Whining about being broke is pathetic. Reframe the “I don’t have any money” moan and you’ll go from “poor” to “smart”. Challenge your friends to find a place to eat out that’ll cost you $10 or less a person. See who can come up with the most interesting option, and that person gets a meal out on everyone else.

Swap shopping for sightseeing, bike riding or people-watching. Entertainment doesn’t have to cost money; you simply have to be with people who love you and who make you laugh. And you can do that just as easily at a free concert in the park as at one for which you had to pay big bucks for a ticket.

Make second-hand shopping a game. You can build a fabulous wardrobe in second hand stores. My daughter’s friends refer to it as “pillaging the Village”… Value Village that is. They have a good sense of style so they can spot the pieces that add interest or build on their wardrobes for very little money. They shop as a gang and turn it into entertainment without spending a fortune.

If you have friends who are always pressuring you to spend money you don’t have, you’ll have to come up with some tactics to deal with their rabid consumerism while holding true to your new frugality. Suggest that you’ll join them for the dessert part of the meal. Or eat before you go and then make do with an appie or a salad. Suggest they come to your house for dins, and ask them each to bring their favorite contribution to whatever theme you come up with: Mexican, Chinese, Veggie.

There are loads of ways to embrace a new reality that leaves you enough money to save. Show some imagination. Then have the gumption to stick to your plan.

There are ways to significantly reduce the amount of interest it costs and the time it takes to get to mortgage-free.

1. Choose an accelerated payment frequency. Most mortgages come with a vanilla-flavoured monthly payment. If you want to speed things along, choose the caramel-almond version: an accelerated weekly payment. Since you end up making an extra payment directly against your mortgage each year, you’ll save $70,003.63 in interest. That’s gotta be worth the extra thirty bucks or so you’ll have to come up with each week, dontcha think?

2. Shorten your amortization. The shorter your amortization, the more you have to come up with for each payment, but the less you’ll pay in interest overall. If you shorten a 35-year amortization to 30 years, you’ll save $55,430.90 in interest. Go with a 25-year amortization and save $108,345.42. Can’t swing the higher monthly payments every month? Then…

3. Make a principal prepayment against your mortgage. Most mortgages come with the flexibility to make an annual prepayment each year. It usually runs somewhere between 10 and 20% of the original mortgage amount. So on a $300,000 mortgage you could make somewhere between $30,000 and $60,000 principal pre-payment, assuming you could come up with the money. Hey, that’s what you can use a least a part of that bonus you’re getting for! But you don’t have to come up with a huge amount for the principal prepayment to work for you.  You know that RRSP contribution you made that resulted in the $3,200 tax refund. Slap that sucker against your mortgage each year and you’ll save $112,348.58 in interest on that 35-year mortgage.

The Financial Consumer Agency of Canada has a terrific mortgage calculator tool that you can use to run your own scenarios to see just how much you can save on your mortgage. Spend a few minutes playing with the numbers. It might help you focus on a goal that will see your mortgage paid off up to ten years sooner! Invest a little time now and save a lot of time making mortgage payments, and scads of money too.

Doing well personally, while doing good environmentally is a little like having your cake and eating it, dontcha think? So here are some more ideas you can share with your workmates, friends and family for ways to become a Green Queen while you save some serious bucks too. Hey, why not challenge a friend or co-worker to see how much you can actually save by implementing one or more of these strategies. May the best man win!

1. Are you still using disposable batteries? Do you know what those things do to the environment when you throw them out?  Learn all about rechargables, the best ones to buy and how to save money at greenbatteries.com.

2. When was the last time you checked the seal on your home? Did you know that you could be overspending by up to $350 dollars a year just because your home is leaking? Hold a candle near windows, doors, electrical outlets, range hoods, plumbing and ceiling fixtures. If the smoke blows, you’ve got a draft that may need caulking, sealant, weather stripping, or insulation.

3. How much air are you riding on? One of the easiest ways to save money is to put some air in your tires. Pumping up your tires can improve your mileage by 3 percent. That’s like getting a reduction of 3¢ a litre on a buck-a-litre fill-up. Hey, when was the last time you saw $1/litre gas?

4. Don’t know where to shop for the best ethical deals and save money? Try signing up with ethicaldeal.com out of Vancouver, B.C. It’s like a Green Groupon which sends you daily deals from local green companies.

