What to Do When Your Income Decreases

Facing A Reduction of Income or Wage Cut

First Published Date: December 19, 2015

When you are made redundant, there is usually some form of remuneration payment and the prospect, no matter how bleak it may appear at the time of further and new employment. For some, the lucky few, there is the encouragement of being told that your employment is secure, and that there is also the possibility of a pay rise or promotion further down the track. However, there are some who have been given an assurance of ongoing employment, only at cost of having to work reduced hours and for a reduced pay check at the end of each week.

Meeting the challenge of a reduction in pay is something that can bring out resourcefulness in many different ways.

The first thing that should be done is to make a complete list of what income is actually spent on each month. Often, by the simple process of listing and setting out in writing what each expenditure is, it will immediately be seen which are essentials and which, consistent with maintaining a reasonable standard living can be cut out, or pruned back.

Compare the total of this list with your total after tax income and you will have a precise amount, the deficit that you will have each month if expenditure remains at the same level.

Part of the expenditure will be fixed, in the form of loan or debt repayment. You can look at taking advantage of new lower interest rates by considering a debt consolidation loan, converting all your monthly debt repayments into one, lower interest rate, debt servicing repayment, against which you may be able to offset the interest charge even more by having the repayments made weekly instead of monthly, which can save years of repayments in terms of a home mortgage debt.

Charges for Utilities, and rates are often able to be paid on a weekly repayment arrangement if you make contact with the relevant authorities and inform them of your situation, rather than having to meet the entire cost of pre-payment in one lump sum.

Expenses associated with motor vehicles can be drastically reduced, and give you the possibility of a much needed capital sum, if you consider selling one of two motor vehicles and making use of public transport and  sharing the use of the remaining vehicle. For some, using public transport might mean that a private car is no longer needed.

Look at your savings – it is a good idea to keep some on call funds for possible emergencies – but there is no point in having funds in a savings account, earning little interest if you have high interest debts that you could use this money to repay, and so reduce your monthly outgoings.

Every voluntary expense can be looked at to see what can be discarded, and which will need to be reduced. Subscriptions can be cancelled. It is often tempting to reduce expenditure on food, but this can often be a mistake, as you will need to keep healthy and fit, and to have a lot of spare energy to survive a financial crisis

Two New Mid-Cap U.S. Equity ETFs

IShares Launches Two New ETFs

First Published Date: September 6, 2015

IShares Canada recently launched two new equity ETFs for Canadian. These ETFs will provide exposure to the mid-cap sector of the U.S. market.

XMC – iShares S&P U.S. Mid-Cap Index ETF MER 0.15% – XMC tracks the S&P MidCap 400® Index, which represents the mid-cap sector of the U.S. equity market made of diversified range of industries. XMC provides exposure to U.S. $, as this is unhedged. The index is made of 400 stocks and has greater exposure in the Financials, Information Technology, Industrial, and Consumer Discretionary sectors.

XMH – iShares S&P U.S. Mid-Cap Index ETF MER 0.15% – Same as XMC, but hedges currency exposure back to Canadian dollars.

More ETFs bring more choices and more exposure to diversified sectors. Always do your research and seek the assistance of qualified financial professionals before investing into ETFs or any investment products.

Are We Returning To Good Old Paper Money?

Cash Isn’t Dead

First Published Date: Aug 9, 2009

The past few years have seen a major change in the way we do things financially. More and more, we are seeing an economy that works away from the traditional methods. It used to be the case that shoppers would pay for smaller purchases with cash, and for larger ones with either cash or check, and as time went on with credit cards. As time has passed, however, there are many people who do not bother carrying cash with them and the check is now about as fashionable as velour flares. More and more, we are becoming a society of people who pay with plastic. Our weekly shopping is paid for by handing over a small rectangle of plastic and the funds are taken from our account directly.

This is a system that has taken off in no small part due to its convenience. Don’t have time to get to the ATM and withdraw cash on your shopping trip? Just hand over the plastic. Not sure how much you need to withdraw? Plastic means that the only money to leave the account will be the money you spend in the store. It’s convenient and saves on thinking. Initially it seems that it is the perfect way to do things. But this system does have its drawbacks, and people are becoming more and more aware of these and returning to good old paper money. If anyone out there is  hoping for the day when cash is entirely replaced by plastic, they probably have some time to wait. Checks may be playing less and less of a part in personal finance, but notes are still going to be used for a while yet.

The reason for this is that cash does allow you to take far more of a pro-active role in managing your money. One thing that has made paying by plastic problematic for people is that it makes it altogether too easy to spend money without really noticing. When the wages hit your account on pay day, you have a certain amount of money for the rest of the month. Paying your bills cuts away a fair section of that money. After other necessities are taken care of, you have your disposable income. Now, you wouldn’t be cavalier with the bills and necessary payments – but paying by plastic makes it all too easy to spend your disposable income, and that has to last for the rest of the month.

