A Money Coach in Canada

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Our guest post today is from Pierre, who states, “Keeping up with Jones’ is for suckers!) Pierre and I work (me, part-time) at Canada’s best-kept-banking-secret, a virtual bank called http://www.citizensbank.ca, that puts ethics on the table, right on par with profits. Its parent company is Vancity Credit Union. Pierre is the bank’s IT guru.

First of all I’d like to thank Nancy for her warm invitation to post on her blog.

Nancy and I work and the same great company and I have come to really appreciate and relate to Nancy’s love of technology (I’m a techie myself!) but also for the important work she is doing with her website and blog educating people about the basics of money management.

Some of the case studies I’ve read on Nancy’s blog sound like typical stories, everyday folks trying to get by as best they can but needing a little help to get out and over the trap of living paycheck to paycheck.

Unless you are lucky enough to have learned certain fundamentals from your parents or a course in school (I didn’t have one when I was growing up however did you?) basic money management is still a mystery to most.

With the cost of housing here in Vancouver nearly doubling in the span of 5 short years and the average downtown condo going for 300K+ I can imagine that this can be incredibly daunting to most new young people graduating from college with school debt hanging over them.

I am by no means an expert but for what its worth here are some of my thoughts on the subject:

1. Keeping up with the Jones’ is for suckers. The people who have accumulated the most wealth didn’t do so by being extravagant and showy. Many ‘rich’ people I know drive 10 year old cars and live in very nicely decorated but simple homes (not mansions) even though they can probably ‘afford’ much more. This takes a bit of a heart to heart with yourself: What is the most important thing to you and how do you intend to achieve it?

Many people think that more money, bigger houses, fancier cars is the way but more often than not it leads them down a path which feels more like a trap as they find themselves slaves to the monthly payments, a job they hate and often not having time to enjoy these things they’ve been working so hard for in the end. A lot of people would say more freedom and choice is a good thing to have but most won’t see this until they retire given the current path they are on and then maybe only if they are lucky.

Everyone I’m sure would agree that there are enough things to cause yourself stress so why add money to the equation? Instead of spending time worrying about money all the time why not free yourself up to allow for more time with your family, creative pursuits or (you fill in the blank). I can’t reiterate how important this one is but also the most difficult.

Many people get caught in the rat race trap thinking they have to ‘be’ in a certain place at a certain age taking on huge mortgages and debt and living in absolute terror of how they will manage should their situation change? What if they lost their job, what if the interest rate changes? What if?! If you do your best to lower your monthly obligations to a low as possible you will start to feel that freedom.

2. So how do you start to lower your monthly obligations? I don’t even know where all the money goes each month you say! Simple. To start, do up a monthly cash flow budget! [editor’s note: if you’d like a free, easy-to-use cash flow spreadsheet, contact me, nancy, via my business website – link is just below – and I’m happy to e-mail it to you]. Most of the people I talk to that are stressed out about money have no idea where it all goes every month. You need to get a handle on your month cash flow to understand your spending habits. There are some simple techniques (Nancy has suggested some great ones at www.yourmoneybyyourdesign.com).

One of the simplest and most brilliant ideas was one I read about on Nancy’s blog here, was the separate sub-account. Once you’ve calculated your personal budget at every paycheck transfer your ‘spending money’ – in my case this is money for groceries, gas and entertainment – to a sub account and only spend money on those things from there. It will help you stick to your budget and help to prevent dipping into your savings by having two separate accounts. Certain costs are fixed and others are luxuries which add up quickly (Starbucks, eating out etc…). Once you see where the money is going you can allocate self imposed limits.

3. The harder part is trying to reduce some of your fixed costs like the mortgage. Ok, so I’ve got a hold of my monthly spending. Now what? How do I lower my monthly living costs? Stay or move, settle or co-mingle? Considering the cost of housing in Vancouver has doubled in the past 5 years (although salaries haven’t!) I think many people have thought of alternatives. I believe people will be making some tough choices.

More and more people will either resign to raising a family in a condo or you will see a more occurrences of multigenerational living arrangements where parents and children live together, the parents perhaps passing the family home to their children and the the children looking after their parents in their old age. It is also a real help to growing families who now have some help around the house and certainly makes it easier for the any young family considering children if the parents are there and willing to help with babysitting etc.

