September 21, 2017

Financial Firsts To Help Prepare Your Children

Income expensesWhen my children were growing up, I used to split their allowance into 3 categories: saving, spending and charitable contributions.  I thought this was a great start on learning how to save but I could have done so much more to teach them about saving for their education, their 1st car, engagement, marriage, their 1st home and then children.

Even though money has an impact on practically every aspect of our lives, personal finance is usually relegated to the back burner – at home and at school.  Even though teens seek financial advice from their parents, many parents avoid the subject because they lack confidence in their own ability to manage their money. If parents don’t discuss money with their kids – and teachers don’t teach it – who is educating the next generation about these things?

Better Money Habits, a website created by Bank of America in partnership with Khan Academy, tries to make it easier to understand personal finance. Better Money Habits offers a different approach to grasping personal finance concepts through videos and other content covering topics ranging from building credit to making a budget to more complex transactions. The content can also prepare parents to guide their children through a number of financial firsts, including:

Opening a first bank account: Encouraging children to develop an appreciation for money and saving at a young age can teach them important financial habits they can use throughout their lives. Savings accounts help children understand the time value of money by demonstrating how compound interest works and also teaches them the importance of establishing a relationship with a financial institution and building credit, which will become important as they grow up.

Understanding a first paycheque: Starting a first job is exciting and also represents independence. However, that first paycheque can quickly inspire panic if it doesn’t match income expectations. Teaching teenagers about deductions for such things as income taxes and Social Security before they receive a paycheque can better prepare them for the reality and help them plan how to use the money they earn. This video helps break down the anatomy of a paycheque.

Signing up for a first credit card: While it’s essential to build credit, it’s critical to avoid abusing it. Before your teenager/young adult is tempted to spend up to his or her credit limit on late-night pizza deliveries, teach him/her how to use a credit card wisely. To help avoid debt, Better Money Habits offers a video that explains how credit card interest is calculated.

It’s up to us, as parents, to make sure our children successfully navigate life’s milestones, especially if they aren’t learning personal finance in school. By teaching, encouraging and helping them learn from the good examples we set, our children stand a much better chance of making smarter money choices throughout life. We can contribute to establishing a more financially responsible generation.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Article, Huffington Post, 08/08/2014, http://www.huffingtonpost.com/andrew-plepler/teaching-your-kids-about-money_b_5567567.html

You Can Get Out Of Debt!

You did all the right things. You earned a good education. You’ve worked hard and you earn upwards of $100,000 a year; yet increasing debt has your stomach in knots.

You are not alone. According to statistics Canada, higher income is associated with a higher debt load. Households earning at least $100,000 had an average debt of $172,400. Compare that to households earning between $50,000 and $100,000, which had an average debt of $95,400.

It doesn’t have to be this way. But before you can turn things around, it’s important to understand how you arrived where you are.

How Did I Get Here?

Technology has changed the world dramatically in the last 20 years. In many ways for the better, but the internet has also put shopping at our fingertips and smartphones keep us constantly connected to our work, and the work and lifestyles of everyone around us.

This new world has given rise to three of the primary reasons so many people are in debt despite earning a good salary: increased expectations of what we “deserve.”

Increased expectations

Social Media offers up an upbeat version of everyone’s lives. We see what everyone else is doing or owns and we want it too.  You work hard, make good money so why shouldn’t I have that new purse or that trip or new car.  Why shouldn’t my children have the best of everything.  Debt creeps up slowly and our justifications keep pace.  As long as the money keeps flowing, who has time to plan long term or manage a budget?

No longer any stigma

In our grandparents’ time, debt was something to be avoided. Being in debt carried shame and embarrassment. While I’m not an advocate for shame, the normalization of being in debt hasn’t made life better; it has allowed debt to flourish. Today, many people would be less embarrassed to admit they have debt than to admit they can’t afford something.

What Can I Do Differently?

You can get out of debt, you just need to challenge your perceptions and do things differently. Here are some ideas to get you started today.

  • Create an authentic vision for your life:  Have you ever realized you wanted something only when you saw someone else had it? Maybe you were completely happy with your family camping trips until you saw your friend’s photos from Europe. Before you jump on a travel site, think about what you really want. Define two or three financial goals for yourself that align with your values.
  • Be honest about your current situation:  Have you accepted debt as part of life? Be honest about where you are overspending. The moment you tell yourself living with debt is not O.K. you will realize new ways of doing things.
  • Create a plan and systems:  Living in the moment is great for meditation and calming your mind, but money needs a plan. Learn to track your daily expenses.  Understand what you need to save and invest. Be realistic. Challenge your assumptions about what’s a necessary expenditure.
  • Have positive money conversations:  You’ve probably commiserated with friends about how expensive everything is, and how just when you’re getting ahead, the car breaks down or the roof leaks. These are just excuses. These are the conversations that normalize debt and keep everyone stuck. Instead, talk about positive money goals and how you plan to achieve them.
  • Start today:  Changing your habits, reaching goals and eliminating debt, takes time. A small change today will start the ball rolling. Once you get some momentum, the financial and emotional rewards will keep you going. You will never regret making these changes.

What if I Don’t Do Anything Different?

No matter how many Canadians are in debt, debt is not normal or O.K. It steals your piece of mind and puts the security of your future at high risk. Interest rates will go up and a debt that seems manageable now could suddenly impact your life in a significant way. Over time, debt will wear you down. It can affect your relationships, your self-esteem, and your health. Living well is not enough; you also need to sleep well, knowing that you are in charge of your financial future.

