What happens when we think debt is NORMAL?

At times I feel like I preach too much in my articles about why I don’t think Canadians should take on debt.  Why car payments should not be normal, why lines of credit payments should not be normal, why debt consolidation should not be normal, and I could keep going on.

Today there was a new article that you can find at the Huffington Post.  http://www.huffingtonpost.ca/2017/05/09/consumer-debt-canada-mnp-sentiment-survey_n_16510320.html

This article discusses how half, that’s right 50% of Canadians are $200 a month from insolvency.  This means that in any given month if their bills were $201 more than the prior month, they would not be able to pay all their bills. 

How would that make you feel at night?  Trying to lay your head down on your pillow knowing that you are one car breakdown, one missed shift, one minor inconvenience to knocking down your house of cards you call life.

It’s time to change our behavior and strengthen the foundation of our financial lives.  It’s time to turn over a new way of living that may not be considered normal but removes the financial stress from our lives.  It’s time for Canadians to create financial peace.

Stay at Home Parent

What are your options as a stay at home parent?  Instead of looking at years of working just to put the kids into daycare and missing many life milestones, maybe there is another option.  Being a stay at home parent who also earns and income to help with the household while saving money on child care might be the right situation for you.

The question is, how many parents work from home?  How many “real jobs” are there in the marketplace to support people who want this option?  It appears that people are using the current economy to create their own work.  There are a great deal of people who are working on the side aka: side hustle to build an income and in some cases, a strong financial future. The ups and downs of the economy have surely played a role, as have issues surrounding companies moving jobs to lower cost economies or automating jobs to eliminate the requirement for manual labour.

But what are they doing?

One option is to provide child care in your home.  If you are already taking care of your own children then bringing in a couple more may seem like the easy thing to do.  Follow the provincial or federal guidelines regarding the number of children that you can have along with rules regarding daycare requirements and you could have a successful business.

If you are crafty you could build a business on Etsy.  Etsy is an online marketplace where customers can find unique items to purchase.  Many people have turned a small Etsy business into their main income.

Why the Idea Is Looking Better

Many people have taken notice of the new opportunities available today and decided to choose one already laid out or to simply build their own. Here are five reasons the idea of working from home is now more attractive than ever:

It’s the Best of Both Worlds

As a dad, I feel when I am at work and putting in a long day I am neglecting the kids.  When I am at home with the kids I feel like I need something a little more.  Working at home with the kids gives you a balance of both worlds — you can feel productive, build skills, and earn some household income without feeling like you are neglecting the kids.

All the Milestones

When you are not working from home, you are physically not there.  You end up watching a phone video of your kids saying their first words, or taking their first steps but you won’t be there to witness them.  If you have a business at home, you get to be productive and still capture the moments that matter, and they will stay with you for a lifetime.

Flexibility

Trying to run a household, have to careers, and live life, gets very messy.  The complications that can arise are too numerous to list.  When you run a business from you have the ability to make appointments as necessary and work hours that are favorable to you.  This might mean at the end of the day when the kids are down or early in the morning before they are up but you have the flexibility to choose.  Many bosses will tell you to take care of your family but that is only if you don’t impact their deadlines, otherwise it becomes a disaster.  If you are the one setting the deadlines you have the freedom to move things as necessary.

More Time

Depending on where you live, travelling to and from work can take hours out of the day.  Also, the time it takes to get ready, get the kids ready, get everyone out the door to the daycare or school takes a significant investment of time.  Add these numbers up and see how much time you can save by moving from the bedroom to the office and begin your day.  Time is something that cannot be created but how you manage it can be changed significantly making it feel like you have more time in a 24hr day.

Build Something While the Kids are Young

Imagine what kind of lessons you can teach your kids by building something.  Your kids can learn real life lessons on time management, money skills, managing expectations and all the other things that arise with running a business.  What if this business grows to be extremely successful, your kids may eventually be able to join the business, and the one they have seen grow from the dining room table.

