Archive for Financial Tips

Why the retirement age needs to change by the editors of MacLeans Magazine on Friday, February 3, 2012

What explains the mystique of age 65?

There was no particular logic at work in 1966 when Canada settled on 65 as the normal age of retirement for the Canada Pension Plan (CPP). We were simply copying the “minimum retirement age” the United States chose for itself back in 1934. Since then, the notion of 65 as the proper age at which to stop working and start enjoying oneself has come to be seen as a sacred right. It’s not. And it needs to change.

At the World Economic Forum in Davos, Switzerland, last week, Prime Minister Stephen Harper hinted at looming changes to Canada’s public retirement system. This has been widely interpreted to mean a shift in the age of eligibility for Old Age Security (OAS) from 65 to 67. It’s an entirely reasonable idea, and has been predictably met with outrage and protest.

Continuous increases in life expectancy are fundamentally altering the mathematics of retirement in Canada. When we settled on 65 as the social norm for retirement almost half a century ago, life expectancy was around 72 years. Today it is almost 81 years. And there’s no reason to believe these gains—driven by better health care technology, drugs and education—will stop. Over the past 100 years Canadians have added, on average, an extra three months to their lifespans year after year. But retirement at age 65 remains fixed.

More years of leisure and comparatively fewer for work, partly paid for by government, sounds like a great deal. Yet such a scenario is unsustainable over the long run. According to a recent article in Canadian Public Policy by McMaster University economists Frank Denton and Byron Spencer, the ratio of Canadian workers per retiree will drop from 4:1 to 2:1 over the next two decades. If retirement programs are kept at current levels, this will inevitably require a doubling of the public cost of retirement—a massive burden to place upon future generations. The obvious solution is to adjust the age of retirement.

Canada is unique among developed nations in ignoring the issue until now. Countries that have already raised or are raising their retirement age include: the U.S., France, Germany, Italy, Britain, Denmark, Australia, Belgium, Japan, Finland, Czech Republic, Hungary, Turkey . . . and on and on. It’s worth noting that the U.S. began the process of hiking its retirement age to 67 as far back as 1983.

And yet opponents are now accusing Harper of unleashing a hidden agenda on retirees. “The government has taken off the sweater vest,” remarked NDP finance critic Peter Julian. Critics point out Canada is in much better financial shape than many European countries. That may be true. But whether or not we’ve avoided the excesses of other public pension systems has no bearing on the fact that our system faces a crisis of its own due to rising life expectancies and lengthening retirements.

If Harper deserves criticism for his recent trial balloon, it should be for excessive timidity. In his Davos remarks he sought to contain potential criticism by declaring the CPP off limits: “Fortunately, the Canada Pension Plan is fully funded, actuarially sound and does not need to be changed.” In truth, the plan is fully funded only for the next few years and will soon require a major re-evaluation. Relentless increases in longevity have just as big an impact on CPP as OAS. It makes little sense to adjust the retirement age upward for one program while protecting the notion of retirement at 65 elsewhere. The social norm needs to change.

Canada’s retirement system was never designed to cover several decades of freedom from work. While it may be politically expedient to argue that Canada’s retirement system should be protected from change of any kind, there are serious consequences to the status quo. If we allow retirement to grow longer and more lucrative, we rob the economy of productive workers, put a greater burden on the next generation and inevitably threaten the viability of every other social program in the country.

Of course, any changes to the retirement age must be gradual, transparent and fair. (Certainly nothing should disadvantage the elderly poor; the near elimination of seniors’ poverty is one of the great Canadian public policy success stories of the past few decades.) Denton and Spencer propose adding three months per year to the retirement age until it reaches 70. Alternatively, Sweden indexes its normal retirement age to life expectancy tables; as the Swedish lifespan lengthens, so too does time spent at work. Regardless of the process, however, something has to give. Retirement can’t last forever.

By Larry MacDonald | January 27, 2012 Moneysense Magazine

The media and blogosphere is full of predictions that the housing market in Canada is going to crash. My hunch is that it won’t. It could level off or stagnate for a while, but Canadians aren’t going to wake up one morning a year or two from now and discover their houses are worth 15% to 25% less. Here are five reasons why:

No. 1: Housing doomsayers argue that when interest rates rise from their currently low levels, it’ll take away the credit punch bowl and cause house prices to tumble. However, the Bank of Canada will likely only allow its rates to climb as long as the economy is growing vigorously—which, in turn, means that employment and income levels are trending upward. Historically, job increases and wage gains have contributed to housing demand. These macroeconomic factors might not keep the mania in full flight, but they can serve as an offset to rising mortgage rates and help prevent the market from cratering.

