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Money News>
Community Resource Centre Money News
December 7, 2007
Welcome to the Community Resource Centre's first edition of
Money News
Our 18 month Money Management for Women project, funded by
the Status of Women, produces this monthly e-newsletter.
The project will be also providing other money management
services: courses, finance books in our library, handouts
and worksheets, one-to-one information sessions and ongoing
group support sessions. Call 604 885 4088 or email
resourcecentre@dccnet.com
The next FREE course is a Personal "Budget Blues" Jan 28,
2008 @ 6:30-8:30 pm. Create a personalized plan for a
richer future starting now. Call or Email to register: 604
885 4088 or resourcecentre@dccnet.com
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Moneyscopes: December 2007
See what the stars have in store for your financial future
By Barb Hindley
Is this the month to save or splurge? Let the stars decide
with your monthly money horoscope.
SAGITTARIUS(November 22 – December 21)
Mars in retrograde invites you to re-think and reassess
your current investment strategies, as well as your
investment strategist! You may have more to invest now and
need a new plan. Interview consultants now, but wait until
next February before making any formal changes.
CAPRICORN(December 22 – January 19)
You can feel it, can’t you? Power players Jupiter and Pluto
are poised to enter your sign at the end of this month and
next, bringing opportunity your way. You’re in a
preparatory phase right now. No big spending this holiday
season, but it’ll be a different story next year.
AQUARIUS(January 20 – February 18)
Social activities and group events require you to pony up
this month, but you’re more than happy to do it! You love
being with your best pals, and a few new friends are always
welcome into your social circle. Plan a pot-luck to keep
expenses down (they’re more fun anyway).
PISCES(February 19 – March 20)
The right career move pushes you into the big leagues, with
a paycheque to prove it. Jupiter and Pluto open a
professional door on the 11th, but you may have to say
goodbye to something/someone before moving through it.
ARIES(March 21 – April 19)
Mars in retrograde keeps your spending to a minimum, but
that doesn’t mean you’re not up for a worthy splurge if the
occasion arises. What’s worthy in your eyes? You’re more
likely to exceed your financial limits with a huge donation
to the food bank than you are by spending on yourself.
TAURUS(April 20 – May 20)
Your natural inclination is to save, but you’re feeling
flush this month and more than willing to share the wealth.
You can afford to indulge your good taste and choose
quality gifts that you’re thrilled to give (and they’re
thrilled to receive).
GEMINI(May 21 – June 21)
Mars in retrograde fuels your frustration with financial
limits. Don’t throw up your hands and scrap your whole
budgetary plan. It may just be time to devise a new one
that works with your new priorities.
CANCER(June 22 – July 22)
You’re more about comfort and security than you are about
shopping and spending on gifts this holiday season. Splurge
on great food and lavish it on those you love. Have the
neighbours in for cocktails, or invite the whole extended
family to your house for Christmas dinner this year.
LEO(July 23 – August 22)
It’s a social season and you’re thrilled to be in the whirl
of it. A new party dress is a must and it has to be a
knock-out! You can afford to dress well, but don’t let
extravagant Jupiter get the upper hand. Remember there’s
still a credit card bill coming in next month!
VIRGO(August 23 – September 22)
You’re not feeling overly social this season. Don’t feel
like you have to waste good money on parties or party
clothes when you’re not really into it anyway. You’d rather
spend time with family. If you’re going to spend, do it on
them. They’re the ones who’ll appreciate it.
LIBRA(September 23 – October 22)
Mars in retrograde invites you to dust off an old skill set
to make a little extra loot this season. An ex-employer
needs help and tries to lure you back December 10th or
11th. Venus says the compensation could make it a very
worthy temporary gig.
SCORPIO(October 23 – November 21)
The only money worry you have this season is what to do
with all of it! Jupiter and Pluto combine to say ‘go big or
go home.’ The right financial move could make you a whack
of cash, but an ill-advised one could do the opposite.
You’ve got an opportunity to build wealth here if you play
it smart.
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How to budget for the Holidays
Spreading good cheer doesn’t have to break the bank
By Steve Brearton
Save up
Last year, Visa Canada reported that Canadians would spend
an average of $930 each on gifts alone. Elena Jara, an
education coordinator at the credit counselling service
Credit Canada, suggests that the most painless way of
paying for holiday expenses is having a set amount
transferred from your chequing account on a regular basis
into a savings bond or a designated account. An automatic
withdrawal of $50 per paycheque, based on a standard
biweekly pay period, could give you $1,300 a year for
holiday goodies - start now for next year.
