One of the issues that seem to be front and centre right now is interest rates, where are they going? How high can they go? Will we see a return of the 1980’s interest rates? Most importantly, am I going to be ok? My response, you are going to be just fine. Yes, you will have to make adjustments in the new rate environment and the days of ultra-low rates are now over. Should I lock in? My answer is maybe; it depends on who you are and what goes on in your life. If I qualified you for a mortgage, I did use a much higher rate than what you are paying currently to ensure affordability in the long term. The trouble is, the majority of us overspend or have gotten used to a level of comfort that we don’t want to give up or compromise. Should you lock into a fixed rate? For me it’s a no, I will pay a fixed rate payment and keep my flexible variable rate. If you would like to discuss how this strategy could work for you, see the attached sheet or call me. The low rates that we were so comfortable with are not going to be there for you any longer. That being said, anything under 5% is still a pretty good bargain.
The Blue skies and sunshine and minus 20º burrr. I would rather be on a beach somewhere warm, planning my retirement; wouldn’t we all. Before we can retire, we need to get our finances in order. Last month we revealed the Solvent family and how they are a combination of many families and financial obstacles I see regularly. (Please keep in mind, I am not a financial planner just an observer of-of human nature and witnessing the same repetitive behaviours).
I have a friend named Brian, and he frequently asks, “Are you recession proof?” Can you withstand the financial retrain of living in leaner times? I think the answer for most of us is NO! So, how do we become recession proof? Let’s visit the Solvent family. In January I asked you to pull out all the bills, statements, payments for the past six months and review them. What did you find? Did you discover where your money was going? How many times did you go Tim’s? Did you have any ah-ha moments? What were they? Are you running a deficit or a surplus?? Were you able to give yourself a high five, or was it just too much and you quit halfway through? If you stopped halfway through and felt overwhelmed call me, I can help.
Here’s what happened to the Solvent family.
After reviewing six months worth the financial statements they realized they were spending approximately $1500 more a month than they were bringing in. Where was the money going? With Solvent family it was the small things that added up. Their older car was in constant need of minor repairs, dining out, picking up food at the drive-thru on the way to the kid’s activities as there was never enough time to prepare snacks. Mrs. Solvent secretly smoked and gave into the kids a little more than they could afford. Mr. Solvent was a generous man who liked to buy rounds on pub night on his weekly boys night out. Being generous and kind is incredible, but it shouldn’t come at the expense of your finances. So what can you do?
Now that you’ve taken a look at your statements and discovered where your money is going, its time to ask yourself, where would you like your money to go? I know for myself, it’s travelling and retirement savings. For the Solvent family, its lifestyle and their kid’s education. What is it for you and your family? Where do you want your money to go? If you didn’t have to pay debt or interest on the debt, how would you spend your money? What are you willing to do, give up and change to get there? But before you can get to where you want to go, we have to get our spending in line with our income. In short, spend less than you make at the very least and hopefully pay yourself first. Let’s start with finding the missing money and reevaluating how we spend.
February’s Money Challenge
Here’s this months challenge. If you have not done so already, review your finances/budget. What can you give up? Maybe it’s not giving up so much as its exchanging something for something you really want? Is it cable? Eating out? Hair products? Pub nights? The answer is different for everyone. For me, I quit smoking and cut back on how often I get my hair done. I do coffee/tea dates for work now instead of lunch or drink dates. The bonus for me was my small changes that were better for my health and my wallet. What can you change? How can you bring your spending in line with your goals?
Send me an email with what you changed or gave up so you could meet your personal financial goal.
Advice From An Expert
It’s time to bring in an expert. Each month I will enlist a professional in the field of finance to lean in and provide practical and professional knowledge to assist you and the Solvent family. This month I am honoured to have my good friend Doris Beland lend her expertise and guidance. Doris is a self-made woman, she has known financial struggles and now helps others to find financial freedom. Thank you, Doris!
The Solvent family’s cashflow problem:
The Solvents are off to a good start by tracking their spending and uncovering their $1,500 cash flow deficit. Before they start to make spending changes, however, they need to sort out some basics so that they know the changes they make are the right ones for them.
The goal for our finances should be to make conscious, deliberate choices that serve our values-based goals. Otherwise, we risk spending based on what comes up in the moment and finding ourselves in the hole, like the Solvents, rather than creating a system that serves us well.
So how do you do that? Follow these steps:
Make a list of your Top 5 Values – that is, determine what matters most to you. Is it spending time with family? Being healthy? Enjoying financial security? Philanthropy? Travel? Spend a bit of time with this to really drill down to what matters to you. If you’re part of a couple, write your own list and then compare with your partner to create a list that works for the ‘team’.
Once you have your list of Top 5 Values, write out your Top 5 Goals based on your values. So, if one of your top values is ensuring your family is healthy and physically fit, one of your goals could be go for long walks together a couple times a week or choose to forego fast food, or kick the smoking habit, in Mrs. Solvent’s case. The Solvents have identified their children’s education as one of their important priorities. Therefore, a goal might be to set aside $100 per month for contribution to an RESP for them. You get the idea. Ensure that your top goals are based on your top values.
