Gail Vaz-Oxlade's Blog, page 82

Where Are You Going?

If you've been reading my blog for a while, you know I get a lot of letters every week. A lot of letters. I've been noticing a theme of late that I want to talk about: I've been getting a lot of letters from people who are very willing to explain how they got into the mess they are in, but bring no ideas to the table about how they are going to move forward. It usually goes something like this:

Gail, I've been a big ol' dumbass. I've spent too much money, bought a home that's way more than I can afford, been carrying student debt for decades, and just quit my job. I'm also about to get a divorce, and I don't know how I'll ever get over all the tragedy in my life. So, Gail, I need your help. What should I do now?

Many folks are using where they have been to justify where they are. They are looking backward. If you want your life to change, you must look forward. You must use where you are now to push you forward to where you want to be. You must get moving.

Listen, y'all, my life has not always been a bed of roses. My first husband beat the crap out of me. It took a huge amount of courage to leave, but leave I did. In my second marriage, I had everything a girl could want: a lovely home, a nice car, beautiful clothes, two vacations a year. All I had to give up was me: I had to compromise so much I didn't even recognize myself anymore. I got out. And do you think that leaving the man you've been married to for 18 years with two kids in tow was easy? It was the toughest thing I've ever done. But it was that or watch my child wounded over and over; so I got out.

I've been an immigrant, a divorcee (and scoffed at for it), unemployed, broke, beaten, and ignored by those I thought would always have my back. I have never let any of that stop me from moving forward. My life experiences have informed who I am, but not defined who I am.

We all have the ability to take control of our lives. But first we must stop seeing ourselves as victims and start believing that we are the masters of our own destinies. We must stop looking back and start looking forward. And we must act.

Know that everything you do (or not do) is a choice. There are options. Know, too, that every life has crap in it. You may not be able to see anyone else's crap, but it's there. So stop assuming your life is the worst life going. It's not. And if it is, it's because you choose to stay in that place. Shift your focus and you'll shift your outcome.

I am very happy to help people. It's one of the things I love most about what I do. And when I meet people, or get letters from people, who say I've helped, I'm at once honoured and thrilled. But these people are the ones who take the info I provide and DO SOMETHING with it. They act. They change. They move forward.

If I've been able to help them see things differently or develop skills they didn't have, that's only a small part of what's different in their lives. The big part is them. YOU have to be the big part of the change you want in your life. No one else can do it for you.

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This & That: Good Questions Edition

We are on a tight budget. I shop at a few grocery stores for the best prices, I plan meals on a weekly basis, I buy no name brands, I even eat a lot of meat alternatives as they're cheaper. And we rarely ever eat out (once every 2 months). There are 2 adults and a 3 year old and a one year old in our household (in Nova Scotia). We spend about $670 per month on groceries.

Do you know what the average household spends on groceries? Is this a reasonable amount and do you have any other ideas or tips on how to save on groceries? Thank you very much! I've learned a lot from you!

Gail says:  According to Stats Can, on average, households spent $7,310 on food in 2007, which is the last year for which they've published numbers. But food costs have been on the rise, so you can expect that number to have gone up a bit. If it has risen to $8000 a year per family in the last three years that would be monthly cost of $667, which is pretty close to what your family of four is spending.

I lost my husband suddenly 3 months ago and was left with 2 kids and the task of managing the finances and planning for our future. After paying off the mortgage with some of the life insurance money I am lost and unsure how to invest the remaining funds. I have been trying to put the pieces of our life back together and find this aspect of it foreign to me. Please give me some advice or contacts.  I am a loyal fan and look forward to hearing from you. Thank you for your time and help.  Lost in life, love and finances…

Gail says:  I am very sorry for your loss and for your sense of confusion. The most important thing right now is to chill a little. Stick the money in a high interest savings account or short-term deposits and give yourself some time to breathe. And educate yourself. Go to my website and read the articles under Saving & Investing to start. I also have lots of blogs on investing.  I do not make recommendations to advisors.

Matty wrote:  I am enthralled with your show, and I just finished two of your books. I wish you would come lay a smackdown on me and my family.

I am a 23 year old who just convocated from university and started my first career job. I finished with $50 000 (5.0%) in a student line of credit, and $7000 (5.5%) in government student loans. I have no consumer debt. My net income is approximately $42 000 a year and only have monthly fixed costs of $200 since I plan to live at home for the next 3 years. So, here are my questions.

