My best financial tip

Money can’t buy happiness. That’s not my tip – that is just a prelude, and an obvious one at that. Because, although money might not buy happiness, the lack of money has been known to buy misery.  This is Financial Literacy Month, and it appears that Canadians need better financial literacy.  As do our American cousins.

This blog post is part of the Blog for Financial Literacy campaign, where each participant offers up their best financial tip.

My tip today might seem obvious. Indeed, it is obvious – and it has been spoken by wiser and more eloquent people than me. Yet most people – including myself (sigh) – totally ignore it. Not everyone who ignores it is miserable, of course. But most people who are miserable about money are miserable because they have ignored this one simple tip:

Don’t spend more money than you have.

How many people ignore this simple tip?

Everybody who carries a balance on their credit card. Everybody who has taken pout a loan. Everybody who has debt.

I know, I know. Sometimes you get a wallop in the wallet and you just need to borrow some money. And, yes, a mortgage is usually a good investment (if you don’t try to buy as much house as you can “afford” with a mortgage).

But debt should be an exception to the rule. It should not be a way of life. If you are already in debt, that is not the time to decide to buy a cottage or a motor boat. First pay down the debt, then save up for the splurge, then have fun.

READ ALSO: 8 sneaky ways to get free furniture

READ ALSO: Get a $1000 Raise With Your Personal Fast Food Outlet

Yes, you will have to wait. Yes, you will have to defer some pleasure. Yes, some people will say that you have only one life to live, so buy things right away and get the most out of life.

Sorry, that’s a lie. Buy now, pay much more later might bring you some pleasure sooner. But if later on you are spending so much of your money feeding interest payments, that you can’t buy the fun things you want, you don’t gain a thing. You lose; you might even lose big time.

And I know that more than one savvy reader is thinking about the even bigger misery that debt creates. It is no secret that couples fight most about money.  And life sucks when you are fighting with your partner, your comrade-in-arms, your best friend.  And even more so when you have to go through a divorce.

You can accelerate your savings by adopting some frugal habits.  We have had some fun with frugal on this blog, but of course it’s about more than just fun.  It’s about avoiding misery, too.

Am I the only person so unrealistic as to recommend spending only what you make?  No.  Here are a few of the top personal finance bloggers and their thoughts on the subject:

http://www.getrichslowly.org/blog/2009/10/12/to-build-wealth-you-must-spend-less-than-you-earn/

http://freefrombroke.com/personal-finance-in-one-simple-equation/

http://financialhighway.com/financial-literacy-earn-more-than-you-spend/

http://www.boomerandecho.com/how-to-make-a-better-personal-budget/

Money can’t buy you happiness, but it sure can help you avoid falling into a pit of misery.  So earn more and spend less, and paint a great big smile on your face.

8 sneaky ways to get free furniture

I hope that title is not misleading.  While there is nothing sneakier than tiptoeing into somebody’s house in the middle of the night and stealing stuff from them, that is not what this post is about.  This is about being creative.

Free furniture is there for the taking.  All you have to do is open your eyes, and you will never pay for furniture again.  Not all of these methods might apply to you, and some might be a little…er…eccentric (yeah, that’s the word!) than others.  But all are real and some may even be realistic.

Use less. This is the most obvious and simplest way to get free furniture.  You don’t pay anything for furniture you don’t have.  And let’s face it, most of us have too much furniture and too little space.

DIY. There are books in the library that will show you how to build your own furniture.  There are plans.  There are step-by-step instructions.  You can become a one-man furniture factory.  Or a one-woman furniture factory.

Of course, this is only free if you already have the tools (or have a brother-in-law who does) and the materials lying around.  If you have to buy materials, this won’t count as “free”, just as “frugal” or “thrifty“.

Roadside scrounging. You would be amazed at what people throw out.  Sometimes, it is total trash (not so amazing), but sometimes it is almost like new (amazing).  If you “shop” around various neighbourhoods on their respective garbage days.  If you don’t mind having furniture that might look like you have had it for a few years – and even new furniture looks like that, after a few years – this is a great way to stock up on pretty much anything but mattresses.

Barter. This is a great way to add new furniture to your home and clean out the clutter at the same time.  One person’s junk is another person’s treasure, so trade junk and you both win treasure.  There is always someone around who has the piece of furniture you would like, and bartering is becoming more popular.  And why complain if they are foolish enough to pay for a new piece to replace it.

