Thursday, August 28, 2014

Protect Your Score

Have you watched your favorite football team take a commanding lead in a game, ensured a win because their score was twice that of their opponent? Then the drama begins. Suddenly this fabulous score doesn’t look as great because they are being outplayed.  They may have slacked-off; took a few penalties or dropped the ball because they misunderstood the play. In the end they didn’t play defensively.

What about you? We take part in a game where we must protect our score.  Every time we borrow money or require a service {cell phone, rent an apartment), someone checks your credit score to ensure you are creditworthy.  Quite often people do not understand they are graded on their performance. Credit reporting agencies, like Equifax or TransUnion, are keeping tabs on “your stats” to determine how well you manage credit.  The better manager you are of your debt the higher your “Credit Score”; the poorer you are at managing your debt, the lower your score.  The good news is you can defensively put into action strategies to either protect or improve your score.  
Five Ways to Create the Winning Play with Your Credit

1.  Make your monthly payments on time. Knowing the due dates of your debt obligations in advance ensures you have set money aside for monthly payments.  Being consistently late with your payments will appear on your credit and lower your score.
2.  Pay the minimum payment even if you are unable to pay the entire balance on your credit card.  Even if the minimum payment appears insignificant (i.e. $10), ensure you pay at the very least this minimum amount.  If you don't, you are sending a message to the world you can't make a larger payment either ($310, $510). Many people opt to miss the small payment and vow to pay double the amount the following month.  This strategy ends up hurting their score. 
3.  Limit the number of credit inquiries others conduct on your credit report.  (i.e. credit cards company, car dealerships, financial institutions).  Most people do not understand that an excessive number of credit inquiries “take hits” against their “Credit Score.”

4.  Stay within your credit limit. Credit card companies are notorious for allowing you to exceed your credit limit especially when you diligently make regular payments.  You may trigger a penalty which results in a transaction fee; but what’s worst--your credit score also drops.

5.  Resolve unsettled disputes. By taking a stand and refusing to pay for an unsatisfactory service or product, you may find this unpaid bill appear on your credit report.  The best you can do is to reach a compromise to ensure the unpaid bill doesn’t jeopardize your credit report.

Now that you are informed about ways to protect your score, Financial Consumer Agency of Canada has a short five-question quiz to test your knowledge. If you are interested in taking the quiz, click here

  •  if you don’t know your score, apply for your credit report. 
  • if you don’t like what you see, put into effect winning plays to improve your score.
  • if you like what you see, continue to protect the score.

Thursday, August 21, 2014

Are Negative Thoughts about Money Holding You Back?

Henry Ford is often quoted for saying, “Whether you think you can or you think you can’t - - you’re right.”  Nothing can be more powerful or debilitating than how you think. 
I lived with thoughts like “There’s never enough money.”  Then the teaching of positive affirmations changed my thinking into believing there always is enough money.  Kitchen renovations to our small farm home, mini-vacations and the purchase of a newer vehicle were some of things I wanted. Its renowned authors like, T. Harv Eker, (Secrets of the Millionaire Mind), Rhonda Bryne, (The Secret); and Brian Tracy (Achieve Any Goal), to name a few, who turned people around with their wisdom on “you are what you think.”  It’s that simple.  So if you want to have an abundant and fulfilling life, then think that.  The critical ingredients required to get what you really want starts with a wish which turns into a desire mixed with intention and passion.  This lesson from Dr. Wayne Dyer should be well received by negative thinkers who are looking to change their present beliefs.  
If we constantly catch ourselves saying, “I don’t have enough money. I am always broke.  I hate money,” these negative images become our reality. Do we really want this?  Of course not! Let’s see if we can change this by applying three basic ground rules we learned as children to change our attitude about money. 
1. “Stop, look and listen!” Pay attention to how you talk daily about money.  When you see something you like, do you say, “I can’t afford that?”  When your children ask to buy something, do you say, “I don’t have enough money?”  When your friends take a winter vacation, do you say, “That’s nice but we can’t afford to do that?” 

2. “If you don’t have anything good to say then don’t say anything at all,” applies the same to “thinking”.  If you don’t have any good thoughts about money then don’t think at all.  Change any negative talk into positive; and if you can’t, remain quiet. Complaining about not having enough money does not solve anything.  You are better to think about all the things you would do if you had money.  Retrain your thinking and create a wish list.   

