Coronavirus and your expenses (with a BC twist)

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Pandemic or no pandemic, we all have bills to pay….unfortunately. If, like many people, you are already feeling the pinch financially, let me give you some advice on which bills to pay first and any assistance that might be available to you.

Since I live in British Columbia, I will provide information about the provincial government economical response to Covid-19.

Also, some of the advice I’m about to give is controversial, and may completely go against conventional wisdom. You’ve been warned!

It’s all about prioritizing your payments

When you lost your job or your working hours have been reduced, you can’t keep living the same way than when you were fully employed.

I know it sounds obvious, but many people still live and spend as if nothing had happened. You can’t routinely spend $150 per week on take-out or clothes when you have no, or little income.

# 1. Cut unnecessary payments

It’s pointless to contribute to your RRSP, TFSA or RESP if you can’t pay your rent or your mortgage. Same goes with charity contributions. You need to help yourself first before helping others.

#2. Paying your credit card balances

Like many people, you probably have several credit cards; and like many people you may be carrying a balance on a few if not all of them.

If you happen to have a Line of Credit -LOC-, transfer your credit cards’ balance there. The interest rate on LOCs is lower than the one on credit cards. Most LOCs are also interest-payment only.

Afterwards, only use 1 credit card for your purchases. It will limit the number of monthly payments.

If you don’t have a LOC, check if one your credit cards offer a 0% interest transfer or a low interest one. Many credit cards give their customers the possibility to transfer balances from other credit cards with 0% interest for 3 or sometimes 6 months.

Afterwards, only use 1 credit card for your purchases. If you can keep using the one you transferred balances on, it’s even better. You’ll only have one payment to make.

If you are in a dire situation, only make the minimum payment. It will keep your accounts current, while buying you some time.

# 3. Paying rent

Unfortunately, renters are the forgotten of the Federal Government financial package.

If you live in BC, a moratorium has been implemented on both evictions and rent increases. In addition, renters can claim up to $ 500/month. That amount will be paid directly to landlords.

Your rent is definitely the one payment you really need to make. If need be, you may take money from a LOC or a credit card to do so. You need a roof over your head!

# 4. Paying the mortgage

If you are an owner, you have a few more options. Many lenders offer options to skip payment or take a “mortgage vacation”. Contact your lender directly. Note these options are not free. Interests will still accrue.

This is also a payment I suggest you try to make as much as possible.

Should you be unable to make payments, it will take months before your lender takes action. Foreclosure proceedings take well over a year.

# 5. Paying for daycare

In BC, the provincial government is picking-up the tab for licensed day cares and private, family ones. It means you don’t have to make payments and your child retains her spot.

I don’t know about other provinces. If there is no disposition, negotiate with your provider. Ask for reduced fees since you’re not using the service.

# 6. Paying other bills

Hydro: BC Hydro is no longer disconnecting service for non-payment. In addition the corporation has a crisis fund to assist customers who can’t pay their bills. Other provinces probably have dispositions as well. I wouldn’t worry too much about that particular bill.

Car lease/loan: I’m afraid you may not have many options here if you can’t pay. Call your lender or dealership. If it’s a possibility and as a last resort, you may need to part with your car. Either sell it, or if have a lease, obtain a buy-out. In BC, repossession is not automatic and usually takes months.

Cell phone/cable/internet: It will also take a few months before your provider disconnects services and/or send your account to collections. Telus is no longer disconnecting at the moment. Many providers also offer payment plans. Don’t worry too much about this bill.

Student loans: the federal government has suspended both payments and interests for the next 6 months. The BC government has done the same.

Strata/ HOA fees: it will also take months for your strata to go after you on these.

# 7. What about income taxes?

If you’re entitled to a refund, file now.

If you owe money, defer until June 1st and pay by August 31st. CRA is no longer charging interests for late payment.

Conclusion

Don’t get me wrong. I am not suggesting you default on all your payments, or that you let your home be foreclosed. What I am suggesting however, is that you buy time if you are in a dire situation.

Don’t beat yourself up if you have to use credit to pay for your bills, or if you have to miss some payments in order to keep a roof over your head and food on the table….

Coronavirus: Canadian economy edition

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In light of the pandemic caused by the coronavirus, the Canadian government announced an unprecedented economic package to help as many Canadians as possible during these turbulent times.

It is unprecedented, indeed. Even in during the Great Recession of 2008, the measures implemented were nowhere close to what we’re seeing now. This crisis was actually much more severe than the current one.

