Scott Schaefer, CA CIRP

Budget – in simple terms, is a projection of future income and expenses. The concept is simple, but the execution is hard. Individuals, businesses, and government all struggle with enforcing realistic budgets and sticking to them. In order to be effective with budgeting, you need to be ready for a lot of hard work and accountability. Below are my top 6 tips to help you with your budget:

1. Understand your income: In my opinion, the most important item. Know exactly how much you bring home every month. This is the biggest constraint we have. Always think about your income after taxes as that amount is all that you have available to spend. If your income varies, you need to know the lows and the highs. In order to set a realistic budget, you need to be realistic with your income or the bottom line is not going to work.

2. Review your expenses from the last 12 months: This is a lot of work – I am not going to deny that. You need to review all your expenses from last year to understand where and how you spend your money. Get copies of all your bank statements and look at each transaction to get an understanding of where and how you were spending your money. Once you have reviewed all of your past spending, group the items into categories, such as shelter, vehicle, food, personal items, children costs, etc. Make your groups make sense for you.

3. Plan out your expenses in advance: Once you have reviewed last year’s expenses, you now can project forward the next 12 months of expenses. It is important to look at expenses on a monthly basis due to possible monthly or seasonal swings. Expenses change when looking at consecutive months but remain relatively consistent looking at the same month year over year. For examples, birthdays happen the same month every year, increased child care costs occur in the summer months, etc.

4. Understand your NEEDS versus WANTS: In order to stay on track and not overspend, you must ensure all the NEEDS are paid first. See my prior blog posting on Needs versus Wants concept.

5. Time all your bill payments with your pay cheques: Make life easier by matching the cash inflows with the cash outflows. Doug Hoyes explains this concept in his video at this link.

6. Reduce your debt load: Interest payments can eat up a serious portion of your monthly income. Eliminating debt allows you to have more available cash so that you can budget more effectively and start to save money for yourself.

Budgeting and cash projection is challenging, but very rewarding once you have mastered it. There are many principles and ideas out there – learn from them and adapt them to your situation. No two cases are ever the same; therefore you must find what works for you. More budgeting tips including video feeds can be found on hoyes.com.

If after you have done your budget and cash flow projections and you are losing money each month, then something needs to change. Look at the interest and debt serving costs – is this amount putting you in the negative each month? If so, then now is the time to restructure your debts. Consider what option will work for you. Some options include selling assets, refinancing with the bank, or a more formal plan such as a debt management plan, consumer proposal or personal bankruptcy.

Back to school season is in full swing and the kids will be back to the classroom next week. For many, this can be a hectic and expensive time of year, but saving money on back to school expenses might be easier than you think. There are many low cost ways to get the kids what they need for the school year without breaking the bank. Consider the following:

- Take advantage of dollar store deals (you’ll be amazed at what you can find)
- Compare prices (many store offer back to school deals, and will price match competitors)
- Reduce, reuse, recycle! (that’s right – try purchasing only what is necessary versus what your child wants and reuse items from previous years that are still in good condition. As for back to school clothing, why not check out a local thrift store!).

The back to school season is also a great time to start teaching our children about money!
I recently read a book that has some useful advice, titled: “Power Spending: Getting More for Less” by Carolyn Johnston, Eric Poulin and Robin Poulin.

The authors of this book have dedicated an entire chapter on the importance of teaching our children about money. When it comes to money lessons, sooner is better. They point out that “if your child is old enough to ask for candy or toys, they’re old enough to start gaining some financial awareness” (Pg. 83). Why not get the children involved in some money spending decisions so they can understand “stuff” comes at a cost. As suggested in the book, “It is important to let children be involved in some of the money spending decisions. They are more likely to understand your response to their requests for stuff, and may even stop asking, once they do understand” (pg.82). It’s also important to note that when children have money handed to them and are free to spend it at their own discretion; they begin to see money as disposable income. This can lead to poor money habits in the future. It is wise to teach our children the importance of saving!

Johnston, Carolyn, Eric Poulin, Robin Poulin, and David Johnston. Power Spending Getting More for Less. Clarington, Ont.: ABC Pub., 2010. Print.

Scott Schaefer, BA CA CIRP

Today, we are experiencing different success stories of companies in the high-tech and insurance industries. With large companies like RIM, Sunlife, Manulife, come many good jobs. These companies are playing key roles in our local economy.

