Gail Vaz-Oxlade's Blog, page 28

How much to Your RRSP?

Are you planning on contributing to your RRSP for 2014? Will you make a smaller contribution than you did last year? According to the Stats Man, even as our spending on crap has gone up, RRSP contributions have been on a steady decline. Fewer people are contributing, and the amount we’re socking away is falling too. In fact, we only used about 24% of those eligible contributed to an RRSP in 2011. And we socked away just 4% of what we were entitled to put away in RRSPs.

According to two big banks, fewer Canadians are planning to put money into an RRSP this year. They say they can’t afford it. That’s what happens when you prioritize spending over saving and don’t pay yourself first. The Wealthy Barber must be cringing!

Scotiabank and Bank of Montreal both say people have other expenses, like car payments, credit cards and lines of credit, that are preventing them from making a contribution.What’s I find interesting is the discrepancy in their surveys. Scotiabank found that 31% planned to contribute to their RRSP, down from 39% last year while said 43% of those surveyed planned to contribute, down from 50% in 2013. Since they always claim their surveys are coronet to within a hamster’s whisker, does that mean Scotia’s customers are more indebted than BMOs?

Regardless of the excuse, this unwillingness to use an RRSP to save for retirement totally blows my mind. The tax-man wants to hand you back money you would be paying in taxes and you’re going to let him keep it? Really? You can’t find a single thing – pay down debt, boost your TFSA, go on vacation – that you’d rather do with that “tax” money?

If you think that because you can’t dump a whack of money into an RRSP it’s not worth thinking about, you’re a dope. Every dollar you save now, is a dollar plus growth that you’ll have when it comes time to hang up your spurs.

Put $50 a month into an RRSP, and give your money 25 years to grow at an average return of 5% over the long-term and you’ll almost double your money: you’ll have put away $15,000 but you’ll end up with $29,775.

Give yourself more time, and the results are even better. Let’s say you start contributing at 25 and do so until the normal retirement age of 65. You’ll have $76,301 just by socking away $600 a year. Com’on, you can find $600 a year.

Up your contribution to the mean contribution for 2008 — $2,680 – and in 25 years you would have $133,394. In 40 years you would have $341,829.

Don’t be sad about how little you can save today. And don’t let a small contribution stop you from starting. Find the first $50 a month and aim to get to the $233 a month you need to meet the median contribution amount. Then keep going from there.

You can use your tax refund to boost next year’s RRSP contribution. That’s a great way to build up your savings. Allocate half of your next raise to savings. And you know all that money you’ve been wasting on some bad habit? Why not use it instead to build a future.

Plan now to start contributing month, and this time next year you’ll have formed a habit that’ll do you good for years to come!

I think one of the reasons people may be using RRSPs less is because they’re funneling money to their TFSAs… with limited resources for saving, something’s gotta give. The government, of course, is laughing all the way to the bank. With the switch to using TFSAs, they’re issuing fewer refunds; that’s more tax money in their pockets to spend telling us what a great job they’re doing. In the mean time one of the best savings vehicles languishes. Yes, there are people for whom a TFSA makes a lot of sense. But once you’re making more than $40K a year, if you’re not using an RRSP it’s likely because you’ve bought the claptrap about RRSPs being crappy. They’re not. They are stellar and they’ve helped me save for my future. Don’t just react and not contribute; crunch the numbers and see for yourself.

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Who’s In Charge Here?

Are you sure you’re in charge of your life? Or could it be that you’re actually a product of all the programming you’ve been given? From childhood and the need to live by our parents’ rules, through school age and all the rules imposed there, to adulthood and the need to fit in, we are being programmed. Little ones say what they want to be when they grow up and their ‘dults smile smugly, “That’s NOT going to happen, don’t get too big for your britches.”  Young’uns want to change the world and they hear, “You’re only one person, how much of a difference do you think you can make.” Most of the messages are designed to keep kids, and then young adults, and finally even old adults, in their places. Follow the rules. Don’t rock the boat. Be a good girl.

