I was in the supermarket the other day using my gas coupon – I get two cents off for every litre of gas I buy – and redeeming my PC points (my $64.00 bill cost me pennies). The woman bagging in front of me said, “It’s good to see you practice what you preach.”  I laughed. I can’t go anywhere these days without people watching to see what I’m buying, how I’m paying, or asking, “Is that in your budget?”

But back to the coupon thing. One of the phenomena I found most interesting as I’ve worked with people and their money is the extent to which they will go to “save.”  I put “save” in quotes, because often these people use the “savings” they derive from their couponing or sale shopping to justify the mad shopping they love to do. If I had a coupon for every time I heard, “But Gail, I saved…”

Of late, perhaps because of the economy, people seem to be even more coupon crazy than ever. But there are smart ways to shop with coupons, and not-so-smart ways to shop, like the chick who can’t say what she’s done with her coupon “savings” or the dude who shopped with a coupon, put the purchase on a credit card, and then carried a balance. Oy!

If you haven’t shopped with coupons, the biggest hint from professional coupon shoppers is to buy something on sale and then use a coupon to pump up the discount. Know that coupon shopping probably means you can’t be married to a particular brand. If you’re willing to try a new kind of laundry soap or a different flavour of toothpaste, you’ll be more successful shopping with coupons.

The biggest savings tend to be on non-food items. I just got a coupon for a bathroom cleaner that gives me a free second cleaner that I use in the kitchen. I stuck it on my fridge for my next trip to the store.

Avoid being tempted into buying something you’re not likely to use just because the savings seem terrific. If your kids only eat smooth peanut butter, buying crunchy at half the price is still a waste of money.  So make your shopping list first and then flip through your coupons to see what you have that’ll save you some money.

Resist the urge to over-buy with coupons. People sometimes go overboard stocking up on savings. My girlfriend Pammie and I were talking about this the other day. She knows a woman who compulsively stocks food that often expires before she has a chance to use it. No savings there.

Coupon swapping is another way to get your hands on more of what you like. If you have friends that also coupon, set up an afternoon cuppa tea coupon swap where you put the coupons you don’t need in the middle of the table and everyone takes what they want. Course, once you become a serious coupon shopper, you’ll need to keep those suckers organized. And be patient. You’ll no doubt slap yourself on the forehead a couple of times because you “forgot” your coupons. This isn’t supposed to be an exercise in frustration. Give yourself a break. You’ll get better at couponing over time, particularly if you track your savings and use them for something that’s really important to you.

Your turn. Where do you find coupons and how do you use them? What was your best coupon deal?

I meet a lot of people who have expectations that are completely unrealistic, and it makes me wonder where they got their life pictures. Why would a woman who has just graduated from university and hasn’t even got a good job yet think it’s okay to have a baby, buy a house, and throw herself a big wedding? Why would a young couple believe that the beautiful house they bought (that they could barely afford) isn’t good enough and buy a bigger one? And when did the kind of car we drive, the clothes or shoes we wear, or the neighbourhood we live in become such a reflection on us that we’re willing to pretend things are fine when we’re neck-deep in debt?

We’ve grown up with more STUFF than has ever been available before for consumption. TVs get bigger and flatter with better resolution and more fabulous sound. Houses get bigger, with more bedrooms, bathrooms, kitchens. Cars get fancier (I want the one that knows how to parallel park itself!) with leather seats, in-car communications, and more cup-holders!

With all the STUFF just waiting to be bought, the question becomes this: Are you really willing to spend whatever it takes to have it all right now, regardless of the impact on your financial health?

It may be that the lifestyle you have, or want to have, is shaped by what you had when you lived with your parents. Their hard work made it possible for you to grow up in a house, and you can’t imagine living in anything but, despite the fact that you haven’t saved a downpayment. For while it took our parents 10 or 15 years to come up with the money to get into a house, many of us think we’re entitled RIGHT NOW.

Unless you come out of school earning as much as your parents, with the savings to back it up, you can’t buy the same lifestyle they had. Putting yourself into debt and not leaving any money for savings mean you’re setting yourself up financial failure.

I meet a lot of people who want to indulge their every whim either because they were indulged as children and it’s their norm, or because they weren’t and it’s their due! Talk about no way out. Delusional Debtors can always find a good excuse for spending money. That’s a no-brainer. The fact that we’re spending money on credit – spending money we haven’t yet earned – is down-right dopey, particularly when it’s for consumables. Sure, that $200 dinner was great. But once you go home and have a good poop, all you’re left with is the debt on your credit card.

