Gail Vaz-Oxlade's Blog, page 85

This & That: Don't be a Sucker Edition

I am so sick of people being given bad advice for the sake of profit. Shame on our lenders and bankers for telling people to do things that work against their financial interests just so their companies can make more money.

R wrote:  Our life insurance broker has informed us of a software program that will help to decrease your mortgage in a short amount of time. It is called "Smart Equity Mortgage reduction software" from what I can gather from the website it states that using your line of credit to pay off your mortgage is the way to go.  Have you heard of this software?  Is it legit?  Is this the best way to pay off your mortgage?  I so want to be mortgage free and do not seem to be getting there any time fast.  Please let me know your thoughts.

Gail says:  In your desperation to be "mortgage free" you can't see the forest for the trees.  If you pay off your mortgage with your line of credit, then you'll still owe your line of credit.  You haven't paid off anything… simply moved the debt around.  And since your line of credit has a variable interest rate, when rates go up, as they will, you'll end up paying more in interest than you are now.  As well, your line is "callable" at any time.  So the lender can demand that you pay it off in full and you'll have to come up with the money.  A software program can't get your mortgage paid off faster.  The only way to get to debt-free faster is to put more towards your principle each year.  That means making more payments or reducing your interest rate so more of your payment goes to pay off the debt.  You can use an accelerated monthly or weekly payment.  You can increase your payment amount.  You can double up or take advantage of the annual principle prepayment option.  Moving the debt around isn't paying it off.  It's just playing a game.

Rita wrote:  Gail, do you think it is wise and/or necessary to keep our secured home owners' line of credit open, even after our mortgage is paid off and we have no debt?  We are 57 and 58, debt free and have emergency funds set aside.  We don't really like having this (0 balance) secured LOC "against" our property so to speak… (Home worth $500,000)…would closing/discharging it not simplify our lives say for eventual estate purposes? …I guess we think of it as a little bit of "financial house-cleaning!"…we cannot think of when or why we would want to access this $185,000 line of credit again….many thanks for your thoughts on this…

Gail says:  If you don't anticipate ever needing to use the line then by all means get rid of the sucker. Very often we get talked into having lines of credit "just in case" and then we use them only to find that the "just in case" is the debt we've racked up because we had easy access to the line.  Hmm.  Do what you think is best for YOU.

S wrote:  Hi Gail, I have a question regarding mortgages. Along with my girlfriend I have just placed an offer on a strata townhouse.  I expect the offer will be accepted, or even if we receive a counteroffer I don't expect it will be much over our initial offer. I intend to take a variable rate, but pay additional funds on my payment (accelerated bi-weekly) which will make it equal to what the payment would be if I was using a fixed rate.  We're putting down 20 percent and going with a 25-year amortization. When I come upon extra money (tax refunds, etc.) that will be applied to the mortgage as well.

While I think I've got my bases covered regarding the mortgage, a co-worker of mine doesn't agree with me on one thing.  I have some additional money in a savings account which I intend to use as an emergency fund, and to build up and use for maintenance of the home (taxes, utilities, furniture, etc.). My co-worker thinks I should take this money and add that to the down payment to lower my mortgage payments and if issues arise with the home, use credit to take care of it. I don't agree with my co-worker. What's your opinion?

Gail says:  You are correct.  Your friend has bought the poop that credit is an "emergency fund".  That's a line of caca being sold by lenders who want people to consider their lines of credit to be as good as cash.  They are not.  Lines of credit are debt waiting to happen.  You have a sensible and well-thought out plan.  Stick to it.

E wrote:  Dear Gail, I paid off the mortgage on my townhouse back in the 90's.  Shortly after, I got a $50,000. line of credit from MBNA.  I used that line for kitchen and bathroom renovations but have since paid that off completely as well.  When I transferred all my accounts to CIBC, I was still paying that LOC off, so it's now remained as one of my CIBC accounts, only dormant.

My financial advisor from CIBC says it's better to keep that dormant line of credit as a disincentive to anyone who would want to claim title to my place.  She said thieves specifically look for properties without a mortgage to place one on it, the owner remaining completely ignorant of the transaction until she finds herself in trouble, saddled with a new mortgage. But I am uncomfortable with the bank still holding that LOC on my townhouse.  I would like to eliminate that secured line of credit but don't know what to do.  Should I allow it to stay on the books or should I tell the bank to eliminate it?  Thank you, Gail.  Your show I watch every chance I get, and I admire your warmth, common sense and passion in helping people.  You're terrific!

