WHAT HAPPEN TO THE $27.00 BRA GIRL?

A few months ago, I promised you some post from the people who have followed the plan they created with my help. Today is part one of the $27.00 bra girl saga.

What happened to the $27 bra girl?

I am that girl. Tessa retells my story to many people as they begin their work in financial literacy. During my first meeting with Tessa she instructed me to write down all the purchases I made in a week and bring the list to her during our next meeting. When I presented the list to her the following week, there it was, a $27 bra purchase that Tessa did not agree with. I ‘may’ have cried because at the time I thought it wasn’t outrageous, I mean, it wasn’t a $100 bra! At the time my husband and I were getting ready to move across the country for his job and my employment was uncertain, this is what made a $27 bra matter.   That meeting was 5 years ago.

I am blessed to have Tessa in my daily life, she lives a couple steps away from my childhood home and it always a phone call away. But she hasn’t actually seen my finances in years. Sound strange? Tessa set my husband and I on a path to achieve two big goals, save for a down payment on a home and pay cash for what turned out to be a moderately lavish wedding. Once those goals were achieved, I could see in Tessa’s eyes that she was ready to take the next steps with us. She would often ask, ‘so what are we going to do now? I think we should revisit your plan and set new goals’ but we did not. It was important to my husband and I to take what we had learned from Tessa and challenge ourselves to apply her principles to our new life back in our hometown. We were newlyweds, new homeowners, I had a new full-time job and had also returned to a part-time job I had left before we re-located. We needed to purchase two cars, furniture and re-establish our social lives. It would have been very easy to take our record book to Tessa’s kitchen table on a Sunday afternoon and get a new plan and to be honest, there was a couple of times over the years I have almost called Tessa. But the lessons that we have learned applying Tessa’s principles have been invaluable.

#1 Comparison is very costly.

We have attended housewarming, weddings, showers, parties but on the way home have almost the same conversation each time, what we liked, what’s not our style, what we would have done or done differently. We have been part of conversations common to newlyweds or new homeowners; what the reception cost, high property taxes, the cost of Reno’s etc. It always leaves us with the question of ‘would we have made the same decisions as our family and friends?’

Over the years we have driven higher end cars, added to our wardrobes each season and had made room in our financial plan for these things. As car leases have ended or as life has become too busy to find weekly shopping time, we realized we haven’t missed it. Tessa’s plan includes the use electronic transfers to various accounts to keep your plan on the correct path.

Within the last year we have made it our new goal to simplify our lives regardless of what others opinions are. We have lived in our home for 4 years and never worried about finishing the basement. We have always heard the comments ‘well you should really get that basement finished’ but just never felt the need to. We have family and friends with homes larger then ours, with finished basements complete with all the home theater systems a person could dream of. It was not in our plan, Tessa biggest lesson is that your financial plan in just that, yours. Had we renovated our basement years ago when everyone thought we should it would not fit our lifestyle today. As we wait the arrival of our first baby, basement renovations are now underway. We are excited about using the space and have tailored it to be an open creative space that our family will enjoy for years.

Unconventional to some, but perfect for us.

Stay posted for the conclusion of the $27.00 bra girl saga.

WORKING WITH A FINANCIAL NAVIGATOR: BY PATRICK AND RILEY

When Riley and I began our journey with Tessa- Marie we were in dire need of help. Although neither of us was in any large debt we both had a dream of moving out and starting our lives together.

Unfortunately houses aren’t cheap and a down payment is required.

We both had bad spending habits that hindered our ability to gain any savings or any money security. If something went wrong and it was an expense we would end up in debt using a credit card to pay for whatever situation we were put in.

We started our journey with a limited budget and personally had doubted that Tessa-Marie could deliver on all of her promises.

Surprisingly we found that not only did we have money to save. We also could continue to live our lives. We could go out with friends, have an expensive dinner once in a while. Overall enjoy our weekly lives without a burden or constraint because we were saving money.

Tessa-Marie started working with us weekly. Her methods of saving money and her wise straight to the point teachings started to change our lives.

At first, it began with simply putting our money on paper and looking at our past expenditures. This forced us to look at the actual amounts of money we were spending.

This was a huge shock to both of us realizing that we were basically living pay cheque to pay cheque and spending most of our money on useless things that we no longer have.