No. 2: Real estate is a local market and differences exist between regions. Vancouver, with average house prices above $800,000, may be a bubble about to burst. But many other places, like New Brunswick and Prince Edward Island—where average house prices are under $200,000—don’t appear to be overly frothy.

No. 3: The doomsayers may be afflicted with “recency bias,” which says that people’s view of the future tends to be shaped by what recently occurred. The U.S. and some other countries experienced housing busts over the last several years, so that scenario tends to get a lot of weight in people’s minds when they reflect on the Canadian housing market. But, historically, such busts have been “fat tail” events that rarely occur.

No. 4: There are structural differences between the U.S. and Canadian housing markets. Lenders in Canada have greater recourse rights, meaning they can go after people who walk away from their mortgages (Alberta might be an exception). Also, the subprime mortgage market was less advanced in Canada.

No. 5: Price-to-rent and price-to-income ratios show over-valuation in the Canadian market, but valuation levels are not usually good indicators of turning points. Over- and under-valuation can persist for years in currency and financial markets. Indeed, the U.S stock market has been over-valued for more than a decade going by several yardsticks—yet it’s still holding up.

You may not want to know.

By MoneySense staff | From MoneySense Magazine, Summer 2011

In recent years, homeowners have been feeling pretty smug about their investing prowess as they’ve watched home prices surge. But the costs homeowners face to buy, sell and maintain their homes mean they haven’t made nearly as much as they think.

In this example, we calculated your real profit — after expenses — if you bought a typical home in the Greater Toronto Area 10 years ago, and sold it this year. We assume that it was purchased with a 10% down payment and a 5% fixed-rate mortgage. The home would have cost $248,601 to buy in 2001 and today it would sell for a hefty $456,147.

So does that mean you made $200,000? Not even close.

2011 sale price: $456,147

Subtract:
• $168,434 for the amount still owing on the mortgage;
• $4,000 for legal fees to buy and sell;
• $22,807 in realtor fees for the sale;
• $159,265 for 10 years of mortgage payments ($1,327 per month for 10 years);
• $42,000 for 10 years of property taxes;
• $19,000 for 10 years of home maintenance;
• $2,211 for the land transfer tax when the home was bought;
• $24,860 for the original down payment; and
• $358 in provincial sales tax on the mortgage insurance.

Actual profit: $13,212

Plus, you got a place to live for the last 10 years, of course.

With the right help, buying a condo can be simple and rewarding. But avoid these mistakes, or you could end up with a unit full of nasty surprises.

By Julie Cazzin | From MoneySense Magazine, April 2011

Craig Sebastiano’s first experience as a condo buyer was both exhilarating and annoying. The 35-year-old web producer knew what he wanted: a nice one-bedroom condo unit about a 10-minute walk from his job in downtown Toronto. He also wanted a workout room in the building so he could exercise late into the evening after long days at the office.

After months of looking, Sebastiano settled on a 650-square-foot unit in a building that hadn’t even broken ground yet: he bought it based on a floor plan. That was his first mistake. “The showroom model was a bit bigger than the condo I had bought, but the salespeople told me I would hardly be able to tell the difference,” says Sebastiano. “Well, my condo actually turned out to be quite a bit smaller than I had been led to believe. And it really wasn’t much like the showroom model at all.” Other details differed as well. Sebastiano was told he could move into his new condo in December 2004, but he didn’t actually get the keys until July 2006—19 months later. “I had heard stories of condo possessions being late—but not a year and a half. Even though I was able to keep renting my old apartment, it was frustrating.”

Finally, Sebastiano ended up paying a bundle in “occupancy fees.” When a new condo building is completed, it takes several months to be formally registered with the municipality’s Land Registry Office. You can live in the unit in the meantime, but technically you don’t own it yet. Until the registration goes through, you’ll pay occupancy fees—also called “phantom rent”—to cover the building’s costs, including property taxes. Usually this arrangement lasts three or four months, but in Sebastiano’s case, the payments went on for a year. “And they don’t count toward your mortgage,” he explains. “I wasn’t happy about that at all, but there wasn’t much I could do.”

