<![CDATA[Prudent Money Coach - Blog]]>Fri, 08 Sep 2017 21:14:53 -0700Weebly<![CDATA[Horror Financial Stories]]>Fri, 08 Sep 2017 16:57:54 GMThttp://prudentmoneycoach.com/blog/horror-financial-stories
Photo by Ben White on Unsplash
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.

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. 
<![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
Image courtesy of Serge Bertasius Photography at FreeDigitalPhotos.net
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.

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.

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.

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.

-          https://ca.yamaha.com/en/education/overview/method/index.html
<![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
Image courtesy of AppleZoomZoom at FreeDigitalPhotos.net
“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.

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.
<![CDATA[Investments (Spending Category Part 11)]]>Wed, 10 May 2017 18:11:25 GMThttp://prudentmoneycoach.com/blog/investments-spending-category-part-11
Image courtesy of jk1991 at FreeDigitalPhotos.net
“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.

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.

  • 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
<![CDATA[Miscellaneous (Spending Category Part 10)]]>Wed, 08 Feb 2017 00:00:36 GMThttp://prudentmoneycoach.com/blog/miscellaneous-spending-category-part-10
Image courtesy of K_Kemruji at FreeDigitalPhotos.net
“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.

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. 

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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
Image courtesy of EveryDayPlus at FreeDigitalPhotos.net
“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.

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.

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.
<![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
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.


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.

<![CDATA[Savings (Spending Category Part 8)]]>Wed, 07 Dec 2016 00:43:43 GMThttp://prudentmoneycoach.com/blog/savings-spending-category-part-8
Image courtesy of jimbophoto at FreeDigitalPhotos.net
“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.

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.

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."
<![CDATA[Clothing (Spending Category Part 7)]]>Sat, 08 Oct 2016 22:24:45 GMThttp://prudentmoneycoach.com/blog/clothing-spending-category-part-7
Image courtesy of Franky242 at FreeDigitalPhotos.net
“Clothing” is part 7 of my writing series. To see full complete spending categories, read my February 2016 newsletter. This month, I’m going to write about my experience with clothes shopping.

Clothing is one of the three basic needs of human being – food, clothing, and shelter. For the purpose of budgeting, clothing includes everything that would cover you from head to toe, such as socks, shoes, hats, gloves, undergarment, and accessories. This clothing expense would be the cost to clothe your whole family, from the youngest to the oldest. Just like any other categories, we can spend a lot or a little on clothing. Here are some scenarios about clothes purchasing.

New vs Used
Some people would never entertain the idea of buying used clothes, let alone wearing them. So why would anyone want to buy used clothing? Here are some common reasons.
·         Hunting for a vintage piece of clothing
·         Looking for Halloween costumes
·         Searching for decent pieces of clothing at bargain price

Some of the drawbacks of buying used clothes is that some styles may be old and you may need to tailor it to fit your body. I think it is for this reason that consignment stores do not accept anything that is more than a year old. They want to sell stylish, still in-fashion clothes, and sell them quickly. Fast turn-around means cash in their pocket.

How would you take advantage of shopping pre-loved clothes? Buy classic items such as white shirts, dark pants, jeans, single-breasted jackets, and knee-length skirts that do not go out of style. Carefully examine each piece to make sure it is not torn or stained.

Cheap vs. Expensive
If you can get the same item, same quality, same cut, same fitting, it’s not wise to pay extra. However, if you buy cheap clothes that don’t fit you well or don’t serve the purpose (for example, a jacket that doesn’t protect you from cold), then most likely the items would only sit in your closet, adding clutter. In the end, you end up spending money for something you’re not wearing – that’s a waste.

Compare to buying a piece of clothing at a higher price, but fits you well and serves its purpose. If you love it and wear it often, then the cost per wear may be lower. For example, a pair of jeans you bought on sale for $10 are not comfortable and you only wear them twice. Now the jeans are sitting in your drawer. You bought another pair for $50 and you love the style and the fit, causing you to wear them once every other week, or about 25 times in a year. For the first pair of jeans, your cost per wear is $5 and they are clutter now. For the second pair of jeans, your cost per wear is $2 and they are functioning as part of your wardrobe.