After this, we both knew that we needed to listen to Tessa-Marie and follow her guidelines to achieve the life we both knew we wanted.

She asked us what we wanted most. We gave her a list of five things we wanted. We could see that she genuinely wanted to help us achieve these goals. Tessa-Marie then started to organize our money into different accounts each with a specific purpose to reach our goals while, still living our lives. After about a month we started to notice growth in our savings, while still having social lives. We truly began to believe in the system.

Then with a helpful nudge we realized that we could save more money and still enjoy life. So we needed to re-evaluate our spending and change our recent accounts.

After this, we had a solid plan that worked well and helped us save larger amounts.

Now it has been around 9 months and not only can we see our financial future but, we can clearly see how inflamed our bank account has come. Tessa-Marie doesn’t force you into saving, she simply helpfully guides you but, puts the responsibility on yourself or in our case us.

Truly Tessa-Marie has helped drastically change our lives for the better and we both are much happier in our lives and our future. Although she helps you reach your ultimate financial goal she does so much more than just save you money. She made us look at our lives and create goals. Figure out what we wanted out of life and overall make us realize we could do it together.

We both owe Tessa-Marie something more than you can give back because she gave us something you cannot put a price on, a happy and stress free financial future.

I hope Patrick’s and Riley’s experiences guide you to seek financial navigation to your own stress free financial future.

All the best

Tessa-Marie

FIVE POWERFUL STEPS TO FINANCIAL SUCCESS

Interesting year we are in, 2013!  Commonly, anything with the number 13 generates fear and superstition.  Many people run away from this feared number. Buildings do not have a 13^th floor as it is so feared.  Do we have a choice?  Can we ignore the year 2013 or pretend it does not exist just because it has the number 13 in the mix?  No, we can’t so we are going to include 2013 in our lives.  We are going to do something different this year.  We are actually going to embrace the number 13; we are going to embrace the entire year!  A suggestion for our theme for 2013 is NEW HOPES, NEW DREAMS AND FINANCIAL SUCCESS!

Every year we make plans and set goals, which we refer to as RESOLUTIONS.  Let us scrap that word. We are setting New Goals for a New Year with a number that will surely improve our chances.  We will begin by naming “2013” the year my life changed for the better.

My first question; what do you want to ACCUMULATE and what do you want to ELIMINATE?  Take a few minutes and write your answer down.

In the past few years were you a MISSILE WITHOUT A GUIDANCE SYSTEM?  Were you just going about your business working, paying bills, spending and reacting to life instead of life reacting to you?  It’s time to change.  Give yourself a GUIDANCE SYSTEM. Where do you want to go and when?

Now what are those five powerful steps to financial success I am talking about?  Well here they are, you might have heard some version of them previously, but not described to you in the way I am going to do so now!

1.  SPECIFICITY

Key to meeting your goals is to know your goals. Describe your goals completely and entirely until they become something you can recite like a nursery rhyme. You want to pay off your Master Card then say I want to completely pay off my Master Card.  Do not only say I want to pay off my debt.  This non-specific statement does not completely describe your goal.  The specific statement you want to make describes which debt and the amount.  Generally, when a goal is not specific it is not attained.  Ask yourself which debt, the $100.00 you owe your brother, or the $3000.00 outstanding on your Master Card?  Be Specific.

2.  KEEP SCORE

What steps are you taking to meet those goals?  In other words, keep score of your progress towards your goals.  Your statement should be as follows.  I want to pay off my Bank Master card (name the bank) and I am paying $250.00 towards the card every month.  So I Keep Score every month of the total I have paid towards my Bank Master Card debt, which shows me the headway that I have made.

3.  PUT YOUR GOAL INTO YOUR LIFESTYLE

Now that I am paying this Bank Master Card off, I should not continue to use the card.  Making payments to eliminate debt every month and simultaneously incurring more of the same debt is counter-productive.  For example, one should not make efforts to pay $250.00 a month towards a Bank Master Card debt and charge $200.00 to the card just because there is available credit.  Create habits that will enable you to bring your financial goals into your lifestyle and eliminate the habits that work against you.  Modify your behavior.

