Love and Money

Have you ever wondered what life is like when a thrill-seeking "High Roller" marries a risk-averse "Security Seeker" or when a sweat-pant-wearing "Dawdler" starts dating a research-crazy "Systematic Striver"? The five Vancouver women who make up the Smart Cookies financial self-help team have considered these and many other questions about love and money in their new personal finance book for couples. It's worth the cover price...especially if the idea of talking to the one you love about money makes you want to throw up or call off the wedding.

Overall, I really enjoyed reading the book. It was straightforward without being boring and had some good old fashioned you-can-do-it encouragement along with some solid money management advice that can help you get control over your finances even if you are currently flying solo or just dating.

My favourite parts are the two introductory chapters and the "Perfect Day" exercise on page 46. The first chapter was great because the Cookies spent some time talking about why money is so hard to talk about in the first place. There are some interesting statistics and insights to be found there. Chapter Two I liked as well because it got me thinking about how we learn about money from our parents, mostly by observation, and how what we see and hear about money growing up shapes the financial baggage we bring with us into relationships.

In the third chapter, which outlines some suggestions for personal and financial compatibility, there is an exercise called "Picturing Your Perfect Day Together." You and your partner are asked to imagine your life five years from now on a weekday and then use the Cookies' eleven questions to ignite a conversation about the financial reality that those fantasies entail. It's a fun exercise, well worth doing over a glass of wine or a cup of tea after you've both had a long hard day.

While these were my favourite parts of the book, the rest of the book does not disappoint. Whether you are planning to pay for your wedding or pay off debt, are buying your first home, starting a family, or learning to invest, you will find a lot of practical advice...and it's written for Canadians. Yay!

At $19.95 CDN, this book gets 5 out of 5 dollar signs for value and 5 out of 5 stars for readability. It's all about love and money, but you won't find any intimidating vocabulary on any of its 220 pages.

Moms and dads, if your son or daughter is old enough to fall in love but still has no idea what a RRSP or mortgage is, you may want to pick up this book and read it together as a family, which would be a great way for you (Mom and Dad) to talk to your grown up kids about how you handle love and money in your own intertwined lives.

Copyright 2011. Laura Thomas. All Rights Reserved.

For reprint permission contact moneyme@telus.net.

Kevin O'Leary's Tough-Love Approach to Kids and Money

Twice now I've heard Kevin O'Leary talk about about how he makes his kids fly coach while he enjoys the softer seats and sumptuous service of first class. He tells them that they can't sit up front because they don't have any money. If you're familiar with Kevin's work on Dragons' Den, Shark Tank or on The Lang & O'Leary Exchange you won't be surprised because you'll know that with Kevin "it's always about the money," even with his kids it seems! Let's call it O'Leary's tough-love approach to financial education.

BC HRMA Conference April 2011

While I don't agree with every aspect of Kevin's "business is war" philosophy, I do admire his realistic approach to talking to kids about money, which is why on April 13th I took my seven-year-old daughter to see him do a presentation called "Up Close and All Business with Kevin O'Leary" hosted by the BC Human Resources Association  at the Vancouver Trade and Convention Centre. Actually, I didn't really take my daughter to the presentation, she had to take herself.

One Tough Mom Equals One Tough Kid
When we first heard about Kevin's talk, my daughter was anxious to go. She's a big fan of Kevin's sense of humour, especially when he is being tough on pitchers in the Den. I thought it might be fun to go, too. I've been hoping to interview Kevin for this blog for quite a while. But when I saw the ticket price was $57 plus HST I decided against it (parking would be another $25!).

My daughter persisted so I told her that if she paid for her own ticket, we could go. The funny thing is that even though she is a shareholder and has a healthy pile of cash in her ING kids account, she said that she didn't want to spend her savings. That left us with figuring out how she could earn $57 plus HST.

Ella-Rose's Tip #2

To make a long story short, she spent the second week of March break providing money-saving tips to a group of subscribers (which included David Chilton, author of The Wealthy Barber, family, friends and a few of my blog followers) at the rate of $2 a day for 5 days.