And then there are the people who spend money they know they shouldn’t, experiencing buyers remorse and slapping themselves upside the head for being stupid… who then go out and do it again. What will it take to stop?

It may take revamping the picture you have of your life. If you have painted a picture for yourself that you simply cannot afford, it’s time to paint a new picture – one that  you can feel good about.

It’s lovely to think that a beautiful home, a late-model car, and a cottage, boat, basement full of entertainment equipment is ours for the having, but the reality is that for many people our grasp exceeds our reach. I can’t afford that car that parks itself and I know it. To go out and lease one would mean I’d have to scrimp in other areas – most likely on my saving and my emergency fund – and I’m not prepared to do that.

Ditto an annual vacation. While it’s a lovely idea, and it may be hard to watch others head south while I’m stuck shoveling snow, the reality is putting it on credit isn’t an option for me. So I’ve painted myself a picture that includes a family vacation somewhere wonderful about every three to five years, depending on how I’m doing financially. I save up the money and come back with no regrets.

So, what pictures did you paint that are getting you iton trouble? What did you imagine your life would be like, only to wake up to some hard realities that have you scratching your head? And how do you feel about having to change your expectations? If you aren’t willing to revamp your picture, how are you planning to make it work?

Perhaps the hardest part of taking control of our money and our life is the first step: honesty. We must honestly look at the picture we’ve built and the impact it’s having on our financial stability. If we’re balanced and in a good place then the picture’s a keeper. If we have debt, no savings, no EF, no insurance or worry about paying the hydro bill on time, it time to get out a fresh canvas and start painting a new picture.

Experts have been touting the importance of having an emergency fund since Moses was a lad. So why is it that so many people still don’t have enough (or any?) money set aside just in case? Reasons and rationales abound.

“I’m paying off my debt. That’s the most important thing.”  With the amount of debt people are buried in, it’s no wonder people want to get rid of it as fast as they can. But having a single focus is never a good way to create balance. Money in the bank gives you options – ways to deal – so that you can stay on track with debt repayment even when the caca hits the fan. Having no cash at the ready means you’ll no doubt be forced to use your credit to deal with a broken furnace, unexpected medical bills, or replacing that tire you blew on the highway. Accessible cash means you can keep to your debt-repayment plan and deal with whatever crisis – large or small – that has come knocking on your door.

“I can’t see the point of letting money sit earning next to nothing.”  While it can be a really sad thing to watch thousands of dollars languishing in a savings account, return isn’t the priority with an emergency fund. Access is. Stick that money into the market and it may not be there just when you need it most. Stick it in a high-interest savings account and while you may be irked by the pittance you’re earning in interest, the emergency fund will be at the ready when you hit the wall. The point is to have some wiggle room when the unexpected happens.

“I have $1,000. That’s enough.”  $1,000 may be enough of an emergency fund if you live under a rock. Yes, you’ll need less of a buffer if your home is paid for, you have no debt, you walk everywhere you go, and you’re happy eating ketchup soup three nights a week. If you want a realistic emergency fund – one that actually gets you though the rough – figure our your monthly essential expenses and multiply by six. That’s how much you need.

Unemployment insurance may help fill the gap if you lose your job, but it doesn’t go far. And unemployment isn’t the worst emergency you may face. Get sick and watch your money evaporate. Even if you have good health and disability insurance plans, your cash flow will still take a kicking until your benefits click on.

“Who needs an emergency fund when you can use a line of credit?”  The people telling us to get an LOC is an emergency fund are the same people who let us buy houses without enough money down, offered us ways to satisfy all your whims while spending money we hadn’t yet earned, and continually raised our limits until many of us had enough debt to bury an elephant.

A line of credit is not an emergency fund… it is debt waiting to happen. If you hit a wall and end up racking up tens of thousands in debt on an LOC, how was that diverting disaster?

Perhaps the problem with the whole emergency fund thing is that people don’t like to think they’ll have to deal with “emergencies.” It’s not unlike the folks who won’t make a Will because they don’t want to contemplate their demise, or who won’t buy disability insurance because they can’t imagine becoming disabled.

