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When I realized that my financial future was in my hands

Posted by on Apr 16, 2014 in Uncategorized | 20 comments

I have to say, I’ve been very fortunate. And for the most part, most of us have. Sometimes we get all mixed up in what others have and forget about what we have and what’s truly important.

I grew up with a wonderful family. My parents were hardworking people who immigrated to Canada from Italy, in search for a better life for their kids. They didn’t speak the language and because of that, jobs were tough to come by at first, just as they are today. They didn’t make much money, but I don’t recall us ever struggling with money.

I guess you could say we didn’t have enough money to worry about money. But we did have plenty to put food on our plates, clothes on our backs and a modest roof over our heads. The money my parents worked so hard to bring in, was just enough to cover the necessities. We didn’t have money left over to worry about what to do with it. It made life pretty simple, looking back. It was a life revolving around family, and we had a great, happy, carefree childhood.

My financial past

My first real memories of using my money of my own to buy anything was when I was about 11, 12 years old. My friends and I would pool our pocket change together, and then scout the local corner store to see what we could all buy. We’d split it on a pack of gum, Mr. Freezies, or splurge on a pack of hockey cards (that often came with a bonus stick of gum – remember those!). Hockey cards turned into comic books, then cassette tapes as I grew older and by age 15, I joined those same friends to take up a job at the local pizza joint. My first few paycheques were saved up to buy my first stereo system. Each stereo component bought one at a time, as I earned it. It brought me great excitement waiting for the next piece.

I worked part-time and paid my way through college/university, with a little help from my parents. But was surprised during my time there, to find so many students in financial troubles — even a year in. There were those that you knew right away, mom and dad were forking the bill. You could see them a mile away with their shiny new laptops and spare time. Then there were those who went running from their last class of the day to catch the bus to make it to their part-time job. They/we were starting to get our feet wet juggling finances.

My a-ha moment

From a young age, I was pretty responsible with my money. I didn’t necessarily think to save for a rainy day, but I put money aside for things I wanted to buy. But back then, it was easy. I was living at home. I had no responsibilities – barely any financial ones. Yes, I paid for and owned my own car, I paid for my clothing, my hobbies and anything I wanted, really. But the minute I stepped out of my parents home and into my own, is the first time I think I realized and now appreciate, all the sacrifices my parents went through for us.

I described in my last post how easy it is for anyone to get caught up in the dream of a home and not realize the true costs of homeownership. It was kind of scary. To be financially independent of my parents, and financially responsible not only for my own self, but for my family, my wife, and now my own children, was a big wake-up call. No matter how responsible I thought I was, there’s always one thing that can throw you off track. But it felt like a hundred things all at once and you learn really quick, when you see a fork in the road, that it’s up to no one else, but yourself, which direction to take. I could sink, or learn to swim. It was that moment when I truly realized, that my financial future was in my hands.

I had control. And everyone does. Every day, YOU get to make that decision. You can make the choice to live frugally or frivolously or a bit of both. Just remember, when you’re spending money that is not going towards your dream, you run the risk of losing that dream, falling further and further behind from your goals, from where you want to go or where you’d like to be. What you choose to do with your money, really is up to you. It’s that simple!

If I knew then, what I knew now…

I would remind my younger self that “the only thing worse than not starting yesterday, is not starting today.” That same thought process could be applied at any stage in your life, really. In our 20s, we laugh at the mere thought of retirement planning. And in our 30s, 40s and higher, we say to ourselves, “we should’ve invested when we were in our 20s”. But the funny thing is, sometimes even then, we still don’t do it.

I wish I would’ve invested earlier, saved up for a larger down payment on my house, and I’m sure I could come up with a hundred other things. But I’m happy where I am. I have a wonderful family of my own now and and I’m excited about where we’re going together. When we’re young, we all take that stuff for granted, and we don’t often think about our financial future. But it’s really up to us. We have today, and we all have the power to change our thinking.

When I realized my financial future was in my handsAs part of the Financial Literacy Awareness Carnival that my friend Shannon @ The Heavy Purse put together, please join me, Shannon, and a host of other fellow bloggers at The Heavy Purse, as part of Financial Literacy Month. Please feel free to share their content to help spread awareness. We ALL have the power to change the way we, and others around us, think about money.

Want to change the way you think about money? Feel free to click on the ‘Subscribe by email’ link on the top right, or follow me on Twitter or Like me on Facebook. Together we can all make a difference.