I have been aggressively paying off my line of credit debt for the past few months by putting $1500 payments of my $3000 monthly income into it. I now have to start paying back my student loans as my 6 month period is up, but the minimum payments are only $82. I also pay $150 into RRSPs and $200 dollars into my TFSA for saving for a downpayment, and my emergencies. The remainder gets used for cashflow and short term savings.

You often suggest that 15% is a good amount for debt repayment, but right now I am paying 50%. Is this too much?

Also, I am having a hard time deciding if I should be paying more into my gov't student loans as I paying a lot of interest over the long amortization period and could kill that debt pretty fast. I don't have to make payments (other than the interest) on the line of credit until next year. Is it true you can claim your gov't student loan interest on your income tax?

I guess I just feel lost in general as to what my budget should be for the next 3 years since I really have a lot of freedom in terms of what I am paying vs what I am saving.

Gail says:  The 15% debt rule actually says if you have to pay more than 15% you have too much debt. It's not meant to limit your debt repayment. You are on the right track and I'm very impressed with your determination and focus.

As for your student loan interest, students can claim a non-refundable tax credit for the interest paid on a student loan.  However, to be eligible, the loan must have been obtained under the Canada Student Loans Act or similar provincial act. There are both federal and provincial non-refundable tax credits which are calculated by multiplying the lowest federal, provincial, or territorial tax rate by the amount of the loan interest (except in Québec, where the rate of 20% is used).

Unused interest amounts can be carried forward for 5 years so if you do not need to claim the student loan interest because your taxes are already zero, save it to claim in a future year.

BTW: A non-refundable tax credit can only be used to reduce federal or provincial/territorial taxes to zero.  It will not generate a payment from the government if no taxes are payable.

To decide how best to apply your payments, look at the interest rates you are paying on your various loans, and the comfort level you feel making those payments. My advice is always to attack the loan with the highest interest rate first. Having eliminated that debt, you can then roll that amount to your next most expensive debt. You'll have to do some math to see if the non-refundable tax credit is worth the higher interest rate you're likely paying on your government student loans (the Feds don't cut students any slack on interest once the interest clock clicks on.)

QUESTION:  I have two related questions: (a) what's your opinion on having sinking funds to cover your expenses? and (b) if you have set up that you regularly withdraw a planned amount of your averaged expenses to put in the sinking fund, and you have balances in your sinking fund to cover lots, do you need an emergency fund? Or do you need as high an amount in an emergency fund if you have plenty of sinking funds liquid in a high-interest savings account?  Thank you for answering so many of these questions, and in a casual, easily understood register.

Gail says:  I'm a big proponent of sinking funds (The idea of a sinking fund is to save money in regular increments to pay for a large purchase down the road) but I call it Planned Spending. My budget worksheets ask you to take the amount you spend annually on anything from clothing to car insurance and divide by 12 so that you're setting aside some money every month. I tend to move this money to a separate savings account for storage and then move it back to my current account when I need to spend it. Since the sinking fund is money you intend to spend… be it on your home insurance or on a holiday… it is NOT a replacement for an emergency fund, which is money you save in the event of having no income: sickness, job loss, some other type of horrible emergency.

Christina wrote:  Thank you for all the help that you offer everyone. Your shows and your website offer so much to so many people. I did not originally intend to write you but I am anyway. If I'm lucky, I will start to be able to answer my own question by taking the time to write it to you. If I'm really lucky, you might be able to offer some insight as well.  A bit about me…I have a steady job as a teacher and musician and I live a simple life in country. I'm in my early thirties and on my own after a thirteen year relationship (which ended about 3 years ago). I was responsible for the finances during the relationship but I didn't manage very well (lets just say that there was a lot of room for improvement). Now, I have to take complete responsibility for myself and I guess I struggle with the weight of that at times.

I've been working hard to become better at managing my daily finances and but I am still working on how to manage my savings and investments. More accurately, I need to find a way to feel more comfortable with it. I find myself using the cash in my pocket and the total in my bank account as a bit of a security blanket.

Knowing that I have so many options available to me with the money in my account seems to make me hesitate to act on those options. I research investment options and information about all things financial, but I have trouble feeling secure about my money. There seems to be a gap between what I know and how I feel about it.

Being specific money wise…I still owe about $100 000 on my house, I have no other debts, I have about $18 000 saved in an RSP, I've let my bank accounts build up to about $33 000. (I had some extra income this year).