So how do you take back the control for your thinking?

I believe it starts by deciding what you really, really want. This isn’t about what you can achieve, or what you can accomplish. It’s about what you really, really want from your life. You have to imagine. You have to look outside the box. You have to be willing to try and fail and try again.

It is a little sad that we live in a society where many people measure themselves by their STUFF instead of by their growth. I’ve been lucky in my life. I’ve had the opportunity to try new things. I’ve had the opportunity to grow. But part of the reason I’ve been so happy is that I’ve faced changed with optimism and excitement.

You’ve seen those random pictures of plants growing up through cement, right? We see trees clinging to cliff-sides. We see remarkable evidence of determination to survive and thrive. Why don’t we have the same sense of determination for our own personal growth then? Why are we willing to measure ourselves by the shortest of rulers?

If what you’ve been doing until now isn’t making you happy, if you don’t like the results you’ve been getting, maybe it’s time to change the way you’re thinking. Break through the cement set around your thoughts as you were growing up. Find the sun and air and water you need to thrive and be happy. Change the way you look at things, and what you’re looking at will change.

Answer these questions:

How meaningful is your life? (rank it on a scale of 1-10)
Are the things you’re currently spending your time doing adding to your sense of meaningfulness? (how?)
If you could do anything you wanted to have a more meaningful life, what would it be? (write them down)






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This & That: Mish Mash Edition

L Wrote: I have power of attorney for my Mom.  She’s 90. She has invested wisely and is comfortable for the rest of her life. She has a nice problem-too much money in GICs that are due and too much money in her regular bank account! She wonders what to do-doesn’t need over 60 thousand there. Should she put a lump sum in the gt-grandkids education fund? Give a lump sum to two children, two grandchildren and two great-grand children? Will this avoid death taxes? She will probably have between 175 and 200 thousand when she dies.

Gail Says:  Your mom is in a lovely position, and it’s great that she wants to share her money while she can watch her children and grandchildren enjoy it. First off, we don’t have “death taxes” in Canada they way they do in other countries like the U.S. If that money is unregistered (not in an RRSP or RRIF) it would pass to her heirs without taxes, although if it did go through her will there would be probate fees. Probate fees are provincially set, but on an estate of $200,000, the fees in Ontario would be about $2500. On $260,000 it would be $3400 (yes, it’s on a sliding scale). So by giving away that $60,000 ahead of her death, should would not only be able to enjoy the gift giving, but save about $900 in probate fees. Here’s an example of a probate fee calculator for your reference: http://www.yaleandpartners.ca/calc_pr... There are plenty of these on the Internet, and you can find one for your province using Google.

There is also no “gift tax” in Canada, though transferring money to a spouse or minor child can have tax implications. Gifting cash to adult children and making educational savings contributions or cash gifts to non-child minors are no problem.

A Wrote: My sister has been on disability for over a year, and they finally have diagnosed her with a rare, genetic disorder called Fabry’s Disease. Life expectancy ranges from 40-70 years for a woman with this condition, but it can lead to severe pain in the extremities amongst more serious complications. There is a good chance my years of being able to work will be limited as I show many similar symptoms and now have to go for testing myself. My sister was 33 when she had to stop working (she will be 35 next month); I will be 33 in August. Her husband makes $100,000 a year so they are okay with their income and her disability cheque. I have term life insurance for $250,000 that has another 7 years left in the term plus a year’s salary in life insurance through work. We own a small home with a mortgage of $535 including property taxes bi-weekly. My husband makes $1,350 take home biweekly and I earn $570 weekly take home after daycare costs currently with 2 girls (ages 5 and almost 10). Do you have any recommendations to someone in my situation to get their financial house in order to help deal with a loss of health as smoothly as possible?

Gail Says:  I’m very sorry you have this significant trial ahead of you. I’m sending you many hugs.