Inherit. Unless your parents are living in a cardboard box, chances are you will inherit some furniture.  This is absolutely free, because society has set up the system of inheritance to make sure that everybody qualifies for free end tables.  Be forewarned that this method does require more patience than bartering or scrounging.

Watch for sales. I love this one, because you get to be such a helpful person and so sneaky and under-handed at the same time. Why would you watch for sales if you are looking for free furniture? To help your friends out, of course – out of their current furniture.

For instance, if you would just love Jenny’s couch, mark up all the furniture sale flyers by circling some of the best deals on couches she might like.  Then pass the flyer on to Jenny.  Sooner or later, she will take the hint and buy a new couch.  And guess which helpful friend will likely walk away with the old couch.  It’s a win-win.

Rewards. Credit cards offer rewards.  Well, all the rewarding ones do.  And those rewards can usually be spent on – you guessed it – a new dining room set.

Refinish. I saved the best for last, because this one can be combined with scrounging or with DIY or just on its own to extend the life of your current furniture. We once had a plan, long since forgotten.  We were going to scrounge wooden kitchen chairs.  We wanted to collect an entire set with no two alike.  All wood.  Each a different shape.  We were going to pain all the seats one colour, most likely in a textured multi-tone paint.  We were going to paint all the backs and legs in another colour, most likely a glossy complementary single tone.  Each chair different in shape.  Each chair, the same in coloring.  And, of course, the table to match.  This was not planned as a frugal project, so much as a decorating project.  But, aside for some paint to buy, totally free.

Not all these methods are for you.  And some are easier than others.  But with a little creativity and a willingness to compromise, there is no reason that you should have to pay to furnish your house.

Indispensable Strategies for Budgeting in a Bad Economy

In a bad economy, many people find themselves in major financial trouble. That’s not just the case with those who lose their jobs. Even people who are gainfully employed can suffer major losses in a bad economy. As a result, everyone can benefit from following a few simple strategies in a bad economy. A handful of the most effective ones are outlined below.

  1. Shop Around for a Better Bank – Switching banks seems like a huge hassle, so many people stay put even when they’re paying exorbitant fees or not enjoying very competitive interest rates. Whether the switch is simple or difficult, it will pay off if it means spending less and getting more. High-yield online savings accounts are especially useful.
  2. Set Basic Goals – When it comes to personal finances, there’s always room for improvement. With that in mind, it’s smart to constantly set new goals. That’s just as true for people who are on shaky financial footing as it is for those who are in better shape. From setting aside money for an emergency fund to paying off a mountain of debt, there are always ways to make things better. Saving up for a major expense like a new house or car is another example.
  3. Pay Less for Essentials – One solid piece of advice during a bad economy is to avoid unnecessary expenses. What about the essentials? For example, car insurance is one thing that every drive must have. As easy as it is to compare vehicle insurance online, there’s no excuse for not shopping around from time to time. Shaving even a tiny amount off of a monthly premium can result in huge savings over the long run.
  4. Opt Out of Junk Mail – Junk mail can be absolutely insidious when it comes to trying to be fiscally responsible. From credit card offers to catalogs filled with the latest gadgets, the opportunities for making major mistakes are rife. Fortunately, there are ways to cut back on junk mail. Opt-out services are available. The Consumer Credit Reporting Industry, for example, maintains a website that allows people to opt out of many types of junk mail. The same process should be used to cut back on tempting marketing emails as well.
  5. Be Diligent about Paying Off Debt – People who already have debt when a bad economy develops should make paying it off a top priority. At least 20 percent of a person’s income should be used for this purpose. Expenses can be cut elsewhere to make this possible.
  6. Save Consistently – After old debt has been paid off, at least 20 percent of a person’s income should be socked away in a savings account. Once again, the best thing to do is to put it into one of the many high-yield savings accounts that are available online.
  7. Monitor Credit Carefully – Every adult in the U.S. is entitled to one free credit report from each credit-reporting agency per year, and everyone should take advantage of it. A single mistake can have very expensive consequences, so it’s important to catch errors as early as possible. It’s even possible to sign up for credit alerts that make it especially easy to nip issues in the bud.

By implementing these simple strategies, anyone can emerge unscathed from a bad economy.

