Tuesday, February 5, 2013

11 Tips for Financial Health



I am a regular reader of Moneyville, a fantastic online resource for personal finance tips and tricks. They have recently shut down and re-opened as the Toronto Star's personal finance. The editor was recently asked by a reader what were the best lessons he had learned in the 2 and a half years of Moneyville's existence. Here are his answers; very solid advice is you ask me! 

1.  It will take about 240 years for $1 to double at the current interest rate of one third of 1 per cent (0.30 per cent) offered by my bank on a daily interest savings account.
That's why it's a good idea to start saving early, as soon as you get a first job.
I wish someone had told me that. 

2. Nobody wants you to save except you, which is why it is so hard to do. payroll deduction is a painless way to get around that. You lose it before you see it and so don't miss it.

3. Low interest rates are not necessarily good. They may have saved the developed world from Depression in 2009, but they're punishing savers and encouraging people to spend beyond their means.
When rates rise so will mortgage payments, house prices will fall, the economy will slow and people will lose jobs. Now's the time to get your financial house in order.

4. Paying off a 19.99-per-cent credit card debt with a 3.5-per-cent line of credit doesn't count as good financial management. It has switched high-interest debt for low — and unless you pay off the credit line that hole just gets bigger.

5. It's alarming that people think lines of credit are an asset. But if the bank gives you a $100,000 credit line secured by your home, you are not $100,000 richer. . It's a liability. The moment you start using it, it's something you owe, a debt that has to be repaid.

6. Ask and you will likely receive. You'll never know how much better a deal you can get unless you ask. If you're a good customer, you will likely get something.

7. Fees are a fact of life. Choose ones you want to pay and revisit them periodically. If you bundle services you can get a break. If you're a good customer you can make a deal. If you're polite you're more likely to succeed.
8. If you want a discount or think you deserve a break, have proof of the better deal elsewhere. The more knowledgeable you are the better your chances.

9. You may want things, but you don't necessarily need them. Wealthy Barber Dave Chilton said people who live within their means tend to be happier for the obvious reasons, but also because they are not “consumed with consumption.” Saying “I can't afford it” is not an admission of failure.

10. Good customer service is hard to come by. My gold standard is Amazon.com. When my two-year-old, out-of-warranty Kindle stopped charging, I called for a diagnostic. Within five minutes a tech support rep had confirmed it couldn't be fixed and passed me over to a customer service rep who, without asking, shipped me a free Kindle. It was at my door two days later. They called me by my first name and didn't treat me as if I was trying to get something for nothing. They valued my custom. Now I'm telling you about it.

11. I wrote a column 2 1/2 years ago that said personal finance boils down to spending less than you make, saving the rest and revisiting your plan occasionally to see if it's working. I think that still holds true.


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