As I sit here typing while teaching my daughter piano, I can't help feeling content and blessed. Although life is certainly not all a bed of roses, I find that a thankful heart is indeed a happy heart. There is too much we take for granted in life. Our plan is to always be here for our family. I believe in God's protection for our lives, however, I do not want to be too arrogant to presume that I am always in control. Therefore, I do have Life Insurance purchased to protect our kids. I am the kind of person who is very practical and make decisions based on probability and risk percentages. Therefore, since the probability of my demise before I turn 65 is minimal, I have opted for minimum insurance. Basically, it will be enough to pay off the mortgage of the house (our only "debt"). If my husband survives, he can continue to live in the house and his income will be sufficient for the operating expenses of the household. If we both don't survive, the house can be sold and the people who have agreed to bring up our kids will have that money for bringing them up until they finish University. The cost of our Life Insurance for both of us is only $120 per year ($10 per month) - cheap, cheap - because it is a group insurance (Professional Engineer's group) with Manulife and we had purchased it many moons ago. What I have is a Term Life Insurance. When I leave the group, or when I reach 65, it is no longer valid. All the money I had put into it is not recuperated. I am ok with this because to me, it is a minimal cost for sufficient protection which I hope to never use.
I had a very interesting conversation with a friend a few days ago. She is a WFG (World Financial Group) agent. She showed me an interesting case study. It was for a couple who lives from paycheque to paycheque with no money for emergency fund, retirement savings, kids' education, let alone life insurance protection. In this case study, since the couple had equity built up in their house, if they take out an "interest only" loan to the limit that a bank would allow them (75% of the value of their house), they were able to pay off their mortgage, pay off their credit card bills, have money to put in a TFSA account as an Emergency fund. Since they no longer have debt payments to make and they have a lower loan payment (an interest only loan vs. a mortgage where the principal has to be paid off), they have more Cash Flow for a Universal Life Insurance policy, where part of the premium paid goes towards Life Insurance protection and part of the premium is used to invest in registered Mutual Funds of their choice.(Or they could simply get a Term Insurance and invest in an RRSP). The tax savings from the payment into the registered plan can then be used to create an RESP for the kids' education. So now, they have insurance protection, consumer debts paid off, retirement savings, savings for kids' education and an emergency fund to boot. I asked the question, "What happens if the couple lose their jobs?" If they did not do anything different, their house would be reposessed because they would not be able to make the payments. In the second scenario, they could take the money from their rrsp and emergency fund to make the minimum payments on their loan until they got another job, and not lose the house! She showed me that in 20 years, their net worth would be higher than if they did not do anything (even after they paid off the original loan).
Of course, the key to making this work is, if they had enough equity built up to allow them to borrow enough to cover the mortgage, pay off their debts and create an emergency fund. The increase in net worth will occur if the interest rates stay low, if their investments had returns higher than the loan interest rate and if they were disciplined enough to live within their means and not get into more debt.
I do consider myself a risk taker, but there are just too many "ifs" I can't control, for me to be comfortable with recommending that someone increase their debt load. My suggestion to this couple would be - downsize to a smaller house to get the money to do all of the above. Then, as their income increases, they could upgrade to a bigger house.
Thursday, November 18, 2010
Wednesday, November 10, 2010
Spender vs Saver
When I was single and looking for "the man" - I had a list of requirements that "the man" needed to have. (This was more than 20 years ago :-)). When I met my hubby, he scored 87% on my list. The cut-off was 80%. Yes, indeed, this is the Engineering side of me coming through. The other 13% was overcome by his continuous pursuit with romantic messages, rap tunes and complimentary "lines"! Well, one of the items that caused him to not score 100% on that list, was his financial management style. He was a spender and I was a saver.
He would buy CDs, hide them in the basement and then slowly bring them out, thinking that I would not notice. Unfortunately for him, his wife was just way too sharp for him :-). I have heard of women who buy clothes and hide them from their husbands. It seems to be common for spenders to do, when there isn't enough communication and unity about the finances.
For years, I would struggle with the resentment of my hubby spending our hard earned cash on frivolous things and I had to be the one who ensured that the bills were paid, the one who ensured that we had any savings. I threatened to have a separate bank account from him, on many occassions. I am so very glad to say that we have overcome that hurdle and we no longer struggle with that. I am thankful that we did not go our separate ways with regards to our bank accounts. One of the things we do is run an Alpha Marriage Course at our church, so healthy marriages are of great interest to us. I have observed that couples who can work through the challenges of having a united bank account (and not have secret accounts or separate accounts) can have more unity in their marriages.
