<![CDATA[Prudent Money Coach - Blog]]>Sat, 11 Nov 2017 07:15:15 -0800Weebly<![CDATA[Not Enough Time/Money]]>Fri, 10 Nov 2017 16:09:38 GMThttp://prudentmoneycoach.com/blog/not-enough-timemoney
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Image courtesy of Shutterstock, by Looker_Studio. Stock photo ID: 499753177
 Overview 
Can you relate to the title? Do you find yourself often running out of time or money? There is a principle we can use to manage both time and money.

Understanding Why
Understanding why is the first step in solving lack of time or money issues. Let’s take lack of time as our first example. If I find that I am often short on time, I would take a look at the end of the day and find out what I have accomplished for that day. Did I take on too many activities? Or did the day just happen to be a busy one with too many appointments booked? Or perhaps I wasted too much time doing leisurely things like checking posts on Facebook, playing electronic games, or watching too much YouTube? I would be interested in doing a journal for a few days to give me an idea on what I did with my time.

The Plan
Fast forward a few days or a few weeks. Now I can see what I did with my time in the last few weeks; I can understand why I am always short on time. If I have too many activities, my remedy may be to take on less activities, or to do the same number of activities in less amount of time. If I spend a lot of time driving my kids around, perhaps I should cut down on the number of activities. Maybe I could get my husband to take them or carpool with another parent and take turns. Or perhaps I can keep the same number of activities, but do it in places that are closer to my home.

Implementation
My last step now is to implement what I have learned. So, if I am always short on time, and it’s because I have too many activities, then my next step might be to decide to cut down the number of activities. If I find that I am spending time on useless activities such as social media, perhaps I can set aside a dedicated time slot for social media instead of checking on it every few minutes throughout the day. Or I can have a task-based approach by avoiding electronics until I have finished one or more things on my to-do list.

What about Money?
My next question is, can apply the same principle to money management?

1.      Understanding Why
If I find that I never have enough money, perhaps it is a good idea to keep a journal of my spending. Where did my money go? Did I happen to have a month with lots of unexpected expenses like a car repair, school fees, medical emergency, or a death in the family? Or, did I spend money frivolously? Or perhaps my income is not enough to support my choice of lifestyle?
By the way, speaking about unexpected expenses - are they really unexpected or did I instead fail to plan? For example, if my car is old, I know that eventually the car will need to be replaced. Am I saving money for that replacement or am I just waiting on the car to fail?
Going back to keeping a journal, from my experience, it is not enough to track expenses for a week or two, because you probably don’t have an accurate picture. I recommend that you track expenses for a few months, or, if possible, a year. Why? Because some expenses are seasonal such as Christmas, or back-to-school, so it is best to average them out over a year.

2.      The Plan
Now, when I find out how I spent my money, then I can work on a plan to improve my money management. I can decrease my spending, increase my income, or do both. Without a starting point (my journal), I wouldn’t have a reference point. My goal is to do better than where I am now. I need to have a spending plan (or some people call it “a budget”). Every good business and organization should have a financial plan – to know their estimated income and expenses, and so should you. The expenses must be less than income. Without a spending plan, how would I know if I have overspent?

3.      Implementation
Now I have my spending plan, can I stick to it? If not, why not? Should I try cash method so I can visually see it when money is leaving my hand? Or perhaps I need to separate my finances into a savings account and a spending account? How about taking a concrete action plan? For example, if I know my weakness is in shopping, perhaps I can avoid going near a shopping area.

Conclusion
Time is a limited commodity. In a sense, money is limited too. You can save money to use it later, but you can’t save time. Everybody must use up 24 hours in a day. Tomorrow we all get new 24 hours again. If we say we save time, well then, what are we doing with the extra time saved? To manage our time/money wisely, we need to understand why we were short, make a plan to tackle it, and actually implement our plan. If our first plan and/or our first attempt does not work, try an alternate one. It will be a trial and error, continuous improvement until we get it right.

For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.
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<![CDATA[What We Do with Our Money]]>Mon, 09 Oct 2017 17:26:28 GMThttp://prudentmoneycoach.com/blog/what-we-do-with-our-money
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Image courtesy of StockSnap.io, by Negative Space
Overview
There are only three things we can do with our money – give, save, and spend; and I think it should be in that order.

Give
What I mean by give is tithing, which is to give back a portion of what God has entrusted us. This is what I learned from Crown Financial Ministries a long time ago. The teaching is based on the Bible. If you do not believe in tithing, I still recommend that you share what you have through donation to charities you support.

Tithing teaches me that the money I have is not really mine. I am merely a steward, a manager of what God owns. When I die, it will not matter how much money I have because I cannot take it with me. Tithing also teaches me to trust that God will provide for my needs.

Giving teaches me not to hoard my money, to share my blessing with others. If you want to give but you feel that you don’t have enough money, you can try to donate your time (volunteering). If you want to tithe but are afraid you won’t have enough money to live on, create a budget, tithe, and see that God will meet your needs.


Save
OK, everybody knows that you have to save. Have you ever heard people say “I’m not going to spend anything, I’m going to save ALL my money”? Well, that is not realistic. It is impossible to live on nothing. You need money to buy food. You need money to buy your clothes, unless you have sufficient hand-me-downs; but even then, you still need to replace your underwear, socks, and other personal items. You have to pay for your shelter - rent, mortgage, or maintenance fee if you are already mortgage free. Even at thrifty stores you have to pay when you want to buy something.