Guest poster Pete Schilling is a writer for AutoInsuranceCenter.com who specializes in personal finance and insurance topics.

 

Do your research before you take out a mortgage

While the housing market has improved slightly since the crisis a few years ago – there’s even been recent suggestions of a bubble in Canada – it can still be a minefield to buyers if they don’t know how it works. To get an idea of what you need, it’s crucial that you do your homework on mortgages. Knowledge is power, and with the right research you will have the best chance of living happily ever after. Here we look at the first steps you need to take ahead of taking out a mortgage.

What can you afford?

It may seem obvious, but with the many houses that will be on the market understanding your limits is key. Properties can make you fall in love at first sight, but know what’s too high. Statistics for June 2011 showed that one in every 583 homes was in the midst of active foreclosure proceedings. With this in mind, speak to smaller lenders and brokers as well as the big banks to see what you are capable of borrowing.

How does the market look?

As commitments go, there aren’t many more worrying than taking out a mortgage. With the possibility for borrowing far more money than your actual salary, whether you’re on a fixed or variable rate there’s a gamble within a mortgage. So, with this in mind, make sure you get expert, impartial advice through your research. People tend to search for rates these days online. Banks are there to be bargained with, they wouldn’t make so much money if this wasn’t true, so don’t just take the first offer on the table.

Lenders: How do they work?

Getting a lender to give you the seal of approval is the most important part of taking out a mortgage, so you need to know what sways their decisions. What happens is that your credit report and application form will be valued and a decision will be made based upon those things. Each lender uses different calculations, and the mortgages are of course different so acceptance can vary. The thing of most importance is your credit health-check.

How to check your credit health

Your credit report is of paramount importance and everything from credit cards, loans and existing mortgages will be taken into consideration. Any other credit will also be looked at along with your repayment history and this is what lenders will use to assess your application. If you have a clean track record of timely repayments, you’ll be held in good stead. Get a check from more than one place and be sure to clear up any inaccuracies that you feel there are within the reports.

Know what mortgage you need

Just like researching the market, knowing what you want and how it will be set out is also important. With this in mind, don’t be scared to ask a lot of questions to get the detailed information you are after. Just be sure that you don’t actually enter the application process because this will work against your actual submission. Remember that putting a bigger down payment on your home, you will be in a better position to find the top rates no matter what mortgage you’re looking into.

Conclusion

As you can see, there are a number of steps that you need to take when considering your mortgage and how to find it. Applications for mortgages have shot up to a three-year high according to reports, and it’s certainly a time to be considering taking one out. Follow all these steps and you’ll be well on the way to getting the best mortgage for your needs.

Keep Your Head Up

Financial woes can take its toll on anyone. Increasing stress levels and pressure on one’s personal and professional life can be just the beginning for some people. There is light at the end of the tunnel, though.

Baby Steps

You might be in some financial pressure. Or, on the other side of the scale, you might be on the cusp of bankruptcy. Financial stress is nothing to ignore.

For those of us who have experience trying financial times, it is not easy. After all, financial concerns can cloud one’s future and alter one’s confidence. There can be a sense of failure that takes its toll as well.

image courtesy of Andrew Kitzmiller

One of the best things that can be done in this situation is to take it one step at a time. You aren’t going to come up with a three-month plan to get out of your $25,000 debt situation on a $34,000 salary. It isn’t going to happen. However, that doesn’t mean that you have to accept your current situation, and the accompanying stress/pressure involved.

Take some small steps that can give you some confidence, moving forward:

• Here and Now: What can you do today to get on the right track? Take a long and hard look at your budget. Sell unneeded items and/or downsize across the board (home, car, and “stuff”). You can accept the frugal lifestyle today.

• Microcosm: Take your big goals and then shrink them – a lot. These smaller goals will help you stay motivated and remain on the right track. They can spell success and keep you headed there for good.

• Dedication: Can you stay on track with your plan? What will it take to meet your stringent eating out guidelines needed to get out of debt? Whether you need mini-budgets posted on the fridge for motivation, or something else, you need to stay dedicated.

A Word on Stress

You have to keep your head up. Allowing financial concerns and stress to enter your mind is natural. However, you shouldn’t allow it to overwhelm you.

Look to separate your financial situation from other things. While you might be saying that this is impossible, due to lack of available funds to “enjoy” the finer things, there is a point to that. However, when you take financial stressors seriously, you can learn to live frugally. You can enjoy free and cheap ways to go out and stay home – and still have a great time.