I know I can make my money work better for me and I will be setting up a tax free saving account this week. I will be putting a lump sum against my mortgage when I can in March and more into my RSP. I feel like my plans are all reasonable, but somehow I still get worked up over it. I never actually feel on top of things. Perhaps I just need to have a chat with a counsellor to learn how to chill out, but I was wondering if you have any thoughts on this.

Gail says:  If you are looking at your pool of cash as security — as in the more I have the safer I am — that may cause you to hesitate when you think of doing anything else with your money. You haven't mentioned any goals to me: things that are important to you that you are trying to achieve. Nor have you mentioned having thought about your core values.  This is something I go into detail on in Debt-Free Forever (yes, the book is more than a map to get out of debt). Figuring out your core values is meant to help you figure out what's really, really important to you so that you can prioritize and choose. What matters to you?  What do you want? What do you dream? What makes you happy? What is the thing you feel defines who you are? Who do you respect, and why? Where do you wish you were in your life? What do you think the future holds?

You also need to make a commitment to following the rules of money:  not spending more than you make (check), paying off all your consumer debt (check), saving something (check), mitigating your risk… which may be something you need to look at again. Do you have six months' worth of essential expenses saved as an emergency fund in case the worst should happen? As a teacher, you have a good pension plan, and good insurance coverage, but that emergency fund is still important so you don't go into debt waiting for your benefits to kick in.

As far as the plan you've outlined goes, I think it is sound. Maximize your TFSA, set aside your emergency money, pay down your mortgage. It's all good. But none of it will bring you the peace you are seeking unless you're sure this is what you want.

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9 Money To Do's – Not!

This site has been nominated this year along with dozens of others.Vote for your favourite money sites.

9. Marrying a money moron. You can't change people. They can change themselves if they really want to. And if they really want to marry you, they should be willing to be a grown-up about how they deal with their money. Can't get them to pay attention? Have the money talk. Share your dreams and expectations. Ask your partner to be in bed with you when it comes to how you'll manage your money. If he can't, or she won't, re-evaluate your thinking and ask yourself: Do you want to spend the rest of your life trying?

8. Procrastinating on making a will. More than half of us don't have a will. Really? You're never going to die? Or is it that God is holding YOU by your pompom? Grow up. Without a will you have no say on who gets your money. Without a will, you can't plan to minimize your taxes. Without a will you're leaving your family in the lurch. Suck it up and do the tough stuff. Make a will.

7. Buying too much house. The rule of thumb is to spend no more than 35% of your net income on housing expenses: mortgage, property taxes, insurance, utilities, maintenance. If you're over your head on housing, it means having very little life. It can also mean you're having to use credit to supplement your cash flow, digging yourself a hole that'll just add to your misery. If you must spend more than 35% because home prices are so high where you live, you better have no consumer debt so you can use that allotment (15%) to make your home a manageable expense.

6. Waiting to invest. What are you waiting for? Do you think some magical can-opener is going to come out of the sky, open up your brain, and pour in everything you need to know to get comfortable with investing? If you aren't putting your money to work, you need to find a course, read a book, follow a blog or three, and learn. Learn. LEARN. Remaining ignorant isn't the answer.  The two biggest things that affect how much money you'll have in the future are:

how much time you have, and

how much return your investments earn.

5. Not saving. This may be the reason you're not investing: you have no money to invest. If you don't set something aside today for tomorrow, what are you planning to live on when you retire?  It doesn't matter how much you start with: $100, $50, $25. Open up a high-interest savings account and set up an automatic plan to have your "savings" deducted from your regular account. And remember, you can't spend that money on credit or you haven't saved a thing.

4. Using credit to scratch your consumer itch. You can't afford to pay for that couch or vacation now, but you'll be able to at some future date? Gosh, what planet are you living on? When you use credit to buy stuff, you're spending money you haven't earned yet. And it's only a matter of time before all those minimum payments end up squeezing your cash flow tighter than a nun's knees.

3. Not having enough insurance. The cheapest you'll ever get your insurance is when you're young, healthy and don't need it. Buying life insurance when you're 35 or 40 is expensive and narrows down your options. Buying disability insurance after you're 30 is almost impossible: you'll have picked up some physical disqualifiers and your premiums will be astronomical. Just imagine how you'll live if you get sick, can't work a full week anymore, and still have a family to feed and a mortgage to pay? Having enough of the right kind of insurance is the responsible, grown-up thing to do. Do it.