Large companies in their best years offer large amounts of jobs and bring in significant revenue to the community. These jobs allow people to settle into Kitchener-Waterloo by spending their income at local retailers, buying homes, raising families, and participating in the community. It could be said that large companies have helped shape the city into what we have today.

With the business world constantly changing, people have to adapt; change in employment is almost inevitable. The idea of “life-long” employment at one place is a thing of the past. This greatly affects individuals and their families as they try to maintain a secure lifestyle through changes in jobs. When you add a change in employment or a period of time without employment, with the amount of debt that families are carrying, it can be devastating to the family. In fact, job loss or reduction of income is one of the common causes of someone filing a consumer proposal or personal bankruptcy in my Kitchener bankruptcy office.

With RIM’s lay-off announcements over the past week, we are likely going to see people in our community experience job loss and may leave others stressing over future uncertainties. Not to mention the impact on the investments and shares people are holding in RIM stock.

Good, steady paying jobs are vital to keeping a budget balanced. If you are struggling financially due to changes in your employment, periods of time off work, wage cuts, etc and want to discuss options to deal with your debts, give me a call at 519-747-0660 or send me an e-mail.

Scott Schaefer lecturing

We discussed various Family Work and Family Money issues, but the core part of this is the focus on personal finances. Personal finances are one topic that seems to never be taught to our students throughout the various levels of school. Within personal finances, is personal budgeting. Most peoples budgeting uses the “sink or swim” theory that exemplifies that you just have to live it to learn it. I presented to the students that personal finances are about “choices and constraints”. Conveniently, this was the name of the class text book. As adults we all know too well the true money constraints we live with, as there is only so much money to go around. As kids, it is hard to fully gain the appreciation of this concept.

I focused the class discussion around things the students should think about as they graduate, enter into the work force, develop their relationships, and have a family. When it comes to the working environment, I believe we are all going to see more changes in our jobs as the years go by. Only a limited number of people will have only one job for the rest of their lives. Most will be employed by a variety of companies throughout their lives. We will see changes in the market place with economy swings, government regulations, companies merging, etc. The more prepared for change we are, the more able some will be to adapt to that change.

When it comes to children, there are courses available related to child birth and parenting, but I have yet to see one course that prepares new parents on budgeting as a family. During the lecture, we discussed things the students should plan for when it comes to children, house, vehicles, travel, etc. No one case is ever the same, but the fact is we need to be open to discussions on personal financing. Personal finance is one area people tend to keep relatively sacred and rarely discuss with peers. I feel it is time to share our experiences and help people as they learn to “swim” in the adult working world with great financial commitments and responsibility.

The concepts I discussed with the students today are not new or overly complex. The key thing I wanted the students to get from the lecture is to consider life and how it impacts their own needs as well as understand the choices and constraints they face. These concepts are even more relevant to someone who is obtaining a fresh start through a personal bankruptcy or a consumer proposal. Bad things happen to good people. With a fresh start and life’s past experiences under one’s belt, it’s all about the future and what can be made of it.

If you are overwhelmed with your debts and would like to sit down and discuss your personal situation so that you can make a plan for the future, please call me at 310-PLAN or send me an e-mail.

Scott Schaefer CA CIRP

What is the future outlook given these facts? You will hear many views on this topic, as everyone’s situation is different the impact on your family can also be different. My concern – we have seen low interest rates for a relatively long period of time. Every small increase in interest rates will have a big impact on $100,000 in debts. The impact may be a short or even a long term impact on the family situation. Increased interest costs take more of the monthly budget to pay, and therefore less for savings and other items. Increased debt costs today, will decrease funds availabe to pay for future things like children’s schooling, repairs to the house or vehicle, retirement savings plans, etc.

The time to make a plan to deal with the debts is now. First take inventory of your situation. How much do you owe, what are the family income and expenses, and what are the family’s plans/hopes for the future. Look at your debt level, is it increasing, decreasing, or staying the same on a month by month basis.