I helped her choose her money-saving tips and did the uploading and emailing (some of the tips were images, some were videos) but the creative piece was hers alone. There were days when she came home from art camp and did not want to "work" but she did it anyways and ended up raising $80, which was more than she needed.

I was proud of her and pleased that she was willing to work so hard to earn money to do something that she wanted to do. She didn't complain. She didn't argue with me about why I was making her pay for her own ticket. She was able to deal with this "tough-love" money lesson with a tremendous amount of fortitude. I imagine that Kevin's kids can do the same.

Up Close & All Business with Kevin O'Leary

It wasn't until Kevin mentioned the "I make my kids fly coach" story again at the presentation that I realized that I have been using O'Leary's tough-love approach to financial education without being aware of it. One of my parenting catch phrases is, "Sorry. Mom's job is to buy the stuff you need,  not the stuff you want."

It seems to be working.

The cool thing about the tough-love approach to financial education is that it doesn't matter how wealthy your family is. Whether it's a first class plane ticket worth thousands of dollars or a front row seat at a Kevin O'Leary talk for $57 plus HST, the point is that you make your kids hungry to get there...and then you step back, do a little coaching and watch them go.

Copyright 2011. Laura Tomas. All Rights Reserved.
For reprint permission contact moneyme@telus.net.

Laura Thomas on Financial Literacy

Moola Lingo: Corporate Tax

Watching the leadership debate last night made me realize that politics is really just about about money. The May 2nd federal election isn't about ideas, it's about who has the power to decide how we earn, spend, grow and share our collective cash. And that was very evident when the word "corporate tax" was brought up last night. Should the corporate tax go up? Should it go down? Should it stay the same?

Which is why I thought to myself, hey, if this is such a pain-in-the-budget topic, I should probably take a minute to understand exactly what the word means before I cast my vote.

What is corporate tax?
Just as we the people have to pay tax on our income, companies have to pay tax on the money they earn as well. They pay tax on "profit income" and on capital (cash or goods used to generate income).  And, just like us, corporations have to file a tax return, a T2. If you've ever wondered what a T2 looks like you can check it out here.

Who has to file a T2? Any corporation with a Canadian address (except registered charities) has to file a T2 every year even if there is no tax due. This includes non-profits, tax-exempt corporations and inactive corporations.

And, in case you wanted a history lesson, it seems that corporate tax has been around longer than individual income tax in Canada. Corporate tax was introduced at the end of the nineteenth century while income tax was introduced in 1917 as a "temporary" way of funding World War 1.

Corporate tax rates, by the way, are:
19.5% effective January 1, 2008
19% effective January 1, 2009
18% effective January 1, 2010
16.5% effective January 1, 2011
15% effective January 1, 2012

Individual tax rates in Canada for 2011 are:

15% on the first $41,544 of taxable income

22% on the next $41,544

26% on the next 45,712

29% on taxable income over $128,800

Our Parities & Our Pain-in-the-Budget
The Liberals vow to keep the corporate tax rate at the 2010 level of 18%. The NDP promises to keep the combined federal/provincial corporate tax rate (which is about 26%) below the U.S. federal corporate tax rate of 35%. This means that the NDP will boost the federal corporate tax rate to 19.5%. The Conservatives will keep lowering the rate to 15% in 2012. The Bloc Quebecois and Green Party do not have explicit plans to either raise or lower the corporate tax rate.

There is some additional vocabulary that comes up when individual and corporate tax obligations collide including: dividends, shareholders, tax credit, double taxation, capital gain, capital cost allowance and income trust. But I am not going to touch on any of that moola lingo today. The point of this post is to clarify what corporate tax is so that we can better decide which party's earning-spending-growing-sharing plan we want to support on May 2nd. Happy voting!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

5 Tips for a Chubbier Savings Account

Preet Banerjee wrote a piece for the Globe and Mail today about ways of saving that include voluntarily increasing your income tax deductions so that Revenue Canada acts as your banker by holding on to your money until refund time. He also suggested setting up an automatic savings plan at a real bank that pays interest while your money grows.

