Archive for January, 2011

Saving for Retirement is Like Eating Chocolate

By: Kristina | Date posted: January 31, 2011 (3:27 am)

As young adults we have to start saving for our retirement.  We definitely don`t want to still be working at 70 because we have to.  I know that if I am still working at 70 years old, I hope it is by choice. 

It is important to start saving for retirement when we are young.  I like to compare my personal finances to other parts of my life, and I think that saving for retirement is like eating chocolate.  I enjoy personal finance, as both a personal interest as well as my professional career.  I enjoy eating chocolate both during my personal and professional time.  I deal with personal finance on a daily basis, and I also eat chocolate on a daily basis.

Here are some other ways that saving for retirement is like eating chocolate:

We need to have a little piece at a time. It is important to start investing early, and start investing young.  This allows us to save a little bit over a long period of time. The exact same philosophy is true for eating chocolate.  We don`t want to eat too much at one time. We can eat a little piece of chocolate at lunch and a little piece at dinner; in the end it all adds up to a whole chocolate bar. Saving $50 or $100 for our retirement on a monthly basis will add up to a large amount of money over the long term.

It is something that we should always want. I am not going to lie, I totally love chocolate.  The same is true for my retirement. I can honestly say that I totally want to retire financially stable.  In order to do this I have to save for retirement constantly over the next 25 years if I want to retire at 55.   It is safe to say that my love of chocolate will not fade over the next 25 working years of my life.  I will still be eating chocolate when I retire (hopefully) in 25 years.

Don’t indulge too much. Too much of something, even if it is a good thing, is never a smart idea. I would personally say that I can never eat enough chocolate, but I am sure that my Family Doctor, my Nutritionist, and my Personal Trainer would disagree.  As a Financial Planner I give the same advice to my clients about their investment options.  It is very important to diversify our retirement portfolio.  As we invest for the long term, we can choose different investment options to diversify our retirement portfolio. We don`t want to have only one type of investment for our retirement savings because if that investment crashes we can lose all of our retirement savings.

Stick with your favourites.  This saying is as old as I am (30 years). If it works don’t fix it. If you love chocolate don’t eat something else, if you are craving chocolate don`t eat an apple. If the way we are saving for our retirement is working for us we shouldn`t want to change it.  It doesn`t matter how we save, as long as we are saving for our retirement.  I choose to save through my employer via direct payroll deductions.  This method works for me and I love it. I don`t love it as much as I love chocolate, but I still love saving for my retirement.

Photo By The All New Adventures

What’s Cool Around The Web

By: MD | Date posted: January 28, 2011 (6:00 am)

We are back again after a fun week here to check out the top links:

1 .6 Superheroes Bloggers I Admire @ TFB.

2. Why Staying Organized Saves You Money @ Canadian Finance Blog.

3. How to Become a Millionaire @ Moolanomy.

4. Do You Need to Adjust Your Tax Withholding? @ Free From Broke.

5. What Happens When You Stop Using Your Credit Cards? @ PT Money.

6. 57 Avoidable Tax Mistakes @ The Wisdom Journal.

7. Planning a Wedding On a Budget @ Frugal Dad.

8. Tax Estimator to Calculate Your 2010 Tax Refund @ My Dollar Plan.

9. Credit Report Repair DIY For Dummies @ Wealth Pilgrim.

10. 4 Tax Effective Ways to Invest in Canada @ Do Not Wait.

11. 15 Things I Look at Before Trading a Stock @ TDGB.

12. Paying The Bills As a Blogger @ PIN.

13. How-to Have a Killer Business Lunch @ Studenomics.

14. Carnival of Money Stories @ My PF Journey.

15. Carnival of Personal Finance @ Living Richly on a Budget.

»crosslinked«

The 5 Steps to Buy a House Soon

By: MD | Date posted: January 27, 2011 (6:00 am)

First Time Home Buyers Program StepsWe have come a long way with our discussion on buying a home. We recently looked at how-to get a mortgage in 3 easy steps and how-to pick the right home for a first time home buyer. Today we will look at the 5 steps to buy a house a first time home buyer:

Step 1: Save up your money as a first time home buyer.

You need to get your finances together before you can apply for any first time home buyer program. A part of this process will require to find out where your credit score stands. Your credit score is extremely important here because it basically dictates your level of credit worthiness. To put it bluntly: poor credit score means you pay more money on interest.

If your credit score is poor or you don’t have enough money saved up you might have to take a step back and fix these issues. You can start by working to pay off your debt, save more money, and start making all of your payments on time. You need to get your finances up to par before you can continue on and look to buy a home. This includes an increase in savings and with your credit score.

