You get what you save for.

Mi Casa, Your Commission?

January 31, 2012 – 7:30 pm

Congratulations! You’ve made the decision to sell your home; one of the biggest decisions you’ll make throughout your life. Based on referrals from friends and family members, you interview three realtors and learn that each will charge a hefty commission to market and sell your home.

Feeling irritated by the commission rates? You’re not alone. According to ComFree’s December 2011 poll of Canadians, 58 per cent of respondents would rather make a purchase from someone who is not working on commission.

If you can’t justify paying $15,000 in realtor commissions, you have other options.

You can sell your own home privately. To do this, buy a ‘For Sale’ sign from the dollar store and hang it on your lawn. Generally speaking, however, if you don’t actively market your home through newspaper ads, Kijiji and online brokerage sites, no one will know your house is on the market. The largest risks with this approach are that you may not be equipped with the right information to know how to price, market, and wade through the legalities of selling your home.

A second alternative is to use a reduced commission listing services, like ComFree, which allows you to market your property through its website and brokerage sites like MLS and Realtor.ca. It also provides excellent resources to educate buyers and sellers on their local real estate market and it provides a step-by-step real estate transaction framework that can easily be followed. The fees for these services are less than $1,000 – a fraction of what an average home seller would pay in commission.

There are certainly benefits to working with a qualified real estate agent when sellers have limited time and/or information; they’re knowledgeable about the market (where, when, and how to buy) and how to conduct a successful transaction. They have access to immediate information such as home price comparisons or community development plans and they can market your home through their networks.

But, Canadians are becoming increasingly more frugal and don’t want to fork over their home equity in commission. 

Long before you hang a ‘For Sale’ sign on your lawn, seek information from qualified sources. Download FREE real estate aps or visit listing websites to compare prices, neighbourhoods, etc. Whether you work independently or with an agent, it pays to conduct thorough real estate research.

Check out ComFree’s infographic on the benefits of saving money on commission: http://www.duproprio.com/files/Infographic.JPG

Published by Metro News January 31, 2012: http://www.metronews.ca/calgary/comment/article/1084547–mi-casa-your-comission

By LesleyScorgie | Posted in Debt, Real Estate, budget, consumer, economics, financial goals, frugal living, how to save money, personal finance |

You Can Protect Your Identity

January 29, 2012 – 1:46 pm

I was speaking at a conference last week and the subject of insurance protection for identity theft came up in the Q & A portion of my talk.

I’m not a huge fan of this type of insurance because I believe there are far more effective ways to protect your identity than paying $15/ month to have an institution register your credit cards and monitor the activity. Sometimes this type insurance only covers the legal fees associated with having your identity stolen; often in excess of $10,000.

Insurance coverage cannot prevent identity theft; it only helps to detect it and cover losses associate with it. YOU are the best form of insurance to protect your identity. The top five ways to ensure no one steels your identity are;

First, don’t leave your bank statements, credit or banking cards in places where someone could steal the information. If you’re using a shared computer at a library or coffee house to do your banking, clear the computer’s history before you leave the terminal. DO NOT lend your banking cards to anyone; even a close friend.

Second, protect your passwords. When you enter in a pin number for a purchase, cover the key pad while you press the digits. If you bank online or use sites like PayPal for purchases, change your passwords regularly. The Government of Canada has focused significant attention on this issue in recent months. Check out their Cyber Security Strategy here: http://www.publicsafety.gc.ca/prg/ns/cbr/ccss-scc-eng.aspx.

Third, shred any documentation that has personal information like your name or address on it. This includes letters sent for advertising purchases. You can buy a shredder for $20 at your local office supply store.

Fourth, read your bank statements and monitor your account activity for a minimum of 10 minutes each week. If you see anything that looks fishy, call you bank immediately.

Fifth, check on your credit score regularly to ensure there are no items you don’t recognize on it.  If there are, contact the credit bureau immediately to have the issue investigated and resolved. There are two credit bureaus in Canada – Equifax (www.equifax.ca) and TransUnion (www.transunion.ca). You can request a FREE copy of your credit score by visiting their websites (it will arrive by mail).

