For our first financial makeover, we have a young family in the Greater Toronto Area (GTA) who has a decent income but are struggling with debt, including monthly payments.   They have requested some advice on how to best to improve their financial situation.

The Client(s)

Steve and Sue are both 32 years old and have a 2 year old son.   Steve is a technician earning $55,000 per year and feels that he has a fairly secure job.  Sue earns $45,000 as an office administrator and is concerned about her job, ‘it could be gone any day’, she says.

The Problem

This couple feels that they have a comfortable lifestyle; however, they have realized that they have made some bad decisions in the past few years, including opting to go deep into debt to upgrade their home and staying off work for the entire year to be with the new baby.

They now have monthly payment obligations far in excess of their net income and are consequently getting further in the hole.  They’ve already cashed in all of their RRSP’s to fill the hole, so they have no further  financial cushioning left.  Fortunately, they have in-laws who watch their child for no charge.

Financial Snapshot

Here is a financial snapshot of the family’s finances.

Monthly income

Net income $5,300

Monthly expenses

• Mortgage $1,700
• Property taxes $250
• Utilities $250
• Phones, Cable, Internet  $300
• Food $500 Read More…

  

What Is Leverage?

When you learn about leverage in school, it usually entails using a lever of some sort to move something heavier that you could not normally move without it. In personal finance terms, the concept is essentially the same: you use debt (other people’s money) as a lever to help do something you couldn’t do without it.

Simply put, it will amplify a gain or loss from an investment you make in something.

A Tried and True Example

The most common form of this in personal finance is Read More…

When you break down the idea of investing to its basic purpose, you’ll find that it’s not just taking your extra money and hoping to earn a decent return from it .

Investing, in essence, is simply something that you do to ensure that your future cash needs are met.  Usually that entails “squirreling” money away for future use, but it can also take the form of spending now to save later.

If you can spend some of your savings now that will result in a cut to your living costs by a certain amount, then that cost savings is equivalent to a return on your investment.  Done wisely, you can earn a return that is tax free, low risk, and higher than you could earn for equivalent risk traditional investments. Read More…

Here’s an idea you likely won’t ever hear elsewhere…consider not buying a home until you have enough cash to pay for it outright.

You heard that right.  Yes, it would take you many years to do so, but if your personal situation and risk tolerance suits it, this could add a boost to your net worth in the long run.

Some may feel that this is unattainable. Fear not: there is a way that you can get the full amount! Read More…

The Canadian dollar has seen a sharp spike up in recent months, as we’re seeing it get closer to par again. That means opportunities to save money!

Some of these opportunities will happen automatically, as in lower prices on goods you buy that are imported into the country, lower prices on some foods, etc.  Others you will have to think about and decide if it’s worth it for you to explore.

Here’s some ideas to consider: Read More…

Looking for some extra cash?  Why not sell your unwanted items?

You probably have lots of stuff lying around that you no longer use, but is still worth something to someone.  After all one man’s junk is another man’s treasure. Why not clear some space and also make a few bucks?

How Much It Costs

The days of paying a hefty price for a listing in your local paper are over, as there are now many free or low cost ways to sell your stuff.  Read More…

Laid off? Got a reduction in your benefits and/or salary? Graduated and can’t find a job? Don’t you worry, we have the stimulus package for you! Read More…