Money Rules – Gail Vaz-Oxlade

Money Rules - Gail Vax-Oxilade
YOUR money is YOUR responsibility.
If you won’t take the time to figure out how it works, you shouldn’t be surprised when it doesn’t work for you.

Rule #4: You must have POA’s: 

Dying is easy.  Not dying and becoming incapacitated, that really sucks.  And if you don’t have all your i’s dotted and T’s crossed, it will suck even more.  Just because you are married, don’t assume you can make decisions for your partner.  Since he had never executed POA’s, Kathryn could not touch his bank account, she tried to keep the mortgage paid and buy food for the kids.  At least go to the Ministry of Attorney General website and download the kit.

Rule #14: Don’t let your lender decide how much home you should buy:

Letting your lender decide how much you can afford to borrow is like putting a fox in charge of the hen house.  Lenders are perfectly happy to lend you far more than you can afford to repay.  In 2011 a study came out showing that 700.000 Canadians could not handle a $200 increment per month in their mortgage payments, while another 200.000 Canadians could not handle ANY increases at all.  With rates at historical lows, there is only one way for rates and payments to go: UP!

Rule #21: It is not how much you make, it is about how much you keep:

Saving is a habit. Either you get in to the habit of saving and having something in the future or you don’t.

Rule #29:  You can have it all, just not at the same time:

Rule #40: Figure out your money set point:

Everyone has a money set point. When you reach yours, you feel rich and stop paying attention to the details.  It may be a low set point, just $500 is all it takes to make you think you are invincible.

Rule #56:  Leveraging is not for everybody:

You should never leverage unless:

  1. You are an experienced and knowledgeable investor, and
  2. You are prepared to loose money.

Rule #83:  Calculate the real profit on your home:

One of the favourite delusions people like to share is “I made a gazillion dollars on the sale of my house”.  Your profit is not just the sale – buying difference.

Here are some of the other things besides selling price that you should take into account:

  • The interest you have paid through your mortgage.
  • The property tax you have paid.
  • The cost of maintenance and upkeep.
  • The costs associated with selling the home.

Rule #110: Ash these questions before you borrow:

  • What will my payment be?
  • What will this loan end up costing me in the long run?
  • Can I get a better rate if I secure the loan?
  • How long will it take to repay the loan?
  • Is there a penalty or fee to repay the loan early?
  • If I miss a payment, how will that affect my interest rate?
  • What will I give up to get this?

Rule #112:  Ask for a cash discount:

“You may not be able to discount between cards, but there is nothing in your agreement with Visa that stops you from giving me a cash discount.  So you can give me 1% off for cash, or I’ll use my credit card and you can pay 2 to 4 % for processing this transaction”.

Rule #143: Designate beneficiaries on everything:

Want an easy way to avoid probate costs and pass assets directly to those you want to have them?  Make sure you have a beneficiary on the plans themselves ( TFSA, RRSP, Life insurance plans ).

Rule #171: Work harder to pay more taxes:

When I tell people that they should make more money, very often the response I get back is “it’s not worth it to have another job because I will end up paying the whole thing in taxes”

Good Lord! So the reason you are not prepared to make more money is that you don’t want to pay more taxes?  You would rather stay broke, poor, or in debt because you want to screw the Tax Man? Really?

Rule #173:  Your bank will give you all the rope you need to hang yourself:

Banks are in the business of selling money.  If they think you are a higher risk, they simply charge you more interest to make up for that risk.  But they are more than happy to help you borrow your way into Debt Hell.  Counting on the bank to lend you only as much as you can afford to borrow is like counting on the fox to take care of the chickens.

I am surprised when I come up a 21 year old making $24.000 a year to whom a bank has given a credit card with a $15.000 limit, banks don’t care about your ability to repay the balance in a timely fashion anymore.  Now they are most interested in keeping you on the minimum payment hook for as long as possible because you are a cash cow!

YOU have to know how much you can afford to borrow.

Rule #211:  Self employment is tax smart:

Start a business form home, however small, and magically, expenses from internet access to plumbing details become at least partly deductible.

Rule #223:  Open an RESP for your kids:

Rule #229:  Ask yourself, would you pick it up?

I tell people to move their savings account to another bank paying 2% more.  They do a quick calculation in their heads and say something like “On my 10.000 emergency fund that is just $150 a year”

So along comes my friend Victoria, her question would be “So, would you bend down and pick it up?  Would you pick the $150 if it was on the ground?”

Rule #232: Don’t buy now and pay later:

The biggest problem with BNPL is the ease with which people can take home stuff they have yet to pay for, making it feel like they go a special deal, and leaving them with the euphoria of purchase without the pain of payment as an offset.  BNPL encourages people to spend more than they would if they were shopping with cash.  Physiologically we need the pain pleasure balance to help us prioritize.  Removing one side of the equation lets us delude ourselves.

If you don’t have the money to pay for something, you don’t have the right to take that something home.  If you have the money, pay for it and be done with the transaction.

Rule #235:  Calculate the Cost Per Use to determine Value:

If you are buying a pair of shoes that you will wear all the time you should be prepared to pay a little more so the shoes last and they are comfortable.  But if you are dropping $800 on a pair of high heels that you will end up wearing four or five times you are looking at a $160 – $200 a wear cost.  Dumb!

Rule #245: Don’t make yourself house poor:

Home ownership is NOTHING like renting.  If you think you can afford a home because the mortgage payment is almost like aren’t, you are going into home ownership blind.

You will have utility costs, taxes, insurance, and maintenance when the roof leaks or the furnace gives up.

Calculate your maintenance budget.  Use the rule of thumb of between 3% to 5% of the value of the home.  If you are not prepared for the costs associated with home ownership, you will end up filling the gap in your cash flow by using credit and your savings will go to hell.

Rule #247:  Name a contingent subscriber on your RESPS:

The money you put in an RESP does not belong to the beneficiary until it is paid out.  All the money you are piling up for your kids remains your money until you start doling it out.

Since kids who are the beneficiaries have no legal interest in the plans, you would be very wise to name a “contingent subscriber” for the RESP when you open it up.  If you don’t and you die intestate ( without a will in place ) the plan will likely be terminated and all the contributions and income earned put into your estate.

Since the plan has been terminated, the Canada Education Savings Grants would have to be repaid to the government.  Don’t what that to happen? Make a will. Name a contingent subscriber; your children’s guardian would be a natural choice.

Rule #248: Cross cheques to protect yourself:

According to the law, if a third party ( cheque cashing stores like money mart )accepts a cheque that it does not know has been stopped, it can treat it as a valid cheque and collect the money from the issuer ( YOU ! ).

If you are writing a cheque that may have to be stopped ( to a supplier you are not sure of, or post-dated cheques that might need to be cancelled down the road  ) cross your cheques and write “Not Negotiable” between the lines.

If a third party accepts a crossed cheque and finds out the cheque was stopped, they can’t come after you.  It must seek recourse after against the body that cashed the stopped cheque.

Rule #258: Leave $1.000 of your emergency fund in your checking account.