You don’t have to be a stay at home parent vs a working parent.  In today’s world the technology and options we have allow us the best of both worlds.  It is time to stop the discussion of work vs child rearing forever as we can do both.

I want money for…

What do you burn for so badly that you are willing to budget?

 

I want money for the ability to control my life!

I want money to travel when I can!

I want money to go back to school!

I want money to buy a new car!

I want to spend money when I want and not worry!

 

You probably grew up hearing from your parents not to say, I want.  Well, now you can.  I want to hear each and every one of you tell me what you really want.  If you focus on what you really want you can change your habits to get what you want.

Each day we get up, go to work, come home, take care of family and do it all again the next day.  We work jobs that we have to work to pay for the basics of life and day after day the energy gets sucked out of us.

What if you could change all of that?  What if you could get your finances in order to be able to make the changes in your life that will infuse it with energy?  You get up every day looking forward to the day and what it will bring versus dreading the day and making it to the weekend.

Let Money Monk Nation help you focus on your goals.  Say your goals loud and proud.  Let them stir up from the bottom of your mind and float their way to the top.  As they move their way up, focus on how they make you feel, feel your energy rise as you focus on what you want, get EXCITED!

Now right down what you want, somewhere you can see it every day and every night.  Focus on it, let it excite you.  Don’t believe you can’t get it.  Focus on the darkest days how one day you will get your want.  Go to the Fast Lane – Debt Ladder and follow the steps to get control of your money and get what you want.

Cheers,

Money Monk Nation

Canadians are Debt Free!

Isn’t this a headline that would be awesome to see!  Canadians would have expendable income to use for vacations, new cars, updates to their house, RETIREMENT, the options are endless.  This would also lower stress for people while teaching the government a lesson on money management.

Instead, in Quarter 4 Canadians debt rose to record levels.  Majority of this debt is being driven by mortgages since interest rates are so low.  My question is why?  Why are Canadians needing to purchase more expensive houses?  Let’s not forget about consumer debt, it came in at over $9.5 billion.  Consumer debt is all debt that is not mortgage related.

There are certain traits many debt free people have that we should all strive to reach:

1)      Lower Stress – Debt creates stress.  Individuals tend to find that they become more productive at work and work becomes less stressful when they don’t need the money.  It provides choice when you don’t have debt hanging over your head.

2)      Pay Cash – Once you are debt free, pay cash for everything.  When you want that new car you will be amazed at how fast you can save up for it when you are not paying consumer debt.  Also, the excitement of getting something new and knowing it is yours feels amazing.

3)      Value Driven – Debt free people understand value.  They would rather save up and buy something that will last instead of buying something cheap that won’t.  They understand how to think about owning things for the future and not just right now.

Let us all strive to get debt free in 2017.  Once you start watching your debt decrease it becomes exciting, you want that trend to continue.  It becomes motivating to watch debt drop off as you begin to attack the next piece of debt in your portfolio.  I don’t claim that everyone can be 100% debt free in 2017 but it can be significantly less than it is today.  Let’s do it together.  If you are not sure how, then check out the Fast Lane Debt Ladder it will guide you step by step.

Employees are Expendable to Banks

My first day as a personal banker was a bit of a shock.  I loved working in personal finance and I thought I was working for a company that was rated high in worker satisfaction.  I quickly learned that the satisfied workers almost solely came from outside of sales.  The individuals in sales that were satisfied were people that were sales motivated, not customer satisfaction motivated.  This is my first hand relationship I had with the bank.

An insight to my experience:

After being welcomed to the team I had a sit down with the branch Manager.  I was informed right off the top was the sales targets that I had to hit, what I was allowed to count towards my goals and what I wasn’t.  Next I was informed that I needed to treat my role as a personal banker as my own business.  I would be expected to hit my sales targets by any means necessary.  I would need to work before work hours, after work hours, within my city, outside of my city, in my office, on the road and all of this for my salary of $35k/year.  There would be no kilometer allowance for driving to customers, there wouldn’t be overtime pay as I was on salary and if I was dedicated to my work this shouldn’t be a problem.