Many people -whether experts or not- are decreeing the world is in recession, but it’s actually too early to make that call. In economy, a recession is a temporary period during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

We’re not there yet, folks.

This pandemic is not going to last forever

Like all the ones we’ve had before -and we’ve had a few!-, it will stop at some point. It’s usually a matter of months or a little over a year, at most. Let’s look at the previous 2, most recent pandemics:

  • H1N1: Apr 2009- Aug 2010
  • SARS: Nov 2002-July 2003

As you can see, they didn’t last for years. Right now, China is at the tail end of the coronavirus pandemic. At the time of writing, this country hasn’t reported any new cases for the last couple of days.

Anyhow, let’s go back to the crux of this post:

Canadian personal finances

As I was saying above, the federal government announced a list of extended measures to help Canadians:

  • Removal of the 1-week waiting period for all new EI claims
  • Emergency Care benefit: for workers who don’t have paid sick days, don’t qualify for EI and have to stay home to care for their family or themselves -$450/week for up to 15 weeks-
  • Emergency Support benefit: for anyone who doesn’t qualify for EI and lost their job or had to temporarily close their business -$450/week up to 15 weeks-
  • Tax-filing deadline has been extended to June 30th, with payments to be made by Aug 31.
  • Boost to the Canada Child Benefit, up to $ 300.
  • Additional GST rebate, amount unknown at this stage
  • 6-month moratorium on federal student loans
  • Lower amount of mandatory withdrawals for RRIF holders

For businesses:

  • Deferral of tax payments until Aug 31
  • Wage subsidy: up to 10% of an employee’s pay, maximum 25K per employer
  • Ease of borrowing through BDC and EDC
  • CRA has also suspended its audits and re-assessments on businesses

Something for almost everyone

This has to be one the most comprehensive program I ever seen in Canada. It’s pretty extended.

However, many details are still blurry at this stage. We don’t know what will be required to qualify for these various programs. Both the Emergency Care and Support benefits are not available yet. Applications will open on April 1st.

It is also expected it will take a few weeks for claimants to actually start receiving money. That’s when an emergency fund comes in handy!

Unfortunately, our most vulnerable population is excluded from these announcements….It may fall on provincial governments to handle -and pay for- them.

Many banks, as well as CHMC, have also committed to helping people who may have difficulties with their mortgage payments. The details are also unknown and will probably be on a case-per-case basis.

We’re definitely not sure of how long this coronavirus will linger and the depth of its economic, health and social impact.

However, we will get through this, the same way we got through previous pandemics, economic turmoils and recessions. The world is not going to end! In the meantime, keep calm and carry-on…..

Don’t trade on the news: coronavirus & your money

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The last couple of weeks have been turbulent market-wise. Fears of the coronavirus and its impact on the Chinese economy sent markets into bear territory worldwide.

My own portfolio lost between 5% to 10% over that period. And I don’t really care. Yes, you’ve read correctly. And, yes, you also guessed that I didn’t sell any of my stocks, and don’t plan to at this stage. Why? because I don’t trade on the news….and you shouldn’t either.

Debunking misleading, false information

A lot has been said and written about this Novel coronavirus or Covid-19. For true and accurate information, I invite you to check the World Health Organization website.

I just want to make the following comments:

  • At the time of writing, the number of cases worldwide sits at just over 93 000. It will most likely increase. That being said, the world’s population sits at just over 7.5 billions. It means only 0.12% of the world population is infected….and 99.88% isn’t.
  • At the time of writing 3 199 people died from Co-vid 19. This will likely increase too. It means about 3.5% of the infected people died…and 96.5% will recover -a lot already have-.
  • Should we be careful and take basic precautions? Definitely.
  • Should we stop living our lives? Definitely not!

Keep calm and carry on, financially

The main economic issue with Co-vid 19 is that it started in China. China is the 2nd largest world economy. It has been at a stand still since January. Of course, it will have a ripple effect worldwide. China manufactures the majority of goods we consume.

It’s way too early to predict a global recession. There are a lot of factors that can trigger a recession. A coronavirus is not necessarily one of them, nor is it the only one.

This is definitely not a reason to sell all your stocks and rush to buy bonds or gold. By doing so, you would probably loose a lot of money.

I previously mentioned this, and I am going to do it again: as long as you’re not actually selling your stocks, you are not losing or making any money.

Bear markets are normal and are to be expected. I’ve also mentioned this before.

A little secret…

The most successful investors are the ones who don’t try to time the market – no one can!- and the ones who actually buy more stocks in a bearish market. The silver lining of a bear market is that stocks tend to become more fairly valued or undervalued.

