Gail Vaz-Oxlade's Blog, page 81

This & That: Young'uns Edition

My boyfriend and I are living together, renting an apartment and saving $1,000 a month to eventually put down as a down payment on our own apartment. We are currently up to $5,000 and it is just sitting in a savings account. What is the best way to invest this for the best return? I don't want a long investment either, maybe just around a year. Is it worth it to put it in a term deposit since interest rates are so low lately? Thanks for the advice!

Gail says:  Since you know you're going to need the money in the short term, you're very wise to keep it nice and safe so it's there when you're ready to use it. What you choose to invest in — since you're sticking with conservative investments — should be dictated by the interest rate you're getting. A GIC at a major bank may not pay you much more than a high interest account at a company like ING or PC Bank. Shop around. A great place to start is at ratesupermarket.ca (http://www.ratesupermarket.ca/best_gi...).

A wrote:  I need your help, seriously. Me and my Dad are in debt and it keeps accumulating… I am at the point where I am going to move out as soon as I get out of high school, because I'm tired of having things shut off (like power and gas) and I'm tired of having to "lend" my dad money whenever he runs out and living with the stress of dealing with this (which I have since I was 12, and I am now 17.) My Dad doesn't make enough money to pay the bills, keep food on the table and a roof over our heads (and supply his cigarettes and pepsi) I have been working since I was 12 to help him pay the bills, and I continue to work now even though I have to study for diplomas to ensure my future and make sure that I don't end up like him…Please help! I am at my wits end… Anything will help.

Gail says:  Oh my darling, I am so sorry that this has been such a tough life for you already. I'm not sure what to tell you since you need to be where you are safe and you need to be able to focus on school. I'm sorry that your dad hasn't been able to see that your needs are more important that his addictions. Your determination to help, and to have a very different life, is magnificent, and I'm sure you will have a solid future once you are fully in charge of it. Do you have any other relatives with whom you could live while you finish school so you can focus on that? I wish I could offer you more, but I'm really quite at a loss on this. I do applaud your tenacity and your strength so far, and hope that the rest of your life is kinder and gentler.

Kelly wrote:  Over my seven years of post-secondary schooling, I have accumulated a hefty debt. One was a bank loan, the other OSAP. My OSAP is sitting at around $44,000 (and I won't graduate until August 2011 so no payments for a while) and the bank loan has been absorbed by my dad. He took equity out of his house and put the loan under that which is still my loan, but under his name and with a lower interest rate, and I put money on that monthly, a bit more than the minimum payment. That loan is at about $47,000. My question is – is it at all possible to consolidate these two loans together so that I can pay them at the same time under one bill and possibly at a lower interest rate (somehow)??? I'm thinking it's not possible because the one loan is under my dad's name and OSAP will be under mine but please tell me if there is some way to make paying these two large debts easier for myself.

Gail says:  You've described to me debt that amounts to about $91,000 so far. I hope you are going into a career that makes this financial commitment a sensible investment. On the consolidation front, since the $47K is in your dad's name, the only way to take it back would be for you to take out a loan and pay him back, and then consolidate your loan and your OSAP. I can't image that anyone will lend you that kind of money unless you are in a kick-ass career. You should also look into the Ontario Student Opportunity Grant. The purpose of OSOG is to limit a student's repayable COISL debt to $7,300 for a two-term academic year and $10,950 for a three-term academic year. As a result, the amount of OSOG awarded to each student is based on the total amount of COISL they were eligible to receive for the academic year.

Shelly P. wrote:  I think the work that you do with young women is super important and it is great that there is someone who works so closely with the "Princess" type. I am a new university graduate who was lucky enough to get an entry level job in their field of study (finance) and I have been there for six months now. I have a student loan that starts to take effect in March. I have been putting away $1600 a month ($800 a pay cheque) since I started working into mutual funds just to grow and I now have almost $11000 saved up. In addition to that, I put $100 a month into an RRSP. My student loan is $16000. My initial goal was to throw everything from the Mutual Funds I have saved up until March into my student loan so I can pay it off faster. However, I have no other debt (which is how I want to keep it), but I heard that a student loan can be good for building up credit. While I want to pay off my student loan ASAP, I am wondering if maybe I should realign my plan. Would it be better to pay the loan off in the course of a year so that I still pay my loan off quickly and continue to invest, or should I go my initial course and throw all my savings against the student loan in March.  Thank you so much for your advise, I really do appreciate it

Gail says:  A thoughtful question. Here are some points to consider:

1. Just because you aren't required to make payments against your student loan right now, does not mean that interest has not been accruing on the debt… so while you were earning your return on those investments, you were also racking up interest costs. Yes, the repayment period doesn't begin for 6 months, but the interest clock clicked on the minute you left school, so your debt will actually have grown.

