Gail Vaz-Oxlade's Blog, page 70
October 25, 2011
School Lenders (Part 4)
Have you read School Lenders Part 1, Part 2 and Part 3?
The 5 C people are most familiar with is Credit History. I am constantly surprised when I hear from people who are in a bind because they have no credit history. This is something we associate with older, widowed women who have been cared for by loving, controlling spouses. But not having a credit history isn't the domain of slightly out-of-touch women; there are men out there who haven't got a clue because their wives do EVERYTHING. And it isn't the exclusive territory of our elders; there are young professionals who haven't bothered to establish their own credit identities.
Your credit history is important because lenders follow the rule, "History repeats itself." They want to see how you've behaved in the past because they believe that's how you'll behave in the future. That's why when you mess up it can haunt you for a long, long time.
Once upon a time lenders also used your credit report to check up on you to see if you were being completely truthful about what you were telling them. Since your credit report has heaps of info on it, from where you live and have lived, to where you work and have worked, to if you've got dependents, lenders could use your credit history to verify the information you were giving them. Not so much anymore. Because the credit score is the go-to source for granting credit (damn! I hate that!), I've met lenders who can't read a credit history properly! OMG!
To build a credit history you have to get your hands on some credit. But getting credit is only the first step. How you use that credit is the real test.
1. Pay all your bills, including your cell phone and utility bills, on time. Setting up pre-authorized payments is a great way to ensure payments are made on time.
2. Avoid applying for credit too often. Repeated requests for credit may be interpreted as a sign that you're in trouble and need a way to cover your butt.
3. Charge regularly and pay off in full. Responsible on-going use of credit will produce a good credit rating. Just having your card sit in your wallet does not.
4. Don't over-expose yourself. Having multiple forms of credit with small balances can add up quickly and become unmanageable.
5. Don't use credit to pay off credit. Taking cash advances on one card to make payments on another means you're in over your head. Ditto using your Line of Credit to make your payment on your credit card. Cut back on your spending, pay off your debt and get back to the business of using credit to keep your record active and healthy, not to spend money you haven't yet earned.
Check your credit history at least once a year. Twice a year is better. And since you can get a free credit report from each of Equifax and TransUnion just by writing in to request it, it doesn't have to cost you a cent. Look for errors or signs of ID theft. My friend Tash found that her credit history had been mixed up with someone else's, which presented problems when she went to get a mortgage. Make sure that if you find an error, you get it corrected lickety-split. And you'll have to follow-up and follow-up. Don't assume the other guy is looking out for your best interests. It may take several calls to get an issue cleared up.
Have you joined School Lenders on Facebook yet? Have your sent your letter off to your member of parliament? Spread the word. Tell friends and family. It's time to insist that lenders learn how to lend responsibly. Next week: More about the 5 C's.
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October 24, 2011
Guest Post: Smart Shopping with Coupons (Part 1)
Now that we've rounded the Thanksgiving Weekend in Canada, the push is on to Christmas. No doubt you'll be squirrelling away all your extra pennies to make it through the holiday season without racking up debt. Here's some help.
This guest post comes from Cassie Howard at MrsJanuary.com. Cassie's website updates daily with new Canadian deals, coupons and freebies. She also posts personal finance and frugal living articles. See the end for a contest. Ooooh, a contest! Here's Cassie:
When the holidays roll around, how do you feel? Excited? Nervous? Stressed out?
If your answer was stressed out, or even nervous, join the club. Many people feel this way when the holiday season hits. How will you pay for presents? Can you afford to host a Christmas party this year? Some of you may even still be paying off last year's credit card bill!
The good news is that it is possible to enjoy the holidays and not break the bank.
Use coupons: Coupons are an amazing way to save money. You can save on all of your holiday food items – but why not take it one step further and save money on cleaning products, health & beauty items and food for your pet(s), as well? It's not that hard to use coupons in Canada, I promise.
There are so many places available to find coupons. They're not just in newspapers, anymore!
Online Coupon Companies: Websites such as save.ca, brandsaver.ca, gocoupons.ca and websaver.ca are amazing resources for coupons of all varieties. You can find cents and dollar off coupons for food items, cleaning products, health & beauty items and many more. Sometimes these sites even have coupons for FREE items – just order the coupon and redeem it for the free item at a store near you.