For the next year I suffered from severe anxiety. Twice a week we had “sales meetings”, these were mainly meetings to use a stick and scold the team for never selling enough.  Even if we had hit targets or exceeded targets it wasn’t enough.  We were expected to have all clients at a specific number of products.  If the customer had too many products then they weren’t profitable enough, if they didn’t have enough products they weren’t considered profitable at all.  Yet somehow the bank could still make close to 1 BILLION dollars every 3 months.

Many of the people doing these rolls were good people.  They were working hard to support their families, pay their mortgages, educate their kids and had to convince people to take products they really didn’t need to keep employed.  They started at the bank with a great hope in helping people with their personal finance but left realizing that helping people happened by accident while trying to meet sales targets. Needless to say I left.

I recall on my giving notice the bank was quick to say how banking wasn’t for everyone and the people who didn’t fit would quickly be weeded out.  If you weren’t motivated by sales than it isn’t the right place for you.

Reading what happened with the TD bank this week doesn’t surprise me.  What does surprise me is that every major bank isn’t listed in the articles.  All the major banks have similar operating styles and you can switch out the TD bank name for any bank name, there is no difference.

At the end of the day you must remember that the bank makes money off of your investments and your debt.  They love debt because you are owned by the people who own your debt.  Be sure to get debt free and you won’t have to worry about the bank managing your personal finances with only their best interests at heart.

Best Reward Credit Cards – Don’t Care!

I should start this article by telling you that I have one credit card and it is used sparingly. 

There are websites that make a business out of dissecting each year what is the best rewards card for people.  It may even break down the best cards by category such as travel rewards or hotel points.  Currently there are 75 travel reward cards available to Canadians.  That’s right 75!

Cards are broken down into categories, based on whether they have an annual fee, no annual fee, whether they are a hybrid card or a straight cash back or travel reward card.  There are hotel points, flight points, points you can turn into different points, lots of options.

Have you ever sat back and considered why the credit card companies do all this?

They make money, lots of money by getting people to use their credit cards.  You might tell yourself that you pay it off in full at the end of the month, but you don’t.  Most people do give an honest effort to paying it off but life happens and balances tend to drag on, month after month.  They love charging interest, also there is the yearly fee and transaction costs paid by the merchant.  Ever heard of multiple income streams, that is the art of the credit card companies’ game.

Credit card companies play the long game, they like to give bonuses and gifts up front knowing that most people will continue using the card going forward.  This provides free advertising to the credit card company because every time you are out with people using your card it may generate conversation.  You will talk about the points for travel or flight or whatever else you receive and this will encourage your friends to also get one.  Word of mouth advertising is always the best form of promotion.

If you are playing the juggling game to achieve the most amount of points or to get the best gift, it is time to stop.  Put the effort into more productive uses, whether that would be making a budget or learning about your investments or reading a finance blog like this one.

At the end of the day, the credit card company makes money from the people who have their cards and are not in the business of giving away things for free.  In the long game they always make their money back and then some.  If you truly want to win at the game, keep a single card, keep the limit low, and be sure to pay it off every month.  Use the money you save from playing the juggling card game for travel, dinner or to top off your investments.

The Money Mirror

People always tell me about how they hate budgeting, but what I learned is they hate to view themselves through the money mirror.

What is the money mirror?  It is the realization of how you truly live your money life vs how you believe that you live your money life.  Each of us have a perception of the person we are, what we do and how we live.  Yet, when you are forced to look through the money mirror, you may find that you are not living the way you think you are.

In the money mirror you will be forced to see overspend like the following:

·         Significant bar/alcohol spending

·         Cigarette spend

·         Dinner/Lunch spend

·         Clothes spend

·         Make-up spend

What happens if you see spend that you don’t like about yourself?  Possibly you have always considered yourself a social smoker but when you review your finances you realize that you are buying cigarettes more than every once in a while.  Potentially you find out that you are buying cigarettes multiple times a week and it now changes the perception you have of yourself, you realize you are a smoker not just a “social” smoker.

