You get what you save for.

Happy Holidays!

December 22, 2009 – 9:59 pm

Happy Holidays Everyone! Thank you for your continued support as we work towards improving financial literacy across North America.

Over the past year I’ve been writing my second book which will be released in Spring 2010. The new book is called Rich By Forty: a young couples’ guide to building net worth. It focuses on giving 20-to-30-somethings the skills they need to grow their bottom line – a combination of debt reduction and asset growth. I’m so excited to share my ideas and financial strategies on:

• relationships, money, and how to talk about them;
• what net worth is and why it’s important;
• making financial commitments to a home, a family, and a dream;
• sharing, protecting, planning, and prenups;
• debt reduction;
• the big deal about big-ticket items;
• investing; and
• how to financially prepare for the ups and downs.

Rich By Forty will be available in most major book stores and can also be ordered online in advance through Amazon. To kick off promotions for the new book, The Globe and Mail invited me to be a guest on their great show, Let’s Talk Investing. This is one of three videos I recorded, so stay tuned for more.

Enjoy the holiday season and I wish you the very best in the New Year!

Sincerely,

Lesley Scorgie

By LesleyScorgie | Posted in financial goals, inspiration, personal finance |

Tracking Your Money

October 5, 2009 – 10:01 pm

Dear Rich By Thirty Readers,

With competing priorities for your time, how do you keep track of your money? Many North Americans have more than one bank account, investment account, loan, credit card, and ATM card. And when you layer on the fact people often use multiple banks, passwords and advisors, it can be a challenge.

I’m a huge fan of tracking your money. When you watch carefully, you can identify where your money is going, how well you’re doing at achieving your net worth goals, and if something flies off the rails (like if you seriously overspend), you can take immediate action to rectify the situation.

One of the most helpful tools I can recommend is a simple net worth spreadsheet. Start by marking the date at the top of your spreadsheet. Then, identify all your assets – things you own. Write down the name of the institution where your account is held, followed by the type of account, then how much money is in the account. Total it all up. Do the same with your liabilities. Now, subtract your liabilities from your assets and voila – that’s your net worth. Gather your account information from mailed statements, or better yet, view your account online and save a tree!

Update your spreadsheet monthly or quarterly and watch your bottom line grow.

Need a hand building your tracking tool? Check out the Net Worth Calculator on Micrososft Office Online. Or check out the tracking tool on www.moneyproblems.ca. This site also clarifies whether something is an asset or liabilities. Mint.com is a great site allowing you to plug in your financial scenario and it will help identify where you can save money.

To specifically track your investment portfolio (or to create a practice portfolio), you can use free portfolio management programs. This will help you get organized and spend less time hunting down ticker symbols on the Internet. Check out the portfolio management tools on www.globeinvestor.com,www.stockhouse.com, www.smartmoney.com, or www.finance.yahoo.com.

Grow your net worth! One of the best ways to do this is by tracking where you are now and setting realistic net worth goals for the future.

Check out www.unlimitedmagazine.com for my recent podcast on tracking money.

Cheers,

Lesley Scorgie   

By LesleyScorgie | Posted in budget, consumer, economics, financial goals, frugal living, how to save money, investment strategies, personal finance |

Negotiate Your Interest Rate

August 19, 2009 – 7:35 pm

Are you feeling squeezed by your current interest rates? Ever wonder whether you can get better rates on your debts? The answer is yes! But, like a boxer preparing for the ring, you need to put your gloves on and get ready for a match – an interest rate negotiation. No, you won’t get hurt, nor will you get a chance to slug your lender, but a good discussion can lead to reduced rates. And reduced rates can translate into thousands of dollars in savings. Why pay extra interest when you can save money through a simple negotiation with your lender?

Let’s say, for example, you owe $8,000 on your credit card. Making minimum payments at 19% interest, it’ll take approximately 48 months to pay off that initial balance. If, however, you negotiate your rate down to 10%, it’ll take 40 months And you’ll save about $1,500 in interest charges.

If you’re wondering what your debts are actually costing you, check out www.bankrate.com for ‘cost of borrowing’ calculators on car loans, credit cards, mortgages and other personal loans. Another great website which has calculators is www.ic.gc.ca, just click on resources for consumers. Using these calculators, and plugging in different interest rate scenarios, you can see for yourself the impact negotiating for a better rate will have on the time it takes to pay back a debt and how much you’ll save.