When someone says “I have no money”, is this true? Does the person really have no income at all? Or the expenses seem to be more than income? If you feel that your needs are endless and you always need more money, track your spending. Look at your bank statements. Look at your tax returns. Look at your credit card statements. Look at your receipts. Where did the money go? Are there things you can do without in your life? What did you spend your money on? Is there anything that you didn’t really have to buy? Is there any clutter in your home as proof that you purchased what you didn’t need? Everyone has his/her own weakness. If you splurge on something, then you need to give up on others.


I recommend that you set aside money first before planning your spending; this will ensure that you have money saved. As for spending, you can spend as much or as little as your money allows.

To make saving meaningful, your savings should have purpose. Here are some examples.
·         Emergency fund for rainy day - save for an amount that is equivalent to three to six months of your living expenses
·         Christmas and vacation money, unless your spending for these falls within your monthly budget
·         Big purchase goals such as down payment for a home or a car
·         Long-term goals such as retirement and college funds


Spend
Spending money is probably not very difficult for most people (although for some who have been thrifty all their life, it would probably be painful to spend money, but it’s a rare case). If you have a budget, then you won’t feel guilty spending within the budget (although I know there are people who would rather not spend even when there is budget).

So where do we spend our money on? It starts with our basic needs, which are food, clothing and shelter. Beyond that, there are transportation, medical, school, and others. Lastly, there are entertainment and recreation. I wrote fourteen posts about spending that you can read on my website, www.PrudentMoneyCoach.com. Check out the first of the series from January 2016.


Conclusion
Everybody has money. How much we allocate to giving, saving, and spending depends on our priorities. If you allocate your money wisely, you will find that you can always adjust your spending to allow you to give and save.

For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.


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<![CDATA[Horror Financial Stories]]>Fri, 08 Sep 2017 16:57:54 GMThttp://prudentmoneycoach.com/blog/horror-financial-stories
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Photo by Ben White on Unsplash
Overview
I was wondering about what I should write this month. I flipped through my small notebook where I collected my ideas. The first page was titled "Horror Financial Stories." These are stories I have heard from friends, extended family members, and others. Hmm....how about that? Since I wrote it back in February 2016, I read through the page. Interesting! I decided to use part of it as my next newsletter blog’s material. I hope you will find the examples informative. Due to time and space, I am going to share two stories.


Story One

A couple just bought a home together. Both husband and wife worked and received good income. In fact, the wife just started a new job. The mortgage was based on their two incomes. Not long after they bought the home, the wife was diagnosed with a serious long-term illness. She had to undergo medical treatment and found herself unable to work. While their income decreased dramatically, they still have to pay the same amount of mortgage. What should they do?

Here is what I would do if my family and I were caught in the situation.

·         First things first, ask God for help. Nothing is beyond His control. If He allows it to happen, we pray that He will provide the resources to help us navigate through the rough waters.

·         Cash flow is severely reduced. We must look at all our expenses and cut down on unnecessary expenses. We will be living on a bare-minimum budget. In our situation, we would probably stop eating out, music lessons, and other luxuries. We would put savings on hold.

·         Since our health care system is run by the government, I would probably check first what services are covered. If our income drops drastically, I would check to see if we qualify for premium assistance and/or PharmaCare.

·         Next, I would probably check our companies’ benefit. What are covered? Are there any short-term or long-term disability benefit? Are there any home care or medical services that are covered? I would do research to understand our benefit.


·         If we have critical illness insurance, we would talk to our insurance agent and find out how to file a claim.

·         I would try not to be shy to get help from family, friends, church, or other organizations. If we do not have enough savings, I would probably check out local Food Bank and other non-profit organizations to get help with groceries and any other service they provide so I can make our cash last as long as possible.

The above are immediate actions to be taken. If the illness is not terminal, below are further actions I would consider.
·         Find out if there are government benefits I qualify. For example, I may qualify for Disability Tax Credit that I can use to reduce my tax payable. If I do not need it, I can transfer the credit to my spouse.

·         Are there any expenses I can cut permanently? For example, is our housing cost too high? Should we downsize? Or, can we rent out part of our home to generate additional income?

To avoid this couple’s difficult situation, I would recommend that when buying a home, couples should use only one person’s income to qualify for the mortgage. The additional income from spouse can be used to pay down the mortgage faster. This also ensures that if one spouse loses income, the mortgage payment will still be bearable.



Story Two

In some cultures, children live with their parents until they get married. Depending on the culture, even married adult children continue to live with their parents at home. This can bring positive and negative impact on everybody. Let’s start with the positive.
Assuming the adult children are productive, they are contributing in many aspects to the big family. For example, if they are bringing in more income, household expenses become lighter and overall family’s net worth value goes up. If they help-out around the house, chores get done faster, resulting in less time for household work and more personal free time.

The negative impact could be numerous too. If the adult children are not productive, they add a burden to their parents. Instead of feeding one adult child, now the parents are feeding two adult children (child and spouse). Household chores may double – twice as much laundry to be done, food to be cooked, dishes to be washed, and so on. This frustrates many parents. Add to that, sometimes these unproductive adult children produce children of their own (or bring in children from previous marriage). Some parents feel the pressure to make more money so they can support the additional dependant(s). They love their children and grandchildren, but they can’t bear the financial burden for long. Add to all these is social conflict. When family members hang out with each other much, ugliness come out. Taste buds differ (“the food is lousy”), lifestyle standard differs (“why is she wasting so much paper towel?”), etc. Suddenly home is not home anymore. For some parents, the home becomes so uncomfortable that they prefer to work out of town so they don’t have to deal with all issues on daily basis.


