Doyle Salewski Blog

Set short term financial goals

Brian — Thu, 26 Jan 2012 15:31:10 +0000

Short term financial goals, as is implied by the term, should only take up to a year to accomplish.[1] These goals are not meant to be large or intricate. For example, a short term goal may be to drop your household spending to $200 a month.

Three strategies you may want to try that can help reach your short term goals are:[2]

Cutting expenses to create more disposable income.
Saving a certain amount of money each month.
Invest in short term vehicles that allow quick access to your assets.

Have a good understanding of your income and expenses before you begin setting these goals. Base these goals off your budget and your expenses.

[1] www.lendingtree.com/smartborrower/empty-nesters/managing-your-money/setting-financial-goals/
[2] www.msmoney.com/mm/financial_health/financial_goals/short_goals.htm

Financial Freedom

Brian — Thu, 19 Jan 2012 15:12:04 +0000

Here are some steps to achieve financial freedom[1]:

1) Pay off your credit cards: Before you think about investments you should pay off your credit card balances.

2) Establish a six month contingency plan: Putting money away for a rainy day or unforeseen circumstance is a huge benefit. This practice will save you from a money scramble when something does occur.

3) Pay yourself first: Regularly put away a set amount out to invest.

4) Begin investing as early as you can: The earlier you begin to invest the more interest you begin to generate.

5) Invest in indexed funds: These funds are designed to replicate the movements of an index of a specific financial market. So if the S&P/TSX Composite Index goes up, your index fund goes up by the same proportion.

6) Find an unbiased adviser: If you are not comfortable managing your investments, find an adviser to do it for you. Find an adviser that does not sell their own brand of investment products. This will ensure that you are getting unbiased advice.

7) Put market drops into perspective: These will occur at regular intervals and the best approach is not to get too driven by emotions.

8) Allocate your assets: as you continue forward you have to remember to expand and increase your investments.

[1] www.theglobeandmail.com/report-on-business/retirement/nine-steps-to-financial-freedom/article1335531/

When marriage breaks down…..dealing with accumulated debt

Brian — Fri, 13 Jan 2012 14:31:59 +0000

After a divorce, the debt can put a lot of stress on both spouses. It is important, especially if you have a child with this person, to have a good plan in order to manage the debt effectively and not let it become out of control. Since your income has now been cut down to one income, a budget of expenditures is very useful in order to re-evaluate your cost of living and determine where your money should be going. Once you have made a budget, it is important to limit impulse spending. If you have a hard time with this you can make a list when you go to any store, forcing yourself to stick only to the items on the list. Staying on top of the budget and reducing your spending is vital to this system. You should be allotting no less than an hour a week to review your finances. After you have set up a budget, it’s time to make a list of all of your debts. This can be done on paper but is much easier to modify and edit in spreadsheet form. Once you have your debt listed out, order it from smallest to highest. From here, you can start making large payments on the lowest debt, while making the minimum payments on your other debts. Continue this system until you are debt free!

Paul’s six steps to become debt free

Paul — Thu, 05 Jan 2012 14:59:33 +0000

1) “Know your finances intimately”
This process begins with knowing how much income you have and where it’s going. Start by working out your monthly income and list the sources of this income. Then list your expenditures.

2) “Decrease your expenditures”
Cut your costs. With the expenditures list from the first step, begin to go through the list and cut out expenses that are not necessities for living.

3) “Increase your income”
Begin to think of ways to increase your income every year. This could involve getting a job or a second job, getting extra hours, reducing your tax, starting your own small business.

4) “Play the interest rate game”
Determine the different interest rates on your debts. If none can be lowered by the creditor, then you can start focusing on one debt and paying more than the minimum payments on it while maintaining the minimum payments on your other debts of course!

5) “Spend Less”
Base your spending on absolute need versus want. Use rational versus emotional criteria for making spending decisions. Consider the following:

Don’t carry credit cards with you
Pay cash or write cheques
Turn down credit line increases
Don’t sign up for new credit cards
Make a special event fund (holiday gift-giving, vacations)
Ask for a friend’s support in your attempt to save money
Pay cards on time to avoid late fees

6) “Earn More”
Starting a small home-based business — picture framing, painting and decorating, lawn-mowing, eavestrough cleaning, baking or furniture refinishing — or thousands of other simple businesses may be an option for you. In addition to having some extra dollars this business may help you transition into retirement more comfortably.

Overwhelming bills and your budget

Brian — Thu, 22 Dec 2011 15:08:18 +0000

When dealing with overwhelming bills, creditors calling, and life spinning out of control, the most important thing you can do is not panic. Careful management and damage control is going to be vital to take some of the pressures off. If you need help developing a realistic budget to put you on track, you should recruit help from trusted knowledgeable friends or advisers to help you develop a reasonable budget. As part of this process you should write out your debts and select what you plan to begin paying off first. If the interest is greatly affecting you, consider calling the lender and asking about a possible interest rate reduction and other ways that could help you with lowering your interest. After preparing your budget, listing your debts and working out a repayment plan, if things still aren’t adding up, call Doyle Salewski. We’d be happy to evaluate your situation and offer some free advice.

