How to Maximize your Spending Plan (AKA Budget)

Maximize Spending Plan

Get the Most for the Least by Shopping Carefully

Budgeting can be like strong tasting medicine – it’s one of the most challenging remedies to take, but its effectiveness cannot be denied.  Whether you’ve got money troubles or not, a budget will help your finances.  You don’t make a budget just to fix problems – you have to do it all the time.

A spending plan is more than just a list with numbers.  It’s a willingness to do things that may seem inconvenient at the time, but add up to a considerable advantage when you’re looking to cut costs, without sacrificing quality.

Here are some everyday actions you can take that will make your bottom line look better:

Check Prices
Ok, so you’ve decided to make a purchase, and you’ve budgeted for it.  Before you expend precious funds, make sure you’re getting the best value for your dollar.  Ask yourself the following:

“Can I save money by buying used?”  A lot of times, a used item will serve just as well as a new one.  Appliances, for instance, are often available used, many from dealers who will offer a warranty.  Clothing, too. Many discount stores offer name brand clothing, gently worn, at a fraction of the original cost.  If you’re ok with previously enjoyed clothes, you’ll find that you can start dressing really well for really cheap.

“Is another store having a sale on this item?”  Is the sale good enough to justify the extra travel time and expense?  Try to avoid paying more just for convenience.

“Is it less expensive online?”  Sometimes it’s worth having to wait a few extra days for delivery.

Prepare your Own Meals
We can’t stress enough just how much impact this one simple act can have on your bottom line.  Take out or delivery costs several times as much as preparing a similar item at home, and when you make it yourself, it’s how you like it.  Compare the savings to the time spend preparing meals, and it’s like you’ve got another job that pays really well.

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Canadians Not Meeting Debt Reduction Goals

Manulife Bank of Canada released their debt survey which revealed that many Canadians are not meeting their debt goals. Creditaid’s Brian Denysuik was on the air at CBC Radio with Caroline Barghout to discuss the survey, provide advice and tips on how to save to spend, budget and the steps to take to relieve stress and become debt free.

Listen to the broadcast below.

Canadians are Postponing Retirement to Help Their Adult Children

Couple-postponing-retirementHalf of Canadians surveyed are willing to postpone retirement for their children according to a study by BMO Wealth Management. Even more worrying is that 24 per cent said they’d be willing to go into debt to help their children succeed. Ironically, one of the top reasons parents cited for their financial concern about their children is that they will incur debt that they can’t manage.

According to Statistics Canada, today’s youth are more educated, staying at home longer and putting off their entry into a treacherous labour market where unemployment rates for young adults are twice the national average. This is daunting information but not insurmountable. Parents and their children can find a way through the morass by learning about how to manage their money better.

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Credit Score 101 – A Refresher Course

We all know that we need to be careful with credit – because it’s easy to borrow money, and wind up owing as much, or more than we can pay. We all know what it feels like when there’s “too much month left at the end of the money”.

And there’s this vague fear of a negative impact on our credit history that can affect us in the future. The more we know about credit reporting, the more we can work to improve the way potential lenders see us, and then we can leverage a good report to get favourable terms when we borrow money.

What is a Credit Score?
In Canada, a credit score is assigned by one of the two large credit reporting agencies – Equifax or TransUnion. The score is a number between 300 and 900 (900 being perfect) that represents Credit-Report-illustrationthe aggregate of all of the information that the bureau has on file about us. Most interactions that you have with lenders, either positive (payments made on time) or negative (late payments, collections, bankruptcy) will affect our score. Anyone who has ever accessed any form of credit has a file with the credit bureaus. Potential lenders use your credit score, with your permission, to determine whether or not you qualify for credit, and sometimes they use it to set the terms of borrowing (interest rates, etc.).

Who Can Access My Credit Report?
Any lender can provide information about your loan, payments, etc. to the credit bureaus. You give them permission to do so in the agreement you sign when you begin to access credit with them. Any potential lender with your permission (usually in the application) can access your report and score. You can (and should) access your own credit report with both bureaus. Make sure that all of the information that they have on file is accurate.

By knowing your own credit score, you can demonstrate to potential lenders that you are a responsible borrower. You may be able to negotiate more favourable terms as a result.

If you’ve got questions about credit, or have found yourself in some trouble, contact Creditaid anytime online or by telephone at (204) 987-6890 or (877) 900-2659. We can help you take those important first steps toward a debt free life.

Second Time Around

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.

Brian Denysuik is a local credit counsellor and a registered insolvency counsellor at the for-profit debt-management agency Creditaid in Winnipeg.

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

Has Society Become Desensitized to Spending?

