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A Big-Picture New Years’ Resolution

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Happy New Year and good riddance to 2020!

Meet the tree-year old who has inspired my one and only New Years’ resolution this year:

My duplex backs onto a park and skating rink. I’ve now seen this tiny guy a number of times. To a three-year old of his size, the rink must seem the size of Europe. Watching him New Years’ day for about 15-minutes, he probably fell down at least 50 times. But he always got up. Sure, sometimes he rested on the ice for a bit and sometimes dad would skate over and he could pull himself up on dads’ stick. But he always gets up.

For arguably the majority of people, the pandemic that’s now in its second calendar year, is only an inconvenience. Maybe it was working from home for a while, or still missing the routine of restaurant dinners with friends, concerts, or a hockey game.

But for millions of us, including us self-employed and their staff, other peoples’ inconvenience is our nightmare – and not just in financial ways. Sure, lots of people can (and have) file for bankruptcy – but bankruptcy does not create income! Only the return to a healthy economy creates income.

With no immediate end in sight, millions of us have to keep getting up – have to keep positive – somehow – some way – for some time to come.

What’s the definition of “getting up?” That’s different for everyone. Maybe it’s deferring one more bill. It might be cashing one more RRSP, or hoping that the Canadian Recovery Benefit will be changed for vast numbers of people who will max out in March and be cut off. Maybe it’s asking for help – one of the hardest things to do.

I don’t know about anyone else, but I know I can’t get up 50 more times. But I’m pretty sure I can get up one more time – from one more setback – from one more nightmare of a week. And maybe one more time after that if I keep the image of that little three-year old in my mind.

The Money’s All Spent – Now What?

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Now that it’s the week after Christmas I’m reminded of an old Irish Rover Song called: Wasn’t that a party, and then talks about the hangover.

That’s kind of like our financial lives, having just spent over $22 billion on Christmas, mostly with borrowed money, and including lots of presents for ourselves. I know, I know, we work hard, it’s our money, we deserve something, it was on sale, we really needed it, etc. Well, if we were to be honest with ourselves, that’s all nonsense. Broke people can’t afford to buy stuff, and it’s almost always a “want” and not a “need.” That’s how we get to spending over $4.2 billion on impulse purchases in a year, according to one Canadian study. And, to be honest, that number is way low, because it’s the last thing we’ll admit to.

Yes, we work hard, and yes it’s our money. But do you want to keep working hard forever? Freedom 77 doesn’t have the same ring to it as that old commercial campaign of Freedom 55, does it? At some point in time, we do have to get away from the spending party and focus on paying off the hangover and saving something for someday down the road. Intellectually, we know that, but when are we actually going to get around to it is the big question that will change your entire financial life.

Right now, let’s be honest: We spend more time planning our vacation than we do our financial situation. Make 2012 the year that you’ll actually turn that around. Here are a couple of suggestions that are small enough where you’ll do it, but big enough to have a significant impact. Why small steps? Because our sub-conscious mind will revolt against huge goals that seem impossible to reach.

You’re not going to lose 60 lbs, but you can lose a pound a week. You won’t run the marathon this summer, but you can go for a 15 minute walk each day. You also won’t be debt free by February, but you can start on that journey with one step at a time.

Resolve to say no: Whether it’s to yourself when it comes to spending, to your kids, people at work, or anywhere else. It’s the one word that’ll change your financial life.

Take your credit cards out of your wallet: At least for January, leave the cards at home. If you have an emergency, you’re one call away from getting help. But going to the mall or charging this or that isn’t an emergency – honestly.

Set a cash limit: Pick an amount below which you’ll always always pay by cash or debit. The higher the limit, the better – if you make it $50, gas, small grocery purchases, lunch, etc., will all be paid cash. That alone will drastically reduce the charges on your credit card. When we use a credit card we spend 12 to 18% more – period. Whether you pay it in full or not, it’s still a ton of extra spending that isn’t helping.

Stop being financially stupid for 2012: You know exactly what that means. They are different things for all of us, but make the New Year one where you’ll stop doing the top two things that get you further in debt, or don’t grow your savings.

And finally, here’s a great post from Facebook this morning that kind of says it all: Do something today that your future self will thank you for.

