering, is it ever a good idea to take a home equity loan?

You don’t say why your wife is off work, or how long it may be until she’s fully employed again, and that affects the answer. If this is a short-term thing, then I’d say do the refinance and un-strap your budget. If it’s a long-term thing, you may have to sell your home to make it through. Good luck.

 

Karen wrote:

My relationship with my boyfriend of 8 years is strained to say the least because of this debt and not knowing how to budget. We have thought of calling it quits. I think the icing on the cake was when I was offered a job but would have to take a 14k cut in pay for 2 years from what I am making now, but then would make over 100k a year after that. I had to turn it down because each month I am going further and further into debt AND with a 14k a year cut in that!??! How would I make ends meet? Help! Please point me in the right direction.

I don’t often say this, but are you sure you’re in the right relationship? After all, is this the way you want to spend the rest of your life: giving up your hopes and dreams because your partner can’t get outside himself long enough to stop going into debt for crap? If you’re determined to stay in the relationship, then I’d separate the money - yes, you heard me say “separate the money” - and make the Boy Man responsible for himself. If he can’t do it, then either reconcile yourself to a life of misery with him, or get the hell out!

 

RC wrote:

What is the best way to invest money that I am intending to use toward the purchase of a home/condo, in one years’ time. I would be a first time buyer.

Since your time horizon is very short, you need to stick with something that has no volatility at all. Go with a term deposit, GIC, high-interest savings account… wherever you can get the best rate for one year.

 

Carol wrote:

I am 55 years old and will retire at age 64 with a good Omers Hydro pension. I was a single mother raising 3 children for most of their lives, so savings and retirement planning were not a priority. However, as my children are now grown I have more disposable income. Is it too late to start RSP’s or should I concentrate on paying off my mortgage?

Since you’re over 50 and have a good pension, I’d focus on paying off that mortgage so you’re retiring mortgage free. If you still have money left over, you can take me out for dinner.

 

Cynthia wrote:

I watch your show all the time and I noticed that you always talk in terms of household income and don’t discuss the differences in the amount each person makes. My boyfriend and I recently purchased a home, but we still have totally seperate finances, we live like roommates, simply splitting the common expenses in half and then we each pay our own credit cards etc. I would like us to be a more equal partnership, but he still thinks in terms of “your money” and “my money.” Is there a proper way to start combining finances?

Girl, you and your honey need to get on the same page. Go and read To Consolidate or Not to Consolidate and So You’re Getting Married even if you’re not.

 

Brett wrote:

My wife and I have recently realized that our parents are in rough financial shape, planning on relying solely on a single pension in retirement (no RRSPS). How can we approach them to talk about it and get them doing something about it? We feel as if we will be burdened by our parents within the next 15 years, and need help to get this situation under control!

Sorry Brett, it might already be too late if they have not been planning and are pretty close to retirement, with not enough money. Do they have assets they can liquidate to provide an income? Can they move to a less expensive community to cut costs? In terms of just approaching them about the issue, read Aging Parents: Talking about the Money. 

 

Okay, that’s it. My brain is mush and my fingers are cold from the breeze created as they’re flying across the keyboard! Ha! 

 

BTW: I’m planning to put up a series of articles on home buying. Are there any special topics y’all want me to cover? Speak now.

I received two questions this week on very different topics that dovetail quite nicely. The first was from a young investor who wanted to know what types of safe investments were available that could return a rate greater than the 3% or so available on a GIC to grow retirement assets at a decent pace. The second came from someone who said:

You said to a couple in one of your shows if they save 500$ a month they will have 700,000$ for their retirement. The couple was around 30. How is this possible? My banker told me it’s not. It doesn’t matter what you do.

 

Ah, yes. Another case of The Banker! Hmmm.

I’m going to answer question number 2 first.

You can most certainly have $700,000 in assets if you start investing in your retirement plan early enough, earn an average return of 7%, and (this is important) reinvest your tax benefit.

A $500/month RRSP contribution adds up to $6,000 a year, resulting in a refund of about $1,800 (at a marginal tax rate of 30%) which then increases your contribution to $7,800. Iin each subsequent year, your refund is slightly larger, pushing up your overall contribution.

I do use an average rate of return of 7% for these calculations, which you should be able to achieve over the long term, with a balanced investment portfolio.

How, when GIC rates are at a pathetic 3%, barely beating inflation? Well, a GIC would be considered a very conservative investment. Remember the investment pyramid? (If you didn’t read these articles, go find them in the retirement section.)

As you move up the investment pyramid, you’re taking more risk, but earning a higher rate of return.

Which brings me to the first question. If you want to earn more than you can get on a GIC, you must look beyond a GIC, and it’s safety, to do so. And even if you decide to stick with a GIC, you’ve got to be more selective about WHERE you buy your GIC. While The Banker may only be offering 3%, there are alternatives today offering as much as 4.7% for the same level of security.

However, the rate of return is only one aspect. The other is how long the money will have to grow. Start investing in your 20s or early 30s and even with a fairly low rate of return, you’ll have a very handsome amount when you’re ready to retire because your return will have had time to compound — earn a return on your return. And — like the idea of using your tax-refund to boost your RRSP contribution each year –this painless growth of your assets can mean BIG BUCKS over the very long term.

Ready to try something new? You need to learn about various alternative investment options - things like bonds, preferred shares, and balanced mutual funds.

