debt debs

Personal Debt Wrangler – Had my money head in the sand – but no more!


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Family Matters – How Does Your Family Treat Money and Debt?

How Do Your Family Members Treat Money and DebtI wrote recently about some key contributors to our debt journey, acknowledging that my worst fear was the impact it was having on the ability of my adult children to manage their finances responsibly and proactively.

The Early Days after Debt Acknowledgement

My oldest is the most frugal of all of them, and has been quite capable of managing her finances well, (mostly) without my help.  In fact when we first acknowledged our debt crisis, I was quite overwhelmed and anxious.  I found it anxiety provoking to even log into our bank accounts or credit card statements on line!  Can you believe that?  She gave me some sage advice suggesting that I just start with one of them, and log in every day, until the anxiousness subsided.

Later I added logging in to see my credit card balances to my routine, and soon I was creating budgets on excel and living and breathing our financial numbers until I was bleary-eyed.   The new found financial good habits, for me, had begun.

More than a year later, after that initial shock, I had built up routines and coping strategies and I began to talk more openly about our finances with all of our children.

Good Personal Finance Habits

Even though I knew my oldest was probably in the best position, I still wanted to satisfy my curiosity urgent need to know exactly how they were managing things.  Were there any things they were not doing or neglecting that, after twelve months of debt wrangling, I might be able to offer advice on.

She assured me that they had all of the following in place:

  • An emergency fund of cash equal to about 3 months of expenses.  We discussed the merits of having up to six months of expenses.
  • Fully topped up TFSA’s (Tax Free Savings Accounts), for both her and her husband.  This equated to about 40K at the time, more than enough to be considered the additional component of their emergency fund.
  • Regular contributions to their RRSP’s to obtain the maximum company match.

I also knew that she had good frugal habits in place such as:

  • Managing household expenses by minimizing hydro use (her husband always jokes that he walks around in the dark half the time).
  • Selling unwanted stuff on Kijiji to make a few extra dollars from household clutter.

More recently, they just moved into a new home, and I helped them do a few different sensitivity analyses for the mortgage repayment.  I use the following Canadian Mortgage Calculator (from Vertex42 – can also be used for US, see note below (*).  We created the following worksheets by making copies of the master and tweaking the variables:

  • To illustrate the impact on total interest paid and final payment date of switching to accelerated bi-weekly payments from monthly mortgage payments.  With accelerated bi-weekly, you pay half of your budgeted monthly mortgage amount exactly every two weeks on the same day of the week, thereby fitting in 26 payments a year,  instead of 24 if you just paid it twice per month, or 12 if only once per month.  Your payments are less if you pay biweekly, but the biggest savings comes from taking your monthly payment and dividing by 2 and paying that every two weeks having the equivalent of 13 months of payments (26/2) instead of 12.
  • We also wanted to see the impact of making prepayments, both annual of $3,000 plus an extra bi-weekly payment of $50.  These prepayments come right off the principal.  (Note:  You need to check the terms of your mortgage with respect to prepayments.  There is often maximum annual amounts.  Some can be made at any time and as often as you want throughoutt the year, some can only be done once per year at or near anniversary date).

canadian-mortgage-calculator_options

  • The compound period for a Canadian mortgage is semi-annual, but this calculator can also be used for US mortgage calculations by changing the compound period to monthly – the main difference between a US and Canadian mortgage.
  • They are planning to following the final option in the chart.  If they can save make an extra $50 payment every two weeks and save to make a $3K payment every year, they will reduce their mortgage term to just over 16 years.

My son lives farther away and seems to be pretty savvy.  I’m pretty sure he’s paying off his credit cards each month.  I think his student debt is fully paid.  I believe he is also saving for a down payment for a house.  Other than that, I don’t know much else.

I offered him help to prepare any budget spreadsheets answer any questions he may have in order to ensure his financial house is in order.  He hasn’t taken me up on it yet, probably because when we see him we don’t really have time to spend on this.  But he knows I’m ready any time, even if we do it on a web session.   I can always send him the spreadsheets to fill out, but something tells me that it’s easier more valuable if Mum is there to ask the savvy questions and keep it interactive!