Budgeting itself is just an action, it doesn’t have good or bad feelings.  Unfortunately budgeting is a door and when you walk through it you may be surprised about what is on the other side.  The best part is when you budget, you can change what is happening on the other side and get back to being who you think you are.

Ignore the taxes I OWE, the CRA won’t notice!

If you can take one piece of advice out of this blog post it should be this:

“DON’T IGNORE the CRA”.

Facing the issue head on is the best way to deal with taxes because the Canada Revenue Association will get the money out of you one way or another.  If you avoid them, they will inform your bank, your employer and any other financial institution they see fit.  Also, you must understand that they will make minimal attempts to contacting you before they make your life very difficult.  Here is what you need to do to keep everything in order.

1)      File taxes on Time

Do not decide to avoid filing your taxes.  The interest is going to accrue from day one and you may be adding additional fees for late filing.  The cost of late filing may even work out more than what you owe.  Be sure to use a tax specialist if you owe, they may be able to find you credits or rebates that you or your software program missed.

2)      Pay what you can

The CRA is willing to work with you and wants you to make a good faith gesture.  If you pay some up front and then contact the CRA, they are willing to work with you to setup a payment schedule.  They are also willing to waive fees and interest if you are working hard to making the payments you owe.

3)      Keep Paying

If you are in contact with the CRA or if they don’t get back to you right away, don’t ignore your obligation.  Keep paying bi-weekly or monthly whatever you can afford to get your tax debt paid down.  When they do get around to working with you, these actions will go a long way to how they will deal with you.  It is always best to be working with them instead of fighting them or claiming ignorance when it comes to taxes owing.

4)      Fix your Tax Problem

Many people who are on EI tend to run into tax problems.  It seems to be even more relevant to people who are on paternity leave.  EI does not take into account your yearly earnings when taking taxes therefore you may not be having enough taken off.  The second issue is that when you move to employment insurance your income may take a significant drop and having more tax taken off will cause pain.  The short term pain is worth more than owing the CRA later.  Be sure to use a tax professional who can help you determine if investing in an RRSP is the best route for you to take or to have additional tax removed from your paycheck.

At the end of the day you don’t want to owe the Canada Revenue Association.  You have the obligation to ensure that you have paid your taxes and paid the right amounts.  The responsibility falls on the shoulders of the tax payer and you want to make sure that you take this responsibility seriously.

5 Incorrect Budget Perceptions

Budgets have gotten a bad rap and I don’t know why.  They haven’t done anything to us, they are neither good nor bad they just are.  The budget is only as good as the person or couple that put it together and are only effective if you follow it. 

1)      I don’t have time

Budgets don’t have to be all time consuming.  Some “experts” will tell you to review your spending habits for the last three months and break down your spending.  This is time consuming because if you haven’t been tracking your spending you won’t remember what you purchased three months ago.  Start today with your next paycheque, it really is plug and play with programs like mint.com where you can access your payments in real time almost anywhere.  Time is no longer an issue.

2)      Budgeting makes my eyes glaze over

Make your budgeting a game.  I like to look at my money as little soldiers that need to be sent off to battle.  If they are being invested or reducing debt, then I am winning the battle.  If my money is being wasted on fast food or junk I don’t need then I am losing the battle.  Take your dollar s and cents to war and see if you can make them come out on top.

3)      You need to be an Accountant to budget

A budget for a household does not need multiple years of schooling and a professional designation to make it worthwhile.  Most small businesses don’t even need that kind of budget, therefore your budget truly is simple to do.  You know how much money you make, you know how much you spend on big items such as rent, hydro, cable, car payments and etc.  At the end of the day you need to come to a zero number, all the income that comes in goes out somewhere and you don’t have to borrow to survive.

4)      I track everything in my head

I have done this, you wouldn’t be the first.  As your life gets more complicated or if you need to recall money spent from a prior month or what you spent money on, you won’t be able to.  Before you know it late payment fees will start showing up on your utility bills and credit cards because you thought you paid it but didn’t.  Also, knowing how much money you have in your bank account is not the same as knowing where your money is going.