Desensitized-to-spending-Apr-15

Good question. Certainly, not everyone has, but spiraling levels of consumer debt have risen to record levels, indicating that Canadians are spending more money that they don’t have at an alarming rate.

Statistics Canada has released figures for the third quarter of 2014 indicating that Canadian household total credit-market debt, which consists of mortgages, consumer credit (mostly credit cards) and non-mortgage loans rose to 162.6 percent of disposable income. The Bank of Canada has stated that “high consumer debt loads and imbalances in the housing market” are a concern.

In short, people are using credit more today than ever before.

Two generations ago, very few people used credit. Society was based on a “cash on the barrelhead” philosophy that encouraged living within one’s means. This standpoint has been slowly eroded by rising home ownership costs (it is virtually impossible to purchase a home without a mortgage, and the length of time that the average family spends paying for their home gets steadily longer), the availability of consumer credit, and the replacement of “hard” currency with cheques, credit cards, and digital wallets.

It’s easier to access credit today than ever before, and advertising inundates us with constant messages promoting consumption of high-value items, usually on payments. It’s no wonder that people wind up in trouble with credit cards, loans, and lines of credit.

Creditaid exists to help people who have used credit improperly, or have been faced with unforeseen circumstances, and are having trouble dealing with their debt. We offer a free initial credit counselling review with professionals who can advise you on how to best manage and repay your debts. We’ll work with you in a judgment-free manner to develop solutions for your specific situation. We have a number of tools available to help you deal with your creditors, including debt consolidation and debt management solutions. If you’re feeling the pressure of collections, call Creditaid for help today.

2015 Marks a New Relationship with Smart Biz Winnipeg

Creditaid is very proud to have formed a relationship with Smart Biz Winnipeg for 2015.

Smart Biz Jan 2015 editionSmart Biz is a monthly publication that aims to connect people with information about different educational paths and career streams. Smart Biz works with the Winnipeg Chamber of Commerce, the Assiniboia Chamber of Commerce, and the Downtown Winnipeg Biz, in order to present perspectives from within the workforce. Every issue also features lifestyle columns on health, money, gaming, personal life and fashion.

Brian Denysuik will be publishing articles to appear in Smart Biz throughout the coming year, offering advice on everything from the new rules of cohabitation to the basics of creating a budget.

You can access the January edition here or by clicking on the image in this post. Brian’s first article in the series appears on page 15.

Follow button from Smart Biz siteBe sure to visit the Smart Biz website and click the “Follow” button in the bottom right corner to keep up with all of the updates!

New Year, New Start – Budget Bootcamp

New Year resolutions are hard to keep – in fact; did you know most are abandoned within the first two weeks of the year? The same is also true of first-time budgets; which is why we at Creditaid are offering a FREE 5-Day Back to Basics Budget Bootcamp.

Bootcamps are known to be hard work. In order to become a champ, you will have to challenge yourself and push yourself beyond your limits. Once you do though, you will see and feel the results of your hard work – which is why we like the concept of a Budget Bootcamp so much!

Over the span of one week, we will help you create a budget that will work for you and your lifestyle and provide you with all the tools and advice you need to get you on the right track and keep you there. The process is not complicated; you just need to put in the effort.

We understand that budgeting isn’t easy, so we will show you how to work with the money that you have while remaining realistic. There are no quick fixes or shortcuts, just sensible, effective ways to manage your money. The course lasts five days, and by signing up you will receive an email on each of those days which will take you through simple steps to set up and maintain your daily, weekly and monthly budgets.

The sign up process is easy; there is just one form to fill in and then we’ll send you the first part of the series. We do not ask for any personal information other than your name and email address so that we can send you your 5-Day Back to Basics Budget Bootcamp emails. Once you have received part one, you can begin to get your spending under control. This is your opportunity to have a new year with a new start so sign up now!

Scared to Pick Up the Phone?

Do you panic every time the phone rings? At Creditaid, we help people take back control of their lives. Many of the people we have helped have been where you are today – too scared to answer the phone or check the mail when it is delivered, missing out on spending time with family or friends for fear of spending money that you don’t have. Life is too short to live in constant fear – it is time to take control, and start living your life again. Call to speak to one of our qualified counsellors who will walk you through each step of the way to becoming debt free – whenever you’re ready, just give us a call at 204-987-6890.

Visit Us Today

The New Year is fast approaching – and it’s a great opportunity to take some time to think about what you would like to accomplish in 2014. If getting your finances back on track is on your list for the year, take this opportunity to drop by and see one of our counsellors.

We are available today and tomorrow –

Monday December 30th  9:00 am – 5:00 pm
Tuesday December 31st 8:00 am – 3:00 pm

Have a wonderful holiday season!