To Know Where You Are Going, One Must First Know Where They Came From

 

I love tracking my expenses. There is something so satisfying about knowing exactly where my hard earned money is going. I acknowledge I am likely a minority in this regard. So many people cringe at the thought of expense tracking or budgeting! Imposing limits, dealing with spreadsheets, tracking spending….brings about as much joy as tuna salad. Why do you have good intentions when it comes to personal finances but fall flat when it comes to follow through?

You are starting too big.

One of my aunts provided a challenge last year. The task was simple: every day write on the calendar where you spent money. At the end of the year review the information. I did it and let me tell you, it was very eye opening.

I learned that my biggest expense, by far, is my home. Now this in itself is not particularly earth shattering, most people can expect this to be their biggest expense. What was surprising, was the percentage of my total expenses that my home consumed….47%!!!!! Why is this important?

It doesn’t matter how many coffee’s I don’t buy, how many shopping trips I pass up, or how many times I pass on ordering pizza on Friday night. If almost HALF of my money is going to my home, there will only be so much money left for everything else.

I knew prior to doing this exercise that my home was a big expense – that is why I got a roommate at the beginning of 2015. But seeing the real numbers in front of me confirmed that the decision was the right one – AND that I needed it to continue. Where previously I thought of the roommate as a temporary solution, I realized that if I wanted to continue living in my home, I needed to do so at the expense of sharing it with someone else.

This realization is so important. I can make a budget, track my expenses, get frustrated that I don’t have more money, but it’s all for relatively minimal return if I don’t acknowledge the main source(s) of my spending (and accept or change them).

So my plan for 2016:

  • Continue with room mate
  • Determine how to increase passive sources of income
  • Eat out less! (this was the next biggest culprit when it came to spending!)

Also of interest – I don’t spend nearly as much on clothes and entertainment as I thought! Data is a powerful thing.

As a final parting thought, you may notice you don’t have to CHANGE your spending habits to complete this task. All you are doing is collecting information. Once you have information, you can make a plan moving forward. Sounds nice doesn’t it?

New Year, New Outlook

Happy New Year! Did you make a resolution this year? How do you feel about resolutions? The word seems to illicit mixed emotions in people. For some, it’s exciting. An opportunity to turn over a new leaf and set some intentions for the year ahead. For others, it’s viewed as an unnecessary exercise. Why should a seemingly arbitrary date on the calendar push me to lose weight, save more, be happier?

Really, if we think about it, a resolution is just a call to action, given a fancy name due to it’s timing in the year. Google results for “resolution”:

res·o·lu·tion

noun
  1. 1.
    a firm decision to do or not to do something

We are constantly making resolutions, even if we don’t know it. Finish school. Get promoted. Buy that investment. Sell that investment. Go to Jimmy’s soccer games more often. Sleep in. These are decisions to do (or not to do) something.

I think one of the biggest obstacles people face is the fear of failing. Setting resolutions can be intimidating. If I set a resolution, I have an opportunity to fail. Therefore I will continue doing what I am doing, without the prospect of failure. Ah. Bliss.

The problem with this is it provides no momentum for personal growth. Over the Christmas break I was able to read “The Happiness Project”, by Gretchen Rubin. This is a great book, I highly recommend it. It’s an easy read, entertaining, and most importantly full of good tips and advice on how to be happier. One of the ideas presented in the book is that personal growth is crucial for our happiness. I really resonate with this. I truly believe if you are not moving forward, you are falling behind, as the world forges ahead regardless of your decisions.

But personal growth is so hard. Who has the time to learn a new language, travel to Thailand, or exercise every day. The key is baby steps. Instead of telling yourself “I’m going to save $1000 this year”, say “I’m going to put $20 in my savings account this week.” The latter sounds much more achievable and you are more likely to accomplish a small, specific action. The satisfaction from following through with it, will give you motivation and maybe you’ll save $25 the next week 🙂

So this year, have a new outlook. Put aside fear, and start small. You may be surprised how far it can take you.

 

 

 

Unexpected Charges for Changing Tires

It’s November, which here in Canada means it’s time to change your tires. Although not required by law, many people decide to swap out their regular tires for something a bit more grippy and reliable on our slippery snowy roads!

I have never purchased winter tires. I believe a good set of all seasons and cautious driving are sufficient! But this year, with five year old all season tires, I caved. After purchasing a set of gently used winter tires, I did my research on what were the best, affordable tire shops in town.

Something I never thought of was that the tire shop would have difficulty in removing my tires. You see, some tires come with a locking wheel nut. If the place that installed your tires is on their game, they will store the KEY somewhere in the trunk, glove compartment, etc. Well, if they can’t find the key that means the mechanic has to do extra work to try and ‘unlock’ the tires, which comes at a cost. Depending on the business, it will run you an extra $25-100 (the cost varies depending on how much work, if something broke while trying to unlock the tire, etc).