3. “Mind your own business.”  When others start ranting about money woes, don’t participate and share yours. The polite thing to do is caution them and share your new-found wisdom, “you are what you think.”
How do you stop yourself from having these negative thoughts about money? Have you ever said, “The next time I do something stupid, slap me?”  If no one is around to honor your request when you have negative thoughts, try this.  Put an elastic band around your wrist. When you catch yourself saying anything negative about money, pull the elastic band away from your wrist and release it.  Smack! It’s guaranteed to make you think about what you say.  AND if you think a little slap from an elastic band hurts your wrist, imagine how much your negative thoughts about money hurt you financially.
When I ask, “How do you think about money?” I sincerely want to know. The phrase, “a penny for your thoughts” leads us to conclude that good thoughts have positive results.  Being rewarded for positive thinking creates incentive and makes you wealthy in more ways than you realize.

Thursday, August 14, 2014

Why Do I Need a Budget?

When most people hear the word, “Budget”, moans and groans generally follow. WHY IS THAT? For starters, staying on track can be difficult while life events derail your best intentions.  Secondly, having a budget sounds so restrictive that people feel BOXED into a corner.  BUT really a budget is intended to keep you and your money on track.  Most people are fooled into believing a budget is a one-size fits all. NOT TRUE.  Your budget has to be tailored for your family needs.

 The way to get started is to quit talking and begin doing.  ~~Walt Disney

If you procrastinate in creating a budget, the road ends here. Enough talk and a little more action.  GUESS what?  It is not difficult if you have some sound guidance.  It’s as easy as 1-2-3.

1. LOOK at your month-to-month expenditures.  FIRSTLY, they can be easily labeled as:  Shelter, Basic, Discretionary, and Transportation. Placed into one category, these are your LIFESTYLE NEEDS.  The very things you spend your money on day-to-day.  SECONDLY, you may have a loan, credit cards and mortgage payments.  These totals formulate your DEBT.  LASTLY, you have your SAVINGS.  Your list may include long term savings for retirement, education, vehicle replacement, vacations and short term savings for annual expenditures (property insurance and taxes), emergencies, appliances and furniture.

2. FOCUS on only the three categories.  Together as a couple (or single) can be involved in the next important step, determining the percentage allocated to each of the three categories: Lifestyle Needs; Debt Repayment; and Savings.  Initially, prepare to divide your combined net income(s) -- your take-home pay/after-tax income (whatever you call it).  Work with 10 dimes to represent 100% of your income. Each dime represents 10%. YES, this appears elementary but it works! It’s an easy way to determine the percentage to each category by physically shifting dimes with 10% increments, for example: 60% Lifestyle Needs; 20% Debt Repayment and 20% Savings.  Because you have an estimate of your monthly expenses you have a fair understanding of your allocations.  However, the challenge is whether you can reduce our lifestyle needs (primarily in discretionary spending) by 10% in order to allocate this percentage to Savings (i.e. family vacation)? Perhaps your focus is to reduce debt, is it possible to shift 10% from Lifestyle Needs to Debt Repayment?  Regardless the amount assigned to each category is tailored to fit your needs. 

3.  STRUCTURE your bank accounts to align with your specific categories.  This is your budget in its simplest form.   

The following illustration shows all deposits from your income (employment, sales commission, pension, CPP/OAS) directed to an account, designated as the Collection Account. (This can be either a chequing or saving account depending on the service charge package offered.) From the Collection Account, a specific transfer is created to cover your monthly lifestyle needs.  You are restricted from touching any extra cash designated for debt repayment and savings.  In essence, you are giving yourself an allowance, a similar process given to children. This method offers protection from you. (In some situations, you are your own worst enemy. Having too much money in a chequing account can be dangerous.)  Therefore, you can only spend the amount you give yourself in your designated LIFESTYLE NEEDS account.  Because you can check the balance of your account regularly, you always know “when you get close to being busted.”

Your loan, credit cards and mortgage payments are made directly from your Collection Account (the account where your incomes are pooled). Likewise the same process is followed with your savings.  All you need to do is ensure you stick to the allocations assigned to each of the categories.

At the beginning of this process the percentage designated to your debt repayment may be significantly higher; but as you pay off debt, the shift can be made to increase savings. If you receive pay increases, the percentages will increase accordingly to your net income.