2. You should always have some money on hand in the event of an emergency. Building an emergency fund is one of the best things you can do for yourself in terms of creating financial stability.

3. You're better off using revolving credit for building a credit history. I would get me a credit card and start using it for something like groceries, paying it off in full every month, so there's a record of regular use and repayment.

4. Pay off your student loan as fast as you can. What a lot of people don't realize is that student loans have some of the highest interest rates going. All that deferral of payment and interest while you were in school, and those special rules around student loans (like the ability to claim interest relief if you aren't working) come with a cost and the interest rate is substantially higher than a loan from a bank would be.  Paying more interest is never a smart move… get those suckers paid off.

A wrote: Hi Gail, just want to say I love your shows, I think Princess is great, I can definitely relate. Ok, I am 25 and just graduated university, and have had to move to a new city to find a job in my field. Right now I make $48,000 a year, which for a first job I'm pretty happy with. By moving to a new city I have incurred some debt. I currently owe $3000.00 on a credit card. I did manage to get a low interest rate for 6 months of 4.5%! So here are my questions:

1. I was wondering as long as I pay all my bills on time, will carrying a balance on my credit card negatively impact my credit score? In the past I always paid off my balance in full but now I will need about 3 months to pay off my balance, I do however make a large payment at least once per month.

2. What is the best way to start saving for a down payment for a home? Should I put money in a high interest savings account or put it all into an RRSP and then use that to buy a house?

3. I work for the government and have a very good pension, how much on top of my pension should I be putting into RRSP's?

Gail says:

1. As long as you make at least the minimum payment on time, your credit score will not be negatively affected.

2. I'd use a high-interest savings account.

3. As long as your pension plan is reliable (government, teacher, etc.) and you are taking full advantage, focus on building your emergency fund and your home fund for now. Later, if you have RRSP room and are in a higher tax bracket, you can catch up your unused RRSP room and save more on your taxes.

Kat wrote:  Love the show… me and my boyfriend watch them together- it keeps us in check! I want to go back to school full-time and finish my Bachelors in MIS (about 2 years of full-time school) and am unsure if taking out student loans or paying from our savings is the best way to fund this investment.

My boyfriend and I live together- we are in our late 20's, have no consumer/educational debt and have a combined savings account of $25k. He pays the fixed expenses and puts $1k into savings each month. My income is variable and I pay for the "fun" things. We both have fully funded Roth IRA's. We hope to become super frugal when I go back and I plan to keep working part time during the school year (making appx $35k year).

Should we scrimp/pinch and pull from savings to pay for full-time school or should we take out 50% of tuition in loans & pay the rest from savings or 100% loans and pay in full upon graduation?

Gail says:  Sweetie, you need to think about what you want to achieve. Having some money in the bank for emergencies makes sense so I wouldn't spend it all on tuition, but the amount of money you end up borrowing is something you need to be comfortable with. So, what will you likely be earning when you graduate? If you borrow half your tuition, how long will it take you to pay it off, and what will it cost you a month? You need to work through the numbers together to see what makes the most sense for you?

Sara wrote: My partner and I have unequal incomes (he is finished school and working and I am in my last year of school). He makes $70, 000 gross, and my net income is $35,000. We often split dining-out bills and we share rental expenses. The problem is that we each pay 50%. Can you give me a simple formula to use so that we are paying our share relative to income? I know that he will see it as fair, I just need to be able to explain it to him in a simple fashion before the rent comes due or the next time we go out for a meal.  Thanks for all you do!!