Gail says:  This is a scare tactic being used to keep the line open.  Tell your banker that if (s)he's so concerned about your safety, (s)he'll be willing to reduce the line to just $1,000 so that you're not overexposed on credit, but still have the "security" of the title protection.

For your information, there have been several rulings against banks that have mortgaged property without doing an appropriate appraisal and confirming ownership with the body in residence prior to accepting the title change as valid.  Courts uphold the original owner's rights in Canada.  Don't let this dope scare you into doing something you don't want to do.

Courtney wrote:  Hi Gail, I am nineteen years old and I have just started University this fall towards my Bachelors of Nursing. I am trying to look ahead and plan for the future and I realize that establishing credit is very important. I am lucky enough to have my tuition, books and all related costs paid for as well as rent, food, etc. as I am living with my Dad and some extended family that my Dad provides for as well. I am responsible for taking care of everyone's personal needs (laundry, shopping, cleaning, cooking, etc.) in return for this. Therefore, I have no bills or expenses I am responsible for at this time.

I recently applied for a credit card and I was wondering if that was the smart way to go. I'd appreciate if you could answer the following questions and perhaps provide any other awesome advice I know you have! How should I pay it off? Should I pay the full balance or just the minimum? (I was told from the bank that making just the minimum was the way to go about getting the best credit history.) Should I have more than one type of credit? I have researched personal finance and have found that the majority of resources suggested having 2 credit cards or types of credit.

Gail says:  Very often the things you have to do to have the best credit score are not the things you have to do to be financially sound. So when your banker tells you to pay only the minimum to get the best credit history, that banker isn't trying to help you, he or she is trying to make sure you pay lotsnlotsa interest. Banks put profits before people and the credit scoring system is designed to ensure borrowers jump through hoops to keep their scores high. But doing the wrong things to have a higher credit score is just plain stupid. While paying your minimum will give you a higher credit score, it's a dumb thing to do since it costs you in interest. Paying your balance in full means you'll not be wasting your hard-earned money on interest charges, making the banks richer and yourself poorer.

By all means get yourself a credit card but make sure you only charge as much as you can afford to repay in full every month. Make your payments in full and on time. Actually, you should make your payment about three or four days before the due date to ensure you aren't hit with interest or fees because your payment didn't go through on time. Don't use more than 30% of your available credit limit if you want to boost your score. So if you think you'll need to get closer to the top of your credit limit, make an early payment against your credit card balance to reduce your "utilization."

Having two cards is also a good idea. Allocate one to your day-to-day spending, and keep the other for your online shopping. That online card should have a very low credit limit so that if it is compromised, you're not over-exposed.

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Managing Money Together

It's not unusual for two people who are VERY different in how they see and manage money hooking up before they've talked about those differences. Then money becomes something they fight about.

I've suggested everything from keeping your money separate if your mate is putting the family at risk, to painting yourself with chocolate to get his or her attention. Hey, desperate times call for desperate measures. Here are some of the more practical ways you can get on the same page.

If you've been operating without a budget on paper, now's the time to create one. Sure, YOU don't have to write everything down; you've got it locked and loaded in your brain. But your partner might not be as intuitive about the money.  Concrete folks need to see it in black and white before they'll get it.

Since some people are very concrete, you might want to try doing what I've been doing on TDDUP: give your mate some representative form of money (can be a deck of cards with dollar amounts written on it, it can be money from a game, it can be coins that represent larger amounts of money, or screws of different sizes or … well, you get my drift) and have them figure out the budget using these very concrete tools.  It is truly amazing to see the look on people's faces when they realize they've just run out of screws, cards, coins, whatever you've used to represent income. This approach makes the finiteness of money very real for people who usually just assume there will always be more money.

Having a jointly created plan on paper gives you a starting point for discussing how you're managing the money. She'll not only need a sense of the big picture, but the detail of a budget will help her see how all the pieces fit together. If you also create a calendar for which bills are paid on what days of the month, he'll be able to pick up where you left off if you're suddenly called away on business or have to go out of town to look after a loved-one.

Another great way to make the whole money-management experience real for your mate is to have him shadow you for a couple of weeks as you do things. You'll be able to answer his questions in real time as he observes the process. She'll see that when you pay the hydro bill, you make a note in your ledger that the bill has been paid, with the date and the transaction number in case hydro claims they didn't get the money.

