My Own Advisor

For today’s post, I thought it would be interesting to crunch some numbers…

Your Mortgage

Owing $250,000, at 3% interest over a 5-year term, amortized over 25 years, making bi-weekly payments and you’ll pay over $90,000 in interest costs over the amortization period.

The lesson:  even a cheap mortgage rate will cost you BIG bucks over time.   Get a good mortgage rate and make lump sum payments on your mortgage when you can to significantly reduce your borrowing costs.

Your Credit Cards

Owing $10,000 on a credit card, paying 18% interest, paying just the monthly minimum:  you’ll pay almost as much in interest as the original balance.  It will take you around 22 years to pay off this debt.

The lesson:  credit cards are great for temporary credit, getting cash-back or travel rewards in the process.  Credit cards could cost you a bundle if you don’t pay off the balance in full by the due date, always.

Your Mutual Funds

Investing in your average Canadian equity fund at ~2% management expense fee, putting down $10,000 initially and keeping that money invested for the next 20 years:  should earn close to $24,000 (based on historical returns of about 6.25%) but it will cost you about $9,000 in fees during that period.

The lesson:  look for active money management fees less than 1%, since almost every single mutual fund charging more than this will be hard-pressed to keep up with indexed products that charge you much lower fees for the same (or better) returns.

What does this mean to us?  Our plan is to accelerate our mortgage payments where we can, avoid any credit card debt and stay out of all high-priced mutual funds for good.

I can’t promise you’ll save all this money but there are options available to all of us.  You can visit this page here to play with some math yourself.

Thanks for reading and sharing this article.

I was on my way home from work the other day and stopped at FreshCo to load up on groceries and supplies for the weekend.  My routine is nothing unusual and neither is the practice of price matching by many consumers.

What is price matching?

The words pretty much mean what they say but I like to think of it this way:  the retailer backs up their “We beat any advertised price” guarantee.  The retailer will match any advertised price for the same product at any other store and agree to sell you that product for the same price (or sometimes less) as a token of your patronage.

I like these guarantees.  I’ve used them before and will continue to price match, when it makes sense as a function of my time and impact on my wallet.

Here are a few price matching rules I live by – then a brief story about someone who seemingly broke some of these rules  and annoyed a few people in the process.

Find the deal

The first thing you want to do is look through your flyers and find the deal for the product you want. Determine whether it’s a deal or not.

Review the price match policy

After determining the product is a deal for you, make some effort to understand the retailer’s price match policy.  When in doubt, ask to speak to a supervisor or manager on duty, especially for high-price ticket items.  Be sure to ask about product limits for your deal or whether other discounts might be void.

Make the shopping list

Add the deals to your shopping list and be specific about the product details.  This is especially helpful when more sales are advertised in the store than listed online or in the flyer.

Bring the advertised deal with you

Many retailers who price match include in their policy, a requirement for you to show the advertised deal to them before the purchase transaction.  If the retailer doesn’t include this explicitly in their policy, be sure to bring advertisement with you to the store; it never hurts.

Be ready and be nice

So, you’ve finished loading up your shopping cart with product deals.  You’re in line at the cash – be ready and be nice.  Have each product at the cash associated with its companion deal, coupon, flyer ad or whatever the retailer policy says you need.  Also, say “hello” when you get to the cash because a little kindness can go a long ways.

Unfortunately, not everyone lives by these “rules”….

At FreshCo recently, I witnessed a woman spending minutes scouring various flyers at the cash, visibly frustrated, because she could not find her deal in a competitor’s flyer; murmuring “it’s here…”   The young cashier stood bewildered by the process and looked at other customers in line, including myself, with apologetic shrug.  After patiently waiting in line for a few minutes, the man in front of me asked the woman in a terse tone “couldn’t you have done this at home?”  The woman replied with a grunt with the cashier saying on her behalf “she’s price matching…”  Thankfully another cashier who witnessed this ordeal opened up the adjacent cash and proceeded with the man’s order in front of me and then ours and the people behind us.  We left the store as the woman continued her price matching ways.

This FreshCo experience is not uncommon and I’ve seen this before it other stores but felt compelled to write about it because if and when you decide price matching is worth it, please plan ahead.  You’ll save yourself, the retailer and other customers some aggravation.

Do you price match?  If so, do you plan ahead?

Thanks for reading and sharing this article.

The best financial tip I received was given to me by my father – pay yourself first, son.  No, my father is not David Chilton.

He is a retired nurse administrator now in his early 60’s who grew up in very large family in Eastern Ontario, the eldest of many.  In his teens he worked long hours after school and on weekends to help support his parents and family.  Without any formal financial training my father learned the value of a dollar very early on because funds were so scarce.  When you grow up with more brothers and sisters than digits on both hands you learn how to be frugal faster than most.

