Saving Money Is A Choice?

An opinion piece by Jerry

My wife and I finished buying our children's clothes and school supplies 2 weeks ago.  It was a lot of money to spend in one weekend, and there is more to come with school fees and the fall sports/activities registration coming up.  In fact we have found mid August to mid September to be more expensive than Christmas for our family.

We are fairly frugal, and my wife is amazing with a budget.  Before we did any clothes shopping she went through the kids current clothes to see what still fits and the shape of the clothes.  None of them had much of a growth spurt this last year, so many of the clothes can be worn again, those that didn't fit were given to friends that could use them or to goodwill.  There were a few new things they needed, so we made a list.  We went to Old Navy and stuck to the list.  Old Navy carries its own brand and doesn't carry popular brand name clothing, but the quality and prices are decent, although we did notice price increases over last year.

Save Money On Summer Vacation

Summer provides us with an opportunity to spend time with family, but it is also a time when we spend more on driving, camping, hotels and restaurants.  With so many people taking a hit in the wallet the past 2 years there are many who are looking for ways to have the family trips without blowing their budget.

Hotels:  Hotels have a wide variety of costs.  Sometimes paying for the most expensive hotel does not mean the nicest stay (although the service is usually better), but choosing the lowest priced hotel can often lead to a bad experience.  There are many websites that allow former customers to rate their hotel stay.  People will submit their opinions on location, service, cleanliness...  It's a great way to see if a hotel is worth staying at.

5 Tips To Better Mileage

Summer is a time when people drive.  They drive for family reunions, for vacations, and just to get out while the weather is nice.  It is also a time when gasoline prices rise and everyone grumbles about them.  There isn't really anything we can do about gas prices, but there are 5 things we can do to improve our mileage so we don't have to buy as much gas.

1.  Driving at the right speed.  Most vehicles built since 2001 get their best mileage between 90 km/hr and 105 km/hr, which speed is best depends on the vehicle.  Fuel mileage declines rapidly as you go over the 105 m/hr mark.  A heavy foot will cost you money for gas.  Slow down a bit and you will save.

2.  Avoid stomping on the gas and then stomping on the brakes.  A vehicle uses a lot of gas when it is trying to accelerate, even more if you are trying to accelerate quickly.  Learn to slow down a bit arriving and leaving intersections and stop lights.  This will reduce gas usage and save you money.

3. Don't idle a vehicle.  Idling not only uses up fuel, but it is also hard on an engine and not good for the environment.  The engine does not fully burn the fuel because it is not running at its hottest, meaning you are just wasting fuel.  Many people run a vehicle to run the air conditioning or the heater.  For air conditioning, it is far less expensive to roll down the windows and turn the vehicle off.  For warming up a vehicle in the cold winter, it is far better to let it run just for a minute or 2, and then drive (with the windows scraped off).  The engine warms up much more quickly driving than it does idling.

Finances in Your 50s

On past blog posts I wrote about how your 20s and 30s are mostly about debt - gaining debt and trying to control debt.  In your 40s you are transitioning away from gaining debt to paying down debt and hopefully starting to build up assets that will support you in retirement.

In your 50s you should be completing the transition away from debt and focusing on preparing for retirement.   You should be making some extra payments on your mortgage, paying off credit cards completely whenever they are used, and have all vehicle loans at a minimum. 

As the debt decreases, the ability to add more to your retirement fund grows.  Throughout your 50s you will most likely be at the height of your earning potential, which will also allow you to add more of your income to your investment portfolio.  Usually, if you are in a relationship, both people are working, which provides a greater opportunity to increase your retirement fund holdings.

Money Lessons My Kids Taught Me

My family reserves one night a week for just us.  We try not to book anything else so that we can do an activity together, like swimming, playing board games, and sometimes holding a family council.

This past week I was taught an important lesson concerning how to teach my kids. It came in 2 parts.

Part 1:  For our family night my wife and I decided to help teach our children about budgeting and saving money.  We went through a brief discussion about separating their allowance (based on chores done properly) into spending, savings, and long-term savings.  We used lots of examples of things they could save for that would take a few months to do (iPod Touch, horse riding lessons...).  We tried to emphasize that by saving some of the spending money they would achieve their goals more quickly. We then decorated 3 boxes for each child, giving them a place to store their money as they saved it for the 3 different purposes.  I though it went pretty well, until we were starting to clean up and the 3 oldest immediately asked if they could go to 7-11 to buy a slush.  It was a "slap my forehead in frustration" moment.

Kids Learn about $ from Parents

I've written articles about teaching youth about finances before.  I wrote about using games like Monopoly or the Game of Life to teach youth about budgets and incomes.