Execute the car insurance comparison to save some money. Look at term deposit rates once you get out of debt. However, whether you are struggling in debt or finally out of it (permanently!), learn to manage financial pressure and your regular life. Don’t let the numbers get to your head.

Keep your head up. There are plenty of ways to make your current situation more manageable. When you’re not engaged in these, try to separate yourself from that world. Even if you’re looking at a long hard road out of debt, you don’t have to let it consume your thoughts and life.

 

Brian Neese is a personal finance and insurance blogger who writes for Home Loans Australia.

 

 

Get a $1000 Raise With Your Personal Fast Food Outlet

It’s not Wendy’s. It’s not McDonald’s. It’s not the Colonel. It’s…

… your freezer.

Yes, fast food is as close as your freezer. The appeal of fast food is that it is fast. No cooking. No time spent cooking. No cleaning twenty pots and twenty pans. But it does cost a bit – certainly much more than eating in.

Sure, it’s fun to make a Nasi Briani stir fry, and much cheaper than eating out, but fast food is – fast!

But so is your freezer.

What? Your freezer has tubs of ice cream, frozen peas and something that looks like it once was gravy? Or spaghetti? Or something?

Next time you cook Nasi Briani, spaghetti sauce, any casserole or dish, cook lots. Cook enough for five or six meals. Cook two different dishes at the same time (many of the ingredients might be the same, so you need only grate cheese or chop tomatoes once for two dishes (10-12 meals).

Eat one of the dishes – that’s your supper. Yum.

Once the others have cooled enough, separate them into 9-11 containers. Label each with what is in the container – including the date it was frozen, so you can keep track and not leave it too long (ideally, eaten within 6-8 weeks).

Nasi Briani with rice
One portion
April 23, 2012

 

READ ALSO: The frugal shopper’s guide to protein

FRUGAL: So a traditional fast food meal that might cost something like ten dollars to eat, will cost you more like three dollars at home. Not much of a dent in your budget for one day, but if you can replace 100 meals a year this way, you have saved about $700. When you factor in taxes, that’s like getting close to $1000 raise!

GREEN: Have you ever given a moment to really review how much paper and plastic and foam you throw away after eating at a fast food restaurant? No? I don’t blame you. It’s enough to make anyone who hopes for a future on this planet churl their stomach. Save the planet at your own, personal fast food outlet – your freezer.

HEALTH: It’s no secret that traditional fat food – oops, I mean “fast” food – is not exactly very healthy. Loaded in fats and sugars, and bearing little resemblance to anything Mother Nature has grown for us, fast food has been fingered as to blame for much of America’s obesity epidemic.

PERSONAL: Do you want food prepared just for you, the way you like it. Freezer fast food is 100% customizable. Put in what you want. Nothing more. Nothing less. Like t spicy? Like it mild? Want a big portion? Want a small portion? You decide how you will serve yourself.

Fast food in the comfort of your home, made exactly the way you like it, easy on the planet, easy on your body, easy on your pocket book. Time to check your freezer fast food.

Searching High and Low for a Deal

Which of these three animals pays more for his groceries?

A) The beaver
B) The moose
C) The giraffe

If you guessed the moose, you are right. But do you know why?

Manufacturers fight hard for eye-level space in grocery stores, pharmacies, hardware stores and other retail outlets. They often pay for the space. Retailers, for their part, want to place those items that earn them the biggest profits (the highest mark-up) at eye level. This is because of: “The Rule of Lazy”. Which states that people will look where it is easiest to look, in other words, at eye level.

READ ALSO: Get a $1000 Raise With Your Personal Fast Food Outlet

What this means is that anything at eye level has the highest mark-up. And guess who pays that markup? Poor Mr. Moose. The can of beans that the giraffe buys from the top shelf and the can of beans that the beaver buys from the bottom shelf will have less of a marketing fee tacked onto the price than the can of beans that the poor moose will end up buying.

You can look high and low and never find the meaning of life. But you will find a cheaper can of beans.

This post was featured at Managing Your Personal Finances List #3.

Does it make Financial Sense to Trade in your Car?