Sebastiano’s story is as sobering as it is common. Condo lawyers can talk your ear off with stories about problematic and costly deals. It hasn’t helped that the market has been so hot in recent years—many buyers, afraid to lose out on a great condo in a prime location, have been pressured into making decisions that came back to haunt them.

The real estate market in most Canadian cities isn’t as frothy as in years past. If you’re a serious condo buyer, this is good news. It means you can wait for the right opportunity and not worry about bidding wars.

“Don’t rush into anything,” urges Nicolas Brunette-D’Souza, a real estate lawyer with Delaney’s Law in Ottawa. “There will always be a hot new building. Do your research thoroughly, because once you’ve bought, it’s a 30-year commitment.”

“A person will often go to Ikea several times before buying furniture,” adds Jeffrey Kahane, a Calgary-based real estate lawyer. “Yet you’d be amazed how many people look at a condo for 20 minutes and then write up an offer to buy. You need to put more thought into it than that.”

So let us help you put some thought into it. We’ll show you how to avoid the most common condo-buying pitfalls and end up satisfied with your new purchase.

Make sure you’re a condo person
Before you even think about looking for a condo, ask yourself whether you’re suited to the lifestyle. That means being comfortable living with certain rules, and in close proximity to others. You’ll also need to make sure you’re okay with shared common areas and condo board politics.

Karen Martin, a lawyer in Vancouver, lived in a condo for 11 years before finally accepting that she wasn’t suited to the lifestyle. “When I bought the condo, I didn’t realize that you get no independence whatsoever when it comes to making decisions,” says Martin, 56. “If you’re in a minority in the group when something has to get done, such as painting, and you don’t like it, you have to suck it up.” Martin was also shocked at how dirty some of her condo neighbours were. Some even let their pets pee in the building. “You could voice your displeasure, but you couldn’t actually do anything to stop that behaviour. As a condo owner you’re always dealing with everyone’s petty issues. I reached the point where I had to move out to stay sane.”

Decide between pre-owned and pre-construction
If you purchase a pre-owned (resale) condominium, you’ll see exactly what you’re buying. You can shop around, walk through various suites and pick the one that best suits you. Even if it needs some work, you can be secure in the knowledge that you got pretty much what you expected.

If, however, you decide to purchase a pre-construction condominium like Sebastiano, you’re entering the unknown. Sure, you can view sketches in the sales office, but you have no idea what your unit will really look like once it’s built. Still, there’s an attractive trade-off: you’ll be the first owner of the unit, and everything in it will be brand new.

If you find it hard to visualize what your new space will look like, do what Brunette-D’Souza did when he was condo hunting: view similarly sized units in other buildings. “I set up viewings in older buildings with condos that were about 700 square feet,” says the real estate lawyer. “What I learned is that 700 square feet can be big or small, depending on how it is laid out. It gave me a feel for the type of space we were talking about when trying to chose a unit from a plan.”

Research the builder
If the building hasn’t been completed yet, take some time to do an Internet search on the builder, their past projects and any complaints about the workmanship. If it’s a resale, find out if the builder is still in business and whether the company is financially stable. If it’s no longer around, the condo board (the group of volunteers who manage the building’s affairs) may have no legal re­course if major flaws are discovered later on.

As well, try to get some feedback from people who have bought units from the same builder, either through Internet forums or from residents of the company’s other buildings. A high rate of people selling their units is a red flag. So is the fact that your builder is in court a lot. There are a few places you can go to look these things up: British Columbia has a Homeowner Protection Office where you can check whether there are complaints or lawsuits against a particular builder. J.D. Power and Associates recently ranked condominium builders in the Greater Toronto Area with a five-star system. In other areas, your local Better Business Bureau may have details.

If you’re buying a resale unit, ask for the last two years’ worth of minutes from condo board meetings. They will give you a good idea of the types of problems you might be dealing with in the building.

To make sure your condo is structurally sound, you may want to hire an home inspector. That’s what Pauline van Hemert and her husband Michael did when they bought their Vancouver condo in 2009. They had heard horror stories about leaky West Coast condos, so they hired an independent inspector (not one recommended by the real estate agent) to get an honest assessment of their individual unit and the overall building. “When we heard those key words from our inspector—‘You’ll never see a tarp on this place’—we knew it was the condo for us,” says Pauline. “We had another condo inspected in the past that turned out to be a nightmare, so we were extra cautious.”