This makes sense when you think about it – the lock nut mechanism prevents any Joe Blo off the street from walking up to your car and stealing the tires. Where it fails in reality is that in many cases tires are only changed at best every few years, and in many cases the garage that performs the change may forget to put the key back – which is small, and easy to misplace.

A trip to Fountain Tire (where my original five year old tires were purchased), and a quick chat with the owner there, and I was able to get a key from them, free of charge. Problem solved!

There are many people that don’t know where the key is, and many shops that MOST of the time can get off your tires – it’s just helpful to know where you can save a few dollars here and there 🙂

Unexpected Expenses and Hidden Fees

Are you comfortable asking questions when it comes to your money?

Many of us trust that “the system” has our best interests at heart. That the bill we are being asked to pay for services provided is fair and accurate. But here is the thing….no one is looking out for you! The bank, the insurance company, the phone company, the car dealership….they are all concerned primarily with maximizing profit. You have to be comfortable asking the difficult questions. Let me provide some examples.

Scenario 1; Hidden Fees: You walk into a car dealership looking for a new car. A helpful salesperson spends the time with you to determine your needs and budget. You are quoted a price of $20,000 for the car you want. Then, after an hour of sitting in their office, you are presented with a bill of sale….for $24,000. What happened? Where, there is GST of course. There are also fees associated with the sale. And a fee for registration. And a fee for cleaning the car. And an admin fee…And…And…..Gee, all of these charges seem reasonable but no one told me about them and my budget was only $20,000. Some of these charges will be necessary and it is assumed that you would have done some research on the additional fees – but some can be waived with a bit of negotiation. Don’t be afraid to ask what the charges are for to determine if they are really necessary.

Scenario 2; Unexpected Expenses: You and your spouse finally saved up enough money to buy your first place. The bank approves you for a mortgage of $250,000. You calculate that your monthly mortgage payments will be $1300. Off you go, searching for that perfect townhome. Your realtor finds you the perfect home and you sign on the dotted line.

Then the first months bills roll in…..

The mortgage payment comes out for $1300. Then the condo board sends you a notice. As the new owner you will be required to pay condo fees of $300 per month. These fees go to maintaining the building and providing services like insurance and garbage pick up. They will need payment within 30 days. The condo fees don’t include utilities (water, heat, and gas). Last month these were $150, payable to the local utility provider by next month. The city sends you a notice in the mail – property taxes are going to be due in three months. As you declined the TIPP program offered by the bank (what does TIPP stand for anyways?), you’ll be required to pay $1,500 in a few months time. (*Note: TIPP stands for tax instalment prepayment plan. The estimated annual property taxes are taken from your account on a monthly basis, making the payments more manageable than a one time lump sum).

Let’s revisit your monthly budget. Mortgage: $1300. Condo Fees $300. Utiliities $150. Taxes $125 ($1500 over 12 months). Total: $1875. That’s 44% increase from what you originally budged when you bought the place, yikes! That’s an extra $6,900 per year you have to now factor into the budget.

Typically the bank factors some of these things in when approving your mortgage. However it is in their best interest to provide the maximum mortgage amount possible (in order to gain the most interest from you), while balancing their fiduciary responsibility to not lend you so much that you will default on your payments.

The onus is on the consumer to do their homework. The above is a great example of how shocking it can be from going to a renter status (pay one person once per month and that’s it!), to a homeowner who has obligations to many people.

There are lots of websites with helpful tips and information when it comes to buying a first home.

With things like insurance and car purchases, it is up to you to ask what you are being charged for. It can be an uncomfortable conversation and many times you may be given high level answers which do not really provide insight. Don’t be afraid with speaking up! It is YOUR money after all….the best companies are the ones who will have no problem answering your questions because they know an informed customer is a happy customer.

The Total Costs of Car Ownershp

Have you ever considered what the total costs of car ownership are? I mean, sure, there are the typical “new or used,” “lease or buy” questions, but paying for the car itself is only one (small!) part of the story.

My car is ten years old, and has been paid off for some time. I realized it may be a good idea to start putting money away towards the purchase of a new car. I am hoping to get at least five more years out of this one (the mileage is very low for it’s age), but recognize that the more money I have to put down on the next one, the easier it will be on my monthly budget! So, in true financial analyst fashion I made a spreadsheet with some lines:

1) Buy Car

2) Fuel Car

3) Maintain Car

This seems reasonable right? But then my brain gets thinking… and I add a few more categories:

4) Insure Car

5) Parking Expense

6) Other Catch All

The last category is for things like car washes, windshield washer fluid, and furry steering wheel covers (if you are into that sort of thing).

