In our culture of immediacy we are urged to download INSTANTLY and get what we want ON DEMAND. We drive-thru to get our food fast. We substitute movies for books so we can get to the end of the story in two hours or less. If we get to a web page that takes more than 20 seconds to load, we move on. And if we have to wait in a line, we tap our foot and huff and puff because things are just taking too long.

I caught myself complaining about the traffic in Brighton a few days ago. It took me about 2 minutes to make a turn because of “all the cars” going by. This is in Brighton. OMG!  Now, I don’t usually get into a flap over traffic. And when I drive in Toronto I make a conscious effort to stay chill. I think it was because I was home in my small town where I didn’t expect traffic that it had an impact on me. But, let’s be real, what’s 2 minutes in a life? Time enough to admire the neighbours’ lilac bushes in full bloom. But not so much time that you have to get yourself into a lather about all the time it’s taking.

Our tendency to be impatient and our skewed sense of what constitutes a “reasonable” amount of time spills into how we manage our money. We want stuff and we want it NOW. The very idea of accumulating some cash to buy a thing is foreign to us. Why wait when we have a perfectly good credit card with some room available to satisfy our Immediacy Itch.

Sometimes it means we give up too soon because everything doesn’t fall into place tickety-boo the first time we try. Like living on a budget. There are folks who throw up their arms because the numbers aren’t working from the get go.

And then there are the people who leap into investments they know nothing about, or don’t have the risk tolerance for, simply because they don’t have the patience to watch their money grow slowly.

Most worthwhile activities take time. With some time, budgets can be finessed. With some time, investment portfolios can smooth themselves out.  And with some time, you can accumulate the money you need for that family vacation and come home without worrying about a credit hang-over.

The next time you hear yourself saying (out loud or in your head), “that’ll take too long” stop and take a breath. How long is too long? And what are you losing by not waiting?

Waiting for things to go on sale means you can anticipate getting a bargain. Waiting to be sure that the thing you think you want, you know you want means you’re sure you’re using your money wisely. Waiting for the next part of your life to start unfolding as opposed to rushing to the next whatever means you can enjoy where you are, not just where you’re going.

One of the key differences between people who can’t wait and those who can may be the sense of deprivation some people feel when they can’t scratch their itch immediately. Those who can wait feel anticipation… they enjoy the not-quite-there-yet feeling, imagining the potential pleasure they’ll derive and looking forward to bringing their wish to fruition.

Waiting is an important lesson to learn. It can be hard sometimes. But waiting gives us the time to evaluate whatever it is we want against all the other wants that will crop up in the meantime, so it makes us better at prioritizing. And if we learn to enjoy the pleasure of waiting, we can revel in our anticipation right up until we scratch the itch.

Assuming you had $100,000 to put down and got the mortgage at 3.7% (the lowest available at a major bank at the time I wrote this) and amortized your mortgage for 35 years (the longest available), your mortgage payment would be $3,809.75.

If the mortgage payment alone was to hit the 35% suggested in the Life Pie for what housing should cost (assuming you had no taxes, utilities, insurance and maintenance costs), you’d have to NET almost $11,000 a month to pull it off.

Okay, so the real estate market is a little overheated. What’s a body to do? You have to live somewhere, right?

I just wonder how those folks are going to cope with the rising interest rates when it comes time to renew. So I went back to the same bank I used for the mortgage quote (I used the one-year closed rate) to see how the payment changes. Their five-year closed rate is at 5.79% and that takes the monthly payment up to $4,964.42. This takes the percentage of your net income used for housing up to 45%, without taxes, utilities, insurance and maintenance costs. Ouch! Betcha that home-buyer will be putting those fees on her line of credit and her groceries on her credit card.

One of the reasons I chose the five-year rate is that new rules came into effect earlier this year that are designed to stop people for over-extending themselves. Now borrowers must meet the standards for a five-year, fixed-rate mortgage, even if they choose another term with a lower rate. (Anyone want to take bets on how long it’ll take for lenders to offer “special five year rates” so they can help customers get around this little mole-hill?)

While nobody seems very flustered by the fact that the Bank of Canada raised it’s rate another ¼% — hey, let’s not scare off the borrowers – if you’re carrying debt or planning to renegotiate a mortgage at some point in the future, you should be paying close attention.

But that’s just Vancouver, right? Elsewhere things are saner. Well, maybe. Calgary watched it’s home prices slip 8% at the beginning of the summer. If that happened in Vancouver, $80K of that $100K downpayment would be wiped out. Some people are under the impression that the drop off is a result of rising bankruptcies in the hitherto spend-free city. But it was an over-supply in housing that was the real culprit.

Earlier this month, Stats Can reported a drop of 5.3% in Canadian residential construction permits. And this week a National Post article quoted home sales as down 20% in June compared to June last year. That’s a whisper in the wind that there may be an over-supply of housing in the future. That doesn’t bode well for people who find they can’t make their mortgage payments and decide to downsize to something they can actually afford to carry and have a life too.

So how do you know if you’re contemplating buying in a over-heated market? Check the “affordability index,” which measures home prices against gross household income for an area.  Some pundits say you shouldn’t buy an area where the index is over 4, meaning that house prices are 4 times gross earnings. (When I was still just a kitten, the rule of thumb was under 2.5 times gross earnings. See how things change?) Vancouver’s index is sitting at almost 9.5. Toronto is at 4.93. The national average is just over 5.

Where do you find the affordability index? You’ll have to search the internet for it. And you have to look at the numbers and not so much at the yackety-yak that goes with ‘em. Since the numbers are often produced by banks, and banks are in the business of lending money, the “spin” is often designed to encourage borrowing. If a bank goes so far as to tell you that a market is actually overheated, take heed.

Keep in mind that the affordability index reports for an entire area. There may be pockets of very reasonably priced real estate within those areas, so don’t go getting all despondent and think you’ll never be able to afford anything. It will mean you’ll have to shop hard. And you’ll have to be patient. Someone else may be just about to bail and you’ll get your house on a sell-off at a considerable discount from the current “market” rate.

What you should not be doing is taking on more home than you can reasonably afford. If you do, don’t be surprised when you become “just another statistic” in the housing drama.

Sarah  wrote: I am 30, with a 4-year-old daughter, and living at home with my parents.  I do not receive child support from her father, and this is not likely to change (he dodges).  My parents have been kind enough to allow us to live with them while I get the divorce and child custody issues settled, but this is naturally wearing our relationship thin.

I support my daughter on about $450 a month, which I receive in government tax benefits.  I live a very frugal existence; I shop for used clothes for my daughter/myself and we have verylittle in the way of entertainment (we go for lots of walks).

She has just begun kindergarten, but it is part-time.  My parents are eagerly and aggressively pushing me to get a job and move out, telling me that everyone has to get into debt and that I should stop being afraid of it.  However, I AM afraid of debt in a massive way.  I seldom charge things to my credit card because I’m terrified I won’t be able to pay it off.