2. Not having an emergency fund. As your first line of defense against the unexpected things life will throw at you, an emergency fund is indispensable. Without an emergency fund, you'd have to turn to credit to fill the holes. And, no, a line of credit is not an acceptable emergency fund. It's debt waiting to happen. You need to have cash in the bank. How much cash? Work towards accumulating six months' worth of essential expenses. (Cable is not an essential expense!)

1. Not having a budget. If you don't have a budget and you aren't tracking your expenses, you have no idea how you're using your money. You have no plan. You haven't prioritized. You're flying by the seat of your pants. And that can't end well.  Since you're working so hard for all that dough, don't you think spending a little time managing it makes sense? Nothing else about your financial life will work if you don't create a game plan for the money coming in and going out each month. You'll whine that you don't have money to save for an emergency, to save for the future, to invest. You won't know where to find the money for your insurance premiums because you don't know where all your money is going.  You'll end up not even knowing how much house you can afford. And you won't ever make a will because you can't come up with the money for the lawyer. As for marrying the wrong mate, if you can make a budget together and live on it as a team, you're almost certainly on the same page when it comes to the money.

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7 Ways to Avoid Debt Hell

The winners of the Savings Tips give-away are Samantha Travenor and Sheena Beaverton. Please send me an email (getgvo@gmail.com) with the word WINNER in your subject line,  your snail-mail address, and whether you'd like the Canadian or U.S. version of Debt-Free Forever and I'll have your books out to you licketysplit.

STAY TUNED: I'll be publishing many of the tips I received for y'all to enjoy. There were some great entries. Thanks for playing.

Going into debt is sometimes a choice. We make the choice when we buy something we can't afford to pay for, every time we don't bother to check to see if we have enough money in the bank to get to the end of the month, every time we waste $5. But sometimes there are life events that can contribute to pushing us into debt:   illness, widowhood, divorce. If you are managing our money wisely, those life events will be a lot less painful.

#1 Get yourself some money management skills. That's right, money management is a skill and, unfortunately, loads of people are missing it. They fly by the seat of their pants hoping that things will turn out okay, and end up fire-fighting to stay afloat. A lack of money management skills is, perhaps, the biggest predictor of financial failure. All the credit counseling, all the bankruptcies, all the income in the world isn't going to save your butt if you don't take the time to figure out how to use what you've got to your advantage. There are rules to follow, work to put in, and self-control to be applied. It's much easier to simply whine, "I can't" and go happily on shooting yourself in the foot.

#2 Set up an emergency fund. Whether you bought the marketing B.S. that "a line of credit is an emergency fund" or you're using the excuse that interest rates are pathetic and your money would just be idling, you're deluding yourself if you don't have an emergency fund. If you're not willing to live on a little less now so that you'll have a cushion set aside just in case, you'll be pushed into Debt Hell in no time flat. With six months' worth of essential expenses in the bank, getting sick won't also make you financially ill. Having money in the bank means you have options.

#3 Work harder. Some people are just born lazy. Some people think that earning $14 an hour for 37.5 hours a week is just fine. It may be, if you're prepared to live on $400 a week. But most people aren't. They want to buy beer. They want cell phones and premium cable. They want to buy everything else their pals have. And they use the excuse that working more would take away from their Mommy or Daddy jobs. Ya know what? That's an excuse for not wanting to work harder since many of those same people spend hours a day doing stuff that doesn't involve their kids. Those are the hours you could be spending making more money.

#4 Keep your income and expenses even. There are people who buy a home and think they can still eat out six nights a week. And there are people who get laid off from work, become ill, or stay home to raise their children, but don't cut back on their spending. Whether your income has gone down or you've made a move that sends your expenses up, if you use credit to fill the gap in your cash flow, you're stepping onto the road to Debt Hell.

#5 Buy some insurance. Some people believe they will never get sick. It's why people don't bother to get critical illness insurance, disability insurance, or life insurance. Of course, you may not be the one to get sick. It may be your partner, at which point you better have some money to help pay for the things (s)he used to do. Or it may be a child or an elderly relatively that causes you to lose time off work.

#6 Talk about your money. How can you have an intimate relationship with a partner and then refuse to talk about your money? How weird is that?  You love each other enough to make a life commitment but aren't willing to talk about how to manage your money as a team? Perhaps it is because one or both of you don't want to be held accountable and so long as no one's watching, you can just do whatever you want. Or maybe your self-esteem is bruised because your partner makes more and throws his/her weight around. Whatever the reason, Debt Hell is around the corner.

