Manitoba summers are notoriously short, so it’s understandable that we celebrate our respite from frigid temperatures with zeal. Unfortunately, for those of us on a tight budget, seasonal celebrations can prove to be a strain on the budget, especially because we tend to throw caution to the winds once the sunny weather comes. Here are some strategies to limit the pressure your budget:
Resist the Temptation to Pay for it All
Chances are your friends will understand your need for budgetary restraint. Most of them probably feel the same way. There’s no need for you to take on a huge expense in the name of entertainment for your friends. If they don’t understand you need for restraint, then perhaps they aren’t really your friends. Ask them to share the cost by bringing their own alcoholic beverages if they choose to drink, and consider asking them to bring a dish to accompany your barbecue as a potluck. It’s a good idea to co-ordinate the things guests bring so you won’t have too many macaroni salads!
Spend Your Money in the Right Places If you’re going to splurge, do it in a way that people will notice. Shrimp skewers for appetizers, or a really nice cheese plate become a focal point of your party. Don’t spread your money too far.
As for barbecue, there’s really no need to grill expensive cuts of meat. Hotdogs and hamburgers are traditional summer fare, and they’re reasonably economical. Consider making your own burgers rather than buying pre-made patties. It’s cheaper, and nearly always better.
Make Do With What You Have
Resist the urge to make big purchases in the name of entertainment. Summers here are short – don’t spend a lot of money on expensive outdoor furniture you can’t use most of the year. There’s no shame in asking your guests to bring their own lawn chairs to your party, and your buffet table doesn’t need to be a new shiny glass-top from the big box store – your old one, or even a door on a couple of sawhorses will look just as good with a table cloth on it.
Plan Ahead
Make sure you have enough propane or charcoal for the barbecue, and that there’s no need to purchase condiments or anything else from the convenience store at exorbitant prices.
Above all, remember that summer entertaining is about the people, not the party. There’s no need to expose yourself to financial risk in the name of entertainment. Go ahead and have fun, but exercise restraint.
Creditaid Offers credit counselling and debt management solutions for individuals in Winnipeg and across Manitoba, including areas such as Portage la Prairie, Brandon, Winkler, The Pas, Flin Flon, Thompson, and many others.
Republished from the Winnipeg Free Press print edition June 6, 2015 B13
Hoyt and Summer knew home ownership wouldn’t be easy. After all, the former Money Makeover participants were told as much by a financial counsellor their first time around.
Phil Hossack / Winnipeg Free Press
In 2012, they graduated from university and were interested in jumping into the condominium market. Both having landed full-time jobs with good pensions, they believed home ownership would help them get ahead.
“We had been renting about five years,” said Hoyt, a civil servant in his early 30s. “We had a lot of debt, so we thought we could buy a condo, live there a few years, and after selling it, we could hopefully find some way to alleviate the debt we had.”
“Boy, were we wrong,” said Summer, an administrative worker in her late 20s.
At the time, the couple had about $21,000 in debt, largely the result of earning university degrees.
They did have some savings — about $17,000, including $11,000 from their parents for a down payment. Moreover, they had steady income, earning a combined $75,000 before taxes a year. Eventually, they purchased a renovated two-bedroom condo for about $187,000.
It didn’t take long before they realized it was more than they could handle.
“The debt just kept ballooning because we couldn’t keep up with the mortgage payments, the condo fees and everything else that comes along with it,” Hoyt said.
The expenses that hurt the most were large, unanticipated repairs: a sewer backup, burst water pipes and a leaky roof — to name a few. Soon their reserve fund was empty and they were paying out of pocket.
“We had rose-coloured glasses on and seeing what friends were doing with their lives, we thought ‘this is something we should be doing, too’ not realizing we were not financially in a place to do it,” Summer said.
So late last year, they sold at a $20,000 loss and were relieved to be renting again. Now Summer and Hoyt owe about $42,000, including a $6,000 no-interest loan from their parents, and they have almost no savings.
Still, they have hope.
They earn more than before: more than $90,000 combined a year. And they are determined to get out of debt as soon as possible, particularly since they want to return to school so they can upgrade their career options and earn more money so they can become homeowners again.
“We are really a cautionary tale for others like us thinking of doing the same thing,” she said.
He said many first-time buyers find themselves in financial trouble because — like Summer and Hoyt — they underestimate or even overlook the costs of ownership, particularly with respect to condominiums.
“The repairs and the (loss of the) reserve fund frightened them so understandably they decided to cut their losses.”
Now, Hoyt and Summer must become debt-free to move forward. Yet while they have been trying to track expenses and make regular debt payments far above the minimum requirements, Denysuik said they will have to bear down on the budgeting process to make meaningful progress.
“I asked them if they are working from a spending plan and tracking their expenses and the answer was ‘we have a hard time keeping up after a week or so.’ ”
But if they were tracking costs, they would realize they have more free cash flow than they think.
“Three years ago, they had a combined gross income of $75,000, but today they have a combined gross income of $94,446, an increase of 26 per cent,” he said, adding their take-home pay has increased to $4,640 from $4,088 a month.