Getting Financially Fit For 2009 (Part I)

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Happy New Year, but it’s pretty depressing that us Canadians just hit the trillion dollar mark in consumer debt and it keeps growing.

New Years resolutions don’t work most of the time which is why fitness clubs are a ghost town in February while everyone is still stuck with an annual membership fee. Most of us just don’t have a “hallelujah moment” the first few days of New Years which has much of a lifespan.

The good news: It’s a new year! It’s a chance to start over, to resolve to do better, to do more, or in the case of your payments and all that interest – to do a lot less.

The bad news? You’re already broke! How’d that happen? Well, we spend more than 120% of our disposable income, half of us have no savings and almost 70% of us don’t even make RRSP contributions. Why? Because every dollar we earn goes to make a long list of lenders really really rich and there’s simply nothing left at the end of the month. Never mind that the average person figures it’ll take two months to pay off their Christmas debts when surveys keep showing it’s actually more like six months.

How do we make it through January with the Christmas and other bills heading our way?
When you’re in a hole – stop digging. In other words, spend less or earn more. Both will have a huge impact in changing your financial situation really quickly.

Annual bills kill your budget, but they’re not a surprise. We know they’re coming – but we haven’t got the money to pay them. Open a savings account that’s not hooked on your ATM card. Then add up what you’ll need for next years’ Christmas bills, your property tax and car or home insurance. Divide it by 12 and put that monthly amount away.

Set yourself a credit limit. Pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. Anything below that, you’ll pay with real money instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways.

Pay off one bill. Minimum payments buy you another month – nothing more. It’s treading water. Credit cards and debt are not your friend. They’re financial dream killers and suck money out of your pocket and add a ton of stress to your life and your relationship. Take your smallest bill and put every dollar you can towards it while paying minimum payments on everything else. When it’s gone, take the next smallest and focus only on it. This step-up plan will get you debt free in less than half the time. It’s an entire section of the It’s Your Money book and will become a huge tools for you.

Close your overdraft. I know – it’s like being hooked on drugs. It’s so convenient and always there and you can’t live without it any more. Well, that’s what the banks were counting on. Just a $1,000 overdraft will cost you between $200 and $300 in interest and fees. It’s a one-time pain to cancel the overdraft, but it’s worth it.

Getting Financially Fit For 2008

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The good news: It’s a new year! The chance to start over, to resolve to do better, to do more, or in the case of your payments and all that interest – to do a lot less.

The bad news? It’s likely that you’re already broke! How is that? Well, we spend more than 120% of our disposable income, half of us have no savings and almost 70% of us don’t make RRSP contributions. Why? Because every dollar we earn goes to make a long list of lenders really really rich, and there’s simply nothing left at the end of the month.

So when it comes to making some commitments about our debt, credit and all those bills, perhaps we should think small to make sure we set ourselves up for a win, and not a sure-fire let-down. But small doesn’t mean pointless, small just means some little steps you can actually keep, that’ll pay off big for 2008.

If you need additional motivation, remember that every $100 you don’t pay out making lenders rich is really about $150 or more. Why? Because you earn gross income, then all the deductions and tax come off your pay, and it’s only the net income that you have left over to pay bills.

So here are some more points, continuing our list from last week:

6. Set yourself a credit limit. If you won’t leave your credit cards at home for at least 90 days – pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. But anything below that, you’ll spend with real money, instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways. After all, look at your statement. Almost all the charges are for pretty mickey mouse amounts that add up in huge debts – twenty bucks at a time.

7. Destroy your line of credit cheques and unhook the account from your bank card. Your line of credit was set up for emergencies and not for monthly bills. It’s too tempting to use the account if there are cheques around. Because when you use a line of credit for a monthly bill – the next bill will be here in thirty days, while you’re paying the last one off with interest over a year or more!

8. Close your overdraft. I know – it’s like being hooked on drugs. It’s so convenient and always there and you can’t live without it any more. Well, that’s what the banks were counting on, and where they make a huge amount of their profit. But it’s killing you. Just a $1,000 overdraft will cost you between $200 and $300 in interest and fees. It’s a one-time pain to cancel the overdraft, but it’s worth it.

