How I get what I want – Part 3

What went before this:

How I get what I want: Part 1

How I get what I want: Part 2

Okay, so I’ve talked about saving money by choosing a good bank account. It might seem like it’s only a few dollars a month, but the point of that was to just think about how the money is going out the window. Keeping an eye on things and making conscious decisions about spending is what will make the difference. Today’s tip is one I swear by and could be the biggest life-changing mindshift.

Spread big payments over time

I go to Trinidad every two years for at least two weeks. I don’t know if you know this, but Vancouver and Trinidad are not exactly a hop and a skip away from each other. The tickets aren’t cheap and going out all the time when we’re down there isn’t cheap either. For the first few times, I bought the tickets early and saved money that way, but when I was there, I used my credit card for spending money. The problem with that is – and I’m sure you know – when you come back home, you have a huge bill that immediately kills your vacation buzz. What I started doing was thinking about how much money I would need for spending money; I used a generous estimate. I then divided that amount over the number of pay cheques until our trip. That way, I was going on my trip with all my spending ‘already paid for’. The first time I tried it, I even had leftover money. It was such a GREAT feeling not having any issues when I got back. There’s no guilt, no anxiety – just the memories. Even if I did need to use my credit card on my trip – think hair supplies or a steal of a deal thing – it’s only on splurge items that won’t break the bank rather than every meal for a two weeks. Also, because the money was pre-saved, it didn’t actually impact on my bank account while I was away. All around, it works!

I employ this strategy, not only for our trips, but for buying a lot of stuff actually. For example, getting my hair braided last weekend. I had saved what I thought it might be and when the time came, I spent my money with no reservations. I felt rich – not worrying about the price. I just plunked my money down, which included a generous tip, without batting an eyelash and sashayed out of the hair salon! Yeah, that’s how I do!

The trick to this is patience. Knowing what you want ahead of time and WAITING until you’ve saved for it. It makes all the difference.  Let me bend your mind. What is the difference between saving first on your own equal payment plan and THEN buying what you want rather than walking into a store and taking something home today and paying interest to the store for months and months AFTER. Think of my way as an interest-free payment plan. Makes sense, right? The only trick is that there is no instant gratification. What I’ve found is that when there is instant gratification on taking home something big on credit, it doesn’t always last. When you have to make your first payment after the fact or when you get your first credit card statement, it feels like, “Oh.” This is especially true if it’s something that takes a chunk out of your monthly budget.

I’m not going to lie to you: it takes discipline. What I’ve also figured out is that, if I have the money put aside, who knows, it might come in useful for something else along the way. Not relying on credit is a big thing, but I’m my own creditor: the Bank of Me. In a perfect world, that money would be sitting in your (hopefully free) bank account slowly gaining interest while you save all that you need. It’s worked for me on many, many things. It might work for you too.

This one is a big one, but it’s the one that’s made the biggest impact on my financial comfort.

How I get what I want – Part 2

What went before this:

How I get what I want – Part 1

Knowing your money

In a credit society, where you can spend today and not think about it until 30 days later when the bill shows up, it’s hard to keep track of your spending. If you’re like most people, pay goes into the bank and bills come out of the bank and there’s no real awareness of the actual dollars and cents going in and out. I equate it to constantly eating while you’re distracted. You’re not really paying attention to the consumption until your pants don’t fit then you’re like, “Whoa! How’d that happen?” You have to know what things cost, so you will know if you’re spending too much or if it’s worth it or, most importantly, if you can actually afford it.

When my old car, which only cost me gas to drive since it was paid off in full, started acting up, I panicked because I need a car, but how could I possibly afford a new one? With the price of gas, our hunka junka cost $65-$70 for a full tank and I could get 300 kms on a full tank. In a month, I used approximately 350 kms for my commute to work, I probably used another 60 for swimming lessons, maybe 90 for my trips downtown for dancing and let’s add another 150 for miscellaneous trips. Throw in the fact that the car’s fuel consumption is sub par, I was filling my tank about 3 times a month – more if I went out of town and even more if I used the air conditioning. That totalled about $200. Until I had to evaluate it, I didn’t really know how much I was spending on gas. I just knew that I didn’t have a car payment and I didn’t have to pay for transit, so it was all good – I was ahead.

