How an FCNB staffer managed a (mostly) cost-neutral holiday
We know, we know. Some of you might just be getting over your holiday hangover – and you don’t want to think about it anymore! But what you might not know is that NOW is the best time to start planning for next December.
If you’re still feeling the December 25th pinch, you’re not alone. A survey by the Canadian Imperial Bank of Commerce (CIBC) found that half of Canadians expected to go over their holiday budget. It also found 59 per cent of Canadians expected to use credit cards to make up for budget shortfalls – even though most agreed that holiday spending is out of control and that they would rather save money. It doesn’t have to be this way!
That’s why one FCNB staffer’s attempt at a cost-neutral holiday really got our attention. In past holidays, Erin loved to give her kids experiences rather than things as gifts – ski hill passes, for example. This year, she wanted to do something a little different, but without cluttering the house with more stuff that would end up gathering dust in a closet.
Now, “cost-neutral” isn’t totally accurate, since Erin did wind up spending around $300 on gifts for her three kids. But for a first attempt – and compared to the usual staggering spend by parents during the holidays – we would say it’s a pretty good start.
So how does it work? Here’s her step-by-step:
Do some decluttering around the house and donate or sell the things you don’t use that are in good condition. This could include cell phones, sports equipment, toys, video games, clothes –you name it.
Base your holiday budget on whatever money you made selling these items. This is where self-control can really pay off. “In the past, my kids would often have a wish list of just one or two items that they really wanted, but I would always feel compelled to give them more gifts on top of that,” Erin said. “But when I was decluttering, those extra gifts ended up being the ones we sold or donated because they weren’t being used. It was a real eye opener for me.”
And that’s all there is to it!
Now, this method won’t necessarily work for everyone, and that’s okay. There are lots of ways to prepare for the holidays to avoid a pile of debt that follows you around long after Santa’s gone back to the North Pole. Check out our video below for more ideas!
Home ownership is often seen as an opportunity to build equity at the same time as having a roof over your head. But with loans such as the Home Equity Line of Credit (HELOC), it can be tempting to use your home like an ATM - even if it's not the wisest choice for you and your family. Today in her guest post Lucie Tedesco, Commissioner of the Financial Consumer Agency of Canada, describes how mortgages have changed, how HELOCs work, and how you can use them wisely. You can watch the related HELOC video here.
If you’re like millions of Canadians, you’re busy paying down your mortgage. It could take 25 years or so, but it can be a great way to accumulate personal wealth, especially if house prices rise. However, with changes to mortgages in recent years, it’s important to understand just how they are different if you want to fully benefit from your home’s potential to build your personal wealth over the long term, rather than your debt.
Today, to finance your house most banks will offer you a readvanceable mortgage if you have a down payment of 20 per cent or more. It combines a traditional mortgage with a home equity line of credit (HELOC). There’s a big difference between these two forms of debt.
First, your mortgage debt only goes one way — down — because you must make regular payments against both the interest and the principal borrowed. This increases the equity you have in your home, meaning the difference between what you still owe and the value of your home.
But as you pay down your mortgage, a HELOC lets you borrow against your growing equity as part of your mortgage. Unlike your mortgage, you only have to make regular payments against the interest. You can ignore the principal until you sell the house. This short-term credit advantage can mean a long-term debt problem.
With flexible repayment terms, low interest rates and a credit limit that rises with your equity, a HELOC can be used to pay off other, higher-interest debt or home renovations.
But would a HELOC tempt you to use your home like an ATM? Mounting HELOC debt could put you at increased risk if you lose your job, get sick or injured, interest rates go up or your home decreases in value. If it consumes too much of your equity, you might end up owing more than your home is worth, lose your home or have to sell it to pay down your debt.
To use this borrowing tool wisely, stick to a plan to pay it off fully and avoid continually borrowing against your home equity.
Payday loan: A payday lender can charge you $15 for every $100 you borrow. So a $300 payday loan will cost you $45. At the end of the 14 days, you must pay back $300 plus the $45 fee. TOTAL: $345
Credit Card: The annual percentage rate (APR) for this example is 23 per cent. At the end of the 14 days, you would pay $300 plus $2.65 in interest for the cash advance. TOTAL: $302.65
The payday loan costs $42.35 more. That’s money that could stay in your pocket!
A report by the Financial Consumer Agency of Canada, however, found the use of payday loans has more than doubled in Canada recently. Disturbingly, it also found less than half of consumers understood that payday loans cost them more money than other borrowing options – like credit cards, banks or credit unions.
How payday loans work.
They are usually small, short-term, high-interest loans that are meant to get you through until your next paycheque. Typically, you write a personal cheque to the lender or give permission for them to automatically withdraw the loan amount and fee from your bank account on your next payday.
On your next payday, the lender cashes the cheque you wrote them, or makes the withdrawal electronically from your bank account. If you do not pay your loan back in full and on time, you may face additional fees – including penalties and NSF (non-sufficient-funds) charges.
New Brunswick introduced new rules for the payday loan industry on 1 January. Payday lenders in New Brunswick must be licensed by FCNB. You can check their registration by contacting FCNB.
The new rules also give consumers more rights, better disclosure and stronger protection.
Top 10 things you need to know about payday loans in New Brunswick:
Payday lenders can't issue you more than one loan at the same time. They also can’t rollover your loan. This means that they can’t extend or renew your loan at an additional cost or give you a new loan to pay out an old loan.
The most you can be charged in penalty fees for not paying off your loan in full and on time is 2.5 per cent per month on the loan amount. The most you can be charged is $20 for each NSF charge, and the payday lender can only attempt to withdraw the amount from your bank account once more after the first NSF charge.
