Gail Vaz-Oxlade's Blog, page 80

Have Your Life & Money Too

People equate financial freedom with being rich. Such a shame. All those people who will never be rich — folks like me who have to work hard for every red cent we make — longing for a goal that's unattainable. What exactly is "rich" anyway? Ask a hundred people how much money they'd need to feel rich, and you'll get a hundred different answers. Give folks the amount they classify as "rich", ask them again, and watch the bar for rich rise.

I consider myself to be rich. I've got a happy home life, two kids I'd die for, work that I love to do (even at 4:00 a.m. in the morning, which is when I often write) and I'm financially free. You can be too. All it takes is a commitment to doing the detail and a sense of balance.

If you define financial freedom as freedom from stress, then the road to freedom must be paved with more than good intentions. It requires action: small steps that lead to a big sense of well-being. And that's where doing the detail comes in. Being free means not having to worry. To not worry, you've got to take care of all the what-if's.

You must save.  If you want to have money set aside for the future — tomorrow, next week, the year 2020, you have to NOT spend it today. You must manage your cash flow if you want to keep yourself in the black, minimize your credit costs, and eliminate the midnight spectre of bogeyman reminding you that you've bounced yet one more cheque. And if you want to protect yourself and your family, at least financially, from life tragedies — death and disability — you need insurance.

None of this is, in itself, difficult.

To save you take $5, $10, $25 a week or month from your cash flow and put it somewhere that you can't spend it.

To invest, you choose a financial vehicle you understand that meets your needs in terms of time and risk/reward, and use it to put your money to work for you. You start simple and as you learn more you become more adventurous.

To gain control of the monster credit, you throw the cards behind the freezer so you can't use them for a while, transfer your balance to a cheaper form of credit so you'll pay less in interest, and squirrel away as much as you can to pay off that debt so you can live debt free.

For those who see these small steps as overwhelming — you want to run and hide from past sins and a future that seems less than rosy — stop measuring yourself by external standards. Anyone can be smart about money. It doesn't take a special brain. It doesn't require a degree of any kind. And being smart about money — once you've committed to doing the detail — is more about having a sense of balance than anything else.

Balance, of course, is the ability to deal with a variety of things at once, giving each just as much attention as it deserves. Don't be influenced by someone else's — anyone else's — standards. Doing nothing because you can't meet some standard arbitrarily set by a Spurt is dumb. How much is enough? Only you can decide.

When you do set goals for yourself, make them realistic so you don't end up berating yourself for missing the mark. Work steadily toward achieving your goals. And remember that as long as you're moving towards your target, you'll be on the right road. But they've got to be your goals, not the goals of others around you whom you may think know better.

Today, if you haven't begun an emergency fund, decide you're going to save … (how much will that be?) a week. And if you don't have a will, decide that by the end of the month you will. And if you haven't yet established a debt repayment plan, decide how much you can afford to repay, and calculate your debt-free forever date.

Also decide that you're not going to feel bad, overwhelmed, stupid, stressed, or anything else negative about your money anymore. Instead, you're going to do something about it — no matter how small those steps — so you can achieve your own sense of financial peace.

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This & That: Home Edition

T Wrote: When we bought our house the bank offered us life insurance otherwise we would be able to get a mortgage. Looking closely I realize it doesn't offer too much benefits for us since our house is getting paid on time the more we put the less it covers for us. Talking to some people suggested me to go for one that pay you back your money in the event nothing happens to you in a certain period of time. I am trying to find the right insurance for us but I do not know where to start there are so many and it gets confusing and the few people I met with where all about selling you something right now. Can you please guide me alittle and please tell me where and how to start.

Gail Says:  First off, the taking out of the mortgage should not have been conditional on buying the lender's mortgage insurance. Unfortunately, if it was only in conversation, you'll have a tough time proving you were coerced. I am not a fan of mortgage life insurance sold through lenders. First off, when you buy the life insurance offered when you take out a mortgage, there's no underwriting done. That doesn't happen until you try to make a claim. So after years of paying premiums and thinking you've protected your family, you could find that you are declared "uninsurable" and your claim denied. Doesn't that sound a little like buying a pig in a poke?  When you buy life insurance from a life insurance specialist, the underwriting is done before they start to take your premiums so you know you will be covered.