What did we do? Quite a few years back, I decided to take a chance and have my hubby pay the bills. We have a designated spot for the bills that come in and when he sees them (because the designated spot so happens to be a spot by the computer he would work on), he would pay them. I have to confess, I would still secretly monitor the situation, to ensure that the bills were paid on time - I did not want any of my utilities cut off during this learning process. Unlike some couples whom I have counseled to try this, my hubby enjoyed paying the bills. He is also an Engineer who enjoys numbers. I did not have to monitor him for long! He paid all the bills on time. He saw for himself what we had and didn't have in the account. At the beginning, it did not stop him from spending. He got very proficient in transferring money from the credit line to the chequing account to pay bills when we had used up our Overdraft!
He could see that when he continued to do this, our debt load increased - he now had another bill to pay - the Credit Line! We then implemented a family meeting. I wanted our entire family to be in on our financial goals - not just me. I just could not bear the burden alone anymore! So, one night, after I finished doing our Month End, I gathered everyone together to go through the information I had obtained on the Month End. I told them that it was a Family Meeting. I showed my hubby and kids our Monthly Budget and how we were doing in reality. I believe it was a true eye opener for everyone, kids and hubby included. The kids got to learn that Electricity and Water costs money. My hubby got to see that if we keep running a deficit, we would keep adding to our debt load.
I am now a believer in ensuring that the entire family is informed, so that I no longer need to be the mean person who puts a stop to all spending. We are all aware of what we have to spend and so we usually spend responsibly. I have relaxed a whole lot more and have started to buy nicer things for the entire family, including myself. We are no longer "spender" vs "saver", but we are a couple who are united in our financial goals. Life is good when there is peace in the household and money in the bank!
He would buy CDs, hide them in the basement and then slowly bring them out, thinking that I would not notice. Unfortunately for him, his wife was just way too sharp for him :-). I have heard of women who buy clothes and hide them from their husbands. It seems to be common for spenders to do, when there isn't enough communication and unity about the finances.
For years, I would struggle with the resentment of my hubby spending our hard earned cash on frivolous things and I had to be the one who ensured that the bills were paid, the one who ensured that we had any savings. I threatened to have a separate bank account from him, on many occassions. I am so very glad to say that we have overcome that hurdle and we no longer struggle with that. I am thankful that we did not go our separate ways with regards to our bank accounts. One of the things we do is run an Alpha Marriage Course at our church, so healthy marriages are of great interest to us. I have observed that couples who can work through the challenges of having a united bank account (and not have secret accounts or separate accounts) can have more unity in their marriages.
What did we do? Quite a few years back, I decided to take a chance and have my hubby pay the bills. We have a designated spot for the bills that come in and when he sees them (because the designated spot so happens to be a spot by the computer he would work on), he would pay them. I have to confess, I would still secretly monitor the situation, to ensure that the bills were paid on time - I did not want any of my utilities cut off during this learning process. Unlike some couples whom I have counseled to try this, my hubby enjoyed paying the bills. He is also an Engineer who enjoys numbers. I did not have to monitor him for long! He paid all the bills on time. He saw for himself what we had and didn't have in the account. At the beginning, it did not stop him from spending. He got very proficient in transferring money from the credit line to the chequing account to pay bills when we had used up our Overdraft!
He could see that when he continued to do this, our debt load increased - he now had another bill to pay - the Credit Line! We then implemented a family meeting. I wanted our entire family to be in on our financial goals - not just me. I just could not bear the burden alone anymore! So, one night, after I finished doing our Month End, I gathered everyone together to go through the information I had obtained on the Month End. I told them that it was a Family Meeting. I showed my hubby and kids our Monthly Budget and how we were doing in reality. I believe it was a true eye opener for everyone, kids and hubby included. The kids got to learn that Electricity and Water costs money. My hubby got to see that if we keep running a deficit, we would keep adding to our debt load.
I am now a believer in ensuring that the entire family is informed, so that I no longer need to be the mean person who puts a stop to all spending. We are all aware of what we have to spend and so we usually spend responsibly. I have relaxed a whole lot more and have started to buy nicer things for the entire family, including myself. We are no longer "spender" vs "saver", but we are a couple who are united in our financial goals. Life is good when there is peace in the household and money in the bank!
