"BALANCING
ACT" by Joanne Yaccato
=============================================
Additional thought
of Graham White in highlights.
This
is an excellent book for women. It connects in a very personal way with
many stories and insights specifically for women. I have left out those
stories and the detailed investing information in the second half of the book
in favor of conveying the key messages that the book contains.
If
you are a woman who does not know exactly what your personal financial plan is
or should be, including women whose partners look after the finances -
Buy
This Book
=============================================
The Real Secret To
Getting Rich
Take 10% after tax from
every paycheque and invest it. That should be the minimum.
It's called getting rich slowly. It
requires that you moderate your consumerism lifestyle, but in the long run, it
is the strategy that will really get you what you want.
To find out how often your
money is going to double, divide 72 by the interest rate you are
getting. To find out how often
your money is going to double in value (value meaning how often you
will be able to purchase twice as much), subtract the rate of inflation from
the rate you are getting and divide 72 by that figure. (12% return - 4%
inflation = 8% 72/8 = 9 years). So if you put away enough money to
buy a refrigerator today, in 9 years that money would have grown enough to buy
two refrigerators.
When I turned 30, I realized that I did not have the life
I had imagined I would have when I was younger. My house was rented, the
car was leased, my closet boasted the finest quality clothing money could buy,
but a family of moths had taken up permanent residence in my bank
account. I had $24 in my bank account because of my "live for the
moment" type of existence. It wasn't money that was my problem - it
was my attitude toward it.
I had become fat and broke. I wondered why, since I
had discipline in other areas of my life. If I was able to have a decent
and fulfilling personal life, why couldn't I have a decent and fulfilling
financial life? The two, I decided were not mutually exclusive.
The only thing stopping me was fear - the task seemed huge.
I was afraid that learning new behavior
about money was
going to be unbelievably hard. The idea filled me with tremendous fear
until I realized it was going to be a cakewalk compared to the way I was
living. So I began with my weight (one issue at a time) and then moved
on to my finances.
I knew how to make money - I just didn't know what to do
with it or how to keep it. I was spending money as fast as I made it,
and I made a lot. Bills got paid inconsistently, credit cars would
sometimes be two or three months overdue before I got around to taking care of
them. The only payments that were on time were because of post-dated
cheques that I'd had the good sense to write, or automatically came out of
pre-authorized debit plans.
I did put money away into savings and investments, but
when need arose, I would cash these in or if they matured, I treated them like
found money and bought lavish gifts and holidays. Money disappeared like
a snowflake on a hot stove.
I had always wanted to own my own home, but never gave it
very serious thought because it seemed completely out of financial
reach. I wasn't about to alter my lifestyle to try to save for a
down-payment.
My career was a double-edged sword. Income did not
determine my lifestyle - lifestyle determined my income. I was very good
in sales an marketing, so if I needed more money, I would just work
harder.
In my early 20's I discovered the seductive power of
credit cards. The banks were pushing them at school and I jumped on with
recl3ess abandon, without understanding the "dark side" of credit.
I became a "recovering spender". More
importantly, I put away childish notions that "he" was going to come
and relieve me of this tiresome burden of money and all that it entails.
You MUST put the proverbial knight in shining armor to rest.
Beliefs about money are based on emotional responses
to certain life experiences.
A financial plan needs to be as individual as the person
who has it. Women in their 20's have dramatically different financial
goals than women in their 50's and 60's. This is the result not only of
age, but of differing experiences and expectations.
At seminar presentations I often overhear women saying,
"I don't know what I'm doing here. I don't have any money to
financially plan with!" You will never have any money UNLESS you
financially plan.
For people just getting started, financial planning can
mean something as simple as getting organized, beginning to pay your bills on
time, reading a book like this one, attending a free seminar - all of these
are financial planning. Any step you take toward financial literacy is
part of the process. And it doesn't have to cost you a cent.
Eventually, however, you are going to have to start organizing the actual
dollars you spend and siphon some off to build your financial base.
You must invest
time and energy into financial fitness the same as you would for physical
fitness. Pace yourself though, or you will be at risk of burning out, or
flaming out (investing too much too soon and losing it because you didn't know
what you're doing).
Credit Rating
The quickest way to establish a good credit rating is to
borrow money from a financial institution and pay it back promptly.
Current income and ability to pay are factors, as is living at the same
address for a long period of time.
Create An Emergency Fund
After recovering your credit (do this through credit
counselling with a local agency - this step alone may take years if you've
really made a mess, but you might as well start now rather than letting it get
worse) after rebuilding your credit, it is time to create an emergency fund.
Death or Divorce
If you don't know anything
about your finances, what is your plan should something happen? Women
are often motivated into learning about finances only after a
crisis. Women who become divorced or widowed can find themselves in a
terrible bind when they realize they can't get credit and may become
emotionally and financially destroyed because they left the finances to their
husband.
-
Make it your business
to know what is going on with the family finances. At the very
least, know where everything is filed!
-
Always have your
own account. Too often the joint account is emptied by whoever gets
their first in a nasty divorce. If your partner dies, all the credit
cards in your partner's name that you share can be frozen. It is
appropriate to have money of your own stashed away in case a crisis
occurs.
-
Get your own credit
rating. Open your own line of credit and have your own credit card in
your own name. Become an individual, an identifiable person in
the eyes of the financial institutions. You can use the things that
you are mutually liable for payment of, but you must contact all your
creditors directly and tell them to report the credit history of both you
and your partner.
-
Be sure to list
everything that was yours and his before you were married that has
value. If you bring in something of value to the marriage and don't
have it listed, chances are it will be considered equally owned by you and
your spouse.