The true costs of homeownership

Posted by on Apr 10, 2014 in Mortgages | 6 comments

Ah, the joys of homeownership. There’s nothing quite like the feeling of getting those keys to your first home. And parking the car in your own driveway for the first time, racing to the door, unlocking the door and joyfully glancing at your partner or friend, as you twirl around the empty space.

You imagine where you’re going to put stuff, renovations you want to do. After all, you just saw a whole episode of Property Brothers, how hard can it be? Then the bills start quickly rolling in. Okay, so you kind of accounted for a few things, but unfortunately, homeownership costs don’t end once you sign. There’s additional initial costs of owning a home and the everyday expenses that you need to account for. That’s where the true costs of homeownership lie and I’m here to break down some of them for you.

Look beyond the monthly payment

Wherever you look, home builders are trying their hardest to save you the math, by telling you how much it will cost per month to own your home. Ok, who are they kidding? Sure, it’s an easy way to rope you in, but don’t be fooled by the low monthly payments. There’s many more costs involved than one simple monthly payment and although, it seems like interest rates will stay low for a while, any change in interest rates, can really affect that seemingly low monthly payment.

  • Closing Costs. Realistically, I could probably write a whole post on these, but I’m not going to do that. But many first-time homebuyers don’t consider the extra fees before you move into the home. Without getting into too much detail, in addition to the down payment, you have pay a real estate lawyer, you may have to pay for mortgage loan insurance (in Canada, typically if your down payment is less than 20% of your purchase price. Here’s a breakdown of CHMC fees.), local land transfer taxes, title insurance, registration of the Deed and Mortgage, and other miscellaneous fees. We paid just under $7,000, due at closing, for all these goodies. This, of course, will vary by region, size of your home, size of your downpayment, etc. If you’re in Canada, closingcosts.ca can give you a rough estimate on your closing costs, that you can use to plan.
  • Interest Costs. After closing, you immediately start paying interest. Everyone knows this. But I don’t think that many grasp just how much. I would wager that the average homeowner pays at least twice the original cost of the home over the life of the mortgage.
  • Property Taxes. One more thing renters don’t have to worry about. Thankfully the info is pretty easy to get. Just do a search of homes in your desired neighbourhood on realtor.ca (MLS) or your local home listing service and they will have the property taxes listed.

Oh, I forgot to mention, in addition to closing costs, all your utility companies will also charge you a small setup fee, just for being a new customer. Aww, isn’t that nice? Welcome to the neighbourhood.

Getting zapped with utility charges

  • The essentials: electricity, heating gas and water. Utility rates can fluctuate greatly, depending on the size of your home, utility rates in your area, and the time of year. So, it’s always best to ask your parents, relative or a friend to get a rough estimate of how much it’s going to cost. Electricity and water rates tend to peak in the summer and heating gas, obviously peaks in the winter. But also check to see if the water heater is rented or owned. Some heating gas distributors already include that as part of their bill.
  • Non-essentials: home phone, cable TV, Internet. It pays to bundle where you can. Depending on your area, you can probably get a quick quote online or call them up on the phone. It will be largely dependant on you and what you’re willing to pay for. We manage to keep ours down to about $130 for all three, taxes in. But that’s only because we have the basic everything, except internet and call every year for new promotions. It can be much higher or much lower. It’s really up to you.

Just maintaining

Condo living? Pay set condo fees. Buying a house, the list is a little longer (but not always more expensive). But here are just a few of the expenses you can look forward to:

  • Approximately every 10-15 years. Roof, windows, garage doors made of wood, furnace, AC unit. Lucky for us, we’ll get to replace both our roof and windows this year. Roof for our size home averages about $3,000. Really cheap when you consider quotes for our windows came to an average of about $1,000 each! Ouch! So, make sure to tell Johnny to take his friends and their baseball gloves elsewhere.
  • Every 5-10. Driveway paved, house repainted, some appliances and furniture will need to be replaced.
  • And when you least expect it, all of those things. And other countless things that will break or require maintenance and the countless tools you will need to fix them. Think plumbing leaks, lawn maintenance, etc. That’s why it’s always important to have an emergency fund.

Looking good never cost so much

You can probably get away with milk crates for a while. But keep in mind, the bigger the home, the more furniture you’ll need and the more pillows and knickknacks you’ll want.