Because we’ve been in a bull market for so long, a lot of stocks are currently overvalued, i.e. expansive.

What if you can’t keep calm?

If you find yourself in panic-mode over the last financial news, you may want to take an honest, serious look at your risk tolerance. You may also want to review your investment objectives.

In my opinion, holding stocks in a portfolio should reflect a more long-term objective, such as retirement. If you invest in stocks, you shouldn’t need that money for at least 5 years, unless you’re a day trader. If you are, this post is not for you :).

The best way to weather a stormy market is to do nothing drastic or impulsive. Keep in line with your objectives and risk-tolerance.

In other words, keep calm and carry on….

Blog Anniversary: 5 years

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5 years ago, I published my very first post on the Money Savvy Blog. Its title was the cost of eating-out.  5 years and 181 posts later, my view on this particular topic hasn’t changed. When convenience becomes a daily necessity, it will derail most financial plans. I still refuse to pay for these by the way.

A number of things has changed in my life in 5 years. I became consumer-debt free, traded houses, switched to part-time work and decided to obtain an MBA. This one thing, however, hasn’t changed.

As for the topic of Personal Finance, my overall perspective has drastically shifted. I realized Financial literacy alone wasn’t enough, that some of the advice dispensed out there was way too generic, if not downright judgemental. It is not all about avocado toasts and lattes. It is more about focusing on the big picture and increasing income. There are Financial killers way more potent than lifestyle inflation. And, oh, living in the suburbs isn’t necessarily cheaper; and sometimes renting is the better option.

There are a few topics, however, on which my perspective hasn’t changed. I don’t see any change happening in the foreseeable future. Debt will always be debt; whether good or bad, it still needs to be paid off. The necessity of an emergency fund is not up for debate, regardless of how it is structured. A line of credit is not an emergency fund per se. While saving for the kids’ post-secondary education is not a requirement, saving for retirement is. To do so, becoming proficient in investing is a good start.

Last but not least, net worth has nothing to do with self-worth. It is also OK not to be into F.I.R.E. In the grand scheme of things, health is more important, as well as being grateful. Happiness can’t be bought on any stock exchange.

To conclude, here are the 5 most read posts for each year I have been blogging.

Life update and musings

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I am aware I haven’t blogged that much lately. Actually, I haven’t blogged much at all this year, with a total of 18 posts, including this one. I guess 2018 was a little bit complicated and full of changes for me. The first half was actually not that great.

CAR ACCIDENT AND INNER QUESTIONING 

In October 2017, I was involved in a minor car accident that resulted in whiplash and soft tissue injuries. Said injuries lingered for over 6 months. This period was difficult, both physically and mentally.

On top of this, I started resenting my full-time job like never before. The only silver lining with this accident is that it really put my current life into perspective. I realized I had been putting off a lot of items, and that it was no longer sustainable.

FIRST WAVE OF CHANGES

I also realized I wanted more out of my life. “More” however is still proving elusive to define. I am working on it. Career-wise, I narrowed a path down to 2 options that I am really interested in. To do so, I decided to obtain an MBA.

Subsequent to this, working full-time was no longer doable or sustainable. Initially, I had given my resignation. After further discussions with my boss, I decided to stay on a part-time basis.

To cope financially, I refinanced my mortgage and leveraged against my condo. I had personal savings as well, but leveraging gave me more options. I don’t regret doing it.

Since then, I have seen drastic improvements in my life, particularly health-wise. I am feeling much better. I am finally taking better care of myself and addressing issues.

There are still a few key aspects of my life that are not satisfying and that I need to spend time on. But, I don’t want to make any rash -or rush!- decisions.

More changes are coming to my life and 2019 has the potential to be a powerful year for me. I can’t wait!

THE FUTURE OF THE MONEY SAVVY BLOG

This leaves me with the future of this blog. To be honest, I am undecided at this stage. One of the things I want to do is definitely being more offline. Maintaining an online presence is exhausting, as well as time-consuming.

I don’t know when the next blog post will be. I simply have more important priorities to take care of at the moment.  I am totally fine with that. Thank you for reading my posts and visiting my blog over the years.

Why I don’t really blog about my own finances

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A lot of fellow PF bloggers share their most intimate financial details online. How much debt they have, their net worth, their spending, their income….you name it, it is out there.

While I did share my debt amount, and how I repaid for it, I chose not to share many details on my finances , and here is why.

privacy concerns

Once you share something online, regardless of what it is, there is no way to get it back. No matter how hard you try, it will stay online.

