Budget / Money Management

Most of us are having to work harder and longer for our money today. Our earnings are a precious commodity, so we owe it to ourselves to look after our money and spend it wisely.

Unfortunately, money management is rarely taught seriously in school, if taught at all, so 'trial and error' has become our teacher. This can result in enormous stress as we wrestle with paying bills, managing debts and saving for the future, against the ongoing challenges of inflation and for some, unemployment. Setting up a budget is the only solution, but take heart - many families find budgeting is much easier than they expect. What better time to find out than right now? 

Tips and Tools You Can Use

Successful budgeting begins with clear identification of income and expenses, with the latter broken into fixed expenses (fixed payments that you have to make, such as rent, mortgage, loan payments etc) and variable expenses (ongoing payments that vary and could be controlled, including gifts, entertainment, travel etc.) Many tools are available to help you with this vital first step. Once completed, you'll be in an excellent position to begin taking control of your finances. Here are some great tips: 

Assessing the situation

• Add up your income from all sources, including take home pay, pensions, child support, alimony, rental income etc..
• Determine the fixed expenses you have to pay, including rent, mortgage, utilities, loan payments, insurance etc..
• Determine the variable expenses that you have some control over, including food, clothing, entertainment, travel, gifts etc..
• Track your daily pocket-change expenses for a week or more, including snacks, newspapers and spontaneous small purchases. These can add up!
• Add an amount for emergencies that may crop up over the year.
• Add an amount for savings for the future.

Balancing income and expenses

• Compare your income with the total expenses you listed above. If your income is greater than your expenses, reflect whether you could make better use of the surplus through saving or investments.
• If your expenses are greater than your income, it's time to trim your budget.
• Clearly identify the amount you need to trim from expenses.
• If debt load is overwhelming, consider credit counselling.

Trimming expenses

• Review fixed expenses. This is the hardest area to trim but savings are sometimes possible through better mortgage rates, loan consolidation etc.. In extreme cases, alternative housing options may need to be explored.
• Divide your variable expenses into 'needs' which would include basic food, clothing and utilities etc. and 'wants', which might include entertainment, hobbies and travel etc.
• Consider where savings could be made. There are many resources to help you with this.
• Set realistic targets that allow for small treats. If your budget is too harsh, you are more likely to give up.
• Be a financially wise food shopper

o   Slash your grocery bill (http://www.chatelaine.com/article.jsp?page=money&cid=294933

o   Save on purchases (http://www.ourfamilyplace.com/purchases.html)

o   Find saving coupons on the internet (http://www.save.ca/)

·         How to handle your debt load

o   Manage Debt Step by Step(http://moneycentral.msn.com/articles/smartbuy/debt/contents.asp)

o   10 strategies to reduce your debt (http://moneycentral.msn.com/articles/smartbuy/debt/1330.asp)

o   What Debt To Pay Off First (http://www.bankrate.com/dotp/news/cc/19980713.asp)

o   Dealing with debt: from the Office of The Superintendent of Bankruptcy Canada (http://strategis.ic.gc.ca/SSG/br01035e.html#Possiblesolutions)

Savings and Emergencies

• If at all possible, consider funds for savings and emergencies as budget 'needs'.
• Try to cut 'wants' before you cut into these funds.
• Consider automatic payroll deductions from your monthly salary into a savings account.

Helpful Resources

Household budget form

(http://www.ourfamilyplace.com/budget1.html)

How to budget

(http://www.bankrate.com/dotp/news/advice/20000511b.asp?keyword=)

Money Saving Tips

(http://www.ourfamilyplace.com/saving.html)

10 strategies to reduce your debt

(http://moneycentral.msn.com/articles/smartbuy/debt/1330.asp)

The Canadian Coupon, Contest and Online Shopping Site

(http://www.frugalshopper.ca/)

Online Coupons

(http://www.insanecoupons.com)

Free things to do in the Greater Toronto area

(http://www.e-kidstoronto.com/ekids/freethings.htm)

For more information or to arrange an appointment for confidential counselling, contact FGIworld, your EAP/EFAP provider, (24 hours-a-day/7days-a-week) at: 1-800-268-5211 (English) © FGI          1-800-363-3872 (en français)

How to Handle Your Debt Load

We live in a society where a credit card is considered as essential as a phone and where students learn to accumulate debt through student loans before they even start earning. Small wonder then, that so many of us end up drowning in debt. 

