As credit counsellors, we have the skills and experience to aid this wonderful charity by providing budget strategies to new Habitat homeowners to help them prepare for home ownership and budget effectively for a lifetime of financial success.
The financial education they receive helps to instill a sense of accountability and pride in their new home ownership status.
We are happy to be part of the Habitat for Humanity family, and seeing videos like this one makes us even bigger fans!
Most people avoid developing a spending plan. It’s just no fun hearing the same things over and over – “be frugal, be thrifty, save every penny you can for a rainy day.”
Unfortunately, failure to develop a spending plan usually results in our money waving goodbye every payday, and when bumps in the road occur and they will, (life being, well, life) you find yourself with very difficult financial challenges.
There’s got to be a happy medium – something between the regimented, enforced frugality that is so often presented as the solution to your life’s financial future and the carefree spending that’s going to land you in trouble. Taking control means that you take back full control and “tell your money where to go”!! No more letting it simply wave good-bye!
Enter the Save-to-Spend concept, a system of budgeting that will have you future-proofing your money, while still allowing you to achieve the things you want, and even giving you some “mad money” for the things you didn’t know you wanted. It is really all about pre-planning by putting your short, medium and long term goals on paper. Once you have them, put down what the costs are for each of them. Then prioritize them and determine the length of time it will take you to save for each of them. A simple example is buying a new big screen television. If the cost is $1200 and you want to have it in one year, start putting $100 away each month for it. This is far different then the buy now pay later program where you forget to pay off the interest free loan and end up paying 30% interest back to the day it was delivered. This is an example of a change from that path of instant gratification to one of delayed gratification!
The concept goes one step further and includes the most important part of any plan and that is building your emergency savings account. These are just a few simple examples of a very old concept that we need to return to.
Of course, you can’t make money from nothing, so there are going to be some sacrifices. They will, however, seem unimportant as you quickly see your bank balances grow with all the individual financial goals you have set.
Just remember you need to keep happy while you work within your Save-to-Spend plan! Like dieting, if you tell yourself you can never enjoy one of the foods you love, you’ll likely cheat. If you allow yourself the occasional treat, you’ll be happier overall and are more likely to get the result you want. Save-to-Spend has been proven to be effective.
CALGARY – A new poll suggests nearly half of Canadians surveyed last month are within $200 per month of being unable to pay for their bills and make their debt payments.
The Ipsos Reid survey also found about one-quarter of the 1,582 people who responded to the poll were already unable to cover their bills and debt payments.
The online poll was done between Jan. 27 and Jan. 29 for MNP Debt, which provides licensed trustee services in six provinces, from Quebec to British Columbia.
MNP says the poll found that 31 per cent of respondents said any increase in interest rates could move them towards bankruptcy.
Ipsos Reid conducted the poll about a week after the Parliamentary Budget Office issued a report on Jan. 19 that said Canada has seen the largest increase in household debt relative to income of any G7 country since 2000.
The survey also followed Bank of Canada’s decision to keep a key lending rate at a historically low level of 0.5 per cent on Jan. 20, as the central bank lowered economic growth estimates for 2015 and 2016.
The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.
Financial wellbeing impacts one’s overall health, and can affect relationships with family, friends and co-workers. More employers are beginning to realize that being under financial stress can significantly impact the quality of an employee’s daily work. We were happy to be selected by the Manitoba Teachers’ Society as responsible for the Financial Literacy portion of their wellness program.
The Financial Literacy workshops and resources provide information to help individuals deal with financial stress and limit the effects it may have on their life. Topics include but are not limited to:
• Identity Theft
• Dealing with Financial Stress
• Budgeting Made Easy
• Talking Money with Your Kids
We have been helping Manitobans be debt free since 1992 and with programs like these, we can help even more. These valued individuals are teaching our children, and we trust that the more knowledge they have, the more they will pass along.
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.
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:
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
Have you ever tried to perform mental gymnastics with your finances? It is no mean feat, and you are quite likely to forget at least one important payment. Creating a budget is one thing, but ensuring that all the funds in your bank account go where they should is not so easy. When you created your budget, you probably divided all your payments into categories. If you didn’t, then now is the ideal time to create a system that is both efficient and easy to manage. This will make life so much easier, once you split your payments across multiple accounts.
You would imagine that trying to manage multiple bank accounts would be a nightmare. However, nothing could be further from the truth. Separating your monthly expenses and savings across multiple accounts will help you focus on your budgets and goals. There are cost effective accounts like Tangerine Bank where you can have multiple accounts and even name the account the same as your budget category.
If you have financial goals that you are determined to achieve, focus on each one individually. Create an account where you can save towards specific goals. Once you have reached your target, you can use that account to work on your next goal. Keep all your regular payments in one account, where you can allocate a set amount each month, with the security of knowing that you will not overdraw. Next, create an account for your irregular payments. This account should allow for enough breathing room to accommodate ad hoc payments.
Should you be lucky enough to consistently have cash flow to spare, you may want to set up an account for luxuries. Filter your spare cash flow into this account, whenever you can. Once you have been using your multiple accounts for a while, you will find that management your finances becomes much less of a chore.
Gail Vaz- Oxlade has a message for women everywhere – be an “Island” before becoming a “Peninsula”. The tough-talking money expert and host of popular reality TV shows such as Til Debt Do Us Part and Princess maintains that all women should be financially independent , even in marriage rather than expecting a partner to become their financial safety net.
In her latest book, It’s Your Money: Becoming a Woman of Independent Means (HarperCollinsCanada, $21.99), Vaz-Oxlade argues that women have unique challenges when it comes to managing money such as motherhood, divorce, widowhood, disability and caring for the elderly. Instead of relying on others, whether it be a partner, parent or financial planner, women should take action to understand and plan around their unique needs.
Credit Aid is a proud sponsor of “You and Your Money with Gail Vaz-Oxlade” taking place in Winnipeg on February 9th, 2012. Tickets are $45 and can be purchased at www.youandyourdollar.com or by calling 254-2595.
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!
The desire to “keep up with the Jones’s” has become more than a social status issue for many people. Also, it is very easy to get caught up in this during the holiday season. It has become a catalyst for overspending that has consumers running to banks and other lenders looking for ways to finance their purchases. This issue also has countless consumers loaded up with credit card debt so steep it may take them a lifetime to get out of it.
Give your financial literacy a good double-check, and if you are not already practicing the following financial practices, now is a great time to start today:
Pay bills on time and balance your check book each month. You can’t know how much you can afford to spend if you don’t know how much you currently have to spend.
Stop buying on impulse. If you want something, rather than charging it on your credit card and paying interest, save for the next few month and buy it when you have the money.
Always pay more than your minimum balance on credit cards: Get rid of them as soon as possible. You will save money on interest and have more to save for the future.
Vow to maintain only “good” debt. This is the type of debt that will increase your net worth: A mortgage on an affordable home, a car loan, or college debt. These will either increase your creditworthiness or make you more employable so you are able to earn more and keep debt to a minimum.
Always include some savings in your budget. Many short-sighted people are unable to see their needs after retirement and don’t save. This results in financial difficulty during their declining years.
Find out what you don’t know about finances—and learn it. Despite the flood of information on financial management, people don’t take the time to learn.
Finally, in order to put a stop to this financial madness keep in mind the media pull for spending and don’t be drawn into the hype. By being savvy shoppers and savers, the overspending and debt can stop.