Use cash
Some credit cards begin calculating interest charges
immediately after you buy an item, so even if you pay off
your bill quickly, that $100 gift costs more. "The biggest
misconception is 'I will be able to deal with [my spending]
after the holidays,' " says Jara. "But the reality is, when
the bills come in, people say, 'I can't believe I actually
spent that much.' "
Shop early
Finishing your shopping before December 24 can let you take
advantage of sales and will keep you from impulsively
buying expensive gifts out of panic. Shopping at the last
minute costs more, says Jara: "We find we are willing to
spend whatever we have to, to make sure we don't look bad."
Go green
Reuse your gift bags and bows from last year, and instead
of buying a whole new set of decorations, make them the
old-fashioned way by using pine cones and pine boughs as
well as strings of popcorn and cranberries.
Do it yourself
Homemade treats or crafts make the perfect hostess gift.
Pick an afternoon in early or mid-December to prepare your
stock for seasonal parties or "forgotten" gifts.
Feel the spirit
Focus on what you want the holidays to be about for you and
your family, and build rituals that don't have a big price
tag: Go tobogganing, decorate your tree together, rent
seasonal classic movies such as It's a Wonderful Life or
walk around and take in the holiday light displays.
Remember, though, that the holidays often involve
untouchable traditions, so talk with parents, siblings or
your partner to make sure they don't mind making potluck a
new custom when it is your turn to host the big family
feast.
Look beyond bucks
You can cut back on the number of presents and still have
fun. Try playing Secret Santas, where everyone in your
family buys a single gift for one, pre-arranged family
member. Or give children only three gifts - one large, one
medium and one small - and build up the mystery of what's
in those shiny wrapped boxes. "People say, 'It's the only
time I can splurge on my kids,' but that's not true," notes
Jara. "The main purpose of Christmas is to get together and
feel close to your loved ones. And that doesn't cost
anything."
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Financial expert Caroline Cakebread answers money questions
submitted to Chatelaine. Read on for her advice to others.
Q: I recently lost my job and am having financial problems.
I have some money in my RRSP – can I withdraw it? Are there
any limits or penalties?
A: Yes, you can take money out of your RRSP but you will
have to declare it as income on your tax return. The tax
will be withheld when you take the money out – how much tax
depends on which province you live in and how much you take
out. You'll get a credit for that tax when you file your
return.
Q: My husband wants us to put some money into a Canadian
real estate fund. We have a prospectus from the fund
company – it says the MER is 2.79 percent and the returns
for the last five years look great. How do I find out if
it's a good investment overall?
A: There are a couple of things you need to keep in mind.
First off, does it fit with your overall financial goals
and plan? Do you have other investments? Will putting money
into this fund balance out your portfolio and, ultimately,
help you meet your goals? These are questions for both you
and your husband to answer. You should also consult a
qualified financial planner if you have one. As for the
fund itself, there are a few good sources for shopping
around and comparing the costs and performance of mutual
funds. Morningstar is one of them – they have fund ratings
and a search mechanism that lets you compare funds. They
also rate the funds which is always helpful when you're
comparing. So, before you buy, shop around – and make sure
it's a fit for you and your husband financially.
Q: I am self-employed as a graphic designer and am three
months pregnant. Am I entitled to any maternity benefits or
leave?
A: Congratulations on the good news! But unfortunately, if
you are self-employed you are not entitled to any maternity
benefits. Since one in 10 women in Canada is self-employed,
there are a lot of you out there! With no government or
employer benefits, you'll need to put financial planning
near the top of your list (along with taking care of
yourself) between now and your due date. Plan on putting
aside enough money to cover any time off you want to take
when the baby is born. If you don't already have one, now
would be a good time to speak with a qualified financial
planner. It's not just about the first few months with your
new baby. With a dependent on the way, you need to take a
broad look at your financial situation – as a self-employed
parent, life insurance and disability insurance will be
really important safety nets for you and your family. A
financial planner can help you determine how much you need
to save, what kind of insurance you need and how best to
put that money aside so you can look forward to the new
baby and not get too stressed out financially.
Q: I am $65,000 in debt and can no longer make my credit
card and loan payments. Can I declare bankruptcy? Would
this be a good solution for me?
A: I would first advise you to talk to one of a number of
non-profit organizations that offer credit counseling to
see if there are other ways to tackle your debt. Credit
Canada is a great source – they can talk to you about your
options. In many cases, it's possible to work out a new and
better payment schedule with your creditors so that you
don't have to go the bankruptcy route. If bankruptcy is the
step you decide to take, you'll need to discuss your
options with a licensed bankruptcy trustee. The Government
of Canada has a website that will tell you what your
options are – they also have a directory of licensed
trustees that you can consult. But as a first step, see if
there are any ways to get back on your feet financially and
avoid the bankruptcy process.
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Budgeting 101
Underpaid and overdrawn? Wondering how your friends managed
to buy a house while you’re still renting? You need a
budget – fast.