Step 2: Get pre-approved for a mortgage so you can buy a house.

As a first time home buyer you need to apply for a mortgage and get pre-approved for a certain amount. This process will allow you to determine exactly how much house you can afford. A few other reasons you should get pre-approved for a mortgage before you get into any first time home buyer programs include:

  • Save time. You will save time because your real estate agent will only show you homes that you can afford. You want fantasize about homes that are simply out of your price range (no matter how fun this is).
  • A faster closing period. Sine your mortgage loan application has been basically processed you can experience the luxury of a faster closing period as a first time home buyer.
  • Gain confidence. You will start to see homes that you can afford. The process of buying your first home will become more exciting for you.

Once you are pre-approved for a mortgage you will see exactly how much you can afford for a home and you can move on to the next phase.

Step 3: Find a reputable real estate agent.

You need to find a real estate agent that you trust. This is where you need to reach out to your network. Your friends and family should be able to point out a real estate agent that they worked with. Don’t settle for the first one either. This person will play a major role in your first time home purchase.

You must understand that agents usually work on commission, not salary. They are not public servants. If they don’t close the home they don’t get paid. It’s really that simple. Keep this in mind as you agent recommends homes for you. You should also ensure that your expectations are known. You want an agent that works for you and not against you.

Step 4: Figure out your housing needs.

What do you want and what do you need as a first time home buyer? You need to separate your wants and needs. You may need to live close to a school for your kids. You will want a swimming pool in the backyard. Your wants and needs should be established right off the bat so that you don’t waste your time looking at homes that are not right for you.

Step 5: Plan for first time home buyer fees.

As you look to buy your first home you need to become aware of the fees that will be hitting you in the near future. This is a topic that will be covered in greater detail soon. For now we just want you to understand that you will be hit with a plethora of fees as a first time home buyer. The only suggestion here is that you don’t get carried away and buy a home that barely fits in your amount that the mortgage loam was pre-approved for.

There we go. A comprehensive piece for all of the first time home buyers out there looking for the steps to buy a house. Did we miss anything?

(photo credit: svadilfari)

How to Evaluate My Salary

By: Green Panda | Date posted: January 26, 2011 (5:00 am)

Building your finances is continuous. As you work your way by cutting expenses, you look at different ways you can increase your income. It becomes fun, as you realize that you have more control that you thought with money. Take for instance your job. Some people feel like they are stuck, waiting to get a raise. You, though, have started to develop the confidence to reach for more. You decide you want to increase your net worth and a raise may be the way to go. How do you know if you’re getting paid fairly for your work? When you should you consider looking at other opportunities? Is there some net income calculator that can spit out a definitive answer?

There are ways to figure out for yourself if you should ask for a raise or seek more compensation at another company.

Look at Net Income and Work From There

After taxes, health insurance, retirement, and other expenses are taken out, see what your monthly net pay is for your job. It may not be enough and you may be tempted to hurt yourself in the long term by cutting out some necessary expenses.

For example, some people pass on health insurance or 401(k) participation that their job offer because their net pay after taxes is too low to cover their monthly budget. Instead you should think about being at a job where you can cover your bills and have something set aside for your health and retirement.

Compare Your Salary

Don’t just wonder if you’re making about average for your position. Find out by using resources such as Payscale.com. It’s a handy tool that allows you to research what others are getting paid for similar positions. You can narrow it and see average salaries based on location, education, and type of company. Taking the guesswork out, helps you evaluate your salary more objectively.

Look at Other Companies

Once you discovered what average pay is for your industry and position, it’s time to see how other employees like (or dislike their job). It may not be worth the extra pay to be stress out and overworked. One site I recommend for looking around is Glassdoors.com. Besides giving salaries for certain jobs, you can also get inside reviews from people who work or have worked at these companies.

If you decide that moving to another company is not for you, then review some tips on getting a promotion. It can help boost your confidence as you take a more active role with your finances.

Thoughts on Evaluating Salary

How did you know when it was time to ask for a raise? When did you realize it was better to move on? What tools did you use?

When Should I Apply For My First Job?

By: Kristina | Date posted: January 25, 2011 (3:32 am)

A question that recent college graduates may ask themselves is when should I apply for my first job? We don’t want to apply too early, but we definitely don’t want to wait and miss a great career opportunity.  Sandra is a Human Resources Manager and a Professional Resume Writer for Madam Creative Services.  She has worked in recruitment for several years and now she is going to share her experiences with Green Panda Tree House.

When Should College Graduates Apply for Their First Job?

