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From,
The cashsmart Team

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Why Valentine's Day Will Cost You Your Future House

Right now, you may be thinking... WHAT?!! You may be panicking, you may be sweating, you may be wondering "Oh no, what have I done!"
You are right.

This is a very serious matter.

And we shall  tell you how it happens.

PHASE 1

You start off fine. Completely normal and level-headed.

And then, the Valentine's Day spirit kicks in...

PHASE 2

You need a loan to cover the CRAZY expensive gifts you bought.

PHASE 3

You don't pay off the loan because you're an idiot. No we're not trying to be offensive, that's just what love does to people.

This DESTROYS your credit score. You know, credit score, that thing that keeps track of how good you are at repaying loans and meeting credit card deadlines? You don't? Oh dear...

PHASE 4

25 years later you need to take out a loan to buy a house.

But you can't

Because your credit score sucks. You see, banks keep tabs on your credit history. And if they don't like it, they will not hesitate to turn you down. Cuz they're mean that way. And the credit monster strikes again!

Don't say we didn't warn you...

So have a happy Valentine's Day...within reason. No really, be careful.

Love from,

The cashsmart Team

Why You Should NOT Use Your Credit Card as an Unlimited Source of Spending Money

 And that is why you should not use your credit card infinitely. The bad credit score monster WILL attack you and WILL kill you. To be continued...

From,

The cashsmart team.

Hey cashmart fans!

You're in for a real treat today! cashsmart, along with our good friends Andrew Walmsley and RJ Tripple, have come up with an AMAZING-BLOW-YOUR-SOCKS-OFF money game! go through life making money and not getting into debt. Let's see how much you've learned...

Click to Begin Game

Who Needs Insurance?

Hello Everyone!

Insurance is one of those particularly vague financial concepts that don't get alot of attention. But we think that it's a very important topic for you to understand all about your finances, so we've simplified it for you!

What is insurance anyway? One source indicates that it is "a policy from a large financial institution that offers a person, company, or other entity reimbursement or financial protection against possible future losses or damages".

Some of you may not get that, so we'll give you an example. If you're a cyclist, you know there's a possibility that you might have a head injury from cycling down steep slopes, or even just down the street. So there's always this risk that you will be injured; even if the risk is small because you're a pretty good cyclist, the risk is still there. That's why most people wear helmets when they cycle, because helmets in this situation, act as insurance against a potential head injury.

In the same way, we pay insurance in order to offset future troubles we might have. Insurance helps to give us financial security. How does it do that?  When we contribute to an insurance plan, we’re safeguarding ourselves against possible emergencies that we may encounter in the future.

Let's use another example. Let's say, a family member suffered a debilitating disease and has to stay in the hospital for several months – at the very least. Hospital costs are incredibly expensive; who’s going to pay for the costs involved? If he/she has insurance, the insurance company may pay a portion of it, depending on your plan, thus taking off part of the burden of payment.

How about insurance in Ontario?

The Ontario law requires that all motorists have auto insurance, so that's one less thing to worry about.

The Ontario Health Insurance Plan (OHIP) pays for a wide range of health services; however, it does not pay for services that are not medically necessary, such as cosmetic surgery.

We hope this cleared up any confusion around insurance!

The cashsmart Team

What's the difference between a Chequing and a Savings account?

Hey Everyone!

Today we'll be talking about bank accounts - specifically, savings and checking accounts. At some point in life, everyone will have a bank account - and rightly so, because bank accounts are pretty useful. Here's why:

Savings Accounts

One main feature of a savings account is that you can earn interest on the funds in the account.

It is not usually used directly as money (eg. writing a check).

Chequing Accounts

Chequing accounts generally do not pay interest. If a bank does offer interest on a specific type of checking account, the rate is usually much smaller than one that can be earned on a savings account.

You can typically make unlimited withdrawals from a checking account, and you have the use of a debit card as well the ability to pay with personal checks.

We hope that cleared up the confusion over the two! 

Comment below!

The cashsmart Team 

Finance, For those Who Can't Handle Text and Need Demonstartive Cartoons for Understanding

Hey cashsmart fans, welcome to our latest segment of cashsmart!