Over time you should transfer some of the responsibilities to your partner. Start slowly with the easy stuff. As her confidence grows, give her more to do. You're aiming for the goal of having her do everything for a whole month while you simply watch. From that point on, you can take turns month by month or on a quarterly basis managing the money.

There, now you're a team.

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Thrifty vs Cheap

Here's another of those blog ideas that came from Adrian. Y'know, this is one I have to deal with quite a bit when I'm talking about trimming back on spending. Inevitably I get some version of the comment, "So you're cheap." Hey, if cheap means I have some money in the bank so I can tell the next ass who tries to dick with me to peeeeeze ooooooffff, I'm fine with that.

I have known some cheap people. They are the folks who show up at a party with two bottles of beer and then drink a dozen. They are the ones who leave the tax and tipping to every one else at the table. Hey, nobody likes a tightwad, which is why jokes about being cheap make us laugh. Ever hear the one about being tighter than paper on the wall? How about the one about squeezing a nickel 'til the beaver poops!

Thrifty is a whole 'nother matter. Once upon a time, thrift was considered something good. And life may be turning in that direction again. There are a couple of cities in the U.S. that have recently celebrated Thrift Weeks. And our focus on doing good for the environment (recycling, using reusable shopping bags, conserving energy) is thrifty.

Benjamin Franklin was an apostle of thrift. He's famous for it and has left behind pithy little sayings like, ""Waste neither time nor money, but make the best use of both." Your grandparents may not be famous, but they knew how to be thrifty too. With lots of kids, far fewer financial resources, and NO CREDIT, they had to find ways to make do.

They actually did better than make do… they had good lives. Did you know that the root of the word "thrift" is "thrive?" If you've been erroneously associating thrift with being cheap, you need to reorient your thinking. It isn't about being stingy. It's about building prosperity through careful management of resources. It isn't about being miserly. It's about embracing a way of life that lets ordinary people have a good life while they save and share.

Happily people seem to be shrugging off the "cheap" label and enjoying the idea of thrift. With the scare of an economy that tilted precariously to recession, some people decided to embrace their thrift and take better care of their pennies.

I'll willingly admit to being thrifty.  The way I do this (mostly) is by not spending money on crap I don't need. If I need a lipstick, I buy a lipstick. I don't have 30 lipsticks sitting in purses and drawers. If I want a new pair of shoes, I buy a new pair of shoes, but it's usually because I'm getting rid of a pair that's worn out, not because I'm adding to my "collection."

I hate throwing out food.  I despise feeling like I've wasted my money on something because I didn't think about the purchase carefully. So I don't make myself feel bad. I do the thrifty thing and stay on the right side of my demons.  I won't drive around to find cheap gas or to buy stuff on special, but I do know which stations have the best price, and I will plan my shopping around something on sale that's on my list.

How do you demonstrate your thriftiness? Do you know folks who are truly cheap? What's your favorite tip for using your resources to your advantage?

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Nervous about Your Money?

I get letters from people every day covering a wide range of emotions. There are the people who write or tweet me, very proud of what they've accomplished. There are the folks who are puzzled about some aspect of money that they just haven't been able to wrap their heads around. (These are the questions I most often answer.) And there are the people who are desperate. They know they've made a mess and they want me to tell them how to get out of the mess.

How you feel when you think about your money is a big indication of what you're doing right and what you may need to tweak. If the thought of opening up a bill, reviewing your spending, or adding up your debt makes you nervous, you may have been in denial and worry about just how deep a mess you're in.

I met people on my last book tour who have yet to crack the spine on the copy of Debt-Free Forever that they bought the year before. It's almost as if they think that just by buying the book they're going to solve their money problems. Jeeze Louise!

No matter how stressed, how nervous, how reluctant you may be right now about your money, the only way you're going to move out of the Nervous Zone is to do something. Yes, you must DO something. You can't just wish things were better. And you can't hand it over to someone else to sort out for you. You messed it up. Now it's time to clean it up. Put on your big-boy pants and get moving.

1. Do a spending analysis. This is the only way to figure out how you got into the mess you're in. I know this is hard work. I know your stomach will churn and you'll want to hide under the bed. But only by figuring out where your money has been going can you plug the leaks.

2. Add up your debt. You've done the damage, now it's time to face the music. For as long as you don't add it up, you can convince yourself things aren't so bad. Grab yourself a plastic lined garbage can (for when you toss your cookies) and add it up.