Another flaw with the mortgage life insurance sold at the bank or by your mortgage lender is that the lender is the beneficiary.  If the worst does happen, your lender gets paid off. To add insult to injury, while you're paying off your mortgage, your principal goes down, but your premiums never change. So towards the end of your mortgage, you're still paying premiums on your original mortgage balance even though you owe far less. With private life insurance, you get the coverage you need on the mortgage in the early years. As your mortgage balance is paid down, you can use the difference to meet other needs your family may have because your family is the beneficiary of the policy, not the lender.

I don't know of any life insurance that offers a refund of premiums, unless you buy that as a specific add-on to your policy, and it'll come with a price. If you are simply trying to cover your mortgage principal, look at term insurance and make sure the renewal is guaranteed. I would speak to an insurance specialist about this. Don't just go off and done a one-use policy purchase… take all your needs into account.

P wrote: Hello Gail, Currently I'm saving for a down payment for my first home. I was informed that I could take the money for a down payment for my home from my RRSP contribution. Upwards of $25,000 dollars, however I was recently informed that this is not the case. That my $300 dollar bi-weekly contribution into my RRSP will not qualify for a down payment. That is anything that was contributed within the last three months into my RRSP. Can you please advise me, what is the best way to invest my $600 dollars a month to achieve the fastest most productive results for a first time home buyer?

Gail says:  You can take up to $25,000 from your RRSP under the Home Buyer's Plan, but the contribution must have been in the RRSP for 90 days before it is eligible to be withdrawn under the plan. As for how to invest your $600 a month, you must be pretty conservative with that money if you want it to be there when it comes time to make the down payment, so nothing risky. Sadly, interest rates are very low right now, so returns aren't great. But a small return is less painful than losing money just when you want to be able to access the money for the down payment, so be smart and stay safe.

L Wrote: I am a 24 year old, recent university graduate. I am currently renting an apartment with some roommates but I'm looking to buy a place. I've rented for almost four years now and feel like I'd rather own something for myself. I have some money saved, but I know I'll need quite a bit more to put a down payment on something I'd be looking for. My question is about which types of accounts I should open to help me save the most. I already have a TFSA but I was looking into RRSPs, savings accounts and Canada Savings bonds. Which one would you suggest to someone looking to save for a down payment in the next 1-2 years?

Gail Says:  Any of the options you suggest will work. Two t hings to note:

1. You can use the Home Buyers' Plan under the RRSP, but you will have to repay 1/15 of the money (which is interest free) each year to the RRSP.

2. Make sure you're getting as good a return as you can. You're right to stick with safe investments like CSBs and savings accounts but make sure you're getting as high an interest rate as you can find available. Do some research and look at options like ING for higher interest than you may get at a traditional bank.

J Wrote: Gail, love your show (of course, that's why I'm here). I read your post on renting vs owning a home and I am so glad you posted it. My husband and I are still in an apartment after years of marriage and our friends and family are always trying to talk us into buying a home. We enjoy apartment living and feel kind of smug (I know, shameful) when those same friends spend all their free time doing home maintenance and repairs they hate or shelling out tons of dough for a new hot water heater or roof. So, thank you for showing people that owning a house is not always the better financial move.

Still, one thing that makes me nervous about enjoying our apartment living: what happens when we retire? We plan to experience living in a few different cities throughout our life. But I worry: when we retire, will we have trouble still affording monthly rent? Will I end up in the poor house if I don't have a paid off mortgage? Can I buy a home when I'm 60 and afford paying on it until I die?

Please help give me some honest answers about if I can afford to not be homeless if I don't buy a house now. (I am eager to read your new book "Never Too Late," but my local library hasn't purchased it yet.) Thank you for all your help to us all!

Gail Says:  Girl, you've got to stop and take a breath. Home ownership is one way of reducing costs when you retire if — and only if — your mortgage is paid off.  There are still substantial costs associated with home ownership: property taxes, utilities, maintenance and up-keep and insurance. I live in a small home in the country. My taxes run to almost $300 a month, utilities another $225, insurance about $100, maintenance about $300. So even owning the house outright, it's costing me almost $1,000 a month to keep a roof over my head. Home ownership does not mean no housing costs in retirement.

If you're very concerned about whether you'll have enough money, you need to make a budget to compare how much your income vs expenses will be. You may have to get creative: move to a less expensive home or used shared accom modation (think Golden Girls).