Here is another example. I bought a pair of sandal wedges for $25. They look good, but not comfortable. I wore them maybe 5 times in the summer. Later, I bought another pair of sandals for $50. Not only do they look good, but they are also comfortable. I wore them everywhere – to work, to church, to banquets, etc. Needless to say, I probably wore them 20 times over the first year. My first pair of sandals costs me $5/wear and achy feet. My second pair costs me $2.50/wear and I have happy feet at the end of each wear. Ever since that experience, I have not bought any more sandals or shoes that are not comfortable.

Be careful now because expensive does not always mean better. You still need to know what you are buying.

Sale vs. Full Price
I have read that items go on sale at the beginning of the season (when they just arrived) and at the end of the season (to make room for new items). So you may automatically think, well, it makes sense to buy things at the beginning or end of the season, right? Well, perhaps. I think you should buy ONLY when you need the items. Otherwise, you’d be moving the items from the store’s warehouse, to yours. In the past, I have bought items on sale that I think I might use, such as items I think would make great kids’ birthday gifts. The problem is, we did not get as many birthday invitations as I thought we did. And when we did get birthday invitations, I forgot about the items we had, and went out and bought another new birthday gift item. Now I have new clutter in my closet that I did not know exist - more waste of money. 

Compare the above scenario to buying things at full price, but at a time when you need it. For my case, it would be like buying $40 worth of birthday gifts that I may not use (not to mention the birthday kid may not like it) or buying $30 birthday gift (something that the birthday kid actually wants – I know because I asked the kid’s mom what the kid prefers) at a full price that I am actually giving away. Well, the first option costs me $40 and leaving me a shelf full of new items (read: clutter), and the second costs me $30, a happy kid (the birthday kid), and no clutter.

Kids and Babies
Speaking about kids, often children outgrow their clothes, even second hand ones. Thus, in my opinion, there is no need to get the best quality, the most expensive pieces of clothing for them. It would be better to put away the money into the kids’ university fund (RESP anyone?). If your children outgrow good quality pieces of clothing, shoes, or others, sell them at consignment store and put the proceed into the university fund – less clutter, more money for the kids’ future.

Having said that, I hope you don’t think that I’m advocating for “cheap-items-only” for children. Sometimes cheap means lower quality. In the past, I have purchased a pair of $8 children’s shoes and found out that they only lasted 2 months. I have also bought a pair of $45 shoes that lasted my child for 2 years. If you do the math, the $45 shoes that lasted 2 years are better than the ones that cost $8 and lasted 2 months.

New parents who are expecting or just had babies are often targeted by sellers. These sellers know that babies are new experience for these new parents and the parents only want the best for their babies. They can’t wait to spend money on their babies. So guess what, the sellers cater to the “need” (or soft spot) by promoting baby detergent, special pails for diapers, $1,000 stroller, etc. Truthfully, if you think about it, unless your babies have special needs, it would make no difference if his clothes were washed in regular detergent, or baby detergent. She doesn’t care if her stroller is $1,000 or $30. It’s more for the parents. All this enticement is to lure new parents to spend money to make the moms and dads look good.

Whichever shopping method you prefer - new vs used, cheap vs expensive, sale vs full price - spend only what you have. There is no use of dressing well when you are stressed out about debt or having no money to buy food. You can have a decent, clean, neat wardrobe without going broke. Make a spending plan for your money, spend within your means, and sleep well knowing that your clothing items are paid for.

I would like to repeat my message from last month - set up emergency fund for your rainy days!!

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 receive this newsletter monthly in your inbox, send an email to Effie[at]PrudentMoneyCoach[dot]com with Subject: "Subscribe."
<![CDATA[Entertainment/Recreation (Spending Category Part 6)]]>Fri, 02 Sep 2016 14:29:55 GMThttp://prudentmoneycoach.com/blog/entertainmentrecreation-spending-category-part-6
Image courtesy of DigitalArt at FreeDigitalPhotos.net
“Entertainment/Recreation” is part 6 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 what you should do if you are short on your entertainment/recreation budget.

Everybody spends money on Entertainment/Recreation (E/R). Sometimes people don’t realize how much they spend on E/R that they end up with deficit at the end of the month. Usually, E/R expense is the first category anyone would cut if/when they have to cut expenses.

