“You can buy it now, it’s on sale and you will save money!”

“Buy it now and you will have another 30 days to pay it back”

I can’t really argue his point as we have all encountered a moment in our lives where we really wanted something and couldn’t afford it. This is how credit cards can burn a hole your wallet and allow you to spend in a heartbeat. You sign the credit card receipt before you even realize that the item you wanted is now yours hahaha… while the evil debt is growing out of control!

However, I am a big believer of using systems to your advantage. Instead of playing the banks’ games and pay ridiculously high interest rates on their credit cards, I have decided to keep banks’ board game but set the rules differently.

I am looking for a reward credit card with the highest payback and use it everyday!

I actually use my credit card for all daily expenses that would normally be paid with cash or my debit card. No extra, no “rewarding myself because I deserve it”, only normal daily expenses such as gas, groceries, phone and internet bills.

If you have trouble with your credit cards’ powerful mind control abilities, here are 2 quick tricks:

If you want to take advantage of the banks instead of working for them, try these 2 things to make sure you don’t pay a dime in interest nor increase your level of spending due to your credit cards:

- Set an automatic payment through your credit card

There are tons of bills you can set with automatic payments. Since you have to pay for your phone, cable and internet anyways, do it through your credit card in order to earn points or cash rewards.

- Take your credit card out only for specific purchases

There are 2 absolutes in your spending: you need to eat and pay for transportation. So why not leave your credit card in the drawer and take it with you only when you go to the pumps for gas or the grocery store, buy your bus pass/tickets at the same time!).

Combining a few utility bills, grocery and transportation costs, you will most likely spend about $1,250 per month. This is $15,000 worth of points on your credit cards in one year with stuff that you had to buy anyways. This is a free rebate thanks to your credit card!

I personally use my credit card for any purchase (from my $1 coffee to my cash deposit on a new car). I ensure that I pay my bills in full every month. If you are not yet comfortable enough managing your credit cards, you can use my 2 tricks and avoid making unnecessary purchases.

With this technique, you will learn to tame the beast and avoid getting burned by high interest rates on your credit cards. The best thing is to select a card with rewards that you will use. Some give gas cash back, others have points that enable you to buy anything in a catalogue or airplane tickets. I have listed a few great credit cards with rewards:

Credit cards with reward points and (NO ANNUAL FEE!) that I like best:

In order to get other cash reward credit cards click here.

Author: Mike

image source: Andres Rueda

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No, not change in the quarter, nickel, dime sense, but change in the lifestyle sense.

Can a person change? Do people change? Will you ever be able to change your finance habits?  Many readers of this blog are like I was over three years ago – spending more than I was making and starting to pile up mounds of debt. Other readers have successfully put that stage of life behind them and are starting to build real wealth – the rest of us are somewhere in between.

The fact that you searched for and found Gather Little by Little probably means that you are looking for information about how to get control of your financial life. Three years ago, I was desperately searching for the same thing and found much of the knowledge that I needed in personal finance blogs.

You can change

But it might cost you something. Not all change is comfortable or convenient. The lazy man rarely changes, the ignorant are subject to the forces that surround them. But if you have a will, there is a way and if you can read and study, you can find a way to control your spending and build wealth.

Change comes with a price

I knew that I needed to change, but I soon learned that change came with a price. I recently heard a speaker say that “change will cost you something”. He is right.

What is the price that you had to pay? One of my struggles is fast food – financial and dietary change will cost me the Big Mac and fries that I love so much. I also tend to procrastinate my record keeping. I was not keeping a budget during the year that we spend $15,000 more than what we earned. Change cost me more of my free time. I am often tempted to spend money before I earn it – change costs me that instant gratification.

What is the price that financial change will place on your life? Do you have to get another job? Will you have to lovingly confront a spouse who is overspending? Will you have to say “no” to your child? Will it cost you a vacation?

Change requires maintenance

A bad habit can be broken and the longer you avoid the habit, the easier things will be. However, we are always at the mercy of a weak moment. Do not put yourself in places that will heighten the temptation to charge up your credit card. Conduct a financial check-up on a regular basis. Compare notes with your spouse to see if you are spending more than what is needed. Ask yourself: are you really saving as much money as possible?

The alcoholic is never fully cured and the spendthrift can still slide back into a complacent attitude toward his money.

Change brings reward

A balanced budget is worth the effort. I can choose to leave a legacy to my children that includes obesity and debt or I can choose to accept the pain of change and leave them a healthy lifestyle not based on debt.