  • One of the drawbacks though, is that if Mum does all the work, they may be less likely to keep it up or track their spending going forward etc.

I wrote on Worth-it-Wednesday, how about how my #3 surprised me about paying off her student loans.  She was on my list to work with next, because I really wasn’t sure how she was doing, what with a recent humanitarian trip to Haiti which she paid for herself (she’s a nurse).   I think maturity is helping here because I see her being more frugal like her older sister and brother.  I think she now has a sense of how good it feels to be debt free (well, since last weekend   ;)  ) and she seemed pretty, pretty happy about it!  Bazinga!

Bad Personal Finance Habits

I’m not really sure where to start with #4 so I’ll just dive in.  She doesn’t have a lot of income because she is on disability due to here severe OCD (Obsessive Compulsive Disorder) and social anxiety.   Her OCD is the germaphobic / cleanliness type so she’s always buying new products to keep her body and her bathroom clean.  She also discards (or gives to me or my husband digs it out of the garbage) shampoo or makeup that she feels has sat around too long and has become contaminated.  She goes through toilet paper and paper towels like there’s no tomorrow (note to self:  buy shares in Scott paper).  Plus, I think she tends to try to soothe herself and her symptoms by shopping on-line.  The UPS truck is often stopping at our house and makes me feel annoyed.

She used to pay us $300 / month for room and board, which was okay because it covered her expenses.  Lately she renegotiated her payment because she felt she was paying too much and said she wanted to save her money.  I wasn’t too keen but it was becoming a bit of a bone of contention and I gave up the battle out of resignation, I guess.  She had calculated how much she consumes in hydro, paper products, water etc. and thought that $190 was sufficient.  Only I have yet to see any of that money for two months now.

Am I frustrated?  Damn right I am.  Is she taking advantage of us?  Maybe.  Am I going to do something about it?  I will, I’m just too tired to fight with her about it right now.  We’ve been going through this for seven years.  Her symptoms became visible to us at age 14, but really severe at 17 and she’s 24 now.  She acknowledges that she had OCD symptoms since about 5 years of age (touching compulsions, scrupulosity, bad thoughts).

It has been really bad.  Think worst case.  Ya, it happened.  Every parents nightmare.   Well I guess worse case would be if she wasn’t here anymore.  She tried twice.  So I always have to remind myself that as bad as it is, it could always be worse.

Anyways, I just wanna OCD break right now, so I choose not to deal with it.  Probably a bad move on my part.  I think dealing with her OCD has also played a factor in our debt load.   Many trips to hospital, parking, eating out, buying things she needed, shopping to try to feel better, taking trips to get away from it all.  When it gets really bad, your spending becomes an afterthought.

We still have bottles of bug killer in our hall closet that my husband bought last summer when she insisted there were bugs in her room, even though we couldn’t find any evidence of them.   (Ya, I’m frustrated too because he never took them back after she didn’t use them and used something else instead to kill the invisible bugs so now $30 – $40 of chemical bug killer still sitting in my front hall closet).

I’m not looking for sympathy.  But there you have it.  Another excerpt on my personal debt story.  I count my blessings …  still.

I was going to also talk about my sister and how they are treating their debt and spending but this post is entirely too long so I’ll keep that for another time.

Plus this post is getting to be a bit of a downer and I don’t like being a Debbie Downer (even though Debbie Down was my nickname as a kid), so let me end on a positive note and with a joke.

Positive note:

I was initially inspired to write this post by John at Frugal Rules when he wrote Why Financial Literacy is so Important to Me.   He says it’s his responsibility to teach them to be wise about their financial decision making and I couldn’t agree more!

This pair of ducks were coming to our pool in spring for about 10 years - this year they didn't return

This pair of ducks were coming to our pool in spring for about 10 years – this year they didn’t return

An oldie but goodie:

A duck walks into a bar and asks, “Got any gwapes?”

The bartender, confused, tells the duck no. The duck thanks him and leaves.

The next day, the duck returns and asks, “Got any gwapes?”

Again, the bartender tells him, “No — the bar does not serve grapes, has never served grapes and, furthermore, will never serve grapes.” The duck thanks him and leaves.

