September Newsletter 2020

It’s time to go back to school… for your finances! The Fall is the perfect time for a credit clean-up so that you are ready for the holiday spending season.

When it comes to cleaning up credit, there is no better time than now to recognize the importance of your credit score and check if you are on track with your habits. To get started with your credit clean-up, there are a few things you can do:

Pull Your Credit Report:

For most of us, our credit score is something we only think about when we need it. However, if you are unsure of where you stand, this is a great time to find out! The Fair Credit Reporting Act lets you get one free credit report every year through Equifax or TransUnion. Pulling your own credit report results in a “soft” inquiry on your report and will not affect your credit score. Click here to get your free credit report today!

If You Find Errors, Dispute Them:

When doing your annual credit score review, it is a good idea to go through line-by-line and confirm no errors. If you find any errors, report and dispute them immediately as they could be affecting your score.

Consolidate Your Loans:

One of the best tips for managing your credit and working towards future financial success, is to consolidate your debt. Consolidating debt means reducing multiple loans to a single monthly payment, which typically has a lower interest rate allowing you to maximize spend on the principal amount.

Once you have put the effort into cleaning up your credit, you will want to keep it that way! A few tips for maintaining your credit and maximizing your financial future include:

Pay Your Bills:

This seems pretty straight forward, but it is not that simple. You not only have to pay the bills, but you have to do so in full AND on time whenever possible. Paying bills on time is one of the key behaviours lenders and creditors look for when deciding to grant you a loan or mortgage. If you are unable to afford the full amount, a good tip is to at least pay the minimum required as shown on your monthly statement to prevent any flags on your account.

Pay Your Debts:

Whether you have credit card debt, a car loan, line of credit or a mortgage, the goal should be to pay your debt off as quickly as possible. To make the most impact, start by paying the lowest debt items first and then work towards the larger amounts. By removing the low debt items, you also remove the interest payments on those loans which frees up money that can be put towards paying off larger items.

Stay Within Your Limit:

This is key when it comes to managing debt and maintaining a good credit score. Using all or most of your available credit is not advised. Your goal should be to use 30% or less of your available credit. For instance, if you have a limit of $1000 on your credit card, you should never go over $700.

NOTE: If you find you need more credit, it is better to increase the limit versus utilizing more than 70% of what is available each month.

Whether you qualify for a mortgage through a bank, credit union or other financial institution, you should be aiming for a credit score of 680 for at least one borrower (or guarantor). If you are ready to start your home-buying journey, or are looking to refinance your existing mortgage, a DLC Mortgage Broker can help you review your credit score and financial information to help you get the most from your money.

Did you know? According to a 2019 RBC Family Finances Poll, 9 out of 10 parents (96%) are financially supporting their children (ages 18-35 years). On average, this costs parents $5,623 per year! This is an added cost that many parents cannot afford. In fact, approximately 3 in 10 parents (32%) are seeing delayed retirement in order to help kids with post-secondary costs and are facing an inability or delayed response in paying off their own debts.

As much as parents want to help their kids, it should not be done at the jeopardy of your own future. In fact, when it comes to teaching your children about money, there is no better time to start than now!

Financial independence is a critical skill for future success that your children will not learn anywhere else. Not only does financial literacy help your children have more success in life, but it allows them to move out sooner and it avoids delaying retirement!

So, how do you teach your children about money?

Review Your Attitude Towards Money

The first and most important thing is to examine your own attitude towards money. Are you a penny pincher? Frivolous spender? Do you buy on impulse, or take a long time to make a purchase? How much debt do you have? Your financial habits will shape your children’s. To ensure that you are setting them up for their best financial future, parents need to consider what messages they are sending with their own money habits.

Give Your Children an Allowance

Providing an allowance to your children (especially one exchange for chores) is an age-old way of teaching your kids about money. A good guideline is $0.50 to $1.00 per year of your child’s age. For a 10-year-old, this would be $5 to $10 per week.

