The Way We Spend

Pay yourself first but think of others too

We received a letter from a reader who pointed out that in our monthly budget items for our four families we left out money set aside for charitable giving.

Kate's family is on a tight budget but they've decided as a family to always give to others and this is how:

1) Family chooses 12 organizations they wish to support.

2) Write a letter explaining you will support them once a year each year and ask them to only contact you once annually. Make 12 copies. 

3) Send the letters out to the charities.

4) Buy a folder with a pocket on each side. Make a list of the charities, numbering them 1 to 12 to correspond with the months and stick it on the folder. Inside keep tax receipts on one side and donation envelopes on the other (usually there is no postage required). Each month on the same day (ours is the 15th) write and mail the cheque.

5) You can start small (say $10) and increase as circumstances improve. It becomes a habit that will be easy to follow and money you won't miss.

This helps charities with their mailings and helps you reduce the amount of paper in your mailbox and then the blue box.

(Editor's Note: most charities also give a tax receipt)

- Kate

- Lisa Grace Marr

The homestretch

It's hard to believe, but tomorrow marks the end of the Way We Spend. It's been a fantastic experience for everyone here at The Spectator who worked on the series and our families and experts have said they don't regret a single second of their involvement. The families, all four of them, are better off financially thanks to the guidance they've received. There is plenty of work ahead for them, but that's true of any real lifestyle change. Lisa and I really believe our families are committed to the sacrifices and tough choices that lie ahead.

We had a great time at Melrose United Church last week. The Locke Street church offers a movie night and showed the terrific documentary Maxed Out. It is a disturbing and illuminating look at the credit industry and American consumerism. We in Canada like to think we're so much more responsible and restrained but household savings and debt statistics don't really bear that out for the most part.

After the movie, Lisa and I talked about the Way We Spend and what we've learned. It was a great discussion with people who had become really engaged with the series. One woman even asked us to keep it going. We would love to do that, believe me. There is so much more to talk and write about, so many more people who could use a helping hand. If you would like to see more, please let us know and we'll make a case to our editors!

Meredith MacLeod

PS Congratulations to Steve and Cindy Greenway who welcomed twins London and Sienna on Monday. Mom and babies are doing great!

Reflections on letters to The Way We Spend

I'm just going through some of the more than 50 letters we received from readers in May and June when we started this series as we prepare for a talk tomorrow night about the series at Melrose United Church.

The one emotion that is the common thread through all of these letters is anxiety.

There is just so much worry tied up in money. Some examples:

"I pray that there is someone out there who can help us better our lives. It will be a big challenge."

"We live pay-to-pay, never able to save money, pay bills on time or just get ahead of the game."

"We don't have any realistic financial goals, as we would need to have to have savings to accomplish this. we are not only getting nowhere, but each year we get further in debt."

"We own our home but feel like we are constantly relying on overdraft to make it from paycheck to paycheck. We have about $11,000 in credit card debt. I don't know how we would survive if something major went wrong with the house or car and we were faced with a large expense."

"Our biggest financial challenge right now is our day-to-day living ensuring the mortgage is paid, paying our utilities and hoping there is enough for groceries without even mentioning the other bills."

The other common thread here is not knowing where or how to start tackling debt. Patricia Hamilton, one of our families said she was so stressed about her credit card bill and her lack of retirement planning that she couldn't think about saving. But once she faced her fears, it wasn't nearly the mountain she had carved out of that anxiety.

There is hope. Your bank does have plenty of tools and people to talk to. So does Catholic Family Services. Please sort through our stories and tools on our website here - there is so much out there. To make sense of the credit counselling industry, check out our story which ran on Nov. 19 about that. Next week, our last (!) we will have a story about how to pick a financial advisor.

The one thing we hope our readers take away from the series is that there IS hope, there IS a way forward, the only question is are you brave enough to take the first step?

- Lisa Grace Marr

Check out Maxed Out - Melrose United Church is offering a screening

Melrose United Church, located on Homewood, just off Locke Street is inviting the public to their screening of Maxed Out - an American documentary film taking a close look at the finance industry. The church is asking for a $5 donation for free trade coffee.

Meredith MacLeod and I will be offering up a discussion of our journey in producing the series The Way We Spend after the film.

Melrose United often offers screenings of topical films.

Looking forward to the discussion.