Work with people who know condos
Hire a professional realtor to help with the buying process. Then speak with a mortgage broker (or meet directly with lenders) so you get a feel for the type of mortgage you will qualify for before you start your search. You should also make sure you have a good lawyer to review both the offer to buy and your financing arrangements.

It pays to use a realtor who has a lot of experience with condos, as they are very different from houses. “I spend half my time dealing with real estate agents who know very little about what’s involved with buying or selling a condo,” says Gerry Miller, managing partner of Gardiner Miller Arnold LLP in Toronto. “You can end up making some very costly mistakes if you rely on people who don’t pay attention to the details.”

For instance, Miller recalls a recent condo buyer who was relocating to Toronto in a hurry. He saw a large suite, loved it and asked his real estate agent to make sure it came with a parking spot and locker. (He was a big skier who needed a locker to stash his skis and poles.) Unfortunately, the agent didn’t ask enough questions. Once the deal was signed, the buyer discovered that his unit was in Phase 1 of the complex, his parking spot was under the Phase 2 tower, and his locker was below Phase 3. “When that buyer needs to get his skis, he has to take two elevator rides to get to his locker, then another elevator ride to bring them back to his parking spot,” says Miller. “He sealed the deal before dis­covering any of this and had to suck it up.”

Other oversights? Not all parking spots are the same size: some are slightly smaller because they are positioned next to a pillar. With one of these compact spaces, you won’t be able to open your car door without risking a nasty dent.

Pay close attention to the location of the unit itself. Do you want to live on a high floor or on a lower one? In general, the higher up your suite, the higher the price—usually between $3,000 and $8,000 more for every floor above the main level. Of course, you may want to pay extra for the better view. But if you’re on a limited budget, sticking to the lower floors can save you money.

Measure your unit
Before completing the sale you should actually pull out a tape measure and make sure your unit is as large as advertised. You would be amazed by how much the actual square footage can differ from what you were told.

Ken Grunberg, who works at a video production house in Toronto, found out too late that the unit he bought in 2007 wasn’t nearly as large as advertised. When he and his partner measured the area before replacing a linoleum floor, they discovered it wasn’t 700 square feet after all. “We trusted what the real estate agent said,” says Grunberg, 30. “But our condo is actually only 560 square feet if you don’t count the balcony and bathroom.” They ended up taking down all the walls in the unit, except for the ones around the bedroom, to get the feeling of spaciousness they wanted.

Know your closing costs
Closing costs can add roughly 1.5% to 4% to the purchase price of your condo. On a $400,000 unit, that’s between $6,000 and $16,000 on top of your agent’s fee. These costs may include a land transfer tax (an escalating levy that rises to 2% of the purchase price), a bank appraisal fee ($300), legal fees (roughly $1,200), as well as a high-ratio mortgage insurance premium, which is required if you make a down payment of less than 20%. That premium is hefty: it can make up 1% to 4% of your outstanding mortgage.

For pre-construction units, your closing date is the day the building is officially registered by the builder, which could be several months—or even years—after your occupancy date (the day you move in). If you buy a new condo from floor plans, you could be on the hook for two months’ worth of maintenance fees, plus occupancy fees until the building is registered, depending on your province. Only after the closing date will you begin paying down your mortgage.

Understand your legal obligations
Make sure all the details of your condo purchase are in writing and never rely on verbal agreements. Every builder’s Agreement of Purchase and Sale documents are unique, so it’s important to have your lawyer review them fully.

If you’re buying a pre-construction unit in Ontario you have a 10-day cooling off period, in Manitoba it’s 48 hours for a new or used condo. Use this time to discuss concerns with your lawyer and confirm your financing. If you decide you don’t want the unit anymore, you can cancel the deal and get your deposit back. But once that period passes, you’re bound to the agreement.

Jonathan Reilly, president of English Bay Law Corp., in Vancouver, points out a nightmare scenario that happened in Vancouver a couple of years ago. Shortly after the financial crisis of 2008, prices for pre-construction condos in several markets fell abruptly, in some cases by 20%. Many people in Vancouver watched as the price of their pre-built condos plummeted to the point where they would lose thousands of dollars. In some cases, lenders withdrew the mortgage pre-approval, because the condo was now worth less than the loan amount. The harsh reality? Those buyers still had a legal obligation to buy the condo units at the price agreed to: if they walked away, they would not only lose their deposit, but the builders could sue for the difference in price, Reilly says. “If you have to pull out of a pre-sale contract, you’re often out of luck. The magnitude of the losses can be huge.”