Gail says:  70K 35K = 105K… we'll round down to $100K to make this really simple. He pays 70% and you pay 30%.

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The Ways We Save 2

The motivation to save and the ideas that will work for you can come from anywhere. Here's Charlene's story about how handy the local library can be:

My best money saving idea is making full use of my local library. The idea came about when I was planning my wedding 4 1/2 years ago.  To save on wedding costs, I had recruited my crafty sister to help me make our wedding invitations.  She suggested we go to a local bookstore to look for books that would give us ideas.  We did go to the bookstore, but motivated to minimize our wedding costs and pay for the entire event in cash, once we located the books that we thought would provide inspiration, I searched for the titles at my local library rather than purchase the books.  At an average of $25/book it saved me about $100 dollars.  I then applied this to everything else wedding related – wedding planning books, bridal magazines, a book for our wedding emcee.  I saved 100's of dollars by borrowing the materials from my library and we were able to apply those savings to other wedding costs.

As my life has evolved, I've continued to use our library for materials on a variety of topics – financial planning, pregnancy, parenting, not to mention for personal entertainment including fiction books, magazines, CD's and movies.  We save 100's of dollars/year by borrowing materials rather than purchasing books and magazines or renting movies.  These savings allow our family to enjoy a variety of items at no cost and we can put those savings to family outings and vacations.  Not to mention, we feel good about being a bit more environmentally friendly by "sharing" the library materials.

Sometimes saving means you have to give up something. That's not always a bad thing. It's amazing how many things we do that not only hurt our wallets, but our bodies too. Here's Laurie:

Although not original or unknown, my biggest and best savings strategy was quitting smoking almost 5 years.  I did this for both health and financial reasons.  Newly out of an expensive divorce, I was doing everything I could to trim costs so my budget would balance.  I already had the basics: bring my lunch to work, cut back on the cable, cancel the newspaper delivery, etc.  But there was still a gap.  My near pack a day habit was costing me about $300 a month.  A significant number.  I had two choices, I could start rolling my own cigarettes and save about half the cost.  Not bad.  Or I could prioritize myself and my health, quit smoking, and save the whole thing.

After a few false starts, I officially quit smoking late August 2006.  At first, that $300 went into my cash flow and disappeared just as fast as if it wasn't there.  Then I realized, I need to do something worthwhile with this money or I'm just going waste it on something else.  My car was old and needing more and more repairs, and a car payment was not in my (while smoking) budget.  So I took the $300 a month and went car shopping for a decent car in that payment range.

After a bit of shopping around, and with the timing just right for another major repair on my current car looming, I bought a new-to-me car with my "savings" in January 2007.  This is the nicest car I have ever owned.  $246 a month in car payment (over 5 years) and my car insurance was an extra approximate $100 year.  Plus, my cost of gas expenses went down by about $10 to $20 a month because the new car was more fuel efficient.  All "new car" costs within my $300 a month quit-smoking budget.

It's been over four years since I bought the car, it is now paid off and I am still smoke-free.

I now take the money that I was spending on my car payment and purchasing my company stock options, which they will match my contributions at 40% (free money – woohoo!), to save for my next car.  I know in a couple years this car will need to be replaced.  This time my goal is not just to get another car, but to pay cash for the next car.  And I am on track for this goal.  I am taking the money that was literally "going up in smoke" and done something useful with it.  This money has not been integrated into my day to day cash flow, but instead, put towards an ongoing cost (transportation) so that my budget – and me – remains healthy.

Sometimes saving means using your circumstances to your advantage. Get a pay raise? Save some. Have a way to cut an expense? Save the money you would have spent. If you have a strong enough motivation, like home ownership, it's amazing what you can accomplish. Here's Melissa:

In 2008, I moved from Moncton, New Brunswick to Calgary Alberta. I went from making $45,000 a year to $82,000 (and paying a LOT less taxes). In my old job I was making a very modest RRSP contribution every month (which I intended to use to purchase my first home) and had very little to show for my hard earned money. In Calgary I had more money then I knew what to do with! I knew that I likely wouldn't stay in Calgary–and likely wouldn't keep making that kind of salary–so I decided to speed up my down payment fund and "make hay while the sun shines". Besides making significant monthly payments on my student loan, I contributed $500 per month to my RRSP. When my contract was up in Calgary, I moved to Ottawa and looked for work. After a few months in Ottawa I landed a great job and a 6 month house-sitting gig. In exchange for taking care of the house and the cat, I was only responsible for paying the utilities. Knowing I was saving about $750 per month on rent, I saved the difference in my down payment fund.