Why do you want to change your financial habits? If you are one of those who has already executed successful change in your financial life, what was your motivation for change and what did it cost you?  – Author: Stew

Photo by adam*b

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Author: Mike

When we talk about personal finance, there are several rules of thumb that can help you build a solid financial plan. Here are a few numbers to remember when you want to improve your personal financial situation.

Aim for a Credit Score of 750

A credit score may vary from 300 to 900 but most people have a score between 600 and 800. A great credit score will open the doors to get better rates on:

- credit cards,

- insurance (car, home, life, etc),

- personal loans including car loans,

- lines of credit and

- mortgages.

In order to benefit from the best rates available due to a stellar credit rating, you must aim for a credit score over 750. How can you do that? Well, there is no magical ways to improve your credit score. Here are the 5 major things that impact your credit score:

- Credit history,

- Current level of indebtedness,

- Amount of time credit has been in use,

- Credit inquiries,

- Type of credit experience (i.e. number of loans, credit cards, lines of credit and mortgages; the more diversified the better).

100 minus your age to determine your asset allocation

This is a classic in financial planning circles. While this financial rule of thumbs won’t fit for every case, the basic principle remains: The older you are, the less money should be invested in equities.

Fixed income (like bonds, certificates of deposit) will provide stability in your investment portfolio. At retirement, the last thing you want is to see your nest egg losing a quarter of its value in a single year. Those who are retired and didn’t follow this rule of thumb suffered tremendously in 2008.

8,6%: Dow Jones Yield since 1930 (including the 2008 crash!)

As a financial planner, I usually tell my clients the stock market average return is about 9%. It is important to have a realistic yield expectation. This will allow you to build a stronger (and more reliable) retirement plan and will also avoid belief in the Maddoffs of this world who promise double digit annualized returns at all times. The truth is: there are no free lunches in finance!

Another word of caution; 8.6% over the past 78 years doesn’t include management fees. Therefore, if you buy mutual funds, you will have to pay, what we call, MERs (management fees). Make sure to ask your financial advisor what are the fees and how they impact your investments.

70% of you gross income should become your revenue at retirement

This is another great rule of thumb in financial planning used in creating a retirement plan. Most people carry several expenses related to working (transportation, specific clothing, eating out, etc.). Once  retired, you should not have these expenses anymore. You should also be close to paying off your mortgage (we all hope!). Accordingly, 70% of what you earn before you retire should be enough to support your new lifestyle.

Don’t make the mistake of decreasing this amount when you reach 70-75 thinking you will do less activities and be traveling less often. It is true that you won’t spend in activities but chances that your health expenses will increase. Keep the same level of income (adjusted to inflation) in your retirement plan.

10% of your income should be saved for your retirement

In order to respect your financial plan and meet 70% of your income at retirement, one should save 10% of his gross income and invest it. This should be enough to support your lifestyle at retirement while putting 10% aside won’t kill you once you have done a budget.

This financial rule of thumb will vary depending on your age (and the age you want to retire) and your risk tolerance (that will influence your investment yield). These topics will be covered later on.

The Rule of 72

This is a quick mathematical rule to calculate how many years it will take for your investment to double depending on its yield. For example, if you invest $10,000 at a steady yield of 6%, your initial investment will worth $20,000 in 12 years. You simply divide the number 72 by your expected yield, it tells you how many years it will take to double your investment. So when you get a CD at 3%, you will need… 24 years to double your investment!

25% of your gross income should be allocated to your mortgage/rent payment

This should be used as guidance for your budget when you are looking to buy a house or change apartments. Considering that you already have to save 10% of your income for retirement and pay taxes, taking an additional 25% of your revenue should be enough to provide shelter without jeopardizing your financial situation.

You still need money for food, transportation, utilities and don’t forget to put money aside for your children’s education! You can always exceed 25% for your house payment but be aware that you will have to sacrifice something else in order to pay for the house of your dreams.

I hope these financial rules of thumb will help! I am curious to know if you use any of them or if you use other personal finance rules of thumb?

Image source: Austin ampersand Zak

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I decided to share a few of my tricks to save money. Since my wife stays at home with our two kids, we must be careful with our spending and make sure we make savvy purchases.

We have lived together for the past 10 years. When we first started, we got all our furniture from friends and family. Absolutely nothing was new. While it was great 10 years ago, second hand furniture still has a maximum life expectancy! Recently, we had to buy a new bed for us (my mattress and my bed was 30 year old!) and another one for Amy (she just turned 2 so it was time for her to move up, into a real bed).