#7 Don't bank on a windfall. Count all the people who aren't saving for their retirement in this group. Ditto the people who aren't putting money away for an emergency. And all the people buying lottery tickets instead of saving. Or the ones counting on their parents croaking and leaving them a pot of money. Like magic, money will fall into their laps and they will be able to right all their financial wrongs. Except that most people who benefit from a windfall end up in debt anyway because they never had the discipline and strategies for money management in the first place. More money isn't the answer. Focus and a plan are.

Having a balanced financial plan is so important. Sure you can forgo one leg of your financial plan because you're trying to make another stronger; giving up saving until your debt is repaid is the classic example. But don't fool yourself into thinking you've got a balanced plan. For like a table with a weak leg, it'll only take a little pressure in the wrong place to make the whole thing fall down go buff!

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Poll Results: Home Ownership

Home ownership is the North American dream. People will twist themselves into all kinds of knots to buy a home. When I asked the question, "When you bought your home, how much was your downpayment?" you said:

0% : 6%
1-5% : 24%
6-10%  : 17%
11-20%  : 15%
more than 20%  : 38%

Well, the zero-down mortgage has gone the way of the Dodo bird (thank goodness) but there are still a lot of people (62%) who are taking high ratio mortgages and paying mortgage insurance. That can be a substantial amount of money. Most people don't think twice because they just wrap the premium into their mortgage… and then pay interest on it for the next 25 or 30 years!

Those low downpayments have an impact on cash flow. So does buying too much house just because some lender was happy to give you enough rope to hang yourself. When I asked, "What % of your income goes toward housing:  mortgage payment/rent, property taxes, home insurance, utilities, maintenance?"

64% came in under 35%, which is the amount I recommend.
36% are spending more than that, with
7% spending more than 50% of their income to keep the roof over their heads.  That's gotta hurt your life category!

Since rates have been low for some time, the big concern is if people will be able to keep their homes if rates go up. So I asked, "By how much would mortgage rates have to go up before you felt the crunch on your cash flow?"

15% of you said, "Any upward move would hurt."
25% said, "I have no idea." Really?… hmm
15% of you could stand a move of up to 2%.
11% could cope wit a move up by 3%, and another 11% up by 4%.
The rest could handle a hike of 5%.

Mortgage payoff is the ultimate goal, and most of us strive to be mortgage free before we retire and have to learn to live on less money. When I asked, "When do you hope to pay off your mortgage?"

15.5% of you said you're mortgage free now
15% said you plan to be within five years of retirement
16.5% said just before you retire
8% said, "I'll never pay that sucker off!" Ouch!
30% of you plan to be mortgage-free in the next ten years
15% plan to be mortgage-free in the next five years.






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0% : 6%
1-5% : 24%
6-10%  : 17%
11-20%  : 15%
more than 20%  : 38%

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What Are You Doing Right?

So often when the talk turns to money, people avert their eyes or scuff their toes against the ground, bashful to even get into the conversation.  Not surprising really, since when the talk turns to money, most often it's about what we're doing wrong.

Here's the thing: you can't be doing it all wrong. You just can't. And so maybe what you need to do to open up the conversation with yourself (your partner, your best friend, your sister-in-law) is to focus on what you're doing right.

Are you good at:

getting the best deals?
making your own stuff or fixing things?
sharing what you have with others?
keeping track of your money?
squirreling away little bits of money?
deferring the little pleasures so you have the money for the really big thing?
finding the highest return on your savings account?
negotiating to save money on things you buy?
finding ways to earn extra money when you need it?
stretching a dollar?

Here's what I'm good at: discipline. I may hate collecting receipts and writing down everything I spend, but I do it anyway. I may hate having to post all those entries in my spending journal into my monthly budget, but I do it anyway. I may HATE picking up the telephone and making the call to get a fee adjusted or a service charge removed, but I DO IT! I make myself do it. And until I've done it, my brain won't cut me any slack. So I have to do it to get my brain off my back.

Knowing what you're good at is a great place to start when you're trying to figure out how to make things work better both with your money and your life.

Let's say you're really go at finding a bargain, but you're not so hot on the pay-yourself-first savings approach. It doesn't matter that you pay yourself first and the money is whipped away to an account, by the end of the month you've found you've had to transfer it back because something's cropped up and you need the "savings" to stay even in your account.