I am scared that I will not be able to make it on my own – finding affordable day care for my daughter, finding a job that will allow me to work around her school schedule, and of course, having enough money to make ends meet.  This is a daunting task and I am scared stiff.  Oh, and of course, I have to pay a lawyer off for the divorce – to the tune of about $5,000.  I don’t even have $500. Is there anything you could recommend to get me started on this journey to independence?  Is there any way I can do it without living in poverty?

Sarah, I know you’re afraid. You expected life to be one way and then it turn out to be another. And now you don’t think you can trust anything to be as you expect it to be. It hurts like hell. Girl, that’s life. Things are always changing. There will always be disappointment. But there will also be glory and happiness and joy. Just look at that beautiful baby-girl and know that you need to be showing her what HER life can be like by living a strong and independent life now.

You have to stop hiding. Time to get out into the world and learn to roll with the punches. Put away the credit cards completely. You don’t have to use credit. On this point I disagree with your parents. But you do have to get a life. So now it’s time to start figuring out what you really want, and how you’re going to get it.

As long as you’re not looking for work and daycare for your daughter you can continue to be scared of it all. Get out there. Get a job. Find a daycare space for your daughter. Practice it all from the safety of your parents’ home. Give yourself a timeline for that practice — be it six months or a year — and tell them your plan so they can see you moving forward.

The first steps are the hardest. Once you get some momentum going, you’ll be fine. Now, do you have the courage to take those first steps?

B wrote: Over the past 9 years, my wife has secretly taken money from our savings, opened & abused a credit card, several lines-of-credit, and over-draft protection on our bank account.  Most of the monies were to give to her sons (almost 27 & 30) for schooling and expenses.  I had prevention measures in place, but the losses now total over $140,000!  Recently, I discovered we owed $4000 and she had cashed-in $50,000 in RRSPs!  She feels bad and promises never to do it again.  We’ve paid the debts with our meagre savings, closed the line-of-credit and removed the over-draft protection.  I asked TD Bank to stop enabling her “addiction.”  Unsympathetic, they stated that they cannot discuss her money matters with me and even if she told them to stop giving her credit, she could have that removed.  We now have something with our investment company to prevent RRSP withdrawals without alerting us other.  I’ve assumed financial responsibilities and am paying bills and managing our accounts through the internet.  Sadly, she previously co-signed on the youngest’s apartment lease and co-signed on HIS line-of-credit. Other than invoking Power Of Attorney for Her Property, what safe-guards can be put in place to prevent further monetary disasters?  And, is there anything that can be done to discourage TD Canada Trust from enabling her?

Oh, I am so sorry that things have gotten into such a bad place for your family. You know, some people are just dopes when it comes to money. They don’t have the good sense God gave a goose. Unfortunately, you have one of those as a partner. She will continue to put herself at risk, regardless of what you do, so you must protect yourself. That means holding no assets jointly and never co-signing on credit. You can’t stop lenders from giving her rope unless you get some sort of medical diagnosis and assume financial control (through a financial power of attorney). Barring that, she can sign away her life.  I wish you the best of luck. Yours is not an easy path to walk. I send you a hug, and good energy to deal with this.

MM wrote: Hi Mrs. Vaz-Oxlade! my name’s melanie and i’m 11 years old. my parents have been married for 21 years now and they’ve collected alot of debt over the years. together we’ve been trying to get rid of it but things might have a malfunction an if it does then we could have to file for bankruptcy. i watch your show alot and i was wondering how do we fit that to our situation?  Thanks

Hello there sweetheart. Aren’t you a little young to be worrying about money? I’m sorry your family is stressed out. Bankruptcy may be the best option to give you all a fresh start. While I’m all for being honest with kids, I do think your parents should deal with this and reassure you that you’ll be safe. Do they know that you are writing to me? Have you talked about how you feel with them? I think you should. I hope that you’ll learn from this too. It’s important that people realize that using credit you can’t pay off immediately is not a good thing. I wish your family the best of luck and hope that things come out well for you all.

D wrote: My husband and I are older, he had to retire due to a massive hearth attach.  I am the main support for us and I want to retire at 60 in two years.  He does all the finances I do not have a clue about where we stand and when I try to bring it up he gets lets say gets anxious or upset about it.  I am afraid we are getting deeper and deeper in debt but he won’t say.  What can I do….we have only been together for 5 years married just coming up to 3 years.  We are very committed to each other but he keeps telling me if our cards are at the limit it is ok he has them in his name only and he won’t be around that much longer and the cards will be paid.  I hate that; I get very upset about it.  It is not so much the money but the attitude of his not living long enough and that it will be paid when he dies.  Holy cow that makes me upset even now just typing it makes me upset.  Please give me some advice on how to get through to him on the money thing.  I am heading for the library to see about your book and hopefully he will read it with me.  Thank you

Wow, D, it sounds like you are in an emotional pickle, and I’m so sorry you’re having to live through this. I have two pieces of advice for you:

1. You need to stop letting your husband be in charge of the money. If, as he says, he’s going to die, you better know about the money and how it works and stop letting him do it all. Simply saying that the debt will be gone isn’t good enough. You need to know what your life is costing you so you can be in control now and in the future. And since you’re bringing in the money, you can do this simply by taking responsibility for how that money is spent.

2. As for dealing with his sense of desperation over the debt and his health, this may be all because he refuses to face up to the mess you are in. Sitting down and getting it all on the table could be the key to turning it around. If, in fact, there’s not enough money to pay off the debt and have a life, declaring personal bankruptcy may be just the ticket, as long as you’re not signed on any of that debt.

It is important for you to not let this continue as it has. You need to know what’ going on. You need a plan. And you need to be together on this if you both hope to have the life you wanted when you got married three years ago.

Since a bond’s return is based on time and interest rates, bonds suffer from interest rate risk. If rates fall, a bond’s price rises because it becomes more valuable as a source of higher interest rates. So you can sell it for a capital gain. Or you can hold it till maturity for a great (higher) source of interest income. On the opposite side, when rates go up, the bond you bought last Thursday loses value — but only in so far as what people would pay to take it off your hands in a higher-interest-rate environment. If your plan was to hold the bond to maturity, what you’ve lost is the opportunity to have the money invested in that bond earn more at the current higher rates.

Changes in interest rates don’t affect all bonds equally. Long-term bonds experience greater price volatility than short-term bonds. Since the fluctuations will be greater, investors expect to be compensated for taking the extra risk.

There is a direct link between maturity and yield. It can best be seen by drawing a line between the yields available on like securities of different maturities, from shortest to longest. You’re looking at a yield curve.

A consistently increasing spread between the one-year term and the five-year term reflects a very stable market with a likelihood of increasing rates. In financial lingo this is referred to as a normal yield curve. With a normal yield curve, the longer the term, the higher the rate of interest earned. Sometimes the economy goes through periods when long-term rates are lower than short-term rates, referred to as an inverted yield curve. Then you have to decide whether to take a shorter term at a higher rate and run the risk that rates will be lower when it’s time to renew, or choose a longer term at a lower rate at which point you hope rates will have risen. An inverted yield curve is sometimes considered to be a harbinger of recession. When interest rates remain the same regardless of the amount of time that the money is invested, the yield curve is referred to as being flat. In a flat interest-rate environment, the reward for choosing a long-term maturity is relatively small so investors tend to stay in the short end of the maturity range.