The pet biz is one of the fastest growing industries, and we’re shelling out mega-bucks to keep our dogs dapper and our kitties cute. That’s all fine if you’ve got the money to spend AND you’re saving all that you should. But if your dog, cat, budgie, fish, or tarantula are eating into your savings, you need to review your priorities.

A bag of pet food can cost anywhere from about $6 to about $75, depending on where you buy it, how big the bag is, and how “premium” the ingredients are.  And the pet food industry has a bad reputation for putting crap in the food they want us to feed our cuddly companions.  But do you really have to buy a six-star premium dog food when it may mean you end up eating a two-star rated diet when retirement rolls around? Mightn’t a mid-price range product be a better investment in both your pet and your future?

Of course, that may mean you actually have to do some work in figuring out what to buy, as opposed to using the price point to direct you to the good stuff. So what should you look for?

A recognizable meat product as the first ingredient.

Higher quality carbs like potatoes and whole grains as filler.

No byproducts, and no artificial chemicals or preservatives like Yellow #5, BHA or ethoxyquin.

Buying in bulk, shopping on sale, and using coupons are all ways to save on the cost of caring for your Sweet Little Poopster. If you’re currently spending $60 a week on food, and you can trim that back by 20%, you’ll have $624 to add to your retirement plan this year. Over 30 years at 5%, that’ll net you over $43,000 in money to ensure you can eat as well as your cat.

“But Gail, my home IS my retirement plan.”

Have you not been listening? If your whole retirement savings is wrapped up in your home, you’re assuming your home will continue to appreciate (there won’t ever be a down to the UP we’ve been on for so long), and that it’ll be worth a lot more just when you’re ready to sell to make some food money.

And what about your other savings: education savings for the kids, your emergency fund, that curveball account you need for the stuff that pops up out of the blue.

And what about your planned spending: the kids’ hockey fees, the car you’re going to have to replace in two years, or the roof that lost some shingles in the last wind storm.

Squeezing your budget tighter than a frog’s ass to wedge your way into a home you can barely afford is short-sighted and – well, let’s be frank – STUPID! I don’t care how low interest rates are now, how afraid you are of missing out on the real estate market or how often your mother tells you rent is “throwing money down the drain.” Strapping yourself so tight that you can’t take care of the other aspects of your financial life – really, you can afford the $350 it’ll take to make a Will? – means you’re too focused on one goal and you’ve lost sight of the big picture.

And then there are the IDIOTS who not only buy too much home, but go into debt to keep it by using their credit cards and lines of credit to supplement their incomes. Lord love a duck! If buying a home means you’re going to carry a balance on your line or on your credit cards, how can you ever hope to come out even.

If you added the cost of the interest on your consumer debt into your “shelter,” you’d get a more realistic picture of just how much of your money your home is eating.

Being environmentally conscious isn’t hard and it has some upsides for your wallet too. Inevitably the energy and resources we reduce, reuse and recycle end up as money left in our wallets. And that’s money we could put to good use as savings. Today, make a plan to do one thing differently for the rest of the year and see how much you can save. You could:

1. Rethink your commute. You could ditch the car and walk or bike to work, or find a co-worker or friend headed your way and carpool.

2. Make your own cleaning supplies. Did you know that cleaning products are the cause of 8% of non-vehicular emissions of volatile organic compounds? Vinegar and baking soda clean virtually everything!

3. Switch to energy efficient light bulbs. Energy Star says that if every Americans home replaced just one lightbulb, we’d prevent the equivalent emissions of more than 800,000 cars. Holy moley!

4. Use reusable shopping bags. Some supermarkets even pay you in points to use reusable bags. Whatcha waitin’ for?

5. Buy local. Supporting local farmers is not only good for the local economy it also reduces transportation costs and all the truck emissions that go with.

6. Use rechargeable batteries. A little more expensive at the onset, rechargables last longer and eliminate a ton of toxic waste.

7. Eliminate paper and plastic plates and cutlery. Hey, it only takes a second to slip a plate, cup, spoon, knife and fork into a plastic bag for a picnic or barbeque. Then slip ‘em back into your bag, take them home and wash them, you lazy bugger.

Whatever you save a month, pop it into an online savings calculator and see what your Good Earth Savings is doing for your long-term savings. That should keep you motivated.

