Your Money Book

I keep getting asked if this weeks’ stimulus budget is a good idea or flawed. But rather than specifics, what really concerns me is more of the big picture of the issue.

Any 100 politicians or economists in the same room wouldn’t agree what day of the week it is today. So it’s pretty easy to find large numbers of people to argue many of the items in the budget are a really bad idea that’ll never work. It’s just as easy for someone on the other side of the argument to line up the same number of people that think its’ a great idea.

What really bothered me is that two opposition parties announced they were voting against the budget weeks before it was tabled in the House of Commons. That’s sad and so wrong. If, every time you went to see your boss for something, he or she said the answer is no, now what’s the question – what would that be like?

One of the nastiest agendas is the attack on Prime Minister Harper that he should have seen all this doom and gloom coming. What? Talk about playing politics! The markets, banking problems, recession issues and housing problems in the U.S. are changing weekly. Nobody really knows what’s coming next. Yet somehow the Prime Minister should have had a crystal ball? Or is it just a political and agenda-driven attack that he is flexible enough to adapt to deteriorating circumstances in our economy? Talk about a no-win situation. Doing the right thing still gets criticized.

When we’re in the middle of a family argument and a big problem or crisis arises, you gotta know our little arguments get put aside, right? Big problems bring families and companies together to confront a common problem. Why do our politicians not care enough to do that? Why are we hearing nothing but arguments, objections and name calling instead of asking what they can do to help? We have some serious economic problems – can we cut the politics and pull in the same directions for the good of the country?

Should we run a deficit during these times? Well, if you or your partner were laid off, would you still pay the mortgage and groceries? Of course. There are times when we do whatever it takes. Why would the budget of the federal government be any different?

When many people say they support our troops, they’re told it’s terrible that they support the war in Afghanistan. What? Supporting the troops is different than supporting the war. Now we have some large economic challenges and we can’t pull together as a country, again? How sad that we can’t seem to disagree without being disagreeable.

When my car needs a boost because it’s dead, that’s not the time I really want to talk about how dirty it is or whether I should have bought a four-door. Can we just get on with allowing the government we elected to make their best efforts to get us out of the economic ditch?

Oh, and there’s one more industry in the U.S. that’s now looking for a bailout: It’s the porn industry lead by the publisher of Hustler Magazine. Yes, business is soft – but the porn industry looking for government assistance? Give me a break – talk about a stimulus package, though!

Last week we talked about some steps to take in this after-Christmas time of bills and today we’ll look at three more steps

What are some other steps we can take to turn our finances around in these economic times?

Take your credit cards out of your wallet. You don’t need them heading for work on a daily basis. That way the temptation is gone and what you charge is a whole lot less. Take a $20 or $50 bill and hide it in your wallet or purse for emergency money. If it’s really for an emergency you’ll still have it in there in six months. With credit cards we spend about 18% more than paying by debit card or cash. We just don’t connect real money with our cards the same way casinos give us chips and don’t want us using $20 bills!

Set up your Tax Free Savings Account. These came out January 1st. Set one up, even if it’s only for $100. It’s a start and you’re well on the way. Putting the money in is not tax-deductible like an RRSP, but all the share increases or interest you earn is tax free. But you have to be really careful. Many institutions are ready to rip you off with a ton of fees. If you’re not careful, more than half the people will pay more in fees than they’ll make in interest off a GIC or term deposit. Your first question needs to be the full list of fees: What’s the opening fee, annual maintenance fee AND if there are any costs for contributions or for withdrawals. Here’s a really great calculator for it from the Government of Canada web site: http://www.budget.gc.ca/2008/mm/calc_e.html

Keep your car for another year. If you believe a cool car is a status symbol and a must-have, you’re doomed to be in debt for decades to come. Not to mention that almost 50% of people trade their vehicle and STILL owe more than it’s worth. The goal should be to drive a reliable vehicle that doesn’t have payments with it which are killing your chances to save or get ahead financially.

And for 2009, I wish you:

Three months of emergency savings

A debit card in your wallet and a credit card that stays at home for emergencies

A zero balance line of credit

A mortgage renewal where you’ve shopped around and shortened the term

And payroll deduction for some savings or RRSPs where you now pay yourself first

Happy New Year, but it’s pretty depressing that us Canadians just hit the trillion dollar mark in consumer debt and it keeps growing.

New Years resolutions don’t work most of the time which is why fitness clubs are a ghost town in February while everyone is still stuck with an annual membership fee. Most of us just don’t have a “hallelujah moment” the first few days of New Years which has much of a lifespan.

The good news: It’s a new year! It’s a chance to start over, to resolve to do better, to do more, or in the case of your payments and all that interest – to do a lot less.

The bad news? You’re already broke! How’d that happen? Well, we spend more than 120% of our disposable income, half of us have no savings and almost 70% of us don’t even make RRSP contributions. Why? Because every dollar we earn goes to make a long list of lenders really really rich and there’s simply nothing left at the end of the month. Never mind that the average person figures it’ll take two months to pay off their Christmas debts when surveys keep showing it’s actually more like six months.

How do we make it through January with the Christmas and other bills heading our way?
When you’re in a hole – stop digging. In other words, spend less or earn more. Both will have a huge impact in changing your financial situation really quickly.

Annual bills kill your budget, but they’re not a surprise. We know they’re coming – but we haven’t got the money to pay them. Open a savings account that’s not hooked on your ATM card. Then add up what you’ll need for next years’ Christmas bills, your property tax and car or home insurance. Divide it by 12 and put that monthly amount away.

Set yourself a credit limit. Pick a dollar figure below which you’ll pay by debit card or cash. Maybe $20 or $30 bucks – that’s it. Anything below that, you’ll pay with real money instead of running up debts. It’ll become a great habit and will cut down your credit card balance in huge ways.

Pay off one bill. Minimum payments buy you another month – nothing more. It’s treading water. Credit cards and debt are not your friend. They’re financial dream killers and suck money out of your pocket and add a ton of stress to your life and your relationship. Take your smallest bill and put every dollar you can towards it while paying minimum payments on everything else. When it’s gone, take the next smallest and focus only on it. This step-up plan will get you debt free in less than half the time. It’s an entire section of the It’s Your Money book and will become a huge tools for you.

Close your overdraft. I know – it’s like being hooked on drugs. It’s so convenient and always there and you can’t live without it any more. Well, that’s what the banks were counting on. Just a $1,000 overdraft will cost you between $200 and $300 in interest and fees. It’s a one-time pain to cancel the overdraft, but it’s worth it.