4.  PROGRAM FOR SUCCESS

Now that you know the steps you need to take in order to meet financial goals, avoid the impulses and temptations that are a hindrance to your targets.  An immediate reward can produce long-term penalties.  A drink after work every Friday is no longer one of your pastimes.  Dinner out every weekend with your friends should be scaled back. Why not cook with your friends at home and everyone contributes to the meal.  A lovely homemade Tuscan soup and some fresh buns with a bottle of wine can make a lovely winter dinner with friends at home.  Try it!  You’ll it!

5.  TIME.  WHEN DO YOU WANT TO ACCOMPLISH THIS GOAL

This is one of the most important steps in accomplishing your goal.  A friend of mine always wanted to retire to Jamaica.  I’ve heard the following statement for the last 15 years. “I am going back home to retire.”  Now that is an incomplete plan.  My friend did not complete his statement; he should have said:  “My goal is to retire in 2001 at the age of 60 in Jamaica.” Now that is a complete goal!  We have the where, the what and most importantly, the when!  My friend is still in Canada, retired and only vacations in Jamaica.  He maintains his dream of one day living in Jamaica but his goal is still incomplete.  With no when, no timeframe, this is an incomplete and unattainable goal.

So there they are!  Your Five Powerful Steps to Financial Success!  Every three months take time to look at your progress towards meeting your financial goal.  If you are not on tract, then re-evaluate and make the necessary changes to get yourself back on tract.  It may not be easy, keep plugging away, do not abort the goal!

Happy New Year

Tessa-Marie

January 2 2013

MY MOST DIFFICULT WORKSHOP

Someone asked me few days ago, what is the most difficult workshop I have ever done?  I did not have to think before replying, “SAVINGS,” the look on their faces when I said, “SAVINGS” was incredulous, “Savings I cannot believe it would be savings, I really thought that it would be on managing debt and staying out of debt.”  She said. I smiled and said “when I facilitate a workshop on debt control or staying out of debt, everyone attending the workshop is ready to change or planning how to manage debt better than a family member a friend or someone at work.”

With savings I get attitude and comments such as the followingg:

• I have no money to save,
• I am living pay cheque to pay cheque,
• I can barely make ends meet with what I get paid.

The body language and expressions say the following:

• I am defeated and my situation is hopeless,
• The looks on their faces say, what can you do when I could not do a thing about saving money myself.
• Bring it on; I have trials and failures to tell you about.
• You think you know how to get me to save, well I have tried and I failed
• I am living proof that savings does not work it is for the rich and powerful.

These are just a few of the reason why a saving workshop is much more difficult to facilitate.

I now have a special way of facilitating a SAVINGS workshop.  This is how I began, I walk to the white board and write.

$3.50 Bi weekly

Invariably someone would ask “what does that mean” Can anyone guess  I reply?  Every head in that classroom will shake in the negative.   This! I reply was my very first savings, this was the amount I could save.     I was married at 22 so that was  the combined amount for both my husband and myself.

“You put the decimal in the wrong spot” someone shouted.  “No it is in the correct spot, the total we saved in those days was exactly that $3.50” The usual NO’s could be heard.

So here is the plan  we had.

1. We could only save $3.50 every two weeks that we already knew from keeping track of our income and expenses.
2. This was done automatically for us at my financial institution free of charge.
3. Every time I got a raise we  saved it, usually the raises were after taxes $3.50 every two weeks so we increased our saving by that $3.50 which meant we were now saving $7.00 every two weeks.  My husband’s raises went towards the increase in the cost of living.

We  kept increasing that amount and by the age of 29 that amount had grown to $80.00 every two weeks to a total of $7,500.00 in the bank.  Not a huge amount of money, but it was all ours.

To this day we both know and remember that our foundation or the beginning of our financial journey was that $3.50.  It was not easy at first but we had a plan and stuck to it, increasing it at every opportunity we got.

Everything we do the beginning is the hardest and it is no different with money or building the CN Tower, preparing the foundation is the most difficult; the glory is seeing the results,  like the morning you wake up with no bills or mortgage payment to make and money in the bank.

Savings need to have a purpose;  it is not the same any more we have so many distractions waiting to grab our money.  Can you remember when our parents told us those famous three words “SAVE YOUR MONEY.”  Today just saving, just for saving sake  is not good enough; savings without a reason is like emptying a huge bag of feathers in the middle of Dundas Square and coming back a month later expecting that they are still there, you would be lucky to find one soggy dirty feather.  Remember to always have a reason for saving, ask yourself this question.  WHY and WHAT am I saving for?  If you do not have a purpose for the money it will be used for whatever.