If you think your identity has been stolen, you need to talk to law enforcement officials and a lawyer.

Published by Metro News January 24, 2012: http://www.metronews.ca/calgary/comment/article/1078667–protect-your-identity

By LesleyScorgie | Posted in consumer, financial goals, fraud, lending money, personal finance |

Net Worth – A Big Frugal Idea

January 6, 2012 – 8:15 am

Happy New Year!

I love setting financial goals for the New Year. But, over the years I’ve learned to pare back to just one or two that I can really focus on, rather than ten smaller ones.

Take 60 seconds and think about what you’d like to change about your financial health in 2012.

The most popular areas are debt reduction, frugal living, and investing. All three of these elements contribute to your overall net worth; what you have left over when your total liabilities are subtracted from your total asset.

Where does your net worth stand? And NO, your car isn’t considered and asset so scratch it off the list.

My recommendation for you this year is to set a net worth goal. So, if your net worth is currently $12,500, aim to increase it through debt reduction and asset growth to $20,000 by the end of 2012.

Hands down, the most effective ways to reduce debt are to make your payments automatically on the day you get paid, pay a little extra each month (even $10 makes a difference), and negotiate your interest rates so that you pay as little interest as possible.

The most effective ways to increase your assets are to save through an employer sponsored RRSP, pension or savings program. If you’ve been sitting on the fence about home ownership, stop renting and build equity in your own home. But, this only makes sense if your cash flow can handle it.

There are three sure-fire ways to erode your net worth; accumulating bad debt, spending your savings, and buying things you don’t need.

Give some thought to setting a realistic net worth target you’d like to achieve in 2012. Then create a plan to make it happen. Living a frugal life, minding your dollars and cents, will help you accomplish your goal and motivate you to improve your financial health.

Published by Metro News January 3rd, 2012

http://www.metronews.ca/calgary/comment/article/1062052–net-worth-a-big-frugal-idea

By LesleyScorgie | Posted in Debt, financial goals, frugal living, how to save money, investing, personal finance |

Don’t bust your budget on a date

August 27, 2011 – 6:43 pm

Taking on debt for wining and dining isn’t frugal. There are plenty of inexpensive and creative dating activities that won’t cramp your style or your wallet.

Meet your date at a local coffee house and kick back for a few hours in a casual atmosphere (less than $10). Or, grab coffee to-go and walk around the neighbourhood. Share stories and enjoy the chit-chat.

Get active and walk, run, bike, rollerblade, work-out or toboggan. Head to a park, go for a swim, or spice up a game of tennis with competition – the loser buys the next glass of vino (less than $20). Take advantage of free outdoor festivals and plays.

Rent old movies or see a flick in the cheap theaters (less than $20). Get to know each other’s friends by hosting games night – charades, board games and appetizers (less than $30). Check out art exhibit openings, book launches or music releases. Tickets are often free or priced relatively inexpensive (less than $40).

Skip restaurants and turn a weekly grocery trip into a farmer’s market adventure. Pick up fresh ingredients for a home cooked meal which you can make together. Cooking is romantic, fun, and easy – download free recipes from the Internet and follow along. Enjoy a reasonably priced bottle of wine. If the weather is descent, take your meal outside, light candles and bundle up in blankets (less than $50).

If you’re set on going to a restaurant, find a hole-in-the-wall that’s been recommended by someone you trust. Smaller restaurants can be more authentic, intimate, budget-friendly, and have higher quality food than bigger, popular ‘hot spots’ (less than $100).

Dating on a budget often inspires creativity and allows you to showcase your true colours. Always remember; the point of a date is to spend time with someone special; not bust your budget.

