The Dreaded Household Budget

General Nathan Lawrence 17 Feb

We’ve all thought it…URGG!…that darn B-Word!!  BUDGETS!!!   The very next thought is always…”it’s ok, I don’t need to do a budget, I’ve got a good handle on our monthly finances.”

But do you really?

The reality is that you won’t truly know until you’ve assessed your spending habits.

Budgets are hard; however, they are not hard because they are a lot of work or because they are too complicated.  Doing a monthly budget is actually a very simple process, we are just afraid of what the outcome might be.

A budget is about taking control of your finances and understanding where your money is going.  Have more money leaving your bank account than is actually going in?  Then this simply highlights a need to tighten the belt a bit.  A budget is really about two things:

  1. Developing an action plan, and
  2. Taking Action.

When it comes to your personal finances,

Your Budget = Your Action Plan

Sticking to your budget = Taking Action 

So grab your pen!  Take 15 minutes right now to go through this simple budgeting exercise to get the ball rolling:

 

Item Totals Notes

INCOME

 {Enter Monthly Net Income Here} *Remember this should be your after tax income.*If you are paid bi-weekly, you need to properly convert to monthly. The Calculation is (Bi-weekly pay X 26)/12
Total Monthly Income {Add up all Net Monthly Income}  

 

 

 

EXPENSES

*Here is all of your monthly expenses. The trick here is to make sure you think of everything and to be honest with yourself
Mortgage/Rent {Enter Monthly Bill Amount Here}
Property Taxes {Enter Monthly Bill Amount Here}
Home/Auto Insurance {Enter Monthly Bill Amount Here}
Utilities (Gas, Hydro, Water) {Enter Monthly Bill Amount Here}
Groceries {Enter Monthly Bill Amount Here}
Vehicle Fuel {Enter Monthly Bill Amount Here}
Home Phone/ Cell Phones {Enter Monthly Bill Amount Here}
TV / Internet / Netflix {Enter Monthly Bill Amount Here}
Home Security {Enter Monthly Bill Amount Here}
Vehicle Payments {Enter Monthly Bill Amount Here}
Gym Memberships/Sports {Enter Monthly Bill Amount Here}
Monthly Kids Activities {Enter Monthly Bill Amount Here}
Monthly Subscriptions (Magazines, Apple Music, etc.) {Enter Monthly Bill Amount Here}
Any other monthly expense {Enter Monthly Bill Amount Here}
Total Monthly Expenses {Add up all Monthly Bills Here}
 

SAVINGS

*Most of the time we forget to budget our savings (RESP, RRSP, TFSA)
Tax Free Savings Account {Enter Monthly Contribution Here}
RRSP {Enter Monthly Contribution Here}
RESP {Enter Monthly Contribution Here}
Savings Account {Enter Monthly Contribution Here}
Total Savings Contributions {Add up all monthly Contributions}
 
Monthly Net (Loss) {Take your total net income – Total Monthly Expenses – Savings Contributions} *This final number is important and will provide some good insight into your financial strength.

 

Here is the Key…

  • Is the final number a positive number? If so, you’re doing well. However, even with a positive number there is always room for improvement.  Take a look at your expenses and really assess what you’re paying for and what you’re actually using.  Is there potential for additional savings?
  • Is the final number close to 0.00? If so, you’re doing ok, but your spending needs to be watched closely. Take a hard look at your expenses and see if there is any room for you to make some cuts.  Maybe you’re not using that monthly TV Package?  Maybe you have some monthly subscriptions you can cut?  Turning that 0.00 into a strong positive number can make a huge difference in the long run.
  • Is the final number a negative number? If so, you need to take action right now!! Cut some costs.  Basically you have more money going out each month than you have coming in.  If something isn’t done soon, you’re going to find that your credit cards or lines of credit will start to grow. Sit down as a family and work out where you can adjust your spending…always start with the non-essential costs (TV, monthly service subscriptions, etc)

Some quick spending tips that can help save you more:

  1. Grocery Shopping – Plan your meals for the week based on what is on sale in the grocery store. Do the weekly check of the flyers and start trying to buy the items that are on sale.
  2. Fuel – Nowadays, many households have 2 vehicles. And it’s very common for people to default to the nicer or bigger vehicle when leaving the house.  Try to use the more fuel efficient vehicle as much as possible.
  3. TV subscriptions can be a killer – Sit down as a family and really think about how much you use it. Maybe a simple Netflix or CraveTV service will work just fine (and cost a fraction of the cost).
  4. Cell phone bills always running over each month? Make sure that you have wireless setup rather than data when at home or at work. You would be surprised how much of a difference this can make.

If you would like to sit down with our team to see how we might be able to help with restructuring your budget with a refinance, simply give us a call.