We are fortunate in Canada to be able to have as many savings accounts as we want.  I have a savings account for all the important things in my life.  Gardening, Vacationing, Holidays and Birthdays and the list can go on.  Having one savings account for everything is like an Irish stew, there are many ingredients but no distinct flavour.

Savings has its challenges but you can do it. Try it you will love the taste.

Tessa-Marie

TEN STEPS FOR CREATING A SPENDING PLAN

                                                                                                                                      

Creating a SPENDING PLAN may not sound like the most exciting thing in the world to do, but it is vital in keeping your financial house in order.

Before you begin to create your SPENDING PLAN it is important to realize that in order to be successful you have to include all your financial details, no spending is too small to be listed.  It is imperative all spending is listed.

Ultimately, the end result will show where your money is coming from, how much it is where it is all going.

1.  First, at the top of the page write down the date and amount you bring home each week, bi-weekly or monthly.    By that I mean the amount you receive in your account which is your net pay,  this is the amount you have to live on.
2. Write down EVERYTHING you spend each day.   Most people remember their mortgage or rent payment,  but often forget the impulsive things they buy,   like a chocolate bar, the lottery tickets they buy on their way to work each morning.    I recommend that you carry a small notepad with you and write down everything you spend money on,  including lunch, magazines, and your morning coffee.    By keeping track of everything you spend money on, you will have a complete list of all your expenses, which will make it easier to create your Spending Plan.
3. Savings:  Your savings must be included in your list of expenses?  Remember to pay yourself first;  consider it a debt you owe to you.    Have your bank do your savings automatically for you.
4.  Your weekly,  bi-weekly or monthly income should equal the same as your expenses.   If your expenses are greater than your income, you will need to revamp your spending plan.
5. Once you have created your spending plan your job is to make it work for you.   What are you willing to give up, to make your spending plan work?    I do not recommend stopping or modifying your savings,  if you do you are again putting yourself last. Look at the amount you spend on groceries,  cable TV, eating out.    Groceries are usually the bigger culprit; make a list of what you already have and shop accordingly, not because it is on sale.
6. If you choose not to decrease your spending, are you prepared to take on a part-time job?    To spend more than you are making is to dig a hole while standing in the same spot,  eventually you will not be able to toss the dirt over your head and out.   You will need to go over your spending plan several times, before you get it right. Keep at it,  it is worth the effort
7.  If you have a spouse you will have to work together to produce a spending plan that will benefit both you and your partner.
8. Even if one person manages the day-to-day of the spending plan the partner should be aware of what is going on in that plan.
9. After you have your spending plan as you want it,  your next step is to implement the plan.   
10.  Set up weekly, bi-weekly or monthly meeting where you and your partner go over the plan,  you will need to visit the plan often in e beginning.    Then you can go over it at least once a month to make sure you are on tract.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

CONSTANCE

CONSTANCE

I was out shopping the other day and when I got to the cash register the sales clerk took my purchases and then asked me the following three questions.

• Would you like to purchase these lovely gloves they are on sale?
• Would that be on your store credit card?
• Would you like to purchase a shopping bag?

To all three questions my answer was NO, after saying NO I felt someone tugging at my coat.  I looked back into the smiling face of a lady who said,

“Good for you, I can never say no”.  I smiled back and said, “I have trained myself to only purchase what I plan to purchase that day”. She replied, “I wish I could be like you”.  

I was just about to say bye to her when she said, “You are just the person I want to talk too”. She decided to forego her shopping and walked out of the department store with me.   She said, “I hope I’m not taking up too much of your time”.  I replied, “No” and thought to myself you are using NO an awful lot today.   

She introduced herself as Constance and told me she needs the help of someone who can advise her where to get an installment loan.  I explained that her best choices would be her local bank, trust company or a credit union. 

Constance then said, “I have such bad credit, I can’t get a loan from any one of these places, you see I have a payday loan and it is just killing me inside out”.   I paused looked at her with all the empathy I could muster and said, “NO” to that she said, “Yes my dear what can I do?”  I replied, “In order to help you, I would like to know more about your finances is that okay with you?”  “Let’s find somewhere to sit” I said, and then she began her story.