Maybe we’re just calling it by the wrong name. The whole idea of having to deal with “emergencies” can be a real downer. Maybe what we need is nomenclature that sounds far more proactive and positive. We’ll stop predicting disaster and instead focus on the fact that when you have money at the ready, you also have ways and means to deal with whatever life pitches at you.

Hmmm… a Ways-and-Means Fund… cash in the bank that gives us the means so we can figure out ways of dealing with life’s lumps. Your son breaks his arm playing in the yard, and you have the means – the money – you need to take a day off work, get him to the hospital, and cope in whatever other ways you must. Your partner is downsized and you have the means to pay the mortgage and keep food on the table until he finds new ways of bringing home the bacon. You bang up your car, watch your shingles blow off in a wind-storm, or find yourself in the throes of a divorce, and you have the means to keep the financial boat afloat while you find ways to cope with all the other stress in your life.

Convinced that having The Means offers you more Ways of smoothing out life’s bumps? Now it’s just a matter of coming up with the dough. It takes effort to knead intent into action.

To best way to create your Ways-and-Means Fund is to set up an automatic deduction from your regular account to a high-interest savings account. If you don’t have much to save, it doesn’t matter — the important thing is just to start… to convert your intent into action. As long as you haven’t started, you’re not creating the means for dealing with what life will inevitably throw at you. Commit $25 per pay to your Ways-and-Means Fund. Once you’ve begun, you’re on your way and then it only becomes a matter of how to boost the amount you’re setting aside to grow your stash of cash.

Most people have expenses they can trim to boost the money going to their Ways-and-Means Fund. Do you buy coffee every day on the way to work? Calculate how much you’re spending, cut it in half, and send the difference to your Ways-and-Means Fund. Smoke? If you smoked half as much, how much would you be able to sock away? Pick up the latest magazine at the checkout counter? Subscribe to premium cable? Go out for a drink with your friends after work? Buy your lunch at work? Pick up your favorite “stuff” whenever it’s on sale even though you already have 30 pairs of shoes, white shirts, handbags, DVDs, name your vice here. How quickly could you build your Ways-and-Means Fund by focusing on being safe as opposed to being satiated?

If you’re determined to keep all your small indulgences, try the Tit-for-Tat approach to building your Ways-and-Means Fund. Each time you satisfy a WANT, contribute an equal amount to your Ways-and-Means Fund. Not only will it make you really think about whether you’re going to spend the money –in essence whatever you buy is going to cost your cash flow twice as much – you’ll be giving yourself options for the future while you enjoy yourself today.

You’ve probably heard me say this before; it’s one of my mantras: Plan like a pessimist so you can live like an optimist.

Very often people go through life believing everything is always going to be great. In their world, crap doesn’t happen. No one loses jobs. No one gets sick. No one dies. It’s la-la-la, and off to the mall we go because we’s gots money and they’s shoppin’ to be done.

Sadly, there’s a very real possibility that crap will happen. According to the Society of Actuaries and the national Centre of Health Statistics and Transactions (big title… must mean their know their stuff, eh?) every year one in eight people become disabled. And at age 35, the claim incidence is three times greater for women than for men.

According to the American Cancer Society, in 2008 over half a million people died of cancer. Never mind all the people diagnosed who watched their income shrivel as they coped with their treatments. And while The Big C is the thing we are most fear, the incidences of death by heart disease are higher; 1 in 5 (compared to 1 in 7 for cancer).

Here are some more:

• Stroke Lifetime Odds: 1 in 24
• Motor Vehicle Accident Lifetime Odds: 1 in 84
• Suicide Lifetime Odds: 1 in 119
• Falling Lifetime Odds: 1 in 218
• Firearm Assault Lifetime Odds: 1 in 314
• Pedestrian Accident Lifetime Odds: 1 in 626
• Drowning Lifetime Odds: 1 in 1,008
• Motorcycle Accident Lifetime Odds: 1 in 1,020

Among my immediate friends and family, I have lost dear ones to cancer, suicide, car accident, drowning and a motorcycle accident. I know people die. I can die too.

If you know that crap can happen then you should take the steps to ensure that if it does you and your family are adequately protected. Just worrying about the anvil falling on your head is a waste of energy; using that image to motivate you to plan for the worst – to plan like a pessimist – means you can stop worrying because you’ve done all you can. You’ve got your safety net. Time to have fun!

