The political crisis in Ottawa has taken some of the focus away from another crisis affecting Canadians, that of the looming recession. Financial difficulty is something many are either experiencing right now, or will soon be experiencing.
There's an old saying about the difference between a recession and a depression. A recession is when your neighbour is unemployed, a depression is when YOU are unemployed. Having previously worked as a financial consultant with a major Canadian investment firm I thought now might be a good time to offer up some suggestions for coping with these difficult economic times. Writing something like this is challenging, because each situation is unique. Strategies for a single person just entering the work force are not going to address most of the concerns that a retired couple has for example...but none the less, here goes.
Economize and Prioritize
Take a look at all the expenses being incurred by the household and divide them into 2 categories, essential and non-essential. This won't be as easy as it appears for some because I'll suggest you ask some tough questions. Take television for example, hardly 'essential' when compared to the more basic needs of shelter, food and clothing. Many households spend $500 to $1,000 a year or more on things like cable or satellite. Could that money be better used elsewhere? If you're bemoaning the fact that you can't afford a nice holiday once a year...or that your vacations aren't as nice as you'd like...well maybe its simply a matter of setting priorities.
Once you have your 2 lists, (essentials and non-essentials) worked out, look at the essentials. If you own your home you may be able to lower your monthly carrying costs depending on your situation. You may be able to re-amortize your mortgage over a longer period, say 30 or 35 years as opposed to 25, lowering your monthly mortgage payment. Depending on your situation this could result in monthly savings of $100 or more.
Look at your food and clothing budget and see if there are any economies to be realized there. While some might not like the idea of shopping at discount stores or buying in bulk, quite often a small shift in purchasing behaviour can net significant savings. Personally I've found many no-name products to be every bit as good as the brand names. I've tried many and when I find the quality acceptable, I switch. Not in the case of coffee though...that no-name stuff tasted like it had been swept off the floor.
Once that task is complete move over to the non-essentials, and this is where things can get difficult. If you're a couple you need to be able to come to agreement and not harbour resentment. If cable ends up on the chopping block its a mutual decision. No blaming the wife on Sundays when you can't watch EVERY football game, and no yelling at the husband because you can't watch Corey Street at 3AM. Trust me on this one, whatever savings you realize, they are not cheaper than divorce...take it from someone who knows.
Telephone and cellular phones can be tricky. In today's world few would argue that phones aren't essential. But what about all the extras? Cell phones are a value judgment, but perhaps you can live without a land line? It might be worth considering for some. Then ask yourself if you really need features like voice-mail and call display. Sure its often only $5 a month or so...but those $5 bills can add up quickly.
Discretionary Spending
For many people leaving the house without some cash in their purse or wallet leaves them feeling naked. Here's an exercise some might find worthwhile. Take a pocket sized note pad with you everywhere you go, and when you spend on anything (no matter how small) write it down. If you're spending $1.50 every weekday on coffee you'll be surprised to find out how much you're contributing to the dividends earned by Tim Horton's shareholders. Slices of pizza, newspapers, little knick-knacks that often get thrown out....all this discretionary spending can add up to a few thousand dollars for some at the end of the year.
Network Network Network
In this age of digital communication, where so many are connected 24/7, its amazing how little communication of value truly takes place. Are you looking for a piece of furniture? Why not use your status update on Facebook? Instead of saying 'Gord's bored with life', try 'Gord is looking for a child's bed frame'. You may have a friend or family member who would consider it a favour if you'd take something off their hands to free up space in the basement. Can you use the combined purchasing power of friends and family to get discounts by buying products you all use in larger quantities?
If you're looking for work, tell everyone. By the way, if anyone knows of any employment opportunities for writers let me know, provided they can handle an at times opinionated SOB. There are many ways to network, and I'm only scratching the surface here.
Hone Your Negotiating Skills
Whether you've been affected by the economic downturn or not now is a great time to hone your skills in negotiating...or as some prefer to call it, haggling. With less money circulating in the economy those selling products and services are having to negotiate more and more. No matter what product or service you're looking at, scope the marketplace. If its something like a home renovation get multiple quotes. After you've made your decision to buy, work on getting the best deal. The important thing is that you always have the power to walk away.
My father recently underwent a bathroom renovation and had asked the supplier he finally chose if anything could be done about the price, the vendor said no. It was a nice no, 'I'm sorry, but I can't do go any lower'. I was with him and signaled to him to say "Okay..I'll call you back". After 2 days with no call back from the vendor (and my Dad anxious to have the work done) I advised him to call back and say, "I'd budgeted X for this job, is there anything we can do"? The vendor played the game well and said he'd call back after checking. The end result was not as much off as what my Dad was hoping for...but he still shaved almost 10% off the quoted price.
The crux of the matter comes down to simple human behaviour. Many have become accustomed to living an 'on-demand' lifestyle. If you want or need something you buy it, and worry about the financial implications later. With so many used to cheap credit and a booming economy, skills like budgeting and negotiating will be new...but its a skill that serves everyone well in good times and bad.
Check back later when I'll be writing about the dangers of falling prey to stock promoters. They're out in force exploiting people's financial troubles with promises of a quick buck.
I hope you enjoyed reading my blog and I welcome your comments, I read them all. If you think this piece would be of interest to anyone you’re most welcome to pass it along via email or through a social network like FaceBook, just click on the ‘Share This’ icon below.