Rocky Credit Union goes into schools (those that let us in) to teach a class about needs vs. wants, online banking, debit cards, credit cards, and student loans.  In these classes I often ask the students "How do you learn about controlling your money?"   The usual response is from parents, friends or their job.  A few students have responded that they don't ask their parents because they are always in debt and can't teach them anything about handling money, and a few others have said they really haven't learned anything about money from anyone.  This is scary considering most of these students are grade 10 or 11 and half of them already have part time jobs.

There are 2 key things parents do to teach kids about money:  1. Teach by example, and 2. Talk to kids about money.

The Story of 4 Little Pigs

Once upon a time there were four little pigs, brothers all, who decided to head out into the world and build their own homes.

The first little pig didn't want to spend much time or money on his house as there were many more enjoyable activities he could be doing.  He hastily built a frame, found some straw and hay in a nearby field, and put it all together one morning before heading out for a round of golf with his buddies and then an all-nighter playing Pinkeneye 007 on his porkstation 3.  He laughed as he walked by his brothers' yards and saw how hard they were working on their homes. 

The second little pig didn't want to spend any money on his house as he wanted to save as much he could for retirement.  He was afraid that he might have to live in a pig pen if he didn't have enough money saved for his senior years, so he never spent anything extra.  He didn't have any experience building a house, but he found some free plans at the local library, gathered the sticks from discard bins at local wood yards, and found some used twine at a local post office.  He spent several days putting the house together, an activity made more difficult because so many of the sticks were crooked and the twine often broke.  When he was done he went to Cost Club to eat the free samples as a reward for how little his house cost him.  He shook his sadly as he walked by his brothers still building their homes, knowing that they had spent more money than he had, but he felt sorry for them wasting all that money on their houses with retirement only a few decades away.

Avoiding The Debt Trap

I presented a seminar called "Avoiding the Debt Trap" at the Rocky Public Library on Thursday, Feb 3.  I have included some of the highlights and a link to the slide show that I used (500 kb).

Avoiding The Debt Trap

Debt is an obligation to pay for money/services given out, often at an additional cost of interest

When do debt problems start?

• Usually when spending more on wants than needs
• Spending more than is taken home
• Put extras on credit cards and don’t pay them off

Controlling Your Wants

• Write down what you need and their costs - Mortgage, rent, insurance, food, medicine
• Write down what you want and their costs - Cable, phone, movies, meals, vacations
• Look at take home income, figure what fits - Needs come first, wants can be postponed and may even change with time

Common Bad Debt

• Vehicle (truck or car)
• Quad & snowmobile
• RV, motor home
• Vacation
• Sports
• Entertainment (movies, bar, TV)
• All things that while enjoyable, but add no money to savings, no value. They cost money, but there are no monetary returns.

Choices - Avoiding debt or getting out of debt is about choices

• Choosing needs over wants
• Choosing long-term over short-term
• Choosing to control your lifestyle and its costs vs. your lifestyle

For full details from the presentation, please go to the slide show pdf (500 kb).  Any comments or questions, please post them and I'll get back to you as soon as I can.  Jerry

2010 Personal Tax Info

We are approaching the end of another year, which means Christmas is close, but so is the 2010 financial year.  The following is some tax information that you may want to review as the year draws to a close.

The Federal Income Tax rates for 2010 are as follows:
•15% on the first $40,970 of taxable income
•22% on taxable income between $40,970 and $81,941
•26% on taxable income between $81,941 and $127,021
•29% of taxable income over $127,021
The Federal Basic Personal Amount in 2010 is $10,382

The Alberta Income Tax rate is 10% of taxable income.  The Alberta Basic Personal Amount is $16,825.

Typical Wedding About $26,000

A little over a year ago I posted an article called The Cost of a Wedding.  The typical cost of a wedding in 2009 was $26,000, an amount high enough to make me look it a couple of times and shake my head in disbelief.   The Globe and Mail recently posted an article about a company that makes princess dresses for little girls at a cost of $1,600.  Anecdotally. I surveyed a few young ladies who graduated last year and the typical cost of their grad dress was about $1,000 plus another $200 for alterations.  I asked them if any of them have worn it since the grad ceremony and none of them have.

As Canadians start their Christmas shopping, I would encourage them all to think of this: is what you are buying for your friend or family going to be worth the price?  Will it last or be used more than once?

Games That Teach About Money

In my quest to help youth understand the importance of budgeting, avoiding unnecessary debt and saving money, I have looked at various board games as teaching tools.  Some games, like Life, has aspects of what I am looking for but is too unrealistic.  I have altered the rules to Monopoly, adding savings account and mutual fund options, and most recently making GO a salary based square where the salary goes up and down with education and may even be missed if you lose your job with a Chance card.  That version is actually coming very close to what I want, but I have some minor tweaks to do yet.