Tear Pads: I find many of my coupons from tear pads that you can find in most grocery stores and pharmacies. On your next shopping trip, take a closer look at the shelving and display cases and you're likely to find some valuable money saving coupons. You can use them right away, or you can take a few and put them aside until a great sale comes along.
Newspaper: Of course, you can often find coupons in your weekly newspaper. However, unlike in the US, you will not find coupons every single week. You can expect to find Smart Source coupon inserts every 3 weeks, Redplum every 4 weeks and Brandsaver every 3-4 months (sometimes more often). Want to know which newspapers carry these coupon inserts? Where to find Smart Source & Redplum coupon inserts in Canada. (You can find Brandsaver inserts in these papers as well.)
Printable Coupons: There is a bounty of Canadian printable coupons available to consumers nowadays. You can find them by visiting the websites of your favourite companies, or you can visit the link above to see my long list of current printable coupons available to Canadians. Please keep in mind that you can not photocopy printable coupons!
You can also find them on or inside packaging of products you may already be purchasing (such as cereal, milk, taco kits and more) and by emailing the companies of products your family regularly uses and flat-out asking them for coupons (they will usually say yes, and mail some to you). You can even get great coupons from your dentist? Simply ask if they have any to spare at your next visit.
Coupons really are everywhere when you actually start paying attention and actively looking for them. By investing just a bit of time once a week or once a day and seeking out new coupons to use, you can definitely use them to your advantage and save some serious money on your next shopping trip.
Interested in winning a copy of Cassie Howard's eBook Money In Your Pocket? Leave a comment on this post, letting us all know how you save money during the holidays. Two winners will be drawn this week. This contest is available to residents of Canada only.
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October 21, 2011
How You Pay Affects What You Eat
When I read this article I just shook my head. I couldn't believe someone had actually done a study on this. Actually, four studies. As it turns out, when you pay for your food with a credit card, you are more likely to buy crap that's not good for you.
Many of the items that we buy that aren't good for us we buy on impulse. And just as the pain of paying with cash can stop you from loading up on one more pair of earrings, so cash can stop you from loading up on chips, cookies and pop. Yup, cash can curb your spending on crap food.
Professors Manoj Thomas, Kalpesh Kaushik Desai, and Satheeshkumar Seenivasan from Cornell and the State University of New York tried to establish a connection between food purchases and the payment methods people used. They turned to real life shoppers to gather their data.
When the shopping baskets of over 1,000 households were studied over six months, the ones where shoppers were using cards to pay for purchases had much more "impulsive and unhealthy" food. In fact, shoppers who used credit bought 40% more unhealthy food than those who paid with cash.
Cash shoppers found payment much more painful and it is this "pain" that researchers believe make them far less willing to spend on "vice" products. Load up your cart with cakes and chips and swiping your credit card is no biggie. Forking over cold hard cash is not as easy.
Perhaps the limit on the amount of cash available also has something to do with shoppers' prioritizing; the unlimited capacity of a credit card makes any purchase a possibility.
How we pay isn't the only thing that influences our purchases, so does the time when we go shopping. People who shop on weekends buy less junk. Why? Well, weekend shoppers also tend to be list shoppers; they plan their purchases and so are less susceptible to impulses.
People who shop before 11 a.m. and after 5 p.m. also tend to buy unhealthy food. Hungry? Maybe. Or maybe those are periods of lower energy when your self-control doesn't have the power to overcome the power of the Impulse Monkey.
If you're living life according to The Gail Rules, you already know the value of using cash. You also know how important it is to shop with a list. This research is just more proof that being a conscious shopper makes you a better shopper. And it can keep you from packing your face full of stupid calories. Score one more for the Magic Jars.
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October 20, 2011
T&T: Mish-Mash Edition
V Wrote: Hello Gail! I love your television show and would love your help! My fiancé and I have been living together for about 6 months now. We both have good jobs, his over 100k a year and mine 70k a year. We have been working on a budget (thanks so much to your website) and I am a bit confused. Where do I put the child support payments (a whopping $2500 a month) that he has to make? Right now I have put them into the Childcare portion of the budget, but that is throwing the LIFE side of the budget way off! Is this the correct spot to put it?