Published by Metro News February 1, 2011: http://www.metronews.ca/toronto/comment/article/759005–don-t-bust-your-budget-on-a-date

By LesleyScorgie | Posted in Debt, budget, financial goals, frugal living, how to save money, personal finance |

Dabble in art without blowing your budget

August 27, 2011 – 6:32 pm

You don’t have to buy a Van Gough to enjoy art. Art comes in many broad categories like theater, music, literature, dance, food and travel. There are affordable and smart ways to infuse the arts into your lifestyle.

Many communities host free festivals, corporations sponsor plays and concerts, libraries and book shops promote literary events, and local governments foot the bill for tours or lunchtime performances. Local events are often promoted through newsletters, Facebook, Twitter or community websites. Check with your employer or social club to see if you get freebies or discounts on tickets.  If you travel, investigate local hot spots for the arts. You may find a Jazz bar, Shakespeare in the Park or reduced price tickets for Broadway.

Another affordable way to access art is to volunteer – join a fund raising committee for your local art gallery, teach an acting class, donate to a painting program, or write articles for a travel magazine.

Through careful selection of quality and smart shopping, physical pieces of art can be reasonably priced and may even grow in value. Of course it doesn’t make sense to purchase a Botaro sculpture while you’re hacking away at student loans and a mortgage. But, as your career and income grows, you can plan ahead for artistic expenditures, stick to a realistic budget and avoid expensive payment plans. Think of it like this; if there’s a $5,000 painting or sculpture you’re dying to have, start saving $420 monthly and buy it in one year or use your bonus or tax return. Don’t go into debt for art because the value of art can be volatile, and therefore it can’t be considered good debt.

When you’re ready to buy art, take your time, shop around; speak to professionals like a gallery director. A good gallery director will spend time with you to help you find a piece of art you love and that’s within your budget. Through personal referrals and on the Internet, research artists, auction houses, and galleries. If you need help deciding on a particular style you like, visit many galleries and comb through websites of museums, or even www.art.com.

Treat your art purchase like an investment. Investigate how many pieces from the artist exist, where they’re sold and whether critics have been favourable. Research sales history to determine whether the art can hold its value. If you really like a piece, get a second opinion.

Ideally, you’ll spend money on art which touches your soul and doesn’t break the bank.

Published by Metro News January 18, 2011 http://www.metronews.ca/toronto/life/article/745993–dabble-in-art-without-blowing-your-budget

By LesleyScorgie | Posted in Debt, budget, consumer, financial goals, frugal living, how to save money, inspiration, investment strategies, niche |

Staying out of the credit card muck

August 27, 2011 – 6:23 pm

Besides owing money to a loan shark, credit card debt is the worst.

Credit cards are a convenient way to pay for things whether you can or cannot afford them. The truth is, if you don’t carry a balance, and if you charge an item to your card, you’ve got thirty days to pay it off without paying interest on the purchase. If however, you can’t pay off the balance; your credit card company will charge interest, typically 17 to 22 per cent, on your purchase. Remarkably, many store credit cards charge even higher interest rates—some in the range of 28 or 29 per cent. If you charge a purchase on your credit card while carrying an existing balance, there is a twenty-one-day grace period before you’ll be charged interest.

Because of high credit limits and the temptation to spend, a balance can accumulate quickly and it’s difficult to pay off for four reasons: first, high interest rates; second, credit card companies set minimum payments between 2 and 6 per cent of the outstanding balance (or $10, whichever is highest), which barely covers the interest charges on the card; third, interest is calculated daily, not monthly; forth, as you pay off your credit card balance, your minimum payment declines because it’s set at a percentage of the balance. Because some consumers pay only the minimum payment, this extends the time it takes to pay it off.

Suppose you go to Vegas and charge $1,000 on your credit card at 19 per cent interest. The minimum payment on the bill is likely 2 per cent of your total balance meaning $20. If you were to stick to paying only $20 each month, it would take you one hundred months to pay off that $1,000. Even worse, you’d pay $997 in interest.

Deal with credit card debt by; first, having only one card; second, reducing the credit limit; third, paying a little extra each month and in higher frequency.