You need to consider your ability to pay the existing debts. If your debt level is overwhelming and controlling you, then call me for a free meeting to review your situation and your options so that you can make the right plan for you and your family. I can be reached in Kitchener Waterloo at 310-PLAN or send me an e-mail. My Kitchener office is located at 607 King Street West between uptown Waterloo and downtown Kitchener. As a licensed trustee in bankruptcy, my duties are to explore all options with your including debt consolidation, credit counselling, debt management plans, consumer proposals and personal bankruptcy.

A consumer proposal or a bankruptcy is a life changing event. Both options allow for restructuring of your debts and allow you to create a new future, free from being overwhelmed by current debts. This is why I recommend people first consider what they will (or can) do differently in the future. There are many different techniques and tools to help individuals and families through life’s financial challenges. I personally find books to be great resources to get you thinking and talking about ways to do things differently.

The most recent book that I have read is The Smart Canadian’s Guide to Saving Money: Pat Foran is On Your Side, Helping You to Stop Wasting Money, Start Saving It, and Build Your Wealth by Pat Foran. Foran is from CTV’s Consumer Alert and interestingly enough, he began his broadcasting career in Kitchener. I am recommending this book to individuals in their efforts to seek a fresh financial start. Foran covers many topics and helps Canadians through many financial situations. Doug Hoyes, who co-founded Hoyes Michalos in Kitchener Waterloo in 1999, provided information for the section in this book on personal bankruptcy.

If you are struggling with your debts and want to make a plan for your future, then call me at 310-PLAN or send me an e-mail.

Amie Carroll, one of my Kitchener office credit counsellors, wrote a book review on this book. To read her article please follow this link.

1. Sell assets to pay the debts: If your debts are less than the value of the assets you own, then one option is to sell or cash in your assets and simply pay off the debts. For example, if you have $50,000 in an RSP and $20,000 in credit card debt, then a solution for you would be to cash in the RSP’s to cover the debt. The key is to get rid of the credit cards once they are paid off. If needed, only keep one with a smaller, more manageable limit. If you choose to sell assets make sure you consider the tax implications.

2. Remortgage your house: If you own your own home and the value of the home is greater than the mortgage amount, you might be able to redo the mortgage and have enough to pay the mortgage as well as your other debts. Be aware, this will increase the length of time left on the mortgage. I suggest you work with your mortgage company or a mortgage broker to ensure you are getting the right mortgage for your situation.

3. Consolidate the debts into one loan: If your situation is one in which you can afford to pay all of your debts back, but just have too many creditors to pay each month, then a consolidation loan may work for you. A consolidation loan is where you get a loan from a bank to pay off all of your debts, leaving you with just one loan payment to make.

4. Credit Counselling: In this case, you work with a qualified credit counselor to make a budget aimed at paying down your debts over time. Following a budget takes discipline and you need to be 100% committed. It you do not follow the budget closely the debts will not get paid down. Credit counselling works great if you have enough income per month to deal with your monthly commitments, but have not been able to keep track of or stay on top of it in the past.

5. Debt Management Plan: A debt management plan is a voluntary agreement between you and your creditors to allow you to pay back all the debts but under set payment terms. It is like a consolidation loan; however it is not a loan. The interest is eliminated or reduced to a lower amount. This option works when someone’s debts are manageable, but they cannot get ahead with the interest charges.

6. Consumer Proposal: A consumer proposal is an offer to your creditors through a trustee in bankruptcy that allows you to make one affordable monthly payment to all of your unsecured creditors. Through the consumer proposal, you pay a portion of your debts back to allow you to rebuild your financial situation. A consumer proposal allows you to protect your assets and stop wage garnishments. A consumer proposal is done under federal law and is monitored by the government for your protection. The trustee is paid through the consumer proposal and not a direct cost to you.

7. Personal Bankruptcy: As a last option, a personal bankruptcy can be filed with a trustee to eliminate your debts so that you can have a fresh start. Personal bankruptcy is not what people plan for, but when debts become too much and you cannot afford the other options listed above; a bankruptcy is designed to give you this fresh start.

To take care of your debts, you need to have a plan. I talk and meet with thousands of people from Kitchener Waterloo to review their financial situation and help them develop a plan to deal with their debts. As a licensed trustee in bankruptcy and qualified credit counsellor, I serve the Kitchener Waterloo and surrounding area. My office is conveniently located on King Street between Kitchener and Waterloo. I can be reached at 310-PLAN or via e-mail. If you spent the holiday season worrying about your situation, then the start of a new year is a good time to take action.