Once you have your values and your goals, it’s time to rank your expenditures on a scale of 1 to 10, with 1 being necessary for survival (e.g. a roof over your head or good food on the table), and 10 being an indulgence (e.g. beer with the boys, pedicures, etc). Then the hard part: You start cutting the 10’s from your spending, then the 9’s, and so on until you reach the break even point while still covering your important goals. I know, it’s no fun, but it’s necessary and effective.
The Solvents say they value a good lifestyle, but what does that mean? Is it about spending time with friends, living in a big house, something else? They need to discuss what aspects of their lifestyle really matter to them, cut the rest, and ask if they can achieve the same goals without spending as much. Perhaps they can have friends over to their house rather than going out.
Regarding their habit of eating out, perhaps they can choose to dine out only once every two months and buy pre-made snacks in bulk instead of using the drive-thru.
I would recommend that Mr. and Mrs. Solvent set up a regular date night at home, without kids, to talk about where they’re at, where they want to go, and what habits will help them get there. They can even do it with a glass of wine or beer in hand, but just talk on a regular basis about your finances!
With a bit of effort, the Solvents, and anyone else for that matter, can tackle their spending challenges and end up in a financially solid place if they establish values-based goals to guide their spending, make conscious, deliberate choices, and keep track of their progress.
Doris Belland is a credit repair specialist, founder of the financial education company Your Financial Launchpad, and author of Protect Your Purse, Shared Lessons for Women: Avoid Financial Messes, Stop Emotional Bankruptcies, and Take Charge of Your Money.
In her early thirties, she became a widow and was left with $400,000 of debt, which she repaid within two years. She has since developed a real estate portfolio and built two businesses.
Doris helps women grow their financial confidence and develop better options for their families through her monthly Women’s Money Group, a women-only safe zone where all “stupid questions” are welcome, and workshops on financial literacy and investing.
Registration is open on Eventbrite for the February meeting entitled Overcoming Money Patterns, Beliefs, and Blocks:
You can contact Doris with money questions through her website: www.YourFinancialLaunchpad.com or on Facebook: www.Facebook.com/YourFinancialLaunchpad
January’s Frugal Tips Challenge
And the winner is GILES DAY!
Last month I received so many fantastic tips and tricks, I was overwhelmed, see below for some of the suggestions.
Quote from a client
“I actually budget my expenses monthly ever since I bought my house and this past holiday I was reviewing it and I noticed that my food budget has been creeping up the last few months so sure enough I did what you suggested and looked for ways to lower my spending….and I found it. When I get busy and tired at work I will often call for take-out and pick my food up on my way home, so I don’t have to cook.
This is what I plan to limit myself from doing this year. Less take-out!”
Below are some great App suggestions
Flipp – it has all the local flyers in it, an ability to create a shopping list, and coupons. But it doesn’t end there – When you create a shopping list, you can click on each item and the app will find all instances of it in all the local fliers, let you choose the best price and circle it. You do that for ally our list, and then at checkout you get the items price matched. We save a lot on every grocery trip. Not only does it save us money, but helps us not buy things we don’t need/not on the list. Another neat feature about this app is, that you can select which grocery store you are in, and if available, it knows which aisle each item is in, and helps you build a shopping route – saving you time.
Checkout51 – It has coupons you can use after your purchase items. You take a photo of your receipt and when you accumulate $20 they send you a cheque. I found this isn’t as useful to me as it was more processed goods and a lot of baby related items – but could be to others.
CarrotRewards – It tracks your steps, and has occasional surveys/quizzes – which allow you to collect scene/petro points (or other programs). I have already accumulated enough scene points for 2 movies in a year. All the surveys are health/fitness related and are quick to do.
The Mint App – was suggested by several people, heres what one client had to say.
The app allows you to connect all your bank and credit card accounts and automatically sorts your transactions into categories like groceries, gas, mortgage, credit card payments, etc. It allows you to manually adjust the categories and add monthly budgets for each category, and when you exceed your budget, it sends you a notification or an email to let you know.
It’s a great tool that I’ve been using for over a year now. You can also set up goals to save money towards future travels, a down payment, or whatever you want!
Over time you can compare your income vs. spending trends in visual charts and pie charts.
It has definitely helped me see where my money is being spent and where to cut down on possible expenses!
Thank you, Hanan.
TIPS: Trading in Netflixs for YouTube
Follow the budget you set for yourself.
New Mortgage Distribution Data From The BoC Shows Stress Testing Is A Huge Deal
Canadian real estate is going to have mortgage capital throttled, and it may have a serious impact on capital flows. Numbers sent to us from the Bank of Canada (BoC) give us one of the most comprehensive looks at mortgage borrowing behaviour. Borrowing the absolute maximum, is one of the most popular strategies homebuyers in Canada use. This means new mortgage stress testing is going to have a huge impact on the way buyers shop for homes.