I am of the opinion people don’t need to know everything about my finances, whether they are complete strangers , friends or acquaintances.

unhealthy comparisons

Society in general, and the PF community in particular, is using net worth as a measure of self worth. The 2 are actually not related.

If you are not killing your monster debt in less than 2 years, something is inherently wrong with you! Or if you haven’t saved a million by the time you are 25 , you are bad with money. If you are bad with money, you are probably bad with other things as well.

Does the above sound familiar? I bet reading about it wasn’t really helpful. It may even have made you feel bad.

Our own story is unique. We all have different lives. Knowing so-and-so paid x amount of debt or saved x amount of money won’ really do anything for us, at an individual level.

not a financial planner or advisor

A lot of PF bloggers have lists and spreadsheets of all their investments on their blog. Some of them even talk about their “top stocks” or favorite ETFs. I previously mentioned the majority of PF bloggers have no formal qualifications or certifications in Financial Planning.

I won’t be one of these bloggers anytime soon. I believe there is a level of personal responsibility when advertising or promoting financial products to complete strangers you don’t know anything about.

Final word

My blog is to share my passion for personal finances, but not necessarily to share everything about my own personal finances or my life.

I consider my blog to be a peephole into my life, but definitely not the complete picture. There is so much more to me than the contents of my blog….but I choose to keep it offline.

10 Financial killers

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In my previous post, I shared how F.I.R.E. has an element of privilege to it. I also indicated that for most people, F.I.R.E. will remain a pipe dream.

There are very real obstacles to becoming financially independent and potentially retiring early. Here they are, in my personal order of importance:

FINANCIAL KILLERS # 1 & 2: STAGNANT WAGES AND INFLATION

5 years ago, Statistics Canada published a very interesting study on the evolution of wages in Canada between 1981 and 2011. The study shows, among other things, that hourly wages barely bulged during that period. A full-time worker would earn about $ 21 in 1981 and just under $ 24 in 2011. Not even 15% more.

There were also gaps depending on gender, age and education.

In the meantime, inflation during the same period rose by 149.16%. 

FINANCIAL KILLERS # 3 & 4: DISAPPEARANCE OF JOB SECURITY AND PENSION PLANS

Job hopping is the new normal these days. Most people will have an average of 15 to 20 jobs and 2 to 3 different careers. Sadly said so, most employees are seen as disposables. Job security is a thing of the past, just like companies’ pension plans.

Only 37% of Canadian employees have a pension plan today, primarily in the public sector. It used to be over 50% in the seventies. A company pension plan used to be an important pillar of retirement, making-up for paltry CPP amounts and lack of personal savings. Nowadays, workers need to save more for their retirement. It can be an arduous task when looking at Financial killers # 1 & 2.

FINANCIAL KILLER # 5: POST-SECONDARY EDUCATION COSTS

Canadian students graduate with an average of $ 27 000 in student-loan debt. Depending on the degree and university, this amount can be much higher. Starting adult life and career with such burden is crippling, even more so when looking at the previous 4 financial killers.

FINANCIAL KILLER # 6: UNHEALTHY OBSESSION WITH HOME-OWNERSHIP

Yes, I am aware I am a home owner, thank you very much. That being said, I did not think about buying until I was in my mid-thirties, and after doing thorough calculations. Nothing says you have to buy a property right after graduation or after getting married!

In order to buy, you need to save for both a minimum down-payment and the closing costs. You also need to stay put for at least 5 years, if you want to gain equity and recover from the closing costs you paid.

FINANCIAL KILLER # 7: CAR AND COMMUTING COSTS

A subcompact car will cost on average $ 10 000 per year. This includes car payment, insurance, gas, maintenance and tolls. Since more people have to move to suburbia to find affordable housing and easily need 2 cars per household, these costs can only go higher.

FINANCIAL KILLER # 8: STAGGERING DAYCARE COSTS

If you chose to have children, it is very likely you will have to go back to work, despite the Federal government paid maternity leave and the Canada Child Benefit program.

This is not always a question of personal choice. It is merely based on at least the 5 first Financial killers.

A spot for an infant in a licensed daycare in Vancouver costs close to $ 1 300/month. For a toddler, you are looking at just over $ 1 000.  Prices in other big Canadian cities are similar, with the exception of Montreal. The Quebec government has its own childcare program and costs are way lower.

FINANCIAL KILLER # 9: CONSUMER-DEBT, AVOCADO TOASTS AND LATTES

A lot of people are still trying to keep-up with the Joneses, by constantly upgrading to bigger and shinier things.