By watching the yield curve, which is reported in the financial press, you’ll get a sense of where the market believes interest rates are headed, an important factor that could affect your bonds’ prices.

Bonds also suffer from credit risk — the risk that the bond issuer won’t come through with the interest payments or will default completely on the bond so you’ll lose your capital too. The trade-off when assessing credit risk is that a lower quality or junk bond (such as one offered by a company in financial trouble or in countries that can’t borrow from anybody else because they’ve used up their good will or their debt service) must offer a higher yield than a bond of superior quality. And this must be measured against the likelihood that this higher yielding bond exposes you to a greater risk of default.

The ideal time to be a long-bond investor is during periods of falling interest rates. When interest rates are rising, stick with short-term bonds in order to maximize capital preservation and to reinvest more quickly as rates move higher.

A key determinant of bond price movements is inflation. And that’s not just the Bank of Canada’s perception of inflation, but also investors’ perceptions and, therefore, their demand.  When inflationary fears strike, bond prices fall to increase yields enough to entice new bond buyers to accept this potential risk.

Some people in the biz believe that because gold has historically been considered a hedge against inflation, monitoring changes in gold-stock prices can give you an insight into where inflation, and therefore bond prices, are going. A gold mining index such as Barron’s GMI can be both a good indicator for stock investment purposes and for bond prices.

Just as investment diversification is important to equity investing, so too does it play a role in choosing the quality, type and term of the bonds in your portfolio. Remember, diversification helps to protect your portfolio from the ravages in the market — whether the market is in equities or fixed-income securities. Investment-grade bonds, which have lower yields, will offset the potential credit risk on high-yield bonds. Balancing corporate issues with government issues is another way to diversify.

You should also buy securities of various maturities. Buying bonds with a range of maturities, referred to as laddering, reduces your portfolio’s sensitivity to interest rate risk. Invest only in short-term securities and while you’ll have a high degree of stability, you’ll be sacrificing yield. Invest only in long-term securities and your portfolio will be far more volatile, exposing you to losses should you have to sell before maturity.

To ladder your bond portfolio, buy an assortment of bonds with maturities distributed over time — equal amounts in bonds maturing in two, four, six, eight and 10 years. When the first bonds mature, reinvest the money in a 10-year maturity to maintain the ladder.

Next week: Equity Investing

Last week: Types of Bonds

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Sticky Situation:

This in from S: My partner does not fully support the “getting out of debt” plan.  He says he does but then really doesn’t embrace it.  We have no joint debt however we do have our own from our past lives. We also have a joint bank account for “joint expenses”.  I am just starting this journey and am quite able to do it on my own, but how do you deal with this situation effectively while contributing jointly?

I get the sense that there are more than a few people who freak out over the bill-paying process. I’ve listened to people talk about a tightening in their stomachs, the sense of dread in case there’s not enough money. It’s like a monthly ritual of torture. Some people are so afraid of their bills that they just toss ‘em in a drawer without opening them. There’s a plan! If you’re stressing out over managing the monthlies, you should take a deep breath and:

1. Set-up a folder into which you put all your bills every month. Actually, two folders work better. One dated the 1st  to the 15th, the second dated the 16th to the 31st.  When you get a bill, open it and put it in the right folder based on the due date.  Now you have everything in one place so you don’t have to go hunting for the bills you shoved out of sight. Be brave, this is the first step in taking control.

2. Set two dates a month for bill payment and money management: the 10th and the 25th work great. That’s when you’ll pay your bills. See, no more procrastinating because you have a date set! You need to make sure you’re paying your bills at least three days in advance of their due date so you don’t get hit with a late fee because of the time it takes to “process” your transaction.

If you are paying your bills manually, for each bill, look at the balance on the current statement to verify that last month’s payment was credited to your account. If you’re paying by cheque, write your account number on the face of the cheque to ensure that your payment will be properly credited.

Enter the cheque number and the payment amount into your Spending Journal.  If you paid online, enter the amount paid and the confirmation number in your Spending Journal.

Write the payment amount, the cheque number or online confirmation number and the date on the face of the bill or statement.  Put it into your “Paid” folder.

3. Automate as much of your bill paying as you can. Many of my bills come as e-bills. Many more are auto deductions from my account. Each month, at the beginning of the month, I subtract those amounts from my spending journal so the money’s already “gone” and I can’t spend it on other stuff. (Since I’m paid monthly, this works for me. If you’re paid more often, you should read this blog.

4. Set-up online banking so you can pay and record info immediately. I know there are some die-hard pay-by-mail fans out there. If it’s working for you, swell. But if you’re having trouble keeping abreast of what’s been paid and what hasn’t, nothing beats online banking.

5. Eliminate unnecessary bills. Are you still paying for that subscription you took out five years ago? How about that annual gym membership that you keep forgetting to cancel? Are you spending your money on things you actually want, or are you just defaulting to spending because taking action seems like too much effort? Hey, cut that out! You work hard for your money and even small amounts drifting away through apathy is dumb!

One of the most popular tools I’ve given my families on TDDUP is the Office In A Box.  I’ve given these away at a couple of speaking engagements too, and people have cried with happiness. It’s not the stuff in the box per se. I think it is more the relief that they now have a system and they are so frickin’ relieved.

We all find joy in different places. But some of us are so busy with our commitments, our schedules, our to-do lists that we forget to stop and experience the joy that surrounds us.

When my friend Kirk’s puppies were born, I made a trip up to the farm to get licked all over and sniff some puppy-breath. Man, what a great smell. Right up there with horse and chocolate brownies. While I was there, Kirk showed us what his sheep dog could do. He said, very quietly, “Go get the sheep” and she was off. This after having just delivered (four weeks earlier) 8 beautiful, robust puppies. And the joy on that dog’s face was unmistakable. She was doing something she loves to do and it showed in every fibre of her body.

People have common points of joy. Who hasn’t felt the pull of a child’s giggle or a baby’s smile? Or the joy that comes from watching someone you love experience joy? Or the surreal beauty of a lightening storm? A double rainbow? A perfect flower?

I used to experience such joy when my babies cuddled up to me, their soft, warm heads just below my chin, their baby-smell wafting up, their little bodies wiggling in against me. Now, when Alex face-rakes me, it’s back. And when Malcolm looks up and smiles his mischievous smile at me, I am giddy with joy.

Remember the joy you felt the first time you held hands with your major crush? Or the feeling in your stomach as your lips brushed for the first time? How about when you sat with you best friend and told her your secret?

A lot of my joyful moments involve animals. I love critters of all kinds, and I feel a very strong connection to them. That’s how I know I won’t be animal-less forever. I dream of living on a horse-farm in Kentucky, sitting on a big wrap-around porch, watching as the animals frolic and graze. That’s not likely to be my reality, but it’s a pretty picture that brings me great joy because I can actually put myself on that porch and feel the soft wind blowing against my face as I listening to the whinnying and neighing.