Luckily, some builders did choose to renegotiate during the downturn. But other buyers lost their deposits and were sued, says Kahane, the Calgary lawyer. “There was a stretch in 2009 where people were calling my office every week for help. There was nothing I could do.”

Understand condo fees
The good news about condos is that you’ll never have to worry about replacing the roof or tinkering with the furnace again. But that convenience comes with a price: monthly fees. As a condo dweller, you own the inside of your unit. The outside of your unit and the land surrounding the building are owned collectively by you and all the other building residents. The general maintenance and insurance for these “common elements” are covered by everyone’s monthly fees, as are some—but not necessarily all—utilities. A portion of your condo fees will also go into a reserve fund, which is set aside for major repair and replacement costs that occur as a building gets older.

Of course, the more amenities your condo development boasts—24-hour concierge, upscale fitness centre, valet parking—the more you’ll have to pay. When he was shopping for a condo two years ago, Grunberg realized what a huge difference having fewer amenities made to the monthly maintenance fee. “Our condo fees were a low $330 a month when we moved in two years ago, and they’ve stayed low,” says Grunberg. “But I know another building nearby that has a huge greenhouse that’s expensive to maintain. The condo fees there are $900 a month for a suite like ours. That’s a huge difference.”

Also remember that the larger the unit, the higher the fees. In Toronto, as an example, typical condo fees for a pre-construction suite are about 55¢ per square foot of your unit for the first year. Builders guarantee that the maintenance fees on pre-construction units will not increase for one year after your purchase, but after that, don’t be surprised if they go up substantially. That’s what happened to Donna Brodie, an educational assistant in Ottawa. She and her husband, Alex, bought a condo a couple of years ago for her son to use while attending university. “The condo fees were a low $60 a month the first year, but the second year they more than doubled to $126,” says Brodie. “We were expecting an increase, but didn’t realize it would be that much. It can make budgeting difficult.”

From BankSITE Kid’s Corner

BARTERING

Barter only works as long as the things people are trading are worth approximately the same, and as long as two people want the things each other have. Thousands of years ago, when most people were hunters or farmers, bartering worked pretty well. A sheep farmer could trade wool for vegetables, or a hunter could trade meat for bread. As lives became more complicated, bartering did too. A farmer might give vegetables to the pot-maker, who would give pots to a hunter, who gave meat to the farmer. Confusing, isn’t it? They needed a better way to do business.

CURRENCY

Almost every society eventually created its own form of currency. Currency is anything that people agree to take in exchange for goods, like food, or services. Throughout history, people have used many different     things as currency: seashells, cows, animal teeth, even salt.People have chosen their currency because it’s useful, like grains or spices; or because it’s pretty, like seashells or jewels; or because it is hard to get, like sharks’ teeth. To do business with each other, communities had to decide how much their currency was worth compared to someone else’s currency. When settlers first came to Massachusetts, the native Americans used a currency called wampum, made of seashells strung together. Dutch settlers bought the island of Manhattan from native Americans for strings of wampum that were worth about sixteen dollars in Dutch money.

METAL MONEY   

People around the world used many different things for currency, but eventually metal coins became the most popular form of money in most of Europe and Asia.

People used gold, silver and copper as money because it was pretty, and useful, and hard to get. The first metal money was in lumps and bars, and how much it was worth depended on how much it weighed. This wasn’t very convenient, because if someone only wanted to spend part of their money, they had to melt
down the metal to divide it up.

Eventually, people figured out that they could make metal into pieces of equal size and weight. They stamped the weight on the piece of metal, along with some design that proved it was real, like a picture of the king. These were the first coins.

The problem with using metal as money is that it’s very heavy, and hard to carry around. People needed an easier way to make big payments, so they invented paper money.

PAPER MONEY                                  

The Chinese were probably the first to invent paper money as we know it. Around 86 BC, Emperor Wu declared that squares of white deerskin, decorated with the designs of a plant, would each be worth 400,000 copper coins.