These steps allowed me to save $7500 in just over a year, which I used as part of a downpayment on my first home.

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10 Tips for First-Time Home Buyers (the next 5)

#6. Take off the rose-colour glasses. Keep a file that let's you compare apples with apples when it comes to the features of a home. You should take pictures of each home you visit, making notes about what you like and don't like, and attach these to your listings. Put them all away for a couple of days and then bring them all out and look at them based on lot size, the living space in the home, extras included or excluded, and any other parameters you may have set like local schools or distance to transit or work.

#7. Resist the "we can fix that" bug. Unless you negotiate those fix-up costs off the price of your house, where are you gonna come up with the money to make your dream house a reality. Sure, there are things you'll want to do given some time and planning. New floors are something you can save for (I waited two years for my new floors!) and execute down the road. But the house has to be livable. If you're always going to be apologizing because there are things you want to do but don't have the money yet, don't buy that house. And if you're considering more debt to make your home perfect, give your head a shake.

#8. Don't think short term. Selling and buying another house is an expensive proposition. There are legal fees, taxes, moving costs and real estate commission. Until your home has appreciated to double what you spent on closing (and what the other guy paid his agent to sell you the home), you shouldn't consider moving. Make a file folder for your home and write this number on the front.

#9.  Consider resale. Since you may want to sell one day, you should think about the resale potential of the home. While there are lots of things that can be changed and improved in a home, some things can't. If you have a railway line running past your home, you're facing a factory or your neighbour is an empty lot that could be turned into an industrial park, you're going to have to be patient when it comes time to sell.

#10. Don't fall in love. First-time home-buyers (and second, and third) can be suckers when it comes to negotiating the "house of their dreams". Don't buy without a conditional on financing clause even if you've been pre-approved. And don't buy without an inspection clause, no matter how good the house looks. Always be prepared to walk away if there's a bidding war that takes the home out of your price range. There WILL be another house. This ISN'T the only house for you. Keep your wits about you and don't make this big a decision with your heart or your ego.

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10 Tips for First-Time Home Buyers (Tips 1-5)

#1 Decide what you want in a home. There's no point in looking at two-bedroom houses if you need three bedrooms.  And there's no point in looking at country property if you want to live in the city. Sounds obvious, right? Well, there's also no point in looking at $500,000 houses if you can only afford to spend $350,000, so don't let anyone talk you into looking at more house than you can AFFORD just because some dumb lender will give you more money than you can afford to repay. Know your own limits. Then decide exactly what kind of home you want that fits within those limits.

#2 Know how much mortgage you can afford. You can go and get preapproved for a mortgage, but that doesn't mean you have to take all the money a lender will give you. Your housing should be eating up no more than 35% of your total net income, assuming you're paying off debt too. That 35% isn't all mortgage; you have to pay property insurance, property taxes, utilities and maintenance too. If you're debt free, you have another 15% of your net income that you could spend on housing… or on having a life… but not both.

#3. Look at what's available on the market. There may be particular areas in which you want to live, or a particular kind of home you want to buy. Look at the recent sales to set a realistic expectation for what you can have. No point in every viewing being an exercise in frustration.

#4. Think about the extra expenses of being a home-owner. If you buy a home with a pool, you'll need pool stuff. If you buy a home with a yard, you'll need garden stuff. You may need window coverings. You might want a snow blower if you've got a long driveway. How about appliances?  Don't let these things surprise you into using credit.

#5. Don't look at the way the home is decorated. There's a whole industry that's grown up around making a place look good enough to eat. And if you bite, you're a sucker. The house doesn't come with the artwork or snappy furniture. You're looking at the bones of the house to see if they'll work for you. This goes hand in hand with…

Ha! A cliff-hanger… tune in tomorrow.