The next day, the duck returns, but before he can say anything, the bartender yells, “Listen, duck! This is a bar! We do not serve grapes! If you ask for grapes again, I will nail your stupid duck beak to the bar!”

2 bunches of grapes by Grant CochraneThe duck is silent for a moment, and then asks, “Got any nails?”

Confused, the bartender says no.

“Good!” says the duck. “Got any gwapes?”

 

“2 Bunches Of Grapes” by Grant Cochrane from http://www.freedigitalphotos.net
Flickr: Stephen Harper


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7 things about Jim Flaherty and why do I care?

Jim Flaherty

Flickr: Stephen Harper

Okay there’s always a few partisan naysayers in every crowd, but I’d have to say that pretty much all Canadians were stunned and saddened this week by the sudden death of the Former Finance Minister, Jim Flaherty, from a massive heart attack on Thursday.

Flaherty suffered from a painful skin condition called bullous pemphigoid, and although no longer considered a fatal disease, there is speculation that the side effects of this steroid medications may have precipitated the heart impacts.  He definitely appeared to be suffering a lot more in recent years, and when he announced his sudden resignation to return to private live just 3 weeks earlier, his health was at the top of everyone’s concern, even though it was said to not be the reason for his departure.

Without further ado, here are Debt Debs 7 things she wants to say on this topic – some quirky, all personal finance related, of course, or personal or finance … we’re not going to get too picky today… after all, we’re grieving.

Item 1 – TFSA people!!!

Jim brought in our beloved TFSA (Tax Free Savings Account) in the 2008 budget, effective January 2, 2009.   Some people say it as the four letter acronym T-F-S-A and some pronounce it “TIF-SA”.  This tax savings vehicle allows your money to grow and not be taxed on that growth, regardless of when you withdraw the money.  A TFSA is similar but not identical to Roth IRA’s in the US and Individual Savings Accounts in the UK.

Okay so I pretty much wrote a whole post on this one topic alone, so I have cut and pasted it for a future date.  That’s kind of a side benefit spin-off of this whole blogging thing.  You start to research something to support your inner monologue in your head and voila… you have learned a lot and you have a whole other post that is entirely too long to include here on a discrete topic that you can save for a rainy day.  Yup, that’s why I do this.

Item 2 – Registered Disability Savings Plan is a good thing … I think

In 2007, the RDSP was brought in by Jim Flaherty.  Ashamedly, I know nothing about this, and I should.  One of my children is on disability for severe OCD (Obsessive Compulsive Disorder) and social anxiety.  (Yes, it has been a bit all consuming for us the last 7 years and may be a part of why we fell off the money management band wagon).  So I need to  research this for her sake and I will provide my views in a future post.

What I have heard in the news media, is that one of the Flahertys’ sons has autism, and this may be a reason to spur our former finance minister to put in place programs like this to help the nation’s disadvantaged.   I hope everyone is for that.  And for personal reasons, I do understand Mr. Flaherty’s as well.

2007: Introduces the Registered Disability Savings Plan to help Canadians with disabilities and their families save for retirement. One of Flaherty’s three sons has a mental disability and the minister wept openly when he announced the plan.

Item 3 – Bye Bye Penny!  It’s good to see you go!

 

Canadian Penny 2012AKA, don’t let the door hit your a$$ on the way out.  (OK, that’s just funny in my head)

In order to save $11 million for Canada, on March 29 2012, as part of the country’s Economic Action Plan 2012,  Flaherty announced that the penny would meet it’s eventual demise with a plan to start in February 2013 (Last penny was made May 4, 2012) .  The ‘nuisance’ coin was too costly to produce at 1.6 ¢ (60% over it’s own net worth! Poor Penny.)   Prices would not be impacted, but only a  methodology to support how to round up or round down the final transaction amounts for cash purchases only.

I think it’s worked out well.  (What do I know?  I never pay cash anymore. )  The nickle may be next.

Item 4 – GST (Goods and Services Tax) – Where’d it go?