Now it’s time for the nitty gritties of how you can go about negotiating for a better rate:

  1. Get research on current rates, so that you know what’s currently being offered in the market place. Research will give you a ball park idea of what interest rate you can aim for in your negotiation.
  2. Get on the phone and ask for a better
    rate. Remember, if you don’t ask, you don’t get!

    •  Call or visit your lender, speak to a representative, and ask for a lower rate.
  3. If you’re not getting anywhere with the representative, speak to a manager. Managers tend to have more authority to negotiate and work with you.
    • Ask for a lower rate and tell them why, from a customer service perspective, they should work with you.
  4. If you need a little ammunition to help with your negotiation, prepare to present a competitive offer. The great thing about doing research up front is that you know what current rates are available. You can even suggest a ‘target’ rate.
  5. If it’s a ‘no-go’, explore an alternative to the financial product you are currently using. There may be a variation of a product that has a lower rate – for example, a low interest VISA vs. a traditional VISA.
  6. If you can’t get a better rate, prepare to transfer your business elsewhere.

One thing to keep in mind when you negotiate rates is that your lender might try to saddle you with fees and penalties for re-negotiating. Just be aware that these extra costs do exist, BUT, they too are negotiable. Whatever you do, ensure the benefits of renegotiation outweigh the costs. This is when ‘cost of borrowing’ calculators can really help. You can evaluate the impact of saving money on interest compared to fees and penalties your lender might charge.

In the current interest rate environment, when interest rates are at historically low levels, it can be very advantageous for consumers to lower their interest rates. Negotiating doesn’t need to be time consuming. Take 10 minutes to phone your lenders and see what they can do to lower your rates. It will often lead to thousands of dollars in savings.

If you liked this blog post, check out the pod-cast version on www.unlimitedmagazine.com.

Have a great week!

Lesley Scorgie

By LesleyScorgie | Posted in competition, consumer, financial goals, frugal living, how to save money, lending money, personal finance |

Globe & Mail Stock Picking Contest Update

July 3, 2009 – 10:45 pm

Dear Rich By Thirty Readers,

We’ve just rounded the corner of the second quarter of 2009. In January 2009, I entered the Globe and Mail’s One and Only Stock Pick Contest. So far, I’m still in the lead!!!

The article covering the second quarter results of the contest came out yesterday July 1, 2009. It gives a brief background on who the contestants are and what stock they’ve selected. I have selected Suncor (SU), a Canadian based integrated energy company focused in the Oil Sands and refining business.

If you’re interested, following along with the contest or try your own version with friends or colleagues. 

The rules of this particular contest are as follows.

  • Each contestant picked a stock, income trust, American depositary receipt (ADR) or exchange-traded fund (ETF).

  • The stock must trade at $1 or more (and have a $100-million market capitalization minimum for Canadian equities) at the beginning of the contest and trade on the TSX, the TSX Venture Exchange or a U.S. exchange. A U.S. stock or ADR must have a $1-billion (U.S.) market cap minimum.

  • Any U.S. pick gets converted into Canadian dollars to reflect changes in the exchange rate, as well as gains or losses in the stock’s price.

  • Results are tabulated on a total return (dividends and distributions included) basis.

  • The winner will be the contestant who has the top percentage gain on a total returns basis for the calendar year 2009.

  • The pick must be held for the entire period, unless it is taken over.

  • If a stock is taken out in a merger or privatization, the contestant has the right to stand pat for the year or pick another stock, ETF or ADR within a week of the date that the stock ceases trading. That gain or loss will be added or subtracted from the original stock’s return.

  • The prize for the invitational contest is a Globe and Mail coffee mug and bragging rights

Have a great day!

Lesley Scorgie

By LesleyScorgie | Posted in investing, investment strategies, personal finance, stock market |

Your Financial Dream Team

June 21, 2009 – 2:29 pm

Hi Rich By Thirty Readers,

I’m often asked about what types of relationships are important to have in order to achieve financial freedom. So, this post is specifically about who/what you should consider bringing into your life. I like to think that choosing people to handle your money is like deciding who you want to date.

For example – I had a terrible date a few years ago. Dinner was fine, and we went for a nice walk, but the conversation was brutal. By the end of the evening I knew he wasn’t for me. He was a sweet guy, but noticing the romantic red flags, I ended the date. No big deal. But then as I went to leave he attempted the Goodnight Kiss. I pulled the Swoop-and-Hug. Not getting the hint, he tried again. This time, I took a step backwards and tumbled down his porch steps, ploughing through a row of flowerpots, scraping my wrists and ripping my pants wide open. Bleeding, I made a break for the car and didn’t look back. I’d made a decision about who I wanted – or, rather, didn’t want – on my team, and it was good for my personal well-being.