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Your Hierarchy of Needs

About two million years ago when I was working for a management consulting company, I was introduced to Maslow's Hierarchy of Needs. Abraham Maslow came up with the Hierarchy of Needs in the 1940s and his theory of human motivation still holds water.

According to Maslow, our lower motivational needs must be satisfied before we seek to satisfy "higher" (on the scale, not value) needs.

Imagine a pyramid. On the first tier lie the physiological needs: air, food, water, sex, sleep; the stuff that keeps us ticking.

Once those needs have been satisfied, we move up a tier to safety needs: personal security, employment, familial security, healthy, safety of our property.

On the third tier we seek to satisfy our need to love, to be loved, to belong: friendship, family and sexual intimacy fall into this level.

Moving up another tier we come to the esteem needs: confidence, achievement, respect of others, and our own self-esteem.

And finally, at the top of the pyramid is the much misunderstood "self-actualization." This is the level at which we achieve creativity, spontaneity, problem solving, acceptance. This is the level at which we do things just because the doing feels awesome.

Maslow's theory holds that if a lower need is not being satisfied, higher needs become irrelevant. As life throws its many curves at you, you may move up and down the pyramid as you seek to re-establish equilibrium on a lower tier because something has changed. Lose your job and you're back to the Physiological tier because your primary concerns become finding a way to keep a roof over your head and food in your tummy.

You can live anywhere, of course, that you can afford to pay for. If all you can afford is a small room in a rummy part of town, your next tier will kick in when you seek to ensure your personal safety. This is one of the reasons people move out of neighbourhoods into "better" neighbourhoods: they're looking for a way to increase their personal safety. It's also the driving force behind a simple cell phone plan and having an emergency fund.

Are you a bit of an Internet junkie? It may be your need to belong that you're seeking to satisfy. Ditto if you accept multiple invitations to eat out, go bar hopping or head off to a movie with friends.

While I believe that Maslow's hierarchy is still valuable, I question why it is that people are now seeking to satisfy upper level needs at the cost of their lower needs.  I've met folks whose need to socialize is circumventing their lower needs – to have money to pay the rent, to have an emergency fund saved.  And my Princesses clearly show that the need to belong and the need to be admired by others is far outstripping even their base physiological and security needs.  Is it that these folks are so delusional that the "normal" motivational factors don't even apply?

If you were to look at your life in terms of Maslow's Hierarchy of Needs, what needs are you seeking to satisfy?  And are you a big enough dope to focus on the needs that should only be satisfied after your most basic needs have been met?

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Green Eggs and Ham

This was one of my children's favorite books and Alex can still recite it. Ah, the things that stick, eh? Malcolm was so enamoured with this Dr. Seuss masterpiece that I used to have to colour his eggs and ham with green food colouring. The things a mother will do to get her kid to eat!

The two main characters in this book are Sam, and a second fellow who is never named. Sam is determined to get his friend to try "green eggs and ham". His friend won't agree to try the delicacy Sam is offering… not in a box, not with a fox, not in a boat, not with a goat, not with a mouse, not in a house, "I will not eat them here or there. I will not eat them anywhere."

Ah, the closed mind; so many people have one. And it may be the biggest barrier to doing things differently. If the things you're doing right now aren't working for ya, it's time to open up your mind and try some green eggs and ham, dontcha think?

This little book of just 50 words (yah, there are only 50 unique words in the entire book) has a bunch of themes goin' on. There's the unwillingness of Sam's friend to try something new. There's Sam's patience and tenacity in presenting the green eggs and ham over and over and over. Eventually Sam wears down his friend who agrees to try green eggs and ham.

You know the punch line: "I do so like green eggs and ham. Thank you! Thank you, Sam-I-am"

I run into closed minds all the time when I'm doing my shows. People get so used to things being as the are that they can't imagine them being any other way and are unwilling to even try. I make 'em. Yup, I push them hard (Oh you're so MEAN Gail!) and make them behave differently. That's what the challenges are all about.

Our unwillingness to believe things can be different is one reason partners have so much difficulty convincing their other halves that it's their behaviour that's the problem. That drive-through coffee is no biggie right? It's just a cup of coffee. But if it's a cup of coffee twice a day at $1.45 a pop, that's why there's no money in the bank account when it comes time to pay the telephone bill.