Tuesday, November 9, 2010
Sticking to the Budget - Part 2
I would like to introduce the concept of "Month End" for your households. Businesses review their finances at the end of every month to ensure that they are financially healthy. Part of the month end review include checking to see if you've achieved the income and expense goals/budget for the month and if not, what you need to do to fix it.
For households to stay financially healthy, the same concept needs to be applied. We need to review our income and expenses on a regular basis. When you begin this process, you may want to review it weekly, however as your finances stabilize, once a month seems to be a good time interval for a review.
To review expenses, some people keep their receipts from EVERY transaction so that they could figure out what was spent for the month. I heard of a good idea from a friend - never tried this because I am not a receipt keeper - she stuck labelled envelopes on the inside of a kitchen cupboard door and she would put the receipts in the appropriate category when she got home. So, receipts would go from purse into the appropriate categories.
Some people keep a log book and write down what they spent. I used to have a sheet of paper on my fridge and I would write down what I had just spent when I got home. When I finally came up with an electronic method, I right away abandoned all tedious manual methods! I try to use the Debit Machine for all my expenses. I rarely use cash because I find that cash is not traceable, unless you like keeping receipts. (I understand that some of you may belong to the Conspiracy Theorists group and prefer to not have your expenses easily tracked - so, receipts will have to be your friend :-)).
This next 3 paragraphs will seem like "gobbly goop", if you're not a technical person. Skip the next 3 paragraphs if that's the case...
At the end of each month, I download my transactions for that month from my PC account. PC allows you to download directly into a money managing software like Quicken. I prefer using Microsoft Excel because I already have the software and I am proficient with it. I export the transactions to a .pcf file and then import the file as if I am importing a text file, into Excel. In the spreadsheet, I have a column for each budgeted category. A column for Income, a column for groceries, a column for hydro, a column for gasoline, and so on. I have a category code set up for each column/budgeted item. For example, I use GR for groceries, GA for gasoline, IN for income. You can use whatever you choose. I have formulas set up in my Excel sheet to automatically put the transaction amounts into the proper columns when I enter a category code beside the amount. It all seems rather technical - so if you need help with a tutorial on setting this up, please email arjacob1-finance@yahoo.ca.
So, after I import the transactions, I proceed to type in the category code for each transaction beside the amount. This automatically puts the amount in the correct column and I had set up the spreadsheet to automatically total each category for me.
The totals for each category get transferred automatically to the Budget Comparison sheet which shows me if I am meeting the budgeted amounts. Once the spreadsheet is set up, all you need to do is download the transactions, type in the relevant category code beside each amount and review the data to see if you are living within your means! It takes a bit of time to set up but once it's done, "month end" can be an easy task.
To use the manual method, simply add up all your receipts for each category. You will also need to include the paid bills, such as utilities and property taxes. Then compare them to your budget.
If you meet your budget, sweet! If not, one of the following needs to be done:
1) Review the budgeted amounts and modify the budget to reflect reality
2) Modify spending habit to meet the budget. The numbers don't lie - if you are running a deficit, you are adding to your debt.
It is important to continue measuring your spending reality to your budget. A monthly review, a.k.a. "month end" will help you stick to the budget. If you have a deficit in one month, you know that you will need to watch next month's spending so that it would have a surplus to compensate for this month's deficit.
In the next post, I will share how the "spender" and the "saver" in the family finally stopped disagreeing about the finances.
For households to stay financially healthy, the same concept needs to be applied. We need to review our income and expenses on a regular basis. When you begin this process, you may want to review it weekly, however as your finances stabilize, once a month seems to be a good time interval for a review.
To review expenses, some people keep their receipts from EVERY transaction so that they could figure out what was spent for the month. I heard of a good idea from a friend - never tried this because I am not a receipt keeper - she stuck labelled envelopes on the inside of a kitchen cupboard door and she would put the receipts in the appropriate category when she got home. So, receipts would go from purse into the appropriate categories.
Some people keep a log book and write down what they spent. I used to have a sheet of paper on my fridge and I would write down what I had just spent when I got home. When I finally came up with an electronic method, I right away abandoned all tedious manual methods! I try to use the Debit Machine for all my expenses. I rarely use cash because I find that cash is not traceable, unless you like keeping receipts. (I understand that some of you may belong to the Conspiracy Theorists group and prefer to not have your expenses easily tracked - so, receipts will have to be your friend :-)).
This next 3 paragraphs will seem like "gobbly goop", if you're not a technical person. Skip the next 3 paragraphs if that's the case...