I always found there is a very thin line between wasting money away on goods and treating one’s self to something you really like. I must admit, I am not the model of frugality. I try to not waste money on emotional purchases and I also like really nice stuff. This is the internal fight between the angel of saving and the devil of spending… I have a strange feeling this will last forever!

Since we plan to keep our bed for another 20 years and Amy will probably keep hers for a good 10 years, we decided to look for brand new furniture.

How can you save money on brand new goods? Use your Network!

In this specific case, it was quite easy for me to buy cheap furniture as my sister-in-law works in a big furniture store. She gave me the “family discount” which was cost + 10%. Since she is working for a family owned company (not hers), they encourage their employees to refer their families with this huge discount.

One of my colleagues at work benefited from the very same trick (using her network). She was building a new house and needed new furniture. I had suggested that she take a look at this store and they gave her an additional discount since she was referred by someone “from the family”. Since I believe in helping others, I always try to introduce people I know to my network.

I always ask people what they do for a living. I ask pretty much everybody I encounter. More often than not, I even ask them what others in their family do as well. Occupational hazard I guess, comes from my day job (financial planner), it’s still a great way to learn about others and open your network of contacts. Usually people like to talk about themselves and their friends & family. On top of that, they love when their connections can help others. As such, I am never afraid to ask if I can call one of their friends for advice or to buy goods…

By using my network:

- I buy meat from a local butcher that is a my father’s friend. The meat is less expensive and tastes a lot better than what is found at the grocery store!

- I bought the ceramic for my new bathroom from a small shop owner who worked with my brother-in-law.

- The guy that did the renovations in my basement was a friend of a friend. Great job, cheap price (he did the electrical work as well!)

- I get suits half price from a co-worker I trained a few months ago.

- I did an amazing landscaping job for the front of my house and it cost me nothing! People we know gave us the plants, trees and flowers we used.

- I get a cheap price for a condo in France from one of my client’s mother for my future vacation (I still have to pay for it because of potential conflict of interest).

- I got flowers for my wedding at half the price as the sister of my wife’s colleague studied to be florist back then.

There are so many ways you can save when you are dealing with friends and their connections. They say that an individual has more than 100 friends/family members that he talks with on a regular basis. Therefore, if you talk to your 100 connections and they talk to their 100 connections and their connections do the same thing… you are building a saving network of infinite possibilities!

I was blessed to benefit from my father’s network to start mine. He is actually the master of networking. He talks to absolutely everybody he meets. The funniest part is that he does it naturally and as a result, makes friends. He just has a big mouth and loves to talk It turns out that people in general are more than willing to help and always find solutions for him when he talks about something he would like to do or buy… So don’t talk to people with a specific interest in the back of your head, just be friendly with as many people as you can and you will be rewarded one way or another.

image source: Luc Legay

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I previously mentioned that I have been with the same girlfriend since the age of 15. We actually moved in together at a young age. As I was the only child in my family, I was fortunate enough to have my parents’ basement entirely to myself. I had a small kitchen, a pool table (that was actually my dining room table ), my TV with PlayStation and a huge double sized bedroom. I had asked my dad if we could remove the wall between 2 small bedrooms. I was lucky enough to have my own entrance and garage (the previous owner was renting the basement as a bachelor apartment). Life was great as a 16 year old teenager

While still in college, my girlfriend moved into this little paradise.  Therefore, I had to trade my pool table for a real table and establish a schedule for my Playstation time (it is crazy what a girlfriend can make you do hahaha!). We were 18~19 at the time.

We lived at my parents’ house for another 2 years or so. Because we all have strong characters, the living arrangements became uncomfortable after a while. At one point, there was too much tension in the house. I really love my parents and they were getting too involved in “our” lives. We wanted to leave yet we were still in school, my car just died (literally!) and I didn’t have a penny saved as I was coming back from a semester as a foreign student in living in France.

My dad came to me one day and said: “So what are you going to do son? It is not like you are able to afford to buy another car and pay a rent”. My dad has always been a great man and I really get along with him. However, at that stage of my life, I really needed to fly with my own wings and he wasn’t ready to let me go. He thought I wouldn’t do anything since we didn’t have the money.

I guess I surprised him and ignored the facts and felt that I was able to do anything I put my mind towards at anytime. When I was born, emotions such as fear, anxiety and low self confidence were apparently missing in my brain and they haven’t being acquired over time! So my girlfriend and I decided to pack our gear and move on.