- Lisa Grace Marr

Giving at Christmas from the Royal Bank

RBC Wealth Management just issued a press release today about giving in a recession. OK, so some of these ideas seem to be lacking glitz and glimmer that we all love at Christmas, but hey in the end, charities benefit. Check out these ideas:

1.      Plan your giving as a family – Some families agree on a vision and make a long-term commitment to support selected causes. Asking your kids to help choose the causes can be a great way to teach them about giving.

2.      Give to a worthy cause in lieu of Christmas presents for adult family members – Consider agreeing to donate the money you would normally spend on a new sweater for your brother-in-law to a charity instead.

3.      Establish your own charitable gift fund – A charitable gift fund allows you to create a lasting charitable legacy without the time and expense of a private foundation. A registered public foundation administers the assets, but you can decide which charities receive grants. Investment earnings in the fund grow tax-free and are available to fund selected causes every year.

4.      Check for donations unclaimed in previous years and combine tax receipts with your spouse – Donations can be carried forward for five years. If you make small annual gifts, consider carrying forward your donations and then claiming the combined donations to benefit from the higher tax credit for gifts over $200. Maximize your family tax savings by claiming all donations on the higher-income spouse’s tax return. 

5.      Donate depreciated securities to reduce your taxes – This could be a good time to donate underperforming securities for a tax break. If you donate a security in kind that has a capital loss, you can use the loss to reduce your capital gains. After applying capital losses against any capital gains in the current year, you can carry the balance of the loss back three years or forward indefinitely to offset capital gains in future years.

6.      Give the gift of life … insurance – Consider gifting a life insurance policy. You are eligible for a donation receipt for the fair market value of the policy when you transfer ownership to a registered charity. While you will be taxed on any gain, it should be offset by the donation tax credit, and in fact the credit may be larger than the gain. If you are still paying the premiums after ownership is transferred, you will get a tax receipt each year.

7.      Designate a charity as a beneficiary on your RSP or RIF – This strategy avoids probate taxes on your registered plan. In addition, your heirs can claim a donation tax credit on your final tax return to offset tax owed by your estate.

8.      Donate through your company to get a tax-free dividend – For owners of an incorporated business, a donation of publicly-traded securities from the company may allow for a tax-free dividend to the owner through the use of the Capital Dividend Account.

Consult with your financial advisor and a tax professional to determine whether these strategies are right for you.

- Lisa Grace Marr

Battling back

Hello,

We hope you were all able to catch the Spectator's Way We Spend Open Forum, either live here the paper last week or during several broadcasts on Cable 14. The final broadcast is tomorrow (Wednesday) at noon. The event offered some great advice and knowledge from experts on our panel and in our audience.

Thursday is the last instalment of the tale of John Butler and Diane Morris as they save for their wedding and plan to set off in their new life together.

The series is quickly wrapping up. The last week is Dec. 10. We've been meeting with our families and our experts for this series since July. They have made some remarkable progress, but financial change doesn't happen in a few months. We have committed to checking in with our families periodically to see how they're making out on their long-term financial makeover.

I thought I would share the story of a fellow I interviewed for the series, but space limitations are going to keep me from writing a story. He didn't want me to use his name, but he's a 56-year-old civil servant for the Ontario government. He's got a good job but found himself in hot water after his brother suddenly announced he was getting married and wanted to be bought out of the Toronto home the two shared. His increased mortgage obligations, climbing interest rates and $52,000 in consumer debt combined to drag him down.

“I wasn't in control in any way. I could not pay my bills," he said. He was ashamed and didn't know where to turn. He'd never seen anyone struggle with finances.

Then one day Henrietta Ross, executive director of the Ontario Association of Credit Counselling Services, came to his office for a lunch and learn session. Afterwards, he mustered the courage to approach her and explain his circumstances. She referred him to a credit counsellor in Toronto and that meeting was a turning point in his life.

He laid his cards out on the table and cried. She told him to cut up his credit cards and stop taking out loans. "When I walked out, I felt like a million pounds had been taken off my shoulders. I walked to my car with tears rolling down my cheeks and I told myself I would get back on track.”

He enrolled in a debt management plan, resolving to pay all his debts back because he didn't want a hit to his credit rating. Creditors slashed his interest rates.

He gave up his car and cut his spending on entertainment and other living categories.

He got a second job at Canadian Tire, eventually working his way to a manager’s role. He got a promotion and raise at his government job and took classes to further boost his position. His total income is about $90,000 and he's still trying to find ways to increase it.

After two years, he's paid off $20,000 in debt and brought down his mortgage by $19,000.