Lucy recently got a new job. Now she’s working with a group of people who come from money – old money, and lots of it. So Lucy is feeling some pressure to keep up. While she’s been content to brown-bag lunch for most of her working career, her new work peers eat out often. And they like expensive restaurants. Lucy is making good money, but if she tries to keep up, she’s going to have a lot less money available for saving.

Lucy tried eating out a couple of times a week, using her workload as her excuse for eating her lunch at her desk the rest of the time. But when her work mates come back from lunch having discussed a work issue, coming up with a plan into which she’s had no input, she feels at a decided disadvantage.

The dilemma isn’t very different for Caroline, although the circumstances are not at all the same. Caroline has been hanging out with the same bunch of girls ever since high school. Two of them married very well, and the third has been extremely successful in business. In fact, Caroline is working for her friend, Judith. Problem is, when the girls head off on vacation together, which they like to do a couple of times a year, Caroline has to put her portion on her credit card, which she can’t afford to pay off. The debt has been building for years and Caroline is at the point where she’s putting her family’s financial security at risk for the sake of keeping up with her posse.

Higher incomes often come with higher expectations – a nice house, a new car, myriad social events. And if you’re hanging with a crowd that’s significantly above your social status, you may always feel like the poor cousin. Or you may be “driven” to spend money you should be saving.  That’s one reason why people making solid incomes often default to using credit to keep up with what they think they should be able to afford.

You know the old saying, “It’s not how much you make, it’s how much you keep.” Income is only the issue when people make so little that they can’t keep body and soul together; then they must make more money. But for most it’s a matter of knowing what’s truly important and sticking to your guns. Income is, after all, only part of the equation. Inflated expenses can go through a big income faster than green grass through a goose.

If you build a life around keeping up, you’ll always struggle with how to save. If that’s the path you choose, just don’t whine about it. You can live your life for YOU and be healthy. Or you can struggle to keep up and flounder. It’s your choice.

1. You’re prepared to bust your butt. You don’t get to be a millionaire working a 37.5 hour week.  According to the research, the higher the net worth of the household, the more hours worked. Is anyone surprised? And yet, routinely I meet people who want to have it all while they work a 37-hour work week. Hey, you can have more time or you can have more money. It’s a choice.

2. You’re educated. According to Spectrum’s research, almost 90% of millionaires have post-secondary education, many with advanced degrees.

3. You’re smart about investing. That doesn’t mean doing it yourself interestingly enough. It means hiring the right guy to do it for you; seventy percent of millionaires use an advisor.

4. You own your own business. Yup, doing it for yourself gets you more money than working for The Man.

5. You don’t waste money. Frugality is a trend among millionaires who believe that living well below their means is the ticket. How else do you save up a million dollars?

Interestingly enough, getting an inheritance, using family connections and winning the lottery didn’t make the list as factors in becoming a millionaire. But being willing to take some risk to achieve a goal did. That’s not stupid risk. That’s the kind of risk that comes after a lot of preparation. It’s often the thing the guys looking in wishfully like to call “luck.”

I ask, “Why would you give the government an interest free loan?”

They say, “It’s like forced savings.”

So what they’re really saying is that they can’t keep their sticky paws off their savings and would rather earn no interest on their money. Hmm.

Here’s a form that very few people use, but is remarkably useful for keeping money out of the government’s hands: Form T1213. This form let’s you request permission from the Tax Man to have your employer reduce the amount of income tax taken off of your paycheque every month.

If you can demonstrate that you’re eligible for certain recurring deductions that will reduce your tax bill at the end of the year – you can trade in your tax refund for more take-home pay. Do you make monthly RRSP contributions by way of pre-authorized withdrawal? You’re eligible. How about child-care expenses? If you’re tithing monthly you can do it for your charitable donations. If you have rental losses, interest expenses on investment loans or carrying charges, those are eligible too.

You’ll have to fill out the form and send it to the Tax Man each year. You can do it at any time, but the best time is in October or November for the following year. Once you’re approved, the Tax Man will provide instructions by letter to you, which you then give to your employer, who will adjust your pay for the remainder of the year.

Fill out Form T1213 and get the Tax Man’s approval and instead of paying extra tax and getting refunded, you’ll pay less tax on an ongoing basis so you’ll have more cash that you can then use to establish an automatic savings plan. Whether you send that money to your RRSP, your TFSA or your high-interest savings account, it’s way better in your hands than in the tax man’s.