What you really need is disability insurance that will replace your income when you have to stop working. Unfortunately, once you get a diagnosis, or it is perceived you had a pre-existing condition, you can’t get coverage. This is one reason I strongly encourage people to get individual disability insurance early in their lives. But that’s a bridge already crossed so let see what options you have now.

You need to look for ways to trim back your costs so that as your income goes away, because you’re able to work less, you’re able to manage your costs on your husband’s income. I strongly recommend that you learn to live on one income NOW. Your income should be used to get rid of the mortgage and build up a whack of cash so that when it does go away you’re very stable financially. If this seems impossible right now, don’t lose hope. Breathe, and then start cutting back.

You will also want to make sure you’re spending quality time (not expensive time) with your girls so you’re building heaps of wonderful memories together. And start investigating pain-controlling options outside of medication: you might want to look into massage, meditation, acupuncture. You want to build an arsenal of skills/options to deal with what’s coming.

You have some time to plan, and from your question, you sound like a strong, practical woman. There will be days you don’t feel so strong, so get started now while you still have the energy and determination. And remember to be kind to yourself. You can’t do it ALL; do what you CAN.

K Wrote: I have just received a settlement from a lawsuit (for long-term disability benefits owed). I am planning to pay off my debts including 2 small credit card balances and do some upgrades to our home. My question is how do I manage the balance of the settlement that will provide me with a decent return on investment??  Where do I put my money? Do I pay a portion of our mortgage?  I also have a pension plan in place, through my employer (HOOPP). I am also receiving disability pension from Revenue Canada. I am 42-ish years old and have 3 children, ages 17, 14 and 10. I trust you and adore you for your life-changing ways on all of your shows!! You are truly wonderful. I appreciate your frankness, and humour! Can you help me?? Pretty please??

Gail Says:  Good plan: paying off the debt. Since you have a pension plan and are getting a disability pension, you’ll want to figure out what the gap is between your current income and your expenses. If there is no gap, take half the money and pay down the mortgage so that’s gone as soon as possible. Put the other half of the money into a high interest savings account (you can’t afford to take any risks with this money) at somewhere that pays you more than 1.5% interest. (This is often a better rate than you can get on a GIC, so that’s why I’m suggesting it. When GIC rates are higher, use them.) If you have a gap, you’re going to need to cut back on your expenses or use some of your settlement to fill the gap. Keep in mind that settlement has to last a long time, so spend it as if it was your last piece of chocolate!

D Wrote: I love your shows and the new chapters in your blog. Your advice has helped me tremendously over the years. My question is this:  My husband and I are in pretty good financial shape – we have absolutely no debt at all (including no mortgage as we own our home outright), we have planned spending for every yearly expense we can predict (insurance, Christmas, birthday parties, children’s school fees and activities, etc), we max out our pension plans every year (with the help of my husband’s employer), we have all our insurances, and we put money away for the kids’ futures (by saving the rent we receive from an investment property we own).

We have 6 months of emergency savings that will let us continue living exactly as we are now (including continuing to save) and we have enough money in the bank for a car when our old one stops working (anytime now).

At the moment, we save 36% of our combined net income (as extra savings, not planned spending, and from our “job” incomes not income off investments, which is saved separately). So, considering we are not paying a mortgage, should our savings be more along the lines of 45%? I feel that what we would be putting towards a mortgage – 35% – should be put towards savings and we should save another 10% on top of that. Do you agree?

Gail Says:  I don’t often get to say this: Do you ever feel you’re sacrificing your Today for your Tomorrow? If you’re saving 36% of your income now, why do you feel the need to save even more? How much will be enough? I’m not trying to dissuade you from saving, I’m asking if you’ve evaluated how you’re using your money and if all the saving you’re doing is serving your needs today as well as tomorrow. Think about it a bit. Are there things you wish you were doing that you’re sidelining right now?