I like the sound of water on a beach too. When I’m stressed or just need to find some tranquility, I head on over to the beach that’s five minutes from my house. I sit on my towel and watch the water move in and out. Or I lay back and look at the clouds move overhead through my sunglasses. It’s a peaceful joy.

With life so busy, sometimes we forget where our joy comes from. So take a moment now and think about what makes you feel joyful. And if you haven’t experienced any joy in the last couple of hours, days, weeks, ask yourself if you  may have forgotten where to look.

You don’t have to shun your old friends. Simply choose one or two times you can join them and skip the rest of the outings. Or suggest some less expensive options you can all enjoy together. Don’t get caught up in a flashy lifestyle that has you scrambling for rent money come the end of the month. And don’t get caught in the trap of thinking your life is any less worthwhile simply because you don’t have gobs of money to throw at your own self-indulgences. You’re a grown-up now and it’s time to put away childish things like instant gratificant and me-see-me-want-me-get.

One of the biggest struggles for the newly independent is the sense that their lives were so much better when they lived at home where they had the full run of a very nicely appointed home. If your parents made your life something from a bad reality TV show, the cold shower of independence may leave you a little nostalgic for what you had. You may even feel you’re entitled to the same big-screen TV and upper-middle-class diet to which you grew accustomed. Hey, if you don’t have the means to pay for that lifestyle, you are not entitled to it… yet. You’ll get there. It’ll take some time and some concerted effort. But you have the power to make the life you want.

Don’t fall into the trap of thinking you can have it all right now because you have credit available. If you think that you can take on loads of debt now and then tackle the repayment later when you’re making more money, you’re setting yourself up for a big fall. A big part of growing up is recognizing that you’ll likely never have enough money to do everything you want to do at once. You must prioritize. And you must be patient. And if you have debt commitments like a student loan or a car loan, you must work hard to pay off that debt as fast as you can before you take on another penny in debt.

The Pay-It-Later Fiasco is rampant among the newly independent with student loans who choose to pay the least amount possible on their debt so they have more money available to par-tay. The longer you take to pay off your debts, the more you’ll pay in interest. And that outstanding debt could prevent you from getting approved for something really important, like as a mortgage, later on.

Speaking of taking on a mortgage. Please, please don’t think that just because you now have a steady paycheque you’re ready to take on home-ownership.  If you’re convinced you must get into a home of your own immediately, calculate all the costs associated, like your mortgage, insurance, utilities, taxes and the like. Don’t forget home maintenance, which you should calculate at between 3% (for newer homes) and 5% (for older homes) of the cost of the home or the insurance value, whichever is less. Then start living on your income as if you were already paying those costs. So if your total “home ownership” monthly costs are $1,567, and your current rent is $1,200, you would take the difference of $367 and put it in a savings account. Now you’re practicing living on the smaller disposable income you’ll have and you’re saving money for your downpayment and closing costs too. Hey, if you’re planning to move to another part of town so your home will be less expensive, don’t forget to calculate in your commuting costs when you’re figuring out your smaller disposable income.

If you can happily live on less and you have the downpayment to get you into a home, go for it. But if you find you’re struggling to make ends meet, wait until you’ve got more to put down on a home or your income goes up to a more comfortable level before you jump into the market. Contrary to popular opinion, renting is not “throwing money away.” It’s paying for a place to live. Besides, for the first 5 years of your mortgage, 95% of your payment will be going to interest costs… since you’re “renting” someone else’s money.

Becoming independent and earning your first “real” pay cheque is exciting. Learning to manage your money sensibly is an important part of being independent. Keep the most important money lessons front and centre in your mind:

• don’t spend more money than you make
• save something
• pay off your debt
• mitigate your risks.

There now. You’re off to a great start!

K wrote: Gail, my mom made me sit down and watch your show the other day and what an eye-opener it was. I can’t believe the mess so many people get themselves into. Well, actually, I can believe it since I’ve gotten myself into a mess too. And all because I finally got a good job and was making more money than I had ever seen before. After being a poor student for years, I went nuts. But with you in my head now, I’m on my way to making it better.

Lots of young people get a rush when they get their first real pay cheques. With “so much money” in their accounts they imagine they’ll never be able to spend it all. This is particularly true when they walk away from the human resources department with the echo of their new “annual income” rattling around in their brains.

Hang on now chickadees, don’t forget you must pay tax on that money. There may also be other deductions that eat away at your take-home pay. And then there are your expenses like rent and food. While it may seem like more money than you’ll ever be able to spend, you’ll be surprised at how quickly it evaporates.

To avoid a So-Much-Money Fiasco, you should spend carefully and track your expenses for your first two or three months until you get a good handle on what life is costing you before you go out and blow your wad. Use your experience in those first few months to draw up a realistic budget that covers all your needs and some of your wants.  Don’t forget to stick some money away for emergencies and start your long-term savings. It doesn’t have to be a lot to start. But you must start.

One of the biggest temptations the newly independent face is the urge to fill up their closets and apartments with all the stuff they’ve done without. Sure you have a new job and need some professional outfits to carry off your new image. But that doesn’t mean you can go out and build yourself a whole new work wardrobe in one swipe of the credit card. Nor can you furnish your apartment overnight simply because a buy-now-pay-later offers you everything your heart desires with no money down and 12 months to pay.

To avoid the I-Have-to-Have-It-All-Now Fiasco, start by buying just the essentials and creating a list of all the other things you’ll want over time. Each month you can allocate a specific amount in your budget to acquiring the thing you’ve put on your list. When you do buy, shop smart so that your money goes as far as possible.

When it comes to clothes, stick with basic pieces in neutral colors like black, grey and khaki. Buy shirts/blouses that can match any of the bottoms, and mix and match to create multiple outfits.

For furniture, all you really need up front is a bed. Beg, borrow and swap for pieces that can act as stand ins until you’ve saved up the money to buy the couch or coffee table you really love. Try Freecycle or Craig’s List. Hit the second hand stores. Turn the furnishing of your home into a process — and a fun one at that — instead of another case of immediate gratification.

Put your credit card or debit card away so you aren’t tempted to buy when you’re out and about. Make shopping for what you need and want a purposeful event: you decide to buy those black pants you need today, you set a budget based on what you’ve seen while you were shopping around (window-shopping, checking prices online, etc.), you put the money in your wallet, you go shopping, you buy.

Perhaps the biggest mistake the newly independent make is to think they are too young for words like “retirement” or “emergency” to be in their vocabularies. This is the I’m-Invincible Fiasco, and it strikes because you’re sure that all that saving and planning is for “older” people. Sure you’re only 24 and retirement is a long, long, long way off. But the earlier you start saving, the less you’ll have to save each year. Besides, savings is a good habit and you’re never too young to start a good habit.