What can be done? Kathy Lynn shared some principles in her article published in North Shore News on Wednesday, August 23, 2017, titled “Dropping out of school doesn’t mean a free ride.” Young adults living at home are adults, not children. They are expected to pay room and board, to do their share of work maintaining a home which includes home repairs, laundry, cooking, and others. I agree with her. Parents’ responsibilities are to nurture children and train them to be responsible adults. If I have unproductive adult children living at home, I would set expectations and let them know that they are not staying for free. They need to pay for room and board (unless they are students) and contribute to household work.

What can be done to prevent unproductive adult children? We need to train our younger children on responsibilities around home (chores etc.), simple financial management (give, save, spend), and other issues we think are important. When they are older, we need to let them know what the expectations are – responsibilities around home, financial contribution, and others.



Conclusion
There are many difficult financial stories out there. We can learn from them. When we do make mistakes, we should not dwell on them. There is no need to cry over spilled milk. What we need to do is to get up, find solution and learn to avoid it.
 
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit. 
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<![CDATA[My Experience in Choosing Kids’ Music Classes]]>Sun, 09 Jul 2017 06:12:43 GMThttp://prudentmoneycoach.com/blog/my-experience-in-choosing-kids-music-classes
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Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net
Overview
I was asked by friends, readers, and other fellow parents about my experience in selecting music classes for my kids. After finishing my series about spending categories from Crown Financial Ministries Canada’s Percentage Guide, I am writing about my experience in choosing kids’ music classes. By the way, if you want to read the whole series on the spending categories, visit my blog at www.PrudentMoneyCoach.com, starting with February 2016. As for the process of choosing a music class, I would like to tell you about your options and methods of teaching music (piano/keyboard) that I was considering.

Options
First of all, there are three options in taking music classes. These are
·         private,
·         semi-private, and
·         group lessons.
Private and semi-private lessons may be conducted in music schools or at private homes. Semi-private lessons could consist of two to four students. As you can imagine, private lessons will cost more, but you get the teacher’s (hopefully) full attention during the whole lesson time.

Depending on your child’s personality and type, I would say that generally younger children do not enjoy private lessons (I was one of them). I also know that some teachers refuse to conduct private lessons for younger students. The reverse happens when a child is in a higher music grade. Teachers and music schools recommend only private classes. Group lessons are the cheapest of all three. My own children started music with group lesson because I was not sure how long their interest would last.

 
Methods
There may be many music teaching methods out there. When my kids were young, I only knew the Royal Conservatory of Music (RCM) because that was what I studied. A friend at church told me about the Yamaha method and bragged about how good it was for ear training. I was sold because I had (still have) bad music ear. In addition, the cost of the lesson was very attractive - ($15/hour) compared to private lesson ($25/half hour).

The Yamaha method emphasizes on ear training, rhythmic sense, and creativity. Both my children had wonderful teachers. Each developed differently even though they were taught using the same method. The packaged Yamaha lesson was attractive since it came with CDs and DVDs that the children could watch and listen to at home.

During class times, one of each child’s parents was supposed to sit in so the parent can be aware of what was taught and in turn, help the child practice at home. Even though I have a music background, I was happy to sit in the class and learn from the beginning. I found the method to be very effective. I knew what was taught in class, the length of time recommended as practice time, and how to lead my children to practice at home. Some students reported enjoying the music so much that parents did not have to ask them to practice. The students automatically practiced for their own enjoyment. How wonderful!

Having said all good things about the Yamaha method, I wish that there was more emphasize on technique. Because students start with keyboards, their tiny fingers do not have to assert as much pressure as if they start with pianos. However, this also leads to a tendency of students not applying proper finger posture on keyboards. When students graduate to pianos, many find their fingers weak, and to push the piano keys, many bend their fingers at the finger joints instead of pushing the keys with their fingertips. (Imagine your hands crawling like a spider with the legs spread outward and it only touches the surfaces with the tips of its legs.)

As I learned more about the Yamaha method, I realized that the RCM is more academic, while Yamaha emphasizes more on creativity. In the Yamaha method, not much time was spent training students to read notes (sight reading). However, students may be very good at recognizing notes (listening) and following rhythm.

Sometimes creativity is what draws a student to continue learning music. When we were shopping for a digital piano (long story for another post – why we chose digital instead of an acoustic piano), one salesperson told us that had it not been for a digital piano/keyboard and all its bells and whistles, he would have lost interest in studying music when he was young. He proceeded with demonstrating his piano playing skills (which were very good).

My point is, while RCM certification is sought after in many places (especially if you are considering a teaching career), you should pick a method that suits your child best. If you know the weakness of one method over the other, try to fill in the gap at home. Also remember that you do not have to stick to one method. My children studied the Yamaha method for 4 years, then switched to the RCM method. Their Yamaha teachers started with RCM and learned about Yamaha later in life. If a student loves music, it should not matter which method he/she studies first.