B Wrote: I am in my late 20s and have recently purchased a small home with my partner. We are both hard workers and have taken virtually no time off work for the last number of years. We started watching your show over a year ago, and have been strictly following a budget ever since. Neither of us have a problem with spending and we are quite hawkish when it comes to expenses and purchases. But despite this, we keep getting into financially driven fights because of my family. This is because my mother is constantly asking for personal loans.

In addition to the cash (she will ask for several hundred, if not thousands of dollars at a time), she has a credit card in my name which is maxed out at $12K, and last year she convinced one of my friends to loan her $20K. She declared bankruptcy a few years ago, but will not admit her financial situation to anyone for fear that it will damage her business reputation. At that time, as I was younger and felt a responsibility to help, I applied for increased credit limits at her urging in order to take out cash advances for her, something I absolutely hated doing! To make matters worse, she spends a considerable amount of money on alcohol and lives in a ridiculously large house. She gets burnt out from working and will take extended periods off work, or trips down to the USA to visit her significant other. This is a serious source of tension for us, as neither my partner nor I feel that we can take any time off work or afford the cost of a vacation.

To be clear, she eventually does pay me back for the personal loans, but the requests are so frequent that I can never save and I feel constantly feel broke. I feel guilty when my family does not have food, but they are living an unsustainable lifestyle. She also lets my brother live at home for free and encourages him to NOT WORK (he’s a recent university grad).

This week I got a call from the bank that her credit card in my name is past due AND over limit. The years of financial stress have taken an immense toll on my personal happiness and well-being… I need a way out of this mess. HELP!!

Gail Says:  I get that you love your mom. Why the hell does she have a credit card in your name? I expect you’re going to say it’s because she couldn’t get one herself which leads me to… How could that turn out well? And why do you continue to lend to her over and over? You are positively reinforcing her bad behaviour.

At some point you must draw a line. She clearly is having a fabulous life funded by whomever she can get to pony up the money she needs in the moment. When do you plan to stop being her ATM? I can’t believe you’ve put up with it for as long as you have.

Love is a two-way street: you don’t have to be a doormat to keep your mother’s love if she loves you. And if she loves you as much as you love her, why would you create this kind of strain in your life? You can love your mother without supporting her bad habits. And you can love your mother without giving in to her. You now have to learn how.

“I love you mom, but your constant requests for money have worn me out. So no more. I won’t lend you money. I won’t help to bail you out if you can’t manage your cash flow. And as for the debt you’ve wracked up in my name, take my name off the account so it’s not hanging over my head. If you won’t do that, I’ll understand that I’m less important than your having a good time. I’ll always love you, but right now you’re not making it easy for me to like you.”   How’s that?

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Fun & Frivolous Books

Planning to head south sometime this winter to grab some sun. Here are some light and lively books to stick in your suitcase. Or you could just pretend you’re on holiday: spread some coconutty cream on your body and curl up with one of these for a couple of hours. Enjoy!

Nice Girls Don’t Have Fangs by Molly Harper is my latest excursion into Vampire Literature. Some of these books are hugely fun, some just awful. Molly Harper’s writing is funny and her character, Jane Jamison is a peach. First she gets fired. Then she gets drunk. Then she gets dead… well, almost dead. Her drinking companion turns out to have been a vampire with a small crush on her and rather than let her die, he steps in. Having just been turned, she’s trying to figure out the world of the undead while dealing with a very dysfunctional family.  If you’re a fan of the Sookie Stackhouse series, you’ll like Molly Harper’s books too.

You don’t have to love vampires to love Molly Harper’s writing. If you’re not a fan of vampire genre, try And One Last Thing.  With her trademark humor, this biting social comedy tells the story of Lacey Terwilliger’s shock and humiliation over her husband’s philandering. Her response: she adds some bonus material to Mike’s company newsletter including detailed descriptions of the special brand of “administrative support” his receptionist gives him. Her vengence blows up in her face, and Lacey has become the pariah of her small Kentucky town. So Lacey retreats to her family’s lakeside cabin, only to encounter an aggravating neighbor named Monroe, a hunky crime novelist with a low tolerance for drama.

