Spruce Grove Mortgage Broker: Krista Rumberg
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Who taught you about money?

My parents are still married after four decades together and recently retired after they successfully sold their business. My in-laws have also been married for four decades, and both couples live happily thru retirement. How did they do that? How did they like each enough to stay together that long, and how did they save enough money to be retired while they still had their health?

Tightening the belt

As I think back to some of my memories growing up, I can remember my mom and dad calling a “family meeting”. I hated these growing up…(mostly because my friends made fun of me) I think I was in grade eight? My mom had quit her job in accounting for my parents to build a car wash. I knew something big was going down because my mom was in tears.

As I sat and listened, I learned that my parents had put a mortgage on our family home (that was previously paid off) and had used every possible shoebox stash of money they had. My mom was crying because the car wash had encountered some delays opening its doors (as any project does) and they were out of money. They were not going to be able to buy my brother and me back-to-school clothes.

As I think about that today. The message that was sent to my brother and me. The message was “if you don’t have money to pay for it – you go without.” And we did . . . we went without new back-to-school clothes and it wasn’t the end of the world.

I certainly wasn’t traumatized by it. I learned a much bigger lesson. Live within my means and if I didn’t have the money to pay for it in my bank account, I didn’t get it. That lesson has stuck with me my entire life. And today we operate our household finances the same way.

Pinch the pennies

I was very fortunate in relationship number two, that he was raised the exact same way I was. In the early parts of our relationship, I quickly realized that he was better at money than I was. He spread larger expenses out over the year and made sure our bank account went in the right direction every month. In the event, if went backwards there was a conversation between us on what happened and how we were going to fix it.

I remember my father-in-law coming to visit and for the first time, I heard him say if you pinch the pennies the dollars will take care of themselves. I think of him every time I am grocery shopping and it’s really cold and I don’t want to take the buggy back to get my $1 back.

Where did Canadians go wrong?

When I think about the headline, we see almost weekly “Canadian debt increasing at an alarming rate,” I think, where did Canadians go wrong? Well, I think a lot of it comes down to marketing. When did it become ok to only advertise how much a monthly payment is for something instead of what the total cost is?

The worst financial choice a consumer can make is to allow a “balloon payment” at the end of financing or to finance a vehicle (a depreciating asset) greater than five years. When you enter any financing situation the question you should always ask yourself is “what is my exit strategy?” If you don’t have a good one then you better not do it.

Ask more questions

The other thing I absolutely despise and is a VERY poor financial decision is to finance a boat or RV over 25 years. Not only are these recreation pieces a depreciating asset but your overall cost is astronomically amortized over 25 years. My mentality on this is if you can’t afford to buy a piece of recreation equipment with cash . . . do not buy it!

I assure you that you don’t need a $100,000 boat or RV. Save some money, and spend a few hours on Kijiji. We need to ask more questions and be better thinkers about what our financial future looks like.

I recently bought a new to me vehicle and I am so excited about it….no car payment! It’s not fancy, 2017 Honda Civic touring, but it had 17,000kms on it when we bought it cash. But I have pure joy when I fill gas and its $35 for a full tank that lasts me 10 days and my insurance cost cut in half from my previous Nissan Murano.

I learned the hard way with that Murano…I (not my husband) wanted to buy it new from the dealer. So, we did, and when we sold it after three years our deprecation on that vehicle was $10k per year. OUCH! My plan is way more practical this time. When I go to sell it three years my depreciation cost should be about $1500 per year. Yes, I clearly learned the hard way.

How do you sleep at night?

In closing, I think we need to go back in time with how we think. Does all that debt to look like you have the biggest and the best really bring you that much joy? How do you sleep at night? What happens if you get sick or injured and you can’t work? Do some basic math and figure out how much that purchase is actually costing you? Who cares what the damn payment is – what is the hard cost of owning it? And if you can honestly say that you can afford it and it will bring you total happiness with no regret – then please proceed. Me? I like nice things, but I sleep better with money in my bank account.