It’s been a week of budgets. The Ontario provincial government brought down their budget on Tuesday, and on Thursday we got to see the Feds work their charm.

Ontario will eliminate the lap year that many kids take as they figure out what to do with their lives. When I told my daughter, Alex, her first response (she’s 18) was, “Well that sucks. You’re going to see a lot more kids doing dope and wreaking havoc because they just not mature enough to go to university yet and they have to kill time.” Hmm. I’m sure that parents are creative enough to figure out how to keep their kids in school for that extra year if those kids need more time. Since students are now limited to a maximum of 34 credits, dropping a marginal course will make more sense so you have the opportunity to take it again. Alex needed her lap year because she graduated high school early. Without that lap year I would have been sending her away to university just days after she turned 16. What the government hopes to do is kick “loafers” off the high school rolls. I wonder where they’ll end up?

There’s going to be a cap put on the Ontario Clean Energy Benefit. This is to stop energy pigs from benefiting and it’ll save $500 million dollars from going to folks who likely shouldn’t have been getting it to begin with. The cap comes in at 3000 kilowatt-hours. The government says that most families use between 800 and 1,000 kWh. I checked my bill for Feb, and I use 519 kWh. I use about 2kWh a day more during the summer when the air conditioner is on.

If you’re netting $100K as an individual or $160K as a family and you were getting your prescription meds for a song because you were using the Ontario Drug Benefit program, your medical costs are going up. There’s now going to be means testing on this benefit that will see you paying up to $665 a year more for your drugs. Though why you would need to take advantage of the ODB if you had a six figure net income is beyond me.

You’ll see some other fees go up, but they’ll be in small increments, $5 here, $15 bucks there. They’re hoping you won’t be hit too hard by these small increases, but they’ve decided fees for services, like the Drive Clean Program, should cover their actual costs. What a concept.

And then we come to the Feds. Wow, way to carrot dangle things of very little importance to detract from a do-nothing budget. The penny is gone. Say buh-bye to the copper kid. Expect lots of rounding up. It won’t happen immediately, but I’d be rolling those puppies and translating them into nickels PDQ. This, of course, won’t affect debit or credit transactions, just the transactions you do in cash.

If you like to cross-border shop, you can bring back more stuff without wearing it in 37 layers and without having to pay duty. After 24 hours away you will be able to bring in $200 worth of goods free of duty or taxes, an increase from $50. People gone more than 48 hours will be allowed $800 in duty-free goods, double the present $400. Great way to incent the U.S. economy, dontcha think?

But the big news is the raising of the age at which you can start collecting OAS…up to 67 from age 65.

I’m a little concerned about those people who most depend on OAS and all the other benefits it triggers like the guaranteed income?supplement, veterans’ benefits, aboriginal benefits, and survivors’?allowances.

Pension specialists are going to have a very good year as they help companies and governments figure out how rejig their?employees’ pension plans.

Adjustments will begin in 2023 and will phase ?in gradually over six years. If you’re over 54 you won’t be affected. In your?early 50s? You will see moderate changes. And people under 50? Well this is your big WAKE UP CALL… you need to take personal responsibility for your retirement by NOT spending all your money.

As for those who will be most affected, those who don’t have the money to save a thing and were counting on all those benefits to see them through retirement, I’m sorry, this sucks. Perhaps you’ll all be motivated enough to make enough noise to get it changed.

You could propose a lowering of the means testing so that those who make, let’s say $35,000 a year (that’s $2916 a month) or more net would give up their OAS so that those people sitting at the poverty line wouldn’t be pushed below it.

So, would you be willing to forgo your $6,000 a year ($540 a month) in OAS benefits so that someone whose only income was that $540 a month plus some other benefits (like the GIS, which is tied to OAS) would be able to eat?

How much income do you think you’d need to have to let go of your OAS without a struggle?

What do you think will happen to people who were living so close to the line that they could not save while they were working?

How about women who never worked outside the home and were depending on social benefits because they had no savings of their own?

People often can’t wrap their heads around the idea of getting a pile of money together as an emergency. The concept of having six months’ worth of expenses covered is just too overwhelming. Well, here’s an idea that’ll make it easy peasy to get your emergency fund together.