Don't worry, we totally get it. You want to learn about money but you just don't want to go through those impossibly long and boring internet articles because you are a teenager and you have the attention span of a hamster...

...you need colour, excitement, SHINY!!

So it's a simple equation really, we're gonna take that colour, excitement, and SHINY!! and add it to the finance, behold:

With information alone, you may find yourself feeling symptoms such as disinterest, disengagement and drooling. This is known more commonly as, boredom...

You would much rather feel excited and interested...

If we take that excitement and add it to the information, we get...

Just like that. See how that works? Yes, we know. That's why we're the experts. Check back soon for updates! We promise to include pictures this time :)

Knowing What You Need, And Want.

Hey Everyone!

It's time we talked about needs and wants. Some of you have probably heard about this a thousand times before, but most people don't really know the difference between the 2. So we'll explain it here!

Needs? Wants? What? Who even cares about this anyway?
It's important, because once you understand what you really need in life, from what you only want for temporary happiness, you'll be able to control where your money is going to. 

Also, learning to live within your means is an important skill that many people do not know how to do. The easiest and most effective way, is through a budget! Having a budget ensures that you don’t run up a debt because you’re overspending and helps you see where you’re spending unnecessarily.  

“Needs” are necessities like food, shelter and basic clothing. Everything else are usually considered as “Wants”. Try to follow the 50/30/20 budgeting rule if you can, and your finances will be kept in order.

Pay yourself first!

Saving money is easier said than done, but it’s still vital that you try to save a decent amount. Always pay yourself first, that is, save! Putting away a part of your income every month will ensure that you have a tidy sum in savings.

But why save? It’s not just for that rainy day; in time to come, we’ll have to buy houses, cars and ensure that we’ll have a comfy lifestyle upon retirement.  

Save every penny!

The cashsmart Team

An Investor's Best Kept Secret! The Rule of 72 Explained

Hello Everyone!

We're here to share with you today, a secret. Areally good one, too. One of these days, you guys are probably all going to want to invest. Now here's the secret, a really popular and easy rule that investors use. 

What is this life-changing revelation?? ....... It's called the 'Rule of 72'.

According to Investopedia, The 'Rule of 72' is a simplified way to determine how long an investment will take to double, (given a fixed annual rate of interest). By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.

For example, if you had $1000 that was invested at a rate of 6% a year, it would take (72/6 =12) 12 years for your money to double in value. i.e. in 12 years you would have $2000.

So this would be really useful if you were investing for a particular financial goal.

Now keep in mind that this rule is best used when dealing with interest rates of under 10%; it doesn't work as well with interest rates higher than 10%. 

Happy cash counting!

The cashsmart Team

Canadians' Household Debt is "higher than it’s ever been"

Hey Everyone!

If you haven't seen it on the news yet, then this will probably surprise you. 

A Globe and Mail article published yesterday highlights an alarming trend in Canadian loans.

"Canadians’ borrowing has entered ``uncharted territory’’ and the risks associated with the level of debt households are carrying is something that ``we all have to take seriously,’’ Bank of Canada Governor Mark Carney said Tuesday."

To put this into perspective, our debt-to-income ratio is now higher than Americans' for the first time in a dozen years. Wait, what's debt-to-income ratio?

It's simply a ratio of how much debt you are currently carrying, compared against your current income. According to the article, this ratio has reached a whopping 148.1 per cent. Again, this means that for every dollar that we make, we're borrowing 1.48 times as much!

But why's that so crazy? Why should we worry about that?

The government is getting worried because, if there were a sudden negative shock to our economy, such as a drop in house prices, higher borrowing costs or job losses, it would leave people unable to make their payments and hence cause personal and corporate bankruptcies.

While we as young people are not the main people behind this, we can take one lesson away from this issue.
Loans aren't all bad; sometimes, we do have to borrow money to finance our college fees or to buy a car. It's practically impossible to pay it all at one go with cash! So loans do have their merits too.

But the minute we start using loans as our first 'strategy' in life, then we'll be getting into some trouble. We should never get a loan to finance our vacations, or frivolous wants that we don't really need urgently. It can all get out of control really easily if we're not careful.