A game that my eldest son has been playing over the past couple of months is called Record Shop Tycoon.  You start out in a small store in a poor location (it's all you can afford) and then are responsible for stocking music CDs to sell to your customers.  The game takes into account neighbourhood buying patterns, supplies

5 Tips To Help In A Tight Economy

No matter how you look at it, the economy is going through some difficult times, and many Canadians are facing tighter budgets than they have seen in a long time.  The following are a few tips that can help people manage their finances through the ups and downs ahead.

Watch out for high interest rate debt
As of Oct 31, 2007, there were over 64.1 million credit cards in circulation in Canada.  Many of these cards charge standard interest rates of 18% or more.  The way most credit card payments work is that your monthly payment will cover the interest charged and 3% of the balance of the card.  If you have a balance of $2,000 on your card, and you make the minimum monthly payment, this means that after 5 years you would have paid over $830 dollars in interest, and still have $321 left to pay on the card.

Financial Articles For You

I have found a few Financial Articles that I think may be of some interest to you.  I'm linking to the specific article, as I don't always agree with everything on the website itself.
Enjoy.

An Interview With The Millionnaire Next Door - Get Rich Slowly Blog
Eight tips for feud-free estate plans - Financial Post
Keeping the farm all in the family - Financial Post
Feeding yourself on a dollar a day - Macleans

If you know of a good financial book or article that you have read, please post a comment about it below.
Jerry

Healthy Financial Life

In February I wrote an article about the habits of a “Sick Financial Life”.  It was very easy to write as the problems listed are common habits that we see harming our members on a regular basis.  Today I decided to look at the positive habits that we also see on a regular basis (but we do see people in bad situation more than those with good, after all, the doctor doesn’t tend to see the healthy people).

The people we see who are leading a healthy financial life either have or are doing the following:

1. 1.    Set realistic short term and long-term financial goals.  They then create and stick to a plan in order to achieve them.
2. 2.    They know their financial situation.  They keep track of debt monthly, and review their investments at least annually.
   

Sick Financial Life

Financial problems come from all sorts of sources and can create havoc in quite a few different ways.  I just want to let everyone know about some of the most common and harmful financial situations that we see on a regular basis.

• Too much consumer debt – It has been a very tough 18 months for many people, with lay offs and reduced wages for many households.  Unfortunately, during the boom times, many households were buying vehicles, expensive toys, and going on vacations and did not put much away for a rainy day. 
  

FP - Golden Years Postponed

Just a few articles from various sources this past week that I thought you might find of interesting.

Financial Post - Golden years postponed
Globe Investor Blog – How to avoid taking on too much mortgage debt
Financial Post, Wealthy Boomer – Canadians flunking test on TFSA
Financial Post – Crack that nest egg

I'm not trying to create a downer of a post, it's just that the articles came out that way this week.
Jerry

Youtube Budget Series

There are quite a few sources for people to turn to when trying to learn about budgets and finances.  As a part of trying to help our members have the best knowledge and advice available Rocky Credit Union created this blog.  Now we are also doing Youtube videos.

The first videos are about budgeting.  With this difficult economy it’s a topic that many people just don’t know enough about.  We hope our videos can help.  We will also be doing videos about saving and investing, what to look for when getting a mortgage, and quite a few other topics as well. 

Check out our Youtube videos at myrockycu.
Let us know what you think.  Jerry

Has Your Spending Changed?

Alberta and most of Canada had some pretty amazing economic years from 2001 through 2007.  With lots of jobs and low unemployment, there was a fair bit of money to go around.

Quite a few people invested the extra money they were making, some put it into much larger houses, a few paid down debt, and others used it as a down payment to buy boats, quads, ski-doos, RVs and other somewhat expensive luxuries.  Whether those actions were right or wrong is not the point of this article.  My point (question) is this:  With the drop in the economy, possibly a reduced income for you and your family, has your spending changed?

Youtube Budget Contest Over This Friday

Just letting everyone know that our Youtube Budget Contest deadline is this Friday.  If you are between 15-21 years old, check it out.  You could win $300 and other stuff (I think it's cool stuff).  We don't have a lot of entires yet, so with 1st, 2nd and 3rd prizes up for grabs you have a pretty good chance of winning something.

Check out the contest page
Jerry

Finances In Your 40's

In the Finances in your 20’s and 30’s articles, I wrote that those two decades tend to be a lot about debt: accumulating debt, living with debt, trying to control debt.  In your 30’s, hopefully people start a bit of saving for retirement, emergency purposes, and children’s education as well.

Finances in your 40’s changes things a lot.  In your 40’s you are probably on your second or third home.  Hopefully you haven’t gotten the largest home and mortgage possible, as this could cause problems for the financial effectiveness of this decade.  This is the decade when you should be clearing off your debt, ending your 40’s with only a mortgage as debt.  You are approaching the height of your earning potential, and with that money you should clear off credit card debt, pay down your mortgage at more than the basic payment, and start seriously saving for retirement.