Future Money – Save and Invest Part 1

You can save time, energy, and water. But one of the most important things you can save is money.

The whole idea of saving is that it will help you meet goals, cover emergency expenses and provide a cushion for everyday expenses. And if you save money it increases in value, you’ll have better position to meet your needs.

You have three good reasons to save.

> Everyday expenses cost more than you expect – always a good idea to have some extra money saved to cover things like a rise in food or gas prices. You can think of the savings as a cushion.

> Emergencies happen — and can be expensive. What’s an emergency? It’s anything that absolutely needs to be fixed, taken care of or replaced.

> Goals have price tags. – It’s something you want to accomplish in your life. Like buying a car or going to college, require money. Hence, starting to save early in life is so important.

***List your goals, from your top priorities – to the least.***

There’s at least one goal everyone should have – saving at least 10% of his/her income.

Saving doesn’t mean there won’t be money for things you currently enjoy. You can budget for things in your spending plan. But putting a priority on saving means you’ll be sure to have money for the really important things in the future.

Is saving a priority in your budget?

If you’re going to save, you’ll want to have a bank or credit union savings account. Financial institutions provide a safe place for savings and pay interest to help savings grow over time. Safety and growth are keys to having the money needed when you need it.

Another safe place for your money is a checking account, especially if you need to make a lot of payments online or with a check. With a checking account you can:

– Write a check.

– Authorize an electronic payment.

– Sign up for automatic bill pay.

– Take money out of checking account with a bank or debit card.


Checking is convenient. But be aware of all the fees and charges that comes with your account – per check charges, account minimums to earn interest, monthly account fees or a combination of these features. Need to use your account responsibly to avoid overdraft fees.

Debit cards are very convenient – the money spent comes right out of your account. But there may be fees for overdrafts and some debit transactions. It’s important to note what charges could apply before using card.

The way to keep things in balance, so you always have enough money in your account for expenses, is to keep good records.

Most banks and credit unions offer basic saving and checking accounts. You can take advantage of other bank services – there’s usually no charge for cashing your paycheck. Or, better yet, you can have the check deposited directly in your account via direct deposit.

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Which is the Right Loan?

When it comes to obtaining a loan, there are plenty of choices – from credit cards, personal loans, to tax loans and mortgages. Here are the options that you can choose from, depending on your spending habits/needs.

CREDIT CARDS – most flexible and convenient way of paying purchases. Spending limit is provided according to your credit score or credit worthiness. Payment options are flexible too, but comes with high interest rates.

Consolidating Credit Card Debt – For multiple credit card debts, you can consolidate all debts into one      card. Once done with consolidation, cancel some of your credit cards, this way, you will be able to manage        your spending. You will be able to focus on your new consolidated payments, but make sure not to lose              track of your spending.

> Cancel some of your credit cards. After you’ve transferred all your card debts into one account, it might                be wise to cancel some of your paid-off cards. Having fewer lines of credit available may help you manage your spending patterns.

> Stay on track with new payments. While the interest on your consolidated loans might be lower, any        new purchases you make with your card will be charged at the normal credit card interest rate. Keep up           with your payments to avoid penalty fees.

PERSONAL LOANS – This provides access to funds for various things such as family emergencies, buying home/car, or for consolidating other debts. This type of loan requires a regular installment pay within a set period of time.

Watch out for:

> Handling fees charged for processing a loan.

> Early repayment charge if you pay off a loan earlier than the agreed term.

> Late repayment charge if your monthly repayment is overdue.

> Cancellation fee if you change your mind and cancel the loan after you’ve signed the contract.


OVERDRAFT - If you withdraw more funds than you have in your account (for example, writing a cheque with insufficient funds in your current account), your account is considered overdrawn. You may be charged an overdraft fee, and also have to pay interest for the amount overdrawn.

Watch out for:

> Annual fees for overdraft facilities.

> Overdraft handling charges if your account becomes overdrawn.

> Interest is calculated daily on most overdraft facilities.

> Extra fees for overdrafts beyond your agreed credit limit.


MORTGAGE LOANS - Mortgages come with fixed or variable interest rates. A fixed-rate mortgage means your payments will be the same for the life of the loan. If you have a variable-rate mortgage, the rate you pay rises and falls in line with market interest rates. You can use a mortgage repayment calculator to work out how much you can afford to borrow. When choosing a financial institution for a mortgage, consider the following:

> Length of approval process

> Loan period

> Repayment terms

> Fixed vs. floating interest rates

> Early repayment penalties

> Handling fees, cancellation fees and valuation fees.


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Loan Basics

Loans can be effective financial tools to help you achieve your goals, but they must be used wisely. If you’re thinking about borrowing money, consider your options carefully.

Secured loans

Secured loan is when you offer something as security in return for the money you borrow as collateral – such as property, your deposits or other assets. This offers lower interest rates than unsecured loans. However, banks or other lenders can claim your asset if you default on your loan repayments

Guarantees and sureties

If lender is unsure about your ability to repay the loan, they ask for a surety/guarantee, a legally binding agreement that a third-party (usually a person or a company) accepts responsibility for the loan if not paid. This third party is known as a surety/guarantor. If the surety fails to meet the obligation, the lender has the right to take legal action against the surety.

Unsecured loans

With an unsecured loan, you borrow money without collateral. Interest rates for unsecured loans are higher than secured loans because you are not offering any security to the lender. Credit score is taken into consideration when applying for unsecured loan, and your score suffers if you have trouble with repayments.

Fixed vs. floating interest-rate loans

Floating-rate loan – A loan with an interest rate that rises and falls – or floats – with market interest rates. The interest rates for most floating-rate loans change in accordance with the prime rate.