3. Make a plan. That means making a budget and a debt repayment plan so you can get out of the mess you've made.  The tools are on this website. Or you can go borrow a copy of Debt-Free Forever from the library. Or maybe you just have to open up the copy you bought last year and do the work I told you it would take to change your life.

I don't mean it to sound as if I think this is easy. It's damn hard. I know that. I work with people who swoon when I show them their debt, their spending, and where they are headed.  But you HAVE to do it if you want you life to be different.

The people I've met who have done the hard work and are debt-free or getting there are so much happier with their lives. With a plan, with the determination to never go down the road to Debt Hell again, they feel free. They feel like they can accomplish anything. They're sure of themselves and of what they're doing with their money. There are no Nervous Nellies amongst them.

Hey, if you're nervous about your money that's a sure sign things should be different. Get moving!

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Fear Hurts

A friend of mine recently wrote, "I can't believe it took [me] 37 years to realize that fears aren't real."

Fear is something most of us have to deal with. And it's a very real part of being human. It manifests in the dread you feel when you don't know how something will turn out. It is the sense of doom that lies in the pit of your stomach despite your best efforts to ignore it.

We can't ignore fear. It is around us – promoted to us – and inside us. Each bad-news story brings fear: fear of a recession, fear of disease, fear of a catastrophe. Employers use fear of unemployment to make us work longer and harder. Governments use fear of terrorism to restrict our civil liberties.  And if you're afraid of being alone, you'll be willing to conform to the rules of your church, your ethnic group, your family to stay in the fold.

Fear is a powerful tool that can be used to manipulate and control. When we're afraid, we will do just about anything to feel safer.

Each enterprising salesman who suggests you buy an extended warranty is using fear to make the sale. In fact, in the language of sales, theirs is a "Fear of Loss Close" that is actually used to motivate you to buy. You've heard it: "This sale will only be on today." "This is the last one we have and we don't know if we're getting any more." "Use it or lose it."

Acting from a place of fear means you're probably not making a well-thought-out decision. And allowing fear to paralyze you – I so afraid of what will happen, I'd rather do nothing – is no answer. In fact, unchecked, your fear can make you ill.

Before you'll successfully be able to deal with the fear, you must accept that it is part of who you are. Then you'll be able to rally your inner energy.

It is actually very normal to feel afraid. It's that "fear" that kept us alive and able to come as far as we have as a specie. Fear motivates us to do the right thing. Sure it's hard to climb up into the tree to go to sleep, but if we don't the wild animals will eat us. And sure it's hard to pick up the telephone and make another sales call, but if we don't we won't have any money to feed the kids.

If you're prepared to look at what you're afraid of, if you have the courage to stare deep into the nothingness that makes you want to cry, face the loneliness, deal with the sense of terror, you will find you can do the most amazing things.

Accept the fear. It is what it is. Then look it in the eye and move forward. You can. You must.

Each time you face your fear and do it – whatever it may be – you strengthen your ability to face whatever comes next. You will find it remarkably freeing. Since you'll be in control of your own response to fear, others won't be able to use that fear to manipulate you.

If you can't face your fears alone – if they are too much for you – then get a friend to help you. That may be someone who loves you. Or it may be a professional trained in helping you to deal with your fears.

If you are going on this journey on your own, a mantra can help you.  Make your own using the words "I won't" "I will" and "I am". Something like this:

I won't hide from my fears.

I won't let others make me afraid.

I will accept my fears.

I will move through those fears.

I am strong and able.

I am full of positive energy and love.

Fear is one of the two most powerful emotions; the other is desire. While desire can make you do the most unexpected things, fear can stop you dead in your tracks. You've got to learn to feel the fear and do it anyway.

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Reduce, Reuse, Recycle: Prescription Bottles

There's no better way to save money than to find creative ways to reuse the things we already have. So often we don't even think about the stuff we're throwing away. Even if you're a vigilant recycler, once something leaves your hands, it's going to cost money to do something with it. But if you can find a way to put it to good use, well, that's killing two birds with one stone.

I bet if you gathered up all the prescription bottles you and your family (extended) used in a year, you would come up with a basketful. We just throw those little suckers out without much thought to how we could reuse them. Since most drugstores won't take 'em back – they don't have a system for sanitizing them adequately, or collecting them for that matter (which they should) – you can get creative yourself.