5)      I already track my spend monthly

Tracking your spend is not a bad habit but it is not the same as making a budget.  My goal is to send my money out to win their battles for me and I have to direct them where to go.  If I tracked my spending monthly only, then that would be me counting my soldiers that came back to me and I may not know where they went.  Tracking after the fact might lead me to find out that I didn’t pay my electrical bill but I have paid my cable bill twice, oops.  It is best to know where your money is going ahead of time and helping it get there, not just finding out where it has been.

Now is the time to take action and don’t late this misperceptions of budgeting lead you astray!

Fast Lane Debt Ladder - Step 1 – Emergency Fund

Life is going to jump up and bite you when you least expect it and want it to.  Do you recall how many times you have tried to get ahead but something keeps pulling you back down?  You make more money but it seems like you have less and less every month.

Good news is here.  The first step on the Fast Lane Debt Ladder is to create your two thousand dollar emergency fund and save you from life’s hiccups.  Listen, life generally doesn’t throw major curveballs at you on a regular basis, most of the time they are hiccups.  Oops, have to get the furnace fixed, oops blew a tire on the car, and more.  The truth is that these feel like big problems because we are not in a financial position to take care of them.  We end up searching, scratching, and clawing our pennies together to pay for whatever has come up.

You never know what is going to happen in life but you want to be prepared.  You will want to build this as fast as you can.  No dinners out, no sports games, new magazines are off the list until the money is saved.  Find things that you can sell, used sports equipment, and used clothing, plus that bike you never ride or whatever else you can find in the back of the garage.

Don’t be surprised that while you are saving up the two thousand dollars, something comes up causing you to use some of that money.  As we already mentioned, life doesn’t wait until you’re ready it has its own schedule.

Keep working at it until you have it squared away in the bank, preferably in a high interest savings account where it cannot be easily debited for daily use.  This money is locked away and now you can start working on your next step “Fast Lane Debt Ladder Step 2 – Debt Elimination”.  Go get’em.

How Can I Help You?

Feeling crushed by debt, trying to figure out how to move your money to avoid late fees.  This month are you taking from the right hand to pay the left and next month taking from the left to pay the right?  Nothing feels quite like going to pay for your groceries or gas and your debit/credit card is declined.  Have you ever told a cashier that you will be right back and were so embarrassed you knew you weren’t going to be back for a long time?

I have a hate for debt?  Does that mean I am completely debt free, no, but I’m getting there.  I would love to help you get there as well.  Showing you a path to get on the Fast Lane – Debt Ladder and make your life less stressful.

Depending on the type of debt and the amount of debt will determine how fast.  Yet, if you don’t start today than a year from now or two years from now you will still be wanting to get out of debt.  Get started today and let me know how I can help you.

Follow this link to the Fast Lane – Debt Ladder.  The steps are not complicated but getting out of debt is not easy.  It is going to take a change of heart, lifestyle and habits.  Change these three things and getting out of debt will get easier.  Before you know it, it will become a game and that you will want to win.

Let us know today, what we can do to help!

FAST LANE – Debt Ladder

1)      $2000 Emergency Fund – You need to cushion yourself against emergencies.  Understand that emergencies are fixing a furnace that has broken, fixing your car that you need for work, or fixing that leaky sink.  Not buying new outfits or furniture.

2)      Debt Ladder – Time to put all your debts down on paper and figure out what to do.  A few options are available to you depending on your position. 

a.       First is to pay property taxes if you are behind on them because your house can be foreclosed on.

b.      Pay the CRA as they will garnish your wages and make your life a living hell until you are out from under their hold

c.       Next make a list of all your balances, write them down from smallest to largest, beside each one write down the minimum monthly payment

d.      If any debts have similar amounts, put the one with the largest minimum payment first to free up cash flow faster

e.      Now pay minimum payments each month on all the bills except for the first one on your list, this one you want to pay as much as you can until it is eliminated. 

f.        Once a debt is paid off, take that amount plus the minimum payment on the next lowest balance and pay it towards this debt every month.  As you move up the debt payment ladder you will beginning paying off your debt faster than you think.