Fixed-rate loan – A loan with interest that remains fixed for the loan’s entire term, regardless of market interest rate fluctuations. Some people prefer this type of loan because their payments will remain the same throughout the duration.

Interest rates of loan products

Interest is usually the main cost of taking out a loan. Depending on the types of loans, there are different commonly used basis on which interest is calculated in the market, monthly flat rate or annual rate for personal instalment loans and daily or monthly compound rate for credit card outstanding balance.

Repayment terms

Set a period of time to repay the money, typically from 6-48 months. If you choose a longer repayment period, you will reduce the size of the monthly payment, but increase the total amount of interest payment. Your repayment period can affect the interest rate of the loan.

Documents for loan application:

Banks/lenders will require documents to support loan application.

>Permanent Resident Identity Card

>Proof of income – latest payroll slip, bank statement or passbook listing your name, account and salary.

>Proof of residential address, such as a utility bill or bank statement.


Fees and charges

Lenders are required by law to publish their fees. Be aware of common fees and charges when borrowing:

>Processing fee charged by banks or financial institutions for a loan

>Early repayment charge: The bank charges extra fee if loan is paid earlier than the agreed term.

>Late repayment charge: If monthly repayment is overdue.

>Cancellation fee: Cancelled loan after signing the contract.

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Loans – Responsible Borrowing

Borrowing may be a convenient way to purchase something that you would otherwise take a long time to save up for. In the case of buying a home, for example, a mortgage allows you to live in your home while you pay it off.

Whether you’re planning a big purchase like buying a car, getting married or need extra cash to deal with family emergencies or pay for education, sometimes borrowing may not be the best option for you.


Can you afford to borrow?


Before you decide to borrow money, it’s worth taking the time to ask yourself a couple of key questions below, and to make sure you can afford new debt repayments on top of your current expenses or commitments.


– What are you borrowing the money for? Make sure it is IMPORTANT!

– Is borrowing your best option? There may be other ways to achieve your goals, TAKE ON EXTRA JOBS!

– How much should you borrow? Borrow what you can ONLY AFFORD TO PAY!

– What is the cost of borrowing money?  Check the BEST INTEREST RATE!

Before borrowing, consider the following:

. Do a budget to work out your monthly spending, savings and loans.

– Allow to have emergency funds in case you lose your job, illness, or in any emergencies.

– Borrow what you need and what you can comfortably repay, regardless if you are qualified for a higher loan amount.

– Make your payments on time to avoid penalties and pay off your debt quickly to minimize total interest payments.

– Avoid unnecessary multiple sources of credit to keep an easy track of repayments.

Situations when you should avoid borrowing:

> Problem paying everyday expenses. If you have trouble paying for daily necessities, borrowing money could put you into debt.

> Covering optional spending. If you can put off an optional purchase until you’ve saved up the money, you will avoid interest charges altogether.

> Borrowing because to settle other debts. If you’re already deep in debt, going further into debt is probably not the best solution.

Risks of borrowing too much:

Borrowing too much can leave you struggling financially as you plunge deeper into debt. Be careful about borrowing too much.


> It draws money from other important needs. If you borrow money, you have to pay interest. Money that goes towards interest payments can’t be used for other purposes, such as paying down your mortgage or meeting other obligations.

> Your credit score can suffer if you can’t pay your bills. Falling behind on your payments means it will be increasingly difficult to borrow more money for future needs. Find out more about your credit score and how it affects your borrowing.

> It can lead to higher interest payments. Lenders may charge higher interest rates on subsequent loan applications if you are already carrying a large amount of debt.

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Most Effective Ways to Get Out of Debt

We’d love to pay down our debt or get rid of it altogether, but we aren’t quite sure of the best way to do it. There really isn’t any one “best way” that works perfectly for everyone. Here are few suggestions to get started, if these are achieved, the faster to get out of debt.

Pay More Than the Minimum

Always pay more than the minimum payments. Paying minimum credit card installments takes forever to pay off balance. Paying off balance quickly, saves lots of interest money.

Spend Less Than You Plan to Spend

We get into, and stay in debt because we only buy the “wants”. Want something? Buy it with available cash. If you can be satisfied with less than you would ideally want, then you can use the money that you are saving to put towards other financial priorities.

- Pay Off Your Most Expensive Debts First

Make minimum payments on all debts and credit cards, except for the debt that has the highest interest rate. Choose the one debt that is charging you the most interest and focus all of your extra payments on paying that one off first. This strategy, sometimes referred to as the snowball method, will get you out of debt quickly, and you will feel encouraged as you see your progress.

Reduce on Car Mortgage and Household Expenses.

Consider purchasing a second-hand car that’s in good condition, this will reduce expenses on mortgage and interest. One-car-policy in the family is also a good consideration.

Save up on groceries and other household items by stock-piling on non-perishable items when they are on sale.

Get a Second Job and Accelerate Debt Payments

Having extra jobs converts to extra cash! This means your ability to pay faster on your debts.

- Track Your Spending and Analyze Where to Cut Back

Track your actual expenses—not what you should be spending over the course of a month. Once you know your spending habits, you should be able to identify areas where you can cut back. Allocate the money you “find” to paying down your debts.

> Get a Consolidation Loan

Ask your bank or credit union help you consolidate all of your consumer debts into one loan with one payment at a lower interest rate. Getting a debt consolidation loan will only help if you set your payment goals.

> Speak With a Credit Counsellor and Create a Spending Plan.

Speaking with a Credit Counsellor will help you pinpoint the weaknesses and strengths of your finances. You will be assisted on the best option to get out of debt. Credit Counsellor also helps create spending plan, a realistic one.

Some people don’t like budgets, but have they tried one? If you’ve lived all your life without a budget, how do you know you won’t like having one? After trying a realistic budget, most people agree that the alternative—being in debt—is much worse.

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