List each category of expense you would have to keep covered if you hit an emergency. That may include rent or mortgage payments, food, medical costs, insurance, child-care, car payments, gas. These are your essential expenses: the stuff you must pay to keep the wolves from the door.

Go back over your list and cut out anything you’ve kept that’s not essential to keeping body and soul together. If you’ve just gone from two incomes to one, you can give up your cable, telephone, entertainment and everything else you wouldn’t die without, at least in the short term. Your Emergency Fund is designed to cover the essentials of life.

Now write in the average monthly amount for each of your essential emergency expenses. Then put six check boxes beside the amount.

Pick the first expense you want to have covered. Most people pick either the roof over their heads or the food in their bellies. Let’s go with shelter for our example, and say you need $1,200 to cover your rent or mortgage payment.

How much can you save every month? Ten dollars? $25? $100. Whatever it is, open up a savings account where they’ll pay you a decent rate of interest and ask that the amount you’ve designated be deducted from your regular account to this account every month. For our example, we’ll say you can save $100 a month.

Now you’re going to save your first month’s worth of rent/mortgage expenses. So when you’ve got your first $1200 in your Emergency Fund Savings Account, you’re going to put a check-mark in one of your boxes. There. You’ve done it. One month’s worth of shelter money at the ready, just in case.

One of the decisions you’ll have to make is whether you’ll save all six months’ worth of shelter money before you start on your food category, or if you’ll check the first box for each category and then start back at the beginning. That’s your choice. My choice would be to put a check-mark in the first box of each category, and then move on to save my second month’s worth of essential expenses.

Now you have a plan to build your Emergency Fund. All that’s left is for you to stop planning and start doing.  Go ahead, pick up a pencil and a piece of paper and start making a list of your essential expenses. NOW!

When David Chilton wrote The Wealthy Barber in 1989, millions of North Americans bought it. The messages were clear and simple. The strongest: “Save ten percent.” We all nodded and sighed. Yes, indeed, we should be saving.  And once upon a time we did. But even David is disheartened by how little we’re saving and how much debt we’re piling up, driving him to write The Wealthy Barber Returns.

Canadians had the reputation of being good savers. Between 1973 and 1993 we saved 10% or more, with our savings rate reaching a peak of 18.5% in 1982. In 1993, four years after David started preaching about how important it is to “pay yourself first”, we began our great slide. By 1999 we’d hit an all-time low of 3.6%. But we weren’t done slipping yet. In 2003, the average Canadian saved just 1.4% of his pay. And in April of 2007, the personal savings rate came in at NEGATIVE 1.3%.

Why?

That’s the big question. Why would we just stop saving? What happened to make us think that we didn’t have to put away some money for the future?

In Boom Bust and Echo, David Foot asserted that, “When you are young, you are a borrower. In your 40s and 50s, you are trying to build a nest egg for retirement.” Yet since 1993 as we watched the first of the baby boomers turn the corner to middle age, the savings rate plummeted despite a healthy economy, low inflation and more being written about the importance of saving. Today there are more people going into retirement with debt than ever before. Not just mortgage debt, which is bad enough. But stupid consumer debt because boomers, like everyone else just can’t stop scratching their consumption itch.

Okay, so what we know we should do and what we actually do are totally different things. Whether you want to blame higher taxes, easy consumer credit, a booming housing market or job losses, the reality is that we are not saving what we should.

What’s the solution?

Perhaps if we each took the time to figure out what are life will actually look like if we try to live on the pittance we’d receive if we have no money of our own it might jolt us into reality. And perhaps if, for just one month, we forced ourselves to live on the much smaller income we are dooming ourselves to because we don’t save, it would be the wake up call we’d need to start squirrelling a little sumthin’ sumthin’ away while we still can.

You: I should get my RRSP money in as soon as I can.

You: Ah, but I’m really not sure where to put the money.

You: Doesn’t matter just get it in.

You: But I kinda hafta decide what I’m gonna buy before I open up the RRSP. Will it be a mutual fund, or a GIC or a segregated fund, or will I buy the index?

You: If you wait to decide, you’ll never put the money in the account.

You: Yah, but I can’t decide, so I’m going to wait.

Could it be that the reason we don’t save is because with so many choices on how to invest we’re stymied. Yes it could.