My father’s financial lesson to pay yourself first, son, started to sink in as a teen.  As a 12-year-old I carried the Ottawa Citizen and saved some money during my first year with the route to go halves on a bike with my parents.  After I had enough of the early morning deliveries, I worked in the fast-food industry which provided some spending money on weekends.  At age 16 I stopped flipping burgers and got a job at Canadian Tire in my hometown.  The cash provided money for the car, touring around town with my best friend listening to the latest hair-bands on tapes.  The girls thought that was great, believe me folks…   I returned to work at Canadian Tire every summer during my university years, making a few thousand bucks that helped pay for textbooks and beer money, I suppose more of the latter.  With my degree in hand thanks to the University of Ottawa I started my first full-time job in the pharmaceutical industry almost 15 years ago.  Armed with my first “real job”, I heard the pay yourself first mantra ringing through my head.  Since starting that paper route years ago, I had always saved for things I wanted to buy.  As a young lad without any credit you can’t buy what you don’t have the money for.  So, with my meagre full-time income in my 20s, living in Toronto and starting my career, before the rent was paid I started doing what my father said I should do as soon as I could – pay myself first.  I haven’t stopped since.

Some years I didn’t contribute very much to my RRSP, maybe only a few hundred bucks per year – but it was a start.   I might have contributed $25 or $50 a month throughout most of my 20s actually.  (There was no tax-free savings account (TFSA) back then – too bad.)  I also contributed to my company’s defined contribution pension plan as soon as I started my full-time work as a chemist and they matched my contributions, mind you, in some high fee mutual fund products.  In my own account, the mutual fund holdings in my RRSP were nothing to celebrate but they did grow modestly over time.  A decade ago, I didn’t understand dividend investing, index investing, nor did I have any clue how important asset allocation was.  Since my 20s I’ve matured as an investor.  I’ve learned money management fees kill your investment returns almost as much as bad investing behaviour.  I’m still learning about personal finance and investing and my plan is to never stop.

Approaching another milestone birthday next year, I continue to pay myself first.  I’m passionate about personal finance and investing today in part because of a lesson told to me a long time ago.  As a kid, many things go in one ear and out the other, lost in time.  For some reason, the value of saving and paying myself first, thankfully, stuck.  Automatic contributions are at the core of my “pay me first” strategy and my wife’s as well.  So, we pay ourselves first and hopefully always will.  Some lessons in life are worth sharing and passing along.

What’s your best financial tip?

This post was written to promote financial literacy in Canada, a worthy campaign led by Glenn Cooke, president of Life Insurance Canada.com.  November in Financial Literacy month, and Glenn is spearheading the Blog for Financial Literacy campaign that will post the “best financial tip” from Canada’s top financial bloggers, including Canadian Capitalist, Canadian Couch Potato and many more.  Today, along with my post, you’ll likely read about dozens of “best financial tips” online that are aimed to help Canadian consumers.  Thanks to Glenn for asking me to be part of this effort.  I hope you enjoyed my story.

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An article I read highlighted a survey released by the Bank of Montreal recently that found 54% of Canadians have more than three months of savings available, while 49 per cent “have access to” more than $5,000, if needed.  This implies emergency funds across Canada are moderately established.  In the same article, of the 1,000 Canadians polled by Pollara:

• 66% of those polled said they feel ready to withstand a financial emergency this year yet 33% feel unprepared for any financial downturn;
• 19% of folks feeling unprepared said a financial emergency would deplete all their savings.

In another article I read this one conducted by Harris/Decima, respondents were asked how confident they were about being able to raise $2,000 within a month if needed.   Amongst the 1,000+ Canadians interviewed:

• 55% said they were extremely or very confident they could raise the cash although 92% said they’d consider borrowing for the money.
• 26% said they couldn’t raise the money no matter what timeline they were given.

Readers, I am curious….where do you stand with emergency funds?  Do you feel you need one?  Do you borrow for emergencies?

Are these scary financial stats or just scare tactics from the financial industry and media?

Thanks for reading and sharing this article.

Smart shopping never goes out of style whether it’s in the store or online.  Here at My Own Advisor, I’m always looking for ways to save more money. Saving can come in the form of being financially responsible for some of the essentials in our lives, like holding a bank account, owning insurance and using utilities in the house.  Here are a few simple things I do to save more money – I hope they help you too. 

1. Eat at home.  My wife and I enjoy dining out now and again but it’s expensive to do that frequently.  Instead of paying $50 or more at a pub on a Friday or Saturday night for pub fare, we’ll have pub night at home.  It’s significantly cheaper.  We’ll save that money for when we see friends and family to have meals out on the town.
2. Don’t pay banking fees!  We have a no-fee chequing account for paying bills online and we put all our transactions on our awesome MBNA credit card.  If we need cash, we always use ATMs affiliated with our bank where transactions are free of charge.
3. Use a programmable thermostat.  These things are less than $100 to own and they can save you an estimated 10% or more on your home heating and cooling bills.  For my budget, that’s equates to saving over $200 per year on utility costs so the payback is immediate.
4. Buy quality products.  My father has often said to me “quality is not an expense” and I think that’s true for many things.  Quality products may cost more money up front but the longevity is there over cheaper products.  I believe clothes and shoes are obvious examples.  I have some items in my wardrobe that have a shelf-life going on over 5 years now, not because I don’t like shopping for new duds and I’m cheap at times but because I don’t need to…the garments are of excellent quality and they haven’t worn out. 
5. Act like it’s 2012 and shop online!  Where isn’t there a website to shop online?  Shopping online is smart because it offers convenience, it’s efficient and you can easily compare prices.  Shopping for insurance online is one of the more obvious examples I can think of where I save time and money.  Certain insurers have made online auto insurance quotes fast and easy and I recently found one provider that will save you an average of $200! 

What about you, what are some of the key things you do to save more money?

Thanks for reading and sharing this article.