In Europe, people wanted safe places to keep their coins, so that they would not have to carry them around everywhere. People left their money with goldsmiths, who gave them pieces of paper to show how much gold they had in safekeeping. Eventually, these goldsmiths became bankers, and the pieces of paper became “bank notes.” People could trade these bank notes for metal coins.

Do you have a dollar bill? Look at the words at the top: “Federal Reserve Note.” Our paper money is still a kind of bank note, and you can still trade it for metal coins. See the line that says “This note is legal tender for all debts, public and private”? This means that our government says you can use this piece of paper to pay for anything, and it will always be worth one dollar

Many see their debt as an obstacle to their long-term goals

Monday, August 8, 2011           By Megan Harman

Canadians are taking steps to tackle their debt loads, but most aren’t seeking financial advice on this important part of their financial plan, a new CIBC poll shows.

The survey of 1,000 Canadians, conducted by Harris-Decima, shows that 72% of Canadians hold some form of debt.

Of those in debt, 61% say they’ve made good progress towards paying down their debt so far this year. Efforts include making lump sum payments towards their debt, instituting a household budget and making sacrifices in order to better manage their debt.

“Managing debt as part of their overall financial plan is top of mind for Canadians in 2011, and these latest poll results show that some progress is being made,” commented Christina Kramer, executive vice president of retail distribution and channel strategy at CIBC.

Despite this progress, however, 42% of Canadians owing money said they still see their debt as an obstacle to achieving their long-term financial goals.

And, they may not be using all available options to help them become debt-free sooner. Among Canadians with debt, only 21% have had a conversation with an advisor sometime in the last year about strategies to reduce their debt faster.

“Canadians often associate getting financial advice with topics like saving for retirement and investing, but they should also think about making debt reduction part of a broader conversation with an advisor about their overall finances,” said Kramer.

She said advisors should help clients review their overall interest costs and help determine how best to allocate their money towards their debt.

Individuals aged 35 to 44 are most likely to hold various forms of debt, with 89% of those in this age group reporting that they hold at least some debt. Canadians aged 18 to 24 and those 65 and up were least likely to hold debt, according to the poll.

By Lindsey Webster

It’s the first time away from mom and dad. You’re on your own. It’s your freshman year of college. Whether your parents are helping you pay for school and board or you have financial aid, you will still probably need to get a part-time job to pay for the other necessities of life. Because it is most certainly your first time handling your own money and purchases, it may be a good idea to sit down and create a budget for yourself.

When you are a college student, creating a budget will mean making sacrifices. It will also mean watching every dollar you spend. However, with a little planning ahead, watching your money can be easy as pie. Before you create your budget, save all of your receipts and bills for one month. At the end of that month, review them and tally up the total amount of money you spent that month. Then, look back at your consumption and try to find ways to cut back. Once you have done that, break down your spending into the following categories and find out how much you will need to survive.

1. Food consumption: When deciding how much money to allocate for food each week, it is best to over-budget. After all, you don’t want to starve! However, if your food receipts from the last month say you spent an average of $100 on food every week, it probably means you are eating out for most meals, and you should start trying to make a weekly trip to the grocery store. Some great items to buy at the grocery store for students on a budget are: oatmeal, milk, eggs, select fruits and veggies that can be eaten on the go, sliced bread and deli meat, crackers and popcorn, yogurt, canned soups, select frozen meals, nuts and granolas and peanut butter. All of these items are low cost, quick to prepare, easy to transport and can last in your pantry or refrigerator for some time; all the things a student needs. Another great money saving tip is to drink mostly (if not only) water. Purchase a reusable water bottle and drink water from your tap, or if you prefer filtered water, purchase a home water filter system. Doing this will save you a ton of money, as most single people who consume flavored or carbonated beverages or bottled water spend on average an extra $15 per week on these beverage items. If you practice these tips, you should be able to knock your food bill down to only $50 or less per week.

**Note: Most universities and colleges now have Starbucks on or nearby the campus. Stay away or try to only visit once a week. If you went to Starbucks every weekday, you could easily spend $35 per week on coffee drinks; a luxury that most college students cannot afford. **

2. Utility Bills: If you are responsible for your utility bills, look at the bills from the last month and use that amount as a benchmark for the future. For example, if your last electricity bill was $50, you should expect your future bills to cost anywhere from $40 to $70 per month. Set aside $70 every month for electricity, so you will have a cushion for payment. Do this for your water bill, as well.