It turns out, because I was spending a crazy amount on gas and I could get a car for around the same price as what I was spending on gas. I couldn’t believe it. I could have a car payment and pay $40 for a full tank of gas on a car with GREAT fuel consumption and break even. That’s the thing, I didn’t know. You have to know what you spend to know how you can do better. Maybe you could be better off with just a small change.

Eating out is another one. How much do you spend on eating out? Lunch out a few days a week, drinks with the girls, quick bites here and there. They add up. If you spend $300 a month on eating out, for example, and you spend $200 on groceries – that doesn’t make sense somehow, right, because are you really eating $500 worth of food? Probably not. Eating out is expensive if not done correctly and chucking out dead veggies every week is not fun, a waste of food and it’s depressing.

Perhaps a solution is to budget the cost of eating out into your spending. When Kidlet is not with me, I rarely cook. Why bother? I’ve learned that for those weeks, I buy the bare minimum – think bread and cheese and milk and some fruit. That way, I can eat out guilt free. I used to (but now don’t) have lofty meal plans for when he was away, so I’d go out and get a bunch of groceries. In reality, I was out all the time socializing, coming home late at night and only used the stove to boil water for tea. Now, I use that same grocery money to eat out. I also make sure if I do eat out, I order food that can be eaten in two meals, which makes my money stretch even more!

You have to know what spend to know if it’s too much. To end with a cliche that just happens to apply in this situation: “Knowledge is power!”

Next: Spreading big payments over time

How I get what I want – Part 1

Good morning! I hope all is well.

As promised, I’m going to do a series about how I save money. Now, I’m not going to sugarcoat it and say that it’s easy because it’s not. I just know that as the head of the house, I have to provide for my family and with only one income, there’s only a little room for error. You don’t have to do what I do, but you can certainly read what I’ve done and maybe it can help you look at a different way of spending and saving money. It’s not perfect, but it’s worked for me. Six months ago, I had been unemployed for 5 months with no income assistance – I was living off my savings. Today, I’m driving a brand new car AND I can still afford food! hehehehe….

Okay, here we go!

Never pay for someone to keep your money

This is my biggest pet peeve. I don’t know if it’s because our family has always been a credit union family, but paying an exorbitant monthly fee to a bank, especially a big bank, makes me crazy. Okay, so they provide a service to me, sure, but in reality, what am I getting for that service? For me, I have simple banking needs: I need somewhere for my incoming money to be deposited and I need access to it afterward for paying bills. I’m not investing, I don’t have a mortgage (YET! EEEK!), I don’t have a complicated portfolio. I just need somewhere to keep my money.

Now here in Vancouver, the average interest rate on a chequing account is around 1%, so depending on how much money I keep in the bank, I’ll be getting a couple dollars return for keeping my money there. Is that price every month worth it? For me, it’s not. I don’t think that I should have to pay $10 a month to keep my money in the bank and then they give me back $0.22 for my loyalty and basic service because, let’s face it, most of us use online banking anyway, so what does your bank really do for you to earn your $10 a month (which is $120 a year, by the way). That’s money that could be yours! Don’t pay banking fees because you have to, pay it because you are getting a service that is worth the money. I use a no-fee account that works just fine for me. I have never ONCE pined for a big bank.

If changing where you put your money is not an option for you, maybe you can look into changing the KIND of account you have. You know how you use your money – maybe there’s a cheaper type of account you can have so you can save a few dollars a month with little or no effort. Remember, the banks want to make money. They are not going to volunteer to let you know that you could change your account to one with cheaper monthly fees based on your usage. You have to look out for #1! You can always call in and ask for your options once a year to make sure you’re spending your money on the best products and services. You work hard for it, don’t throw it away.

Remember, with so much competition out there, they want OUR business, not the other way around. You have to ask, “What are you going to do to earn the privilege of keeping my money because I can get somebody else to do the same thing for less?”

*****

Okay, that sure sounded like a lecture, but I’m passionate about it.

Next: Knowing your money

 

 

How to get out of debt – the Vikera approach (Part 2)

Good Saturday morning to ya! Now that the holidays have died down and you are on solid ground again, are you ready to look at your financial situation?