There is nothing better than the new car smell. The thought of this alone attracts many people into a car dealership. While there is nothing wrong with buying a new car, you have to consider your current situation before moving forward. For example, what are you going to do with the vehicle that you have right now? You may think that it makes financial sense to trade in your car and upgrade to a new one, but until you focus on the finer details you will never really know for sure.

Are you Upside Down?

If you own your current car outright, you are in good position to trade it in if necessary. This means that any money you receive on your trade in can be put towards the down payment of your new vehicle.

On the other hand, you may still owe money on your car loan. If so, you have to decide if you are really in position to upgrade. If you owe more than the car is worth, you are going to “take a hit” when you trade it in. In turn, you will have to roll this amount into your new loan.

Does your Car have any Life Left?

If your car is paid off you may be tempted to trade it in. After all, you can receive money for your trade that can be used to lower the cost of your new vehicle. But remember one thing: you are going to be spending additional money. In most cases, this means another car payment. And most likely a higher car insurance premium, as well.

Although buying a new car may be exciting, you don’t want to jump the gun if it is not going to benefit you financially. If your car is doing its job without showing any signs of breaking down, you may want to hold onto it a bit longer. With each month that goes by, you can save the cost of a car payment.

READ ALSO: Quirky ways to save money on your car  

Should I Keep my Trade In and Buy a New Car?

In some cases, it may make sense to keep your current car and buy a new one. Of course, this is based on a case-by-case situation. For example, maybe you have a child who just received his/her driver’s license. At this point, you may want to give your child your old vehicle and buy a new one for yourself. This gives you access to enough cars, without having to buy two new ones.

Some people decide to keep their old car and buy a new one, even though they don’t need both vehicles. Even if your car is paid off, there are other financial considerations such as the cost of insurance and maintenance.

Sometimes it makes sense to trade in your vehicle. Other times you are better off keeping it. In the end, you need to make the decision that is going to best benefit you from a financial point of view.

Does it make Financial Sense to Trade in your Car? is a guest post by Chris at CarInsuranceComparison.com.au.

Here’s What’s So Good About Being Debt Free

Why should you aim to be free of debt? Having debt alters the way that you spend your money. Instead of spending money on the things you want, you have to spend money paying your creditors back. Not only can it be disheartening to see your hard earned money going out the window, but you can fall even further in debt if you are not able to make the payments on time. Aiming to be free of your debt has many benefits.

Keep Your Money In Your Pocket

You work hard for that paycheck that you get every week. Why should some credit card company get a slice of that money? While it might seem easier to purchase something and pay back later, the consequences of making payments with credit aren’t always apparent at the time. Before making any purchase with a credit card, you should think about the interest rate that you are paying to spend your money. Unless you can pay back that balance in the next 30 days, you are just paying someone to tempt you into spending more than you can afford.

Stress Out Less About Your Finances

What would you do if you ever lost your job? If you have no debt, you can ride out a job loss for a longer period of time. Making a large cash purchase won’t be as much of a strain on your finances if you are working just to replenish your bank account. Creditors will not be calling your house all day if there is no debt to collect. Living a life that is free from debt allows you to worry less about your cash flow.

More Freedom To Live Your Life

Most people have a job in order to make money. If you have no debts, you have more of a say in where you work. If you don’t like your job, you can quit because you don’t need the money right away. Sleeping in every morning is viable if you don’t need to work so many hours to stay ahead financially. You can take a vacation on a whim if you have enough money in your bank account. Without debt, you are free to live your life as you see fit.

Ensure A Secure Future

The ability to put your money directly into savings accounts comes in handy. There will be a time when you cannot work anymore, and you will need to rely on the money that you were able to save. Having a higher level of savings will enable you to have a more secure retirement. Having that safety net will also help you pay for health care and other necessities that seem to become more expensive over time. Your savings could also help your kids pay for college and ensure that they start their lives as free from debt as possible.

To Conclude…

A life that is free from debt offers so many advantages. You will stress over your finances a lot less while avoiding the other pitfalls of debt. Keeping your money in your pocket allows you to determine where and when you spend it. Having the ability to make choices in your life is liberating and allows you to enjoy your life that much more.

Andy co-founded Credit Card Compare, an Australian comparison website where consumers can review and rate the best credit cards from across the whole market. If you are in debt and want to live a debt free life, he recommends using a 0% balance transfer in conjunction with the debt snowball method, a proven strategy for getting out of debt.