 

3)      Employee contribution plan – if your work offers a matching component to your employee retirement plan, be sure to maximize your amount to take full advantage of the matching.

4)      Save up 3 months of monthly expenses in your emergency fund.  This will allow you to live beyond 3 months while you look for work if you are entitled to Employment Insurance benefits or at least 3 months if you are not eligible.

5)      Maximize your retirement investing up to 15% of your gross income.  Determine how much you are currently putting in through work, plus the match and invest the additional amount to get yourself to 15%

6)      Invest into your children’s educational accounts.  Don’t sacrifice your retirement to pay for your children’s education as post-secondary school is fairly reasonable in Canada.

7)       Pay off your mortgage early

8)      Add any additional monies to your retirement accounts and plan for a future to enjoy

3 Reasons You Cannot Depend on a 9-to-5 Job

Warren Buffett said it best: "If you don't find a way to make money while you sleep, you will work until you die."

College is costing more and more every year.  Many students are getting out of school with record amounts of student loan debt before they even start to work.  After college many want to make a big step and work a full time job to support their lives.  The problem is, there are very few full time jobs available and it will take years to earn enough to pay off their loans.

1)      Lack of Job Security

Companies are always looking for ways to be more productive.  This translates into getting rid of higher priced workers for someone who will do the work at a cheaper rate.  It also includes the elimination of jobs and the current work being downloaded onto the people who are left.

2)      No Pension

Look in the rearview mirror, looked farther and farther back down the road behind you.  That spec that is way out in the distance almost beyond recognition is the last company that offered a lifelong pension.  Many seniors are working today because they cannot afford not to and that is not a position you want to find yourself in.  Instead of looking for a pension find a way to make money while you sleep or at least on your terms.

3)      Freedom of Time

You want the opportunity to try new things and build a life on your terms, then you need time.  Working for a company’s 9 to 5 job that quickly becomes 8 to 6 without overtime pay or time off will begin to suck the life out of you.  If you want to control your life to do the things you love, spend time with the people you love, or just to not require an alarm clock, you need to stay away from the traditional job.

5 Side Hustle Options to Earn Money and Eliminate Debt Today

Getting out of debt sometimes takes some down and dirty work.  If you are not afraid to put in a little bit of effort selling yourself, you could start a great little side hustle today.  By the end of the month you could be cashing cheques and be well on your way to getting out of debt.  Take a look below at 5 options that cost little or no money to start that can generate cash flow very quickly.

1)      Bookkeeping – Help small businesses with their bookkeeping.  This has been at or near the top of best earnings from Entrepreneur magazine.  This business can be run with very little overhead and only takes some time to get clients.  If you do not have a background in bookkeeping you may want to take a course at the local community college or online with www.learntobeabookkeeper.com with Ben Robinson.

 

2)      Room Rental – Rent a room in your house.  Depending on where you live, you could rent a room for $400/month including utilities.  This would give you $4800 to pay down towards any debt to help you get debt free faster.

 

3)      Catering/Bakery – Do people love your food or deserts?  Can you free up some time in your schedule to do additional cooking?  If so, you can start a made to order bakery business or a small catering business to supplement your income.

 

4)      Carpet Cleaning – Carpet cleaning is a relatively low cost business option.  You can start by renting a carpet cleaner or purchasing your own.  It takes a little bit of legwork to land your first client but the sky’s the limit.  This business is completely up to you and your effort.

 

5)      Cleaning Service – The work may not be pretty but it can pay well.  If you have time in the evenings or at night you could setup a cleaning business.  Every office needs to be cleaned and many dentists, doctors, banks, etc. outsource this to local contractors.  If you don’t mind rolling up your sleeves it can lead to some real money.