If your idea of an emergency is not having the right shoes for your cousin’s wedding, give your head a shake. Now that you’re independent and self-sufficient, who’s going to pick up the slack if you’re off work ill for a few days and your pay slip shows it? What about if your car breaks down or your cat get sick? Having an emergency fund is the only way to have options when dealing with unforeseen events. Money in the bank means you have the means to deal with whatever life throws at you. And, no, a credit card or line of credit is not an emergency fund. Its debt waiting to grab you by the short and curlies.

Aim to build up an emergency fund of at least 6 months of essential expenses. Set up an automatic savings plan to move just $25 or $50 per pay to a high-interest savings account. Increase your emergency savings over time until you’re up to $100 or more a month.

Set up a retirement savings plan and contribute a minimum of 5% of everything you earn. You’re aiming to get to 10% within your first two years. If you have a pension plan at work, you can reduce your personal savings by an equal amount.

Tomorrow: Part 2

Callable bonds can be redeemed or “called” by the issuer before they mature, usually for a stated price and at a particular time.When interest rates fall and issuers know they could float (or sell) new bonds with substantially lower rates, they redeemed their callable bonds. When you’re buying a bond, always check whether it is callable, and if so, when and where. If you hold registered bonds, you will be notified of a call directly. However, if you hold bearer bonds, you need to keep on eye on the financial press so that you don’t inadvertently continue expecting interest to be paid on a coupon for a bond that has been redeemed. (Bearer bonds are unregistered bonds which are payable to the person who presents them. While bonds are no longer issued in bearer form, there are some older bearer bonds that are still in circulation.)

Convertible bonds, which are sometimes issued by corporations, allow you to exchange the bond for common shares of the corporation. This gives you the opportunity for capital appreciation should the common shares of the company increase in value. However, this types of bonds usually pay a lower rate of interest than a nonconvertible bond would.

When investment dealers buy blocks of long-term, high-quality government bonds, detach interest coupons from the bonds and sell the interest coupons and bond residues separately to investors at a discount, these are referred to as strip (or zero coupon) bonds. The term “strip” is an acronym for “separately traded residual and interest payments.”  Strip bonds provide an investment vehicle that meets investors’ needs of safe, high-yield fixed-income investments that offer automatic reinvestment of interest. Sometimes referred to as TIGRs (term investment growth receipts) or sentinals, these are secure investments that avoid the reinvesting of small amounts of semiannual earned interest. With a strip bond, you know exactly what the yield will be on your investment at the time of purchase. Maturity dates range from 60 days to 20 years.

While there is a secondary market for the liquidation of strips, here are a few points to note:

•   If the interest rate at the time of purchase is higher than the current interest rate, it will be easy to sell the strip bond. However, if the interest rate is lower than the current interest rate, there is less likely to be a market for this investment. It will probably have to be held until maturity (or until interest rates fall below the rate guaranteed by the strip bond).

•    Strip bonds are far more susceptible to interest-rate moves than are regular bonds. This is great if you’re planning to use interest-rate moves to your advantage. For example, if interest rates declined from ten percent to eight percent, the price of a conventional government bond would rise by about 20%. However, the equivalent strip would appreciate by about 45%.

•   Since strip bonds offer security of principal and guaranteed interest payout, they appeal to people looking for high levels of security with a better return than investments such as certificates offer. However, that security should be further defined. Strip bonds issued by the federal government are very secure. Those issued by other government bodies are usually less secure and, as a compensating factor, offer a higher rate of interest.

Just as you can play the interest-rate game to earn a higher return on your bonds, so too can you play the foreign-exchange game using foreign bonds. Bond trading goes on 24 hours a day, every day, so there’s no need to limit your bond buying to North American bonds. Foreign markets provide opportunities, as well. At any given point in time, some countries have low interest rates, while others have high rates. You can, therefore, get a higher current return on your bond investments by buying bonds denominated in other currencies. But be warned! Playing the currency game can have both a positive and a negative effect on your overall return. Make sure you seek advice from someone very knowledgeable about foreign bonds before you decide to jump in.

Bonds pay out regular amounts, usually twice a year on a semiannual basis. But bond trades are constantly taking place. The registered owner of the bond at the date the interest is paid out will receive all the interest. This means if the bonds were purchased just a few days before the interest payout, most of that interest would have been earned by the previous owner, but paid to the new owner. As a result, there is a mechanism for ensuring that all bondholders receive the accrued interest to which they are entitled.

Let’s suppose you have a $1,000 bond paying ten percent, which you decide to sell. You sell your bond on June 15. The next interest payment date is September 15, at which point the buyer will receive the full six-month interest payment of $50. To ensure each bondholder gets a fair share of the interest pie, however — after all, the buyer only owned the bond for half the time — when the buyer purchases the bond from you, he will also have to pay you three months’ interest, or $25. You’ll get your share of the interest, and so will the buyer.

Next week: The Risks with Bonds

Last week: Bond Quotes

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Sticky Situation: You’re a natural-born fundraiser and you support several charities that are near and dear to your heart. How many times can you hit up the same people for support?

Do you have a sticky situation that you need help with? Send it along to getgvo@gmail with Sticky Situation in the subject line and we’ll see what our great community has to say.

You might want to try this at home too. If there is something that you think you can’t live without, pile a mess of it into a knapsack and carry it around with you for about a week. Doesn’t all that stuff get heavy? Better yet, if you have debt, carry a representational amount of it around. So if you owe $30,000, make 1 pound of weight equal $1,000 and carry around 30 pounds of your stuff (or weights). Will you get the message fast.

Our obsession with stuff is unhealthy. If you are shopping to make yourself feel better, to fill a void, or to prove to other people that you’ve made it, you’re shopping for all the wrong reasons. And if every time you see something new, something shinier, you HAVE to have it, you’ve really got it bad. Stuff does nothing to fill our lives with meaning. But it can lead to Debt Hell. If you’re obsessed with needing bigger houses so have the space you need to hold all your stuff, you’re playing a dangerous game.

Shopping to stave off the Screaming Blue Miseries means you’re not dealing with what’s making you unhappy. And doing it on credit is only going to add to your pile of woe. Buying beautifully things for other people to show how much you loooove them is not really saying “love” as much as telling them would, or doing something for them that would truly bring them joy. Simple things like cooking them dinner on a night when they’re at their busiest, or heading over and cutting their lawn and weeding their garden on a weekend when they’re away. Or offering the take the kids overnight so they can have a romantic evening to themselves. There are so many ways to show people you love them that shopping is really the easy way out. And if you’re doing it on credit, you’re not even using your money!

Some people think they have to drop a wad just to have some friends: if they aren’t clubbing or eating out in a restaurant, it can’t be as much fun. Really? In my parents’ day, the basket-party was the thing. Everyone would get all dressed up (no fancy, just fun) fill a basket with their contribution to the eats, and bring along some great music. And they’d have a heap of fun. How did that get replaced with limos and bottle service for a way to hang with friends?

People also get remarkably attached to their stuff. You can take away their right to choose and they’ll let you. You can take away their ability to shop, and they’ll let you. But try to separate them from their stuff and they’ll panic. I’ve seen it over and over. It’s like the stuff has some sort of stranglehold on their psyches.

