Monday, July 20, 2009

When the Government Wants Your Money and You Profit- Bonds

Your country wants to grow financially.

Sounds good right? You love your country and you want it to grow; after all, this will help you too. But in order for it to grow, it needs money to finance investments. So the governments turn to you in order to take even more of your money than what you already pay, albeit in some cases they actually give it back to you. But you can make money this way too if you decide to obtain a bond. In this case, the money that you make is chiefly the rate of interest from lending your money.

Essentially, if you're looking to make a safe investment than you usually can't get any safer than bonds. In the battle between bonds and stocks, you'll be much safer if you choose to put your money in a bond. There are different kinds of bonds, the safest in Canada being the Canada Savings Bonds. Some bonds, however, can be kind of risky. In fact, if you try to take out the money you already paid before the bond matures (i.e when you can safely get your money back without economic penalty), you could lose quite a bit of money. Plus, you might not get much money back at all if the company goes bankrupt.

How on Earth do I Buy Bonds?
You can buy them at banks, credit unions, trust companies, brokerage firms, the Canada Investment and Savings agency, and online at the Canada Savings Bonds website. Thinking about buying the Canada Savings Bond? You better check your calendar, 'cause they aren't sold all year. Usually you'll find them sold from October until the beginning of April.

Really the best thing that you can do when you're thinking about bonds is to find a trusted personal finance advisor. This person will know how to properly spread out your money by choosing a wide variety of bonds. And make sure you hold onto the bond until it matures. Just remember too that just because they are low risk investments, they are still investments- the very name suggests instability.

Tuesday, July 7, 2009

The BEST Way to Save the Leaves on Your Money Tree

A friend was commiserating with herself the other day, worried about her money woes. She felt like she had spent too much money shopping, recently dropping nearly $200 on stuff. And that's what it was- just stuff. She bought jeans that were similar to the ones she owned, shoes that she didn't need, and shirts that I knew she would never wear. But she doesn't make that much money, and she has rent, food, and student loans to pay for. It got me wondering about the best way to save money- how can you avoid a costly outing like that?

Avoid it.

Simply put, don't go shopping unless you absolutely need something. And I do mean absolutely. If you already have two pairs of black shoes, why do you need another? Lois Frankel, author of Nice Girls Don't Get Rich: 75 Avoidable Mistakes Women Make With Money, made an excellent point in this book. She reasoned whether or not you would get the job - or a raise for that matter- just because you went in to see the boss with new shoes on. And you know what? She's right! Unless your shoes look like the Grand Canyon, your shoes are probably fine. Some might argue that point, saying that "new shoes will give me that extra confidence boost!"? Well why don't you gain confidence by paying down your debt with the money you would have spent on those shoes?

That's it- plain and simple. It's a lot like weight loss- if you want to lose weight, you have to consume less calories than you utilize. That's how my aunt lost so much weight (almost 40 pounds)- she just started using a smaller plate size. And that's what you need to do too; use a smaller plate size. Spend less than you earn. Take up an inexpensive hobby, like running (outside, not in an expensive gym). Go for walks with your friends. Make some of your own jewelry together. Discuss politics over a pot of tea or coffee, 1800 style. The list of cheap, fun activities are endless.

Cheers to saving those leaves!

Thursday, July 2, 2009

10 Things You Should Know About Your Student Loan (OSAP)

Ah yes, the infamous student loan. Many of us have one, many of us are thinking about getting one. Education may be almost a necessity in this day and age, but that doesn't mean that it comes cheaply. I'm specifically dealing with the "wonderful" (disgruntled look on face appears) folks at OSAP- the Ontario Student Assistance Program. But many of these points apply to all student loan receivers. Either way, these loans aren't exactly fun to deal with, and here are a couple of things you should know about your student loan:

  1. You have to pay it back (duh!): Ok, so this may seem like a trivial point, but its really the most important point of a student loan. When you first receive your student loan, it may seem like a lot of money, but try not to spend all that you receive. Instead, try to live cheaply throughout the year, and the money that you have saved, pay it back. The same goes for those of you who are done school- pay that OSAP back ASAP!
  2. Find money for your schooling: search for grants, scholarships, and bursaries to help pay for school.
  3. There is good news for those of you who fall below the poverty line (hurrah!): If your loan is greater than $7000, you will not have to pay the remainder, at least under OSAP. For example, if your loan is $10,000, you will only be required to pay back $7000. Check to see if this is the case for your student loan.
  4. Don't lie: on your application to try to get more money (ie. don't say you're poorer than you are), 'cause it will cost you in the end (see #1), especially if they find out.
  5. Pass your class: "really?" you say with a sarcastic undertone. Classes are expensive, and so you should do your best to avoid failing because not only does it mean you may be shelling out $1000 or so per class, but you might end up having to take a summer school course, which is also expensive. The summer is the time when you should be making money to pay off your student loan, which brings me to my next point.
  6. Set aside a portion of your money to pay off your loans: seriously, just do it! If you can afford it (i.e you've moved back home where you get free rent and mom buys you your favourite groceries), set aside at least 15% of your monthly cheque to paying off your loans. For example, if you make $700 a month, you should at least pay $105 per month to paying off your loans. This means you will still have money to do whatever floats your boat. This is the minimum though, and you'll thank your lucky stars for it later.
  7. You get interest free status in between your studies, as long as you're going back to school. For example, if you're enrolled in a 4 year program with the summers off, you won't be charged interest during those carefree summer months.
  8. You will be charged interest AS SOON AS your studies are finished. Literally, the day after your studies are finished, interest starts accumulating. And its not at all nice interest, contrary to what you've probably been told about OSAP. Rather, depending on the size of your loan, it can amount to amost $5 per day. This ends up costing about $155 a month and $1860 per year just in interest. That's enough to take you on vacation!
  9. Pay off your loan- FAST! The faster you pay your loan off, the less you pay for interest. For example, if your debt is $20,000 at a floating interest rate and you decide you want to pay it off in 10 years, the total amount you will pay back will actually be approximately $24,890 because of interest. That means you're paying about $5000 just in interest! However, if you are able to pay that loan back in 5 years it will only cost you about $22,380, indicating interest will only be approximately $3000. That means you are actually saving about $2000 by paying it off faster! Calculate how much it will cost you by visiting the National Student Loans Service Center Loan Repayment Calculator at
  10. It's not always that bad: if you can't make payments at all, you can apply for "interest relief status". This means that you won't be charged interest on your loan for a certain period of time because you aren't making enough money.
Good luck paying back your loans :)