These are the kinds of decisions that reverberate through your life and will potentially turn out to be good financial decisions, too. Like your personal relationships, who you build financial relationships with have lasting economic impact. Teaming up with the right people, asking the right questions, learning what characteristics to look for and knowing where to find them are as important when building a financial dream team as they are when you’re building a personal relationship. Some people will wait in the wings, only entering your life occasionally. A mortgage broker and realtor, for instance, can assist with the nitty gritty in real estate contracts and save you money while they’re at it. Others should be front and centre. It’s a little like creating the lineup for a basketball game. Here are a few positions you’ll want to have on your side:

Your Michael Jordan: Your top draft pick is an investment advisor, or shooting guard, to help you focus on building a realistic financial plan based on growing your long-term net worth. Ensure they have their Certified Financial Planner (CFP) designation. As with any financial expert, always get a referral from someone you trust and then interview a few, to 1: – see if you like them and 2: – figure out if they’re being honest and realistic. Ask each candidate to prepare a proposal of a financial plan. This will help you select the advisor most aligned with your goals – you’ll instantly be able to tell who was listening well.

Your Steve Nash: An insurance agent (a.k.a. the point guard), whether it’s a Chartered Insurance Professional (CIP) or Chartered Life Underwriter (CLU), can advise you on protecting your assets and family if something such as property damage, illness or death derails your plans. A good agent will direct you towards insuring for big things (life, home, loan and auto), not small things, and help you buy the right insurance to protect your assets. Ask candidates to prepare a proposal to address your needs. One more thing: Many investment advisors and insurance agents work on commission; a good one will always be upfront about the costs and benefits of doing business.

Your LeBron James: A small forward, or chartered accountant (CA) focuses on tax aversion (though not the highly illegal tax evasion), helping you structure your finances to avoid paying unnecessary dollars to the government. Their role is to advise you on how manage your net worth growth in the most tax efficient way possible, along with ensuring you pay the right amount of tax – not too much or too little. Make an appointment at least once per year to ensure you’re finances are properly structured.

Your Wilt Chamberlin: You won’t need their services of a lawyer (your center) often, but they’re critical when you need to do fun things like buy a house, draw up a will, handle estates or assist with property transactions. Accountants and lawyers charge by the hour, so make sure you’re organized before your appointments to make meetings more efficient.

Your Tim Duncan: The last person is, naturally, your romantic partner, a kind of power forward. Be clear – this also goes for people who are single – about your views on debt, investments, spending, budgets, family, lifestyle expectations, and future goals. As uncomfortable as these topics seem, do not pass go until you’ve discussed your views on debt, investments, spending, budgets, family, lifestyle expectations and future goals. Try the “who, what, where, when, why and how” approach: Do you have a budget? Who taught you how to budget? What are your top budget priorities? Do you budget for the unexpected? When do you evaluate your budget? How successful are you at keeping within your budget? Unlike “dating” your financial advisors, however, this is best done over a bottle of good wine.

Whatever you do, choose your financial dream team wisely. These people will have a big impact on your life and your pocket book.

Lesley Scorgie

Lesley@richbythirty.com

***Also posted on www.unlimitedmagazine.com

By LesleyScorgie | Posted in financial goals, personal finance |

Tips for Managing in Today’s Economy

June 8, 2009 – 2:22 am

The economy is changing once again. Over the past two months, the markets have started to recover from the economic meltdown of 2008. Though we certainly haven’t recovered from where we were from this time last year (the market peak), share values are gathering strength and commodity prices are improving from where they were in the trough of the market. Finally – this is a glimmer of hope for many people in North America.

But, for many people, reality is still not very good. Unemployment continues to rise in both Canada (Canada Unemployment) and the US (US Unemployment), even though the government is funneling money into the economy in variety of ways. Also on the rise, is the average household debt level. A frightening study released two weeks ago (Canadian based) by the Certified General Accountants Association of Canada (CGA) indicated that approximately 85% of households are currently carrying balances on their credit cards. Additionally, 21% of respondents reported they were unable to manage their current debt load. One in four households can’t handle an unexpected expense of $5,000 or more and one in ten reported they’d be unable to handle an expense of $500 or more.  All in all, debt has risen nearly 30% since this time last year, and the majority of the increase is related to consumer debt.

Though the market is starting to recover, it will likely take quite some time for the unemployment rate to improve and households to get back on their feet once again. So, now is the time to manage your money in the most prudent fashion possible. Cut out any extra expenses, build a reserve fund and try very hard to remain employed.  If you are in serious financial trouble, here are some ‘heavy hitting’ approaches to getting your financial situation somewhat back on track.