While their debt has doubled, they do have the cash flow to pay it down faster than their current pace.
In 2012, their discretionary spending was $850 a month when they were advised to cut costs if they decided to buy a home.
Today, they’re spending more than $950 a month on entertainment, coffee, clothing and dining out even though they are focused more on debt reduction than they were before.
“At this point, even if they earned an extra $20,000 a year without changing their habits, they will just keep spending more.”
The upside here is they make enough money to become debt-free in less than five years without taking more drastic measures such as a consumer proposal or bankruptcy. But they must become dedicated budgeters to make it happen.
Hoyt and Summer have to closely track their expenses to understand their true cost of living. This is the only way to find where they can cut spending to increase cash available for debt payments while building up emergency savings so they’re not forced to go back into debt when things go sideways.
Already, they’ve done some good work, paying more than $1,000 a month on debt while saving $165 a month for emergencies. Still, they could do better because about $466 a month of income is unaccounted for in the budget.
Moreover, they could increase the effectiveness of their efforts using the ‘avalanche method’ of debt repayment — something Summer is already doing. This involves paying the minimum amount on the lowest interest debts while making the largest payments against the highest interest debts.
“In this respect, Hoyt should look at reducing his line-of-credit payments — at seven per cent — from $300 a month to $100 and increase payments on his credit card payment — at 20 per cent — to $400 a month from $200,” Denysuik said.
“This way they can have their unsecured debt paid off in 40 months with another five months to repay parents.”
Yet with a few more tweaks, they could be out of debt even faster.
“If they reduced their discretionary spending by $400 a month, increasing emergency savings from $160 to $200 and pushing $300 more to debt repayment, they can be out of debt in 30 months,” he said.
Another benefit of this strategy is their cash flow would increase to more than $500 a month from $466 a month simply because their money is being managed more efficiently. This extra cash could be used to save for a home, tuition or pay debt faster.
“All of this is dependent on monthly tracking of expenses and making adjustments,” he said.”That means keeping all receipts and once a month sitting down together and sorting the bills and adding up each category.”
And it need not be a grim task either, he said.
“Make it a date night at home where you cook supper, have a little wine and summarize the tracking and compare it to plan.”
— — — Summer and Hoyt’s finances:
INCOME:
Summer: $49,500 ($2,340 net a month)
Hoyt: $43,900 ($2,300 net a month)
MONTHLY EXPENSES: $4,173 DEBTS:
Summer line of credit: $15,000 at 3.5 per cent
Hoyt line of credit: $10,500 at 7 per cent
Summer credit card: $7,070 at 19.99 per cent
Hoyt credit card: $4,300 at 19.99 per cent
Loan from parents: $6,000 ASSETS:
Summer TFSA: $90
Hoyt RRSP: $1,300
Savings: $800 NET WORTH: – 40,680
The Smart Biz March 2015 edition is out, and in it, Brian Denysuik talks about the importance of teaching our children the basics of money.
How often is actual money, as in cash, used in your daily life? This is what children see every day; the concept of money has been reduced to plastic cards that seemingly act as a “get out of the store free” pass in the eyes of a child who may have never seen anything beyond Monopoly money.
To read more about how to open the discussion with your children and starting their financial education sooner rather than later, check out the full article on page 13 of the March Smart Biz.
If you need to expand upon your own financial knowledge, or just need somebody to talk to about your finances and debt load, contact the caring folks at Creditaid for your free, no obligation assessment.
You need only to look at the recent demise of the penny, or see the “wave your card here” payment option at the supermarket to know that the way that we think of and use money is changing.
In ancient times, humans would barter objects or labour directly. A farmer might give his neighbour two chickens in exchange for a bag of flour, or might help build a fence and be rewarded with a sack of carrots.
At its core level, money is a substitute for human labour or resources, traded to someone in exchange for “payment”. This payment can then be used to obtain the things you need or want from a third party, not related to the first.
In the past we used gold and other precious metals to represent the value of our labour and goods, but switched to a system of currency consisting of minted coins and printed paper. In the 20th century, cheques and bank drafts simplified purchasing, and in the 1950s, credit cards were invented, to allow us to access money we hadn’t yet earned, in exchange for a “borrowing fee”.
Today, money exists in a number of forms. We still have “hard currency”, or cash, but its use is on the decline. The digital revolution has brought us more options. As more and more purchases are being made at a distance, instant transfer of money via credit cards and money transfer services have become part of the landscape.
At the end of the day, no matter how you spend your money, simple rules of budgeting must apply to keep your finances in balance. With so many ways to spend money that don’t involve any kind of currency, it’s easy to forget to budget. This is one of the ways that people wind up in financial trouble.
If you find your credit card and loan payments are making it hard to budget your money, contact Creditaid for a confidential assessment of your financial situation. We have tools that can help!
Your relationship is going well, and you take the big step to move in together. However, reality soon comes crashing down. Before you know it, the honeymoon is over, and you’re disagreeing about every little aspect of your lives together.