Every step you take, from building an emergency fund, to buying enough insurance, from saving money for the future to executing a well thought-out estate plan, gets you closer a place where you don’t have to worry.

If it’s been a while since you looked over your financial life, today’s the day to make your checklist and get busy putting your Pessimist’s Plan into place so you can forget about the yuckies and live like an optimist:

• Check credit report; fix errors
• Review savings goals; chart progress.
• Establish/review emergency fund goals; chart progress.
• Review life, health, disability insurance coverage; supplement if necessary.
• Update resumé. Plan for your next job review.
• Review your estate plan: wills and powers of attorney, along with guardianship designations for your children.
• Review Debt Free plan; chart progress
• Set a new goal for increasing your financial knowledge. The more you understand about how money works, the less you have to worry about it.

Once you’ve got all your ducks in a row, you need only do a periodic review to see that you’re still on track.  Semi-annually, or each time there’s a significant change in your circumstances, you can go over your checklist and make sure everything is still ticketiboo. Or you can make the changes you need to put things back in order.

Then you can forget about worrying. You’ve done all that you should, and worrying isn’t going to make a scrap of difference. Get busy being happy.

I’ve been getting a bunch of letters from people recently about taking advantage of the new, lower interest rates. Here’s one from Kristina:

Today’s mortgage rates have my husband and I tempted to refinance our current mortgage. We are 17 months into a 5 fixed year term, 25-year mortgage. When we bought our house, the 5 year fixed rate was 5.75% and now it is 4.09%. This is a difference of $320 a month, an amount that would significantly accelerate the down payment of the mortgage. I have read that we can expect that the bank will want 3 months interest in penalties if we try to get out of our current mortgage. Is this always the case or are there any other options that we can explore? When does it make sense to refinance?

When you’re trying to decide what interest rate and term to use for your mortgage a whole bunch of factors come into play:

• There’s the difference between the rate for a variable mortgage and one for a fixed-term mortgage, along with
• The different terms being offered, usually anywhere from six months to 5 years (or in some cases even longer), as well as
• The choice to go with a closed mortgage or one that is open and can be repaid early.

From the lender’s perspective, the rates reflect where interest rates are headed. Usually longer-term rates are higher than shorter-term rates, but the yield curve can become inverted  if the economic gurus are predicting that rates will be coming down over the long term. And usually, variable rate mortgages are less costly than closed, fixed-rate mortgages. But those closed, fixed-rate mortgages also protect you from interest rates that head upward during your term.

If you choose to go with a closed mortgage and then watch interest rates drop, as they have over the past few months, you may feel like you’ve been cheated since your mortgage is going to cost way more than it needed to. If only… if only you had known interest rates were going to fall, you’d have gone with a variable rate… if only you had known rates were declining, you’d never have committed to such a long term at such a high rate… If only…

Quitcherbitchin people. You looked at the info at hand, made a decision and now must stick to your side of the bargain. If you try to get out, the lender will hit you with a big fat penalty – called a “lost interest compensation, or LIC” – because you’re breaking the contract.

Some people are very willing to eat the LIC, adding it into their mortgage so they can get the lower interest rate for a longer period of time. Hmmm. They argue that the longer-term savings on their mortgage is well worth paying the LIC.

If you’re determined to renegotiate your mortgage, let me introduce you to the concept of the “blend-and-extend.” With a blend-and- extend, you continue to pay the existing interest rate for the remaining term on your mortgage, but you renew early to lock in the lower rate for the remaining term.

Let’s say you have 18 months to go on your mortgage at 5%. For argument’s sake, the current 5-year rate is sitting at 4%. If you used a blend-and-extend, you’d pay 5% for the first 18 months and 4% for the remaining 3.5 years on your new 5-year term.

Most lenders offer the option to blend-and-extend. They may not know it, but they do. And you may have to convince them that this is something they can do, since the financial world is sadly under-educated in terms of how stuff works, and what their own companies offer. Hmmm.

You must be persistent. Your persistence will be rewarded with big savings. Brenda wrote me to say:

You are a peach! Dear Gail your advice has saved me $2,259.70 blending and extending mtg, and I negotiated a rate of 4.638 from 5.1 based on $214,515. locked in for 5 yrs closed. It took a lot of wear on the branch mgr, but TD came through.