A Little Night Magic by Lucy March was light and entertaining. Olivia Kiskey has been working at the same waffle house since she was a teenager and She’s been in love with Tobias, the cook, for the last four years. Problem is, he’s never made a move. Every Saturday night, she gathers with her three best friends—Peach, Millie, and Stacy—and to drink margaritas while listening to the same old stories.  Along comes Davina Granville, a strange and mystical Southern woman who shows Olivia that there is more to her life than she ever dreamed. As Liv’s latent magical powers come to the surface, she realizes that the dark side of someone else’s magic is taking over good people in town. Now she’s in for a fight!

And for the romantics out there I give you Not Another Bad Date by Rachel Gibson, which was thoroughly entertaining. As if it wasn’t bad enough that Adele lost her true love to a conniving Queen Bee, now said Queen Bee is dead and Adele has been cursed with bad date after bad date. When her perfect sister’s life goes to hell in a handbasket, Adele steps up to care for her through her pregnancy and to watch over her daughter. Returning home to where she grew up – and fled after she was unceremoniously dumped – Adele runs into Zach Zemaitis, a former pro football star and Adele’s one true love. Is this destined to be yet another bad date?

In Criminal by Karin Slaughter Will Trent is an agent with the Georgia Bureau of Investigation who is being kept off an important case by his supervisor and mentor, deputy director Amanda Wagner. Will can’t figure out why… and then… the two literally collide in an abandoned orphanage they have both been drawn to for different reasons. Decades before – when Will’s father was imprisoned for murder – this was his home… 40 years earlier when Will Trent was born, Amanda was just starting her career at the Atlanta police department. One of her first cases was to investigate a brutal crime. Now that case has come back to life, and it is intertwined with the long-held mystery of Will’s birth and parentage.

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My Greatest Luxury

When my girlfriend, Jen, salivates over a $36 lipstick, I just smile. Lipstick is her thing. She must have 30 or 40 of those puppies sitting in her drawer at home, never mind the three in her handbag, the two she keeps in her desk drawer at work, or the extras she has stashed in the pockets of jackets and various purses.  And if Jen ever wants to tell her boss to peeze off, her lips are going to look damn fine as she forms the words. But that’s about as much as those lipsticks are going to do for her.

I, on the other hand, have a big fat FU account. I don’t collect lipsticks or shoes or jewelry. I collect cash. I’ve long known that the greatest flexibility in life comes with have money in the bank. Cold, hard cash, that’s my luxury.

A beautiful suit can build your confidence if you’re going in to close a deal, and having on a stunning pair of shoes will no doubt make you feel like you’re walking on air, but nothing beats cash for giving you an aura of, “I’m great, thanks.”  You’ll sleep better and you’re far less likely to compromise your values (and kick yourself in the ass over and over).

Running late for an appointment? Ever noticed how that’s the day you can’t find a parking spot. And it seems you’re constantly apologizing for the rest of the day.  But if you’ve got extra time because you left early, you can cope with the absence of parking without losing your cool, so you can walk into your appointment in control.

Time is like money: have some extra on hand, and you have the ways and means to cope with whatever life throws at you. You don’t have to end up borrowing, adding interest and fees to the weight on your back. You don’t have to scramble to figure out how you’re going to pay an unexpected bill. And when your boss makes that last demand that’s beyond unreasonable, your pretty – if bare – pouty lips can form the words, “Peeze off” because you’ve got a huge stash of cash just waiting to step up to the plate.

The next time you’re caught in the sights of a consumable luxury – an afternoon double espresso, something bright and shiny, or a new name-your-pleasure – think about all the confidence and panache you will exude with enough cash in the bank.

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New Year, New TFSA Contribution Room

Doesn’t everyone know what the TFSA is yet? Apparently not.