If you have a car, look at your gas receipts from last month. Think of ways you can decrease the amount of time you drive. Set aside the appropriate amount of money for gas, remembering that gas prices are unstable at this time. When it comes to TV, you should strive to live without this luxury as a student. Most cable TV costs anywhere from $50 to $100 per month; this amount of money should be saved for more needed items. For internet, see if your apartment complex or a local café offers free Wi-Fi, or go to your school’s library.

3. Insurance: If you are lucky, you should be able to stay on your parent’s health insurance plan until you are 26. However, some of us aren’t so lucky. If this is the case, check with your university or college about a student health care plan. Most schools offer this, and it comes at a fraction of the cost of other individual health care plans, usually running around $50 per month. Also, if you have a car and your parents are asking you to pay for the car insurance, know that insurance can run anywhere from $60 to a little over $100 per month, depending on your gender and accident history.

4. Miscellaneous items and toiletries: Allocate about $50-$75 per month for extra necessities like shampoo, paper towels, toilet paper, soap, toothpaste, etc.

It is a good idea to save a little extra money for instances of overspending in the above areas or emergencies (nail in your tire, etc). Try to save any amount of extra money that you can from every paycheck for this purpose. Also, ban yourself from any type of credit until you have the means to pay off that credit. This is especially important if you have student loans, as you are already racking up debt with these.

All in all, you shouldn’t have to spend over $450 on food, gas, electricity, water, health insurance, car insurance and other extra items every month, and this amount is actually over-estimating your budget by about $50-$100. The highest amount you could spend would be about $550 to $600 (this is including cable, internet and high-cost car insurance). The best thing you can do is save your receipts to track your spending habits. If you notice any unnecessary purchases, stop this habit immediately and find ways to curb your spending in the next month to make up for the overspending from the month before.

Lindsey Webster has been a rehabilitation counselor for 15 years and also owns the site <ahref=http://www.mastersincounseling.org>Masters in Counseling</a>. She likes to write about different topics related to counseling and careers.

‘Tis the season to eat out. Watch out for these restaurant tricks designed to make you spend more on your meal

By Gail Vaz-Oxlade | Online only, 2/12/11 Tags: dining, Food, Holidays, saving

If you know what restaurants are doing to play with your mind, you can thwart their psychological games and put the money you didn’t spend in your bank account.

Top-of–the-list trick
Did you know that you’re more likely to order the first item on a list. That’s why restaurants put their most profitable dish at the top of the list. And that’s why some menus have so many lists; more top of the list spots. Read further down the list and you may not have to spend quite so much, or you may get better value.

Box-it trick
When a restaurant wants to sell something, hey draw a line around it. That simple step will get people to buy it. Steer clear of the boxes.

No-dollar-sign trick
We have a huge avoidance response to dollar signs. When a number has a dollar sign in front of it, it has way more of a negative impact on our decision-making then when the number appears without the dollar sign. Restaurants are eliminating the dollar sign and decimals to play with your brain. The next time you’re planning to pay 18 50 for that salad, say the amount out loud so your brain can hear what an idiot you’re being.

Small-large version trick
I love rocky road ice cream. I buy two scoops, I pay $5. I buy one scoop, I pay $3.50. Hey, wait a minute. Restaurants use this trick all the time, convincing you to spend more because it’s a better “value.”Order the smaller version and you can also save money on the diet program.

Fancy-ingredient trick
When restaurants list exotic-sounding ingredients, it’s to trick you into thinking you’re getting something special you should pay more for. Don’t fall for it!

By Passard Dean

Published November 25, 2011 FoxNews.com

Hours after we fill up on turkey, stuffing and mashed potatoes, many Americans will give the plastic a workout at shopping retailers across the country.

Last year, the National Retail Federation estimated that 212 million bargain-seekers visited stores and online retailers over the weekend spending a whopping $45 billion.

Overspending on gifts around the holidays isn’t something uncommon. In fact, with high lines of credit available to consumers, credit card companies are doing everything they can to ensure that we overspend.

In a society that oftentimes requires individuals to borrow, one’s credit score is increasingly an important number. Companies use algorithms to calculate how much credit an individual can obtain. With recent dips in the economy and foreclosures on the rise, many people are wondering if there are a few easy ways to improve their credit scores? Here are my seven top tips:

1. Pay bills on time

Paying your bills on time is probably the single most important contributor to a good credit score. Credit bureaus want to see people make payments on their debt in a consistent and timely manner. If you have missed payments get current and stay current. It is harder to build than to destroy your credit.