Don't get yourself in a knot. Start thinking about where you want to live when you retire and how you're going to get what you want.

W Wrote: My wife and I are both in our 60's. We have rented all our lives. We have four adult children and have lived on one income. My wife had small part time jobs so she could be home with the children. We have no savings and no RRSP's. We have now inherited about $300,000 and don't know if we should invest it to live on when I retire in about 4 years or buy a small house.  All we will have is our CPP and old age pension to live on.

Gail Says:  If you buy a home you will tie up all the money you could be using to live on. Have you done a budget yet to see if you'll be able to live on your CPP and OAS. In all likelihood, your wife will receive very little CPP since she's worked only part-time. This is where you have to start. Then you can look at how you can use the money to bridge any gaps between your income and what you need (and want) to spend. There are a number of ways to use your capital to create an income, from purchasing an annuity to building an investment portfolio of your own that slowly draws down on the principal. You will need to seek some professional advice. Please start with the budget and go from there.

Carlie wrote:  I just bought my first house and I keep hearing that by having weekly mortgage payments can save you money, I don't understand how it saves you money or how you figure out how much money you will save from it.

Gail says:  You can save a smidgeon by making your payments weekly instead of monthly, but where you'll really get the biggest bang for your buck is to go with an accelerated weekly repayment that will not only save you thousands in interest but know about four years off a 25 year amortization. That's because the calculation of the "accelerated" payment option is different, allowing you to make the equivalent of one extra monthly payment a year that goes directly to your principle. But you do so in such small amounts that the extra payment fits easily into cash flow. With a regular monthly payment, the total annual payment is divided by 52 to get your weekly payment amount. But with the accelerated option, it is divided by 48 instead, raising the payment amount ever so slightly. How slightly? Well, if you take out a $100,000 mortgage, amortized for 25 years, for five years at 5%, paying monthly would cost you $581.61 a month and the total interest cost over the life of the mortgage would be $74,890.04. If you did it weekly (dividing your annual payment by 52), your weekly cost would be $134.22 and you'd pay $73,385.56 in interest because you got the money to the bank a little bit faster. But if you went with an accelerated weekly (dividing your annual payment by 48) your weekly payment would be $145.41 and you'd end up paying $61,817.95. So your weekly cost would go up $11.19. Yup, lunch out one day a week. And your total interest savings on your mortgage just from switching from weekly to accelerated weekly would be $11,567.61. Well worth it in my humble opinion.

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You're Richer Than You Think. Really?

People are in denial. Helped in large part by their access to credit, many people think they can afford stuff they can't. And the idea that they are richer than they are leads them to sink deeper and deeper into debt.

According to the Canadian Payroll Association, almost 60% of Canadians are living paycheque to paycheque, which leaves us only marginally better off than our American cousins. Dave Ramsey says that 70% of Americans are in the same boat. And an article in USA Today last week says that Americans are very worried about running out of money in retirement.

So are you among the 40% of people are actually able to set something aside for the future? Or are you caught up in The Myth of Richer and spending money as fast as you make it? Are you spending money on credit and going further into debt? Has your net worth actually moved up or down the past five years?

I receive letters every month from people who tell me that they've done a budget and it balances but that they always seem to run out of money. Hey, making a budget isn't an exercise in theory, it's an exercise in practice: you have to live within the budget for the exercise to have been worth the effort.

And this is very often where people's delusions come into effect full force. While, in theory they plan to spend $600 a month on food, practice is another thing completely. They run out of stuff and head to the stores to restock. Friends pop over and they run to the stores for supplies. The kids are having a bake sale at school, so they run to the store to do their bit. And laundry soap goes on special, so they leave having stocked up. And then there are the unconscious shopping trips they make: the extra bag of milk at the convenience store where they also grab a candy bar and two bottles of juice. The salad dressing they forgot on the last trip that takes them back, which gives them the opportunity to add the croutons, six tins of tomato sauce (on special) and a brick of cheese to their cart.

The jars help. When you take a certain amount of money out of the bank and stick it in a jar on your counter, you tend to be more conscious about what you're spending since you can actually see the money running out. That's the "magic" of the jars: they remind you that money is an exhaustible resource. So the jars are the very antithesis of credit, which wants you to believe you are richer than you are because you can pay for anything you want whenever you want it.