Since people imagine that things will always be as they currently are, they can't imagine that they could actually DO something different to get a different outcome. But that's all it takes. Sure, the idea of making a budget sounds like putting on concrete shoes, but until you've tried it – really tried it, not just faked it so it would fail – you don't know the freedom you can feel by knowing exactly where your money is going.

If you haven't done a spending analysis yet, if you haven't made a budget, if you have laid out a debt-repayment plan on paper, maybe it's time to try some green eggs and ham. Hey, you might like them.

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The Ways We Save

A couple of weeks ago I asked for your best ideas on saving money. I got lots of great responses – thank you – and over the coming weeks I'll share the ideas with y'all under the title The Ways We Save. Congrats to the winners of the books, and here's to all the great ideas we can now share.

Saving starts wherever you want it to start and builds from there. It's amazing how changing just one thing you do can lead to so much more money for the things that are really, really important to you. Here's what Mel said:

When it comes to saving money I believe it's all about the little things. At first it seemed like nothing in our budget could be trimmed – no one wanted to give up their favourite channels, lunch dates or Friday dinners out so I thought I would make a small change and sacrifice some time.

Our second vehicle is used to: drop off our kid at daycare, drive to the train station where it's parked all day and drive back home again. I sacrificed just 10 minutes to leave earlier for the daycare drop and park back at home in time to take the bus, which is just steps away. I save on parking, gas, and on insurance because the vehicle is classified as "pleasure use only". Over the last 4 months I have saved at least $500, which has been put towards a vehicle maintenance fund and a gas fund for an upcoming road trip in the summer.

This change in attitude has sparked savings in other areas of our budget like making use of the crockpot to make homemade soups for work lunches instead of spending $10 a day.  Homemade food is SO good and so easy – and making a big batch saves both time and money. We only have 1-2 dinners out a month and we monitor our spending on an iPhone app called Mind Your Money. I carry $20 cash for emergencies in my wallet and have never used it. I rarely use my credit cards unless it's for a reimbursable work expense. There's so much more…

Amazing what happens when you keep track of your money. It's actually kinda fun to input items and see "how we stack up" against ourselves, month to month.

Some people believe that it's impossible to save. And some believe it isn't about how much you make, but how you spend it… or NOT, like Rose:

Motivation for my husband and I was to build a life that we didn't have to wake up in the morning and worry but continue to work together as a couple to sustain the love and marriage we entered in and not let money rule it.

"Our" best saving strategy started with being attentive to what we spent and prices. Then came using coupons and wow did our world change. We were able to save thousands of dollars on everyday items, which we continue to do. Although educating is one of the best ways I still can't stress more to friends and family how making a budget and tracking monthly expenses *deal or no deal" has helped us to save, save, save.

Both my husband and I have been savers since we were young although I look back and can see I would have so much more if I was educated in finances and savings. In the past 4 years using the above strategy and with our past savings we have paid off 2 new vehicles, maxed out TFSA, put 100,000 down on our house and have over 100,000 in savings ( I know still trying to figure out what to do with it). We owe only the mortgage.

Our house was furnished from Kijiji and we don't own a flatscreen. We both have RRSPs, TFSA, life insurance and looking into critical illness life insurance. We are in our 30's, and my husband went back to school 3 years ago and is now a trade apprentice and I went back to school 2 years ago and finished. I always say, "It's not how much money you make, it's how you spend it".  I read your books all of them and love them although I took them out from the library. I always love to share with friends but in the end, it's up to the individual to want to make the changes or else they will learn the hard way.

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The A, B, Cs of Money: O

OCTOBER EFFECT: Investors get all wobbly in October because some pretty big dips have happened in this ghoulish month. A few crappy days have lead people to say with vigour (and in a deep, propounding voice) "stocks fall in value during October," but the statistics don't support the claim. Prolly just a media thing to make a story and keep investors hopping.  Gotta get those traders trading y'know.