I will tell you that using 7% as a rate of return over 35 years (some years will be higher, some lower, this would be the average), $500 invested a month, with tax refunds reinvested, would grow to:

• $107,000 in 10 years
• $204,000 in 15 years
• $338,000 in 20 years
• $528,000 in 25 years
• $793,000 in 30 years

So, yes, it can be done.

One of the challenges I give my fams is to find a way to swap bad habits for good ones. It’s a great challenge because it makes people both think and act. And since they’re usually fighting internal demons on the bad-habit-front, they’re grateful when I make ‘em stop.

Sometimes, in anticipation of my arrival, people will change what they’ve been doing before I even get there. There’s the guy who watched me flush Dan’s cigarette’s down the toilette, who gives up smoking before I even get there. And there’s the chick who having watched me toss Bev’s credit cards behind the fridge, decides to stop carrying her credit card so she won’t be tempted.

One of the best ways to get rid of bad habits is to replace them with good ones. It works because if you just take away something, you feel a loss. And the loss is all you can think about. But if you substitute something else for what you’re eliminating, then there’s no LOSS, just CHANGE.

If your socializing is costing a ton of money because you meet in bars, over dinner in restaurants, or at expensive outings, you can substitute a less-expensive, equally as satisfying social encounter. Instead of meeting in the pub on Friday night, have a Friday-night-game-night. Each week you decide what your next week’s location, game and food theme will be, and then you all chip in. If it’s taco night, someone brings the cheese, someone else the vegis, someone else the salsa and shells. That’s no more expensive (except for the gas) than having dinner at home.

Okay, here’s the kicker when it comes to replacing bad habits with good ones: Figure out what you’re saving a week by eliminating your bad habit.

Let’s say you’ve decided to eliminate coffee on the road by substituting home-made coffee and you’re saving $20 a week.

You take that $20 and multiply it by 52 to get how much you’d save in a year.

Then you go to an online savings calculator plug in your annual savings, a reasonable interest rate (say 6%), and the number of years until you retire.

If you’re saving $20 a week and you’re 30 years old, eliminating that one bad habit will mean $84,000 in your pocket. Yup, $84,000! That some pretty expensive coffee.

Now, I know money isn’t a motivator - Yeah, yeah, I read Abraham Maslow too - but often people aren’t aware of the long-term financial cost of sticking with a bad habit, and this exercise puts a positive spin on it.

You can’t say you don’t have the money to save if you smoke, drink booze, buy lottery tickets, have more than four pair of shoes, eat cookies, never drive car that more than four years old, pay more than $20 a month for bank charges or carry a balance on your credit cards. Since you have the money to waste on bad habits, you’re just making excusing for not saving.

What you need is a good habit. Then saving will become a snap.

So, how much are you planning to save this year?

I was intrigued to read in USA Today that baby boomers are losing confidence in retirement savings. While 20% of those surveyed felt they were “equally confident”, a whopping 56% are “less confident.” With the financial marketplace in a constant swirl, it’s no wonder really.

Are interest rates going up or down? Can you trust investments that have been previously touted as “secure” when 32  BILLION DOLLARS in asset-backed commercial paper are frozen?  And remember when they said gold would never see $800 again? Ha! Never say “never.”

The uncertainty about what we can trust has sent sales of money market funds through the roof. While Canadians continue to pour gobs of money — $2.6 billion in net sales per month - into the mutual fund sector, according to the Globe and Mail, in March ALL of it went into money market funds, which now hold over $66 billion of our hard-earned dollars. People are parking their money in the hope that some clear signal will come from above telling us its safe to invest our money again.

There are a lot of people who are saving (or planning to save) for retirement, but just don’t have a clue where they should be putting their money. I keep saying, “Get a handy-dandy advisor; I have one.” But I’m beginning to think the questions I’m getting are even more fundamental than “where.” So I’m going to do a series of articles for you on how to save to retirement.

The decision on where to invest is at once complicated and simple.

“How much do you want to have saved when you retire?”  seems like a simple enough question, right? But if it were, then there wouldn’t be this constant chatter about how much you’ll need, and the fact that a million bucks won’t cut it in the future. And there wouldn’t be this quiet sense of desperation on the part of people who believe they are doomed, so they might as well just stick their heads in the sand and pray nothing creeps up behind them and bites them on the butt.

“How greedy are you?”  would be another of those simple questions that has a ton of implications. If you’re content to hold an investment paying you a 2% return, and can stand the scorn of all your friends and relatives at your niativité, your lack of ambition, or your sheer stupidity, then you’d been pretty low on the Greedy Scale. If you’re insisting on an investment that will turn your $1,000 into the Magic Million in ten-seconds-flat, then you’d be right up there with Gordon Gecko.

“How committed are you?”  is a simple question, that has a wide range of answers from  not at all committed, to somewhat committed, committed, very committed, and passionately committed. Do you know what you are?

“How much time do you have?”  How long you’re planning to invest has a big impact on the investment alternative you might choose. Pick the wrong time-line and you could find yourself a little sad when cash-out time comes.

Along the way, you’ll have to learn what an RRSP  is, the various types of investments available to you and where they fit on the Investment Pyramid, and how to diversify your portfolio to create the Asset Mix  that’s right for you.

 

These articles cover the basics of what you have to think about as you plan for the future. Whether you’re investing for the long-term for your retirement, or for the medium-term to send your kids to university, or for the short-term  to buy a home, the fundamental issues remain the same:

• know how much you’ll need,
• know how long you have,
• know how brave or chicken you are,
• know what you know - and DON’T know, and
• mix it up a bit.

 

With a little determination, you CAN have what you want.