And this is where you've been sold a pig in a poke. You aren't paying for anything when you put it on credit. That vacation on your LoC, it isn't paid for yet. Those shoes on your credit card, NOT paid for. The groceries you put on your card for the points, but didn't pay off in full when the bill came in: NOT PAID FOR. When you put things on credit, you aren't "paying" for them, you're promising to pay for them at some point in the future. And since someone else is paying for them on your behalf – they're renting you their money – you're going to pay for the privilege of not having to pay for the stuff you brought home.

So here's my big question: If you can't afford to pay for the stuff you are consuming today, how can you be richer than you think? If you're carry any balance on your credit cards or on your line of credit, you're not living within your means, and you have fallen prey to The Myth of Richer.

So what are you going to do about it?

You can sit and wring you hands. Yes, it's hard. Yes, there's lots of paperwork and (oh no!) math involved. Yes, you're going to sweat bullets or cry buckets.

You can decide that giving into the Myth of Richer isn't working for you and give up the illusion, learn to live within your means, and actually start building your net worth.

No one can do this for you. I certainly can't do all the budgets and debt repayment plans I get requests for every week. And if you're looking for a resource to show you how to make this better, good luck! There aren't a whole lot of people in the business of hauling your sorry balance sheet back into the black.

But there is YOU.

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The Ways We Save 4

It's is truly amazing what you can accomplish when you set your eye on something. It does require a little creativity sometimes. And sometimes it means knowing how to get what you want for less. Here's Samantha's story:

I love Til Debt Do Us Part! I watch it all the time on Slice! I am 25 years old and my goal last year was to traveltraveltravel! My partner and I were living in the very expensive town of Whistler, BC. We wanted to save but still enjoy the mountain fun. Whistler is packed with outdoorsy people, which means LOTS of gently used outdoor gear. We bought all of our skis, outerwear, snowboards and gear either through Craigslist or on serious discount during the summer. We were able to enjoy the mountains using on (work discounted) passes and used gear! From the money we saved we were able to save more than $10,000 in 4 months!

With the money we travelled India, Thailand, Vietnam, Cambodia, Laos and Australia. Once we landed overseas, our thrifting ways continued…looking for the best deals for tours, accommodation, and transportation. We got great a bartering!

See what you're paying on something that's financed… even your home… can be a huge motivator to knock down the interest cost. Just ask Marilyn:

When we initially entered into the mortgage for our home, our mortgage broker gave us two schedules.  One was a schedule showing the minimum payments for our term with the full amortization of 35 years.  Another was our planned schedule for comfortable payments set at more than the monthly minimum.  Both showed the amount of interest we would have to pay for the term.  The amount of interest on our planned schedule still made me uncomfortable because of my debt "allergy".  The interest, added to the amount of the mortgage, makes the total cost of living in a house quite pricey!

Our saving strategy is to throw "found" money at the debt.  Found money is any money that is above our usual paychecks.  From our reward cards, we'll get cash back, groceries, gift cards, etc.  Since we would spend the money on groceries, gifts, etc. and those amounts are already worked into the budget, it goes towards the mortgage instead.  RRSP money is automatically deducted from my paycheque, so when the tax refund comes in, it goes to the mortgage.  Ditto rebates like the home renovation tax credit, the recent Bell Canada rebate, etc.  When our collection reaches the minimum we need to make a payment, we make a payment.  If the amount is close, we'll split the difference and bring it up to the minimum.

Since January 2010, we've "found" over $5500 to put towards our mortgage and the amount keeps growing.  That translates to reducing our mortgage by 9 months or three months short of a maternity leave.  Since we may be anticipating an addition to our family within the year, it's a welcome cushion to our budget.

Nothing says we can't use someone else's good idea (which is what this series of blogs has been all about). And if it's our Mom's idea, we get extra points for being smart! Like Laura:

I have to admit, this idea isn't mine … my mother's been doing this for years to boost her savings.  And, boy, am I glad I listened to her.  I think most people create their budgets in January … when they're all revved up with New Year's resolutions, but I actually go over and revise my budget in July.  This is because at my work our annual raise is communicated to us in June and is effective July 1st.  Why is this important?  Because, following in my mother's footsteps, I look and see if I can manage on my current income (without the raise) for this year's budget and if I can then I put all of my raise into savings (either into RRSPs or a separate savings account for something specific, or both).  The way I figure, it's not money I'm needing, so it's like 'free' money for savings … and the best part is, I set up automatic payments into my savings account on payday so I don't even see the increase in my pay that is deposited into my regular account, but my savings accounts do.  It's hard to say exactly how much I've been able to save using this method, only because when it's used for RRSPs then my refund from my annual tax return is a bit higher and such, but I do know that when I was saving for my trip to NYC this year it was painless and my entire trip is paid for with money still in my vacation account for next year's trip.  But if I had to guess I'd save I've saved thousands over my career … I'm 35, own my own home, car, I travel all the time and am debt free.  I'm so happy I listened to my mom and took her advice.