OFFER: When you choose a house that you want to buy, you have to make an offer to the seller.   The Offer to Purchase is a formal, legal agreement that offers a specific price for a property. The offer may be "firm", which means that no conditions are attached or "conditional" which means that specific conditions must be met – typically things like inspections and financing approvals — before the offer becomes binding on the buyer.

OPEN MORTGAGE: A mortgage that allows the borrower to repay the debt at any time and without prepayment charges. CLOSED mortgages, on the other hand, are those for which the interest rate is specified and term is fixed.

OPPORTUNITY COST: If you spend $50 on dinner, you can't spend the same $50 for those fabulous shoes that are on sale today only! That's the opportunity cost of having used the money. The opportunity cost of spending $5 on coffee every morning is the lost compounding on your savings over the long term.

OPTION: An option is a contract that offers the right to buy (a Call option) or sell (a Put option) a security at an agreed-upon price (called the strike price) during a certain timeframe or by a specific date (called the exercise date).  If you buy a call, you're betting the stock price will go up. If you buy a put, you're betting the sock price will go down.

OUT OF THE MONEY: When a call option's strike price is higher than the market price of the underlying asset, it's said to be "out of the money" or worthless. For a put, the strike price must be below the market price for the put to be out of the money.

OTC: Short for over-the-counter, which means the security is traded in some context other than on a formal exchange. Usually OTC stocks belong to small companies that can't make it to the Big Market, so dealers and brokers negotiate directly with each other.  Since bonds don't trade on a formal exchange, they are considered OTC securities.

OVERDRAFT: This happens when you spend money that's not in your bank account and the bank covers your butt. You can buy overdraft protection, which should really be renamed "Too Lazy to Keep Track Protection." Designed for people who don't want to have to be bothered with making sure they have enough money before they go shopping, overdraft protection protects your credit history from becoming bruised because you bounce a payment. Some people consider it permission to live beyond their means.

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9 Signs Home Ownership Isn't for You

Owning a home is the big dream for so many people. But sometimes home ownership is a big ol' pain in the arse. Like when your shingles blow off in a windstorm. Or the furnace breaks. Or you're trying to sell and no one wants to buy so you can't move and get on with your life.

Home ownership isn't for everyone. Some folks are happier and better off renting. There's nothing wrong with that choice. And don't fall for the crap that you're throwing your life and money away. Just point out that of your best-friend's $2,100 a month mortgage payment, $2,084 is going to interest at least for the first few years.

Before you jump into the home-ownership pool, it would behoove you to really think about taking such a big step. Are you really committed to home ownership? Not the dreamy, picket-fence home ownership everyone is in love with, but the paying for all the crap that happens home-ownership.

1. You don't make enough. People are under the misconception that home ownership costs the same as renting. It does not. When you compare renting to owning a home in the same area, of the same quality, home ownership is more expensive. According to the Stats Man, Homeowners spend $57,649 a year compared to renters who spend $32,536, which is a significant difference (over $25,000). Just being able to make the mortgage payments isn't enough. If you don't add up all the other costs with which you'll be faced, you may find yourself house poor.

2. You have a variable income. If you find that your income has some slow periods when you have trouble making ends meet, taking on a home may be the straw that breaks your cashflow's back.  Most people with a variable income, unless it's very high, find budgeting difficult. Taking on home ownership – a mortgage, taxes, insurance, utilities, maintenance – means taking on a ton of stress.

3. You work in an industry where employment is seasonal or erratic. Ditto above. Unless you really sock it away while you are working, you may find it hard to keep up with the financial demands of ownership.

4. You don't have the time, skills or desire to deal with home maintenance. There is always something to be done on a house. There are gardens to be weeded, walls to be painted, lawns to be cut, plumbing to be fixed, curtains to be replaced, roofs to be repaired, snow to be shoveled, carpets to be cleaned, furnaces to be maintained… the list goes on and on and on. Home maintenance can be expensive. One rule of thumb is to estimate between 3% of the value of your home every year to keep it in tip-top shape. So on a $200,000 house you'd need to include about $500 a month in your budget for maintenance. If you can do it yourself, you'll save on labour. If you must pay someone else, your costs will be higher.