Constance’s’ story went this way:

“I am 70 years old and live on a fixed income of $1,133.00 monthly, my source of income is from Canada Pension, Old Age Pension and a Guaranty Income supplement.  For the past thirty years I have never held a job past probation, therefore, I do not have a company pension”.  So I said to Constance, “Can you tell me what your expenses are?”

Here are the numbers Constance gave me:

1. Rent                                                                                  $ 413.00
2. Telephone and cable        ABOUT                              160.00
3. Bay Card                                                                               50.00
4. Bus Fare                                ABOUT                              100.00
5. Grocery                                 ABOUT                              200.00

                                                               TOTAL                               923.00

I realized quickly that is was $923.00 in monthly expenses.  Although whenever someone tells me an amount of an expenditure or income prefaced with words such as, “PRETTY CLOSE, NEARLY, ABOUT, LET ME SEE and I BELIEVE”, I know right there and then that person is not managing their money properly; which means they are usually in debt, and don’t know how much they owe and how they spend their money.

I asked Constance if that was all her expenses, and if it was she still had $210.00 left.  I wanted to know what she spent the remaining on.  

Constance replies, “Oh I forgot, I’m paying a Credit Proposal of $150.00 for the next five years”. 

“Well that still leaves you with $60.00 I said, where does that go?”

“You know” she replied, some of those prefaces again I thought.  

“You mentioned a payday loan, how and when are you supposed to pay this?” I asked. 

She replied, “That’s the problem” as she held on to her head.  “You see, I borrowed $500 and I have to pay back $600.  When I pay back the $600, I do not have sufficient money left to pay my expenses and so the cycle continues, I take another payday loan for the next month and so on and so on.   If I had an installment loan, I would be able to pay a small amount every month until it is paid off”. 

I asked her “When you received the credit proposal, were you advised not to incur anymore debt?” 

To that she said “Yes but I did not have any money and started using my credit cards again”. 

 Do you have any family or friends that could lend you the $600 to pay the payday loan off and then pay that family member $55 a month over one year that would give them a small amount of interest?” 

She replied “No I can’t.  I’ve received help from both my son and my sister and right now they are unable to help me.”  Constance continued with sadness, it was my carelessness and lack of knowledge over the past thirty years which paved this road I am on.  I never thought it was necessary to save for old age; no one told me that I shouldn’t retire with credit card debt.  I believed that my Canada Pension and Old Age Pension would be enough to pay all of my expenses and I would have some left.  Do you know until I became eligible to receive my pensions I thought the amount was in the thousands?  I moved from the Maritimes to Ontario at the age of forty for a better life, now I’m not able to purchase a train ticket home to visit my family.    

The situation that Constance is in is not uncommon, I am meeting more and more people who are finding themselves in this position.   We are planning to meet again to see if together we could come up with a solution to solve her problem.

It always comes back to those five simple words:  proper preparation prevents poor performance.

It is never too early to begin to plan for your retirement, better to start sooner than later. Everyone should pay off all debt in full before retirement; retirement income is MUCH, MUCH lower than employment income.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

DISCIPLINE

                                                                      DISCIPLINE

Life Planning includes Financial Planning, Career Planning and then all the other things we need to plan to do or to get.

In planning our life we make choices and decisions we make these everyday and we make them without any thought. Can you remember actually brushing your teeth this morning or do you just know for sure you did?  Well life planning is different much different you need to be aware of every step in the planning process in order to attain the goals you set.

Most people fail not because they plan to fail it is because they fail to plan.  What are you willing to endure to attain your goals?   I know that to attain ones’ goal you need to be discipline and discipline will require a certain amount of pain.   The pain of discipline will grant your desires. What would happen if you choose not to be discipline which requires a certain amount of short term pain, you would have the experience of the PAIN OF REGRET which one would you prefer.  The pain of Discipline will last a few months at most a year whereas the pain of regret will last a lifetime.

LET’S LOOK AT THE TWO TYPES OF PAIN:

 

 

The Pain of Discipline

What is the pain of discipline?  The pain of discipline is the pain that you must endure to create the habits that will grant you your desires.  Only through right habits can you succeed; it is right habits alone that grant you your desires. 