Owing money on a credit card is financially lethal, forcing us into a situation where we are continually paying for the past rather than investing in the future!

Published by Metro News January 25, 2011: http://www.metronews.ca/toronto/comment/article/752336–staying-out-of-the-credit-card-muck

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

Wrangle your wedding debt before it happens

June 14, 2011 – 4:38 am

Weddings are expensive, considering they last for a day. Save in advance and pay for expenses as they come up. Avoid wedding debt; it’s considered bad debt because it forces you to pay for the past rather than invest in the future. Try these tips to save money, avoid debt and still enjoy your special day.

First; discuss budget priorities like photography or food, and the wedding planning roles you and your partner will play such as organizing flowers or liquor licenses.

Second; set a budget and stick to it. Hunt around the Internet and borrow library books to get an idea of costs like a bridal gown, venue, food, drinks, photography, rings, transportation, the ceremony, honeymoon, gratuities, and taxes. Discuss how you’ll pay for the wedding and check whether there are obligations if you accept funds from family members or friends.

Third; pick the size of your wedding. Expensive food and glamorous surroundings will translate into fewer invitations whereas a larger venue paired with a buffet dinner means you’ll be able to host more people. Reducing the guest list and bridal party means fewer mouths to feed and gifts to buy.

Fourth; pick a date, time, and venue. Save big bucks by planning your wedding in the off-season (October to March) and getting married on any day but Saturday. Time of day has an impact too: breakfast, lunch and twilight weddings are cheaper than dinner weddings.

In-demand venues are expensive, so wrangle a deal through your network or host a small town wedding.  Negotiate terms and prices with the owner of the venue. Getting married in public spaces or someone’s back yard is an inexpensive option: parks, beaches, gardens, public golf courses, historical sites, libraries, civic buildings, etc. Secure the required permits and investigate if there are liability issues.

Fifth, get organized and get to work. Ask friends and family to help make invitations, prepare flower arrangements and table decorations, etc. Forget the limo fleet and borrow a friend’s cool car. Hire a photographer, caterer or wedding planner from a local college (get a reference). Put limitations on an open bar. Avoid designer wear: rent dresses and suits or have them made locally. Borrow, rent, or buy second-hand decorations online.

Negotiate everything and read the fine print on all contracts.

Consider setting up your own website whereby you can post information about the day, manage the invitations and guest list, keep a budget, send reminders, etc. Check out:

www.topweddingwebsites.com

www.budgetdreamweddings.com

www.weddingplanningonabudget.com

www.weddingwindow.com

Published by Metro News November 16, 2010: http://www.metronews.ca/toronto/life/article/692435–wrangle-your-wedding-debt-before-it-happens

By LesleyScorgie | Posted in Debt, Food for Less, consumer, financial goals, frugal living, how to save money, personal finance |

Save cash by Travelling Smart

June 14, 2011 – 4:34 am

Whether you’re hitting the beach or chill’n in Amsterdam, you can enjoy your travel experience on a limited budget. Develop a budget BEFORE you take off, not a repayment plan for after. Save in advance by automatically transferring money into a vacation account the day you’re paid. Pay for expenses like airfare or hotels as they come up and cash in your loyalty points. Racking up your credit card to pay for a trip you can’t afford will only cause stress which interrupts sightseeing.

Major travel expenses can easily be slashed in half by traveling in the off season; tour Europe in April vs. July. Or, travel to a hidden gem that’s largely undiscovered and not a tourist ‘hot spot’; visit Croatia vs. Italy or stay in the suburbs. Last minute travel can be booked for a bargain so long as you’re flexible on date, destination, flights schedules and accommodation.

Watch out for super cheap flights, often $50 or less. They’re saddled with airport, security and service fees which can make the deal less sweet. Nit-picky charges like $25 baggage fees can be avoided if you pack carry-on only. Sign up for travel deal email alerts and compare air and hotel fares regularly for lowest costs; check out www.expedia.ca, www.tripadvisor.com, www.travelocity.ca, www.tripalerts.ca.