So think twice before you get a loan! Loans are always the last option, if we can help it. Who wants to waste money on interest anyway? 

Brought to you by
The cashsmart Team!

Saving Skills # 4: More MAGIC Rules

If you're like most people, and you have trouble with the psychological aspect of saving, one way you might be able to bypass this obstacle is by setting specific limits for yourself.

Introducing...The 50/30/20 rule. Simple and effective.
The rule states that:
50% of your income should go to your NEEDS
30% of your income should go to your WANTS
20% of your income should go to your SAVINGS

But it only works if you remember: NEVER under ANY circumstances dip into your savings for a want.

It's that simple.
And it really works. Experts say that by saving at least 20% of your income, you'll be able to build up some decent savings over time. These savings, of course, you'll want to keep in a savings account. (More on different types of bank accounts and interest coming up!)

The hard part, though, becomes determining what is a NEED and what is a WANT. Watch for our next edition of Saving Skills!

Saving Skills # 3: Cutting Down On Those Utility Bills

If you’re living on your own, then utility bills must cut quite a chunk out of your income. But for

Ontario’s residents, there is a way to save some extra money if you purchase electricity from the local

hydro utility.

Smart Meters – or Time-of-Use meters, have been implemented across Ontario for residential

customers. What are Smart Meters? The new meters that use a different pricing formula for customers

with time-of-use meters, since these meters can not only report on how much electricity you use but

also when you use it.

Sounds complicated? It really isn’t at all! Check out this chart released by Ontario Hydro that easily

explains how it works to your advantage.

Basically, it means that you will be charged one of three prices depending on what time of day you

use your power. These prices are set every 6 months by the Ontario Energy Board, the government

regulator of electricity in Ontario. At present the three price tiers are:

For “on-peak” hours = 9.9 cents per kilowatt-hour;

For “mid-peak” hours = 8.1 cents per kilowatt-hour; and

For “off-peak” hours = 5.1 cents per kilowatt hour.

Check out this site for more information about this!

http://www.smartmetersavings.org/index.php?page=smart_meter_billing’

Saving Skills # 2: Don’t let holiday shopping stress you out!

Hey Everybody!

 

It’s the holiday season again, and here in North America, we make shopping look like an extreme sport. Think packed malls, bulging bags full of gifts for friends and family….and of course, the stress of budgeting what little you have, in order to get everyone that perfect present.

But cashsmart is here to help you from breaking the bank and overspending! We have some money management advice for you to keep financially healthy during the holidays:

Tip #1: Develop a spending budget.

Sounds like common sense, but not many people write up a budget before hitting the mall. A budget can be the difference between saving some cash, and overspending.

There are many ways to create a budget plan, but we find this one the easiest:

a)      Set aside money for your personal use, including phone bills, food and transportation costs that you may have.

b)      The money left over will be a good starting point to gauge how much you can afford to spend. Draw up a list of purchases, and include the maximum amount that you’d be willing to spend on each one. For example, you might want to limit spending $20 on Christmas cards, and $25 on decorations.

c)       Stick to the budget! That way it’s practically impossible to overrun it, and incur debt into the next month.

Tip #2: Make your own gift!

This tip is especially for all you cash strapped people, but it also applies to everyone as well. Hand-made and homemade presents have a personal touch that mass produced products lack. It can be anything from baked goods to cross-stitched designs, or even a basket of fruit! It might be cliché, but really, it’s the thought that counts.

 

Tip #3: Don’t shop last minute!

If you’ve left shopping till 2 days before Christmas, your budget will be in for a rough time. Shopping under stress can lead to unnecessary spending, so try to get it done 2 weeks earlier.

 

Tip # 4: After the holidays

The Boxing day sale could leave your healthy looking accounts in the red, if you take an extra day of Christmas shopping without first calculating all your expenses for the month. Make sure you account for all your expenditures including gifts, postage, entertainment and decorations before hitting the mall for that last shopping spree. If you’ve already hit the limit, stop shopping! It’ll only run you into the misery of debt. 

 

Happy Holidays!

The cashsmart Team

A Worrying Trend from “Generation Spend”

Hello Everybody!

