Tag Archives: savings

Have Some Mattress Money?

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While GIC rates are still pretty high, but dropping, it might be a good idea to consider what to do if you have any money under your mattress, too much in your checking account, or sitting in a bank savings account.

No, that wouldn’t and shouldn’t be investment money. That’s your retirement investment. But that definition is for any money you will not need or touch for over five years. The money you’re saving for a down-payment, a newer vehicle, home renovations, or other things is money you should not be investing as you’ll want access to it in less than five years.

The most effective way to have this money earn some returns is to ladder five GICs. Let’s use $10,000 as an example: Get five GICs for $2,000 each. A one year, two year, three year, four year and a five year one. That way you have access to a fifth of it every year. Right now, a five year GIC is still about 3.75% and a one year (if you look around) still gets you around 5%. Just make absolutely sure that you have it in writing that the maturing GIC does NOT automatically get renewed. No, them telling you doesn’t count. No, their comment that they “never auto renew” is a lie and doesn’t count. You need it in writing that the maturing GIC will be deposited into your checking or savings account. If it’s not in writing it does not count. On two previous occasions I’ve had to get a lawyer involved when GICs for a relative and acting as an executor were auto renewed and the bank attempted to tell me that I was out of luck. And that was WITH written instructions, dated and noted as to who it was given to!

Oh, and none of this matters or applies if you have a credit card balance! Hunting for an extra quarter percent return when you have a 20% credit card rate is crazy! See the Money Tools book chapter on credit cards: How to get a guaranteed 50% return (by paying off your cards).

My Annual Free $1,500 Has Arrived

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This is my third year of taking every toonie and loonie and throwing it into a jar for the year as my coin-savings account.

This year, it added up to $1,512! That’s entirely free money. It kept my pockets from sagging, my cup hold in the car empty and I never missed any of it. Yes, I find ways to “get” coins. I’ll go buy a coffee and use a five dollar bill knowing it’ll get me a toonie and a loonie. Any little trick to grow the pot with money I never miss!

If you didn’t know how well this works: You do now. Give it a try for a year. But making it smaller coin won’t work. You can search the stories back a few years to find it. I took a big pop bottle and filled it with small coin once. Turns out that was barely a hundred bucks if I remember correctly.

If $1000 to $1500 isn’t a big incentive for you: Congrats! Your financial world is different than the majority of the population.

If you pay mostly by credit or debit card: Sorry. Studies show you overspend 12 to 18% total. I know, you’re not going to admit that – but it’s true. There’s no direct association with money when you just pull out your plastic. McDonalds sales on credit or debit are 70+% higher, vending machines over 100% and there are tons of other examples. Try switching (back?) to real money. You may end up with a free thousand bucks or more and will definitely spend less. After all, when you’re out of real money you’ll need to leave the store!

Zig When Others Are Zagging

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We’ve talked about that logic a number of times over the years when it comes to financial tools. These days – right now – it’s really critical that you think about doing the opposite of what financial institutions, mortgage lenders and utility companies want you to do.

With the high utility rates last fall, the marketing was to get you to lock in your rates “before they go higher.” The pitch was to have you think you’re getting a good deal at the time. Well – maybe. And I certainly know people who took a long term locked-in contract. Fast forward six to nine months and the rates are down significantly from those “good deal” fixed rates that large numbers of people are now stuck with.

What you will not see or hear in any bank advertising is any campaign to get you to lock in your savings. Term deposits, CDs, whatever are at a pretty good rate compared to what they were before the last two years of rate increases. Are rates going down as early as this winter? Depends on which economist you ask. Are they close to peaking and will at least stabilize? That’s a pretty reasonable bet, according to most economists. So, at this point, the fixed savings investments are about as high in rate as can reasonably be predicted. That’s why the last thing financial institutions want you to do is to now lock in those high/higher rates. That would mean they’re out a lot of interest payments to customers when they drop.

Since their profit is the spread from what they pay out to depositors to what they lend out, they obviously want tiny savings rates and high lending rates.

Who are the credit card issuers that have “won” the rate battle so far? The ones who sold variable rate cards. Why? Because they go up with every prime rate increase. What are they going to market to you now? Take that variable card and consider locking it in for a fixed rate. Why? Because rates are or should be close to the max right now. Your zagging would be their winning!