My friend, Kath, is an avid gardener and she always keeps one or two of these in her handbag for when she goes walking – in the park, in friends' gardens – to collect seeds for future garden projects. First she makes sure she's washed off the labels and cleaned out the insides. Then she applies a new label so she can make a note of what she's collected. It got me thinking about what else you can use an old prescription bottle for.

You could glue different sized bottles together to store change in the car. Or you could use them to store things like paperclips, safety pins, and rubber bands. If your kids play board games and the pieces are always getting lost, you can use these bottles to wrangle them all into one place. Whenever the kids and I travel, we always take a cribbage board and this would be a good place to stash those little pieces.

Maybe your local vet would like the bottles to use for dispensing animal meds.

If you're really creative you can turn those bottles into crafts – or use them to hold craft supplies like glitter, buttons, and all the other stuff crafties love. Just glue a sample of what's in the bottle on the lid.

Here's an idea I once saw in a magazine: For Valentine's Day, fill up a bottle or six with chocolate kisses and re-label the bottle: "Rx for a Happy Valentine's Day." Cute, eh? Hey, be careful about putting candy in a prescription bottle for kids. You don't want them getting the wrong message.

A well-washed prescription bottle is the perfect size for that salad dressing you pack to go with the salad you make for lunch at work.

You could build a mini sewing kit. Thread a couple of needles with different coloured threads (white, black, red, green), wrap the threads around the needles and pop into the bottle.  Add a couple of safety pins, a button or two and you've got a portable sewing kit. Ditto for an emergency medical kit: a band-aid, cotton ball, Q-tip, and a packaged alcohol wipe will fit into one of those fatter bottles.

See if there's local company like this one in Vancouver that will work with pharmacies to recycle plastics including prescription bottles. Then suggest to your pharmacist that (s)he start a recycling program for these bottles.

Okay, now it's your turn. What do you reuse that other people just throw away? Give us your best ideas for ways to put things to work a second time.

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Opening the Shopping Floodgates

Ever notice how sometimes when you go shopping for one thing, you end up bringing home four or five other things? How many times have your heard, "I only came in for…" at the check-out? It's one of the reasons I shop with a list and only add to my list, not to my shopping.

From Stanford comes a new set of studies that talk about how shopping can lead to more shopping. It seems that buying that fateful first item may open the shopping floodgates.

People were given the opportunity to buy discounted items from the researchers as compensation for their participation in the study. Some people were offered a light bulb, others received something more relevant to their needs like an educational CD. This was to vary how likely people were to buy the first item. It came as no surprise that people who received a light bulb were less likely to buy it compared to those who received the CD. Then folks had the chance to buy a second item: a keychain.

Turns out, the people who bought the CD – something they wanted — were more likely to buy the keychain even though the second item was completely unrelated to the first. Turns out shopping is a two-stage process:

People deliberate about a purchase, weighing cost and benefits, the degree to which they need the item, and so on.
Once the deliberation is over and the buying begins, a subtle psychological mechanism comes into play and a roller coaster of shopping can begin.

That first buy creates what the researchers call "shopping momentum."

Most people don't have a clue that this is happening to them. Outside of stores, people think rationally. Inside stores, a whole different dynamic comes into play and people may be triggered to shop MORE by the sheer act of shopping. That's why smart stores put momentum starters at the front of the store; you know, those small items it's easy to pick up, which don't require a lot of deliberation. Those little buys get you on a shopping roll. It's also why smart retailers use "loss leaders" or products they sell at a deep discount to get you into the store. They know that when you pick up those 24 rolls of toilet paper for a buck fifty, you're going to have opened your shopping floodgates and buy all the other stuff at full price.

So are there ways to slow down your shopping momentum? Indeed there may be. It seems that when you must open two separate wallets, envelopes or other containers for your money, you're more likely to think twice before jumping on the shopping bandwagon. That'd make a good case for not filling your basket and checking out all at once, but buying smaller loads of stuff at a time. It also could help your case if you put the cash you intend to spend into an envelope (and write your list on the front) before heading off to the store. You're less likely to dip back into your wallet for impulse purchases.