As you move away from your addiction to stuff you may find yourself reluctant to give something up, even if you don’t really use it. Ask yourself why. What’s holding you back from getting rid of this particular possession? Does the item have an emotional connection?

While we were on vacation last March, I lost a ring that I’d recently bought while swimming in the Caribbean. “Oh” I gasped when I realized it. “I’ve lost my ring.”

“Were you attached to it yet?” asked Alex.

“No” I said.

“Good” said she.

We tend to get emotionally attached to our stuff.  Sometimes we say we “love” our stuff. Really? Love? Sometimes it is because we have lovely memories attached to that stuff. But memories are of the mind; they’re not physical. So why marry the stuff?

Life, not stuff, is what matters. Think about things that you’ve lost, that have been stolen or that have broken. At first you thought you couldn’t live without them. But you got over it. That connection was all in your head. But your life… well, know, that’s a series of moments that is streaming through your consciousness and how you use those moments can create joy, serenity, contentment. Or you can use them to put yourself in an ugly place by measuring them in stuff.

You know the old saying, “You can’t take it with you.” When you sit back and look over your life right now, what do you think about? I’ll bet dogs to donuts that it’s not the stuff. It’s the people and the places, the experiences, the joys and the sorrows, the feelings. What you fill your life with is what truly matters, not the stuff.

How do you deal with the stuff that you’ve become attached to? How much of a hold does your stuff have on you?

Don’t believe me? Over the next 24 hours, count how many times you complain about something: the price is too high, the weather’s too hot or too cold or too rainy, your shoes are bruising your feet, you have a headache, you have too much to do, your children are messy, your partner’s a jerk, your MIL is a miserable old bat, your sister is being unreasonable…. Hey I could go on ad nauseum. Do it. Count.

Complaining has become so much the norm that there’s actually a movement afoot to help people become more ware of just how much they’re doing it. The Rev. Will Bowen launched an innovative campaign to convince people around the world to stop their gossiping and complaining. He distributes purple bracelets for people to wear and when you catch yourself saying something negative, you have to move it from one wrist to the other. The goal: to see just how long you can keep that little purple bracelet on one wrist. Since the good Rev gave out his first 250 wristbands at his church in Kansas, the anti-complaining movement has become a worldwide phenomenon with 6 million bracelets being shipped.

I’m starting today. I’ve got myself a bright blue elastic band and I’m going to see just how long I can go with it on my left wrist, and how many times I end up moving it. I figure that simply becoming conscious of how often I kvetch is the first step to stopping. After all, bitchin’ and happiness can hardly ever exist in the same space (although there have been times when a good rant has made me feel MUCH better.)  I think the trick is not to complain unconsciously. Rather, if you recognize that you’re complaining you can stop and ask yourself if you would rather complain or be happy.

Want to come with me on a (almost) complaint-free, happier life? Find some way to get yourself to notice each time you complain or unnecessarily criticize. This includes judging others, getting pissed at people or events, and the general whining we do so unconciously. Each time you catch yourself complaining, stop and pay attention to it. Then ask yourself this question: Is there anything I can do about what I’m complaining about, or it outside of my control?

If there is something you can actually can do about what you complaining about, quitcherbitchin’ and do it! If there’s nothing you can do, it’s beyond your control, then breathe and let it go.

I’ve lived and worked with people for whom complaining is an addiction. It’s never about the doughnut, it’s always about the hole.  And chronic complaining is a tough habit to break. It takes time, focus and determination. I’m not sure I’m made of the stuff it would take to live completely complaint-free. That’s okay. Less complaining leaves more room for gratitude and joy. That’s where I’m headed. Wanna come?

Virtually everyone knows that the basic percentage used to calculate what you’ll need to live on in retirement follows The 70% Rule: you’ll need about 70% of the income you were earning just before you retired. In fact, most defined benefit plans – the Cadillac of pensions — only replace 60-70% of your working income.

The big supposition was that you’d have all your debt paid off by the time you retired. No consumer debt, no car loans, no mortgage.  No way. That’s just not happening. Now, people are buying fancy houses and renovating as they retire. They’re still driving luxury cars, repurchasing every couple of years. And they’re racking up consumer debt either on credit cards or on their lines of credit so they can do all those things they promised themselves they would do when they retired: travel, play, party.

One of the reasons why “retirees” are spending so much money is because people are retiring earlier than ever before. Freedom 55 was sold to us as nirvana. Hey, it’s expensive to retire that early. It means your savings have to last between 23 and 28 years if you kick the bucket when you’re supposed to at 78 for guys and 83 for dolls.  Have a longer life expectancy because you come from good genes and you’re really going to feel the pinch. Added to the “more time retired” is the fact that  you lose that extra ten years of earnings you would have had if you’d stuck it out to the normal retirement age of 65.  Retiring earlier also means you have more time to get bored and wanna go shopping. Whether your pleasure is a renovated kitchen, a sail-boat or an annual cruise, living the dream seems to have become a right that can be financed rather than a privilege that comes with having enough money saved.

Overextension of credit is the number one reason given across the country for the reported cause of bankruptcy. From BC to the Prairies, Ontario to Quebec and all the way to the Maritimes, consistently “overextension of credit” is reported as the culprit. So how did so many people find themselves with more credit than they could manage?

Here’s where we return to the problem of the credit score. Since lenders have virtually given up practicing sound lending adjudication, relying solely on the credit score as a means of qualifying customers for credit and more credit, overextensions have become a huge problem.

Having a great credit score does not mean you are able to repay your debt. You can use a cash advance on one source of credit to repay another source of credit to keep your credit score gleaming, since all that’s required is that you make the minimum payment. And lotsnlotsa people people, shuffling their credit around to make it look as if they can handle their debt. Ultimately, when the money flow slows (as in retirement) or when the soft and stinky pile of debt gets too deep, people have no option but to declare bankruptcy.

If solvency is really important to folks, perhaps we’ll stop encouraging people to chase the credit score and learn, instead, to live within their means. And since their means are going to be significantly reduced during retirements, perhaps practicing to live on less before you retire, and using the extra money to pay down debt and save up for the future wouldn’t be a half-bad idea.

I’ll tell you what I do Monique. I have an ING Direct savings account set up into which I transfer the money I’m accumulating for a particular category or a special purchase. So, for example, I have a “house maintenance” account along with a “vacation” account. Each month, I move the money to those accounts and watch it grow there. You could also have a single account that covers a bunch of different “planned spending” things. For example, I have an “overflow account” into which I put my “home insurance, clothing and gifts, and property taxes” amounts. I have a little book where I track these on paper. When I need to spend the money, say to pay my property taxes, I simply transfer the money back to my regular account.

Janice wrote: What savings suggestions do you have for a teenager starting their first part-time job? I have a soon to be 15 yr old daughter who would like to start working to have some ‘mad money’ of her own.  I’ve spoken to her about saving for university in 3 yrs time and I’ve shown her how money can compound with interest to make her a very comfortable adult.  I’m thinking that some money should go into her RESP along with my contributions.  But is it realistic to have her saving for retirement (even a small amount) at this age?  And can she even contribute to an RRSP at 15?.    thanks a bunch!!!!!!