Right habits come through pain.  Fortunately the pain of developing right habits is a temporary pain, but the benefits of right habits will last a lifetime.

It takes about six to nine months to form a sustainable habit.  I didn’t say three weeks; I said it takes about six to nine months, depending on what the habit is.  You may be thinking “That’s hard,” yeah, well so is a lifetime of regret.

 The pain of discipline is a small pain to endure, when you consider all that it promises. You will be able to have the money you need to live the life you want at a later date. The choice to enjoy a relax retirement, a home that is paid off and money in the bank to do what you want when you want. The pain of discipline over the next year is not as grievous as the pain of regret when you are 60 years old.  The pain of discipline is temporary.

 The Pain of Regret

…And then there’s the pain of regret.  The pain of woulda-coulda-shoulda, the pain of next time I’ll do it, the pain that you are forced to realize because you have not yet committed to changing your habits.  

When we talk about changing your habits, we’re talking about changing your roots.  We’re talking about changing the kinds of fruit that you produce.  Do people gather oranges from apple trees, or grapes from a pear trees, No; every tree produces from its kind. 

Your life will produce results based on your kinds of habits.  You can’t produce a successful life, if you don’t have successful habits. 

When you don’t create the right habits, when you’re not committed, it causes regret.

Why do you have regret?  Because you know on the inside of you that you are capable of achieving more.  You’re not regretting the impossible, you’re regretting what you know you could achieve; what you should achieve.

Which pain will you choose?

When you’re on your deathbed, your dreams and your goals will stand by your bedside, if they have not been fulfilled, they will demand to know why.  They will insist on knowing why you choose the pain of regret over the pain of discipline.

Don’t let your dreams down, don’t disappoint your goals.  

Decide today to create the habits that will give you the life you desire, decide today to deal with the temporary pain of discipline.  If you do, you won’t have to live with the pain of regret, you will live knowing that you did your best.

Get to your bank and make all your savings automatic it will just take one hour of your time and you will save yourself a lifetime of regrets.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster.  She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto.  Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank.  During her tenure at TD Canada Trust she held various positions interacting with customers of the bank.   As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

PATRICK AND TINA

Proper Preparation Prevents Poor Performance.   This sentence is the absolute best way to describe how Patrick and Tina were able to achieve their dream of buying their first home.

Someone made a comment that Patrick and Tina seemed so calm during their home purchase.  Patrick and Tina’s purchase was effortless because they worked with a Financial Planner and they followed their plan and stayed on course.  Purchasing a home is the single biggest investment you will make in your life therefore it should not cause any stress, confusion or doubts.  Work with a Planner you trust who will listen and have your best interest.

Patrick and Tina’s journey started four years ago.   Patrick’s mother Corinne called and asked if I could work with Patrick to help him meet his financial goals and manage his money more effectively. Patrick called me a few days later and asked to meet with me.   He came to see me; we talked about his goals, and discussed his income and expenses.  During the discussion about his expenses Patrick discovered that he didn’t know exactly where his money went.  Most people do not know how and on what they spend their money from pay day to pay day. 

Patrick had to go over his list and return with a plan of what he wanted to accomplish.  I was introduced to Tina a few weeks later and was told that she was also part of the plan.  Together, we worked out a course of action that included Tina’s and Patrick’s goals for their future.

When the plan was in place they had to make some changes in the way they managed their finances.

Here are list of the savings accounts they put in place to enable them to manage their money more efficiently:

1. Registered Retirement Savings account
2. Vacation savings
3. Emergency savings
4. House account
5. Christmas and Birthday account

This may seem like many accounts but when you are planning for a secured financial future everything needs its own place. With the various accounts in order you are able to manage and keep track of how much money you have at any time for the various goals you have set.

Financial Planning is not a one size fits all, each individual or couple’s Financial Plan is different.  This is where the Financial Planner is able to take a look at what the goals and plans of each individual are and then put a plan in place to meet their financial goals.

Patrick and Tina stayed on course.  Some modifications had to be made, for example when the amount in their Registered Retirement Savings account reached $25,000 their bi-weekly automatic deposit was then redirected to their House Account.  The funds in their RRSP enabled them to take advantage of the First Time Home Buyers RRSP withdrawal of $ 25,000 without incurring a tax liability.