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The A, B, Cs of Money: L

LADDERING: When you stagger the maturities on a series of investments (as with bonds or GICs) you are said to be "laddering" your investments. If you have $10,000 to invest in a GIC, you could put all $10,000 away for 5 years. Or you could ladder the GICS, $2,000 for 1 year, $2,000 for 2 years, $2,000 for 3 years and so on. The benefit to laddering is two-fold: first, you don't have to guess at which term will give you the biggest bang since you'll have some money invested for each term; second, since you have some money maturing each year, you can take advantages of upward swings in interest rates. If the interest rate movement is downward, only some of your money is exposed to the lower rate.

LEADING INDICATOR: An economic factor that is used to measure how the economy is trending. They're not always accurate, however. Bond yields are often thought to be a good leading indicator of the market since bond traders speculate on trends in the economy.

LEVERAGE: Using borrowed money to buy more of an investment in order to increase the potential profit earned. Leveraging also exposes you to more risk since a fall in the value of the investment may result in a "call" or request for repayment of the loan forcing the sale of the investment at exactly the wrong time.

LIABILITIES: What you owe. These, combined with assets (what you own) are used to calculate your net worth.

LIEN: The right of a creditor to take possession of the goods of someone until that someone fulfils his or her obligations such as a payment of a debt or of an outstanding invoice. It can put a real crimp in your sales plan if someone has put a lien on your home.

LIPSTICK EFFECT: Coined by Leonard Lauder, Chairman of Estee Lauder, this refers to the trend that during tough times sales of lipsticks go up. So increases in lipstick sales have become synonymous with economic uncertainty or recession.

LIQUIDITY: The ease with which an asset can be converted to cash without a loss of value. A savings account is the most liquid investment. Some assets have a high level of trading activity making them more liquid. Assets that can be easily bought or sold are known as liquid assets.

LIRA: Locked-in Retirement Accounts are created when money is transferred from a pension plan to a locked-in RSP.

Here's a note a got from my girlfriend Victoria about her LIRA, which you might find interesting and useful:

My pathetic little locked-in RRSP was destined to become a pathetic little annuity.  My only other chance to access the money came if I qualified under the complicated 'Financial Hardship' clause.  On the site www.osfi-bsif.gc.ca under 'Pension Unlocking', I discovered that I could transfer my locked-in RRSP using the 'Small Balance Unlocking' clause into i) a tax-deferred regular RRSP, ii) a tax-deferred regular RRIF, or iii) I could take it in cash and pay tax on the withdrawal.   I qualified because I am over 55 and my plan was below $24,150.

Anyone who owns a locked-in RRSP, a locked-in Life Income Fund, or a Restricted Life Income Fund can find out what options are available at this website.   Small balance unlocking is just one clause.  There is also Financial hardship, Non-residency, Shortened life expectancy, and One-time 50% unlocking, each with their specific terms for qualifying.

LOAD: The commission that must the paid on the purchase or sale of a mutual fund. A front-end loan means the commission is paid when the mutual fund is bought and reduces the amount you have to invest.  Back-end loads come into effect when the investment is sold and will be higher if your investment has grown. Do I have to say that you should avoid loaded mutual funds?

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What Goes Up

We have a mantra in our household: Where we are now is not where we're going to be tomorrow. It's meant to remind us that good times won't last forever, so say thank you. It's also meant to remind us that bad times won't last forever, so breathe and hang tough.

You might also want to adapt this mantra if you're an investor since it's equally applicable in terms of understanding business cycles. We investors have a tendency, when times are good, to think that they will always be good. When interest rates are low, we think interest rates will always be low. And when the economy sucks,  well… you get my drift.

The reality is very different. Free market economies regularly move through phases of expansion and contraction.

When a business cycle is in an expansion phase, jobs are created and incomes usually go up. The increased prosperity gives consumers loads of confidence so they go out and spend loads of money.  All that spending drives the production of more goods and services to keep up with the demand, further fueling the economic expansion. That over-demand and under-supply can fuel increase in prices. When those prices hit some magic number – a tipping point – consumers pull back. Now companies are left with an over supply of their products and services so they, in turn, pull back, cutting production to reduce inventory and laying off workers. This is where the expansion phase turns to the contraction phase.

When the business cycle is contracting it's because sales and incomes are generally falling and unemployment is increasing.  Consumer confidence is nowhere to be seen so people start to squirrel away a little money because they now believe the worst can happen. Governments usually step in to stimulate spending or hiring and try and mitigate the impact of the contraction.

If the trough is deep enough, it's call a recession. Typically, during a recession, production as measured by GDP falls. Business profits fall. So too does employment and, as a result, household incomes. All this results in lower inflation, higher levels of bankruptcy and increased unemployment.

