Bankruptcies soar above 50% in June 2009 in Canada

The recession is hurting many. Losing jobs can lead to the downfall of so many parts of our lives especially if we have debt. In most likelihood we all have some sort of debt from credit card balances to car loans and mortgages. This number is most likely reflected in most nations around the world as we are all in the same boat to some extent.

http://www.cbc.ca/consumer/story/2009/08/11/june-canada-bankruptcies235.html

According to this CBC article, there were 10,823 bankruptcies in the month of June this year, up 54.3% from the same time a year before.

What Can You do to Avoid the same boat?
There are times when everything falls apart but you need to stay prepared for the worst scenario. That’s why so many talk about the “Rainy Day” fund and its importance. You need to keep 3 months worth of living expenses saved away. This basically means that you need 3 months of wages so that you can survive in the case that you lose your job.

The problem is that with the recent recession, many are unable to find a job within 3 months of losing their job. This is a tough reality since it’s getting increasingly difficult to find a job, which is evident from rising Unemployment numbers. You may have to settle for a pay cut or try and explore different career opportunities but having a job is extremely important so that you can take a positive step forward and keep your finances in order.

What part of your Finances should you make your priority?
The obvious part of this is your living expenses. Not only should you be putting out money to buy food and pay for rent, you have to sit down and look to cut costs. You have to lower your living standards if you are living paycheck to paycheck and look to save money. The more you save, the more you helping yourself move a step forward.

After you have done that, pay down the debt carrying the highest interest. Credit cards usually have effective interest rates that are insane. As long as you carry balances on any credit card, you are on the road to financial doom. Never carry a balance on any credit card! If you have a line of credit with the bank, use that to pay off your credit card.

Upon paying off your credit card and maintaining a monthly balance that you can pay off each month, look to pay down your line of credit and bring that down to a manageable amount. Thereafter you probably have bigger debt like car loans and the mortgage on your condo or house. Don’t think that you will eventually pay these off over time, strive to pay them off as soon as possible. The interest you will save over time could be better invested in stocks and other investments to make you money and lead to your financial freedom.

Check how you can pay down your mortgage, many banks have ways of making double up payments to pay down only your principal without paying interest. A couple of these payments could immense savings in interest! Don’t be surprised in bankers don’t tell you about this, they want to make money by charging interest, why on earth would they want to tell you how to lose revenue they could earn?

I’m a former banker so I can say this. If you find someone giving you advice such as this or ways to sincerely save money then you’ve found a rare breed of a banker that actually cares and should treasure their advice. But you need to do your homework so that you don’t tricked or suckered into “investing” into something you don’t want to be invested in.

Pay Off Your Mortgage!
One of the biggest expenses that we have is paying for shelter. Whether if its rent or paying our mortgage it’s usually a big chunk of our paycheck and this is why you need to do everything you can to pay down your mortgage. Once you pay off your mortgage you have taken a huge step towards Financial Freedom as you will have disposable to put in other more useful places like investing!

Make your money work for you! This is the key to financial freedom. If you can grow your wealth and reap the benefits then you will be happy with your finances and life. Hardly sounds easy and it isn’t but it will definitely be worth the effort! This is probably one of the biggest reasons to buy a home instead of renting. The next would be the value appreciating in your home. In Canada, we have the Principal Residence Tax Exemption which allows us to sell our home and upgrade without having to pay tax on our capital gains that result from the sale. Take advantage of every chance you are given.

Hope this helps!

How to Save Money Everyday in Tough Times – Part 4

This is day 4 of this series to save money in the tough times that we are all experiencing. Be sure to read the first 3 parts to the series if you haven’t already:
Part 1 – Tip #1 Stop Watching TV! & Tip #2 Drink Water
Part 2 – Tip #3 Don’t Smoke! & Tip #4 Use Energy Saving Light Bulbs
Part 3 – Tip #5 Buy Used Instead of New & Tip #6 Pay Your Debt First

Saving money is tough, but if you stay disciplined we can all do it in one-way or another. To be realistic, not every tip is going to work for everyone but if you can start one or two things, in the long run it will make a difference. It’s the thought and action that counts; the result will come in time.