2. Don’t go crazy over the holidays

Keeping balances low on credit cards is also important. After all, you do not receive a prize or award for pushing your credit cards to the limit. It is important to use credit cards wisely and pay off your balance at each payment period as often as you can. This will save you money by helping you to avoid interest as well.

3. Keep yourself under 50% of available credit

If you do need to go into debt, try your best to keep your outstanding balance under 50% of your available credit. Moving debts around from one card to another doesn’t really help as the credit bureaus are looking at all debts and not just debts on specific credit cards.

4. Credit card deals aren’t really “deals”

There are no such things as “credit card deals.” Consumers should not fall for spend incentives by credit cards. In the end, they are gouging you somehow.

5. Get help if you are having trouble

If you’re having trouble making ends meet, contact your creditors or see a legitimate credit counselor. However, it should be noted that some counseling services say they will help but don’t actually end up helping. You want to find a service that is rooted in helping to educate you about your options. Not a service that is trying to sell you on a particular product.

6. Get on a budget

Creating and sticking to a budget is also beneficial, and will help you manage your finances in a way that will translate into a higher credit score. The less money you have, the more you need a budget, because you need to account for every penny.

7. Get a copy of your credit report

As a general rule, it’s also important to get a copy of your report every six months, or at least every year. However, this can take a lot of time and effort, so it’s best to sign up with a company that you know will help you protect your credit.

Passard Dean is associate professor of accounting at Saint Leo University in Saint Leo, Florida. Dean also formerly worked at Equifax, one of the three main credit reporting agencies.

Read more: http://www.foxnews.com/opinion/2011/11/24/seven-tips-to-maintaining-healthy-credit-score-on-black-friday/#ixzz1ewaQcILV

Posted on November 14, 2011 by Jason (Frugal Dad)

Does it seem cheap to search for deals on Christmas gifts? Absolutely not; it’s a frugal move, and one I gladly participate in each year.

With Christmas budgets already stretched thin, it makes a lot of sense to use a few cost-cutting strategies when checking off your Christmas list.

1. Buy online. This one is easy for me. I’d much rather purchase Christmas gifts at Amazon.com than stand in a line with 300 people fighting over limited quantities. Depending on where you live, you can often avoid paying sales tax, too, which can represent a sizable portion of a large purchase such as a computer.

Many brick and mortar stores such as Target and Best Buy participate in Cyber Monday (the Monday following Thanksgiving) deals at their websites where you can find deals similar to the ones that were found in stores on Black Friday.

2. Pay with cash (for larger items). It used to be widely known that if you paid for large ticket items with cash you could expect a deep discount. That’s not always a given these days, because many stores make money on their in-store financing or branded credit cards, and would be just as happy if you financed your big purchase.

Still, it’s worth having the cash on-hand and asking for a cash discount.

3. Buy next year’s Christmas gifts in January. Some gifts are timeless, and if buying the latest hot gadge isn’t particulaly important to those on your list, you might consider picking up some gifts at deep discount after the holiday season shopping rush has passed.

Note, we like to shop for Christmas decorations around this time, too!

4. Don’t shy away from floor models. Just this past weekend I scored a zebra-patterned Parsons chair that will look great in my daughter’s room.

I asked the sales associate if she had one in the back, because the floor model had a few scratches on the legs. She returned with a disappointed look – the only remaining item was the floor model. The chair was originally $79.99, marked down to $59.99. I offered them $30. The manager said they couldn’t go below $40. We settled on $35.

I used a furniture pen to cover the scratches, gave the chair’s fabric a quick wipe down with a wash cloth, and it is now as good as new. Total savings – about 55% off the full, retail price.

5. Use coupons. I rarely purchase anything online without using some sort of coupon or promotional code. Many of these codes offer free shipping, or a discount off your total purchase. There are just too many ways to save not to do a little research.

Of course, I’ve tried to make this easier for readers in recent weeks by offering a consolidated spot here at Frugal Dad for coupons and deals. I highly encourage you to check out this area when you are ready to do some online shopping.

What are a few ways you save on Christmas gifts each year? Share your tips here and at the Facebook page where I’ve just kicked off a new discussion on this topic.