They had visited their bank a few months prior to buying their home and got their pre-approval in writing which they gave to the Real Estate Agent who then knew exactly what price they could afford.   Once they chose the mortgage they wanted they found themselves a lawyer.  When the right house in the right price range and the perfect neighbourhood came on the market they were ready to clinch the deal, which they did. The vendor wanted a short closing and since all their ducks were in a row they were able to do the short closing and move into their home sooner than they expected.  

Patrick and Tina worked as a team during the years of planning and made some difficult choices which gave them the opportunity to take advantage of a great deal when it came along.  A friend told me that Patrick and Tina were very LUCKY but their success had nothing to do with luck. I believe the definition of LUCK IS = PROPER PREPARATION MEETING OPPORTUNITY.  They were on a journey, stayed on plan, handled the detours with some advice and got to the finish line.

The planning stage is not complete for Patrick and Tina. We will be meeting in a couple of months to change and set some new goals for their future.

Everyone should meet with their Financial Planner annually to review and re-evaluate.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

 

The Emergency Account

In my last blog I mentioned that as part of your new financial plan, after buying your home, you should make sure that you have an emergency account with at least 12 months of your monthly expenses.

I really got a few of you charged up and you did let me know how impossible that was, it was not realistic, I was way out especially since you just bought your first home, who am I kidding and you just went on and on.

Well first of all, Rome was not built in a day, but it was destroyed in one. They had the great fire and Nero was playing his fiddle. Well what I am trying to prepare you for is that when your fire is burning you need access to a hydrant that is not plugged with the debris of debt but lots of water flowing in the form of your own hard cash.

I was wrong to just say to you, that your emergency account should have X amount of dollars without giving you some examples of how to do that.

It is a great challenge, when you have just moved into a home with the type of expenses we talked about in the last blog to be able to save for such a large emergency account.

Many banks have savings accounts which you could use as an emergency account. One of the features of these accounts is one or two free withdrawals a month which can be handy when you need to access the funds for an emergency. Another account that can be used as an emergency account is the Tax Free Savings Account-any of these could be used for your emergency account.

My intention was not to expect you to save $25,200 in one year. My intention was to make you aware that you need to focus on saving for those emergencies or just household repairs. The idea is to have a goal which you can set with your planner or on your own. You know what the magic number is for you- it is the total of your monthly expenses. Not your sister’s or friend’s but for you and your household. The amount is 12 times your monthly expenses. In order to plan for your emergency account you must know the total amount in dollars. Once you have set this in place you can then begin to see where in your spending plan you can make the changes or adjustments which will allow you to put this amount aside in a gradual manner.

Let’s look at Curtis’s comment:
Enlighten me – I quote from your blog“If your total monthly expense is 2,100.00 that mean you need to save $25,200 in your emergency account.”

“What would u consider as a reasonable amount of time to build up this account? One year, Two years, – how long. Bearing in mind all of the other bills banging away at yours truly for attention, to be paid, from the frivolous, to the mundane to the necessities.Some frivolity is required in one’s life, at judicious moments I hope.”

A reasonable time for one person or family would not be the same as another. Completing an emergency account is a must but not to the detriment of your other bills whether they are frivolous, mundane or necessities. These bills must be attended to and always on time.

Part of your new spending plan should include an emergency savings plan. For some of you it might take you 1 year while for others it can be anywhere from 2 to 5 years. Remember $2,100 a month in regular household expenses is on the low to medium. We are going to use this number and work on attaining the $25,200 over five years, most of you are receiving your pay cheque every two weeks or you have 26 pay periods in one year. Over a five year period you have 130 pay periods to get the proper amount. To save each pay day divide $25,200 by 130 or what ever your number, that will give you the amount you need to automatically save each and every pay day, in this case $194.85. This is over five years, but I am hoping that when you made the decision to purchase your home you followed my advice and paid off your revolving debt. Without hundreds of dollars of revolving debt to pay of each month you should be able to accumulate your emergency account in a reasonable amount of time.

When preparing your spending plan whether you have just bought your home or rent it must always include some room for what you might consider frivolity. This could be your annual vacation, or a few weekends away. As always proper, planning prevents poor performance and a smart spending plan should be prepared in such a way to allow you to move freely without feeling constrained.

I hope this helps you in formulating an emergency account, and you have come to realize it will take some time to accumulate the funds in the account.