Janice, to answer the technical part of the question first, anyone who has earned income in Canada can contribute to an RRSP. If she decides to put money into the RRSP, she should not claim the deduction, but wait until she’s in a higher tax bracket so it does the most good. But she can accumulate money there.
Hetty wrote:  I’ve been helping my youngest daughter and family financially and started by finding out they had no hot water.  Long story short, I caught them up, had my son in law put most of his income into my account so I could get them on a budget, made him get a 2nd job on weekends.  Bless their hearts, they’re terrific parents to their 2 little ones.  My question is, where can I find help to help me to help them.  I’m 72 years old and if it wasn’t for my job, I could not subsidize them monthly over and above the 2 low paying jobs he has.  My daughter is a stay at home mom and has her hands full with their little mentally delayed son.  She and her husband are good people, but not smart.  I need someone I can talk to.

Hetty, my heart goes out to you. I know how it feels to want your children to be safe and comfortable, and I applaud you for stepping in and taking charge. But you won’t be here forever m’love and you’ve got to move the responsibility back to the “children” so they can do what needs to be done. It’s fine to set them up on a budget, using the jars to help them visualize the money and when it’s coming to an end, but you can’t keep control of the money since they need to learn to do this for themselves. You can be their teacher and their guide, but you can’t be in control. That’s got to be their responsibility.

Since your grandson is mentally delayed, they should make sure they’re getting all the benefits they can from the federal and provincial governments. There’s a disability tax credit, for example, that may be very useful in lowering their taxes.

It sounds like income (or a lack of it) is the major issue. And it sounds like even with the extra job you’re still having to help out. They need to find a way to sustain themselves. Your daughter could help bring in some money, perhaps, by caring for kids before and after school (depending on where she lives). Or she could find a part-time job for the hours when your son-in-law is at home. It would get her out of the house for a bit and bring in some money. They may not be brilliant, but they have to learn to take care of themselves and their wee ones.

As for where to go for help, I’d start at my local bank or credit union (I like credit unions better because they are more about community). Don’t let anyone talk you into doing anything that puts you at risk, but ask lots of questions.

P wrote: I have the ultimate challenge for you.  I am in dire need of your assistance.  My brother (50 years old) sold his computer business 13 years ago.  He was a minority partner in the company and essentially retired after the sale.  The other partners continued to work even though they received significant more money.  My brother is married with two high school aged children one of which will be attending university next year.  His wife does not work.  You probably can see where I’m going with this but please read on.

My brother had approx 1 million dollars that he invested and lived on the proceeds until the last few years.  The market destroyed the bulk of his investments.  I own a business and had given him a salary but I can no longer afford to do so.   I continue to pay his gas bill by giving him a company credit card.   Currently he is living on a line of credit that is drawn close to $200,000.  I ask him about his retirement and children school funds and the answer is “I have money earmarked for that”.  He will not get a job.  In his calculation of wealth he does not include his debt.  The house is paid for but remains unfinished and is cluttered and messy.  He pretends to work each day going to an office (paid for by my other brother) but collects NO INCOME for his efforts.  Just a way of getting out of the house each day.

He is a very likable fellow and is always first to buy the round of drinks for his friends and is generous with his money.  The children have expensive hobbies (horse riding and motorcycling etc.).  He continues to have a membership at the local golf and country club.

My fear is he will loose his house and family if he does not change his spending habits and recognize he must spend less, budget and earn an income.  He is on the edge of disaster.
I have tried several times to talk to him about his situation but with no success.  I have found him job opportunities that he refuses to pursue.

I propose you  meet with him as your were to do a TV show.  I will provide the customary $5000 reward to you so there is no cost to you.  I will also pay for your expenses so there will be a zero cost to you.  I need someone like yourself with a strong, intelligent  review and plan to correct his situation and most of all to realize the mess he is in.

These are just the highlights the story runs much deeper.

PLEASE HELP!

I’m very flattered, however, I’m afraid I’m not as sure as you are that he’d be willing to listen to me. Usually people have to first acknowledge their messes before they’re prepared to clean them up. I understand that your brother has had a tough go and that you want to help, but you can’t. He has to want to be helped.

The first thing you all need to do is stop pretending everything is as it was. You must stop helping financially… clearly it is doing nothing more than stopping him from facing his reality. Your brother, too, must remove the pretense that he is working. Work is what you do to earn an income. If you are spinning your wheels for fun, it’s a hobby. If you’re doing it to pretend nothing is different, you’re delusional. And that requires serious intervention.

Have you spoken to your SIL? Or is she as afraid and unwilling to face the reality as your brother? Continuing to spend as if there continues to be an income is a recipe for future bankruptcy, which they may well face if you can’t wake him up.

As for using the TV format, I’m afraid the costs involved would be far higher than you anticipate, and ruse would be pointless. It costs approximately $100,000 to make 1/2 hour of television. And formats are dictated by the networks which have commissioned the show. All that is to say I have control over what I say and do, but not much else.

I receive between 20-40 appeals like this every week from people who are desperate and have no idea what to do next. That’s the reason I created this website and the tools… I can’t possibly do a house call for everyone who need one.

I wish you the very best of luck. You have a tough job ahead. Whether you work at breaking his illusion or you must simply stand by and watch, what you have to do is hard and I’m sorry it will be so tough. Caught early enough, this problem may still be fixable. By reassessing his financial situation, battening down the hatches, and doing whatever it takes to make the situation balance your brother can take control of this. The longer he waits, the deeper the hole. How you make him see that is the really tough next step

L wrote:  I a recovering gambler. I have taken a treatment course and am working hard at getting my life back.  Financially we are in trouble and I need help getting out. I have been watching your show for months and am trying to impliment your rules. We make about $120000.00 a year and presently about $160000.00 in debt (that is all consumer debt).I am trying to work out paying it back in three years but even with all the shortcuts that seems impossible. I am looking at doing a proposal but I would feel better if I could pay back all the money that I borrowed. I know it may take more time but it is the right thing to do. Can you give me any tips on getting out of this mess. Thanks for your show it has given me hope.

While the three-year rule is one I believe in quite strongly, clearly there are some debts that simply cannot be paid off in three years or less. You have to make a budget and come up with the amount that you can repay every month. Figure out what your interest costs will be a month and subtract that from your debt repayment amount. The difference is how much you’ll actually be paying down your debt by each month. Divide that into the principal you owe. That’s how many months it will take. I will say that if it looks like it’ll take more than seven years, I would definitely discuss it with a bankruptcy trustee.