Conclusion
Although my experience was with choosing a piano/keyboard music class for my children, I think the thought process may be applied to other instruments as well. You should research different music options (if any) offered by your music school/ teacher.

I think it comes down to child’s interest and parents’ commitment. Children may be flaky (interest today, no interest tomorrow), but it is up to the parents to instill consistency. I have yet to meet students who happily practice music every day of their lives. I think it is reasonable for parents to set boundaries and expectations when a child expresses interest in studying music. Let’s say 3 months of music lesson and perhaps 3 months of renting an instrument (or borrowing). There is a financial commitment from parent’s side, and there should be a study commitment from the child’s side. If there is still interest after a prescribed time, the lesson continues. Parents should also ensure the child practices in between lessons so they get their money’s worth.

Whichever music method or class option you choose, and whichever musical instrument your child chooses, I think the principles are the same – financial and time commitment from parents, and study commitment from children. Get your money’s worth.
 
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.

Sources:
-          https://ca.yamaha.com/en/education/overview/method/index.html
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<![CDATA[School/ Child Care (Spending Category Part 12)]]>Sat, 10 Jun 2017 14:51:11 GMThttp://prudentmoneycoach.com/blog/school-child-care-spending-category-part-12
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Image courtesy of AppleZoomZoom at FreeDigitalPhotos.net
Overview
“School/Child Care” is part 12 and the last of my writing series. To see full complete spending categories, read my February 2016 newsletter at www.PrudentMoneyCoach.com.

If you are using Crown Financial Ministries Canada’s Percentage Guide, this School/Child Care is an extra expense that is not included in the 100% calculation. Thus, if you have this expense, you would need to reduce the percentage from other areas so that your total expense will not exceed 100%.

This month I will talk about typical school and child care expenses and ways to reduce or cut them; of course, you can always increase your income instead of cutting expenses.

Here are some expenses I have encountered and ways I think you can reduce or cut them. (PS: Send me an email <Effie[at]PrudentMoneyCoach[dot]com> if you would like to have the expenses in table format (nicer look); this site does not allow me to publish tables. )



Typical School Expenses and Ways to Reduce or Cut them
School supplies
·         Gather left-over stationaries from previous years and around your home. (PS: I still have pencil crayons from 5 years ago, still in good condition.)


Field trips
·         Ideally, you should budget for field trips, but if the cost is too much, ask for a subsidy from your school.


Extracurricular activities
·         You can choose community centres for cheaper cost. If the program is not offered there, then you may need to sacrifice in other areas to come up with enough money to join the program elsewhere.


Hot lunch
·         This is a big fundraising item for some schools. If your child enjoys hot lunches and the money is allocated in your budget, go ahead and order it. Not only will you support your child’s school, but it also means fewer lunches to pack. However, if your budget is tight and your child would like to have it, order it once every few weeks. This way, your child gets to enjoy it and the hot lunches will be really special because it comes only once every few weeks.


Other fundraising events such as book fairs, bake sales, or others
·         You could be a buyer or a seller to help with the fundraising project. If you have a working budget, feel free to donate your time, money, or both. For example, if there is poinsettia sale around Christmas time, you could purchase one or a few for your home. It will save you a trip to the store and you’re helping the school at the same time. If there is a bake sale, you could participate as part of the sellers by baking something for sale.

·         If money is really tight, you could donate your time to any of the fundraising events.


Teachers’ gifts
·         In elementary school, there was always a class parent who coordinated class Christmas and end-of-school gifts for the teacher. I think this is a great idea because collectively you could purchase a better gift or gift-card for the teacher. For example, $10 may not buy you a great gift, but 15 x $10 = $150 would get you a better gift.
·         However, if your budget is tight but you would like to give something, you and/or your child could make something instead of purchasing it.


Before and/or after school care and general child care expenses
·         If you must use the before and/or after school care, make sure that your salary is more than the cost of care. It doesn’t make sense if you make enough just to pay for the cost of care. It would be better if you could find employment during school hours.

·         The same goes for general child care expenses. You may be using a daycare or private nanny. If your income is not significantly higher than the cost of child care, perhaps you should re-think using child care services. Not only does it cost you money and energy, but you could potentially lose out on child benefit because of your higher income, not to mention exhaustion and lack of energy when you do have time to be with your children.

·         If you know of other parents in similar condition, perhaps you can take turn caring for each other’s child(ren) or pool money together to pay for a nanny or a babysitter.

·         By the way, if you hire a babysitter so you and your spouse can go on a date, it should be considered part of your entertainment expense, not child care expense.


Your own schooling
·         Some people are tired of earning low wages. Going back to school is a good investment in oneself. Make sure that your new chosen career will generate more income than the current one, and the future pay will be more than the cost of school.

·         Aside from taking money out of your RRSP (Registered Retirement Savings Plan) under LLP (Lifelong Learning Plan) program, you could also use your savings, or apply for scholarships and grants. Understand the terms and conditions for each source of funding. For example, does the scholarship require you to work for a particular sector after graduation? While in graduate school, I met other students who were funded by a particular organization or foreign government. As I understand it, these students must achieve good grades and upon graduation, return to the organization or the country to work a pre-determined number of years there.

·         Lastly, don’t forget to check out your current company’s benefit plan. Some companies want their employees to excel and grow. Again, make sure you understand requirements from the company that must be met after graduation.



Conclusion
As with other types of expenses, if you must incur school and child care expenses, there are ways to reduce the cost. Sometimes when you have limited resources, you can become creative, utilize everything you have, and not waste money.