I’m surprised when I meet people who don’t yet have – or even know about – Tax Free Savings Accounts. Have you been living under a rock? With a new year around the corner, this is a good time to think about opening up a TFSA. And if you’re not maxing out your TFSA, you should make doing so one of your new years resolutions. Why? Well, here are five good reasons:

1. Earn tax-free income. This is the only way to earn tax-free income on your money no ifs, ands or buts. It’s dead simple too. Stick your money in a TFSA, earn a return, pay no tax on that income. What’s to figure out?

2. Growth is slow and steady. Sure $5,000 this year may not seem like a lot  but over time small contributions really add up. Put away $5,000 a year for 20 years, paying no tax on your 4% return, and you’ll end up with $151,839, $13,000 more than if you were being taxed on your return, assuming you make between $40,000 and $80,000 a year. Higher incomes mean bigger savings. So do higher contributions, since now you can contribute up to $5,500 a year.

3. Choose from a variety of investments. Sure, it’s called a “savings” account, but that’s referring to what you do with it, not because you have to settle for “savings” rates. You can buy anything in your TFSA that you can buy in an RRSP, so you can aim higher in terms of return if you’ve a mind – and a risk tolerance profile – to earn more.

4. Catch up missed contributions. If this is the first time you’re hearing about TFSA, you haven’t missed the boat. And if $5,500 seems like a fortune you can’t come up with, don’t sweat it. You can carry forward your unused contribution room and catch up down the road.

5. Benefit from flexibility. If you’ve been holding off because you’re not sure if you may need the money later, don’t let that stop you from contributing. Sure, it would work against you in an RRSP, but needing to get at your money is no problem in a TFSA. You can take the money out whenever you need it, and then put it back the NEXT calendar year.

6. It won’t mess with your future taxes. Unlike RRSP or RRIF income that is taxable down the road, your TFSA is always tax-free. So money you take from the plan won’t affect government benefits or tax credits down the road.

7.  It’s a great supplement to a pension plan. Want a way to put aside a little extra for retirement without worrying about the amount of extra tax you’ll have to pay? The TFSA was made for you. Save to your heart’s content (up to the annual limit) and you can move into retirement without having to worry about all the extra tax you’ll have to pay when you tap your savings.

Tax Free Savings Accounts are fabulous! You should have one. So should your partner. And all your children over the age of 18. So should your mother and brother and best friend. Spread the word. All that money sitting in taxable savings account should be shuffled into a TFSA lickety-split. Hey, the government’s giving you a perfectly legal way of screwing them out of taxes. Take it!

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4 Rules for Finding Financial Bliss

One thing that drives most people crazy about money is the number of mixed messages the financial world sends out. There are the companies who throw credit at you, offering you cards with the latest bells and whistles: points to fly, free travel insurance, cash back.  They waive low interest rates under your nose and promise you that you can have everything you want right now for just a small monthly minimum payment.  On the other side of this see-saw, the experts are telling you how evil credit is, how it will sap your cash flow and how stupid it is to pay interest. Who would you rather believe? The guy who tells you it’s okay to go shopping, or the guy who calls you a moron for spending money you haven’t yet earned? Rhetorical question, right?

Then there are the mixed messages about saving for retirement: On one side of the teeter-totter are the Joes who tell you that if you aren’t making the maximum contribution to your RRSP every year, cat food will be too good for you. On the other side are the fellows who claim that you shouldn’t even put money in a retirement plan because the government will give you all you need. Who would you rather believe? The guy who tells you to go ahead and spend all your money because saving is a waste or the guy who tells you it doesn’t matter what you do, it won’t be enough and you’re a loser? Hmm.

The insurance industry has it’s own playground toy: On one side sits the boys in the t-shirts that say, “Term insurance is the best.” The lads on the other side are wearing t-shirts with the slogan, “Permanent insurance is the best.” So which is it?

Is it any wonder that people are confused?