PS. We are trying out your jars for the first time this upcoming month of April! We would like to get our debt (other than mortgage) paid off prior to three years. Oh yes, we also are getting married soon, good thing the cruise is paid for…(long story and no we didn't have to finance it!)
Gail says: If you don't want the child support payments to affect your Life category, remove them from your income at the top of the budget by using a minus sign in front of them and entering them under "spousal/child support". That'll show that it's money going out not coming in.
H Wrote: I have a son who is 10, and he is a High functioning autistic (yes extremely high), because of the lousy schools he is extremely far behind academically and I am going financially broke fighting the district (lawyers are 300 an hour, and this fight been going on for 2 years), my question is how do I know whether to save for a college fund or for a special needs fund for him. Also would love to educate him on finances, he got the basic down (he told a little boy in the store the other day who was whining for his mother to buy him something, that it wasn't on sale, and mom didn't have a coupon so he couldn't have it), but he struggle with abstract concepts.
Gail says: I, too, have a high-functioning autistic son who is just finishing his first year of high school. I hear ya mama. I had to assume a lot of the responsibility for helping my son cope with school and develop the skills needed to achieve all he can. I strongly suggest that you stop wasting time fighting a school system that won't change (lord love a duck) and start spending your money (and time) on providing the supports your son needs to succeed. As for teaching him about money, I have an ebook called Money-Smart Kids. Have a boo.
R Wrote: I love watching your show! My husband is finally going back to work after 8 months of unemployment. Up until this point in our marriage, we have had no debt aside from our house. We have gone through our entire emergency fund during these last 8 months. It has been an eye opener to us that we need to do better saving. Additionally we were forced to live on our home equity and pulled out $10K of our $100K line (3% interest rate). There have been things we have put off buying while he was unemployed. There are some things we also need to fix on our house like the leaky sun room and the unstable deck. I'm having a hard time prioritizing what we should do first. Obviously we need to restore our savings account and pay back the $10K we borrowed against our home. What percentage of our income should go to savings and debt? Should we wait to fix the leaks and deck until we have the cash to pay for it? Is it ever ok to borrow for household repairs? My husband and I are in disagreement on this issue. He thinks its ok and I think we should wait and pay cash.
Gail says: I believe you should work hard to re-establish your savings, but not if your home is falling down around your ears. If you have maintenance issues that affect the value of your home (your leaky sunroom, for example), you might want to prioritize that. But you can only do what you can afford to reasonably manage without going too much deeper into debt.
1. Take care of the MUST DOs on the house so that you don't end up causing more expensive repairs.
2. Delay spending any money that's not an absolute necessity.
3. Split your additional disposable income between re-establishing your savings and paying down the debt.
Make sure you keep living like you're on one income (so very frugally) until the debt is gone. Then you can start adding the nice to haves back into your budget.
A Wrote: I work with the wounded warriors as a financial advisor on Fort Hood, unfortunately I can not share your wonderful show with the soldiers since the streaming videos on your website do not work (could be all the security). I refer to your website constantly, tell them to watch on Saturday nights and discuss the benefits of your jars. Do you have any plans to put your shows on DVD's? That would be the only way I could share your wonderful stories of young people like them. It makes it so much more real to them to watch the steps of success. Gail, I love your show, your personality and most of all the fact that you care enough to get in their face and not take excuses.
Gail says: The reason you cannot see the show is because the web versions are made available through the Canadian broadcaster, which you can't view in the U.S. You should write to CNBC and see if they have any plans to put the show on their website. As for DVDs, while there have been many requests, there are currently no plans.
J Wrote: I've just finished reading Never Too Late. First off, thanks for presenting such a comprehensive guide to retirement savings in such an easy to read format.
The short version of my question – Does money taken from an RRSP during our retirement years count as "income" when considering how much income one makes for the purposes of determining GIS or OAS Spouse's Allowance?
The long version of my question – I understand that the money removed from an RRSP during our retirement years will be taxable, but I don't understand if it is considered "income" for the purposes of calculating the GIS or OAS Spouse's Allowance amounts. We will have no pension income during our retirement years but are well on track with our savings and plan to retire in our early 50's. Our retirement savings includes maxing out our RRSP and TFSA contributions, some non-registered Mutual funds and some dividend paying stocks. This means during our retirement we will be receiving taxable income from dividends, capital gains as we cash in stocks or non-registered investments, as well as any money we take from our RRSPs (or RIFs when the time comes.) For the purposes of calculating the GIS and OAS SA amounts I assume the dividends and capital gains will count as income, but do not know if the RRSP withdrawls count as income. I would appreciate any insight you could offer to help me understand what income (other than employment) is considered for the government calcuations.