Okay, let's take your strength and turn it to the problem with your savings. Sure you're great at spotting a bargain and shopping smart. But if you never realize the savings… if you never take that money out of your wallet and put it somewhere you can't spend it … you actually haven't saved a thing.

So now you're going to use your smart shopping as your springboard to save. You'll open up a savings account called, "Smart Shopping" and every time you save so much as a nickel by shopping smart, you're going to save that money (perhaps in a jar at home first until you've accumulated $10) by moving it to your Smart Shopping account. Now you can measure what a smart shopper you are because you'll have an ongoing running total of your brilliance as a consumer.

The point is that most often you need to find the motivation to do things differently. Starting from a strength is a GREAT idea. Using that strength to pull your areas of weakness into the sunlight and eventually overcome them is a GREAT idea. Knowing what you're doing right, and moving from strength to (growing) strength makes way more sense than always beating yourself up for what you've been doing wrong.

So, what's you're strength, and how are you going to use it to grow even stronger?

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On Beyond Zebra!

Years ago – gosh, so many years ago – I worked for a consulting company that specialized in creating training programs for corporations. We used the Dr. Seuss book On Beyond Zebra! to capture the idea of thinking outside the box. It's an important life skill. Very often we get so caught up in how we've always done things, we can't even imagine another way, so we get stuck. And stuck we stay.

Sometimes when we think we're having money problems, it isn't actually the money that's the problem. Sometimes we make enough money. But we're so stuck in our boxes we can't figure out how to use our money in more productive ways to achieve the life we want.

If your life isn't working for you, if you're in debt and can't get out, or if you're working on something and feel like you're spinning your wheels, you need to take a page from Dr. Seuss.  The narrator who isn't happy with the restrictions of the ordinary alphabet, invents a whole new one that pushes past normal to where the imagination can take flight.

Maybe that's what you need to do too… push beyond the conventions with which you are familiar to try something new. Course, that'll mean thinking for yourself; some people are too afraid of messing up to do that.  But if you can be brave, if you can push past "normal" to see all the possibilities beyond, you may find the very thing you need to make the very life you want.

We actually like the idea of thinking outside the box. You know the magazine Real Simple, don't you? They have a very popular segment where they feature new uses for old things. From using shower curtain rings to store scarves, to using paper towel tubes to keep plastic bags under control, Real Simple's idea is to think outside the box… to go On Beyond Zebra! The segment is popular probably because someone else did the thinking and has come up with create solutions we can all use. Hey, it's time to start thinking for yourself.

One of the keys to being able to move On Beyond Zebra! Is to spend some quality time alone with your brain. Some people don't like this idea at all. It scares them to spend time thinking. But if you can filter out the noise of your life, and give yourself some time to think, it's amazing what you can come up with.

Find a quiet place. Relax. You're not trying to force ideas, you're going to let your mind wonder. Make sure you have a notebook and pen handy for jotting down notes as you do this exercise. Keep an open mind. If you've already decided there's no solution to whatever problem you're dealing with, you're stuck at Z. Be willing to try things that may not work. You might come up with simple solutions to other questions you've been noodling.

Ready to think outside the box?

Answer this: SO. What colour is her blouse?

It may not make sense to you at first. But the answer is in there. Go On Beyond Zebra! to find it!

Learning to go On Beyond Zebra! isn't going to happen overnight. You've got to have some patience and keep trying new things. It'll be worth it.  If you're stuck in a box, it's time to move! All that's stopping you is YOU. And a little practice.

BTW: The answer to the question above is BLUE. Can you see why? Were you able to move On Beyond Zebra!?

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6 Money Mistakes Couples Make

Whether you're planning a walk down the aisle or you've already been hitched for eons, there are some common mistakes couples make that can throw a wrench into their moneyworks.

1. Hiding stuff from your partner. Ever gone shopping, brought home a bag of something, and hidden it from your mate? People lie about what they've paid for an item. They rip tags off their new stuff in the hope that it'll blend in with all their old stuff. They keep secrets. If you can't be open about what you're buying, that should tell you something. If you think your partner is going to object to your spending, hey, listen up! And if you're planning to mate and you haven't sat down to talk about your money, you're a fool, plain and simple. Communication is Job One in the survival of any relationship. If you can't bare your financial soul to your partner, and if you can't trust that person to tell you the truth, you should not be getting married.