For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.
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<![CDATA[Investments (Spending Category Part 11)]]>Wed, 10 May 2017 18:11:25 GMThttp://prudentmoneycoach.com/blog/investments-spending-category-part-11
Picture
Image courtesy of jk1991 at FreeDigitalPhotos.net
Overview
“Investments” is part 11 of my writing series. To see full complete spending categories, read my February 2016 newsletter at www.PrudentMoneyCoach.com.

According to Crown Financial Ministries Canada’s Percentage Guide, what falls under Investments category is long-term investment planning, such as college education or retirement. For this newsletter, I will write about three tax-sheltered plans in Canada; they are retirement, college, and disability plans. Before I continue, I do want to say that you should take care of your non-secured debt first before investing. (Mortgage is a secured debt.) This means that if you have credit card debts or student loans, you need to pay them off first before putting the money into your future. It makes no sense to pay 20% interest on your debt and earning 5% on your investment.


RRSP (Registered Retirement Savings Plan)
Many people have heard about RRSP, but only some utilize it. A common reason I have heard is that they do not have the extra money; they barely survive (cash flow problem). If you are contributing to your company’s pension plan, I think it is ok if you have little or no RRSP. You have set aside some funds for retirement. However, I have also heard reasoning from a few people who argue against RRSP. Here is what they say.
  • I don’t believe in RRSP. If I have extra money, I would pay down my mortgage first. Government will take care of me during retirement.
  • If I save in RRSP, I will be “punished” later in my retirement because I would be making too much money and I would be subject to clawback for social assistance (meaning he/she would have to pay back social benefits (money) he/she receives from the government because his/her income is too high).

I think the main purpose of government creating RRSP program is to encourage people to save for their retirement by deferring tax payment on that retirement money and let it grow tax free in the meantime. Yes, government provides other benefits such as OAS (Old Age Securities) and CPP (Canada Pension Plan) when you reach certain age, but these are meant to be supplement, not your primary sources of income. Firstly, there are requirements that you must meet before you qualify. Secondly, the amount is not much. And by the way, if you have never contributed to CPP, you would not be getting it in retirement either.

Now about the clawback, it would be a problem if you have a lot of investment (say more than $1 million) and multiple sources of income in retirement. For 2016 tax return, if you make more than $73, 756, then you would be subject to clawback. Depending on your income (how much higher than $73,756), you may have to pay back a portion of OAS or all of it.

Going back to the main purpose of RRSP (which is to save for retirement), it is assumed that your income would be lower during retirement than when you were working. If you continue to work during retirement, or if the sum of all your income sources will be high, then it does not make sense to put money into RRSP.

It makes sense to put money into RRSP when your income is high (deferring paying high tax on that money), and withdraw the RRSP money when your income is low (paying lower tax on that same money). It is not a tax-avoidance plan, but a tax-deferment plan, meaning you delay paying tax on that money.

If you are already in a low tax bracket, then TFSA (Tax-Free Savings Account) may be better for you. Speak to your banking advisor/ financial advisor.

Whatever form of money saving you choose, I think you should still save for retirement. It could be in the form of RRSP, company pension plan, a rental property, or others. It would be unwise to not plan for the future.


RESP (Registered Education Savings Plan)
If you have children, nieces, nephews, grandchildren, or care about any child’s future education, you should consider getting an RESP for that child. This is one of government’s program that you should not miss. You automatically get 20% grant from the government for each dollar you put in, up to $2,500/year (maximum grant of $500 annually). If you are in lower income household, you may qualify for additional benefit. And if you live in British Columbia, the provincial government has extra grant for you, called British Columbia Training and Education Savings Grant (BC TESP). Why would you not want to get the free money? Which investment program gives you at least 20% return guaranteed every year?

Anyone can open an RESP account for a child. If that child does not need the money for his/her post-secondary education (say he/she receives scholarship or decides not to go to school after high-school graduation), then
  • your contribution would be returned to you,
  • the government grant portion will be returned to the government, and
  • the income that has been growing tax-free all these years can be withdrawn with additional tax paid. Alternatively, if you still have RRSP contribution room, you could transfer that income and avoid paying additional tax on it.

Personally, I think contributing to an RESP as a birthday gift (or Christmas gift or whatever the occasion is) is better than toys or stuff. 😊

There is more to the RESP program than what I can write (for example, how much can you contribute, can you catch up your contribution and still receive grant, etc.). You should do more research or talk to your financial advisor/ banking advisor to learn more about it.


RDSP (Registered Disability Savings Plan)
This program is not talked about as much as the other two (RRSP and RESP). Like its cousins, RDSP is also a tax-deferment plan and you may be eligible for government grant. This fund is meant to help those with disabilities (who are eligible for disability tax credit) with future financial needs such as medical and living costs. There is no limit on the amount you can contribute, but there is a limit on the grant received. The grant is more generous than RESP – 300%, 200% or 100% depending on the family income and the amount of contribution. If you are in the lower income household, you may qualify for additional benefit in the form of Canada Disability Savings Bond (CDSB).

Again, please do more research or talk to your financial advisor/ banking advisor if you would like to learn more.