At the end of each month, I download my transactions for that month from my PC account. PC allows you to download directly into a money managing software like Quicken. I prefer using Microsoft Excel because I already have the software and I am proficient with it. I export the transactions to a .pcf file and then import the file as if I am importing a text file, into Excel. In the spreadsheet, I have a column for each budgeted category. A column for Income, a column for groceries, a column for hydro, a column for gasoline, and so on. I have a category code set up for each column/budgeted item. For example, I use GR for groceries, GA for gasoline, IN for income. You can use whatever you choose. I have formulas set up in my Excel sheet to automatically put the transaction amounts into the proper columns when I enter a category code beside the amount. It all seems rather technical - so if you need help with a tutorial on setting this up, please email arjacob1-finance@yahoo.ca.
So, after I import the transactions, I proceed to type in the category code for each transaction beside the amount. This automatically puts the amount in the correct column and I had set up the spreadsheet to automatically total each category for me.
The totals for each category get transferred automatically to the Budget Comparison sheet which shows me if I am meeting the budgeted amounts. Once the spreadsheet is set up, all you need to do is download the transactions, type in the relevant category code beside each amount and review the data to see if you are living within your means! It takes a bit of time to set up but once it's done, "month end" can be an easy task.
To use the manual method, simply add up all your receipts for each category. You will also need to include the paid bills, such as utilities and property taxes. Then compare them to your budget.
If you meet your budget, sweet! If not, one of the following needs to be done:
1) Review the budgeted amounts and modify the budget to reflect reality
2) Modify spending habit to meet the budget. The numbers don't lie - if you are running a deficit, you are adding to your debt.
It is important to continue measuring your spending reality to your budget. A monthly review, a.k.a. "month end" will help you stick to the budget. If you have a deficit in one month, you know that you will need to watch next month's spending so that it would have a surplus to compensate for this month's deficit.
In the next post, I will share how the "spender" and the "saver" in the family finally stopped disagreeing about the finances.
Friday, November 5, 2010
Sticking to the Budget!
This is one of the most difficult things to do, when it comes to household finances. There are so many different methods out there. There's the "jar" method, where you have a jar for each expense category and you put your monthly (or weekly or biweekly - depending on your budget cycle) budgeted amount of cash for that category into the jar. Then you simply remove the cash from the jar as you need them.
Then, there is the envelope method, where you use envelopes instead of jars.
Personally, I am very much an electronic person. I don't like carrying all that cash in my house or on my person. I'm the kind of person who will use the cash if I have some sitting in my wallet because I have "trained" myself over the years that cash on hand = cash to use!! The debit machine and automatic bank withdrawals were the best invention for me. So, for those of you who are like me, this is what I do to "bucket" my money.
I bank with PC Financial. Simply because I do not like the idea of paying any fees. I will discuss banks and fees on another post! I have also set up an account with ING Direct which is linked to my PC account (a virtual account linked to a semi-virtual account - told you I was an electronic kind of girl!). Now, what I really like about ING Direct is, they allow you to create "sub-accounts" in your account. So, I created a few "sub-accounts", one for my Property Taxes, one for my Kids' Clothing, one for Savings, one for Auto Maintenance, etc. There is a limit to the number of sub-accounts but you can call them to override, if you really need to. I have not had a problem with what I needed to use. After the account "buckets" were created, I then set up auto-transfers from my PC Financial account to my ING Direct sub-accounts, the amount of money I had budgeted per month. For example, I have $200 per month budgeted for Auto Maintenance. This is money that I had set up to automatically transfer from my PC Account to my ING Direct Auto-Maintenance sub-account once a month, saving the money for use when I need to fix our car or van. When my car's transmission line needed to be fixed, the quote was $800. I checked my Auto Maintenance sub-acount and found that I had just over $800. So, I simply transfered the money from my ING Direct sub-account back to my PC Account so that I could pay the Mechanic.
I have set up all these auto-transfers from the PC Account to the ING Direct sub-accounts for all the "fixed expenses" that are paid out only a few times a year, such as Property Taxes, Auto Maintenance, Beginning of School kids clothing, Savings, etc. ING Direct also pays out a higher interest amount than most other banks, which is an added bonus. This ensures that the money that will be needed are put away and we don't think that we have all this extra money to spend - when they were all "spoken for".
I am being rushed by my daughter to finish this because I had promised her a shopping trip. So, I shall continue another day on how to stay on budget!