  • If you can’t find a full time job, try and get a part time job.
  • If you have a hobby or skill (decorating, writing, photography, engineering, body building, etc.), start a small business to increase your cash flow.
  • Access all available tax credits in the US (www.irs.gov) and in Canada (www.cra.gc.ca)
  • If you still have a job, get another one.
  • Pick up the phone and re-negotiate the interest rates on all loans and credit cards
  • Downsize your home and/or rent for less.
  • Get a roommate(s) or rent out your basement. Also consider leasing out storage or a parking space.
  • If your family owns two vehicles, sell one and share the other. If you can get by on public transit, sell all your cars.
  • Sell luxury items online – eBay, Craigslist or any other local used goods website.
  • If you do make a purchase, buy used.

If you have a ‘heavy hitting’ approach to saving money that you’d like to share, please email me
Lesley@richbythirty.com.

Thanks,

Lesley Scorgie

By LesleyScorgie | Posted in Debt, consumer, financial goals, frugal living, how to save money |

Advice for Tough Times

April 14, 2009 – 5:54 pm

Dear Rich By Thirty Readers,

I received a great email that I’d like to share with you.

Hi Lesley,

I have read your book, Rich By Thirty and I really enjoyed it!! I am 40 years old and have been working hard at saving my money. I’ve been very patient with the markets and the recession, but it’s tough to remain positive when I work so hard to save and I don’t see the results I’m hoping for.

Lesley, my question for you is – I am saving $600 per month and have managed to save a total of $100,000. This recession has eaten away at some of my savings and now I am thinking that ‘Freedom 55’ will be more like ‘Freedom 75’. Do you think I even have a chance of retiring at 55? How long does it take for the markets to recover statistically? Also, is there a way to figure out what percentage return I am making on my money (5%, 6%, etc)?

Thank you for your time! Hope to hear from you soon Lesley!

Sincerely,

Owen

Hi Owen,

Thanks for contacting me. These are trying times and it’s tough to keep motivated. But, there is hope. Things will get better. In the long run, the major stock indexes in the US and Canada have returned over 10% annually. So, this means, if you buy and hold (long term) like Warren Buffett, you will hopefully (not guaranteed though) see similar returns in the future.

Right now, your $600/month in savings is buying more units/stocks than before because the unit/stock values have declined so much in recent months. That is a good thing because it will bring the average cost of your units/stock down. Eventually they will recover and be worth more than they are today.

My first tip is; keep saving. Don’t stop. If you can, save even more than before. My second tip is; don’t jump around too much. Though the markets have dipped quite a bit, they will recover. From a long term perspective, buying high quality units/stock and holding these assets, tends to pay off more so than if you try and jump around from investment to investment. Investors that jump around tend to earn less than 4% on their portfolios which is just slightly above inflation which is approximately 3%.

Economic recessions have hit North America before and they have lasted anywhere from 6 months to a few years. Don’t worry though; you still have plenty of time to save (15 years) before retirement. Like I said above, try and save a bit more if you can because the prices of units/stocks are generally undervalued right now. This will pay off in the long run when the values start to increase again.

To determine your rate of return, a quick way to do it is take the amount the stock has appreciated + income you earn + interest earned on the investment for a specific period and then divide that sum by the principle amount invested. Multiple that number by 100 and add the % sign behind it. So if you earned $300 (combined appreciation, interest and income) on a $10,000 investment, that would be a 3% return.  Please note that you don’t actually ‘earn’ anything when you don’t sell the asset because you’re not technically realizing the gain or loss. Please see websites like www.investopedia.com and www.bankrate.com for more information. This is just a basic summary of a return calculation. You’ll need to cross reference it with additional research or with an advisor.

Thanks,

Lesley

Scorgie

Author of: Rich by Thirty: A Young Adult’s Guide to Financial Success

By LesleyScorgie | Posted in financial goals, how to save money, investing, investment strategies, personal finance |

Index Funds in RRSPs and IRAs

February 25, 2009 – 2:43 am

Dear Rich By Thirty Readers,

Just a quick last minute reminder to our Canadian investors – Registered Retirement Savings Plan (RRSP) season is nearly over. You have until the end of this month (March 2, 2009) to make a contribution into your RRSP for the 2008 tax year.

As Marco mentioned in his previous entry, the US equivalent to the RRSP is the Individual Retirement Account (IRA). American’s can contribute until April 15, 2009.