Understanding the cause of our debt accumulation is key to finding solutions and preventing a recurrence. Job loss or personal emergencies, for example, may not be preventable but building a savings 'pad' might make future situations more manageable. However, if the cause lies in compulsive spending, as it does for many people, understanding the habits and attitudes that lead to spending, will be key. Whatever the cause, you're taking a great first step in admitting that a problem exists. 

Tips and Tools You Can Use

Begin by listing all your debts to get a clear picture of your situation. Consider whether it's manageable through stringent budgeting and lifestyle changes or whether your debt load is so out of hand that outside assistance is vital. Remember that you don't have to go through this alone. There are many resources to help you. Here are some tips to get you started: 

Self-management

• Total your debt payments and draw up a budget to allow for them.
• Reduce your credit cards to one low-interest card. Keep it aside for emergencies.
• Consider whether you can use one low-interest card to pay off cards with higher rates.
• Reflect on the cause of your debt load and problem-solve to avoid future recurrences.

• If compulsive spending is at the root of your problems, consider outside counselling.
• Re-establish your credit rating

o   5 steps to credit repair (http://moneycentral.msn.com//articles/smartbuy/debt/1337.asp)

o   To obtain a copy of your credit report:

Equifax: 1-800-465-7166

Trans Union: 1-800-663-9980

o   To contact a licensed mortgage broker:  1-888-442-4625

·         Budget/Money Management

o   Household budget form

(http://www.ourfamilyplace.com/budget1.html)

o   How to budget

(http://www.bankrate.com/dotp/news/advice/20000511b.asp?keyword=)

Credit counselling services

• Offered by many non-profit organizations, some with United Way affiliation. A small fee may be charged.
• They will put together a repayment plan to help you repay debts over a period of time - usually 4 years.
• Clients make a monthly payment to the service, which then pays all creditors.
• Negotiation with creditors usually enables debt interest to be frozen.
• The service helps to prepare a budget.
• Your credit rating will be affected - it usually goes to an R7.

Consumer Proposals

• Administered by Bankruptcy Trustees.
• You will only pay a percentage of your debts, however secured debts will not be included.
• Repayments are based upon your income, dependents and debt load.
• Payments to the Trustee can last from three to five years and are made monthly.
• You must attend two budgeting workshops.
• Your credit rating is affected - it usually goes to an R7.

Bankruptcy

• Administered by Bankruptcy Trustees.
• The approximate cost to go bankrupt is $1600 to $1800. The charge usually works out to around $200 per month.
• Bankruptcy lasts from nine months to just over a year.
• A discharge is granted after the nine month period.
• You must attend two budgeting workshops.
• Your credit rating is affected - it goes to an R9.
• Bankruptcy - it isn't a four letter word.
• Office of the superintendent of Bankruptcy Canada (http://strategis.ic.gc.ca/SSG/br01035e.html)

Helpful Resources

Manage Debt Step by Step

(http://moneycentral.msn.com/articles/smartbuy/debt/contents.asp)

10 strategies to reduce your debt

(http://moneycentral.msn.com/articles/smartbuy/debt/1330.asp)

What Debt To Pay Off First

(http://www.bankrate.com/dotp/news/cc/19980713.asp)

Dealing with debt: from the Office of The Superintendent of Bankruptcy Canada

(http://strategis.ic.gc.ca/SSG/br01035e.html#Possiblesolutions)