How a Mortgage Works when you Build a Home

Home Buyers Nathan Lawrence 11 Feb

Building a new home may seem like a complex and daunting undertaking but your mortgage doesn’t have to be. This particular blog post will discuss and highlight some of the key stages of a progress mortgage and what you should be prepared for.   A progress draw mortgage can be utilized under two different building scenarios:

1st:  A Self Built Home – You are acting as a general contractor and hiring trades.  You may also be doing some of the work yourself.

2nd: You’ve hired a contractor to build a home on a lot which you own and they require advances throughout the construction process.

A progress advance mortgage is exactly what it sounds like…rather than receiving your full mortgage in one lump sum, a construction mortgage is advanced in intervals as the house is being built. There are usually three or four draws (advances) at 19%, 45%, 75%, and 100% completion. Each advance will require a progress inspection report, which will note the percentage completed prior to the advancement of funds.

It is always important to meet with your Mortgage Broker anytime you are thinking about mortgages…but it is especially important when thinking about a Progress Advance Mortgage as there is a large number of details that need to be considered and ironed out early in the process.   For instance, the advances always happen at the end of a phase of construction.  As such, there may be expenses that you may need to carry until that stage’s advance is released.  This makes planning cash flow for your construction project very important.

So what are the typical stages?

Advance: Land/Foundation Preparation

The first phase of the building project is where you will be breaking ground to lay the foundation of your new home. Although some lenders will vary, typically during this stage the foundation is poured and back filled. Once complete, your Mortgage Broker will work with you to coordinate the inspection and advance.

Advance: Lock Up Stage

The second phase of the building project is called Lock Up.  This is when the structure is complete and the building can be locked up.  Meaning that the walls are up, roof is on, windows and doors are installed. Your progress inspection report will typically indicate that your home is 45% completed and you will receive your second advancement of funds.

Advance: Ready for Finishes. 

For the third advance stage, the house is ready for the finishing work.  So at this point, the dry wall is up, taped and mudded.  This means that everything behind the dry wall is done…insulation, wiring, plumbing, etc.  The house is ready for the final touches.

Final Advance:  100% Complete.

You’ve made it and survived!  That’s right, you are ready to move into your new home.  During the final phase, all of the finishing work has been completed.  The lighting installed, walls painted, flooring, cabinets and fixtures are all in and ready for you to use.   At this stage you will receive the final advance of your mortgage, completing the process with one final progress inspection report.

In closing…

Although there are many decisions to be made when building a home, such as choosing house plans,  trim,  paint, and so on,  we often do not put enough focus on the details of the mortgage. It doesn’t get the attention it demands because it is not as “exciting” as the rest of the process.  It is important to make sure that the time is taken to properly understand the mortgage process, advance requirements and the various stages.  If you understand this going into the planning and building stages, you will find that the process is much less stressful than it otherwise could have been.

It is also important that you build your team of professionals and that those professionals know who each other are.  Building a home involves more than just contractors.  You also need to ensure that your insurance agent, realtor, mortgage broker, and lawyer are pulled in at the right stage. They need to know who each other are in the event that they require specific details about the build. Doing your homework and putting the time in upfront to get everything organized will save you headaches during the build.

Happy Building!

Financial Stress During a Marriage Breakdown

Mortgage Tips Nathan Lawrence 3 Feb

When a marriage comes to an end, both individuals are left trying to pick up the pieces of their lives and find themselves feeling emotionally, physically, and mentally drained. People often describe feelings of fear, anxiety and hopelessness.  When children are involved thoughts about their future, lifestyle impacts and coping with loss can also play out in your mind. All of these feelings can become overwhelming without the right support systems.  One of the significant stresses that comes along with a marital breakup is having to deal with the financial affairs that require attention for both parties to move on.

During a marriage breakdown the biggest asset to address tends to be the matrimonial home.  The end of a marriage does not mean the end of homeownership.  A Mortgage Broker can help separating couples explore options:

The first option involves one of the partners taking over the current home and buying the other individual out of the property.  This can be done by refinancing the house to pull out some or all of the home equity.  Many people are not aware (mainly because not all banks/lenders offer the options), but by working with a Mortgage Broker you can gain access to lenders that allow refinances back up to 95% of the value of the home when going through a separation.  This can make taking ownership of the family home much easier.

The second option would be to reassess both of your application, sell the current home and then utilize the equity from the sale of the home towards the purchase of two smaller homes.  Giving both individuals the opportunity to gain a fresh start.

If you are facing a marriage breakdown, it is important to know that you are not alone and support is available.  The tough part sometimes is making the first step by picking up the phone or send off that email.  Our team of Mortgage Professionals understand the financial stresses that exist during a marital breakdown and we are here to help by providing timely and accurate advice on how to best handle your mortgage transition.