Then, there is the envelope method, where you use envelopes instead of jars.
Personally, I am very much an electronic person. I don't like carrying all that cash in my house or on my person. I'm the kind of person who will use the cash if I have some sitting in my wallet because I have "trained" myself over the years that cash on hand = cash to use!! The debit machine and automatic bank withdrawals were the best invention for me. So, for those of you who are like me, this is what I do to "bucket" my money.
I bank with PC Financial. Simply because I do not like the idea of paying any fees. I will discuss banks and fees on another post! I have also set up an account with ING Direct which is linked to my PC account (a virtual account linked to a semi-virtual account - told you I was an electronic kind of girl!). Now, what I really like about ING Direct is, they allow you to create "sub-accounts" in your account. So, I created a few "sub-accounts", one for my Property Taxes, one for my Kids' Clothing, one for Savings, one for Auto Maintenance, etc. There is a limit to the number of sub-accounts but you can call them to override, if you really need to. I have not had a problem with what I needed to use. After the account "buckets" were created, I then set up auto-transfers from my PC Financial account to my ING Direct sub-accounts, the amount of money I had budgeted per month. For example, I have $200 per month budgeted for Auto Maintenance. This is money that I had set up to automatically transfer from my PC Account to my ING Direct Auto-Maintenance sub-account once a month, saving the money for use when I need to fix our car or van. When my car's transmission line needed to be fixed, the quote was $800. I checked my Auto Maintenance sub-acount and found that I had just over $800. So, I simply transfered the money from my ING Direct sub-account back to my PC Account so that I could pay the Mechanic.
I have set up all these auto-transfers from the PC Account to the ING Direct sub-accounts for all the "fixed expenses" that are paid out only a few times a year, such as Property Taxes, Auto Maintenance, Beginning of School kids clothing, Savings, etc. ING Direct also pays out a higher interest amount than most other banks, which is an added bonus. This ensures that the money that will be needed are put away and we don't think that we have all this extra money to spend - when they were all "spoken for".
I am being rushed by my daughter to finish this because I had promised her a shopping trip. So, I shall continue another day on how to stay on budget!
Wednesday, November 3, 2010
Sinking in Debt?
I keep seeing these ads for services that would help people who are "sinking in debt". It truly is a sign of the times. A lot of people seem to be in a lot of debt. Whenever my kids say to me, "wow mom, look at those people with the big house, big cars, all the toys and gadgets, they must be rich". I would say, "hmm, or they are in debt up to their eyeballs!".
I provide free financial counseling to people who need it, as a charity (or as a ministry, for those who know church lingo). I am amazed at how much debt so many people have accumulated. As mentioned in my previous blog, in the days when relatively big money was rolling into our household, we were constantly running a deficit. When Outgoing expenses > Income, there is a deficit. In today's day and age, when we have overdraft protection and our monies flow in and out of our bank accounts electronically, it is very difficult to tell whether or not we are in a surplus or a deficit situation. When both husbands and wives are too busy, it becomes very difficult to pay attention to the details and stay on top of what comes in and goes out. That was our problem back then.
A deficit of a few hundred dollars a month, resulted in debt of thousands of dollars over many years. If you are doing one of the following, you are probably running a deficit in your household:
1) paying one credit card with another credit card
2) not having enough money to pay all your bills every month, resulting in late fees
3) Overdraft protection is invoked every month
4) You cannot pay off your credit cards every month - that balance keeps getting larger and larger
Solution? Like any business, your household needs a finance manager who will ensure that you stay in the black. However, the entire family needs to participate in the financial plan. Otherwise, the finance manager would be very frustrated, exhausted, resentful and eventually give up and let everything "go to pot".
First order of business is to have a plan. This is otherwise known as a budget. I tend to be very practical when it comes to a budget. If you've eaten out most of your working life, it is unrealistic to expect that you will no longer eat out and only bring bagged lunch every day. You are just setting yourself up for failure. When I help people create their budget, I first create it based on what they think they spend on things. Then, we would go over their expenses (I like using 6 months' data by downloading 6 months' worth of bank transactions onto a spreadsheet and categorizing all the expenses - I have customized an Excel spreadsheet just for that purpose) and see how close they were to their budget. We would tweak the budget if it was not accurate and use more accurate numbers, based on the average over 6 months. I like using 6 months to 1 year data because it covers the various seasons in life, such as Christmas expenses, birthdays, winter natural gas bills (for higher heat requirements), summer hydro bills (for higher air conditioning power consumption) and averages them out. If the outgoing expenses are higher than the income, then the couple/family (so far I have only counseled couples, but this would work for singles also) need to discuss what they can eliminate or reduce from their budget. I had one couple decide that they would go longer in between hair appointments! Some people needed to review how much they are paying for their Cable, Internet and phone bills - it is amazing how much that Bell/Rogers bill can vary from household to household. What is "cut" depends solely on your personality and hierarchy of needs! My husband and I cut cable but for some, that is their sole entertainment and they'd rather eat more KD than shrimp kebabs. We are all different - whatever we eliminate (if we needed to), we need to stick to the plan/budget.