Conclusion
Being a good steward with your money includes planning for your future. It would be foolish to think that someone else (or government) will take care of you, because nothing is certain. Government may run out of money, scrap the program, or increase age eligibility. Of course, we do not know what will happen, but this is even more reason why we need to plan. Pay down your non-secured debt first, then save for your future. The longer you let your investment grow, the more you will earn. This means the younger you start saving, the more your money will grow. Don’t forget to take advantage of government’s sheltered plan – RRSP, RESP, and/or RDSP.
 
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.

 
Sources:
  • http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/rrsps-eng.html
  • https://www.canada.ca/en/employment-social-development/services/student-financial-aid/student-loan/student-grants/cesg.html
  • http://www2.gov.bc.ca/gov/content/education-training/k-12/support/bc-training-and-education-savings-grant
  • http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rdsp-reei/cdsg-eng.html
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<![CDATA[Miscellaneous (Spending Category Part 10)]]>Wed, 08 Feb 2017 00:00:36 GMThttp://prudentmoneycoach.com/blog/miscellaneous-spending-category-part-10
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Image courtesy of K_Kemruji at FreeDigitalPhotos.net
Overview
“Miscellaneous” is part 10 of my writing series. To see full complete spending categories, read my February 2016 newsletter at www.PrudentMoneyCoach.com.

We have almost come to the end of Spending Categories from Crown Financial Ministries Canada Percentage Guide. After this topic, we have Investments and School/Child Care topics left.


What are the Expenses?
Miscellaneous is a category where you put all other expenses that do not fit into any other categories. For my family, these could be allowances, gifts, household expenses such as shampoo, laundry detergent, bathroom tissues, and others. Because this category is like a black hole for expenses, sometimes this is the biggest expenditure in our budget. Often when I want to revise my budget, I would look at this category and find out why we spent so much here.


How to Improve or Reduce Miscellaneous Expenses
These are examples from what I have heard from family, friends, and clients. It may be different than yours, but the idea is the same – look at your expenses and see if any can be cut.

1.Know When to Buy
When my kids were younger, we often received birthday invitations. On average, I would say we attended one or two parties per month. Sometimes we had two or three parties on one weekend. While it was fun for the kids, it was not easy on our wallet. If an average gift was $25/child, it would mean an extra $100 in gifts for a month when we had 4 birthday invitations.

So, I started to keep an eye on sales. If I see an interesting toy with an attractive price, say a tea party set for $5, I’d buy two, trying to predict future invitations and thinking I can save some money. Another time I may see a cute hanging basket for kids’ closet for $1. I bought 5 of them. Or how about medium-size stuffed animals for $2 each? These gifts come in handy for birthday party gifts, souvenirs, or going-away gifts for kids.

Well, it was a brilliant idea, except that if you don’t get as many birthday invitations as you expect, then you’d end up with a closet full of new things. Hmmm..….. I see how tough it is to work as a buyer for a store, trying to predict what would sell, or in our case, how many invitations we would get. Plus, as the kids get older, there are less birthday invitations. And with older kids, come pickier taste. Often older kids are quite specific on what they like or don’t want to receive. In the meantime, I still have toys fit for younger kids in my closet. Now, is this a good money-saving move?


I’d say, back then, when my kids were younger and birthday invitations were plenty, yes, it was a good idea to buy stuff on sale in anticipation of future parties. Now? Not so much. So, my strategy now is to buy gifts WHEN we receive invitations. From time to time, I still buy a few items (one or two) when I think the price is really good. But most of the time, I try to avoid shopping areas because I can always find something to buy and justify the purchase.

2.Find Ways to Reduce Expenses (but Spend When It’s Worth It)
Technology changes many things, including how I correspond. In the past, I used to buy cards, print pictures and mail out birthday cards for everyone I care about. Sadly, sometimes those cards never made it to the destination in foreign countries. I didn’t bother purchasing a tracking code because the cost is more expensive than the card. I find that for younger friends and relatives, there is no added value for physical cards and photos. So, why bother spending money and time purchasing the cards and printing out photos? An email or a social media messaging system (Facebook, WhatsApp, etc.) works as well. However, for older relatives and friends who cherish physical cards and photos, I would still purchase cards and print out pictures. The expenses are worth it. Some of the pictures I sent to relatives and friends end up in picture frames, on the cover of someone’s book, or part of a collection of photos.

Another technology advancement related item - paying for bank fees - does not make sense for me. So, depending on the bank, I would suggest you to try to keep a minimum balance, or switch to a different bank that does not require minimum balance. I find that some online banks such as President’s Choice and Tangerine, do not require minimum balance, allow unlimited withdrawals, and will even give you interest (albeit small) on whatever balance you have. President’s Choice even provides cheques for free! Having said that, I do recommend that you leave some money in your chequing account to avoid negative balance (which would equal fees!) and for easy access when you need the money. By the way, I am not receiving any commission from President’s Choice or Tangerine. I just like their products.


3.Know that There are One-Time Spending (or Spending that does not Occur Often)
Examples of these are pots, pans, cookie sheets, storage boxes, computers, etc. You need them, but they are not your monthly purchases. Make allowance for these.

4.Large Annual Spending Items
What do I mean by these? Christmas spending, summer vacation, family reunion to name a few, are examples of spending you may have that occur once a year or once every few years. I used to put them under Miscellaneous, but it bloated the category constantly. Now I separate each large spending (e.g. summer vacation) into its own category.