Using Credit Cards
If you carry a balance on
your credit cards, cut them up. You can apply for new cards when
you've proven that you have the ability to wait until you have cash to pay for
your purchases for 6 months.
Save for your purchases
until you have enough cash to buy it outright. The only way you should
be using a credit card is if you have created a habit where you always
pay off your credit cards every month, then you can use your credit
card. This will extend the length of time you have to pay for your
purchase by up to 51 day. (Tip:
Make your purchase on the first day of your new statement. You will
then have a month before the statement date and 21 days from that date)
Inflation
The average rate of
inflation in Canada has been about 5% per year for the past 20 years.
The problem is, that is only the average. The rate changes.
It is sometimes more and sometimes less. If
you are in debt when the rate goes up, it costs you a lot. If you
have investments when the rate goes up, you make a lot. Invest
when the rate starts going up and borrow when the rate hits lows.
A dollar in 1974 was
worth 14 cents in 1996 and much less today. If you earn $40,000 a year
at 30, you will probably be paid $135,454 when you are 55. You won't be
able to buy any more with that money than the $40,000 because you are simply
keeping up with inflation.
Many women have money in a
bank account earning a limited amount of interest and believe they are
increasing the value of the money by doing so, but because the rate of
interest on savings accounts is so low, it often doesn't keep up with the rate
of inflation. This means that if you put $10,000 into savings and leave
it there, 20 years from today it will still only buy you something that cost
$10,000 20 years earlier. Even though the amount in your savings has
increased to $17,000, it will still only buy you what $10,000 would 20 years
ago because of the rate of inflation.
Your return on investment must
be higher than the rate of inflation in order to be building equity for
you. To find out your true rate of return, subtract the cost of
inflation from your rate of return (7% rate of return minus 3% cost of
inflation equals 4% actual rate of return). You should look for a minimum
growth in your net worth of 10 to 12 percent to keep growing. Five or
six percent growth will keep you afloat, that's all. You still want cash
for an emergency, but don't fool yourself into thinking it is building true
interest for you.
Don't put yourself in the
position where you have put money into savings that you haven't touched and
think that you're saving for your retirement.
Habits of Saving and
Investing
Having an adequate
emergency fund can buy you time for making important decisions that will
affect the rest of your life. The worst time to learn about financial
planning or to make financial decisions is when you are under tremendous
stress. It can also buy you the freedom to leave a failed marriage or
relationships. Too many women are forced to stay in unhappy or unhealthy
situations because of financial dependence or ignorance.
Begin by creating a safety
net. You need to be taking a minimum of 10% after tax and putting it
away. Don't just invest in RRSP's. If you need quick access to
cash, RRSP's are the worst form of an emergency fund! If all your
money is in equity mutual funds or the stock market, you can rest assured that
your catastrophe will coincide with the day the stock market nose-dives.
You are then at the mercy of the market. Having an emergency fund
protects the integrity of each of your investments and allows them to do
whatever they are designed to do. And I repeat, "investments"
does not mean a savings account.
For
those who have a problem with saving money, only to spend it in order to
reward them self, life insurance companies have a type of savings account
often called an investment account. You can set it up through
preauthorized chequing, but what makes it particularly appealing is that you
can't access it through a bank machine or write cheque on it or go into a
branch and walk out with money. It usually takes 7 - 10 working days to
get your money. This may be a good solution for you.
Ideally, you should take
three months' salary net (after taxes) and put it aside into something
earmarked for emergencies only. (Emergencies don't include buying a
framed, mint condition, original album that your life is meaningless
without). If it is an emergency fund you are trying to build along with
RRSP's, put half your 10% into savings and the other half into RRSP's.
START NOW!
People are outliving their
savings these days because of ever increasing life spans.
By waiting 9 years to invest, you will have to put away twice as much.
Don't imagine you'll have twice as much to put away, because we have a natural
tendency to increase our quality of life as we make more and don't have any
more to invest. Instead, invest early so that you can quit working early
too!
Budgets
Budgets don't work.
People don't stick to them. Human nature runs contrary to the very idea
of what a budget is about. A "want" quickly becomes a
"need" and your budget is quickly out of balance. Very
few people can budget effective, and those who can aren't very fun people.
People fight
budgeting. To many, a budget means life is over as they know it.
Budgets only give you a sense of your situations. It is impossible to
calculate your comings and goings down to the penny. It is, however,
important to know how much is coming in and going out consistently each
month. Things like rent or mortgage, savings, insurance, anything that
remains reasonable constant, are easy to account for. If this is
difficult for you, you're in good company, even people who work in the field
of finances have a hard time managing their own money.
To
manage your money more effectively, set up all of your bills on pre-authorized
withdrawals from your chequing account, or use pre-authorized cheques.
Arrange it to come out shortly after your cheque goes in. If all your
bills are paid and there is money left over, feel free to spend it (as long as
part of the automatic withdrawl is going into savings and investments
too).
This
is the simplest way to create a safe secure lifestyle with the minimum level
of having to actively manage your money. It doesn't matter how much you
earn or think you can afford, if you do nothing else but save 10% of
your net income, the chances are very high you will be financially secure.
Gender
Tax
I'm
not going to include what this chapter says, other than to mention what women
already know - women pay more for men for many of the same products and
services when it comes to beauty and appearance. If the service is
identical, refuse to pay more and tell your friends to do the
same.
Joanne
Thomas Yaccato More
About Joanne Yaccato
=============================================
Much of this book
is and none of the detailed investing information is not contained in this synopsis. If you would
like to learn more:
Buy
This Book