Seems so long ago (January 1, 2008), that the National GST rate went down to 5% (it had moved from 7% to 6% for a short time period), but it was part of Jim Flaherty’s work.  It appears as of this time last year some thought it wasn’t good for Canada, but I see no damning evidence of that.  The budget will be balanced and deficit will be gone in 2015, and that’s 6 years after the economic downturn of 2009.  My plan is six years too.

In the province of Ontario, we still have it, but it’s been replaced by HST (Harmonized Sales Tax) which incorporates the PST (former Provincial Sales Tax of 8% [who remembers when PST was 7%?]) with the GST 5% for a total HST of 13%.  Timings for every province are all here folks – read if your planning to move to Canada.

So ya, the GST is not gone, it’s just buried.  Or you could look at it like it entered into a common-law relationship with it’s partner, PST.

Item 5 – Income Splitting – wait, I need all mine!

Income splitting is a part of the platform promised by the Tories (Conservative Party of Canada – CPC) when elected May 2, 2011 with a majority government.  AKA Income Sharing, this concept is supposed to ensure that couples earning different amounts but with the same total income are taxed similarly as couples earning the same amounts.

We heard in the media that Flaherty was no longer in favour of it, but since it was part of what the CPC’s were elected to deliver,  Prime Minister Harper would likely not renege on this campaign promise.

I don’t know a lot about it or why Flaherty no longer liked this proposal, so I need to do more research and report back later.   [Cheesus, church lady, not another thing you don’t know nuthin’ about!]  Plus now I’m curious, because I want to know what is my preference, and I hope you (Canadians) do too!

Item 6 – Frugal Parenting – my new quest :-)

Not only was Jim Flaherty Canada’s Finance minister for 8 years, he was also finance mentor to his 3 sons (My Three Sons – dog, I used to love that show.  Fun Fact I didn’t know – Ernie was originally a foster kid, and the original 3 sons were Mike, Robbie and Chip – here’s the episode where Mike gets married and then moves out East and Ernie comes into the picture.  All the episodes are on you.tube – what fun!).

Here’s the advice Jim had for his triplets back in 2010 with Debt Debs snarky remarks for good measure:

  1. Education is important - well that or training in a trade.  Not everyone needs to go to university.  I always say as long as you’re happy and can support yourself and any offspring and dogs and cats you bring into this world, off you go.
  2. Spend less than you earn - oh.my.dog, he was reading PF blogs wasn’t he?  Because, without a word of a lie, I don’t think I’ve heard that concept until I started reading them.  Novel concept, isn’t it?
  3. Buy property (but pay off your mortgage ASAP) – tax free gains on principal residences, what more could you ask for?  But pay off that mortgage and don’t keep adding to it!!!  Do as I say, not as I …. did.   Sheeeshhh
  4. Be frugal – oh.my.blog I always liked him but now I love(d) him.

Item 7 – Quirky Personal Coincidences

Flaherty tabled the 2014 budget on February 7, my father’s birthday.  He announced his resignation March 18 (my Mum’s birthday) and died on April 10 (my mother-in-law’s birthday).  He died at 64, same age as my aunt, both never getting to see that 65 year milestone, so important in our culture.  He shares Irish heritage with me, commonly wearing a green tie in most public appearances.  I have a green car for the same reason.  

In Canada, there is a long standing tradition since 1966 when the country was 99 years old, that the Finance minister should wear new shoes when he announces the new budget to Parliament.  I’ve known about this since I was a child, coming from a politically-minded family,  however, I was surprised to read that not all Finance ministers have upheld this tradition, not even Mr. Flaherty for a few of his budgets.

But alas, here he is in 2012 buying his new shoes.  At one minute in he picks up a pair of green high top sneakers, laughing, wondering if he should get those.  So cute.  I have one mini green high top sneaker key chain hanging from my rear view mirror in my little green car.

*To view this video on YouTube Click here

RIP, Mr. Flaherty.  My sincere condolences to your family, Christine Elliot, John, Quinn, Galen and extended family and friends.

The Million Dollar Diva

This post is part of the Financially Savvy Saturdays blog hop.  Click on the link above and check out some others.

You know you want to. ;-)