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Common cents approach

Now’s the time to carefully revisit your personal finances

GAIL VAZ-OXLADE, host of Slice's Til Debt Do Us Part, says you can't spend more than you make, you must save something and if you have debt, pay it off.

With the economy on the skids, people everywhere are taking a fresh look at their financial situations.

And that’s as it should be, says Gail Vaz-Oxlade, host of Slice’s Til Debt Do Us Part.

“I’ve been singing this song for a while and all of a sudden everybody’s just got the songbook,” she says. “It’s just common sense: you can’t spend more money than you make.”

Canada’s queen of tough fiscal love has been helping families pull themselves back from the brink of financial calamity for years, both on TV and in print: she’s penned 10 books and dozens of articles on personal finance, and published a financial magazine for women.

Clear, at times blunt and always entertaining, Vaz-Oxlade has distilled her years of expertise into what she calls Gail’s Golden Rules.

“You can’t spend more money than you make,” she says. “You must save something. And if you have any debt, you must get it paid off, no matter what you have to do to do that: I don’t care if you have to clean toilets, I don’t care if you have to take a second job or a third job.

Gail’s Golden Rules

You can’t spend more money than you make
Make or revisit your budget: After you determine how much is coming in and how much is flowing out, chances are good you’ll spot ways to cut 30 percent of your spending right away.
Leave the credit card in your wallet: If you can’t afford to buy that flat-screen TV now, don’t buy it now. Don’t use credit to fill the gap. Save up and buy it when you have enough.

You must save something
Open a tax-free savings account: Vaz-Oxlade loves this new savings option and so should you. It’s perfect for use as an emergency fund. Just don’t settle for an account that offers low interest and set up regular automatic transfers into it.
Watch those bank fees: Don’t spend more than $20 a month on bank fees. There are lots of options out there, including no-fee accounts, so shop around.
Lose the overdraft protection: It’s another form of credit that will end up costing you.

If you have debt, pay it off
Hit ’em high, hit ’em hard, hit ’em often: Pay down higher interest debts first, like credit cards, and always pay more than the minimum as often as you can.
Work it off: If you have to, get a second or even a third job to pay those debts down faster.

“You dug the hole. It’s time to dig yourself back out again.”

The first step on the road to financial health in any economy, Vaz-Oxlade says, is to determine exactly how much money is coming in and how much is flowing out.

“I am astounded at the number of people who tell me what they make and then when I look at their bank account, they’re not making that,” she says. “They’re making $100 less or $200 less or $500 less.”

Making a budget seems simple enough, Vaz-Oxlade says, but it’s not. It takes work, including some digging though personal balance sheets.

“You need to look at historically how you’ve been spending your money. So in the last six months, how much money have you spent on coffee?” she posits. “If you do an analysis of where your money is going, I’m willing to bet dogs to doughnuts that you can find 30 percent to cut right off the top.”

Cutting spending is tough, Vaz-Oxlade admits, especially when governments struggling with recession urge people to keep on consuming.

“The message (the government) is sending is, ‘For Chrissake, don’t stop spending because that’s what’s driving our economy’,” she says. “The reason we hit the wall was that we had on credit more than we could ever afford to pay off.”

Indeed, “spend” is the advice Thornhill MP Peter Kent is giving in the wake of the federal government’s recent budget, which made available $200 billion in low-cost financing.

“It’s human nature to withdraw in times of economic crisis, to either stop spending or to put all your money in cash and put it under the bed,” Kent says. “We’re saying you’re investing in yourself, you’re investing in Canada, the government’s made this money available at incredibly reasonable rates, get on the bandwagon and let’s get the economy on an upward trend.”

True, Canada’s economy is driven by spending but overspending — using credit — has been detrimental, Vaz-Oxlade says, and lenders deserve some of the blame.

Budget. Save.

“As you move through your life, you need to acknowledge that if your life changes, how you manage your money must change, too,” says Til Debt Do us Part host Gail Vaz-Oxlade.

Yet no matter what situation or stage of life you find yourself in, some things should never change.

“Everybody needs a budget,” she says. “Everybody needs to be saving money. Everybody needs an emergency fund. Everybody needs to start putting money in an RSP.

“If you are in your 20s, you may only have to put away 3 percent of your income because you have time on your side. If you are starting in your 40s, then you’re going to have to put away between 15 and 18 percent of your income because you’ve got to make up for all that time you’ve lost.”

“It’s all very well and good for Suzie and Mark to get credit cards and run them up because they’re stupid and they don’t know what the implication is going to be,” she says. “But Mr. Banker knows what the implication is of giving Suzie and Mark too much credit, so why did he do it?”

What’s needed now, Vaz-Oxlade says, is for financial institutions to step up and help people like Suzie and Mark learn how to get themselves out from under their mountains of debt.

But banks offering a helping hand won’t be enough, she adds.

“Until you take personal responsibility for the crap that you created and you come up with a plan to fix it, you’re never going to change your behaviour,” Vaz-Oxlade says.

Pay down higher interest debts first, she advises, and always pay more than the minimum.

Trimming fat from the household budget and tackling debt are important pieces, Vaz-Oxlade says, but the financial puzzle isn’t complete without a plan to squirrel some cash away.

“Everybody needs to be saving money,” she says. “Everybody needs an emergency fund. Everybody needs to start putting money in an RSP.”

Tax-free savings accounts are great tools, especially for use as an emergency fund, Vaz-Oxlade says, but don’t settle for one that offers a low interest rate. Set up regular automatic transfers from your main bank account and watch your bank fees, she advises. Spending more than $20 a month is too much.

“You need to know how you’re using your account and you need to pick the account that works for you,” Vaz-Oxlade says. “And for Chrissake, lose overdraft protection. You know what overdraft protection is? Overdraft protection should be renamed I-don’t-have-to-pay-any-attention-to-my-money protection.”

Times are tough and people are re-examining their finances in light of their particular situations and negative news. That’s precisely why Vaz-Oxlade remains optimistic.

“If you draw a circle and on the right side of the circle you draw an arrow going down and on the left side of the circle you draw an arrow going up, that’s the economy,” she says. “That’s life. We are coming down the right side. We may be at the bottom, we may be close to the bottom, we may be just past the bottom — it doesn’t matter.

“All we have ahead of us is up,” she says. “We are going to see people who finally take financial responsibility for themselves and say, ‘I’m not spending money I haven’t made yet.’ ”

Vaughan Today
In print: February 20, 2009, page 5
Online: February 19, 2009 [link]
The Upswing special series