First, be like Santa – make a LIST and check it TWICE. That is, look at who you have to buy for, what you already have bought and then make a list for what still needs to be purchased. Don’t forget to consider all the extra costs this time of year, such as:
- turkey and fixings for Christmas dinner,
- entertaining items for the guests, like appetizers, and drinks,
- gas for the car to go visit Grandma and family over the holidays, and
- extra child care costs with school out for 2 weeks.

Now before you go to the mall, decide how much more you still can afford to spend. Remember that list you have been making? Check it twice now. Try to determine how much the outstanding items on the list will cost. One great tool is to use the internet to price out what you think you still need to purchase. Then ask yourself this: “How big of a credit card bill do I want to get in January.” If you don’t want a credit card bill, pay cash. Otherwise, only spend what you can afford to repay in January.

The Bank of Canada put a warning out to consumers this week stating that the Canadian debt to income ratio has reached 146 per cent! Now is not the time to over spend if you are not able to pay for it in January.

If you are out of cash, look for alternatives. Talk with your family about gift exchange so you are buying for less people or make Christmas dinner a pot luck meal to spread out the costs. Give your time as gifts, such as:
i. Babysit your sister’s kids so they can have a date night at the movies
ii. Do your relative’s laundry and ironing for a month
iii. Make a coupon book with various things you can help out with
iv. Be creative

If you have been stressing about your financial situation during this holiday season and want to make a plan to deal with your debts, contact me via e-mail or telephone at 310-PLAN. My Kitchener Waterloo office is located at 607 Kings Street West in Kitchener.

1. Know your spending limits:
The most important thing to remember when the holiday season rolls around is your budget! Know how much you can afford and set an amount for your holiday spending.

2. Make a List and Stick to it
To make holiday shopping less stressful and more affordable, it will be helpful to know what exactly you are shopping for. Making a list will save you time, and help you avoid overspending on unnecessary items. Call stores ahead of time to check if your item is in stock so you will not waste a trip and your gas!

3. Compare Prices Online
Travelling from store to store to compare prices will be time consuming and costly. Before you set out to get your shopping done, go online and compare prices. This will save you the hassle of having to make multiple trips. Most stores will price match, so likely you can purchase multiple gifts from the same store, while getting the savings offered elsewhere. Shopping online may also save time and money as some retailers will offer free shipping for the holiday season.

4. Start Shopping Now, Don’t Wait Any Longer
This is a great idea if you want to get your shopping done early and avoid crowds, and it can be beneficial to your bank account. Instead of putting a giant dent in your account all in one go, check for sales all year long. If an item on your list is on sale prior to the holiday season, why not buy it then? It will be one less gift to purchase when the holiday rush comes.

1. Local events: Check out your local paper or go online to find free activities in Kitchener Waterloo and area:

You will be surprised at what you can find for free (or next to it). Many communities hold events each year that cost little to nothing that you and your family may attend. I recommend checking out the light displays in Waterloo Park and Kitchener’s Victoria Park or going tobogganing at a local park. Most TV channels play holiday movies in December, so why not have a free family movie night in the comfort of your own home.

2. Be creative, spend less on gifts:

A great idea to save on gifts is through a gift exchange in which each family member draws a name out of a hat and is only required to purchase a gift for that selected person. This is definitely a crowd pleaser with extended families, as it will save you from having to purchase multiple gifts. This idea is very simple, and you may even set a dollar limit in advance.

3. Be proactive by making a monthly budget and sticking to it:

Set a budget. With less than a month to Christmas, you need to set a budget so you do not over spend. Do not be spontaneous, keep a list of who you have bought for and what you still need to buy. Planning is important to keep on the budget. Store have spent thousands on marketing and promotions to try to get you to spend more, resist the urge go off your budget and overspend.

4. Use 2010 as a guide for 2011:

Keep detailed notes from 2010 holiday season. Now is a great time to start thinking about next year. Set aside a certain amount each month that can go towards your holiday festivities for next year. This way, when the holidays arrive you will not have to use credit cards or stress over how you will pay for everything, because you will already have the savings set aside. Go over what you spent last year and how much you want to spend to determine the amount you will set aside each month.