Though, as Preet also pointed out, there is something awfully tempting about both a growing savings account and a lump sum tax refund. Something that stops many people from letting their savings get chubby.

Last night after swim practice, I treated myself to a hot tub with some of the other moms. As we enjoyed the jets, bubbles and the soothing absence of children, one mom lamented that stores "around here" never seem to close. "In some European cities," she said, "it's almost impossible to shop on a Sunday. You can't even get groceries. I wish it was like that here." Her comment made me wonder how we can afford all this 24/7 shopping.

That's easy. It's called credit. Our economy says to us, "Don't worry about it, Mom! You can get whatever you want, whenever you want and you don't even need to have any money in the bank!" No wonder it's so hard to build a chubby savings account when it's so easy to keep letting the money pour out.

So if you are one of those people who struggles to keep the financial weight on, here are few tips from an avid (dare I say obsessive?) saver.

5 Ways to Bulk Up

ONE Change your way of thinking. Fat is good when it comes to money. The more you amass in your savings account the more you can potentially earn in interest or in investment income. Seriously, passive income (that's when your money earns money) is totally where it's at.

TWO Respect free money. I'm 42 and I still get money in cards from family at Christmas and for my birthday. You didn't earn it so don't spend it. Put any free money (refund, gift, etc.) that comes your way directly into your savings account.

THREE If you suddenly decide that you want something, don't dip into your savings to buy it and don't use credit either. Figure out a fresh, temporary way to earn the required cash. Do an odd job for a neighbour. Do some childminding. Sell something that's been sitting around taking up space. Be creative.

FOUR Do a cost analysis of your favourite forms of entertainment and drop the expensive stuff. What do you do for fun? Create a list and beside each activity write down how much it costs, how many hours of entertainment you get and then figure out what your cost per hour is.

Example: A 3D movie night in the theatre for my daughter and I costs $28 (just for the movie, not including snacks and transportation) which works out to $14 per hour for a two-hour outing. On the other hand, a 500-piece puzzle costs us about $20 and give us more than 10 hours of fun at $2 per hour. For every 3D movie we decide not to see in the theatre, I put $28 into my savings account.

FIVE Passive income rules! I know this was tip number one but if there was ever a carrot for saving money it's this. The more money you have working for you, the more money you will have down the road. I hate to admit it but Kevin O'Leary's goal of going to bed richer at night than he was in the morning is smart. Every dollar that grows in your savings account makes you richer every day.

If however, you don't think that any of these tips are going to help and you are interested in the "Revenue Canada tax-refund savings strategy" or in setting up an automatic deposit, check out Preet's Globe and Mail article by following this link.

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Moola Lingo: Disposable Income

What do unicorns and disposable income have in common? Like most things, the answer to that question depends on language.

What is a unicorn? A unicorn is an imaginary creature that is usually depicted as a horse with a spiral horn growing out of its forehead.

What is disposable income? Good question. Here are a few definitions of "disposable income" that I found on the Web:

"The amount of income left to an individual after taxes have been paid, available for spending and saving" (InvestorWords.com).

"Gross income of an individual from which direct taxes have been deducted." (BusinessDictionary.com).

"The amount of money that households have available for spending and saving after income taxes have been accounted for" (Investopedia.com).

In money-speak, disposable income is a term that refers to your after-tax income. It's what you have left to spend on essentials and non-essentials (and to save, if you're lucky) after you pay your taxes. But getting back to our original question about what unicorns and disposable income have in common, let's break down the language a little bit further to find out why this misnomer, "disposable income," is so very annoying.

Money You Throw Away?

Disposable means that something has been designed to be thrown out after being used, such as a "disposable" diaper. You use it once, you throw it in the diaper genie. Income is money that comes into your life in any way, be it earned actively or a gift or some other passive form of positive cash flow. Literally, then, the term disposable income seems to mean: money that you throw away. Like unicorns, disposable income understood in this way is truly imaginary. Who, after all, has money to throw away?