Natasha  wrote: Hi Gail I love your show and valuable tips, I have been in debt through no fault of my own i leant money and because it came back in dribs and drabs I spent it rather than paying off the loan and it took me and extra 2 years to get out of the hole, I had a car loan £4800 and an overdraft £3,200 that I fortunately had a family member paid off for me intrest free, & i am repaying £250 per month towards the capital only no interest which is perfect. However I feel like a fat person who has lost the weight and is now struggling to keep it off, I only just totalled up my income and it is very low, and my outgoings seem to have monthly emergencys like two new tyres for the car, and a drive shaft in 1 month. Next month its mine and my daughters birthdays and then christmas. Please I have tried the jars and spent every penny in two days. Is there any help for me, I am in a very fortunate position and do not want to Fail this I am 32 years old and want to have a good night sleep please help.

M’love, it sounds as if your spending is completely out of control. You need to grab hold of yourself and give yourself a good shake. There is no magic solution for what ails you. You need to develop some discipline and PDQ if you’re also responsible for a child. One reason why you may be blowing through the jar money so fast is that your budget may be unrealistic. If you budget too little for food or transportation the money will disappear very quickly. The amounts you set aside have to be amounts you can live with. As for “I only just totalled up my income and it is very low” this is probably at the heart of your problem. Time to Make More Money girl. Whether it’s cleaning bathrooms or flipping burgers, if you need to make more money to give your daughter a safe and solid foundation for her life. That’s your job as a mother. You’ll do whatever it takes. BTW, Christmas and birthday presents are luxuries. You will have to find creative ways to make your daughter’s special days fun without the benefit of lots of money. You can do it if you really, really want to.

When you set out to buy a bond, the price quoted is made up of a bid and an ask price. The bid is the price you would get if you were selling a bond. The asked price is what you would pay when buying a bond. Here’s an example of a bond quotation so you can see what all the numbers mean:

1.  The “Issuer/Bond” category indicates who is issuing the bond. This sometimes includes the original interest rate offered (8 1/4) and the date the bond matures (2024).

2. If the original rate isn’t listed under the “Issuer” category, it will be listed under “Coupon” (8 1/4). A $1,000  bond with a coupon yield of 8.25% pays annual interest of $82.50. The coupon yield on a bond does not change during the life of the bond.

3. If the maturity date isn’t listed under the Issuer category, it will be listed under the “Maturity” category. This bond matures April 15, 2024.

4.  In this example, the price is $122.80. Usually when only one price is shown, it is the midpoint between the bid and asked prices. A full quote, in this example, might have been “122.60 bid, 123.00 asked.” Despite the fact a bond may have a face value of $1,000, they are always quoted based on 100. To figure the actual value of the bond, you must multiply the quote price by 10. So in this example, the quote price would actually be $1,228.00.

5. The yield quote refers to the yield to maturity. This takes into account both the interest received when the bond comes due, as well as the difference between the current price of the bond and its price at maturity. If a bond is trading at a premium (or at more than par value), the yield to maturity is less than the current yield. If the bond is trading at a discount (or at less than par value), the yield to maturity is more than the current yield.

The current yield on a bond is simply the annual interest divided by its current market price, multiplied by 100 to make a percentage. While the coupon yield never changes, the current yield will fluctuate based on the market price of the bond. In the case of this bond, the coupon rate is 8.25. However,bonds always have a maturity value of $1,000. Now, let’s assume the bond has been quoted at 122.80 as shown. This means its value is $1,228. The current yield is the annual interest ($82.50) divided by the current market price ($1,228), multiplied by 100 for a total of 6.71%. Despite the fact that the stated coupon yield is 8.25%, if you were to buy this bond in this market, you would earn only 6.71%.

6.  The “Change” category simply shows the movement of the price of the bond during the most recent trading day. Again, this figure needs to be multiplied by 10 and indicates the value of the bond had increased by $5.

As you can see from this example, the yield on a bond can differ widely depending on what kind of yield we’re talking about. You have to understand what return you’re getting on your bond investment by understanding how the coupon yield, current yield and yield-to-maturity differ.

Next Week: Types of Bonds

Last Week: More About Bonds

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Sticky Situation: The check arrives. You had a salad and water. Everyone else had steak, wine and dessert. It looks like everyone just wants to split the bill evenly. What would you do? Don’t forget the tip!

Don’t forget to vote on this week’s poll.

I’m a huge believer in sharing. From the children were wee, we practiced sharing in ways that would be meaningful to them. Before they were even receiving an allowance, and putting some money away each week to share, we would participate in Christmas gift giving to those children who weren’t as lucky. And there were important lessons learned before we left home, on the way to the store, at the check-out and on the drive home about the fact that the gifts chosen wouldn’t be coming into our house but would be going to other homes.

Some people give as a matter of fact. If they earn twenty bucks, they give two. Some people give as a way to support causes that are near and dear to their hearts. After my BFF was diagnosed with MS, we gave to that cause, and Alex participated in the MS read-a-thons. And some people give of their time and their energy because they love the feelings – and they are significant – that come from sharing themselves. I volunteered at the schools my children went to, doing everything to washing floors and desks, to teaching little ones their alphabet, to establishing chess clubs, stamp clubs and working on yearbooks. And I had a ball doing it all.

I’ve blogged before about how silly it is to give money when the money you’re giving isn’t really yours. If you’re in debt and aren’t living within your means, you aren’t giving up anything when you share. You’re simply going further into debt. If you don’t have money to give, that doesn’t take you out of the game. Consider donating your time. Volunteers are the backbone of most organizations that are trying to do good things on small budgets. Work in a soup kitchen. Give blood. Offer to do the books or raise money for a small local charity. Giving doesn’t just mean money. And it shouldn’t put you at risk financially.

If you’re determined to live within your means and share, if you’re prepared to take that $60 you would have spent on dinner out and offer it to a good cause, then the next question becomes how to do it wisely.

Make sure the organization you’re supporting is legitimate. There are more than a few ‘charities’ out there that are ineffective, at best, and downright deceitful at worst. The Summer 2010 issue of MoneySense magazine has stepped into the breach and produced The Charity 100 list ranking everything from cultural organizations like the Art Gallery of Ontario to fundraising organizations like the United Way and the Terry Fox Foundation on how efficient and transparent they are.

Local organizations are one thing, but some people like to give to international aid and development. With rumours running rampant about how inefficient these groups are, and how much of the money they raise goes to overheads, you may have wondered if you were doing any good at all. When I saw the article, I immediately checked out Word Vision Canada and was relieved to see that they’d received a pretty good ranking for efficiency and an excellent ranking for governance and transparency. So that means the goats, honey-bees, and books we chose probably arrived in with their legs, wings and pages mostly intact. The children and I like choosing gifts we can give that make us feel we’re making a difference, as opposed to just throwing money in a pot.

Don’t break your giving into tiny morsels. Funding-raising is expensive and small donations are often nibbled away by administrative costs. Focus your gifts rather than reactively scattering them because you got a telemarketing call or someone knocked on your door. Your gifts will not only have more impact, they will be more satisfying.

Find a cause that you are passionate about. Then think about ways in which you can leverage your gift. By combining small amounts with others you can offer a pooled gift that may make a big difference. By challenging others to support causes you consider important, you may involve people who would never have considered giving.  And accepting gifts to your favoured caused in lieu of more stuff is a way to not only simplify your own life but help others’ lives be better.