While in a foreign country, use regional airlines, take the bus or train. Renting a car, scooter or motorbike from a local agency can be fun and affordable (just don’t forget the map and ensure you can drive stick-shift). Also, consider biking, hiking or backpacking. Take public transportation like buses, subways, cabs or water taxis.

Large hotel chains can offer great deals from time to time. Check to see whether you can use your company’s corporate rate. Consider staying at a boutique hotel. If you’re traveling longer than a week, rent a condo, participate in a house swap (www.homelink.ca or www.homeexchange.com) or stay at a reputable hostel (www.hostelworld.com or www.hostels.com).

Food and entertainment can be more expensive than flights and hotel. Plan your days in advance, explore costs by visiting websites for sports events, museums, tours, Broadway shows or trips up the Empire State Building. Try to pack at least one meal; fresh fruit, granola bars, and nuts can satisfy your hunger.

If you’re strapped for cash, but still need a break, take a staycation. Drive to nearby destinations, visit local festivals or potter about in your garden. Camping, hiking and backpacking can be cheap and entertaining with friends and family. Canada offers some of the most spectacular scenery in the world; West Coast Trail, Niagara Falls, Rocky Mountains and beautiful oceans. Check out Parks Canada:  http://www.pc.gc.ca/eng/index.aspx.

Whatever your travel plans, don’t sacrifice safety to save money.

Published by Metro News November 2, 2010: http://www.metronews.ca/toronto/life/article/679210–save-cash-by-travelling-smart

By LesleyScorgie | Posted in Debt, Food for Less, budget, consumer, frugal living, how to save money, personal finance |

Don’t Overdo it on Home-ownership Hype

March 14, 2011 – 10:19 am

There are many attractive incentives for current home buyers – low interest rates, competitive home prices, tax benefits and an economy that’s finally stabilizing. Plus, many Canadian markets are flush with selection resulting in a buyer’s market. But, don’t let home buying hype push you to overbuy and derail your long-term financial goals.

Buying a home is a huge financial commitment, and the total costs of home ownership go well beyond the mortgage payment. You’ll be on the hook for utility bills, taxes, maintenance, repairs, condo fees, and much more. These extra expenses can be more than your mortgage payment! Before you start searching for property, figure out what you can afford. Consider:

1. You’ll need a down payment. Way back when my parents bought their first home, a minimum down payment was 10% of the home’s value. Nowadays, financial institutions will accept less. But, you’ll pay a hefty premium for highly insured mortgages (less than 20% down payment), through CMHC fees. Check out the CMHC website for rates http://www.cmhc-schl.gc.ca/.

2. Draw up a budget. List your normal monthly income and expenditures, then figure out how home ownership will affect your budget. Run budget scenarios for different mortgage and housing expense amounts to help you determine what you can afford.

3. Calculate how much you can afford each month. You can go online and use a mortgage calculator from a big bank:

-          Royal Bank (www.royalbank.com)

-          TD Bank Financial Group (www.td.com)

-          CIBC Bank (www.cibc.com)

-          BMO Bank of Montreal (www.bmo.com)

-          Scotiabank (www.scotiabank.com)

-          HSBC ( www.hsbc.ca)

-          National Bank Financial (www.nbf.ca)

-          ING Direct (www.ingdirect.ca)

What you can afford is based off your gross-debt-service ratio, which can’t be more than 30 to 32% of your gross monthly income. It’s comprised of your mortgage payment + house insurance + property tax + heat bill. If you have a condo, you must include half of the monthly condo fee. Your total-debt-service ratio includes other monthly debt obligations like credit card payments, line of credit payments, and vehicle loans on top of the gross-debt-service ratio. It can’t be more than 40% your gross income.

If you’re blowing through those ratios, you probably need to pay down some existing debt OR re-think your home buying expectations.

4. Figure out how what you can afford on a monthly basis translates into a home price. The bank can tell you this, or you can investigate online, using the bank’s mortgage calculators. At this stage, if you’re serious about buying you need to get the bank to pre-approve you for a mortgage. Keep in mind that just because you can afford to purchase a $350,000 home doesn’t mean you should.