But that's not what disposable income means in money-speak, as you can see from the above definitions.

Given the confusion created by the word "disposable" and the irritating specter of tossing cash into the diaper genie or other trash bin (which I have done accidentally), perhaps our after-tax money should simply be called "net income." But the term net income is already taken.

Net income is the amount of income we pay taxes on (gross income minus deductions and credits) so disposable income is what's left after you pay tax on your net income. We need another term.

Another option may be to call our disposable income, simply "my money." Once I pay income tax, the money that is left over is truly mine and that's an empowering thought, which is not imaginary at all.

So the next time you're talking to your accountant or financial advisor, and the term "disposable income" rears its irritating head, just remember that disposable income is not meant to be disposable...it's simply your money and you can do whatever you want with it. You can even throw it away!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

The Harper Budget & Financial Literacy

In the midst of the kerfuffle over the federal budget that was tabled on Tuesday (a kerfuffle that may dissolve parliament and turn the 352-page budget into a door-stop) it may seem fruitless to worry over the contents of those 352 pages. And for the most part it may be, except for one thing that really matters to people who are determined to help Canadians get smarter about money: does the federal government have the desire to spend money on financial literacy in 2011-2012?

You already know that I'm one of those "people" and so it will be no surprise that as soon as the budget was available online that I poured through the table of contents looking for anything to do with financial literacy, particularly the thirty recommendations made by the Task Force for Financial Literacy in their report, Canadians and Their Money, published on February 9, 2011.

I found what I was looking for in the first chapter, "Supporting Job Creation," under the subheading "Maintaining Canada's Financial Sector Advantage." On page 87 you will find the following statement under the title, "Enhancing Financial Literacy."

With the growing use of financial services by consumers, the importance of ensuring that Canadians have the tools and knowledge to be confident in their financial decisions cannot be overstated. The Government has received the recommendations of the Task Force on Financial Literacy, and it commends the important work that was done in support of this goal. As a first step, the Government is announcing that a Financial Literacy Leader will soon be appointed to promote national efforts, and is providing funding to advance financial literacy initiatives.

Budget 2011 proposes to provide $3 million per year, in addition to the $2 million per year already provided to the Financial Consumer Agency of Canada, to undertake financial literacy initiatives. Improving financial literacy is a long-term goal and a shared responsibility that requires all partners to work collaboratively to leverage the excellent efforts now underway across the country.

I realize that it's the Children's Arts Tax Credit that's supposed to get me all excited as a parent, however I find these two little paragraphs on page 87 much more stimulating as I do believe that by investing in the financial literacy of children and families today, we can improve the economic well-being of future generations.

While politicking is going to dominate budget news in the coming weeks, take a moment to do a little happy dance with me about the government's desire to appointment of a Financial Literacy Leader and to spend an additional $3 million per year on financial literacy. Whatever happens in Ottawa, it is a positive first step towards a more economically fit Canada.

Copyright 2011. Laura Thomas. All Rights Reserved.

For reprint permission contact money@agentstory.net.

Happy Consumer Rights Day!

I'm in the final week of preparations for my city's first World Storytelling Day community celebration. Under my guidance, twelve amazing young writers in grades four through twelve are going to be taking the stage this Sunday to tell (not read) their stories to a theatre full of families. So what does this have to do with World Consumer Rights Day?

Nothing. Or so I thought until I received an email yesterday from Julie Hauser, Communications Manager at the Financial Consumer Agency of Canada (FCAC) about World Consumer Rights Day, which, like World Storytelling day is an interesting and educational yet largely unknown celebration.

CI Logo

World Consumer Rights Day
World Consumer Rights Day is a project of Consumers International (CI), an aggregate of 220 member organizations operating in 115 countries that was founded in 1960. The CI is a watch-dog group whose purpose is to "protect and empower consumers everywhere."