What You Really Deserve

You work hard; you deserve to put that hard earned money to work for you. You deserve to reach goals that matter to you. You don’t deserve to have your money evaporate on interest payments for things you barely remember buying. The first steps to change are acknowledging that change is possible and being honest with yourself about your current situation.

article: http://moneycoachescanada.ca/blog/good-income-but-cant-get-out-of-debt/

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

 

Before Your Big Day, Discuss Your Finances

Couples spend months, even years, planning every detail of the wedding day, but few talk realistically and openly about their financial future together.  Not being “on the same financial page,” puts couples at risk of big problems down the road.

Why do so many people find it so hard to talk about money?  Talking about our personal finances, especially with that special person we hope to make our life partner, seems to be downright frightening. It’s as if we may be leaving ourselves open to an unfavourable comparison or judgement by the other.  Financial success we can talk about all day long, but financial failure, or even just doing okay, is kind of embarrassing.

A recent poll revealed while (99 per cent) say it’s important to talk about planning and managing finances with the future partner, only 35 per cent actually have that talk.  By a large majority, those who admitted to not having the talk said in effect that they didn’t know how or when to bring it up, they were afraid to.

Two-thirds of those planning to marry or live with a partner admit that they will be entering the relationship in debt, typically from credit cards, student loans or mortgages.   It’s not hard to imagine the tension that could arise here if the couple haven’t discussed their finances and prioritized their goals.

Which money personality are you?

The “springboard” to a couple’s big money talk could be identifying their philosophies regarding handling finances. Here are four money personality types:

  • The Super-Saver: takes pleasure in saving every penny earned, avoids any spending unless absolutely necessary.
  • The Cautious Spender: careful with money, spending it prudently, putting needs over wants, and trying to save as much as possible.
  • The Carefree Spender: believes that money is meant for spending and enjoying; has a hard time saving money and meeting long-term financial goals.
  • The Avoider: doesn’t pay attention to how much money he/she has, owes, or spends; has a laissez- faire attitude towards finances, preferring to let someone else take care of them.

Start your new relationship off on a positive note, have the conversation and you could save yourself years of financial stress!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Tools On How To Read Your Credit Report

When applying for a mortgage, there are many aspects in order for you to qualify and your credit rating is one of the most important.  You can make a substantial income but if your credit rating is poor, you won’t qualify.  

Credit scores range between 300-900 and the higher, the better.  The minimum score in order to qualify for prime interest rates is 650.  

When you receive a copy of your Credit Report, there will be many categories you will have to interpret. What do they represent? How do they impact you and your score? What do they mean?

PUBLIC RECORDS OR OTHER INFORMATION:

Reports outstanding and paid: Collections, Judgements, Bankruptcy
Reports the lending institution that holds collateral on i.e. a car (mortgages are not reported)

ACCOUNT RATINGS:

RPTD – the last time the account was updated/rated
OPND – date the account was originally opened
H/C – High Credit – the highest balance that was ever recorded
TRMS – terms, monthly payment
BAL – current outstanding balance
P/D – amount past due
RT – R1 reflects the account is current, R2 is 1 month arrears, R3 is 2 months arrears, R5 is more that 120 days past due, R7 means Credit Counselling, R8 means repossession, R9 the account has been written off or in collection
30/60/90 – the number of times this account has been late 30/60/90 days
MR – months reviewed
DLA – date the account was last active

If you are maxed out on your credit cards, do not make the minimum payment or carry balances on all your credit cards, your score will be very low.  In order to improve your score, pay off at least 25% of the credit card balances, do not close your credit cards when they are paid off, do not apply for any additional credit.  Your credit needs to be established for 2 years, so start early.

If you need any help understanding your Credit Report, please call me anytime.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Suggestions To Improve Your Credit Score

Clients are always asking ‘how is my credit score calculated or how can I improve my credit score.’  With all the uncertainty in the housing market, your credit score has never been more important.  More than ever, your credit score determines the interest rate on your mortgage.

The main factors in determining your score are as follows:

  • Payment history:  35%, how have your repaid the credit you have already been extended, details on late or missed payments, how much you owe.  Records of collection items, bankruptcies, judgements
  • Used credit vs. available credit:  30%, how much of your authorized credit is being used, how much you currently owe compared to the original amount.  If your credit does not fluctuate or you are over your credit limit, this has a very negative impact on your score
  • New credit:  10-12%, how many new credit accounts you have opened and how many requests for credit have recently been initiated
  • Length of credit history:  5-7%, how long your credit accounts have been established.  Creditors like to see that you’ve been able to properly handle credit over a period of time

Suggestions:

  • ensure your payments are made to the credit card company at least 5 days prior to the due date because if your payment is even 1 day late, you will show as a late payment
  • ensure you never go over your approved limit on your credit card or loan
  • make sure you fluctuate your credit card balances, try not to pay just the minimum payment
  • do not apply for numerous credit cards.  If you are trying to establish a credit history, don’t start by applying for a Visa card where you will be probably turned down.  Start with a Home Depot, Canadian Tire or other retail card
  • don’t let your ego get the better of you!  You know when you get ticked off at Bell or Rogers and say, the heck with them, I don’t owe them $200, it was their mistake.  If there is a chance it will go for collections, pay it and then fight with them because unfortunately you are the one that is going to get the bad rating on your file
  • don’t close cards that you aren’t using because they look at how many accounts are delinquent in relation to all of your accounts.  If you have 10 accounts and 5 are delinquent, you will be rated differently than if 5 are delinquent and you only have 5 accounts.  It is a numbers game!

Call me if I can help you understand how to read or how to improve your credit rating!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

https://www.equifax.com/personal/education/credit/score/how-is-credit-score-calculated