5. Prepare for the unexpected by building an emergency fund and having the right insurance. Leaky roofs, furnace maintenance, taxes, water tanks, fences, and many other expenses can creep into your life.

Once you’ve figured out what you can afford, then you can take action toward buying a home. Home ownership has many benefits – long term appreciation of the home’s value and building equity in an asset. But if owning a home is going to put you into home poverty, where you can’t manage other financial commitments, don’t do it. Wait until you’re ready.

Published by Metro Canada October 12, 2010: http://www.metronews.ca/toronto/life/article/659573–don-t-overdo-it-on-home-ownership-hype

By LesleyScorgie | Posted in Debt, Insurance, financial goals, frugal living, how to save money, lending money, millionaire, personal finance |

When to Borrow From Your RRSP

March 14, 2011 – 10:01 am

There are two ways to borrow from your RRSP. First is through the RRSP Home Buyers’ Plan, for first-time home buyers, and second is through the Lifelong Learning Plan, for educational expenses. These Canada Revenue Agency programs allow you to withdraw funds without a tax penalty. If you ‘borrow’ outside these programs before retirement to pay for a trip or a car, the withdrawal is considered income in the year you received the funds and you’ll pay hefty taxes. Plus you’ll derail your savings goals.

The RRSP Home Buyers’ Plan (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html) allows you to borrow up to $25,000 tax-free from your RRSP (it can’t be locked-in) to put toward a down payment for your primary residence. If you buy a home with a spouse or common-law partner, you’re partner can also withdraw up to $25,000. You’ll have fifteen years to repay the funds to your RRSP.

The Lifelong Learning Plan (LLP) allows you to withdraw up to $20,000 from your RRSPs to finance training or education for you, your spouse, or your common-law partner. You’re annual withdrawal limit is $10,000. You’ll have ten years to repay the funds and once they’re repaid, you can participate in the plan again (unlimited lifetime participation). You can’t use this program to finance your child’s training or education. Check out the Canada Revenue Agency website for more information (www.cra.gc.ca – go to information for individuals than select students).

These plans make sense for some people, but there are drawbacks. First, when you take money out of your RRSP, you lose the power of compounded interest and re-invested returns on those funds. Money grows exponentially over time and when you reduce the money in your RRSP account, you earn less interest and sacrifice potential returns — the TSX Composite Index, for example, returned over 10% annualized over the past 50 years. If you withdraw $5,000 at age thirty, for example, that money compounded at 8.5 per cent for twenty-five years adds up to just less than $40,000 (before tax) when you’re fifty-five. So you’d miss out on nearly $35,000 in compounded interest and reinvested returns by withdrawing early.

Second, when you repay one-fifteenth (Home Buyers’ Plan) or one-tenth (Lifelong Learning Plan) of those borrowed funds each year, you don’t get any tax write-offs on those repayments because they aren’t considered RRSP contributions; it’s not new money. Third, if you can’t repay the minimum amount, you’ll be taxed on the difference between what you still owe and what you paid.

The primary benefits of the plans are that first; they promote home ownership and education – both valuable investments. Second; repayments don’t impact your annual RRSP deduction limit. Third, if you’re flush with cash you can repay earlier.

If you’re thinking of buying your first home or going back to school and you can afford not to use these plans, don’t. The loss of compounded interest and reinvested returns on your RRSP will seriously impact your net worth goals. But, if you need to borrow, use these programs and endeavor to repay the money as quickly as possible to avoid losing out on growing your money. Whatever you do, avoid withdrawing from your RRSP outside of these plans.

Published by Metro News October 5, 2010: http://www.metronews.ca/toronto/life/article/653313–when-to-borrow-from-your-rrsp

By LesleyScorgie | Posted in Debt, financial goals, frugal living, how to save money, inspiration, investing, investment strategies, personal finance, stock market |

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