Sheena S. Iyengar of Columbia University and Mark R. Lepper of Stanford University have found in their research that people are less likely to make a decision when they face too many options.

They set up sampling booths at a grocery store offering some customers 6 choices of jam and other customers 24 jars of jam. While only 40% of passersby stopped at the booth featuring 6 different types of jam, 30% actually bought the product. The larger display drew more tasters: 60%. But here’s the kicker: only 3% actually bought the product.

It seems that having too much choice seems hampers our ability to make the decision on what to buy.

Hey, if you can’t decide what you should buy with your RRSP dollars, you can always go with a Savings Account option to get the money in before the deadline. Once that decision is out of the way you can then focus on what you’ll invest those dollars in to make them grow.

In choosing your investments for your RRSP make sure:

1. You know what you’re buying

2. You’re staying true to your investment personality (your ability to handle risk)

3. You stay in line with your investment time horizon.

To actually save a dollar you have to take that dollar out of your cash flow. Putting it in a TFSA and then spending it on a credit card doesn’t count. You must make the commitment that current expenditures will not exceed current income. You’ve got to spend less money than you make.

Your PSR is a measure of how much money you save out of the money you make.

First, write down your monthly net income. That’s the money that is actually hitting the bank in a month – so it’s your gross less taxes and whatever other deductions you may be paying. If you have a fluctuating income then you’ll have to do a little more work. Grab your bank statements for the past six months and add up all the deposits you have made. Ignore transfers. Include all the money that went into your account including your pay, commission, bonuses, support you received, repayment of medical costs or business expenses, and government payments like child, retirement, and disability benefits.

Keep in mind that if you belong to a company pension plan or have amounts taken off your paycheque for savings each month, to make this calculation work for you add those amounts back into your income so they will factor into your savings rate.

Once you’ve totaled up your deposits for the past six months, divide your total by six. That’s how much you bring in on average every month.

Next, figure out your monthly spending. Notice I didn’t say “expenses.” You’re actually going to have to look at how much went out, not what you thought went out. It doesn’t matter what you spent it on. If it went out, count it. Include what you spent on your credit card, using your debit card, by writing cheques, by accessing your line of credit, or in cash.

Then, subtract your monthly spending from your monthly income.

This is simple math. Take the amount you earn on average each month and subtract the amount you spend on average each month. That will give you your monthly savings.

Finally, calculate your PSR. Divide your monthly savings by your net monthly income and multiply by 100. If you end up with a negative number, then you’re spending more than you make. If your answer is a positive number, you have the money to save. So does your TFSA, RRSP, RESP or other investment account reflect your savings potential?

When was the last time you looked over your home phone and cell phone bills? People shell out thousands of dollars a year on communication without a second thought. A little attention could net you a cheaper plan that gets you what you need and puts money into your savings account.

Ditto your electrical bills, your gas bills, your credit card statements, your bank statement. Do you know off the top of your head what you paid in service charges on all your bank accounts last month? No? Time to read your bill!

Today, spend one hour going over ALL your bills so you’re completely familiar with where your money is going. That’s right, gather them all up, get yourself a highlighter pen and start familiarizing yourself with where your money’s going. If you find places where you’re surprised at what you’ve been shelling out, it may be time to re-evaluate what you’re getting for what you’re spending.

Are you paying to have movies piped in, but never seem to watch? Axe it.

Are you buying services at a premium? Move to a lower level of service.

Paying for membership at a gym that you haven’t visited in six months? Lose it.

Paid even $1 in banking machine fees? Stop it!

Look for all the things you pay for, but seldom use, and as you chop, trim, slice and dice, make a list of the money you’re saving.

Eliminate just $50 worth of monthly spending, and you’ll have $600 to add to your savings this year. Take that $600, invest it in an RRSP at an average return of 5%, and REINVEST your tax refund every year to make your RRSP contribution grow and in:

• 20 years you’ll have $29,610
• 25 years you’ll have $37,485
• 30 years you’ll have $45,360
• 35 years you’ll have $53,235
• 40 years you’ll have $95,424

… all from a measly little $50 a month. Can you imagine what you could do with $100?

Merry Christmas all, hope your next few days will be full of joy and laughter. Repeat blogs next week. I’m heading to Arizona on the 26th for some much needed sunshine! I’ll be all sparkly and fresh when I get home. See you then.