Tag Archives: savings

When It’s Raining You Need An Umbrella!

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

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

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…

Want to Assure Your Teenager Succeeds? It’s Three Things

The Wall Street Journal recently reported on an extensive study of teenagers and their odds of being in poverty. The stats were pretty depressing, but the way out was also quite impressive and easy.

No matter what background, ethnicity, poverty growing up, etc. the odds of any teenagers getting into, or staying, in poverty are less than six percent if they just do three things:

Finish high school

Hold a full-time job

Don’t marry or have a kid until after age 21

That doesn’t seem so hard. If that’s true, the odds are more than 94% that your teenager will have financial success for a lifetime. If any one of these three isn’t done, the odds increase quite quickly, because each have a significant ramification on their income and lifestyle.

These three basic things really are incredibly important for any teenager to know – and to carry through on.

Step two would be how to now become financially successful. That also isn’t that hard to do. In the Money Tools book is a two page chapter on how to make your teenager a millionaire. In short: Save $9,300 by the time you’re 21 and invest it. The money will double every seven or eight years until they’re ready for retirement. At that point, it’ll be over one million dollars without saving another dime.

The challenge for parents or grandparents is that their kids or grandkids don’t listen to them. Yes, it’s true – I hear that over and over again. It doesn’t help that 80% of parents don’t talk to their kids about money or finances, but that was then – this is now. You can’t live for a better past and you need to remember that you can’t make a horse drink. Lead them to water and remember that, when the student is ready, the teacher appears.

Go to Mosaic (they have a bunch of signed copies) or to Amazon and get the Money Tools book. When they’re ready, they’ll use it. But don’t wait for the “ah-ha” moment where they tell you that you’ve been right all along and now they’ve seen the light. It won’t happen! You have to know that they’ll learn when they’re ready. All you can do is give them the tools and the information and keep an open line of communication. That way they know they can ask without judgments or lectures.

That’s it! I harp on this every week and maybe get one or two emails a month with positive feedback. If I were to think I should be getting hundreds of emails, I’d be incredibly depresses. It’s my job – and your job – to plant the seeds. It’ll be their job to grow up and to grow those seeds into something beautiful – if they choose to – and when they choose to.

Financial Worries Are Literally Making Young People Sick

A study of millennials, those around 18 to 35 years old by Northwestern Mutual, found them to be anxious, worried, sick, and often depressed about their debts and finances.

The study found about 70% of this generation experienced anxiety because of their incomes, and 53% because of worries in losing their jobs. More than a quarter of them admit that their financial stress impacts their job performance. Of course it would! Imagine a lot of debt and barely being able to make it through the month. Now your boss wants to see you. What do you think is one of the first things to flash through their mind? Oh boy – I might lose my job. And what do you think the odds are that someone in financial stress will every stick their head above the crowd or would ever make any suggestions for fear of being targeted? No chance.

Their cell bill gets paid on their credit card, one paycheque is wiped out with rent, the other will their car payment, utilities, and other necessities. Then the credit card for spending money to keep up appearances while they’re sinking further into the hole.

It’s not a fun way to go through life – whether it’s older adults, or those just out of school and now working. That kind of stress leaks out. It’ll manifest itself in physical sickness or depression. But that happens when nobody is around. I’ve been there – I’m not making this up! To the world, and most often to their parents, they continue to put on their happy face as if everything is great.

There are solutions. They’re not complicated and won’t take all that long to implement – honestly.

First, get down to Mosaic, or go to Amazon, and invest the $20 in the Money Tools and Rules book. No, it’s not a cop-out for me to make a net of $4 from you. One-third of the book is literally targeted to millennials. Three chapters in there will give you the tools and confidence to change your life around. You may not do it – but that’s up to you. Here are a few steps that will decrease your financial stress in a hurry:

Pay out your cell contract and switch to a 2nd tier carrier like Koodoo or Fido for around half of what you’re paying. There’s $60 a month

If you have a credit card balance, switch it to one that’s 11% not 20% and no annual fee. On a $4,000 balance, there’s $150 or so a month

No more lunch, snacks, or coffee out until you get your finances under control: Your work has coffee – no it’s not the same, but it’s free! There’s probably $200 if you were to be honest with yourself.