Gail says: Yes, money taken from your RRSP is considered income for the purpose of calculating government benefits. GIS is income-tested meaning that an individual cannot receive GIS benefits if their income is above the threshold (currently just over $14K). You can only receive GIS if you are 65 or older. And you can only receive the allowance if your partner is receiving GIS or has died.
You have a lot of control over how much you take from your RRSP/RRIF each year. First, you don't have to convert to a RRIF — so there's no forced withdrawal — until you're 69 (and even then you have one-year's grace since there's no minimum in the first year.) So you could take only what you need to stay under the threshold from your RRSP.
K Wrote: I watch your shows all the time – love the new one – Princess! I also just bought your book "Debt free forever" and am getting my six months of expenses into spreadsheets. I need $500 per month in debt repayment in order to be debt free in 3 years – yahoo! I am excited at that prospect – however…….
My question is about my car lease. I leased a Honda Civic last year at $320 per month. I have three years left on the lease. At the time I needed a car in order to get to work, and I was making more money – $500 more per month net. Since then I got laid off from that job and now have another lower paying one that is a term position, due to end at the end of this summer. I continue to look for permanent full time work but actually got told I was over-qualified a few times! It's tough out there! I moved to a lower rent apartment in order to reduce my living expenses and live in the city where work opportunities are closer and more plentiful.
I do not need this car any more, since I now walk to work and can take public transit if needed for other errands. If I drive to work I have to pay for parking and I do not want to incur that extra $20 per day – so I walk. The payments on this car now keep me working paycheck to paycheck with nothing left for debt repayment.
You often advise people to get rid of unnecessary expenses/vehicles and I am wondering – can this be done with a leased car? Will it affect my credit rating if I break the lease early? I really need this $320 per month for paying down my $25,000 of debt ($5k student loan and $20k line of credit) rather than paying for a car that never leaves the driveway and is more of a liability to my life than an asset, both literally and figuratively. The insurance is coming due and will set me back another $1200 soon.
Can you help please? I really appreciate your advice and will do whatever it takes to become a Gail success story!
Gail says: There are several services available that may be able to help you out of you lease including leasebusters.com, easyrelease.ca, leaseexperts.ca, and leasetakovers.ca. I'd speak to them all, and see who can get you the best deal. When you're done, why don't you write me a guest blog describing what you did and how you did it so others can benefit from your research and smarts!
S Wrote: We bought a condo last year and I withdrew money from my personal RRSP to use it as part of our downpayment (under the HBP plan). When time comes to repay next year, is it better to use that money ($1,333) to pay off our mortgage instead of paying back the RRSP?
Gail says: The two things you need to know are…
If you don't pay the money back to your RRSP, that $1333 will be included in your income and taxed at your marginal tax rate, so you will owe tax, and
If the money doesn't go back into the plan, it can't start growing to build your retirement nest egg.
You'll have to decide if it's worth more to you to pay down the mortgage or to avoid the tax and realize the growth in the RRSP. I will caution you not to put all your eggs in one basket in terms of focusing solely on paying off your home. You need to have a balanced portfolio for the future…. not just a home. So temper your desire to be mortgage free with your very real need to build assets other than your home.
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October 19, 2011
5 More Things to Remember when Teaching Kids about $$$
Congrats to the two winners from last week!
I have 2 more e-copies of Money-Smart Kids to give away today. All you have to do is
leave a comment on this blog telling me the worst example your parents ever set for you about money. Two names will be chosen at random.
1. Don't try to do too much at once. Over-scheduling kids lives doesn't make them happier. Kids need down time to just hang, think, imagine, process, cope. And jamming a whole bunch of money lessons into a day, week or month won't work either since time is important for practicing and processing. Here's a line from a Joanie Mitchell song (or was it Joan Baez?)… "Take your time or time takes you and drains your soul away."