Putting Debt in the Rearview Mirror

If you are ready to make significant changes to your life and get out of debt, you have come to the right place. 

Step one is to stop focusing on what got you into debt in the first and determine why you now want to get out of debt.

Getting out of debt takes work and figuring out why this is so important to you will help motivate you through the down times.

The TRUTH is it will take hard work and commitment to get out of debt.  Generally speaking, you didn’t get into debt overnight and it will take time to get out.

If your first thought is to get a consolidation loan then just put the brakes on right now.  When I worked in banking almost every 6 months to a year I could count on the same couples coming in to get consolidation loans.  Many times they would only qualify for these loans because they were secured against the value of their homes.  Eventually their homes value maxed out and there was no more money to be had.

Consolidations may make your payments smaller but it doesn’t help you stop the bad habits you created to get into this mess in the first place.  Part of working through your existing debt is learning how to take ownership of your mess and creating the habits for fixing it.  Once you have mastered this, the chances of you getting into this problem again is much smaller.

Be prepared to sacrifice while paying back your debt.  You will go without during this time, as in no dinners out, no trips, no fancy dinners at home and you may have to take on an additional job.  The equation is simple, less money spent + increased income = out of debt faster.

Put together a budget for the next month and get started on telling your money where to go, instead of wondering where it went.

The savings dilemma: TFSA vs. RRSP

Here’s how to choose the right strategy for your retirement dollars

As the RRSP deadline inches closer and closer, you may be wondering what you should do with your contributions this year.  The two main options are putting it in your TFSA (Tax Free Savings Account) or in your RRSP (Registered Retirement Savings Plan).  The best option would be to max out each one and not have to think about it, because you would be in a fantastic position.  Unfortunately, this is not the position that most people are in.

First, you want to talk to an "Advisor", one is well versed in the differences between TFSA and RRSP’s along with your financial portfolio.  This person should be someone who wants to teach you the impact of what each decision will be for your personal circumstance.  If you feel like your “Advisor” is someone who is only trying to sell you something then feel free to shop around for a new "Advisor" and pick one that aligns with your values.

Many people invest in RRSP because they have a defined contribution plan with their employer and if they invest $1 they employer will pay money into the account as well until a certain maximum threshold is reached.  In this case it would be wise for you to maximize every dollar that you can get from your employer to increase your retirement account.  This contribution you make also gives you a tax benefit that you can claim annually to reduce your overall tax return.

If you have additional monies to invest you may then want to invest into mutual funds through a TFSA (Tax Free Savings Account).  This does not give you a tax break but when you withdraw the funds during your retirement, you receive the monies tax free, it doesn’t count as income.  This becomes a substantial benefit if you believe you will receive old age security benefits that can be clawed back once you reach a minimum income amount.  These benefits are clawed back on a percentage basis until they are 100% gone.  Your RRSP withdrawals count as income when you withdraw from them and can impact any additional amounts you expect to receive from the government.

In conclusion, both of these investment tools could be in your investment plan and help you maximize your income later in life.  For many people, both of these tools should be in their portfolio and working with an “Advisor” that has your best interest at heart, you will have a great retirement lifestyle.

Debt Repayment vs RRSP Contribution

This is a question that occurs every year around this team.  Should I pay down my debt or make the RRSP contribution plus get the tax benefit.  What should I do?

A mathematical purist will tell you to analyze what debt you are paying down by reviewing the following:

·         Interest rate

·         Tax Refund Expected

·         Employer Matching

Then tell you that if you can achieve a better return in the market plus the tax break then invest it, otherwise pay down debt.

I always recommend to pay down debt.  Once you are debt free you are able to take all the credit card, line of credit, car payments and invest them.  Once you are free from debt you have the freedom to make life choices that go beyond a simple rate of return.

If you noticed I did not list your mortgage on that list.  Make a plan to pay off your mortgage early with your financial institution by taking a 15 year amortization vs a 25 year amortization and pay bi-weekly or weekly instead of monthly. 