Want a greener lawn? Want to spruce up your kitchen? Or bathrooms? All of these items come with a price tag. I used to think many moons ago, like many others, that renting was just throwing your money away. Now I know, that’s really not the case. I’m not here to debate the merits of homeownership or any financial advantages to renting, for that matter — that’s a personal decision, just as much as a financial one.

I’m also not here to scare anyone out of home buying. I’m a homeowner myself and in many ways, I think a home can be a great investment. All I’m saying, is that before you sign your life away. Before you decide to walk into a brand new home (to you) for the first time, really evaluate what YOU can afford. Not what the bank tells you. Know what you’re getting yourself into.

Image courtesy of scottchan / FreeDigitalPhotos.net.


6 reasons why your budget isn’t working

Posted by on Apr 3, 2014 in Budgeting | 6 comments

Many of us start the year with the best intentions. ‘This year, will be different’, you say to yourself. You just want you and your money to get along. You start a budget, but you just can’t keep one. Before you decide to throw in the towel, remember, it’s not you, but it may be your budget.

There are many reason why your budget isn’t working. It’s not that they don’t work, they actually do – budgeting has helped us out tremendously – but why and how you choose to budget is just as important as getting started. So hopefully you and your budget can learn to reconcile your differences and become friends again.

Here are some potential factors that can cause a budget breakup:

1. You’re not planning for the unexpected

Things happen. Sometimes unexpectedly. And sometimes all at once. Without a plan, something eventually breaks down and next thing you know, you’re just playing catch up.

That’s why it’s doubly important to make sure you’re doubly protected. Set aside some room in your budget each month to build an emergency reserve to help plan for and cover potential breakdown/replacement costs or protect yourself from an unexpected job loss or any other type of emergency, for that matter.

2. Your budget is too restrictive

Having a restrictive budget can put a strain on your finances. There’s no fun in budgeting if you don’t budget in the fun stuff. Yes, we use budgets to make sure we have enough to put a roof over our head and food on the table, but it’s equally important to give yourself some breathing room to set aside a little money each month for that vacation you always wanted, or some nights out with friends. When all you’re doing is looking forward to paying the next bill, budgets can quickly get demotivating and easily derail any other plans you had. Budgets are always changing and should be flexible.

3. You’re over-complicating it

No one said it was going to be easy. Anything you’re not used to doing is going to be difficult at first. But it’s easy to get carried away when first setting up your budget by listing every category under the sun. So just because I or any other blogger has posted a list of categories a budget should have, those are just suggestions. The categories should work for you. If you can simplify some areas of your list, it’ll make things a whole lot easier in the long run.

And if you can find ways to automate areas of your budget, all the better. For example, if you set aside a certain amount in your budget for savings each month, don’t waste time trying to remember to do that, because in most cases you likely won’t. Instead have that amount automatically deducted each period from your checking account and into your savings/investment account. Same goes for bill payments. We have most of our fixed bills set up as pre-authorized payments, so we don’t have to worry about missing those bills again. The easier your budget is to implement, the more likely you are to stick with it.

4. Your budget is goal-less

There’s a reason for everything, why not make one for your budget. Yes, budgets help you to make sure you’re not overspending what you’re actually taking in, but they also serve the purpose of making sure you’re on track to meeting your goals. For most, it shouldn’t take much to stay above the zero line. But the really great thing about budgets, is they’re a useful tool for planning and managing your money. Whether planning your next family vacation, helping to fund your son/daughter’s college education or your own retirement, every dollar should have a purpose – and so should your budget.

5. You’re not using the right tools

I know many say it’s not about the tools, it’s how you use them, but if you’re not motivated to use them, then you’re probably using the wrong tool. I’ve tried literally dozens of budgeting applications and most were an over-complicated mess. So I stuck to my own spreadsheets for years, until moving to Pearbudget‘s and eventually their online version. Although there’s no program out there that does everything I would like it to do. Whether it’s pencil and paper, spreadsheets, fully automated desktop software or smartphone apps, choose budgeting tools that work for you and your lifestyle.

6. You’re going it alone

Unless you’re single, there’s no reason to be single about your budget. Nothing will make a budget fall apart faster, than if your spouse or partner is not on the same page as you regarding your finances. It’s so important that you work together and set common goals. Everyone will have slightly different priorities, but you both should have common things that you, as a couple, as a family are working towards.

So before you give in and think that budgets simply don’t work, think about what you could do to turn things around. Reignite that old spark and become your budget’s new BFF.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net