2. Prepare your kids. Telling your kids what you're going to do helps them create a mind-map of what's going to happen. Ditto teaching them about money. Lay out what you'll be teaching them before you get into the actual lesson so they know what to expect. If you're going to teach about allowances, tell them you're not going to get into loans, advances, work for pay or all the other stuff that can make the discussion really complicated, you're just going to be talking about how much, how often, and what they can do with their money.
3. Be prepared. Just as you wouldn't dream of heading out without a bag of clean-up stuff and a set of nibblies to hold hunger at bay, you also have to be prepared when you're teaching kids about money. Don't trying giving a kid her $7 in allowance using a five and two loonies. How will she put away her 70¢ for saving, or divvy up money between her Planned Spending (for that new DVD) and her Mad Money?
4. Routine is your friend. Keep switching the day when you give the allowance and watch your kid eye you suspiciously. Forget to give the allowance and you'll prove you're not trustworthy. Change the rules on how the allowance can be used based on every new situation and you'll teach your kids you're a scatterbrain.
5. Know when to let go. It's not worth all the hassle to get on your kids' cases about everything. Know when to let things go and just relax. As long as you deliver a consistent message, love them and have their best interest at heart, they'll turn out fine. If you're doing anything "because of the principal of the thing", it's because you're too lazy to weigh each decision on its own merit.
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October 18, 2011
School Lenders (Part 3)
Have you read School Lenders Part 1 and Part 2?
Once upon a time you had to be of sound character for any lender to consider giving you money. Back when credit was a tool (as opposed to the commodity it has become), lenders looked closely at your ability to get and keep a job, stay put in one place for a while, and repay past loans.
In lending terms, Character refers to your intention to repay the loan. Lenders used to learn a lot about your Character during the loan interview. With the advent of the credit scoring system, Character seems to have become moot.
A case in point: Joseph is a family man with three kids and a wife who has been off work for almost a year with their youngest. Without her full income Joseph has found it hard to make ends meet. Gina hasn't really changed the way she spends money and Joseph feels he should be able to provide for his family.
Joseph makes his minimum payments on his two credit cards every month, not a penny more. It's all he can manage. When a third card was offered, he accepted with a sigh of relief using cash advances on that card to make the minimum payments on the other two. When he found himself pretty close to his credit card limit on his third card, he applied for and received another card. And then another. And then another. And then another. And then another.
In no sensible world should Joseph have been able to qualify for all that credit. But because only the credit score was being used to grant him access to more credit, because neither his Character nor his Capacity were being taken into account, he continued to receive more cards.
By the time I got to Joseph, he had 18 credit cards and access to over $100,000 in available credit. The man made $47,000 a year! How was that even possible?
Joseph was a man of sound Character. Well he started off that way. But in an attempt to provide the things he thought he owed his family, he dug a hole so deep there was no way out. Gina talked her mom into taking the kids two days a week and Joseph's mom helped too so Gina could go back to work. Her entire paycheque went to paying off the debt. HER ENTIRE PAYCHEQUE. She was working for the BANK.
I'm all for personal responsibility when it comes to using credit. I sing that song loud and clear. But I also think lenders have a responsibility to lend wisely. And giving someone access to more credit than they can ever repay is in no world wise.
Have you joined School Lenders on Facebook yet? Have your sent your letter off to your member of parliament? Spread the word. Tell friends and family. It's time to insist that lenders learn how to lend responsibly.
Next week: More about the 5 C's.
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October 17, 2011
Leasing Isn't All Bad
A friend of mine, we'll call him Desmond, (Hi D!) was telling me that he's in the market for a new car. "Paying cash, financing or leasing?" asked I, not realizing that I was about to step into a pile of poop.
"Lease…" he shouted at me, the spittle flying. He was practically sputtering. "And you call yourself a financial whiz."
Actually, I don't. Other people may call me that, but I just consider myself a chick who is sensible with her money. Anyhoo, I said, "So, what do you have against leasing?"
"Well, that's like dumping a whole bunch of money into a vehicle that you'll never own. It's stupid. Like renting."
Whoa now buddy, renting isn't stupid, and neither is leasing, for the right person and the right reasons. (He might be considered stupid for buying a new car and taking the depreciation hit when he drives it off the lot, but I digress.)
Let's look at some facts about leasing, then, shall we?