————

WOW! What a response I got to yesterday's post. Okay people, I hear ya. LEAVE THE FICKIN' BLOG ALONE GAIL! 'zat pretty much it?  So I'll stay the course, perhaps choosing a day of the week to explore some new areas, but continuing to service your needs for butt kicking and honesty in all areas financial. You're a funny bunch and I think y'all are fabulous! Such an honour to serve you. BIGGEST hugs.

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These Are a Few of My Favourite Things

The Globe recently held it's best of money blogs voting and more than a few people tweeted to ask me what my favourite site was. It got me thinking about how much I love the internet and all the fabulous info available in cyberspace. So I thought I'd share some of my favs and ask you for some of yours so that we can all get smarter!

I find many personal finance sites are highly focused on investing… it's a trend when it comes to money. Go look at the bookshelves and you'll see ten times as much space given to investing as to all other areas of personal finance. Even on the Globe and Mail's website, personal finance falls under the Investing section. That's putting the cart before the horse in my book.

One blog the Globe didn't include on its list, perhaps because it is their own, is the Home Cents blog. I used to love Chaya Cooperberg's stuff. Very personal. Very relevant.  It's still a good blog, but I miss Chaya's voice. Chaya, where are you?

Kerry Taylor over at Squawkfox also does a nice job. But this isn't strictly a personal finance blog, which may make it more appealing to a wider audience. Kerry also covers everything from travel to fitness to home. Which begs the question…. If I were to cover more general topics here, would you like that or not?

READER PARTICIPATION REQUIRED: Do you want this site to be strictly personal finance or do you want to see more of the things that appeal to your whole life? I love to cook. And I have some pretty strong opinions about parenting.  I also read a ton and could include a new Book Review section where we could share our reading pleasures.

So, do you want the site to spread out? I AM GOING TO TAKE MY CUE FROM YOU, SO SPEAK NOW! All you have to say is "change" or "don't change." If you like the idea of spreading our wings here, I can make a plan for 2012 and we can broaden the subject matter.

If you'd like to see stuff from other writers, instead of just what I have to say, let me know that too (though I'm resistant to giving up my writing job because I love writing for you guys soooo much.) If you've followed JD's blog over at Get Rich Slowly, do you like his writers' voices, or did you like it more when he was doing all the blogging?

If you're into real estate, you ought to be reading www.canadamortgagetrends.com. Smart and current, this is a source of info that's not only interesting but relevant.

Another site I like to pop by and have a read is www.canajunfinances.com. The Big Cajun Man is funny and his voice rings true. I think this is one of the things that I look for in a writer: not just the facts, or their opinion, but their true feelings on the matter. So often what we get from money articles is dry as dust and twice as boring. Such a shame.

Here's a good site for a credit card debt-repayment calculator.

Beyond money, one site I find very interesting www.brainpickings.org. Sometimes quirky, sometimes down-right odd, this site brings me back again and again, often inspiring me to think outside the box. I like www.bigthink.com too, along with www.informationisbeautiful.net . Check 'em out. You might also want to take a peak at www.sethgodin.typepad.com and www.danariely.com. Super-smart guys.

Here's a fascinating site that shows world statistics updated in real time.

Y'all know I'm on Twitter now @GailVazOxlade, and I'm building a money list there. If you want to be included on that list, or you want to check it out for inspiration, pop over and have a look. I don't keep a blog roll on my site because I just don't have the time to check for broken links… I HATE WHEN THAT HAPPENS!

BTW: I'm having a twitter party on June 9th. Don't know what that is? Just ignore me. Want to participate, go to the new Gail Vaz-Oxlade Fan Page and like, and you'll get updates.