The latter is not as typical in our culture so my money is on the first scenario, but we’ll see! If neither of these choices sits well with you and you absolutely want the white picket fence dream then moving to a less expensive city or suburb should be a consideration. Locating by public transit can also reduce the need for a vehicle (this is more realistic for single people or couples living downtown who don’t have kids who need to go to piano, hockey ballet etc!!) but can also help couples potentially reduce the need for a second vehicle if communing by transit during the week in as option.
I would love to hear your comments and I also would be curious to hear what you think a bank could do (say in an online capacity) to provide basic helpful advice to help people reach their financial goals.

buy 3 concert series for $71 = 20% off. Jazz Concerts start this Friday!

and visit 10 on Wednesday – clearance on a lot of their online thrift items. Tons of vintage/retro stuff.

act fast! It’s today! (note: sometimes you score wicked stuff, sometimes you leave empty handed. but it’s always fun)

“The 4400” Set Dec, Props & Wardrobe Sale

 

Wednesday August 8th

 

10am to 5pm

 

Stage 8 – North Shore Studios

555 Brooksbank Avenue, North Vancouver

(enter at Gladstone Gate – sort of near the Rona/ back of Park &

Tilford Mall)

 

CASH ONLY / NO PREVIEWS

 

Thanks, Steve!

 

Does the word “economics” trigger a yawn and glazed eyes from you? I was the same… until I started tasting a bit of what some basic, common sense understanding of economics can do. Case in point: I bought a stock on May 1st, 2007 for $3.66. As of today (Aug. 7), it’s trading at $7.02. “What is it?!?” you eagerly enquire, gentle reader?Stock Market Bull

It’s a company that’s not glamorous or sexy at all. It’s canadian, it uses some best practices of sustainability, and it produces silicon – the stuff that is used in computer micro chips, and lcd screens (most flat screens), and most importantly in this case, solar cells (the things that convert light into energy). It’s called Timminco.

Why is it doing so well? Back in March, it won a big contract to produce solar cells and in April it won a second contract. Then, the company successfully got an investor (an investment firm, actually) to lend it a lot of money to build a facility for this new level of production. The loan rate: US prime plus 1%. Low rate loan + new facility + 2 good contracts = a company poised for success. And it’s part of the whole sustainability movement. It’s all good.

Full disclosure: in this case, I didn’t twig onto this company. My mom did. She, like me, does not have any formal education in financial planning (so NOTE: I’m not advising anyone to buy this stock! I’m just an amateur sharing a story!). But she, like me, makes it a point to be informed about what’s going on in the world of finances and economics. Term deposits at 4%? Yeah, I guess… but I’d rather put a bit of energy and interest into becoming informed and doubling my money now and then, wouldn’t you?

depressed manJack is a widower living in Victoria. Jack has a daughter, early 20s still living with him while attending college, and a son, mid 20s, living away from home. Both kids require financial help from time to time. His daughter doesn’t pay rent.

He is a professional, taking home $3400 a month.

Here is his financial picture (see if it doesn’t sound like a lot of us canadians!):
Loans-
car loan,of $330.00/mth;
computer loan-65/mth
a consolidated debt loan of $458.00/mth;
mortgage of $754./mth and

condo fee of $290./mth.

Credit-
a Visa card maxed out at $6200.00 with a minimum of 268./mth;

Utilities are :
oil heat-$170./mth
power-60/mth
water-45/mth
phone/internet/cell-200/mth
water heater bill of 460., currently paying 24/mth on this.

My son’s cable bill ( in my name)- total bill 1000., I pay 100/mth on it.

Insurance-
life-30/mth
house-12/mth

Food / Gas-
I spend about 30 a week on groceries and often don’t have it.
Gas costs me roughly 20 a week.
Dog / cat food- 50/mth
My prescription costs-10/mth
Savings-
none

Ouch. If you do the math, there is barely a couple hundred left at the end of each month.

If this were a friend of yours, what might you suggest? It’s a touch situation, no doubt about it … and one I think a lot of canadians can relate to. I’ll give my money coach suggestions next week. (ps: this image isn’t him! he doesn’t smoke!)

Note:  as always, this case study is a real-life issue by one of our present or past  clients over at Your Money by Design.  Details of the person have been heavily altered to disguise the individuals but the issue remains the same.