"If you think you can’t do it, you won’t. There is always a way. You just have to create your own way," he says. “Never feel sorry for yourself. It’s a form of defeat."

“My advice to anyone is don’t be overwhelmed. Find out where you can get help. People out there will understand, offer sympathy and empathy and ways to get out.”

-Meredith MacLeod

Way We Spend Open Forum

If you've got money questions,  bring them to The Spectator’s Way We Spend Open Forum Wednesday, Nov. 18.

Learn how to save wisely, how to tackle debt and tips to make your dollars stretch further.

The event will feature financial experts Alison Griffiths and Suzanne Schultz. Best known as the host of Maxed Out on the W Network and Dollars and Sense on Viva, Griffiths teaches stressed out people how to turn their financial lives around. She also writes the popular Me and My Money column in the Toronto Star and hosts House Calls, a seminar series on investing and money management.

Schultz is a chartered accountant and a financial planner with RBC Securities in Hamilton. She hosts HGTV’s House Poor, which showcases cash-strapped homeowners who have started a home renovation project they can’t afford to finish. Schultz was one of the local money experts paired with a family for the Way We Spend makeover.

The forum, to be broadcast on Cable 14, will also include money experts from Catholic Family Services of Hamilton and Teachers Credit Union and families featured in the series.

When: Wednesday, Nov. 18, doors open at 7 p.m., Open Forum runs 7:30 to 9 p.m.

Where: The Hamilton Spectator auditorium, 44 Frid St.

RSVP: Event is free, but you must register in advance by phoning 905-526-3535.

More thrift

This comment came in from a reader:

It's a pleasure reading your articles in the Spec.

The one about the thrift stores, October 8th, was great. I volunteer at a Bibles for Missions thrift store in Dundas. We have about 35 of these across Canada right now and 20 in Ontario alone. All the proceeds go to the Bible League of Canada. This organization provides literacy programs for women in countries where they seldom get opportunity to learn how to read. This dramatically changes their whole life and that of the village where they live. They also have programs for children and of course provide Bibles and other Christian literature.

I thought I would let you know about our stores which are run totally by volunteers. 

 Have a good day!

Mary Droogendyk

Think outside the video store

Hi!

 

We were just reading today’s article regarding The Way We Spend.  We noticed that the Lepp’s have an envelope set aside with $60 in it for movie rentals.  Our suggestion is that they get their movies – dvd or blueray – from the library and that $60 can go toward something else.

 

Valley Park Library staff

A similar letter from a Sherwood staff member:

The family featured yesterday spends $60 a month on movie rentals (or ($720 a year).  You can get a library card for FREE and borrow DVD's for FREE at your local library.  I work at the Sherwood Library (Hamilton Public Library) and we have thousands of movies available for FREE.  We have all of the new releases as soon as they are released.

 

You could do a whole column on the books, CD's, DVD's, computer/internet use, Playaways, etc.  that the public can use for FREE.

 

Have I emphasized the FREE part enough?

 

- Alison

This is a super idea. One of our other families, John Butler and Diane Morris were spending about $360 a month on entertainment with a big chunk in movie rentals. The two don't have cable as John watches TV all day for work (he's an on-air technical director for a Toronto TV station) so felt justified in the expense. Until they saw it in black and white. So they took a walk to the local library and between renting movies and TV show packages there plus cutting back on eating out, they've cut their spending on entertainment by more than half. Wow. They've also started exchanging movies or borrowing movies with friends - great way to shuffle those DVDs around.

- Lisa Grace Marr

Remember the old days?

Hi,

When I was at the point of getting married, one of my bosses asked me if I had thought about a budget. My answer was no, as i hadn't. He handed me a copy of an article, circa 1929, and said have a look at this. He also said I would have to vary the percentages to the 1960 values, rent, income and the like. I set up a budget and more or less FOLLOWED it and still do to an extent. We, my wife and I had only a single income and yet we bought a house, raised two kids, one through university and the other college. We were also able to take a two week vacation at a cottage, and a week to the U.S. to visit friends also.

 

I think the problem today is the fact that young folk want the two incomes, but seem to forget that disater can strike at any time, ie. this present recession. I know the feeling as the company where I worked for over 30 years announced a closure two months after Christmas some years ago. I was fortunate enough that I had a trade and was able to be self employed for a few more years.

 

My advice as a Senior Citizen to the young folk, make an very strong attempt to live on ONE income, and save for YOUR future. It isn't easy, but neither is working for a living.

Set up a budget and STICK to it!!!

- Jack, Hamilton