The trick to saving is easy {out of sight-out of mind}.  Do not allow yourself a savings account you can access easily UNLESS you are extremely disciplined… or if the account is specifically earmarked as Emergency Savings.  Only you know for certain what an emergency is.  NO EXCUSES.  Otherwise, set the transfer to a mutual fund (for short and long term savings).  You can visually see the balances on-line; but you would physically have to visit your investment advisor to make a withdrawal.  The harder the access, the less the temptation.  As you watch your savings grow, imagine paying for the vacation or new vehicle with this money.   Putting your life on automatic is SO EASY with pre-authorized transfers straight from your Collection Account to designated investments (RRSP, TFSA, RESP, Non-Registered Savings) for specific purposes.  You can equate this to making loan payments to the person who deserves to be paid the most – YOU! 

ROOM for modification is a must.  Remember the tag line: one size doesn’t fit all.  
  • If joint accounts don’t work for you; then the set-up can be modified so you share at the very least the lifestyle expenses as a percentage of your incomes. 
  • If you work together well as a couple, then one spouse’s income could be designated solely for lifestyle needs; while other pays down debt and contributes to the savings.
  • If you like, set up a “Crazy Money” allowance.  This amount is your permission to blow anyway you choose:  Beer with the boys.  Rendezvous with the girls at a spa.” You decide – you don’t have to report to your partner where the money went all you need to do is stay with your limit. Happy Husband; Happy Wife makes for a Happy Life.
HERE COMES THE CHALLENGE AND REWARD: You may have a budget and are proud because you have taken this important step. If you struggle with making this work, you can always seek help from your financial planner.  This is one of many ways a financial planner can help. The end result is if you spend wisely, pay debt diligently and save faithfully, you can have everything you really want.           

Thursday, August 7, 2014

What Do You REALLY Want?

“What Do You Really Want?” There’s a GOOD reason to answer this question. 

Why? “If you have a clear vision you will eventually attract the right strategy.  If you don’t have a clear vision no strategy will save you.” – Mike Hyatt. 

The six main steps in the financial planning process illustrate the obvious.  Once you establish your relationship with a financial planner, the next crucial step to get you on the right track is to know what you want in life.  It’s difficult to figure the “How” when you don’t know the “What” and “When”.  An important part of your meeting with a financial planner will be discussing your goals, dreams and aspirations. It’s next to impossible to do any of the steps that follow unless your goals are confirmed.

I often share my CRAZY “Rocking Chair” exercise with clients.  Although this sounds hokey-pokey, something mystical happens in the process of writing your dreams. The flow of thoughts and ideas from your heart to your brain to the pen and on to paper allows your life to unfold before your eyes and become reality.  Believe me; this works.

The Rocking Chair Exercise

TAKE a brightly colored (8½”x11”) piece of paper.  {A boring, white sheet will not do; your favorite color works the best.}   

FOLD the paper four times until you are holding what looks like a 2”x2” square.  GET still and relax.  

IMAGINE you are 105 years old, sitting in a rocking chair at your nursing home and looking outdoors through the window. You have all your facilities--you are as smart as a whip. When you look through the window, you imagine watching a movie made of your life; you see all the things you said you wanted to do and you did it. You were not discouraged by believing: you were too old, too young or not educated.  You were not concerned about money or any obstacles that may stand in your path.   You said, “I want to do this; and you did!” 

NOW take and unfold your paper to its original size.  You see sixteen squares on the front and back.  Thirty-two spots to write your goals, dreams and aspirations. The ones you saw played in your movie.  Some may or may not involve money (i.e. learn to play bridge; write a book-the cost will be in the publishing; or winter vacations in Florida).  This exercise will not be completed in an hour or even one day.  This type of exercise takes time.  Keep your antenna up; see what others have done; if you like what you see, put it on YOUR list.

REMEMBER you must grasp the pen and write on paper.  Just thinking about your aspirations is not sufficient.  The MAGIC happens in the process of “DOING”.

THE CHALLENGE:  Write your goals, dreams and aspirations.  Once your list is complied, then it’s easier to take the next step. Distinguish your goals between urgent and important; and subdivided further as short, mid, and long term.  JUST SO HAPPENS worksheets are available to help with the process.  They’re yours for the asking.