Teach Your Child to Save

If you are giving your child $10 per week in allowance for chores, encourage them to put even just $0.50 per week into a piggy bank. In six months, show them how much money they have saved and talk to them about why it is important, and what they can do with that larger amount now.

Encourage Kids to Think Before They Buy

While it’s hard to get a 10-year-old excited about an RRSP, there are other ways to help them plan ahead. One is to encourage them to think about their purchases before they commit. They saw a toy on TV they have to have? Teach them about how advertisements are designed to make you want something. Ask them to wait a week. Do they still want it?

Involve Your Children in the Family Finances

Growing up, I always saw my mother balancing the budget. In fact, I cannot tell you how many times I walked into her office while she was going through endless bank and credit card statements to ensure things matched up. Seeing the time she would devote to this was proof enough about its importance for me. This is why it is so valuable to let your kids see and hear you discuss financial planning; let them be part of opening and paying bills or planning vacations. Explain why you pay certain things and discuss affordable choices.

Remember, you are the best example to your children about money. Don’t be afraid to share the ups and downs with them. Be patient with your kids, but don’t give up! The best thing you can do as a parent is to promote financial security and independence.

When it comes to saving money, there are a lot of little things you can do that add up to make a big difference! Here are 10 of my favourite money-saving tips:

Automatic Savings

Automatic savings are one of the most effective ways to save because you can't spend what you can't access! Instruct your employer to transfer a certain amount from your paycheck each pay period into an RRSP or savings account (or both) or set up automatic transfers in your banking account to coincide with your payday.

Consolidating Debt

Consolidating debt will result in a single monthly payment and lower interest costs! Many people don’t realize just how much money they are wasting on interest each month, especially if you have multiple loans or credit cards. Consolidating debt can help you gain control and maximize spend on the principal amounts to pay off loans faster.

Budget with CASH

Budget with cash if you have trouble with overspending or find it too easy to use your card. After your bills are paid, take out the remaining cash (spending money) and only use that. Once the cash is gone, you’re out of money until next payday! Having physical cash in hand can also help you think twice when making purchases.

Buy in bulk

Buying in bulk is a great way to save a bit here and a bit there when doing your regular grocery shop or purchasing other items. Know you’ll need more? Stock up at once for bulk savings, which will help you in the long run!

Before buying!

Before Buying there are two things you should always do. The first is to wait at least 24 hours and the second is to shop around! If you still want to buy something the next day, make sure you get the best price available!

Plan your meals

Plan Your Meals. Most of us don’t have time to make breakfast (let alone lunch!) before we fly out the door for work. But what if I told you that getting up an hour earlier could save you over $100 a week!? Just think about how much you spend going out for breakfast AND lunch each day? Groceries are a lot cheaper and you can even prep a few days worth of meals on Sunday while you get ready for the week.

Think in hours versus dollars

Think in Hours versus Dollars every time you are looking to make a purchase, especially large ones to help you understand the TIME value of money. A new $24 Blu-Ray = 1 hour of work. A brand-new mattress = 41.67 hours of work. Understanding the time that went into earning money for a purchase can help with reconsidering frivolous items, or encourage you to look for the best deal on necessary products.

Utility savings

Utility Savings can help you save each month! Don’t blast your A/C with all the doors in your house open, don’t pump the heat without sealing cracks and consider things like installing water-saving toilets and running cold-water wash cycles to save energy (and money!) every day.

Master DIY

Master DIY - While sometimes you can spend $120 to make a $20 item yourself, there are some things that do benefit from DIY, such installing dimmer switches, that can help save you money in the long run.

Save Windfalls and tax refunds

Save Windfalls and Tax Refunds for a rainy day. A good rule of thumb is to put 50% of bonuses, tax refunds or other windfalls into your savings account and put the rest against loans owing. While you might want to go on a shopping spree or plan a vacation, paying off your debt NOW will free you up in the future.

Welcome to the September issue of my monthly newsletter!

Back to School: Credit Clean Up!