Budget for Entertainment

Brian — Thu, 15 Dec 2011 14:42:56 +0000

Although saving and watching spending is important to stay within your budget, it is important to have a little fun as well. Adding entertainment to your budget is a good way to still manage your money and bills while allowing yourself some money to do what you want. For big entertainment expenses like vacations or events, it is important to plan ahead and fix savings into your budget to prepare for these bigger purchases[1]. For smaller entertainment fees, a rule of thumb is allotting 5% of your income to entertainment. The important thing to remember is to stick to this budget, it is very easy to get caught up in spending money on things you want, but don’t actually need.

[1] howtomanagemoneytips.com/preparing-a-budget-for-entertainment-spending/

Credit Card Interest and Fees

Paul — Thu, 08 Dec 2011 14:31:01 +0000

What is interest? The basic definition is the fee paid for the privilege to borrow money[1]. The interest fee is the price a person pays for the ability to spend money that would have otherwise taken them a while to accumulate. Interest rates vary greatly, changing from company to company and country to country. There are two basic finance categories: Annual rating point (ARP) and Monthly periodic rate[2]. ARP is the annual rate of interest the card issuer claims the consumer will pay over the course of one year. This can be as high as 30% or as low as 5.9% depending on the card. Monthly periodic rates are fees that the consumer must pay on top of the ARP. Usually this fee is added to the current balance with additional interest charged on the new fee. These charges can include: late fees, over-limit fees, transaction fees, lost card replacement fees and cash advance fees.

It is important to be careful and cautious of low interest rates because they can entice you to spend outside your means. As money continues to accumulate on your card, if you are not able to pay it off then the interest is added and other hidden fees may be added as well. Some card companies are known to have increased fees to compensate for the low revenue from the interest rate.

[1] www.investopedia.com/articles/01/061301.asp

[2] www.crown.org/library/ViewArticle.aspx?ArticleId=580

‘Tis the season to avoid debt

Brian — Thu, 01 Dec 2011 14:35:30 +0000

One of the most important things to remember during the Christmas season is to plan your purchases. Saving money year round for Christmas is a very good trick to allow you to buy presents without having to use credit cards. Trying to pay with cash will also help you stay within budget as opposed to putting things on a credit card and not being sure of exactly how much you spent until you review the receipts after shopping. Be careful with your cash though. Have an amount set, take out that amount and stick to it.

You can also try and to go through one week only spending money on groceries and gas. No coffee, no eating out, etc. At the end of the week add up what you saved and place it in a holiday fund. Tips like these will help you to save and your holiday fund can begin December 26 giving you a full year to save again.

Student Loans (Not a student but still in debt)

Paul — Thu, 24 Nov 2011 14:23:01 +0000

With the growing cost of tuition fees, books, and residency, many students need the assistance of a government student loan. If you need a student loan, you should use it. Investments in advanced education usually pay-off in terms of higher lifelong earning power. But if you are approved for a $15,000 loan, don’t use all of it just because it’s there. Living frugally while you are a student and developing good money habits are part of the overall education process.

If you have a student loan, within six months to a year following your graduation, the payments on the loan will begin. Following graduation and getting your first full time job, it’s important not to get caught up in the thrill of moving out on your own, expanding your wardrobe, and buying a first car. While the student loan remains outstanding, consider having a roommate to share living expenses, or renting a room in someone’s home. With either of these strategies, you can reduce your living expenses and put more of your income into loan payments. Researching living costs in the city you plan to move to is also a good idea. While the lights in Toronto or Vancouver burn bright, costs in these two cities are higher. Make comparisons of cost of living by city so that you will be able to determine a cost effective place to begin your career.

The Wealthy Barber

Brian — Thu, 13 Oct 2011 14:01:20 +0000

The Wealthy Barber is a novel by David Chilton and is considered a great starting point for anyone looking to create a financial plan. The book revolves around Roy the wealthy barber who has been running his barber shop in Sarnia for several decades and gives financial advice to his customers. Each chapter of the book describes a different visit and a different element of financial planning. Each month along with their lessons, Roy’s students are required to start carrying out the actions that have been prescribed. Roy explains RRSPs, mutual funds, real estate, insurance, and so on. His most important rule is “pay yourself first”. He advises his customers to take 10% of every paycheck to invest in “safe interest-bearing investments”. The book focuses around the twin ideas of not chasing after every thing our culture says you should buy, and secondly, on saving 10% of all income to invest for long-term gain.