2. Not having a budget. Whenever you combine two lives, two ways of looking at things, two spending profiles, you need to have a plan to ensure both bodies are on the same page about where the money should be going. Having come up with a budget you both agree to, it's easy to decide what to buy and when. You simply ask each other, "Where does this fit in the budget?" If it doesn't then you work together to make room, cutting a little of her golfing and his beer-with-the-boys to come up with the cash to make the purchase.

3. Putting one guy in charge. Often one person assumes the nitty-gritty of daily finances. Maybe it's because one partner is more inclined toward these tasks. But when the other mate is excluded or totally abdicates responsibility things can turn ugly. Your partner may sail your love-boat onto a reef or grow resentful at always having to do the detail. Each of you should not only to feel involved in the big financial decisions but also understand the day-to-day details. Taking turns managing the spending journal and/or budget and having regular conversations so that both of you are clear about what's going on means you're both in the know and working to the same ends. It also means that one person doesn't have to deal with all the crap, while the other merrily laughs off the stress and frustration with, "You're managing the money, so this is your problem to deal with."

4. Denying the Debt. Regardless of who has the debt, the impact on the family unit will be significant. If you can't be debt free when you get hooked up, at the very least you should have is a plan for how you'll get that debt paid off. Never sign for each other's debt. When you do, you assume responsibilities that may choke you to death. If your buddy needs help pay off the debt, you can do that without putting your name on the paperwork.

5. Sweating the small stuff. Marriage is tough enough. Don't spend your relationship getting your britches in a knot over every little thing. Figure out which battles are worth fighting and when negotiation makes more sense. If the small stuff adds up to big problems it's usually because you don't have a budget and aren't on the same page when it comes to your priorities. One way to deal with the Money-of-My-Own issue is to allot each partner a weekly or monthly "allowance" that can be used for anything that body desires. Since the allowance is part of the budget, the plan stays in place while the individuals have some personal freedom when it comes to how they'll spend their personal money.

6. Failing to plan for emergencies. While no one likes to think about bad things happening, bad things do happen… even to good people. Without a stash of cash at the ready to deal with whatever life throws at you, you won't have the means to cope. One of the big upsides of joining up is that you're able to act as a safety net for each other through life's storms. But that doesn't happen magically. And often couples over-estimate their partner's ability to take over the entire financial burden should one partner lose a job, someone become ill, or the family suffer some other disaster. Every couple should have enough money available to cover six months' worth of essential living expenses. And each partner should make it a priority to get adequate insurance coverage.

Communication and negotiation are the keys to dealing with money issues when you partner. And having some practical money-management skills to pull the whole thing off won't hurt.

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How Do You Stack Up?

Want to win a copy of Debt-Free Forever ? Send your best money-saving idea to getgvo@gmail.com and you'll automatically be entered into the draw. To be eligible, your tip must include:

how you came up with your saving strategy (your motivation, why you wanted to save or your source for the savings idea)
how much you ended up saving using your strategy, and
what you did with your "savings."

Contest closes on Friday, April 29th at midnight.

People are always writing to me to ask me how I think they're doing financially. They send me gobs and gobs of info and then want to know how they measure up. I try to encourage people to measure themselves against themselves. But the questions, they keep coming.

Did you know that Royal Bank has a "How Do You Stack Up?" tool. You put in your income, your savings, your debt and your province of residence and the calculator shows you how you measure up against other Canadians and against others in your province or territory.

If you're a single person living in Ontario earning $36K a year with no savings and $7,500 in debt, the calculator will tell you that you're making about almost $7000 less than the average for Ontario, but just $3,000 less than the average for Canada. The average net worth for an Ontario res is $192,502 (home ownership accounts for a lot of that), while net worth for Canada comes in at $163,535. If you were living in BC, you'd be worse off net worth-wise since the average in BC is 210,108, but you'd be more in like on income since BC'ers average income for singles is just over $40K.

What if you're a couple just starting out and you have a family income of $55,500? You have a house worth $367,000 and almost as much debt in mortgages and student loans? Well the calculator can't cope with those numbers (really?) but you will be taken to a screen that shows national and provincial averages.