There's an old saying about the difference between a recession and a depression. A recession is when your neighbour is unemployed, a depression is when YOU are unemployed. Having previously worked as a financial consultant with a major Canadian investment firm I thought now might be a good time to offer up some suggestions for coping with these difficult economic times. Writing something like this is challenging, because each situation is unique. Strategies for a single person just entering the work force are not going to address most of the concerns that a retired couple has for example...but none the less, here goes.
Economize and Prioritize
Take a look at all the expenses being incurred by the household and divide them into 2 categories, essential and non-essential. This won't be as easy as it appears for some because I'll suggest you ask some tough questions. Take television for example, hardly 'essential' when compared to the more basic needs of shelter, food and clothing. Many households spend $500 to $1,000 a year or more on things like cable or satellite. Could that money be better used elsewhere? If you're bemoaning the fact that you can't afford a nice holiday once a year...or that your vacations aren't as nice as you'd like...well maybe its simply a matter of setting priorities.
Once you have your 2 lists, (essentials and non-essentials) worked out, look at the essentials. If you own your home you may be able to lower your monthly carrying costs depending on your situation. You may be able to re-amortize your mortgage over a longer period, say 30 or 35 years as opposed to 25, lowering your monthly mortgage payment. Depending on your situation this could result in monthly savings of $100 or more.
Look at your food and clothing budget and see if there are any economies to be realized there. While some might not like the idea of shopping at discount stores or buying in bulk, quite often a small shift in purchasing behaviour can net significant savings. Personally I've found many no-name products to be every bit as good as the brand names. I've tried many and when I find the quality acceptable, I switch. Not in the case of coffee though...that no-name stuff tasted like it had been swept off the floor.
Once that task is complete move over to the non-essentials, and this is where things can get difficult. If you're a couple you need to be able to come to agreement and not harbour resentment. If cable ends up on the chopping block its a mutual decision. No blaming the wife on Sundays when you can't watch EVERY football game, and no yelling at the husband because you can't watch Corey Street at 3AM. Trust me on this one, whatever savings you realize, they are not cheaper than divorce...take it from someone who knows.
Telephone and cellular phones can be tricky. In today's world few would argue that phones aren't essential. But what about all the extras? Cell phones are a value judgment, but perhaps you can live without a land line? It might be worth considering for some. Then ask yourself if you really need features like voice-mail and call display. Sure its often only $5 a month or so...but those $5 bills can add up quickly.
Discretionary Spending
For many people leaving the house without some cash in their purse or wallet leaves them feeling naked. Here's an exercise some might find worthwhile. Take a pocket sized note pad with you everywhere you go, and when you spend on anything (no matter how small) write it down. If you're spending $1.50 every weekday on coffee you'll be surprised to find out how much you're contributing to the dividends earned by Tim Horton's shareholders. Slices of pizza, newspapers, little knick-knacks that often get thrown out....all this discretionary spending can add up to a few thousand dollars for some at the end of the year.
Network Network Network
In this age of digital communication, where so many are connected 24/7, its amazing how little communication of value truly takes place. Are you looking for a piece of furniture? Why not use your status update on Facebook? Instead of saying 'Gord's bored with life', try 'Gord is looking for a child's bed frame'. You may have a friend or family member who would consider it a favour if you'd take something off their hands to free up space in the basement. Can you use the combined purchasing power of friends and family to get discounts by buying products you all use in larger quantities?
If you're looking for work, tell everyone. By the way, if anyone knows of any employment opportunities for writers let me know, provided they can handle an at times opinionated SOB. There are many ways to network, and I'm only scratching the surface here.
Hone Your Negotiating Skills
Whether you've been affected by the economic downturn or not now is a great time to hone your skills in negotiating...or as some prefer to call it, haggling. With less money circulating in the economy those selling products and services are having to negotiate more and more. No matter what product or service you're looking at, scope the marketplace. If its something like a home renovation get multiple quotes. After you've made your decision to buy, work on getting the best deal. The important thing is that you always have the power to walk away.
My father recently underwent a bathroom renovation and had asked the supplier he finally chose if anything could be done about the price, the vendor said no. It was a nice no, 'I'm sorry, but I can't do go any lower'. I was with him and signaled to him to say "Okay..I'll call you back". After 2 days with no call back from the vendor (and my Dad anxious to have the work done) I advised him to call back and say, "I'd budgeted X for this job, is there anything we can do"? The vendor played the game well and said he'd call back after checking. The end result was not as much off as what my Dad was hoping for...but he still shaved almost 10% off the quoted price.
The crux of the matter comes down to simple human behaviour. Many have become accustomed to living an 'on-demand' lifestyle. If you want or need something you buy it, and worry about the financial implications later. With so many used to cheap credit and a booming economy, skills like budgeting and negotiating will be new...but its a skill that serves everyone well in good times and bad.
Check back later when I'll be writing about the dangers of falling prey to stock promoters. They're out in force exploiting people's financial troubles with promises of a quick buck.
I hope you enjoyed reading my blog and I welcome your comments, I read them all. If you think this piece would be of interest to anyone you’re most welcome to pass it along via email or through a social network like FaceBook, just click on the ‘Share This’ icon below.
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