Household budget form

(http://www.ourfamilyplace.com/budget1.html)

How to budget

(http://www.bankrate.com/dotp/news/advice/20000511b.asp?keyword=) 

 For more information or to arrange an appointment

for confidential counselling, contact FGIworld,

your EAP/EFAP provider, (24 hours-a-day/7days-a-week) at:

1-800-268-5211 (English)  1-800-363-3872 (en français)

Finance Review Tips

Wouldn’t it be nice to have had a “Money Management” class in school? Instead ‘trial and error’ has become our ‘lessons learned’. Money can cause enormous stress as we try to clear up bills, debts and try to save some money for the future… which only ends-up paying off our bills and debts! Understanding budgeting is the key and it’s easier than most expect. 

Tips and Tools to Use 

Step 1: Identify income and expenses

Step 2: Break down your expenses into (daily, weekly, bi-weekly or monthly):

a)    “Fixed payments” such as rent, mortgage, loan payments, insurances, etc.

b)    “Variable expenses” that can be controlled, including gifts, entertainment, travel, food, clothing, etc.

c)    “Pocket-change expenses” such as snacks, newspapers, spontaneous small purchases, coffee, etc. (These add up fast!)

Step 3: Assessing the situation 

a)    Sum up all income sources such as take home pay, pensions, child support, alimony, rental income, etc.

b)    Sum up all “fixed payments” expenses

c)    Sum up all “variable expenses”

d)     Sum up your daily “pocket-change expenses”

e)      Add savings and emergency amount

Step 4: Balancing income and expenses

a)    Compare your expenses to your income.

b)    If you need to trim your budget, clearly identify the amount needed.

c)    If you notice a significant imbalance, you might want to review your budget with a credit counsellor or financial advisor.

 Step 5: Trimming expenses

Where to start? I have too many expenses and not enough money!

a)    “Fixed payments”: No one thinks about trimming these payments because of their importance. But savings are occasionally possible with your fixed payments by doing your research: such as better mortgage rates, loan consolidation, etc.

b)    “Variable expenses”: split your list into ‘needs’ such as food, clothing and utilities, etc. and then a list of ‘wants’ such as entertainment, hobbies, travel, etc.

c)    “Pocket-change expenses”: consider car pooling, make your own coffee “to-go”, bring a lunch, borrow a newspaper or read the on-line news, etc.

d)    Set realistic goals: You need to allow yourself small treats. You don’t want to set too harsh a budget – this will only cause you to give up.

Step 6: Savings and Emergencies

a)    Here are some tips for savings:

a.    Saving funds are important, try cutting from your ‘wants’ before cutting from your ‘savings and emergencies’ budget.

b.    Consider emergencies and savings as part of your ‘needs’ budget.

c.    An automated suggestion would be to have payroll deductions deposited into a savings account.

Sources:

How to handle your debt load - Manage Debt Step by Step (http://moneycentral.msn.com/articles/smartbuy/debt/contents.asp)

What Debt To Pay Off First (http://www.bankrate.com/dotp/news/cc/19980713.asp)

Household budget form (http://www.ourfamilyplace.com/budget1.html)

How to budget (http://www.bankrate.com/dotp/news/advice/20000511b.asp?keyword=)

Money Saving Tips (http://www.ourfamilyplace.com/saving.html)

Financial Freedom in 7 Baby Steps!

According to the wise and wonderful Dave Ramsey you should begin your "Financial Freedom" journey with Baby Steps...

In his "Baby Steps" post, Mr Ramsey has us review 7 steps:

Baby Step 1:  $1,000 to start an Emergency Fund

Baby Step 2: Pay off all debt using the Debt Snowball

Baby Step 3: 3 to 6 months of expenses in savings

Baby Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement

Baby Step 5: College funding for children

Baby Step 6: Pay off home early

Baby Step 7: Build wealth and give!

To learn more, visit: http://www.daveramsey.com/new/baby-steps/