Sandra advises recent college graduates to start applying for jobs within 3 months of graduation. It is not unrealistic to want to start at the top, but expect to start at an entry level position.  In today’s marketplace, where the “Baby Boomers” will be ready to retire in the next 5-10 years there will be many new opportunities for existing employees.  It is ok to start at an entry level position because the work experience and employee’s loyalty will be considered when new positions become available.   Be aggressive with your job search!  Apply, reapply, and follow up.  Employers love proactive candidates.

What should be on my resume when I apply for my first job?

If you have no previous work experience when you are applying for your first job, be sure to include any volunteer experience; especially if it is within your field of study at college.   All volunteer experience is helpful.  If you helped a parent on a fundraising event, or if you volunteered for an event at your college, it should all be included on your resume.

Any and all work experience should be on your resume when applying for your first job; this includes part time work experience. Even if you don’t feel your previous work experience is relevant, it is important to include any and all previous work experience.  

Mc Donald’s is a great place to start working part time.  Employers often call candidates for interviews if they have experience working at McDonalds.  The training and experience gained from working at Mc Donald’s can be a very valuable asset in the workforce.

How and Where can I apply for my first job?

There’s always a career board in schools where companies will post positions, it may be near the student union or it may be in each faculty’s office.  Some colleges allow employers to post available opportunities online, where all students can apply.   Job Fairs are always a good resource for college graduates to search for new opportunities, and network with potential employers.  Don’t be afraid to go to out of town job fairs.   There are always international companies exhibiting.  They may not have a position in your current city, but at least you will have a lead with a company that you may want to work for in the future.

I recommend that you attend college job fairs throughout the year of your graduation, but don’t hand in your resume.  Take notes of the companies at the job fair and get the contact name of whom you could send your resume to when you are ready. 

What do I need to know about my first job interview?

It is important to dress appropriately for your first job interview.  Be prepared and do your research on the company, this shows your potential employer that you are proactive and a self starter. Always ask questions during or at the end of the interview.  Employers will often ask candidates why we want to work for the company.  You should prepare a personal statement that incorporates your career goals within the company.  As an example, if you’re goal is to become a lawyer and you are applying for a law clerk position, you could say “This position will help me on the road to my career as a lawyer.”

Can I get a car loan if I have no credit history?

By: Kristina | Date posted: January 24, 2011 (3:02 am)

As recent college graduates we may be starting our lives in the workforce, as well as our financial lives. We must learn to live on a budget, and we must start building a good credit.  However, it may be difficult to start building good credit if we have no credit history.  Having a good credit history can determine whether we are approved for our first mortgage, if we are offered our first job, and if we get approved for our first car loan.

How can I get a car loan if I have no credit?

We need to have a good credit history to be approved for our first car loan, but we need to effectively manage our credit in order to build a good credit history.  It is the chicken and the egg complex.  Which came first? The credit or the good credit history? The truth is, we do have options to get our first car loan approved; even if we have no credit history through a No Credit Car Loan.

What is a no credit car loan?

A No Credit Car Loan is a loan that is provided to consumers who have no credit history.  The interest rates are generally higher on No Credit Car Loans than interest rates on car loans from car dealerships or financial institutions.  The interest rate may be higher on a No Credit Car Loan, but at least our car loan will be approved. The interest rates on No Credit Car Loans are higher because the finance company assumes more risk on consumers that have no previous credit history.

Is it better to have bad credit or no credit?

It is better to have no credit than a bad credit history when applying for a No Credit Car Loan.  Bad credit shows a bad past pattern of not repaying our debts on time.  However, no credit allows us to start establishing a new credit history.  Students or new immigrants often have no credit. 

How Can a No Credit Car Loan Help My Credit History?

A No Credit Car Loan is a great way to start establishing our credit history.  No Credit Car Loans are designed for people who may have no previous credit history, for whatever the reason.  However, once the loan is approved and we start making monthly payments on time it establishes a good credit history. 

The high interest rate on No Credit Car Loans in the short term is worth it to establish a good credit history over the long term.

Photo By LensArtwork

Yakezie Roundup

By: MD | Date posted: January 21, 2011 (6:00 am)

This week at GPT we covered How-to Get a Mortgage In 3 Easy Steps for those of you that will be looking to purchase a new home in the near future. It can be a scary process at first but after a little  research home buying doesn’t have to be so daunting.

Time for the Yakezie links:

1. 100 Words On: Why You’re Better Off Buying A Used Car @ Len Penzo.