Fact #1: When you lease a vehicle, you only pay for the vehicle's depreciation over the term of your lease. To figure this out, take the residual value (the estimated value of the vehicle at the end of the lease term) and subtract it from the total purchase price. This is the amount on which your payments are based, plus the lease (read interest) rate you're paying and applicable taxes.
Fact #2: At the end of your lease, you have the option of either buying the vehicle for the pre-determined residual, or returning it to the dealer.
Fact #3: A lease will mean substantially lower monthly payments because you are not making any payments on said residual value. That can free up cash flow for other things, like paying down debt that's costing you more in interest. But you will have to come up with the residual value if you want to buy the vehicle out at the end of the lease. (Yes, you can refinance the buyout, but that's gonna cost you in interest too.)
Fact #4: You will pay more to lease if you assume the same purchase price, interest rates and total number of payments plus the residual value. What a lot of people don't get is that while you're leasing you pay interest on the full value of the vehicle, including the residual value. When you use financing, the amount on which interest is being calculated is reduced at a faster rate so you end up paying less.
Fact #5: Leasing can work out to be a cheaper option. If the interest rate on the lease is lower, or if the term of the financing is longer, the lease will be less expensive. Shop smart. If lease rates are better than financing rates because manufacturers are subsidizing their leases, you'll win on the lease.
Fact #6: If you are self-employed or have a company through which you are running your vehicle(s), leasing may offer a bigger tax payoff than financing.
Fact #7: Dealers may jack up the price on a car if they know you plan to lease. Don't go in declaring how you're going to pay for the car. As far as the dealer is concerned, you don't have a trade in, you don't need financing, and you don't plan to lease. You're just pricing out the car. If you're prepared to spend a little money to get the best deal (about $40), go to carcostcanada.com for a wholesale invoice price on the car you're looking at.
It's your job to read and understand your lease including knowing your mileage and wear limits, overage charges, termination charges, and buyout fees. If you know you drive a lot and the km allowance will be used up in no time flat, then reconcile yourself to buying out the vehicle and start saving the money you'll need.
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October 14, 2011
What Are You Hiding?
I met a woman not so long ago who wanted to know how to not want what all her friends were buying. "It's so hard," she said, "to see my friends and co-workers going on trips, buying new cars, and eating out all the time, and not want that stuff too."
This woman was completely honest about how much she struggled with the idea of keeping up with the Joneses. "My next door neighbor just redid her kitchen," she went on. "I walked into her house, and immediately started salivating over her new granite counters and her fabulous appliances." She was becoming a little agitated as she spoke. "I don't want to be an envious person, but why can they have all that stuff while I can barely make ends meet.
"Life is hard enough without also beating yourself up because you're measuring yourself against someone else's stick," I told her. "And in a society hell-bent on spending every cent and then some on stuff, you're not alone in wondering how some people manage to keep up, while others don't. It makes ME scratch my head, and I make a fine living."
So then I asked her if she had any debt. "Just my mortgage, and I'm about 10 years to the end of that." I looked at her and guessed her age to be about 37.
"So you'll be mortgage free before you're 50?" I asked.
"Yes," she said smiling. My husband and I agreed that was really important. So we put all our extra money into the mortgage.
"Do you have any savings?" I asked.
"Yes, we've both got pensions at work, and we've got that emergency fund you told us to get all set up."
I smiled. A lot of people listen to me as if I'm talking directly to them. It's very flattering. "Why don't you just spend some of the money in your emergency fund on a new kitchen?" I asked. She looked at me aghast. Was I suggesting she blow her emergency fund to keep up with the Joneses?
"Well, would you?" I asked. She responded very adamantly that she would not.
"So you have what you want – an emergency fund – and your neighbor has what she wants – a kitchen." She nodded slowly and then a smile spread across her lips.
Here's the thing. This woman was "hiding" a huge amount of financial stability. If you looked at her older kitchen, her five-year-old car or her clothes, you couldn't tell that she was asset rich and debt free.
There are heaps of folks who don't have a penny saved for the future. Their lack of savings is hidden from the rest of us, so we don't know. And since retirement is quite a way down the road, they can choose to ignore the consequences of not saving until there's little time to catch up, hiding even from their own reality.
People hide all sorts of things. They hide their credit card debt. They hide their overdraft protection. They hide their lack of an emergency fund. You can't see what they don't have. All you can see is what they're spending their money on.