You'll see that  the average real estate asset holdings for a Canadian family just starting out is just under $262,000 while for Ontario it's just over $304,000. You'll also see that the average GIC holding in Canada is $16679, the average bond holding is $7,506, the average stock portfolio is worth $43,240 (which begs the question, "Why does investing get so much space in our financial pages?" Oh, yeah, advertising!) The average mutual fund portfolio is at $39,436 and the average balance in our chequing and savings accounts is $8,014. Hey, I know a lot of people … and I mean a LOT of people with less than $8 in their accounts, so some people are holding a bundle. Say "Hurrah" for emergency funds. Then you click on Liabilities to see the debt story.

Credit card debt = $4,716
Mortgage debt = $163,357
Loan debt = $18,948
Line of credit debt = $33,334

For a total debt load of $220,355

Compared to a total asset base of $376,875

For a net worth… drumroll please… $156,520.

So, how are you doin'?

The Prairies get lumped together (no wonder people out west are always so pissed off at the rest of Canada) as if life in Saskatchewan is anything like life in Alberta! Ditto Atlantic Canada. So if you live in these regions, you'll have to settle for less specific info.

The family types offered range from those I've mentioned to:

Couples already established
Families, oldest child under 12
Families, oldest child 12-18
Families, oldest child 18+

While I don't think we should be comparing ourselves to others, I do think looking at our financial picture in the context of national and regional averages can be useful in helping us to see where we fit in the big economic picture.

If you find this useful, use it.

If you think it's a load of hooey, ignore it.

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5 Simple Steps to Switch Accounts

People are always whining about the fees they have to pay on their bank accounts. Or they pay outrageous fees because they never bother to add up their fees so they're totally clueless. In this day and age, paying more than $10 a month for a bank account is an act of lunacy. And earning next to nothing on your savings… well, that's just dumb!

Many of us keep our money in a Big Six Banks, earning a pittance in interest and paying liberally for service. And then we make matters worse by not managing our money properly, so we're in overdraft, bouncing cheques, or using banking machines that not our own and paying whopping ABM charges as a result.

One of the main reasons people won't switch accounts is laziness, plain and simple. It takes work. And not a small amount of work either. If you have pre-authorized debits, it can feel like torture trying to get them all switched over. But if all that's standing between you and an account that pays decent interest without exorbitant fees is laziness, you need to give your head a shake.

Start by making a list of the things you actually need on your account. Do you even write cheques anymore? How often do you go to the banking machine? (If you're going more than once a week, you're using the ATM as a wallet. Stop!) How many swipes of your debit card do you do in a month? Do you travel a lot requiring easy and cheap access to your money when you're on the road?

Once you know the services you need, it's time to go shopping to compare prices and features. You can hit the pavement, let your fingers do the walking, or head on over to the Financial Consumer Agency of Canada's website and use the interactive tool to narrow down the alternatives.

Ready to quictcherbitchin' and fire your current ungrateful, money-grubbing bank? Take these five simple steps to switching accounts:

1. Open the new account. Take 2 pieces of ID with you when you go. And make sure you have your social insurance number because it's a required piece of info for tax reporting purposes. If the account you're opening is a U.S. dollar account, one piece of ID has to prove your citizenship so take your birth certificate or passport. Get all the information you'll need to notify others like the account number and your branch number. Order some cheques even if you aren't writing cheques regularly since you'll need to use voided cheques to set up auto payments and transfers between accounts.

2. List your transactions. Whether you pay your hydro bill by electronic banking, have your car insurance auto-deducted or have your RRSP contribution transferred monthly from your chequing account, you'll have to switch 'em all over to your new account. Look over your past five or six statements and make your list. You'll want to watch for:

utility payments
mortgage payments
credit (loan, cards and lines of credit) payments, and
other accounts that may be linked to the account you're closing, as well as
auto deductions for things like home or life insurance.

Also list all the people who give you money like your employer and the government – think GST, child tax credits and tax refunds.

This will be your master list, and as you transfer each item to your new account, you'll check them off this list.

3. Reconcile your account. You have to account for every penny so you don't have any nasty surprises during the transition. Those six post-dated cheques to the music teacher will bounce sky high if you close the account without telling her and replacing her cheques.

4. First switch over all deposits first.  Then switch over the withdrawals once there's money in the account. That way there will be money in the new account when withdrawals start.

5. Leave the old account open for about two months with some money in it to catch any missing deposits or withdrawals. Don't worry about the balance in the old account is just sitting there wasting time. It's protecting you from the aggravation caused by a poor memory. Be patient and when there's been no activity for a month, consider yourself in the clear and close the old account.

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