Oh, another BTW…Do you have a favourite ap that's helping you manage your money better? (I get this question all the time. Me, I use a pen and notebook and an excel spreadsheet… I'm a little old school.) Tell us about it and why you like it.

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Be a Positive Person

We live by mantras in our house. I use these mantras to help my kids lock and load on really important concepts. One of the things we're always talking about is "seeing the donut, not the hole." It's all about being grateful for what we have instead of looking at what is missing.

So the other day I was doing an interview and I was asked, "How do you stay so positive?" Truthfully, I focus on the positive because the alternative sucks donkeys.

I smile as often as I can. If you've ever encountered me in person, you know that I have an outrageously loud laugh. I love to laugh. And I think smiling puts you in a position to laugh because it keeps you in the right mindset. I know smiling is contagious because when I smile at people they smile back. (Some look a little shocked sometimes, but eventually the smile creeps onto their faces.) And when you smile you boost your own sense of wellbeing.

I'm even working at smiling in repose. Y'know how when you're just thinking, or just sitting watching TV or reading, not really animated, your face can fall… gravity pulls the edges of your mouth down. I've watch people of a certain (advanced) age sitting in repose with the corners of their mouths pointing south. I don't want to have that expression on my face – or the message that expression sends to my brain – so I'm practicing smiling in repose.

I say yes as often as I can. Nothing shuts down the flow of energy faster than a "No." That's not to say that "no" should be eschewed; "no" is a very useful word. But "yes, but" works too. And yes keeps opportunities open. If I have to say no, and believe me I do, I try to wrap it in a "thank you but" to keep the positivity flowing.

I'm always learning. I find learning something new one of the most invigorating things I can do for my optimism. As soon as my brain gets a hold of something new it does a happy dance and my whole being radiates. So I keep challenging myself to learn new things.

If you make it a mission to see the donut and not the hole, you might be surprised at just how positively you're perceived. Even when the crap hits the fan, look for the upside. When I had to leave my beautiful home in the country because my marriage ended and we had to sell, I countered the sense of loss with positive things I could focus on: the shorter commute to get the kids to school meant I had an extra two hours a day to do new things. The fact that my home was no longer heated by a big wood furnace meant I didn't have to start my day chucking wood.

So have you had experiences where looking on the bright side helped you through a rough patch? And how do you keep yourself positive?

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The Ways We Save 3

Being smart about how you spend can end up saving you a ton of money. Carmen used her wedding shopping to save:

Currently I'm planning my wedding for this June so my money saving strategies have revolved specifically around this event right now…

Our #1 goal for our wedding is to not go into debt over it and 2nd is to try to stay within a manageable budget of $15,000 for our 200 guest event, so I have been taking advantage of money saving opportunities as much as possible.

One way we trimmed costs was purchasing our honeymoon tickets to Victoria BC with the air miles that we have been accumulating while paying for our wedding. As we don't carry a balance on our credit cards we use an air miles rewards one, which makes the money we spend work for us since we travel at least once a year! I also used the air miles to pay for my ticket to my Bachelorette/girls weekend trip to NYC. This saved us approximately $1600 on our wedding budget.

We have used these points to pay for our domestic flights for our Portugal trip last year and the year before for our trip to Toronto. Saving us approximately $800/year. Next year we plan to fly to Seattle for a trip and we are well on our way to having enough points.

Money that we can now put towards our saving for our home renovations that we plan to do next year.

I've spoken and written about how you can adjust your bills so that your money is working harder for you, instead of your bills running you into debt. Here's Sheena's story:

I work for an educational institution that pays employees once a month.  It's been easy to impose habits for paying routine bills by moving their due dates to fall in the week following my pay period.  I get paid on the 16th, pay all bills on the 17th, determine what to set aside for savings or debt repayment, and do my best to make it through the month on the rest.

For many years, I either dipped into savings or over-spent with credit cards during that last week before payday.  After a lot of experimenting, I now budget a set amount for my week and a separate set amount for the weekend.  If I run out of money during the week, I pack my lunch and take the bus and still have pocket money for socializing on Friday and Saturday.  It's a lot easier to limit my choices on Thursdays and Sundays than it is to face the weekend with nothing in my pocket.  I now also set aside a set amount each month for extras.  This helps me make more careful choices on gifts, treats, or dinners out without getting on track to blow my whole budget for the month.