Mortgages work the same way. What you WILL see right now are ads to get you to lock in today’s rates. We’ve talked about that around a month ago or so – how long a term should you take on a mortgage renewal to be ‘up’ again when rates will/have/start to come down? If mortgage lenders have their way, everyone would take another five-year term right now.

Zig when they want you to zag: Lock in savings at a high rate – consider a fixed-rate gas or utility plan (if you must) at low rates and have your mortgage term land in the sweet spot when rates are down (again).

When You’re In Charge of Your Own Retirement Finances

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We talk about finances all the time, and one of the biggest financial decisions is probably your retirement savings. That’s more critical when you’re older but way easier to accomplish when you’re younger. Now, this is not a shot against the current government, but a comment about government programs overall.

There are a few things the government does really well. Included in that list is the military, foreign affairs and the passport office which is just incredibly efficient and well-run. But generally, any government programs are not very effective, and you will always be able to do better, and do more on your own, without waiting or hoping the government will come to your rescue. They won’t – and by the time you’re done waiting for a bailout package, or meaningful help from the government – you’ll be dead, honestly.

There is no place where that is clearer than with our Canada Pension Plan: The CPP pays a maximum of $884 to you in retirement. Let’s use this $884 maximum, even though the average pension benefit recipient gets $481.

Let’s take the lowest working person in the country. We’ll take someone who works from age 18 to age 65 and makes $2,000 a month. So this is a person who never gets a promotion, never gets a raise, and never improves on that income – someone who literally makes a small $2,000 a month throughout their entire working life.

Until retirement, every month, this person has $42.28 deducted from their pay towards CPP. The employer portion is the same, because employers match the deduction. So, for this person, every pay period, $84.56 goes towards their CPP in order to get a maximum of $884 each month after retirement. Simple math so far?

Now, if this person took that same $84 a month and invested it, at a 10% return over their lifetime, they would have $1,084,000! That translates to a monthly pension of $9,033! Let me say that again: Taking the same CPP deduction of someone who makes $2,000 a month for life, and investing it on their own, would have a pension of over $9,000 a month, AND he or she would leave an inheritance of over $1 million to their family.

THAT is why I want you to pay yourself first every month, and have some savings deducted right off your pay where you won’t miss it. What would you rather have? The $884 CPP, or your own $9,000 each month?

A Family With 13 Kids AND Saving 35%

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Rob and Sam Fatzinger have 13 kids, one income, and a free and clear home just outside of Washington, DC. If you want their full story, just go to the Washington Post and type in their name.

Here’s their story in short: Rob made $40,000 a year just a decade ago, but now earns $100,000, plus, and mows lawns in the neighbourhood for a few extra bucks a month. His stay-at-home wife home schools their 13 children with assistance from a tutor. In 2000, they bought a fixer-upper foreclosure with $50,000 down and paid off their 15-year mortgage early, and Rob will retire early at age 62.

They had a lot of help from the community in renovating and expanding the home. The Fatzinger’s also receive a lot of support, where friends and neighbours have helped with gift cards for food, and even used vehicles over the years. Their biggest cost is their food budget that was running $1,600 a month. Today, their savings rate is 35%.

All kids have long ago been educated to know they will not receive help with college costs. Yet, several of them have already graduated from college with part time jobs, scholarships, and ZERO student loans!

But that’s not the story. If you’re really quiet, you can hear what most listeners are thinking right now: That none of that could ever happen in their life:

Judgment and strike 1: I couldn’t buy a place for $150,000

Strike 2: I could never take on a part time job

Strike 3: I wouldn’t accept donations from people or ask for help

Strike 4: I could never do a 15-year mortgage or pay extra on it

Strike 5: I can’t save 5% of my pay, never mind 35%

Strike 6: He makes $100,000 –I don’t…

Strike 7: I couldn’t tell my kids I won’t contribute to their university costs

Strike 8: I’d never be able to retire early

Your attitude determines your altitude. Instead of the judgments and saying “I couldn’t do that” change the wording to: I’m not prepared to do that. Then at least you’re being honest with yourself. Because, people who say it can’t be done should stay out of the way of those who are doing it!

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Last year (you can scroll back for the story “Want a Free Christmas Next Year?”) I managed to save around $1,200 by just dropping my toonies into a jar for the entire year.