An article from Mcleans’ dated early last month, reflects the astonishing attitude that Generation Y-ians have towards spending.

Our generation is said to be well on track to consume more than our parents ever did, and this is not because we have higher salaries, but because we don’t know how to save. 

In Canada, young people between the ages of 25 and 34 “who say they are impulsive spenders and can’t save is 30 per cent… according to a recent study by the Royal Bank of Canada.”

Why is this troubling? This spending habit left our parents in “crippling debt”, as painfully seen in the most recent recession. Saving at 4.4% (our average national savings interest rate) is obviously way too low. “four in 10 Canadians say they struggle to put a nickel in the piggy bank” – is saving really so hard to do?

This appears to be problem that will be hard to solve. Canada.com also wrote early this year of how “Only 13 per cent of Canadians understand financial risk”. Even the after the global economic crisis, “only 10 per cent of Canadians indicated they have tried to learn more about finances matters”. 

We owe it to ourselves to make sure we know how to manage our finances. Because ultimately, we’ll pay for it in the future, just as our parents did in the last 2 years. And it really isn’t as hard as it sounds, all we have to do is spend less than we earn and put aside a decent amount for a rainy day!

From The cashsmart Team

Saving Skills #1

Hey Everybody!

So we know that the #1 rule of having financial success is being able to save your own money. And the only way to save money is to not spend it…as much…ok maybe a little bit…or all of it. See, we all have trouble saving our money, when there are just so many shiny new things to go out and buy.

So here’s the trick, the famed magic rule of money saving...

It starts with knowing what your expenses are. So what do you spend on? Clothes? Food? Coffee? Cell phone bills? Movies? The new iPhone? All of the above (in a small voice...) It’s okay, its not just you.

So let’s say you’re like sir-spends-a-lot here and you spend on all of that every week. Well, unless you’ve got a part-time job as the CEO of Coca-cola, you’re probably not making enough to cover $195. That’s right. If you’re spending on regular everyday things like this (excluding the iPhone and cell bill), you may actually be spending that much. And if you’re working minimum wage... Um, let’s just say that mummy and daddy won’t be around to pay your bills forever (please note that cashsmart does not condone calling your parents up for allowance at age 21. Just saying.)

Alright, so now you know how much you’re spending. Maybe its ten bucks, maybe its twenty, or maybe its two hundred. But that doesn’t mean anything until you know how much you’re making to begin with. If you’re the typical teenager, you’re making minimum wage. Sucks doesn’t it? (Also, to any teen CEOs out there-- Leave. Now. You’ve just been banned from this site.)

Anyway, minimum wage is probably somewhere between $9.50 and $10.50 per hour, depending on where you live in Canada. That means, even if you’re working an 18 hour work week (which is the legal max for teens), you’re making between $171 and $189 every week (ouch.)

Here’s where the magic comes in to play: if you want to be saving, the amount of money that you make must be significantly less than the amount that you spend. I know, it’s pretty crazy.

But obviously, it’s not as easy as it sounds, because if it were, everyone would be saving. So, let’s break it down for you.

We’re starting a series here on cashsmart dedicated just to budgeting and saving. So we hope you got a better idea of where you stand financially today, and next time we’ll lay down some handy tips!

Sincerely,

The cashsmart Team

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Best Free Way To Manage Your Money!

Hey everyone!

We all know that managing our finances is something we should really do. But most of us find accounting for our budget quite a cumbersome task.

Luckily though, there are tons of websites out there that have programs to help track your finances! But of the many out there, we found this site was one of the best as a budgeting tool.
Check out Mint at http://www.mint.com/ !

According to their site, Mint.com is rated top in its category by Money, PC World and PC magazines and was named one of the 50 Best Websites of 2008 by Time magazine. The product has received two Webby awards, an American Business Award and accolades from TechCrunch, Lifehacker, the Wall Street Journal and BusinessWeek since its September, 2007 launch.

And yes, it also has a free app for iPhone/iTouch and Android phones.
'Making financial decisions in real-time is easy when you can view up-to-date information about your accounts, check your budgets and edit info right on the app.'

....Yep, it's just as it says it is. It really gives you no excuse for not budgeting.

From the CashSmart Team!