I began writing on this just before the Christmas holiday, which was bad timing, admittedly. I did get the project going, however, on how to put together your Ins and Outs list. You should probably read this first to refresh you: Groundwork.

Welcome back, let’s get started.

If you’ve done Part 1, you should have two lists that look like this:

Imaginary money in

Imaginary money out

You DEFINITELY should no longer look like this:

Pep Talk

Remember whatever sacrifices you make won’t be forever, just until you are satisfied with your financial position.

Step 3

Even if you’re pretty lean and your gap is small or you’re looking at a chasm, this is what you do next.

• Decide what you can cut out right now, today, immediately! Ask yourself right now: “Self, what kind of lifestyle would you like to have?” Look at your Outs. You know what the essential things are and what’s not. You know you don’t NEED to have your nails done or you don’t NEED a $7 coffee every day and you certainly don’t NEED cable. Or maybe you do. You were probably thinking about what you would cut while you were doing your Outs anyway, so you know where to start.

I won’t judge if you keep mani-pedis. For me, I have to eat out at least once a week. That’s my thing. I don’t feel guilty about it. You still have to have pleasure in life, but you have to cut at least one thing though. Take a deep breath.

Look at your list of Outs draw a line through the thing/s you can do without. Write down: Debt Repayment total and write the total of what you’ve just cut. Now that you’ve cut at least one expense, how much did you free up? Good for you! That’ll be money in your pocket next month!

• Are you paying for what you use? When I got divorced, I did things just like when I was married: got the same cable package, phone service, etc. I never changed. It was what I was used to and I was comfortable. For last two years, I make it a practice once a year to review my services since my life and needs change year over year. Don’t continue to pay for things you don’t use/want/need. You can negotiate, ask for discounts, make sure you’re not spending money you don’t have to spend!!

TIP: When I review every year and cut back costs, I bank the difference. Every year, my car insurance goes down. I keep my OUT the same (from 2012) and bank the difference. Last year, I banked $150 a year. This year I will be banking $300. Painless!

• Can you bank more money without making more money? For some people, it is not a possibility to make more money. I get it. What you make is all you make, like me, but if I get unexpected money – a bonus or kickback or gift – I bank it immediately. I don’t even let it sit in my account for it to think it’s real money, even if it’s $20. You didn’t have it 10 minutes ago, so what does it matter if it’s gone again. You’ve got a point, sure, but use it for good!

TIP: I signed up for a credit card that not only has low interest, but is one that gives me money back. I bank that money every year. If I sell anything I own, I bank that money. I bank gifts, I bank any extra money.

If you can do any of this through online banking, it would be even better! I have $25/month going to my savings/debt on the same day my car insurance gets paid. Painless! In reality, the same amount of money will be going out a month, but going to different places: some to Them, some to the Bank of You!

I’m going to give you a week to work on this. This is a big one. A big (and most painful) part of financial health is awareness! You have to know what you’re paying for and what you pay! It might take some time to do the research.

Note: I know this doesn’t address the issue of the debt you have right now. This is to slow down the stream TODAY. The debt you already have is still there, but right now, today, you’re taking the step to reduce future debt! You need to fix the leak first. It’s important!

Let me know how you do!

Look out for Part 3 on January 18.

How to get out of debt – the Vikera approach (Part 1.25)

Good morning!

So it just dawned on me that I posted about looking at financial health at the very worst possible time of year – Christmas! (It would be insanity to start a diet now too.)

So here’s my dilemma: should I plough through and finish the second half or should I revive this topic in January when everyone’s financial statement comes in from Christmas? Hmmmm…

I choose to wait until January. Let me tell you why:

1. With 3 days to Christmas, most people are probably looking to spend money to spread Christmas cheer, not cut corners.

2. Part 2 of the plan involves a lot more research and hands-on work, so that’s probably better left for the new year when things calm down.

3. It will take some time to finish your “Ins and Outs” list accurately.

but most importantly,

4. The hardest part is already done.

Now, I consider looking at what it costs for how you live your life to be the hardest part because that is the part you can’t change. It’s already gone. Looking back at a concrete past is sometimes harder than looking forward to an uncertain future.