ROME WAS NOT BUILT IN A DAY. Go according to your plan.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com

You Bought Your First Home; NOW WHAT

You have just made the single biggest purchase of your life, “Congratulations”

Things will need to change you will have to visit your Financial Advisor and set up some very different goals. From your previous meetings with your Financial Advisor or from reading my blogs you know that you have to visit your financial advisor once a year after your plans are in place or when there are any major changes in your life. Like having a baby, getting a promotion, buying a home or anything that will affect your family unit in a big way. Since buying your home falls under this category you will need to change your existing goals. These changes are all good.

Let’s begin; you had most of your savings going into your House Account, your Registered Retirement Savings Plan, an emergency fund, your Vacation and Birthdays and holiday account. You will change some things drastically and some you will modify others will stay the same.

As a home owner here are list of things that you will be required to pay monthly:

1. Mortgage payment which will be much more than rent
2. Hydro/ electricity
3. Home heating
4. Water
5. Property Taxes
6. Fire Insurance on your home
7. Mortgage Insurance (optional)
8. Property Maintenance/Condo Fees

These are the payments which you did not have to make when you were renting or living with family.

Where are these funds coming from? Well your house savings account will decrease drastically since you now own your home and no longer need to save for purchasing a home most of the funds going into that account will be applied towards the mortgage payments, electricity, home heating, water, property taxes, fire insurance and property maintenance or condo fees. That is a huge amount of money and maybe you did not save that much monthly in your house account.

The other areas where changes will happen will be taking some off your Registered Retirement Savings Plan not all but some, cutting back on the vacation account and the birthday account. If you did your home buying plans by following guidelines you were given prior to purchasing your home then your changes in the smaller accounts should be minimal.

The forbidden account the one you should not touch is your emergency account. The funds in that account should total 12 months of your new living expenses. If your total monthly expense is 2,100.00 that means you need to save $25,200 in your emergency account. When you reach that number you may then change the amount going into that account, and apply it to savings for bigger and better things.

If you took funds out of your Registered Retirement Savings Plan to use towards the purchase of your new home, your financial advisor will inform you that two years after moving into your new home you will be responsible to replace one fifteenth of the funds you took out of your RRSP to apply towards the purchase of your home. To be able to do this you will have to continue making contributions into your Registered Retirement Savings Plan. This account will be modified but not drastically changed.

Monthly Payments; I recommend that you make your mortgage payments and your entire household bills on the same cycle that you receive your pay cheque. If you make your payments this way your cash flow will be more manageable. When you pay your mortgage payments Bi-weekly or weekly you end up making one extra monthly payment which will help you own your home sooner.

At this time you are thinking it might be easier to stop saving money all together because of having so many more monthly payments. Gear down take a deep breath and continue to do your savings the same way before you owned your home with major or minor changes but saving you must. It is also advisable to automatically make your savings on the same frequency as your bills. In this way you will guarantee that you are paying yourself first.

You have just begun a new journey in your financial life you are a home owner now, a big purchase, you owe hundreds of thousands of dollars and you still need to watch your spending. Guess what, you must not do, use your credit cards to make purchases for furniture and other items that you can purchase for cash later by saving for that particular item. At this time you do not need to have revolving credit which requires a 3% – 5% monthly payment, in addition to your other monthly payments, do not be tempted to go on a household item shopping spree. Slow down and check your revised plans again go slowly you will be able to save to make some of your larger purchases without paying any interest.

Relax and enjoy this part of your journey, you made a smart plan and now you are reaping the rewards of a SMART plan that was well executed. Congratulations and Good Luck.

Tessa- Marie Shillingford is the author of Controlling the Debt Monster. She is Personal Financial Planner, with a designation from the Institute of Canadian Bankers, and a Financial Counselor certified by the institute of Canadian Banker. She is presently a Program Facilitator of Financial Literacy at JVS Toronto. Tessa- Marie was employed by TD Canada Trust for twenty years in the retail section of the bank. During her tenure at TD Canada Trust she held various positions interacting with customers of the bank. As a Financial Advisor and Manager of Financial Services she led a group of Financial Advisors in helping customers of TD Canada Trust successfully manage their finances. Details of her book… Controlling the Debt Monster, can be found at http://www.controldebtmonster.com