Once all debt but the mortgage is paid off, you will want to invest at least 15% of your income in your RRSP or TFSA accounts.  You want to ensure that you are able to retire comfortably and enjoy your golden years.

The only money you should be investing during your debt re-payment phase is any amount your employer will match from your paycheck.  If you are not taking advantage of this then you are giving away free money and not setting your future up for success.

Going forward, you want to eliminate all debt outside your mortgage, then work on investing while simultaneously paying down your mortgage.

 

Just “Set it and Forget it” is not a budget option

People hate the “B” word--- budget.  What is a budget?  A budget is a plan where you intentionally tell your money where to go.  You can do a monthly budget, weekly budget or bi-weekly budget, depending on what works best for you.

What I don’t recommend you doing is setting up a budget for a year and just forget it.  Do you remember the Ronco oven from Ron Popeil?  It was the oven that used the tag line, just set it and forget it.  It was a great tag line and the oven worked pretty well also.

With your budget, there are finance people suggesting you can automate your budget and just leave it alone… this is crazy. 

What happens in this scenario is that six months from now, you have a credit card you have been continually using maxed out because you think the $25/month is making a dent in your debt.  On the flip side the cable company loves you because you have overpaid since the beginning and you have a multi hundred dollar credit on your bill and they are using your money for free.

I’ve been there, you cannot blindly set up a budget without checking on it.  If you are like me it wasn’t the goal to set it up and leave it, but life happens and things got busy.  I then had to go back and go realign everything to pay off the credit card and stop the payments to my cable company so I could use up the credit.

Don’t misunderstand me, I think automating as many budget items as you can is a fantastic idea.  This takes a lot of stress and steps out of the budget process.  What I am driving at is, you need to consistently review your budget to ensure it is on track and working towards eliminating your debt, growing your RRSP or saving for your house.

Is Being Debt Free Worth It?

Can you imagine a life without credit card debt, line of credit debt, car payments and maybe even without a mortgage payment?

First, I would feel like taking a deep breath and then immediately booking a trip for the family to an all-inclusive vacation where everything is taken care of.

Next I would be sitting down with my wife and saying that the world is now our oyster what would you like to do.

With all our debts behind us, we would be free to do whatever we wanted.  Our money would be enslaved to us as it should be, we would not be enslaved to the bank anymore.  I can envision a world where that is happening.

We are not there yet but well on our way.  Soon debt is going to be dead to us, life will be good and we will be able to live a full time life on a part time income. 

This option has become a reality for millions of people in North America.  I’m expecting that within the next 18 months our debts (not including the mortgage) will be eliminated completely.  From there I expect our mortgage to be gone in less than five years. 

We are looking forward to having no debt besides our mortgage in a short amount of time, this alone will allow us to have a freedom we haven’t experienced in our life since marriage. 

Who wants to get on the debt elimination train with us?

Let’s do this together!

“Debt is dead, Life is good, and I can live a full time life on a part-time income”

More Robotics = Less Manual Jobs

What happens when you have been working a job for 12 years day in and day out without issue, then one day, your told your job is being eliminated?  Manual jobs are being eliminated yearly, monthly, and daily across the country.

Companies eliminate manual jobs for a bunch of reasons but mostly to improve profits. Robots don't have strain or repetitive injuries, it works 24/7 without asking for a cigarette or lunch break and it never complains.  

It helps the longevity of the company to eliminate these positions and build a stronger profit base.  Unfortunately if also has a negative impact locally because the people who use to do those jobs are not making money to spend locally anymore.

If you like manual type of work then it may be time to learn a trade.  Trades people make a good income and are cannot be easily replaced.  Instead of being mad at companies for making you redundant it is time for you to make yourself necessary.

This may mean going back and getting a GED or upgrading your qualifications to get into college.  Another option is starting your own business, try something you are good at and have always wanted to do.  

Not every new business has to be online or an app, it can be small a engine mechanic, or a mobile oil change business.  The biggest thing you need to remember is that if you choose to become a basic laborer, expect that at some time in the future you will be replaced.

Cheers,

Ken