By Kira Vermond
Listening to her now, you would never know Katrina
Carroll-Foster ever worried about paying her bills. The
34-year-old Vancouverite, who works in marketing for an
upscale hotel chain, throws around terms like
"self-directed RSP account" and "leveraging my mortgage"
like a born financial whiz.
But five years ago, Carroll-Foster was sinking in a swamp
of debt. She tried to knock down the amount of money she
owed, throwing $500 at her bills from every paycheque, but
the payments hardly made a dent in her $10,000 debt.
Carroll-Foster kept spending, too. "You're thinking, Oh
well. If I drop another few hundred, it doesn't matter.
It's just tacked onto this enormous debt," she admits now.
Finally, after watching her first RSP double in value,
Carroll-Foster realized what compound interest could do
when it actually worked in her favour. It was time to take
an unflinching look at her money, make a budget – the
dreaded monthly plan for spending and saving based on
income and costs – and stick with it.
"As a reasonably successful, independent woman, I didn't
want to be saddled with debt. I wanted to take control of
my finances," she says.
Before she turned her financial picture around,
Carroll-Foster was the poster child for the average
debt-ridden Canadian consumer. In 2005 our household debt
soared to $916 billion, according to a 2007 Statistics
Canada report. Meanwhile, a recent InCharge Debt Solutions
study reveals that 14 percent of Canadians say they always
use credit cards for basic living expenses such as
groceries and gas.
To buck the trend, Erika Penner, a certified financial
planner in Richmond, B.C., says you've got to be aware of
cash flow. "If you want to control your money, as opposed
to your money controlling you, you need to have a budget,"
she says.
But how do you start? It's helpful to remember that a
budget can be as simple as you need it to be. In fact, for
most people, straightforward is the way to go. Detailed or
not, a budget generally involves just three steps:
1. Figure out how you're spending your money now.
2. Evaluate that spending and come up with goals for
saving.
3. Continue to track your spending and try to get it to
stay within the guidelines you've set out.
To track your current spending, first gather up all your
routine expenses from the last few months. Think telephone
bills, hydro, auto insurance, child care and anything else
you pay regularly. Then, collect your variable expenses,
such as dry cleaning or coffee on the way to work. Some
people like to write these amounts into a notebook or punch
them into their computer. Others grab bills and receipts
and stuff them into an envelope to be tallied at the end of
the month. Just don't change your spending habits yet. Be
Zen about it: Simply observe.
All this tracking and calculating can seem like drudgery,
but it has to be done, says Amanda Mills, a financial
therapist in Toronto and owner of Loose Change, a company
that helps people tackle their emotional bugaboos about
money. "People try to make a plan without knowing what they
did last year and they can't stick to it," she says.
"Making a budget without knowing where you actually sit is
tricky. It's almost useless, actually."
After tracking, evaluate the results: What are you spending
and why? Is there anything you would like to spend more
money on? Is there anything you can spend less money on?
Most people severely underestimate what they spend on items
such as groceries, a night's entertainment or their
cellphone bills. Can you shop at a cheaper grocery store?
Maybe take in a movie at a second-run cinema instead of the
multiplex? Or perhaps it's time to call the cellphone
provider and switch to a cheaper plan.
Tracking and evaluating expenditures serves another
purpose, says Mills. When people think about how much money
they spend as they're spending it, they gradually and
naturally start to shift away from buying things they want,
to buying things they need. Mills herself started tracking
how much money she was spending on lattes about six years
ago and discovered that figure was coming in at $300 a
month, or $3,600 a year. Simply by evaluating one
expenditure, Mills realized she could buy a machine to make
her lattes at the office and save a lot of money.
The last step to becoming budget-wise is the most
difficult: Follow your plan. Esmaralda and Matthew Pitman
from Brampton, Ont., use the jar system, something they
learned from the television show Til Debt Do Us Part. The
couple have three small children and want to move to a
larger house in the next couple of years. To make it
happen, they have to save up some cash and tackle their
debt.
The jar system is as easy as it gets. After the Pitmans
determined how much money they were spending, they
pinpointed the places they could cut back – no more big
splurges at the grocery store, for instance – and stuffed
the correlating amount of cash in a jar. Once that hundred
bucks for food and diapers is gone, it's gone.
The system works only because both spouses are on board,
though. "It has to be a two-way street," says Esmaralda.
"Matthew can't just go out and use his debit card because
he wants something. We're both committed to this."
One last word of advice: Don't be too hard on yourself.
Budgeting isn't about being punitive or blaming someone
(especially important when you're going through the process
with a husband or partner). It's about making informed
decisions. Besides, that daily chocolate bar might be
giving you as much pleasure as your Aunt Marla's season's
tickets to the opera give her.
"A budget is a lifestyle choice," says Penner
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