Tip #7 – Pack a Lunch for Work
Packing a lunch is very important. You can be healthy with your choices and eat exactly what you want. You just have to cook extra the night before or if you’re an early riser than cook in the morning for a fresher lunch. By brining lunch to work, you can save a substantial amount of money. Eating out has become more and more expensive and it isn’t uncommon to see people spending $8 or $9 on a takeout lunch. If you actually go into a restaurant to eat it could $20 - $25 or more depending on what you eat and where you go!

Tip #8 – Save on Your Banking Fees
For most people, the bare minimum of banking services is more than enough. If you’re someone that uses your bankcard like a maniac to pay for fees, then consider carrying a little more cash or use a credit card! There’s no need to be paying for a $3.44 purchase and rack up banking fees when you could simply use your credit card or carry a $5 bill.

Check your online banking statement or the statement you get in the mail and see how much you are paying for banking fees. Some banks offer free banking if you have investments or a credit card with them. I would take advantage of the free banking and from reading my blog you should already be putting money away and from reading Become a Smarter Credit Card User, you shouldn’t be scared to carry a Credit card. Take advantage of what you can and get free banking or minimize your banking fees.

Many people complain about how the banks charge insane fees but often times, this is because the person that is complaining isn’t being responsible. If you have 30 transactions in a month when you could have had 15, it’s your fault that you went overboard. If you didn’t have money to pay rent when you wrote a cheque, it isn’t the bank’s fault, it’s yours. Don’t try to fight the banking system, try to use it in your favor. Read my article about Having a Relationship with the Bank! to know what I’m talking about.

Mo2 Thinks
Always take a step back and think about what you are spending your money on. Every lunch that you buy out, cuts into your potential savings or money that you could use to pay down debt. Every extra dollar you pay for fees at your bank is the same, try to cut costs and increase the amount of money you can save and pay down debt with!

How to Save Money Everyday in Tough Times – Part 2

Today is day 2 of learning how to save money in your everyday life. It’s the little things that count and over time you will see a difference in the amount you are saving. These little amounts can lead to big things and believe it or not can actually help you reach your financial dreams including financial freedom! Remember, it doesn’t matter how much you make, it’s about how financially responsible you are and what you do with the money that you do make. There are many people that make over a $100,000 that aren’t well off while people that make $30,000 – 40,000 are doing much better.

Tip #3 - Stop Smoking!
Smoking is an expensive habit. Not only is it killing you and others around you slowly, it’s a huge financial burden. Depending on where you live, taxes on cigarettes is insane and a pack of cigarettes could cost you a lot of money. For the purpose of this article, I will use $7 as the norm for a pack of cigarettes, it’s more here in Canada but depending on where you live on this globe it could be a lot cheaper. I know for example that in Japan cigarettes are ridiculously cheap, pretty much half of what we pay here in Canada.

If you smoke a pack a day, which I hope you aren’t, then that means you need 365 packs in a year. Do the quick math and that’s 365 days x $7 = $2,555 per year! So if you could reduce your smoking habits to half, or one pack every two days, you could be saving half that amount which would be $1,277.50 a year.

If you can put away $1,277.50 for 10 years, and I hope you reduce your smoking over that time which would amount to more, at a compounding rate of 5% (pretty conservative) then you will end up with $18,149.17 over the 10-year span. I hope you’re getting my point here. Be sure, to keep track of how much money you’re saving and actually physically put that money away! There’s little use if you are just spending in some other useless way, unless you really need to.

Tip #4 – Use Energy Saving Light Bulbs
With Global Warming looming, we hear a lot about saving the environment. Wouldn’t it be great if there were a way to save money and help the environment? Well, here’s your chance! One of the many ways to save the environment and save you some cash is to use Energy saving light bulbs. The one drawdown of this is that the light bulbs themselves are little pricier than the conventional cheap light bulbs. But you will definitely see the effect over time as your electric bill will drop and you will save money!

Mo2 Thinks
These two tips will definitely help you cut your monthly bill and you need to work on reducing your expenses especially in tough times. Remember to keep track of the money you’re saving when you put these tips into action. If it’s your electricity bill see how much you are saving on a month-to-month basis. This way you can put the difference away. Obviously, you don’t have to put the full amount away; we all have expenses that must be taken care of such as debt. If you have debt, be sure to pay that down before you put money away. I will get more into paying debt in another article in the near future so stay tuned! As always, thanks so much for reading.