2. With great freedom comes great responsibility @ Early Retirement Extreme.

3. The Art of Saying No @ Couple Money.

4. Hire A Personal Trainer Or Get Buff On Your Own? @ Financial Samurai.

5. Lean Turkey Costs How Much?! @ BITFS.

6. Life After Salary: One Month Without a Paycheck @ Consumerism Commentary.

7. How to Make Your Financial Goals a Reality @ Free From Broke.

8. How Much Mortgage Can I Afford? @ Canadian Finance Blog.

9. When I Started Tracking My Finances @ Bucksome Boomer.

10. 2 Best Tips on How to Freelance Effectively and Profitably @ Extra Money Blog.

11. Our First Home Together @ Invest It Wisely.

12. Planning For The Next Phase Of Life @ Everyday Tips and Thoughts.

13. What Does it Mean When an ETF Jumps the Track @ MJTM.

14. Preferred Shares — In Plain English @ Wealth Pilgrim.

15. 10 Ways To Improve Your Chances To Become Rich @ Money Reasons.

How-to Get a Mortgage In 3 Easy Steps

By: MD | Date posted: January 20, 2011 (6:00 am)

First Time Mortgage Process

Are you looking to apply for your first mortgage? Are you finally ready to purchase a home? The first time mortgage applicants have come to the right place. We had the obtaining a mortgage series here many months ago. Now were back with a comprehensive post on the topic.

Step 1: Make sure that you’re ready for that first time mortgage.

Work.

Those curious about a first time mortgage need to understand that you work will play a heavy role in where you decide to live. Your location of work will allow you to decide what part of town you live in depending on how close to work you want to be. In the city that I live in the hot properties are those close to the subway line because public transportation allows for cheap travel to and from work.

Savings.

How are your savings? Have you dealt with that credit card debt yet? Before you go in for the first time mortgage application you must be realistic with your savings and where you stand financially. Sometimes the best investment is the one you don’t make.

State of mind.

Are you single? Are you enjoying the bachelor life? Are you getting married any time soon? Your state of mind will play a major role in your first mortgage and how much money you end up borrowing.

Location.

You need to decide where you want to live and what area you can afford a property in. You may choose to buy a condo downtown because you want to be close to the centre of town. You could also decide to purchase a bigger property out of town and drive in to work.

Step 2: Get all of your mortgage documents together.

This is the critical stage for those searching for how to get a mortgage. The first time mortgage application process can seem very daunting at first. It doesn’t have to be like this though. If you’re organize and have your stuff together then this process can be dealt with fairly easily.

Your documents for your income.

The mortgage loans/banking industry has really tightened up since the economic crash in late 2008. A few years ago the rules weren’t too strict. These days you really have to go out of your way to prove your income. There are two types of situations:

  1. Self-employed. My friend that works as a Mortgage Broker told me that the banks often hesitate on loaning huge sums of money to the various entrepreneurs that come in. As a self-employed individual you’re going to have to prove your income somehow.
  2. Standard. If you have a traditional job then you’ll have to simply show your year end income forms (name varies depending on where you’re reading this, T4 in Canada).

The next set of documents will revolve around your current financial picture. The bank or company loaning you the money will want to know for sure that you’ll be able to make the mortgage payments. These individuals also understand that you could lose your job at any point in time.

Assets/Savings.

This is where the bank finds out exactly how much money you have. It doesn’t look good when you spend all of your money on the home purchase. The bank will want to know that you have some cash on reserve in case anything were to happen. When it comes to this section please make sure that you list all major assets (usually a car) and savings (investments, stocks, savings accounts) so that the bank sees your financial situation is strong.

Liabilities.

This is where your debt or the debt of your partner can really hurt you. The more money you currently owe the more the bank will think twice. They don’t want to loan money to someone that owes many creditors money already.

Step 3: Learn about the first time mortgage fees.

For the first time mortgage application the fees may be very surprising. A friend of mine purchased a property many years ago with only the thought of mortgage payments in mind. He totally forgot to consider the plethora of other fees that come with a new home.

The basic fees that you need to consider with your first mortgage include:

  • Lawyer costs.
  • Closing costs/taxes.
  • Mortgage payments.
  • Property taxes.
  • Home insurance.

There you have it. A look at how you can obtain a mortgage in 3 easy steps. The steps will take a long period of time but you shouldn’t be shocked by anything after reading this post.

Check out the obtaining a mortgage series for more details:

Part 1: Are you ready to purchase a home?
Part 2: Get your documents together.
Part 3: Get ready for all of the fees.
Part 4: How-to not lose your pants on your first mortgage.

(photo credit: Paulswansen)

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