So it seemed logical that making it toonies AND loonies this year, I would end up with even more money. But, it turns out that was a bust. Sadly.

Not only was 2021 a “full” Covid year which reduced my trips out of the house, I also received four Tim’s gift cards. So every trip for a $1.85 coffee that used to get me a toonie and loonie in change from a five dollar bill went on my gift cards this year. Thank you to the two people who gifted them to me. But no change meant no coins into the savings jar.

This years’ total was $875. Sure I was disappointed – but that’s still a ton of money and cost me exactly nothing to save. If you didn’t do it last year, try it for 2022. Maybe in a “more” normal world the thousand dollar savings mark will be possible again!?!?

Want A “Free” Christmas Next Year?

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Four years ago I saw a picture of a 2 litre pop bottle filled with dimes. It apparently holds about $500 if you fill it with dimes. I’m change allergic and wasn’t going to just take out dimes. So I talked about filling a 2 litre pop bottle with all coins thinking it’d be a lot more than $500 and started filling up the bottle. Wrong – dimes are the smallest size. It turned out that the bottled savings added up to less than $600 because other coins, especially nickels, used us so much more space.

In January this year I decided to just save toonies, instead. I have a big vase, and every toonie went in there until last week – so that’s just about a full years’ worth. I’m single – if you’re in a relationship, you’ll get a whole lot more money when two of you are diverting your toonies!

A quick trip to the bank for rolls that hold $50 each and 15 minutes of work was all it took. But I was stunned that it added up to 1,200 dollars! THAT is a lot of money for saving coins that I never missed. And I’m single. If you’re in a relationship, that’s two of you putting away the coinage!

Whatever you may have for a Christmas budget, something like a thousand bucks or more of free money should make for a pretty impressive Christmas present to yourself next year – if you want.

I do have to confess that I boosted my toonie savings a bit: Any trip to Tim’s for coffee, I’d pay with a five dollar bills. That made sure I was coming home with at least one toonie. If my dollar store purchases were $6.40, I’d give them $10.40 to get $4 change…thus another two toonies. Because, let’s face it, nobody is going to miss two bucks out of their pocket ever couple of days or so. If you want, add loonies to it as well. In fact – that’s something I’m going to do for 2021 now that I think of it. My vase is big enough and if I can divert toonies I’ll never miss, it should logically be 50% more if I add loonies this coming year.

If nothing else out of the crappy year that was 2020, I’m really looking forward to upwards of $2,000 free money next Christmas….

When It’s Raining You Need An Umbrella!

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If you’re optimistic that the rain will stop soon, I admire your optimism, but you’re kidding yourself. The financial pain will continue for some time. I would suggest we are barely at the starting line, and it’s not a 100-yard race, but a marathon. When the economy is good, it’s wonderful to live next to an economic powerhouse. However, when the US is the basket case of the world, it will continue to impact us here in Canada. When the President states that his “gut” tells him it’ll be mostly done with by Easter, you know we’re in trouble.

You and me following the rules and take preventative measures that don’t resolve anything when others aren’t. We are at the mercy of the selfish and the stupid: Florida golf courses are packed, as are Florida beaches. Mardi Gras in New Orleans is in full swing and 50,000 people were at Disneyland closing night a week ago that likely infected 500 people, who then infected 2,500, who then infected 12,500 and so on. We’re in this boat together, but around a third of the people are rowing in the opposite direction and that gets us nowhere.

If you’ve read part of the Money Tools book you’re likely to be a lot more ready and prepared than the average person. Here is one more, and we’ll talk about the banks’ offers to help and how that can boomerang back on you next week:

In the last two days most large retailers stopped taking returns. We talked about that last fall that most retailers really want to cut down returns. Whether the corona virus is a valid reason to stop returns or not is for far greater minds than me to decide. But you need to make sure you don’t buy anything that you are not 100% sure you will use and keep. When you pay – you’re an owner. Personally, I will not buy one single thing that isn’t food, coffee, or absolute essential. So in a plummeting economy this will make things worse – so much worse – if people follow that advice. You cannot return that sweater that doesn’t fit your partner no matter what the sale price, the light fixture that falls apart when you open the box, the towels that aren’t a good colour match, the Chinese made toy that doesn’t work, or area rug that doesn’t fit. I found this out first-hand yesterday at Walmart and Lowe’s! Don’t buy don’t buy don’t buy! One store manager admitted it’s great to know what they sell stays sold! As I said, you decide if it’s logical and right or overkill. But it is what it is – we’re in a new retail environment. So be careful out there or the lesser amount of money you have and spend will go towards things you can’t use or don’t work!