$400 saved right there is the same as a $600 raise. Now get a no fee savings account and put at least $75 a paycheque in there. Within six months you’ll have $1,000 in emergency savings and $2,400 less spent that’ll show up in your lower credit card balance or chequing account.

There’s more – but just do this for a six month test drive. If you’re overwhelmed, email me off the back of the book at yourmoneybook.com

My Savings Are Missing

I’m confused, and don’t have a good answer here – just questions:

If you lose five pounds, you can step on a scale and see that your weight is down and – yes – your five pounds are gone. You have actual evidence of it!

That’s not the case when it comes to our so-called savings. If a store sells you something at 30% off, where’s that 30%? You paid $200 and saved $60, but you never see the actual savings! Sure, you have less of a charge on your credit card, or that supposed extra $60 still in your bank account – but it’s not the same as seeing it.

When you realize you should cut out one of your many weekly stops at Tim’s or Starbucks, intellectually you realize you’ll be ahead about five or six bucks every week. You might even do the math and get pumped that this translates to almost $300 a year, and you’d be right. Except there’s one problem: Where’s the money? Show me the money! There isn’t a cashier or someone who sends you that $300 a year and THAT is what makes it hard to stick with the plan, at least in my opinion.

I recently quit smoking and converted to vaping. It was a $130 one-time expense for the battery, cylinder and liquids, and it is a lot less chemicals in my lungs, and a lot of so-called savings over buying cigarettes. I actually did a little excel sheet now taped on my fridge to motivate me by looking at the savings in not buying cigarettes. That excel sheet says I’ve saved $244 bucks so far. But I don’t see it, or feel any richer! Where’s my money?

I’m still motivated, but not as much when I started to realize there wasn’t actually any extra money coming my way. It stinks that I don’t have any answers. Sure, I’m not spending the money on cigarettes a day, but the only way to HAVE that saving is to spend it daily and put it into a jar. Yet, somehow I don’t have that kind of money. Who has an extra $10 to $14 a day? Yes, I had it every day, come heck or high water to buy cigarettes. But when it comes to saving it, spending it to save makes little sense to my brain. If that’s my best thinking, small wonder others don’t bother skipping Tim’s or Starbucks…

When You’re In Charge of Your Own Retirement Finances

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%

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!

Paying Less This Year & Saving $1,400 the Easy Way

Some Things That Will Cost Less This New Year

4K Televisions: If you haven’t seen one, you should. The resolution is two or three times better than a high definition TV. But these 4K TVs were in the thousands of dollars just a year or so ago. They’re dropping quickly – as everything in electronics does! Walmart in the U.S. now has the Avera 49″ for $249. That won’t be the Canada price, but you can use it as a guide.

Small cars and sedans: California sells in a month what Canada sells in a year. So the U.S. sets price trends and U.S. customers are still buying SUVs and big vehicles like crazy. That makes you crazy smart if you buy a small car or sedan that isn’t selling. They’ll see price reductions and rebates the entire years. And you’ll be even smarter if you buy a two or three year old!

Some groceries: Beef, veal, fruit, and eggs should see a decrease this year, according to the department of agriculture. That’s assuming normal weather and, in the case of most fruit, a stable exchange rate.

Certain Apple products: If you’re an Apple fan, the second half of the year should bring a bunch of price drops on Apple computers, iPads and phones. And what nobody seems to know is that the Apple website has a hidden section where you can get refurbished products right from the manufacturer at great prices!

Airline tickets: According to Expedia,  2017 will give you lower prices and more selection. Supposedly prices should be those of 2012, which would be great! Anecdotally I’m seeing that already with three flights I booked in the last week.

Cell plans: Rough rule of thumb is that you need to re-shop your cell plan every 18 months or you’re probably overpaying! The competition is heating up again, in the U.S. any contracts are gone, and Wind is trying to increase their business a lot since Shaw bought the company!

52 Week Saving Challenge

Can you save three dollars this (third) week of January? OK, can you save four bucks next week?

The 52 week saving challenge was put out by the budgetnista blog. The challenge is to save a dollar in the first week, and add a dollar for each week after that. You’ll have almost $1,400 saved at the end of the year – one dollar at a time. I don’t know about you, but that’s a lot of money, and it starts with a buck.

Yes, it’ll be harder in week 40, because you’ll be saving around $200 or so come October. But is having a $1,400 savings account worth it? Only you can decide.