By withdrawing your disposable income in cash it becomes a lot easier to keep an eye on how much you are spending. Sure, you want your money to earn interest, so open a savings account and put some money in there. The rest of your disposable income can be kept somewhere safe and accessed whenever you need it. If you are keen to stick to a budget, it becomes much easier when you can physically see what you have for spending. Your plastic does not show you a running total as you use it, so the benefits of cash are surely clear. No, cash isn’t dead. Not by a long shot.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Aug 9, 2009.

Financial Cynicism or Financial Skepticism?

Looking to the Future

First Published Date: Aug 17, 2009

Reading the financial pages of the newspapers – both national and international press – has become something of an endurance sport in the past 18 months. Although there have been serious issues in need of being addressed, there must also be some acknowledgement that at a certain point, bad financial news reaches a level of saturation that makes everyone reading want to bury their head in the sand and shout “no more!”. This presents financial editors with a tricky conundrum. You have to report what’s going on, but when all you seem to be reporting is one hammer blow after another, does a point arrive where the coverage begins to dictate behaviour?

There is now a great deal of cynicism when any politician says that they can see the green shoots of financial recovery. Of course, there tends to be some cynicism when any politician says anything these days. It has become de rigueur to simply disbelieve a politician by dint of their occupation. It would be tempting to assert, although one must accept that statistics do not exist to back this up, that were a prominent politician to stand up and declare that it was sunny outside, 25% of any audience would look out the window for definitive proof before trusting that it actually was. This is how politicians are viewed by the general public in almost every country. It may not be ideal, but that’s how things are.

So it becomes doubly hard for governments to persuade their electorate that financial recovery is on its way, or already here. When a populace will refuse to believe the word of a politician on principle, overcoming cynicism becomes a Herculean task. Is this how it should be? A little bit of skepticism is surely welcome, but at what stage does skepticism become deliberate contrariness? At what point do we say “the media are saying one thing, the government another – I can only trust my own judgement.”? It seems that in this case, there is no time like the present. To clarify that, we appear to be on the cusp of a recovery which may, initially, be accompanied by limited growth or none at all. Waiting for recovery with growth to take off could mean missing the best opportunities. Get on the right bus now, however, and there could be excellent payoffs when your stop comes along.

As much as we like to make our own judgements based on a commendable grasp of the information in front of us, it should be accepted that we live in a world without certainties. No-one ever got rich backing sure things, but the markets are beginning to rise. Investing at this point may be the wisest step, because once the recovery has clicked into top gear it could be too late. It may not work out the way you hoped it would, but the same is true of any investment at any time – unless you are illegally well-connected. Be cautious and suspicious by all means, but don’t let opportunity pass you by.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Aug 17, 2009.

Brand Names Not Worth The Money?

Is Brand Name Losing Its Cool?

First Published Date: Aug 25, 2009

That brand names cost more than own-brand or budget ranges is not news to anyone. That this discrepancy can sometimes be quite marked is no more of a shock to anyone who is paying attention. And yet there still seems to be a thirst for the big names among shoppers. However it seems that in the new world which has been born out of the global financial crisis, the numbers of people voting with their wallets and choosing the cheaper option are increasing. Are we finally coming to terms with the idea that all those brand names amount to very little in terms of tangible quality? Or are people simply deciding to tighten their belts temporarily?

Go to any supermarket today and you will see that people are spending longer in the aisles looking for the extra few cents’ saving than ever before. These same people two years ago may well have instantly picked up the recognisable brand name and dropped it in their trolley without so much as looking. What is going on? Obviously we are in a recession, but this time it feels very different. Almost without noticing, we have suddenly become thrifty. It seems strange to say it, but it has almost become cool to be careful.

It must be said that there are some cases where compromising on quality for the sake of price is less well-advised than in others. We can all think of a few ourselves, but suffice it to say that thrifty shopping can become a false economy when we buy the cheapest line possible and end up throwing it out because it was inedible or made us need to go to the bathroom non-stop for a day. Such a strategy is almost doomed to fail and can sour a person on the whole concept of economising. However, there are cases where dropping from top-of-the-range to mid-range constitutes very little difference.

It is no myth that in blind taste tests we will often see a mid-price item out-performing its more illustrious rivals. Perhaps more often the big name will win out, but this is to be expected. After all, reputations are built over time. The better ingredients cost more, and in cases where the mid price item is more or less copied from the bigger name, they can never get it absolutely right. As a result, the consumer will often pay for the name.

If, however, you are making a concerted effort to leave aside the added expense of buying brand names all the time, it cannot have escaped your attention that sometimes the supposed “lesser brands” can be a bargain. Sometimes too, there is so little difference between the big brand and the little one in terms of taste that it is only social conditioning making us buy the big names. It may not be for everyone, but next time you are at the supermarket throwing in the brands you have always bought, why not go downmarket? You might find that sometimes the bargain buys are very much to your taste.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Aug 25, 2009.