It's hard to pin down exactly how much I've actually saved with this strategy.  In 2001, I started putting a small amount away each month into pre-tax retirement savings; I slowly increased exactly how much that amount would be.  That extra account is now worth $90,000; it's almost equal to the amount in my official pension fund, which includes an 8% employer match.  This makes me extremely proud.

Setting a goal is an important step if you want to achieve a specific savings target. And keeping that target front and centre is the way to find the motivation to keep on keeping on. Daniela knows!

In order to save money my Husband and I created a goal list, which was to pay off our car loan, and save for a down payment for a home, and made a chart with increments: $1,000, $3,000, $6,000, and we check them off as we reach that goal. We made several copies of this chart and it is on our bathroom mirror for a reminder first thing and on our fridge, in our wallets with the credit cards, and by the front door. This keeps us reminded about our goals and makes up think about it before we go out in the world or pull that credit card out.

So far, with a little help from a healthy tax return, in 4 months we were able to pay off the remaining balance on our car loan ($6,000 and two years off ) and we have put almost $3,000 in savings towards a down payment.

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Swing High, Swing Low

Whenever there are swings in the markets, people start to quiver and quake. And it doesn't seem to much matter which direction the market is moving in, there's always a fear that the caca is about to hit the fan, that the markets will sink us all, and that whichever direction we're headed is the only direction we can go.

There are a lot of people searching for answers as they watch the market swing high, swing lo. They're second-guessing themselves and their advisors. They're frightened, angry, worried. If this sounds like you, it's time to take a deep breath and do a reality check.

The key to any portfolio's sleep quotient is how well mixed the assets are, and how well suited that asset mix is to your investment personality. When a bump, slump or gallump comes along in the market, that volatility is an opportunity to test your mix and your emotional commitment to your investment strategy.

Remember your investment strategy? It's the blueprint for your portfolio. It's the reason you bought XYZ stock, or LMN mutual fund to begin with. And along with the following steps, it's the path to a solid night's sleep.

Step #1: Review your risk tolerance. If you have the asset allocation the text book says you should have but it's keeping you up at night, that's not the right investment mix for you. As the market tip-toes, slip-sides, and waddles all over the map you need to feel secure in the decisions you've made. While you may have had a moment or two of doubt, you're pretty much okay.

Step #2: Rebalance your asset allocation. If you're not feeling as dreamy as you should, there are many ways to adjust your mix until you've figured out your very own recipe for sleep. If you're invested in equities and find the volatility too severe, it may be time to move at least some of your money to safer shores. A money market fund will let you tread water for a while till you decide where you want to invest next.

Step #3: Dollar cost average. If you've been sitting on the fence counting sheep, wondering when to get into the fray, and think that the latest in a series of market corrections is your sign, be careful. It's false security to think that now that we've had a correction, there won't be another one. It all comes back to dollar cost averaging: buying a little each month so that you aren't attempting to practice the nefarious art of market timing.

Step #4: Don't leverage. I don't care if you're being promised the magic of margin or the tax savings of the Smith Maneuver, when people think they can borrow to invest and make a quick buck, they end up adding to their risk. Leveraging adds more risk to your portfolio since a jump in interest rates will cause the cost of the loan to go up. And a decrease in the value of your collateral means the lender may call in that collateral. You could end up having to come up with extra money to meet your financing commitments. That's fine if you have extra money, but it's not fine if you have mortgaged the house or have to sell investments at an all time low.

Step #5: Have a long-term horizon. Before you sell in a panic, you need to ask yourself why you want to sell. Is your stomach in knots? Do you feel like you've stepped in bear poop? The intrinsic value of a stock may be no different at $50 when you bought it than at $30 after a market correction. It's the market perception that has changed. If you believe holding that stock is a good investment for your portfolio over the long-term, stick to your buy-and-hold strategy.

Don't deny your gut. Your flip-flopping stomach may be telling you that your asset mix is wrong. Take the time to review the realities of your investment strategies in light of the new information your adrenaline glands are sending. And if you find all in order, might I recommend a warm glass of milk before bed.

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Are You Stunting Your Kids' Financial Growth?

We've been listening to a fair about of noise in the media recently about kids and money, how important it is to put financial literacy on the front burner and how government bodies are responding to Canadians' financial ignorance. Imma do my bit: I have an e-book coming out shortly (yes, I'll let you know when it's out) about raising MoneySmart Kids.