One of the biggest sticking points for couples is finances. You may find that you each hold completely different views about the importance of budgeting, or when you do budget, you disagree on what is or is not a priority. These are the times that will try your relationship, but the good news is, you can get through it and reach an accord.
First of all, there is no way around it – you need to be honest with each other. Discuss all your assets and debts, so there are no unpleasant surprises. You then need to decide whether to share financial responsibilities and to what degree. One person may be bringing a lot more debt to the relationship, which is why it is important to have this conversation early in the relationship.
Make sure to discuss your individual credit history, too. Your ability to borrow as a couple will be greatly impacted by your past spending. Don’t panic if your partner has taken out a lot of credit in the past; this is your opportunity as a couple to explore options for getting to a place of financial stability. Talk about setting a budget and goals for clearing debt, and decide on a ratio of responsibility for that debt.
While it is important that both of you contribute financially to your budget and the paying off of debts, you should also play to your strengths. The person who is better at managing monthly bills should take care of that side of your finances; however, it is important that both people in the relationship share the overall responsibility of maintaining the budget.
Compromise and communication are key to a strong financial relationship so make sure you discuss and come to an agreement on where your money is going and when. A relationship takes work, but by having this honest conversation early on and staying on track with budgeting and spending, you may find that your relationship is stronger for it.
Do you wish you had access to a vehicle anytime you wanted but didn’t have to pay the monthly loan payment, insurance payment, gas and repairs? Imagine being able to drive a car anytime you needed one but also saving thousands a year on car costs? Peg City Car Co-op is here for you. This organization has 9 cars located in and around the downtown area waiting for you to pick and use anytime you need one. You pay a low hourly (plus kilometer) rate with no further charges- not even gas! They have 2 programs available for you to choose from depending on your expected car usage. One of these programs is accessible without a credit card. It’s perfect for anyone in a credit counseling program or someone without access to credit.
November is Financial Literacy Month in Canada! If you haven’t heard of this campaign before, it is a national initiative aimed at helping Canadians increase their financial knowledge. This is something we firmly believe in, here at Creditaid. We believe that when people are better educated on how the credit system works, they will be able to make better and more informed decisions when it comes to their personal finances.
If you are interested in participating in Financial Literacy Month – start by picking up or downloading a copy of the 2014 “Money Matters” calendar! The calendar will feature information and valuable money-saving resources for young people, families and individuals nearing retirement, including tips on managing debt, reducing the cost and length of a mortgage, talking to children about money and recognizing personal investment scams.
To download your copy – visit the Manitoba Securities Commission online at msc.gov.mb.ca.
We can all relate to how frustrating it can be to start a new year with last year’s Christmas bills. With Christmas being only a few more weeks away, we can be prepared for shopping season by planning ahead and creating a budget to work off of.
Here are a few tips to help you stay within your budget this Christmas:
Create a Budget – if you shop without a list, it is easy to overspend or give in to impulse shopping. Download our Holiday Gift Giving Planner that can help you get organized.
Comparison Shop – starting Christmas shopping early also means you have more time to shop around and check prices at different stores. Many online stores offer discounted prices or one day only sales.
DIY Gifts- there are many gifts that you can make to give as gifts that won’t break your budget. You can tailor the gifts to the person you’re making it for – all the more thoughtful!
Careful planning can help you debt free – you just need to invest some time now to get organized.
Whatever your financial life goals are, it often takes discipline, planning and a lot of hard work to achieve them. You need to know where your hard-earned money is going before you can make the necessary changes to your spending habits. Here are 6 steps to follow to help you get on track.
The beginning of a new year is a time to start fresh, make some changes and set some goals. Now is as good a time as any to evaluate your income, expenses and overall financial health and set some goals.
Here are a few things to look at when it comes to setting financial goals:
Retirement: Depending on your age, retirement can seem like a lifetime away, or it can be right around the corner. No matter your age, now is the time to look at what is available for retirement income, and if it is deemed to be not enough, now is the time to start saving towards that goal. Insurance: get out your policies, health, life, auto, property, etc. Talk to your agent to see if you are appropriately covered.
Debt Reduction:Consolidate current debt and don’t create more- that means cutting up the credit cards and gaining control of spending.
Savings: Besides controlling spending, you’ll want to amass some savings; typically the interest rate on investments is considerably lower than the interest rate on your line of debt so by saving rather than paying down debt, you’re actually losing money. That’s where you need to strike a balance: you need to invest some, but at the same time reduce the debt.
Additional Income:Think about the possibility of getting a second part time job. If you’re living comfortably on your current income, the income from a second job can go directly on debt or mortgage or into retirement or another fund for education or a trip or an emergency.
Once you set your financial goals, it’s good to revisit them every few months. Six months from you will be motivated to continue your financial plan when you see how well it’s working for you!
If you’re going to splurge, do it in a way that people will notice. Shrimp skewers for appetizers, or a really nice cheese plate become a focal point of your party. Don’t spread your money too far.