According to their website, WCRD was founded on a speech that President J.F. Kennedy gave to the US Congress on March 15, 1963. In this speech, Kennedy addressed the issue of consumer rights, which, according to the site, made him the first world leader to do so.

The eight rights included in Kennedy's speech were: access to basic needs, safety, information and choice, plus the right to be heard and the right to redress as well as rights to consumer education and a healthy environment. World Consumer Rights Day, which first took place in 1983, is a day in which groups organize to celebrate and show global solidarity around Kennedy's eight points.

Especially since the market meltdown in 2008 (and the last few days!) consumer rights in the financial services industry have become an increasingly important part of the celebration.

Your Rights as a Canadian Consumer
Did you know that you have the following rights as a consumer of financial products?

1. The right to open a bank account even if you don't have a job, do not have any money to put in the account or have been bankrupt.
2. The right to cash Government of Canada cheques up to $1,500 at any federally regulated financial institution without having to pay a service fee, even if you are not a client of that institution.
3. The right to know the terms of any loan that you take out at a federally regulated financial institution.

You can find more information online about your financial consumer rights in Canada at the FCAC website. And if, like me, you would like to know exactly what qualifies as a "federally regulated financial institution," you can find an overview of the obligations and voluntary codes of conduct on the FCAC website as well.  

And as you consider how your family might mark these little-known celebrations, here's a suggestion. This Sunday, on World Storytelling Day (March 20th), tell a child a story about money. Or, even better, tell a story about Consumer Rights Day which is today, March 15th.

Copyright 2011. Laura Thomas. All Rights Reserved. 
For reprint permission contact money@agentstory.net.

Money Smarts for Low-income Canadians

With the tabling of a new federal budget just around the corner, I've been trying to find out if any of the 30 recommendations made by the Task Force for Financial Literacy last month will be addressed.

Casey Cosgrove, CCFL Director

Though I haven't been able to find anyone who can give me the inside scoop, it gave a me good excuse to contact people who are deeply invested in financial literacy, perhaps none more so than Casey Cosgrove, Director of the Canadian Centre for Financial Literacy (CCFL).

The Canadian Centre for Financial Literacy

The CCFL is a division of a registered Canadian charity called SEDI (Social and Enterprise Development Innovations which, by the way, was the organization that advocated for the creation of a national financial literacy task force in the first place.) Its purpose is to deliver financial education to youth, newcomers, Aboriginal Peoples, women and families with children.

Recently, I was lucky to have a good long chat with Casey Cosgrove about his role as director of the CCFL. What I found particularly interesting about his organization is that partnership is central to their approach to financial literacy.

While the CCFL's goal is to "improve the financial knowledge and skills of  over 230,000 people by 2013," it does not send its staff out to inner-city streets to find at risk Canadians one by one. Instead, the CCFL sends its staff to train front-line workers at a wide variety of social service organizations that are already serving vulnerable groups. CCFL workshops equip front-line workers to empower their clients in the area of personal finance by teaching them how to integrate financial literacy into their day-to-day operations.

Let me tell you a fictional story based on an example that Casey gave me during our discussion.

Fighting the Payday Loan Syndrome
Imagine a twenty-year-old dropout living on Vancouver's Downtown Eastside. Let's call him Zane. Zane is mostly unemployed but he's recently landed a construction job through his connections at a downtown service organization. Because of this upturn in cash flow, Zane is now able to rent a room. But the landlord needs a three hundred dollar deposit and it's a week until Zane gets his first pay cheque.

There's a payday loan store just around the corner from the service organization where Zane often eats dinner. He decides to go to the payday loan store and get his three hundred dollars after he eats.

He eats his meal and as he's about to head out to get his payday loan there is an announcement that there is a money talk starting in five minutes. Zane decides to stay because the talk is being done by one of the organization's front-line workers. In fact, it's the same worker who  helped Zane get the construction job.

At the talk, Zane finds out that a payday loan will end up costing him a lot more than $300. He also finds out that the organization has a new "loan" program whereby he can get a $300 advance without paying interest. Zane chooses to take advantage of that advance and gets his room. He also begins to talk to his worker about money. He wants to learn about opening a bank account.