While people typically associate me with debt, I’m here to tell you it’s not all about debt. Credit isn’t the monster. Ignorance is. And it doesn’t matter if you’re buying a house, buying insurance, or buying an investment, if you don’t have a balanced approach to your financial life, you’re going to be off-kilter. And if you don’t find the solutions that are right for YOU, you’re never going to get to where you want to be.

The only way to find balance is to be able to hold more than one thought in your mind at the same time… actually 4 thoughts, that’s all:

•          Don’t spend more money than you make, so no credit card or line of credit balances, and no overdraft

•          Save something; how much depends on how old you are and how much you’ve already saved

•          Get your debt paid off; consumer debt first

•          Mitigate your risks with an emergency fund and enough of the right kinds of insurance for YOU.

Have you joined mymoneymychoices.com? Help raise Canada’s MQ (money quotient) by getting smarter about your money and helping others get smarter about theirs. Isn’t it time we eliminated financial illiteracy in Canada?

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New Year, New You

The New Year is the perfect opportunity to take stock of what you’ve done right and what you’ve done wrong, and figure out how to do more of the former and less of the latter moving forward. Here are some lessons you should take with you into 2014.

1.  You can’t spend money you haven’t yet earned. It’s a pretty simple rule, but one that everyone threw out the window when the economy was on an ever-upward track. Using borrowed money is expensive. Using borrowed money to satisfy your every whim is irresponsible and will eventually bite you in the bum.

2. It’s not how much you make, it’s how much you keep. If you spend every cent you make you’ll never have anything. While it might be easy to save when times are good, the real test of your commitment will be to tighten your belt and do without something you really want so you can keep saving even when the money is thin.

3. Credit is good. Debt is bad. Credit isn’t evil. It’s a tool that must be used carefully. Know the rules, and you can use credit to your advantage. Have no self-control and credit will turn into debt and eat your future. It’s easy to buy stuff on credit that we think we must have TODAY! But if you can’t afford to pay for it in full TODAY, then you’re simply indulging yourself. Unmanaged credit has a way of haunting you for eons. Use credit to your advantage – to build a good history, for example – so when there are things for which you must borrow you can do it on the best terms.

4. Debt is NOT going to “just go away.” Prevalent among businesses and individuals alike, it was as if everyone believed that their debt was somehow going to vanish magically. Debt never disappears without a lot of effort. And if you’re buried in debt, you’re going to have to work doubly hard to make it go away. There is no magic.

5. Wishful thinking does not work. There won’t always be more money. When we were living through the good times, we let ourselves be convinced that the work would always be there, raises were guaranteed, and every year we’d be making more money. Wrong. For every up-turn there’s a down-turn. For every boom, there’s a bust. So there’s no time like the present to build up an emergency fund.

6. It’s dumb to invest in something you don’t understand. While the investment world lives to create highly complex investment products that no one can explain, you’re a dope if you buy one.  Whenever you hear of someone offering a too-good rate of return, walk away. It’s easy to let ourselves be convinced that the promised homerun will fix all our previous mistakes. But promises of a higher-than-normal yield come with unstated risks – huge risks – and unless you’re prepared to watch your hard earned money go up in smoke, don’t be tempted.

7. A good financial plan is balanced. A sound financial plan has a firm foundation that covers all the bases. Putting all your eggs in one basket is a good way to see your plan scrambled if you stumble. (This applies just as much to your whole plan as it does to your investment portfolio.) Balancing today’s needs and wants with tomorrow’s is the key to managing money well.

9.  Flexibility is your strongest skill. Companies that can’t respond to changing economic climates fail. People who can’t adjust on the fly as the world around them transitions from one stage to the next won’t fare much better. Having money in the bank helps maintain some flexibility. With money comes choices. The more choices you want to have, the more money you need to save.

While the last year may have left you feeling a little bumped and a tad bruised, how you move into 2014 – your attitude – will play a large part in how successful you are at achieving your goals. Believe in yourself, set a course for where you want to be, and then make it happen.