If you’re more evolved and the past doesn’t bother you and you live your life free of remorse, then perhaps the next step might be the hard part for you. (Strictly speaking, the gap between In and Out will determine how hard it will be, but we’ll look at that in the new year.)

I’ll come back with Part 2 on January 11, okay? Don’t worry, I’ll repost Part 1 as a refresher. Although, with the mall open from 8 am and some groceries open 24 hours, I suspect that when that nice polite envelope from VISA or the bank statement comes in, you won’t need a reminder….nor will I!

Have a great Sunday!

V

How to get out of debt – the Vikera approach (Part 1)

Good Saturday morning to ya!

As promised, I wanted to let you know how I got out of debt. Since I’m committed to writing based on prompts for this month during weekdays, I’ll try to explain it between today and tomorrow.

Okay, before we even get started, you have to ask yourself this question: Are you willing to make the hard decisions? It’s going to be hard – harder for some than others – but there will be times when you have to forgo something you really want and it’ll SUCK, I’m not going to lie to you.

As I mentioned in Dream a little dream, being out of debt seemed to be impossible to me. It started with an idea that I could do it and then all of sudden, the determination and vision took over. If I can do it, you can do it. Okay, let’s get started – I only have 2 days or should I say WE only have 2 days!

Pep talk

When I first went in to the bank, I was lamenting that I was paying off the debt, but it seemed like it was glacially slow. She told me that it will take some time. We had discussed 2 years and at the time I thought: “WHAT?? That’s a long time!” But you know what, it happened before I realized. The way I see it, I had a debt booster – that thing called credit – but there was no payment booster – lotto winnings or inheritance or a bucket of money. Getting out will definitely be slower than getting in. You have to accept that right now. Remember my favourite quote from Double digit followers? Yay!: any step, not matter how small, is a step away from where you’re standing! Don’t be too hard on yourself.

Speaking of not being hard on yourself, I have a small thing to say about that. You bought X or Y because it made you happy or you thought it would make you happy. You’re reading this because you want your future to have less regrets in it, correct? Okay, let’s move on….again.

Financial health is just like physical health – it’s all about in vs out. It’s not complicated or tricky. In vs out.

Step 1

Make a list of what money comes in on a sheet of paper. I mean EVERYTHING! For me, I use my online banking to look at 3 months at a time. What money comes in regularly that you use on a monthly basis. For example,

• Salary
• Money from parents/family/friends/government/
• Child support
• Dividends from investments
• Interest (not from your savings, unless you transfer the interest to your spending money every month)
• Savings (if you dip in there regularly for the same amount every month)

It has to be regular! No “one off” lump sums since it will give you a false sense of wealth. For me, it was salary and child support. That’s all I had in the plus column.

Step 2

One another sheet of paper write down your monthly REGULAR expenses. Here’s how you do it:

Rent           $800
Daycare    $175        $975
Phone       $100        $1075
Car            $250        $1325

I find it better to do it with a running total so you see how the money adds up. You see your expense total go up right before your eyes rather than just having a total, not to mention the shock value! It’s reality! (I told you it could be harsh!) Also, when you do your IN total first, you see exactly when your OUT exceeds it. It’s also useful for when you bring down some of your monthly outs and you do it again. You’ll be able to compare how much slower you approach your IN total.

There are times when your expenses fluctuate, for example, long distance or data charges on your phone if it’s not included in your plan. Put the base values: use the rate that it would be if you use what’s included. If it’s something that’s intrinsically variable, like a full tank of gas, average it out. 

Include any money out : savings, donations, all bills, loan payments, bank charges, magazine subscriptions, iTunes purchases, gym membership, swim classes for children, children’s allowance, hair cuts and mani-pedis. If it’s money out every month, take a deep breath and write it down and add it up. This will be hard.

I don’t want this to be too long, so let’s leave it here for today.

Good luck!

Please post comments about your findings when doing this process. It’ll help others. When I did it the first time, all alone, I almost threw up, but that’s just me! For you, it mightn’t be so bad!

V

Imaginary money in

Imaginary money out

My reaction the first time I did my In vs Out