Looks like credit cards can be useful sometimes…

Back then, we had two old cars. We put them for sale in order to create a small emergency fund ($1,500 is not much but it is better than a slap in the face!). My car wouldn’t start anymore but I was able to sell it for the body. It was a very nice looking 1981 BMW 320i. A retiree gave me $800 so he can work on the car and drive it on sunny Sundays.

Since I spent 6 months in Europe, I had built myself a pretty strong credit bureau for a 20 year old student. I had 5 credits cards each with $1,000 limit. Here’s how I used them the very first month:

#1 put cash down to rent a new car (we couldn’t afford to pay for mechanical breakdowns anymore and we needed a car to work)

#2 pay my tuition (I knew that the only way I would be able to pay back my debts was through a good job. Education is the key to a good pay cheque!).

#3 pay my girlfriend’s tuition

#4 and #5 were left empty in order to transfer the balance from one card to another, withdraw money to make payments on other cards. They were basically a source of cheap financing (close to an emergency fund.)

My girlfriend started working 6 months before me. It really helped in maintaining our budget.  We were about to go over the edge because our credit card debts were killing us with their high interest rates. At the time, I didn’t know about the 6 month limit to 0 APR transfer credit cards so I ended up paying more than full price over 12 months.

This wasn’t a financially comfortable situation. However, we were free and happy. We were fortunate enough to avoid bad luck during that year. Each month, I would juggling credit card balances switching them from one card to another in order to make the minimum payment everywhere and keep a good credit rating. In North America, a good credit rating is your key to access financing and cheap interest rates. I just couldn’t afford to destroy this.

I finally finished my bachelor’s degree and started working right away. I actually had my last exam on Sunday and started my first job the next morning (no celebration for me… couldn’t afford it!).

During that summer, I worked 6 days a week, doing overtime when it was requested and trying to do my best to keep my job. Each penny earned over our student budget was used to pay off our credit cards. So, we lived within our means for 3 months and we paid off $4000 of debt.

I have learned one very important lesson about personal finance from this experience:

Set your goals and be faithful, no matter what is your present situation, you will reach those objectives. Don’t be afraid to move on and do what you really want to do. Feeling great is much more important than having money and feel sorry for yourself!

image source: Blue Square Thing

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Sometimes it really can be hard to control the small, impulse purchases. You know, the ones where you are just craving a burger, or a iced mocha or just one tiny, little candy bar. Maybe the temptation is not food for you. Perhaps you purchase the occasional movie through your cable service – just a couple of buttons on the remote for a great movie and just a small charge on your cable bill. What about that extra shade of lipstick or the scarf that matches only one outfit . . .but it looks great with your eyes?

I do not struggle with the big purchases so much as I do the three dollar and five dollar kind. It’s funny because I meticulously monitor our thermostat to make sure that we don’t spend a dime extra on heat or cooling. I make sure that the only lights on in our home are the ones in use. I make sure that the car does not idle too much and always check to see that my wife is using coupons when she goes to the grocery store. Yet I can blow all of these frugal strategies with one or two trips through the fast food drive through lane.

Start thinking long term

Those little purchases add up over time. Let’s do a little math together and see how a little self-discipline can go a long way toward helping us reach our financial goals or providing us with a way to help others in the future:

Spend a dollar

If you spend a dollar on something you don’t need, you lose that dollar forever. It was worth a hundred pennies today and zero pennies tomorrow.

Charge a dollar

If you charge a dollar for something you don’t need, you lose that dollar forever and you might lose more than that if you don’t pay off your credit card balance every month. Most credit cards are charge astronomical interest. If you pay the minimum payment every month, you might never pay off that dollar – especially if you charge more dollars.

Save a dollar

If you save a dollar and use it to pay a dollar a month extra on a car loan or student loan, you could save a hundred dollars or more over the life of the loan.

Invest a dollar

If you don’t have any debt, invest that dollar and if it earns five percent annually, you could have almost five dollars in thirty years.

Okay, five greenbacks over thirty years does not seem like much and really these examples are all a little ridiculous if we are only talking about one dollar. But how many of us only waste a measly buck over the course of a month? What if instead of $1, we were throwing away $10? Are there some among us who might be able to find $100 worth of waste in our monthly budgets?

The point is that most of us in this culture, have a spending problem, not an income problem. Over the next few months, I hope to solve more of my spending problems and along the way, give you a few ideas on how to hang on to more of your dollars.

Photo by N.ico

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