What comes to your mind when you hear the words “Entertainment/Recreation”? When I was looking for an image for this newsletter under “entertainment”, I came across pictures of people partying in a club, music instruments, drinks in a bar, loud concerts, TV, and others. When I searched for “recreation”, I found beaches, sports, travel, meal with family/friends, and others. These images show that people do all sorts of things for E/R.

Now, what should you do if you don’t have enough money for E/R?

Minimize your Entertainment/Recreation Expenses
An obvious way to reduce your general spending is to cut back on your E/R expenses. Do you suspect that you are overspending? If so, you probably are. How can you know for sure? First, sit down and write what you do in your spare time or on your time off. Examples could be eating out, alcohol purchase, theatre, movies, fitness classes, lottery purchase (yup, it’s considered your entertainment, not an investment), ice cream, coffee shops, weekend getaways, etc.

Next, it’s time to count how much money you are spending on all those activities. If you add it to other expenses like housing, transportation and others, is the final number larger than your income? If it’s larger, that means your expenses are more than income.

OK, now what?

1.      Reduce Quantity of Time
The first option is to reduce the quantity of time. For example, if you purchase $40 worth of alcohol every week, perhaps you can reduce it to $40 twice a month. Another example is if you spend $75/week eating out, perhaps you would eat out only twice a month. You get the idea.
2.      Reduce Quality of Purchase or Activity
The second option is to reduce the quality of your activity or purchase. In our examples above, instead of purchasing alcohol $40/week, you could buy $20 worth of alcohol per week; and find an eatery that would cost you $37.50/week, or cut on appetizer, drinks and dessert. Or how about eat first at home, then go out for dessert or drinks instead?

If you like shopping, would it make any difference if you were doing the shopping activity at Old Navy or a thrifty shop (assuming quality is the same)?

When you are short E/R budget, then you would have to compromise on your expectations. Can you do it less frequent, or are you ok staying at a three-star hotel instead of a five-star hotel?

3.      Find Alternatives
Many in the hot housing market like Vancouver and Toronto are paying a big chunk of their take-home pay for housing (rent/mortgage, utilities, phones, etc.). If this is you, it may leave you little money for E/R. Here is an idea, how about utilizing your home as part of your E/R? Here are some examples of E/R by thinking of alternatives.
·         Instead of eating out, invite family and friends over for a potluck.
·         Have a child’s (or an adult’s) birthday party at a park or at your home instead of renting a place.
·         Make your own wine instead of purchasing it.
·         Choose only one media: internet, cable, Netflix, Free My TV or something else.
·         Cut cable. Instead, enjoy free services from local libraries such as Hoopla, DVDs, CDs, books, audio books, movie nights, concerts, workshops, etc.
·         Perhaps you don’t have time to watch TV, cable or Netflix because you are too busy with social media (Facebook, Twitter, Instagram, Pinterest, etc.) or playing video games. In this case, why pay for something you don’t use?

Increase Income
For some people, they would rather work more hours and earn more money so they can afford their desired E/R. If this is you, remember that the amount you get to spend is after taxes and deductions. So if your net take-home pay is 70%, then:
·         to spend $100, you would need to earn $142.86;
·         to spend $1,000, you would need to earn $1428.57;
·         to spend $10,000, you would need to earn $14,285.71.
For some people, suddenly the absolute-must-have E/R or vacation does not seem so attractive anymore.

What NOT to do
If you have rainy-day fund, please do not use it for entertainment/recreation. Emergencies do happen and you don’t want to borrow money from high-interest loans or credit cards for emergencies. Have at least $2,000 in your savings account for emergencies.

The Summary
The key is to set your entertainment/recreation budget when you have limited money. You can minimize your E/R expenses or increase your income. If there are too many E/R activities that you would like to have but very little budget, pick one or two activities that you really like and save the rest for special occasions (birthday, anniversary, etc.). On the other hand, it is unrealistic to set no E/R budget. You may survive for a while, but it will not be sustainable. Lastly, do NOT use your emergency fund for entertainment/recreation. Emergency fund is for emergencies.
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.