There's a website that I like to visit which provides some good tools for budgeting. Crown Ministries have a lot of good tools and tips you can use for budgeting. I have been using their Budgeting spreadsheet when helping others - I cannot find it on their new website. If you need a copy, please let me know and I can email it to you.
Once the budget is created, then comes the harder part - sticking to the budget. I will discuss this in a different post.
Happy budgeting! Remember, it does require quite a bit of effort to create a proper budget/spending plan but once you have an accurate one that the whole family can follow, you will not regret spending the time on it. It is the beginning of your journey to being debt free.
I provide free financial counseling to people who need it, as a charity (or as a ministry, for those who know church lingo). I am amazed at how much debt so many people have accumulated. As mentioned in my previous blog, in the days when relatively big money was rolling into our household, we were constantly running a deficit. When Outgoing expenses > Income, there is a deficit. In today's day and age, when we have overdraft protection and our monies flow in and out of our bank accounts electronically, it is very difficult to tell whether or not we are in a surplus or a deficit situation. When both husbands and wives are too busy, it becomes very difficult to pay attention to the details and stay on top of what comes in and goes out. That was our problem back then.
A deficit of a few hundred dollars a month, resulted in debt of thousands of dollars over many years. If you are doing one of the following, you are probably running a deficit in your household:
1) paying one credit card with another credit card
2) not having enough money to pay all your bills every month, resulting in late fees
3) Overdraft protection is invoked every month
4) You cannot pay off your credit cards every month - that balance keeps getting larger and larger
Solution? Like any business, your household needs a finance manager who will ensure that you stay in the black. However, the entire family needs to participate in the financial plan. Otherwise, the finance manager would be very frustrated, exhausted, resentful and eventually give up and let everything "go to pot".
First order of business is to have a plan. This is otherwise known as a budget. I tend to be very practical when it comes to a budget. If you've eaten out most of your working life, it is unrealistic to expect that you will no longer eat out and only bring bagged lunch every day. You are just setting yourself up for failure. When I help people create their budget, I first create it based on what they think they spend on things. Then, we would go over their expenses (I like using 6 months' data by downloading 6 months' worth of bank transactions onto a spreadsheet and categorizing all the expenses - I have customized an Excel spreadsheet just for that purpose) and see how close they were to their budget. We would tweak the budget if it was not accurate and use more accurate numbers, based on the average over 6 months. I like using 6 months to 1 year data because it covers the various seasons in life, such as Christmas expenses, birthdays, winter natural gas bills (for higher heat requirements), summer hydro bills (for higher air conditioning power consumption) and averages them out. If the outgoing expenses are higher than the income, then the couple/family (so far I have only counseled couples, but this would work for singles also) need to discuss what they can eliminate or reduce from their budget. I had one couple decide that they would go longer in between hair appointments! Some people needed to review how much they are paying for their Cable, Internet and phone bills - it is amazing how much that Bell/Rogers bill can vary from household to household. What is "cut" depends solely on your personality and hierarchy of needs! My husband and I cut cable but for some, that is their sole entertainment and they'd rather eat more KD than shrimp kebabs. We are all different - whatever we eliminate (if we needed to), we need to stick to the plan/budget.
There's a website that I like to visit which provides some good tools for budgeting. Crown Ministries have a lot of good tools and tips you can use for budgeting. I have been using their Budgeting spreadsheet when helping others - I cannot find it on their new website. If you need a copy, please let me know and I can email it to you.
Once the budget is created, then comes the harder part - sticking to the budget. I will discuss this in a different post.
Happy budgeting! Remember, it does require quite a bit of effort to create a proper budget/spending plan but once you have an accurate one that the whole family can follow, you will not regret spending the time on it. It is the beginning of your journey to being debt free.