What is GDP? Gross Domestic Product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total dollar value of all the goods and services produced during a particular period of time. At its most basic (because the calculation is actually quite complex) GDP is calculated by adding up what everyone earned in a year including total compensation to employees, companies' gross profits, and taxes (less subsidies). Or, more commonly, it can be calculated by adding up what everyone spent in a year, including total consumption, investment, government spending and net exports. When you hear that GDP has risen by 2% over the past year, it means economy has grown by 2%.

If the trough is deeper still, it's called a depression.  While there's no universally agreed upon definition for a depression, one rule of thumb used is that a depression is a period during which GDP declines by more than 10%.

There's an old joke amongst economists (who are, by nature, not particularly funny):

A recession is when your neighbour loses his job. A depression is when you lose your job.

Ultimately, like the sun rising or the seasons changing, the business cycle will shift, moving once again to expansion. Unlike the seasons changing however, there is no regularity to the business cycle, which is one reason why we poor fools keep getting sucked into believing that things will never change. Cycles vary in length. Cycles vary in intensity. But while we can never predict the longevity of a current cycle, it behooves us to keep in mind that what goes up must come down. And vice versa.

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Uncertainty Sucks

Life is full of uncertainty, and it is how we deal with those tummy-turning, muscle-tensing, thought-invading little beasties that can make or break a day.

As you venture from where you are now to where you want to be, the idea of what's unknown potentially holding huge downsides can paralyze you. That's because so many people are control freaks and the sense of not being in control makes them wobbly in the knees. I know. I'm one of those people. But I've learned in my many, many years that just telling yourself to relax can make a difference. And finding ways to cope with uncertainty can make all the difference in the world to your life.

Accept uncertainty. Very often uncertainty arises when we think forward. When Alex was getting read to go off to university, I had a knot in my stomach because she hadn't yet received her "move in" date, and I had to start shooting the first week in September. What would we do if her move in date coincided with my shoot date? The knot grew as I waited for her notification to come.  How would I manage to be in two places at once?

Bah! That was just my mind playing the worst case scenario over and over. Let's face it, if it happened, I'd have to find a way to deal. But the likelihood of it happening was quite small. So it was just my Worry Wyvern rearing his narly head. Once I accepted the circumstances, and acknowledged that I had no way to predict the future, I let go of the worry. (This also applies to things in the past, since we have no power to change what has already happened.)

A mantra helped. Each time my Worry Wyvern growled, I'd repeat: "I will figure it out, but I'm not going to worry about it until I know what's happening." It weren't easy, I'll tell ya. But it worked with time and the determination not to let that worry ruin all the time I had with her until she left.

Talk. I also find that talking about whatever is stressing me out makes me feel better. Perhaps it is taking it out of the realm of mind and making it real with words that helps clarify. Or perhaps it is saying it a couple or 12 times that helps dissipate the swirling emotions that grow in the darkness of mind.  So talk about how you're feeling. Holding it all inside your head, just gives the Worry Wyvern the moist darkness he needs to thrive. Air your worry out in the sunshine of friendship and love, and watch that little bugger shrink.

Be aware. If you don't acknowledge your feelings – no matter how silly you may think they are – then they will seep through your being and make you do the darndest things. I'm convinced that people have substituted shopping for dealing with their real feelings. It so much easier to mask the emotions with the temporary high of shopping. And we've grown so use to retreating into the mall whenever being with our thoughts feels like too much to handle.

You'll be amazed at how awareness brings liberation. Just knowing what's pushing your buttons will help you connect with your inner strength. And when you acknowledge what you're really thinking about and deal with it, you'll feel lighter.

There will be circumstances over which you have no control. But if you let that sense of your world unraveling take on a life of it's own, you'll give up your personal power. You are powerful. And the place where you are most powerful is in your mind. YOU have control over your thoughts, although it can sometimes feel like a wild ride on a bucking bronco. But if you let circumstances trigger irrational, self-defeating thoughts, which in turn affect how you feel, you'll have let your Worry Wyvern take the reins. You have the power to change how you are thinking.

Take control of the language you're using when you talk to yourself, and take control of your thoughts. You get to choose weather you'll let something beyond your control define how you think and feel. Or you can choose words that frame your uncertainty in positives. Move from "should" and "have to", to "can" and "choose to".

And remember to be kind to yourself. You're the only you you've got.

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