Just Do It (Some of it) NOW

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Just Do It (Some Of It) Now

The Nike slogan is “Just Do It” and everybody aged 18 and up, the sooner the better, should take that to heart. Or at least do some of it. There’s a chapter in the Money Tools book entitled: Do You Have a Half Hour?

In life there are tons of things we just never get around to – for all of us at all ages. We’re too busy, maybe next week, it’s not a priority, or whatever the reason or excuse. If you don’t take the first step you’ll never take the second step – and that chapter has about a dozen things that take less than half an hour.

If you look at your bank account and have an extra $200 you might want to save it. But it’s likely you won’t – or at least if you’re in your 20s because you don’t have an investment or TFSA (tax free savings) account, or an RRSP set up. That’s just one no-brainer example. If you take less than half an hour to set up an investment account with just a $20 deposit you’ll have it if and when you have some extra money, a bonus, or maybe some cash for your birthday. But if you don’t even have an investment account, you’ll never detour the money to it. If you’ve done the half hour basics, it’s two clicks and you’ve added to your investments.

Just taking this one example at age 18 to 25 has a staggering impact down the road. Here is a chart of what just $1,000 savings gets you in compounded interest down the road if you set it and forget it (from taxtips.ca):

$1,000 in just GICs over 50 years turns to $16,000. If you’re already 25 or so, over 39 years it’ll be $7,700.

But you’re 18 to 25 so that’d be a total waste of investments. If you put it into a basket of the top 500 companies in the world (that’s called the S&P 500) the $1,000 turns into $135,000 over 50 years. If you’re already mid-20’s it’ll be $77,000.

That’s a lousy $1,000 saved – never mind if you read the teenage millionaire chapter and do it quicker for a return of $1.1 million. Or you can hope you’ll get your $900 Canada Pension – good luck with that.

So the half hour today pays off huge – but you need someone to print you off this returns chart for you to believe it. And then you have to get off your butt and make the half hour. If that’s not worth your time – I can’t help you!

George Boelcke – Money Tools & Rules book – yourmoneybook.com

The Huge Payday of Today Savings

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Trying to save money for the long-term when you’re in your 20s is kind of like the challenge with climate change. We know we need to, or should, do something, but we’re not really willing to pay a price to do it. Why? Because the payoff is so incredibly far down the road, and most people don’t want to make many today sacrifices in order to achieve it.

Yes, there’s a price to pay to set aside savings. It’s the stuff you’ll need to give up right now in order to have the investments way down the road. And that’s a value judgment where the long-term typically loses out to the “today” spending.

That’s the reason it almost has to be savings that come directly out of your bank account automatically. You can’t spend it if you don’t have it. My biggest financial regret is definitely not saving a few bucks every payday into an S&P ETF (electronically traded funds) index fund. Set it and forget it, because it’s a basket of the top 500 companies where you now own a tiny piece of each of them. That’s great diversification and it’ll take you less than 30 seconds to search that the S&P historical returns over the past 50 years are over 10%.

One more way to save, or likely to pay off about half your student loans in a year is also in the Money Tools book chapter called: Broke is the new rich.

If you’re graduating from university, you’ve had two or four years of living on mac and cheese. Now going into the work force with a paycheque, you have an incredible pent up demand for spending and buying stuff that you really couldn’t and didn’t for all those years.

However, if you just live like a poor student for one more year, you’re not really make any lifestyle adjustments. You’re just living on very little money for one more year. If you can do that, you’ll be able to pay off a ton of your student loans in the coming year. Only one problem: Stay on your tiny student spending plan. Once you have a credit card, bought a vehicle, stepped up for some nicer furniture, or moved to a nicer place, it’s next to impossible to give all that up again.

Maybe two or three people in your entire grad class will do what we talked about the last four weeks. I hope you’re in touch with one of them for the next couple of decades as you watch them become incredibly successful financially…