Tuesday, November 2, 2010
The Good Life
I am procrastinating painting my basement. Don't get me wrong, I do enjoy decorating and painting - I just don't enjoy moving heavy boxes that are currently in the room into the next room so that I can get to the prepping (dry wall mudding, sanding, etc. etc.) before painting (ok, I really dislike prepping also - way too dusty for me). So, here I am creating a blog instead! I have many friends who are veterans in blogging. I just learned today that the word "blog" is a short form for web log. Huh, who knew? Well, now that I am a semi-retired stay at home mom who only does Visual Manufacturing software consulting on the side, I am starting to find that I have many more options for the time I have.
When I was in the rat race, my hubby and I would get up at 7 a.m., get our kids ready and bring them to the sitters, go to work till 6 or 7 p.m., pick up the babies, get home, fix dinner (most often consisted of something from the freezer or cans), eat dinner, help kiddies with homework, bathe the kiddies, put them to bed, clean up, (on some nights rush off to church for mid-week service), many nights we would roll into bed past midnight and the routine started back up, the next day. Only time we had to clean the house, do grocery shopping and do laundry was on the weekends. There wasn't a whole lot of time for building friendshiops. Any spare time we had would be taken up by nightmare tennants. There was a tennant who ran a dog kennel in the basement infesting the house with fleas. Another tennant tore up the house, many did not want to pay rent on time, well, I think if I had time to blog back then about all these, hollywood would have wanted our story for a horror flick!
We were pulling in six figures as a household even way back then, but we would constantly be in the red, with lots of help from our Overdraft protection. This was because we did not have the time to pay attention to the financial details. Writing about life back then is getting me stressed! I would never want to go back to that life.
2 years ago, I was laid off from my Software Consulting position. I had been working since I graduated University as an Engineer, when I was 22. Oh, so young back then. I had gone through many downsizing without getting hit. Then in my early forties, I get my first lay-off. Let me rewind this story a bit. A year prior to the lay-off, I was starting to get the sense that I needed to get out of debt and work towards being a stay at home mom. (My personal belief is, it was God telling me to do this - you may not agree with me on God being able to communicate with us, but that's a discussion for another blog). My goal was to be able to live on one income. The reason for that was, my kids were getting older and I felt that they now really need their mom to be home to help them navigate pre-teen years. I wanted my kids to have home cooked meals that are healthy and be able to teach them the things that the school did not teach them, like piano, typing, biblical principles of living, sewing, cooking, etc. When you make $100K a year, it is very difficult to give it up. I was way too chicken to quit! So, I was dragging my feet when it came to quiting however, I was starting to put things into motion (remember, I heard from God :-)) to get ready for quiting.
So, when I was laid off, we had already sold off one rental property and our principal residence was already on the market. The plan was to sell the principal residence and move into another rental property to fix it up. We had already given our tennant notice 2 months before the lay-off. By selling the principal residence and moving into the rental property, we were able to reduce the capital gains tax on the investment property when we are ready to sell it. Here in Canada, you can reduce your capital gains tax if you moved into your investment property first. The amount of taxes you pay is dependent on how long you stay in the property.
We made $90,000 in the sale of our house. We paid off all our debts. Put some money towards the mortgage of the investment/rental property and invested the rest. We did not put a whole lot onto the mortgage of the investment property because the interest rate was 0.5% at that time. We have our mortgage with TD Canada Trust. We had one of those Prime minus 1% rate. We were told that we would probably never see that rate again because sub-prime is out the window. It's like free money!
We then pulled our kids out of expensive private schools and put them in public schools. We cancelled cable tv and re-jigged the budget for one income. I still do some consulting on the side. This is to keep my brains active so that I don't become a blob. It also helps supplement my hubby's income as a supply teacher, till he gets that full time contract position.
My days now consist of having breakfast with the ladies once a week, volunteering as a Treasurer for the School Council, reading novels (my most favourite hobby since I was 8), talking with friends on the phone, going to exercise classes at the gym, watching cooking demonstrations on the internet, teaching my kids piano, cooking, I do only one cleaning chore per day (eg. sweep the floor, or dusting, or bathrooms). I have trained my kids (9 and 12) to do their own laundry so I only have my hubby's and my own laundry to do (so, that happens once every 2 weeks). I also really enjoy trading on the stock market and reading up on finance news. Oh yes, I still do a bit of Visual Manufacturing consulting - about 1 to 2 hours a day on average. Life is so much less stressful. Grocery shopping during a weekday morning sure beats the stampede on a Saturday! Helping the kids with their homework without being rushed - that is such a blessing. I call this living the Good Life. One of my favourite verses in the Bible is, "Jesus has come to give life and life more abundantly". John 10:10. This is indeed abundant living.