We can't judge our lives by what other people do with their money. We can only know what we're hiding, not what they're hiding. I live in a regular sized house, drive a six-year-old van and dress like a slob. I'm hiding a big fat FU account because I've lived long enough to know crap happens.
What are you hiding?
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October 13, 2011
Please Try to Remember the First of Octember
And now we come to one of Dr. Seuss's most important lessons: gratification deferral. The inability to defer our gratification is perhaps the single biggest contributor to the mess we've made of our finances and the debt we've taken on. With unlimited buying power courtesy of credit cards, lines of credit and overdraft protection, we've all but forgotten that putting off a new whatever is an option.
Everyone wants
as new skateboard TV.
Some people want two.
And some people want three.
Yup, the old Doctor waded in on the rabid consumerism issue.
Perhaps you want four?
Well, that's O.K. with me…
if you'll wait till the First of Octember.
This is a lesson parents would do well to learn if they don't want to raise their own Princesses. The good Doctor steps out of the fabulous fantasy worlds he creates to speak of the real world… the characters know the First of Octember doesn't actually exist.
The First of Octember is a day we can look forward to.
On the first of Octember
you'll stay up all night,
drinking 66 six-packs
of Doodle Delight!
Perhaps it's the day you are no longer in debt and can now use all the money you were paying in interest and fees to make your desires a reality. Or maybe it's the day you move into your new home that you've worked so hard to save up the downpayment for. Or perhaps it's the moment when the stress of wondering how you'll ever cope is replaced with the joy and sense of freedom that comes with having a plan.
Not getting everything you want as soon as it occurs to you that you want it isn't the worst thing in the world. But it's hard for some parents to present a "not now honey" in a way that doesn't come across as "What! You think money grows on trees?" or "We don't have the money to pay for that!"
The First of Octember is Dr. Seuss's way of say, "Yes you can have that, but not right now."
As grownups, we would do well to learn that lesson ourselves. There's great pleasure in anticipation. Thinking about getting something can be as good as getting it. I planned my hardwood floors for two years while I saved up the money for them, and for the rug I would need. When I bought the rug about two months before I could put it down (a travelling rug show at 10,000 Villages…what a great store and what a great way to do some good while shopping), I then anticipated unrolling it when the floors were finally finished. It was weeks of sheer joy.
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October 12, 2011
5 Things to Remember when Teaching Kids about $$$
I have 2 e-copies of Money-Smart Kids to give away today.
All you have to do is leave a comment on this blog telling me the best lesson
your parents ever taught you about money. Two names will be chosen at random.
When it comes to teaching your kids about money, remember:
1. They're always watching you. You know that old say, "Do as I say, not as I do"? Well, kids learn from what you do. Shop without a list and they'll learn that when you go into a store it's to impulse shop.
2. It's just as easy to learn bad habits as good ones. Browsing serves a purpose. Unfortunately, in our time-pressured world, we haul our kids in and out of stores, seemingly without purpose, always buying something. If you never leave a store without buying SOMETHING, your kids will quickly learn that their purpose in going into a store is to find something to buy. You can't then turn around and say, "Do you think we always have to buy something?" because the answer is, "Yes." That's what you've taught them. Bad habit. And all because you don't follow the next rule, which is…
3. Explain everything you're doing. Yes, it can become tedious, so it doesn't have to be EVERYTHING, just most things. You can't take cash from a cash machine without explaining how it works or your kids will think, "The machine just gives you money." You can't write a cheque without explaining how it works or kids with think, "cheques are money." You can't leave a tip on a table without explaining what you're doing or your kids will think ,"Mommy forgot money on the table, I better pick it up."
4. What goes around, comes around. If you're truthful with your children, you have the right to expect the same from them. But if you lie, obfuscate, and only tell part of the story, why would you expect any less from them. Remember rule numbers 1 and 2? Hmmm.
5. Keep it simple. The more complicated you make something, the harder it is to deal with. Complicated outfits mean kids will get it wrong and look dumb. Simple colour combinations help them get it right. Complicated rules for how kids can get and use their money are hard to understand and keep straight. That why the Magic Jars work so well (for both kids and adults); the system is simple to understand and use.
Have you joined School Lenders on Facebook yet? Have your sent your letter off to your member of parliament? What are you waiting for?
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