9. Change to a credit card that isn’t a credit card. We’re now averaging three credit cards each, and it’s rising, while card issuers keep upping our limit to make sure we have much less chances of paying them off every month. With no grace period and over-limit charges, it’s a recipe for spending a ton of money needlessly. Get yourself an American Express Green card. That’s not a credit card – it’s a charge card. At the end of the month, there are no payments to make – the balance has to be paid off in full. Oh sure, the first month that’ll be painful. But after that, you’ll watch what you’re charging pretty carefully, and you’ll never ever have a credit card balance again. What’s that kind of financial freedom worth?

10. Contact the credit bureau to get a free copy of your credit report. Almost all lenders now base your interest rate on your credit report and its credit score. So you have to know what’s in there and whether there are errors on your file. The how-to is in the It’s Your Money book and will take under five minutes. Less than 30% of us ever look at our file and that can easily cost us two or three percent on everything we borrow. After all, knowing is always better than hoping.

11. Keep your car for another year. If you believe a cool car is a status symbol and a must-have, you’re doomed to be in debt for decades to come. Not to mention that almost 50% of people trade their vehicle and STILL owe more than it’s worth – that’s financial suicide when you take your extra debt and just roll it over to the next new car with interest for another five or six years. It makes things worse – much worse. And your car will never increase in value. So the goal should be to drive a reliable vehicle that doesn’t have payments with it which are killing your chances to save or get ahead financially. Imagine a couple of years without car payments and the huge financial advantage you’ll create for yourself. And remember: Those $400 car payments are actually more than $600 in gross earnings. If you can’t get a $600 raise this month – here’s a way to get it – you’ll just be giving it to yourself!

Getting Financially Fit For 2008 – Part I

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Well, here we are at the start of a New Year, and now is a great time to focus on the wave of bills coming this month, and how to make the coming years a lot different, financially, than the past years have been.

But please don’t make it like the wave of fitness club memberships where everyone shows up for a week and by February they’re all a ghost town again. Getting financially set for 2008 is one of the longest lasting gifts you can give yourself. Financial freedom really does change lives and also changes relationships, because the number one fight in relationships is about money!

1. Just once – make a budget. You cannot see where your money is going unless you put in on paper. Half an hour with your partner, no TV, and no kids. By the time you’re done you’ll get some huge surprises of where your money is going and how little you really have to live on, once the bills are paid.

2. Get proactive. Don’t make it a scramble again next year to have money for Christmas or for all your annual bills that we never seem to have money for. Open a savings account but DON’T hook it up to your ATM card. It’ll be too tempting to tap it. Add up what you need for Christmas next year, your annual car and house insurance and your property taxes if they’re not paid monthly or through your mortgage. Divide it by 12 and start putting that money aside monthly.

3. Cut up all but one of your credit cards and learn to live without plastic, and no more borrowing – period. It’ll take a month of whining and adjustments, but by February you’ll be amazed at how much extra money you have and how you start looking at your spending in a whole different way.

4. Put your list of debts on the fridge so it’s right in your face each and every day. Then get mad. Really mad that everyone is getting rich off your money and you’re broke. Start attacking these one at a time, starting with the smallest bill because it’s the one you can pay off the quickest. When it’s gone, roll that money to the next one, and so on. It’s in the budgeting chapter of the It’s Your Money book in easy to follow steps.

5. When you’re in a hole – stop digging. You’ve now stopped borrowing and living on make-belief money with your credit cards, and you’ve got a game-plan to attack your debts starting with the smallest.

Now speed it up. These ideas will make it really clear how serious you are in becoming debt free:

• Have a garage sale and sell so much stuff the kids are getting nervous that they’re next.
• Sell the car with the killer payments and get a $4,000 car you can pay cash for.
• Take any savings account at 2 or 3% and put that money onto your debt. 3% savings vs. 19% interest is an easy choice.
• For at least 90 days, don’t set foot inside a restaurant unless you work there! Think macaroni and cheese – that alone will put you $300 or $400 ahead each month.

Is it worth it? Only you can decide. But don’t tell me that you’re hurting your family when you do this. It’s quite the opposite. Debt freedom and financial responsibility is one of the greatest gifts you can give to your family.