5. You'll wipe out all your savings. Some people will do ANYTHING to get into a home of their own. They take money from their retirement savings plans. They annihilate their emergency funds. Once they're there, expenses start cropping up and they have no safety net in place to see them through. If buying a house gobbles every red cent you've managed to squirrel away, you should wait until you can own a house AND have a safety net.

6. You move often. If you work in a career that has you relocating often, the costs of buying and selling are prohibative.  Nomads live in tents for a reason. Getting in and out of home ownership (sales commission, closing costs) can wipe out any equity you've built up, assuming the market has been going up in your area. And if the market's taken a turn for the worse just when you're pulling up roots again, you'll eat the loss.

7. You can't afford to own in an area in which you would like to live. For the sake of home ownership, people move far away from friends and family, from their jobs, from the lives they love. They become house-poor in a place they don't even want to live. And they add huge commuting costs both in terms of money and time.

8. You're not financially responsible. You'd think this would be a given, wouldn't you? Not so much. Loads of people who are clueless about their money have bought homes. They haven't had the discipline to save up a healthy down payment. They don't even know for sure how much they make each month. They don't pay their property taxes on time. And they haven't given a thought to what they'll have to do to keep the place from falling down.

9. You love being able to write a cheque for rent and then not sweat the details. If you're a gad-about or hate routine, home ownership may not be for you. Ditto if you'd rather travel than buy furnace filters, shop for shoes than snow shovels, or go back to school than refinishing the floors. If home ownership is going to get in the way of other things you want to do with your life and your money, you'll only end up resenting your house. So if Saturday morning in a café with a latte is more attractive than heading out to cut the lawn, stick with renting.

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Thank you! Thank you!

One of the things I really love about blogging for y'all is how wonderfully supportive and helpful your comments are to others who visit. It's a rarity it seems. I recently came upon a blog at The Star's Moneyville site written by a woman named Jennifer Stewart. She was sharing her ideas for how to save money now that she's balancing life with parenting. While nothing she said was rocket science (money hardly ever is), she talked about her experiences in trying to save. The comments on her blog were vitriolic.

Not one thing of real value was gleaned from this. Please, Star… can't you find any better bloggers out there?
C'mon people, she's from Ottawa.
Less time at the spa and more time reading would help you realize that spendthrift is a single word.
It is a sad day when I might have to go to the Toronto Sun for financial advice as opposed to the Star.
Bad at budgeting – Bad at math
I too am expecting in September And am not getting meals out, spa treatments or colouring my hair. This blog isn't going to help the average reader or expectant mother. 6 Agree
I just can't imagine the struggle this poor woman has gone through. Ones heart goes out. 6 Agree
This is an insult! Tell "Marie" to take the cake out of her mouth and maybe learn what it is actually like for the rest of us.7 Agree
Poor Little Rich Girl When people like this Jennifer Stewart complain about their tax dollars going to programs to help those less fortunate, it's really sickening. 6 Agree
VERY USELESS article what is new there? I'm already doing all advised stuff, the press better find out why gas prices here are 30-40% higher than in US and Europe. 8 Agree

I think if you don't like a blog you should just go away quietly. Nobody is making you read the blog (or article). And spewing negativity doesn't do anything but make the writer want to run and hide under a rock.

I've got a pretty thick skin. But when I read comments like the ones above it makes me sad. Ms. Stewart's writing is clear and she is sharing her experiences. That's what bloggers do. There's no need to berate her or use her as a verbal punching bag.

I see quite a bit of this as I browse the web. When it's directed at me (which, happily, isn't often) I cringe. But, as one person put it, I'm an old war-horse. I worry that voices willing to share will be quieted because of the negativity they encounter. And that would be wrong.

It wasn't so long ago that nobody was willing to talk about their financial experiences. It wasn't so long ago that things like debt management and budgeting had to sit at the back of a bus driven by investing. (It's still so in some places.) We should be happy to see so much being written. And if a particular writer doesn't strike a cord with you, just don't read 'em.

All this is to say that I'm really grateful to my readers here because you're such a lovely, thoughtful and supportive bunch. I know you don't always agree with what I say, and that's your right. And I'm happy for you to say so. But I am so happy you do not reduce my site to a barrage of negativity. I think – old warhorse that I am – I'd fold my tent and slink away!

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