Let's see how long this new blogging "hobby" lasts for...
When I was in the rat race, my hubby and I would get up at 7 a.m., get our kids ready and bring them to the sitters, go to work till 6 or 7 p.m., pick up the babies, get home, fix dinner (most often consisted of something from the freezer or cans), eat dinner, help kiddies with homework, bathe the kiddies, put them to bed, clean up, (on some nights rush off to church for mid-week service), many nights we would roll into bed past midnight and the routine started back up, the next day. Only time we had to clean the house, do grocery shopping and do laundry was on the weekends. There wasn't a whole lot of time for building friendshiops. Any spare time we had would be taken up by nightmare tennants. There was a tennant who ran a dog kennel in the basement infesting the house with fleas. Another tennant tore up the house, many did not want to pay rent on time, well, I think if I had time to blog back then about all these, hollywood would have wanted our story for a horror flick!
We were pulling in six figures as a household even way back then, but we would constantly be in the red, with lots of help from our Overdraft protection. This was because we did not have the time to pay attention to the financial details. Writing about life back then is getting me stressed! I would never want to go back to that life.
2 years ago, I was laid off from my Software Consulting position. I had been working since I graduated University as an Engineer, when I was 22. Oh, so young back then. I had gone through many downsizing without getting hit. Then in my early forties, I get my first lay-off. Let me rewind this story a bit. A year prior to the lay-off, I was starting to get the sense that I needed to get out of debt and work towards being a stay at home mom. (My personal belief is, it was God telling me to do this - you may not agree with me on God being able to communicate with us, but that's a discussion for another blog). My goal was to be able to live on one income. The reason for that was, my kids were getting older and I felt that they now really need their mom to be home to help them navigate pre-teen years. I wanted my kids to have home cooked meals that are healthy and be able to teach them the things that the school did not teach them, like piano, typing, biblical principles of living, sewing, cooking, etc. When you make $100K a year, it is very difficult to give it up. I was way too chicken to quit! So, I was dragging my feet when it came to quiting however, I was starting to put things into motion (remember, I heard from God :-)) to get ready for quiting.
So, when I was laid off, we had already sold off one rental property and our principal residence was already on the market. The plan was to sell the principal residence and move into another rental property to fix it up. We had already given our tennant notice 2 months before the lay-off. By selling the principal residence and moving into the rental property, we were able to reduce the capital gains tax on the investment property when we are ready to sell it. Here in Canada, you can reduce your capital gains tax if you moved into your investment property first. The amount of taxes you pay is dependent on how long you stay in the property.
We made $90,000 in the sale of our house. We paid off all our debts. Put some money towards the mortgage of the investment/rental property and invested the rest. We did not put a whole lot onto the mortgage of the investment property because the interest rate was 0.5% at that time. We have our mortgage with TD Canada Trust. We had one of those Prime minus 1% rate. We were told that we would probably never see that rate again because sub-prime is out the window. It's like free money!
We then pulled our kids out of expensive private schools and put them in public schools. We cancelled cable tv and re-jigged the budget for one income. I still do some consulting on the side. This is to keep my brains active so that I don't become a blob. It also helps supplement my hubby's income as a supply teacher, till he gets that full time contract position.
My days now consist of having breakfast with the ladies once a week, volunteering as a Treasurer for the School Council, reading novels (my most favourite hobby since I was 8), talking with friends on the phone, going to exercise classes at the gym, watching cooking demonstrations on the internet, teaching my kids piano, cooking, I do only one cleaning chore per day (eg. sweep the floor, or dusting, or bathrooms). I have trained my kids (9 and 12) to do their own laundry so I only have my hubby's and my own laundry to do (so, that happens once every 2 weeks). I also really enjoy trading on the stock market and reading up on finance news. Oh yes, I still do a bit of Visual Manufacturing consulting - about 1 to 2 hours a day on average. Life is so much less stressful. Grocery shopping during a weekday morning sure beats the stampede on a Saturday! Helping the kids with their homework without being rushed - that is such a blessing. I call this living the Good Life. One of my favourite verses in the Bible is, "Jesus has come to give life and life more abundantly". John 10:10. This is indeed abundant living.
Let's see how long this new blogging "hobby" lasts for...
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