5.Unexpected Spending (or One-Time Large Bill)
As we age, so do our parents and loved ones. Many of my friends (and us too), have had family emergencies when we had to fly home or out of country because someone is really ill. When you have emergency fund available or allowance in your Miscellaneous category, you have one less worry (no money worry) and you can focus on getting to your loved ones and staying by their side. It also allows you to be generous in helping others financially.

Conclusion
Just like everything else, miscellaneous expenses are what you need to spend and must be part of your budget. The key to having it under control is to know what you must have. Everything else can be adjusted.
 
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit. 

​To subscribe to my monthly newsletter, send an email with subject "Subscribe" to
Effie[at]PrudentMoneyCoach[dot]com.
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<![CDATA[Medical/Dental (Spending Category Part 9)]]>Tue, 10 Jan 2017 18:55:46 GMThttp://prudentmoneycoach.com/blog/medicaldental-spending-category-part-9
Picture
Image courtesy of EveryDayPlus at FreeDigitalPhotos.net
Overview
“Medical/dental” is supposed to be part 9 of my writing series. To see full complete spending categories, read my February 2016 newsletter at http://prudentmoneycoach.com/blog/archives/02-2016.


Introduction
Everyone needs health care regardless of age. Some people require more than others, but unless you have health coverage, you would most likely have to pay for medical, dental, and vision care. If you live in a developed country, most likely you have health coverage. In Canada, specifically in British Columbia, we have provincial health insurance program, called Medical Services Plan (MSP). If you are an eligible BC resident, you are covered for certain services. For more information, you can visit http://www2.gov.bc.ca, look under “Health”.


What are the Expenses?
Medical expenses could include doctor’s visit, prescription, check-up, laboratory work, and others. It can include vision and dental as well. Many expenses are covered by MSP, but if you have extended health care coverage, you are covered for more products and services. For example, eye exams for children are covered by MSP, but not for adults. If you have extended health care, your insurance may pay for all or part of the exam fees.


Tax Tips
Speak to your Tax Professional for information pertaining to your specific situation.

1. Did you know that you don’t have to use January 1st to December 31st as your medical expense period? You can pick any twelve-month period that ends in the tax year you are filing. For example, for 2016 tax, you could pick February 1, 2015 to January 31, 2016 as your medical expense period, claiming all medical expenses within this time period for your 2016 tax.


2. Did you know that you can claim out-of-country medical expenses in your tax return? See http://www.cra-arc.gc.ca/medical/#mdcl_xpns.

​3. Did you know that moving expenses may qualify as medical expenses? See http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/330-331/dtlxpns-eng.html#mvng.

4. For a list of eligible medical expenses to be claimed in your tax, visit http://www.cra-arc.gc.ca/medical/.

5. If you have enough money saved up, it is best to pay all your medical expenses at once to maximize the tax credit claim. Why? Because your eligible medical expenses have to be reduced by 3% of your net income before they are claimed. So, if you have $6,000 orthodontist bill and are given option to pay it monthly at $200/month for 30 months, it would be better to pay $6,000 all at once if you have the money. Here’s the calculation. Let’s say your net income is $50,000. 3% of your net income = 3% * $50,000 = $1,500.
  • If you paid $6,000 all at once, you can claim $6,000 - $1,500 = $4,500 as your medical expenses.
  • If you paid $200 * 12 = $2,400, then you can only claim $2,400 - $1,500 = $900. And the following year, you can claim another $900. For the last year, you can claim nothing because you would pay only $200 * 6 = $1,200, which is less than 3% of your net income. Thus, your total claim is $900 + $900 = $1,800.
​Therefore, it would be more advantageous if you can claim that $6,000 orthodontist bill at once, rather than claiming $200/month payment.


Shop around for Best Insurance Premium
If you have no extended health coverage from your employer, or if you are self-employed and you are interested in getting additional coverage, shop around for the best medical insurance that would fit your need. Compare prices and coverage. The cheapest premium may not mean the best option for you. Ask for deductibles (if any), service coverage, and claim process.


Conclusion
Everyone will need a medical service sooner or later; make sure you are covered. Have medical insurance and emergency fund to cover extra medical expenses.
 

For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit.
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<![CDATA[2016 Year-End Money Tips (On-Going Post)]]>Thu, 29 Dec 2016 22:53:14 GMThttp://prudentmoneycoach.com/blog/2016-year-end-money-tips-on-going-post
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Image courtesy of Pazham at FreeDigitalPhotos.net
With year end coming to a close, I thought I'd post some year-end money tips that I've come across. This is a work-in-progress as I plan to add more to the list is I come across more. If you follow me on Twitter or Facebook, these were posted there before with hashtag #yearendmoneytips. So, here they are.

#yearendmoneytips

1. Canadian parents, prepay your children's fitness and arts activities by December 31, 2016; because come 2017, the tax credits are gone. 

2. If you withdraw money from TFSA by December 31st, you can put the money back as early as the next day (January 1st). If you withdraw on January 1st, youu'd have to wait another year to put the money back in (unless you still have contribution room).

3. If you want to claim donation tax credit for your 2016 tax, make sure your donations are received by recipient organizations by December 31st.

4. If your medical #insurance uses calendar year, make sure you use up the benefits by December 31st. 

5. It's almost end of the year. Time to look into your #coupons. Any coupons expiring on December 31, 2016? Use them ONLY if you need to buy.