Make sure you’re having some fun too. Put the things that are most important in your life front and centre. Laugh. And remember that money is only a tool. Use it wisely and you can build the life you want.

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3 Tips to Stay on Track

It’s easy to set a savings goal. “I want to save $40,000.” There. Goal set.

It is much tougher, Much Tougher, sticking it out to achieve the goal, particularly when you’re looking at something that’s gonna take a while to accomplish. Let’s face it, if you’re nine months in and your best friend says, “Enough with the savings, let’s par-tay!” the temptation to put your goal on the back burner can be strong enough to derail your plans.

If you want to stay motivated, you have to find ways to keep yourself on track.

1. Tell everyone what you’re trying to accomplish. One of the biggest problems we have is the fact that money is still a BIG SECRET. We’re afraid of looking stupid for some decision we make that ends up going horribly wrong. But we’re all making mistakes and if we don’t share our mistakes it means we have to make them all over and over, never learning from our friends or family. Talking about what we are trying to do means we  can count on our friends or family to pull us back from the edge when we come close to falling. They become a safety network to help us stay motivated.

2. Keep Your Goals Visible. Post them on your fridge, on the bathroom mirror, on the wall right behind your computer. Put them where you see them ALL THE TIME so you can stay on track.

3. Measure Your Progress. This works for kids and it works for grown-ups too. Draw yourself a thermometer graphic to show how much you want to have saved in the next six months. As you accumulate money, colour your way up the thermometer. There. You have a visual record of your progress to keep you motivated. Once you’ve hit your six month mark, make yourself a new chart that includes what you’ve already accomplished and shows what you want to achieve next.

No matter how well you prepare and how many precautions you take, there will be times when you’re thrown off track by an unexpected setback. That’s life. Having friends to urge you on, going over what you’ve achieved and taking pride in your progress chart are all ways to get yourself re-motivated to get back on track. Whatever you’re facing, it can be a temporary setback or you can let it permanently derail you. It’s up to you.

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Set Some Savings Goals for 2014

With a new year just around the corner, you can keep doing what you’ve always done… but you shouldn’t expect a different outcome. Or you can set some goals and do something different in the new year.

One of the easiest ways to find money to save is to pick a “bad” habit and exchange it for a “good” one. We all have ‘em: those little indulgences that do us no real good, but that we keep doing anyway. Maybe you’re still smoking. Or perhaps you have a 4 cup a day Expresso Macchiato habit. It could be lunch out, magazines grabbed at the check-out or that wicked sweet tooth. Or maybe it’s hanging with friends.

If socializing is costing a ton because you meet in bars, over dinner in restaurants, or at expensive outings, substitute less expensive, equally as satisfying social encounters. Instead of meeting in the pub, have a Friday-night-game-night (the point is to be with friends, right?). Each week you decide what your next week’s location, game and food theme will be, and then you all chip in. If it’s taco night, someone brings the cheese, someone else the veggies, someone else the salsa and shells. That’s no more expensive (except for the gas) than having dinner at home.

When you’re replacing bad habits with good ones you can see the financial benefit right off the bat if you take the time to figure out what you’re saving a week and how that savings can grow.

Let’s say you’ve decided to eliminate coffee on the road by substituting home made coffee and you’re saving $20 a week. Multiply that $20 by 52 to get how much you’d save in a year.

Next, go to an online savings calculator (like this one) plug in your annual savings, a reasonable interest rate (say 6%), and the number of years until you retire.

If you’re saving $20 a week and you’re 30 years old, eliminating that one bad habit will mean $84,000 in your pocket. Yup, $84,000! That some pretty expensive coffee.

You can’t say you don’t have the money to save if you smoke, drink booze, buy lottery tickets, never drive car that more than four years old, pay more than $20 a month for bank charges or carry a balance on your credit cards. Since you have the money to waste on bad habits, you’re just making excuses for not saving.

So, how much are you planning to save in 2014?

Tomorrow: Tips to Stay on Track with your savings goals.

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