All of this happened because a month earlier the organization had a CCFL trainer come on site to run the front-line staff through their financial literacy workshop.

Meet Casey
Like I said, Casey, and his work in financial literacy and community market testing,  is at the heart of the CCFL. Prior its formation in 2008, Casey put his business background to good use by traveling across Canada to encourage entrepreneurship in vulnerable youth. He estimates that he taught his program "Dollars and Sense" to more than 15,000 young people. Then about six years ago, Casey began training trainers to deliver his curriculum, which a year and a half ago (with SEDI and the TD Bank as a funding partners) blossomed into the CCFL.

As a side note, Casey did tell me that when it comes to training trainers, that it's sometimes easier to work with people who do not have a background in finance. They seem to be more "flexible." And when I asked him the O'Leary question (what three things would you teach a Canadian kid about money) this is what he said:

1. Don't be afraid of money.
2. No matter what you do for a living you have to deal with money.
3. It's okay to talk about money.

If you belong to an organization that serves vulnerable groups and would like have the CCFL help you incorporate financial literacy into your services, please contact the CCFL at info@theccfl.ca or phone 416-665-2828.

In the meantime, cross your fingers and say a prayer that there will be something in the March 22nd federal budget to address the recommendations made by the Task Force for Financial Literacy. And if you hear anything...email me!

Copyright 2011. Laura Thomas. All Rights Reserved.
For reprint permission contact money@agentstory.net.

Moola Lingo: Budget

The Evolution of a Money Word

It was financial blogger Preet Banerjee who told me in a recent interview that if there is one money word every Canadian should understand thoroughly it's "budgeting." I had a hunch that the word "budget" has been around for a long time so I headed to the Koerner Library at my alma mater, UBC, and hefted a copy of the Oxford English Dictionary off the shelf. It turns out I was right...and what a history the word has. From leather pouches dangling around men's hips to proclamations of governmental accountability in British Parliament to womanly advice from Good Housekeeping magazine, "budget," and its meaning, has been around the block.

1432 A budget refers to a pouch, bag or wallet made of leather.

1618 Budget becomes a verb that describes the act of storing up money or another resource for a particular purpose or result.

1773 Budget (as a noun) is used in the British House of Commons to denote projected government expenses and revenues.

1945 The verb "budgeting" is used to describe the process of creating a budget for the purposes of personal financial planning. First recorded use was in an article that appeared in an issue of Women & Work, "Budgeting and shopping on a small income..."

Good Housekeeping 1955

1951 Good Housekeeping tells its readers, "The first essentials for budgeting are to keep weekly or monthly accounts."

1958 The word "budget" is used to describe something that is cheap for the first time in the November issue of Woman magazine. "This is just the drink to give party guests a glow -- at a budget price." In that same issue you find an article on, "Budget-wise dishes. Family recipes...that are easy on the purse."

1969 A "budget account" is a new noun that describes a type of credit account that customers can open at a department store.

2011  Investopedia.com. A budget is an estimate of the income (money in) and expenses (money out) that will flow in and out of a certain account over a set period of time.

My Take on the Word
If  you asked me yesterday whether or not I do a budget for my family, I would have said yes. But now that I understand that the word implies forecasting cash flow in the future, then the truth is I don't do a budget. I do something else.

At the end of this month I will sit down and look through all of my receipts, bills and invoices and do a tally (in Excel) so that I know exactly how much money came in, how much money went out and what's left over. I use that information to see how I'm doing and where I should reign in or relax my spending next month. I never say things to myself like: I have $175 to spend on entertainment or I have $210 to spend on gas. That's what you do when you write up a budget...which I don't, apparently!

I have no idea what to call the "month end tally" that I do for my family but I'm sure there's name for it. If you know the answer, please post it!

Copyright 2011. Laura Thomas. All Rights Reserved.

For reprint permission please contact money@agentstory.net.