So, are you going to beat yourself up for not having the foresight to predict where interest rates were going? Are you going to bitch and complain about how lenders are greedy dicks?  Are you going sit there wondering how long the lower interest rates are going to last? Or are you going to find a way to capture those lower rates right now, so there are fewer surprises in your future? Hey, hindsight is 20/20. It’s what you do with the information you have in the here-and-now the separates the whiners from the winners.

BTW: A lot of you have been indicating that you’d like an opportunity to get together and meet me in person. Saver Queen is making plans for a Potluck in the Park. There’s a forum set up under Gail Clubs (all the way at the bottom), and if you’re interested in participating, you can go there and get into the mix. I’m coming, and bringing kids with, along with a nice salad. Saver Queen has been good enough to front the costs for the park permit, and we’re all going to chip in. Go check out the forum!

Several years ago I attended my second husband’s funeral. We had been divorced for almost twelve years — and I know that’s a long time — but the man reflected in the service was in no way the man I knew. It felt strange. And it set me to thinking about what I’d want my funeral to look like. Turns out planning your funeral not only has emotional upsides, there are some financial benefits too.

One of the biggest advantages of planning your own funeral is that you’re making all those could-be-very-expensive decisions at a time when the stress levels are nowhere near as high as if your best buddy had just kicked the bucket.

The average cost of a funeral ranges from about $5,000 to around $7,000 and usually includes:

• The transfer of remains
• Embalming and Preparation
• Use of facilities for viewing and service
• A solid wood casket with velvet interior
• Hearse and limousine
• Professional service charges.

Knowing that your partner wants a plain pine box, has agreed to a plain pine box, has insisted on a plain pine box isn’t the same as having paid for a plain pine box when it comes time to plant him or her. Many are the stories I’ve heard of spouses and children who have overridden their partner’s or parents’ desire for simplicity because they were pressured — be it by a smooth-talking salesman, by family, or by their perception of societal demands — into going with something far more elaborate… and expensive.

Isn’t it better to look at all the options available and decide which is right for you in the rationale light of day so you or your family won’t end up spending more than they can afford? Having made all the decisions ahead of D-day, you’ve eliminated your family’s struggle with the decision-making at a time when they least need the added pressure.

You can even pre-pay your funeral. C’mon Gail, why would I do a stupid thing like that?

It may not be so stupid. Did you know you can pre-fund the expenses related to your funeral, burial, cremation or cemetery arrangements in Canada up to a maximum of $15,000 over your lifetime and the income accrued in the eligible funeral arrangement or EFA can grow on a tax-free basis?

If you had decided to spend the equivalent of today’s $15,000 on your funeral and stuck your fifteen grand in an account to compound and, hopefully, keep pace with inflation, you’d be required to declare and pay tax on the interest earned each year. Not so with an EFA. All the income you earned on that funeral money is tax-free. In essence, you are buying your funeral in today’s dollars despite what it may cost in the future.

You pick how much you want to spend on your big day and write a cheque to the funeral home, which puts the money into trust where it sits until you fall off your perch. When you die, the trust account is closed, the funeral home covers the cost of the funeral, and anything left (ha!) is returned to the estate. If inflation has outpaced your pre-paid package, your family isn’t on the hook for another penny.

It makes sense to look into this funeral stuff at much the same time that you’re dealing with the other “death” issues, like your will, although most people put it off until they’re moving into retirement. If you’re planning to put an aging parent into a nursing home, you might be surprised at how many make pre-planned funerals mandatory as part of their acceptance of a new client.

If you’re hesitating about planning your funeral because you have no idea where you’ll end up living in Canada when you retire, you don’t have to delay your decision. Funeral homes routinely transfer these prearrangements so you can be buried where you died, if that’s your family’s wish. And if you change your mind about your pre-paid funeral, you can cancel the contract with a letter. If you cancel the agreement after thirty days, however, the Funeral Directors & Establishments Act allows a funeral director to charge an admin fee of not more than 10% of the package you bought, to a maximum of $200, plus tax.

I’m not a fan of funerals… I avoid them whenever at all possible. I’ve left instructions to give away all the parts of my body that can be reused. The kids can then sell me to some pharmaceutical company – body parts are in big demand and carry a significant price tag – or they can cremate me and use the ashes to keep the bugs off the tomato plants. But for all those people who for religious or personal reasons plan to be planted, do your family a favour and start thinking about what their lives will be like the week you kick the bucket.