6. Wait until January 1st to close your bank account if you are earning semi-annual #interest (on June 30th & December 31st). Keep the interest earned.

7. Bring your item for a price adjustment if the price has dropped between before and after Christmas. Check individual store's policy.

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<![CDATA[Savings (Spending Category Part 8)]]>Wed, 07 Dec 2016 00:43:43 GMThttp://prudentmoneycoach.com/blog/savings-spending-category-part-8
Picture
Image courtesy of jimbophoto at FreeDigitalPhotos.net
Overview
“Savings” is part 8 of my writing series. To see full complete spending categories, read my February 2016 newsletter at www.PrudentMoneyCoach.com. This month, I’m going to write about savings.


Introduction
There are so many things I can write about savings. Sure, everybody knows that you are supposed to save. But how? And for what? Why should you save when credit is everywhere – credit cards, line of credit, personal loans from family and friends, etc. Well, I can tell you that living with debt is no fun. It puts stress on you and you always have this burden weighing heavy on your mind. I want to write about why they should save, and where to put the money.


Emergency Fund First!
Everyone needs an emergency fund because emergencies do happen. Here’s something I have heard often from others and experienced it myself earlier in life. Just when I was ready to save, to try to not spend, and to build a nice cushion, things happen that require money. It could be a car repair, a broken computer, an illness, a wedding invitation from your dear sibling who lives far away, or death in the family, etc.

When an emergency happens, you would dip into your newly-accumulated savings, and you would be broken hearted thinking “I’ll never be able to save. There are always things that come up and there will always be things to be paid. Forget about savings!!” Then you may lose heart and stop trying to save. “Why bother?” you thought.

I think you will not be able to have a true savings account until you have an emergency fund set aside. Let’s be honest, things happen. You want to be ready with your cash when it does happen. So, the first step before having a true savings is to have an emergency fund set aside. You can start with whatever amount of money. Aim to have $2,000 set aside (things are expensive here in Canada, especially if you live in the Lower Mainland). Ideally, you should have your emergency fund equivalent to three to six months’ worth of living expenses.

Think about this - it’s cheaper to borrow from your own savings and pay back yourself than to borrow money from credit cards, line of credit, banks, payday loan, or others. So, start your rainy-day fund now.


Save for a Specific Purpose
If you’re just saving money without any specific purpose or goal, you probably won’t be saving diligently. But if you have a goal in mind, you’d work hard trying to find ways to achieve your goal faster. For example, if you’re using an old car and you know that you will need to replace the car soon, you can start by determining what car you would like to purchase, how much it costs and how much time you have. If you want a $30,000 car in 5 years, that would mean you need to save $6,000/year, or $500/month. This is on top of the cost of maintaining your current car.

Here is another example. You want to buy a home with 20% down payment to avoid CMHC (Canada Mortgage and Housing Corporation) Mortgage Insurance fee. If you are aiming for a $700,000 home, you need to save $140,000. If you would like to purchase a home in 5 years, you need to save $28,000/year or $2,333/month. You could find an additional job and dedicate all the income towards your goal, or if you’re not getting additional income, you could trim your expenses by $2,333. Alternatively, you can tailor your goal. For example, instead of 5 years, you probably could delay your purchase for another 3 years, so you have 8 years to achieve $140,000. This means saving $17,500/year or $1,458/month. Remember though that the amount saved is after tax, which means you need to earn more in gross income.


Utilize Tax Free Savings Account (TFSA)
The government is encouraging people to save by allowing interest not to be taxed. Take advantage of it. If you do not know yet, you can save up to $46,500 tax free. Here is the breakdown.
From 2009 to 2012 = $5000 * 4 = $20,000
From 2013 to 2014 = $5,500 * 2 = $11,000
2015                                              = $10,000
2016                                              = $5,500
------------------------------------------------------------------
Total                                             = $46,500


If you have a spouse, you’d be able to save up to $93,000 tax free between the two of you; that would be a nice chunk added to your other sheltered savings (RRSP, RESP, etc.).

Now, I don’t recommend using TFSA account as your day-to-day account; meaning once you put money in there, only withdraw if you have an emergency, because Canada Revenue Agency (CRA) needs to track your deposit and withdrawal. Use your chequing account for your day-to-day activities.


Seek Better Interest Rates
Many online banks do not have store fronts, which means lower operating costs. In turn they can provide higher interest to clients. If you are comfortable with online banking, take advantage of this. Some traditional banks also have a version of their e-savings. You manage your own money, they save on cost, and you get a slightly higher interest rate. A win-win situation.


Conclusion
Everyone needs an emergency fund because emergencies do happen, and it’s best to store and grow your savings in a tax-free account. Before you could truly say you have savings, you need to have emergency fund tucked away for rainy days. Recommended emergency fund is 3 to 6 month’s worth of living expenses. Start with any amount you have and add to it regularly. Next step would be to save towards your financial goals. Take advantage of sheltered savings program such as TFSA, RRSP (Registered Retirement Savings Plan) and RESP (Registered Education Savings Plan). Enjoy watching your money grow.
 
For more help with reducing your money-related stress, contact me at (six zero four) 728-5139 or Effie[at]PrudentMoneyCoach[dot]com. Take advantage of my free first assessment meeting to see if we are a good fit. 

To subscribe to my monthly newsletter, send me an email (Effie@PrudentMoneyCoach.com) with title "Subscribe."
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