Charitable Giving The holiday season is a time of giving to family and friends. For many New Brunswickers it is also a time to give to the less fortunate through charities or non-profit organizations. Not only are you improving the quality of life of others, charitable giving can help improve your own quality of life. Studies have shown that the act of giving can increase the psychological wellbeing, self-esteem or social status and reputation of donors. Here are some things to consider before making a charitable donation:
Make sure it is a registered charity
It is great that you’ve decided to donate your money to help a cause you are passionate about and that is dear to your heart. Before you donate your hard earned money, make sure that the charity you have chosen to donate to is a registered charity with the Canada Revenue Agency (CRA). It is quick and easy to check the CRA’s database to ensure you are dealing with a charity that offers official donation receipts. Registration with CRA does not speak to an organization’s credibility, so it’s important to do your research before donating money.
Be careful of scams
When making a donation to charity, you are donating your money to help a specific cause or organization that is meaningful to you. You will want to make sure your money is actually going to the intended organization and the intended cause. There are approximately 82,000 registered charities in Canada making it very difficult to choose which one to donate your money to. With so many options it can be overwhelming with deciding where you want your money to go.
Scam artists often will target and profit on people’s generosity. Be cautious of appeals that tug on your heart strings, especially when it involves current events.
If you are contacted by telephone asking for a donation, do not give out your personal or banking information. Don’t hesitate to ask questions such as if they are registered with the CRA and their identification. If the solicitor refuses to tell you or does not have verifiable identification, hang up and report it to law enforcement officials.
For more guidance on how to avoid charity scams, check out the RCMP’s tips on how to watch out for charity scams.
To encourage charitable giving by taxpayers, the New Brunswick government provides income tax credits or it will match the amount donated by individuals in certain cases. Registered charities under the Income Tax act can give an official donation receipt. You can file this receipt with your Income Tax Benefit Return to reduce the income tax that you owe.
Unfortunately, some charitable donation programs promise major tax savings by offering a charitable donation tax receipt for more than the person actually donated. Reputable and registered charities cannot and will not issue tax receipts for more than the value of your donation. If they do, they can lose their registered charity status with the Canada Revenue Agency (CRA) and will be ineligible to issue receipts for tax purposes.
Right to Information
Before making a donation, you have the right to know where your money is going and what it is being spent on, such as how much goes to administrative costs. Be sure to ask about this before you make a donation. You have the right to be informed of the organization’s mission and of the way the organization intends to use the donated money.
The holiday season is seen as a time for giving, not only to your friends and family but to others who may not be able to enjoy the season due to specific circumstances. Charitable giving is a great way to give back to the community and spread the holiday spirit. Use these tips to help you spend smart and spend safe this holiday season.
How to Be a Savvy Holiday Shopper… even If you waited ‘till the last minute
The snow is falling and coffee shops are serving up delicious eggnog flavored treats. All seems right in the world until you realize that your holiday shopping isn’t done and Christmas is almost here! Before you run out to the stores check out our tips on how to be a savvy holiday shopper. You (and your bank account) will thank us after the excitement of the holiday season dies down and you don’t gasp in horror when you open your credit card statement.
Tip #1: Make a list and check it twice. Santa does it and so should you!
Start by setting a budget for your holiday spending. We all like to give as much as we can during the holidays but you don’t have to blow your budget and max out your credit cards to show your loved ones that you care. You will regret it come January when the bills start to roll in. Next, make a list of everyone you want to buy a gift for and set aside part of your holiday budget for each person on your list. This will help you brainstorm gift ideas within your price range.
Tip#2: Think twice before you use credit
If you are considering a purchase that doesn’t fit in your holiday budget ask yourself if you truly need it before paying with credit. Does your adorable niece really need another Barbie or will the 3 others you already bought and gift wrapped be enough? Do you absolutely have to buy yourself another party dress or will the little black dress you have only wore twice look just as great? Give yourself a cooling off period. Go home and consider the purchase. If you do choose to pay with credit, make sure you can afford the payments and have a plan for paying off the balance. Interest can quickly drive the price up if you don’t pay off your statement and all of a sudden that great sale can end up costing you a lot more in the long run. Read our guest blog post on “Holiday credit triage” for more tips on getting through the holidays debt free.
Tip #3: Do your homework
Research products before you buy. I know I know Christmas is right around the corner, but you still have time to compare prices, after sale services and warranties. This is especially important when buying big ticket items. You may also want to check out Health Canada’s Consumer Product Safety website for product recalls, warning and advisories to make sure the gift you are giving is safe.
Tip #4: Always check a retailer’s return and exchange policies BEFORE you buy.
Contrary to popular belief, you do not always have the right to return or exchange any product or cancel a service contract within 30 days of purchase. In fact, retailers have the right to set their own return and exchange policies. If the retailer does have a return policy it is up to them if they will provide you with a cash refund, an exchange on goods or a credit slip. Asking before you buy will save you time and money after the thrill of the holiday season has died down. For more information on understanding warranties, check out our “Ask Before You Buy” tip sheet!
Tip #5: Know your rights when buying gift cards
People love gift cards. I mean, who doesn’t want free money to spend at their favorite store? This great gift idea will save you the headache of trying to figure out the sweater size of your significant other’s best friend’s nephew but can be a disappointment if the card has expired or has been eaten away by service fees by the time he gets around to using it.
Within New Brunswick service fees are restricted and expiry dates are prohibited with some exceptions. For more information on your rights when buying gift cards check out our Gift Cards info sheet!
Tip #6: Keep your receipts
Always keep your receipts, warranties and service contracts. You may need these to make a claim if something goes wrong or to return a product if you change your mind. It is also a good idea to ask for a gift receipt! Many stores offer gift receipts around the holidays which allow you to extend the return/cancellation period on the items you bought, making exchanges and returns much easier.