That being said, a lot of people are also using credit cards to make ends meet, due to the above financial killers.

FINANCIAL KILLER # 10: LACK OF FINANCIAL LITERACY

Unfortunately, we are not taught at school that we need to save for retirement or for emergencies. We are also not taught how to best do these things. We are not taught how interests on credit cards or loans is calculated. We are not taught about management fees.

This doesn’t help, but it is not what sends someone to a trustee in bankruptcy, contrary to popular belief.

To combine finances or not?

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When two people are in a committed relationship, the question of moving-in together comes-up at some point. This question actually triggers a series of other questions such as how to share household chores and if all the belongings are going to fit-in in the new place.

However, there are a couple of very important questions that should not be overlooked: how are we going to pay for the bills and are we going to combine finances?

Long before you move-in, you should have had “the money talk”, as a couple. There are crucial details that partners need to know about one another, such as income and debts, as well as goals.

Once you have the basics down, it is time to take your conversation to the next level.

Option 1: partial combination; 1 joint checking-account, 1 joint savings-account

A joint checking-account is used to pay for common expenses like rent, utilities and groceries. More categories can be added, depending on your situation. If you are a one-car household, then car expenses would also be considered as a joint expense.

If you have similar incomes -or close enough-, you can both contribute 50% to the account. If there is a large disparity between your incomes, use the percentage method instead.

Add your respective monthly net incomes. Divide your individual net income by the combined income and multiply by 100. Always use your net income.

For example, if your net combined monthly income is $ 10 000 and one partner earns $ 2 500, their share is 25%.

It is also a good idea to have a 3-month emergency fund for the shared expenses.

Option 2: almost complete combination

With this option, all the money is deposited in a joint-account and a portion is transferred to each partner’s individual accounts.

All the bills are paid from the joint-account, regardless of their nature. The individual accounts work like an allowance.

The most challenging part of this approach is to decide what amount should be transferred to the individual accounts!

Option 3: complete combination

This approach is definitely the most transparent one. When both partners are on the same page financially, it is also the best.

Communication is key. It is best for both partners to sit down and discuss how to consolidate all their accounts, as well as how to manage them on a day-to-day basis. Both need to be actively involved.

As years go by and children come into the picture, the line between “yours, mine and ours” becomes more and more blurry.

Option 4: complete separation

In this scenario, the couple does not combine finances at all and keeps everything separate. I personally find this method counter-productive. Some household expenses are higher than other ones, and it can be tricky to decide who pays for them. It can also be an hindrance to saving goals or paying-off debt.

You may want to revisit why you are not considering combining finances to some extent. Maybe you have done this in a previous relationship and it was a disaster? Maybe you don’t trust your partner? Maybe your partner has an opposite financial style?

Again, communication is key here. Money is a huge stressor for couples and the leading cause of divorces.

Final word

Deciding to combine finances -or not- is a very personal decision. What will work for a couple may not work for another. It is important to find the system that works for both your partner and you. Don’t worry about what outside people think.

The problem with personal finance blogs

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I totally understand the post you are about to read may confuse you, and even more so since I am a personal finance blogger who has been blogging about personal finances for over 3 years.

That being said, I believe it is also important to have perspective.

PF blogs are either too generic or too specific

A lot of blogs out there are either about extreme frugality, early retirement, stock investing or becoming debt-free. If you don’t fit in any of these categories, it is hard to relate to these blogs and the bloggers behind them.

Same goes with geographic location. A lot of blogs are written by US residents. Well, I live in Canada so that does not necessarily help me.

It is one of the reasons most people create their own blogs in the first place. I was no exception.

most pf blogs are written by non-specialists

This is a highly sensitive area I am coming to. The majority of people blogging about personal finances have no background in it whatsoever. Quite a few are writers trying to cash in on the popularity of the subject.

Writing is also influenced by personal experience. Bloggers are sharing tips and advice because it worked for them. By extension, it should work for everybody else, right? Wrong!

In order to work, financial advice has to be personalized. You don’t get this in PF blogs. It is crucial for readers to always check facts and not take the advice too literally.

PF blogs are repetitive

How many times have you read that you need to save money for retirement or have a budget?

Don’t get me wrong, basic financial advice is and will always be needed. It is a foundation to build on. But we also need different takes and perspectives in order to progress.

So, that what my blog will be aiming to do from now on. Readers will still see basic advice from time to time, as it allows for a broader audience. But, there is some conventional wisdom that can and needs to be challenged.