When I started to add it up, the cost of owning a car was ALARMING. I’m talking, consider selling your house and buying a place near the office so you can walk to work, alarming. I currently have no car payments and I’m spending $9,000 per year on owning a car!!! The interesting thing is this is actually on the low end of how much it might cost the “average” person for a few reasons: 1. I have a Corolla which are known for great gas mileage, 2. I get discounts with my insurance company (shop around!), 3. I am anal about regular maintenance to avoid larger problems. So you could be spending even more! How does it add up? Check it out

CarsAreMoneyPits

So this has taught me a few things:

1) I need to start saving like, yesterday, for the new car that will eventually be in the driveway

2) I need to move to the apartment building beside my office and adopt a car less lifestyle

3) Take money saved with new lifestyle and go on amazing trip to Europe

Jenn

Free Recreational Activities

Today was the start of a new season of volleyball. WOOT! Have to say I was pretty excited to start up the game again.

We have a Sport and Social Club in my city that offers a variety of sports including basketball, hockey, badminton, soccer…you get the idea. You register, you pay the fee, you play!

But did you know that if you volunteer to be a Coordinator your get your playing fees comped!? (free!). Yup. All you have to do is show up early enough to set up the nets, make announcements, and then take the nets down. Since all the players are so awesome, we all help out and so really you’re only job is to spend a few minutes at the beginning of each game telling us to play nice, play fair, etc.

So if you’re thinking you cant do team sports because it’s too expensive….think again! There is sometimes an opportunity hiding behind that internet browser window.

Until next time

~J

It’s the Little Things

Oh Friday. The end of the work week. The day many of us yearn for all week long.

…and also the day we run out of food in the fridge.

I had pretty slim pickings this morning when it came to breakfast and packing a lunch. Breakfast was an apple that has probably been sitting on the counter for too long, and a defrosted muffin. Lunch was some leftover pasta and combined with the scraps from one of those roasted chickens…you know the ones. I’ve been trying to be diligent about using food that is at home, even if it’s not the most appealing option. But as a reward to myself I stopped at Tim Horton’s on the way to work to get my medium steeped tea – one milk, one cream, one sugar.

It cost less than $2 and it made me happy all morning. Could I have gone without this tea? Probably. But instead of spending $10-$30 on breakfast + lunch, I packed my mediocre food and rewarded myself with a tea. I consider this smart spending. The best scenario would have been that I didn’t get the tea AND packed my food, but we all can’t be perfect all the time.

Happy Friday

Expect the Unexpected

At the beginning of this year I set out to keep better track of my expenses. A family member suggested that I get a calendar and write down what I spend every day. This seemed a bit old school at first, and extremely inefficient (why would I do that when I have apps that can do it for me?) but I caved and got myself my calendar and pen and away I went.

We are now halfway through the month and it’s interesting to report the exercise has not gone as I had expected! I set a very detailed budget at the beginning of the year and had grand plans of sticking to it. I even had the fortunate success of securing a room mate for January 1, something I had been working on for some time. My plans of saving the rental income and going on a nice vacation were soon crushed when….

(1) First week of January – furnace has problems. $260 repair

(2) Second week of January – I back out of my garage at 5 am to go to the gym, and, manage to smash my passenger side mirror. In retrospect, probably not very awake at 5 am to be driving. $300 repair

Now these two things in isolation may not seem like a big deal, but I had also…..

(3) December registration for Spanish class in the new year. $250.

Add that all up and we’re quickly over $800!

The Spanish class was not in my budget originally, but it’s something I’ve been wanting to do for a long time and figured with a few less trips to the mall and coffee shop it was totally doable.

Interestingly enough, the combination of the above expenses is almost equal to the amount of rent income I received in January….essentially offsetting all my hopes of saving some extra cash.

The overall point here is that if I did not have my calendar staring me in the face each morning with a detailed list of expenses, I would have probably put these on the credit card, forgotten about them until the bill came in (thus not curving my spending for the remainder of the month), and gotten a little shock. Since my calendar was in plain view, I’ve realized I need to watch my spending for the rest of January in order to recover from these unexpected costs (or make more cash, which I have done by securing some tutoring sessions, more on that later).

The silver lining I suppose is that I won’t be going into debt because of these surprises….it just so happens my rental income will be there to help. But its a GREAT example of how we just can’t plan everything, and that sometimes the best thing to do is expect the unexpected.

So next time you have a few hundred bucks left over at the end of the month, sock it away for when you drive your car into your garage at 5 in the morning 🙂

~J