If you’re not sure what to buy within your RRSP or IRA, you’re not alone. Many people are scared to invest because the markets have performed so poorly throughout the past six months. Though no one knows exactly where or when we’ll hit the bottom of the market, we do know that we’re close.

So, if you’re investing somewhat conservatively in light of the economic situation, consider index funds. Index funds are a form of mutual fund which tries to mimic the overall performance of a particular market index. For example, an index fund could try and copy the performance of the S&P 500 or the Dow Jones Industrial Average by purchasing stocks that make up that index. Over the long-term, the
stock markets in the US and Canada have returned between 10% and 13% annually.

Mutual funds are different from index funds because they invest in specific stocks that are aligned with the fund’s policy.  Unfortunately, mutual funds tend to under perform, relative to the market, 80% of the time. This means that the index (also known as the benchmark), performs better than mutual funds the majority of the time.

To summarize, with Index Funds you’ll never under perform the market because the Index fund is a representation of the market. On the flip side, you’ll never outperform the market either. Lastly, index funds are managed by a computer and therefore have small fees (Management Expense Ratios).

Index funds include funds that track the major indexes as well as ones that follow sectors – like financial services or energy. In Canada, the main index funds are called iUnits. Barclays provides most of the funds in Canada. In the US, the main indexes are the QQQQ (NASDAQ Tracking Stock) , the DIA(Dow Jones Industrials) and the SPY (S&P 500 tracking). They have the nicknames Cubes, Diamonds and Spyders. Go to The Globe and Mail website filter to find all the funds available in Canada.

Thanks and have a great week!

Lesley

By LesleyScorgie | Posted in financial goals, investing, investment strategies |

Last Chance for Tax Plans

February 9, 2009 – 7:16 am

January just whizzed by and we’re well into February. Tax time looms ever closer. Only a few weeks remain in which you can make contributions to tax deductible plans for this tax season.

In the United States there is the Traditional Individual Retirement Account (IRA). Contributions to the account are tax deductible and grow inside the account tax free until funds are withdrawn at retirement. Those withdrawals are taxable. Contributions can be made as late as the April 15 filing deadline.

The Canadian equivalent of the Traditional IRA is the Registered Retirement Savings Plan (RRSP). Contributions can be made as late as March 2nd this year.

A variation of the IRA is the Roth IRA. Contributions to the Roth IRA are not tax deductible but, like the Traditional IRA, the invested account is allowed to grow tax free. The proceeds are not taxed on withdrawal. So you have a choice of tax savings now (Traditional plan) or tax savings later (Roth plan). The Canadian equivalent is the newly introduced Tax Free Savings Account (TFSA). Of course, because contributions to these plans are not tax deductible, there are no deadline considerations.

So consider your options. If you have contribution room, look at putting some money into a tax deductible plan.

Something to consider for out younger readers, especially Canadian ones: It may be wiser to contribute to a TFSA if your income is lower and your marginal tax rate is lower. The funds can be withdrawn any time tax free. You can withdraw them later when you’re in a higher tax bracket and then contribute them to your RRSP for a larger tax deduction.

By MarcodenOuden | Posted in financial goals, how to save money, investment strategies, personal finance |

Know Your Score

February 2, 2009 – 8:46 am

As economic turmoil persists, I’d recommend proactively managing your credit score – no one will do it for you. These days, consumers have to watch out for identity theft, corporate reporting errors, etc. So, to ensure your credit report is accurate, request a copy and review.

To learn more about getting your credit report, head to Equifax (www.equifax.com) or TransUnion (www.transunion.com). In Canada, visit Equifax Canada Inc. (www.equifax.ca)or TransUnion Canada Inc.(www.transunion.ca).

Tips on actively managing your credit file:

- To ensure your credit file has accurate information, check on it every one to two years. You can order your report online (see the sites above) or by mail.

- If you have a question or inquiry, send a written request (with official receipts and paperwork) to the credit bureau and they will investigate the matter for you.

- If an error is discovered in your file, the credit bureau must correct it.

- If an error is corrected, the credit bureau will send copies of the updated file to the credit grantors if you request it.

- If a credit application is refused, the credit bureau isn’t responsible for the decision – the credit grantor makes the decision based on their lending policies. So if you’re shut down, you’ll be directed to contact the credit bureau to review the information that contributed to the decision.

Have a fantastic week!

Lesley Scorgie

By LesleyScorgie | Posted in Debt, consumer, financial goals, personal finance |

Lesleyscorgie.com is protected by copyright. All rights reserved.