You'll need this book if you've been doing either of the following:

1. Practicing Fair-Weather Finance: When the sun in shining on your money, you're happy to talk about it. You're generous. You're less rigorous about watching the pennies. It's like heading out the door in those early days of spring with less clothes on because it feels so good to be free of coats, boots, scarves, mittens and socks.

Your young'uns will learn all the wrong things from your Sunshine Optimism. If you only talk about money when things are good they get an unbalanced perspective on what their own lives will be like later on: all sunshine and roses. Or they become very confused when the tides turn and you're suddenly the Money Grouch.

Your financial lessons should be consistently delivered, in good times and bad, so your children see money management in all lights, and challenges as a problem-solving exercise (not doom and gloom). Learning to be creative in coming up with solutions to short-term cash flow problems is one of the best skills you can give your children.

2. Using the Dole System: Some spurts categorically state that you shouldn't give your kids money without strings… they should work for their money because you work for your money. Hey, wait a sec… aren't they children? And isn't the point of an allowance to teach kids how to manage money?

I define an allowance as "the money you normally spend on your child (think of all the times you dip into your wallet to pay for stuff) put in his or her hands so that your child can learn to manage it." It's not extra money.

If you don't give your kids an allowance with expectations on how they'll use that allowance, you're using the Dole System. They need something, you dole it out. Need new running shoes…. Dole. Want a bag of chips at the store…. Dole. Hockey stick broke…. Dole. Going to a birthday party… Dole. School supplies…. Dole. Back to school clothes…. Dole. Prom dress…. Dole.

You've turned yourself into The Money Tree.

Sure, you want to give your kids all the things that make life fun, teach them skills, and help them develop, but don't you also want they to learn how to manage money? Put their fun money, their clothing allowance, their school supplies money, and all the other money they end up spending anyway into their hands so they learn to prioritize, make choices and shop smartly. You get what you want. They get what they want. AND they learn that money is an exhaustible resource and they have to manage it carefully. Win-win-win!

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Long-cutting Your Way to Happy

Life is busy. Trying to balance work, the kids, your sister's visit, and getting mom to her doctor's appointment is a feat. It's no wonder we're always looking for short-cuts to carve out a little extra time. But you know, it may be those very short-cuts that are robbing you of the "happy" you could be experiencing.

Have you ever found yourself chatting on the phone while you make dinner, consoling your friend while you paid the bills, juggling one task with another. Multi-tasking has become the norm for so many of us that some of us have mastered getting three things done at the same time. But when you're done, what do you remember of what you've done. And how happy are you with your frenetic existence.

Here's an experiment you can try. For the next week, instead of finding short-cuts, use the long-cut.  As you're standing in the kitchen chopping veggies and stirring the rice, focus on the veggies and the rice. Don't let your mind wonder off to all the other things you need to do. Just stay with what you're doing and enjoy the experience you're having.

What you're trying to achieve is "flow." Flow is that feeling of being where you want to be, in the energy, as you enjoy what you're doing. It means eliminating distractions. It's relaxed. It's synchronized. And Flow brings her sister, Happiness, along for the ride.

I know that you have a dozen things you need to do at once. But try to find something you can use to practice long-cutting. Perhaps it's the time you'll spend bathing and dressing your little one without any thought to what you'll need to ready for breakfast. Or it may be the drive you take as you schlep your mother to her doctor's appointment: you'll be in the car talking to your mom enjoying the travel time together, as opposed to thinking about all the other things you must accomplish this day.

You may be of the school that says if you aren't doing at least two things at once you're wasting your time. But that was a bad lesson many of us took to heart. It's time for some retraining. Part of your long-cutting will mean reducing the "noise" of normal life. It'll mean focusing in on the thing you are doing to the exclusion of all the other things you feel you should be doing. It'll be damn hard when you first try, but persist.

You may have to start with just one thing for a few weeks. Whether that thing is prepping dinner, taking your morning shower, or driving from here to there, try to make that one thing be the only thing you do. When your mind tries to take you to other places, bring it back to the chopping knife or the falling water.

Once you've got that one thing down, choose another of the things you typically short-cut and long-cut instead.  You're working towards spending time enjoying the things you do instead of rushing through them to get to the other 2000 things barking for your attention. If you can achieve flow for 10 minutes, you'll be amazed at how much that helps you love your life more. Now you're long-cutting your way to happy!

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