This is where your finance takes place

This is the right time to pay back your debts

Variable interest rates are starting to get very interesting. For a mortgage in Canada, there is about a 1% to a 1,5% difference between a 5 years fixed rate and the variable rate. This means that you can save almost 2K in interest charges for the first year on a 200K mortgage.

So if you can negotiate a 5,5% 5 years rate, you would probably get 4,25% variable rate (P-0,5%). If you can make monthly payments of $1000, you can borrow 162K over 25 years with the fixed rate or 184K with the variable rate for the same amortization. However, if you decided to take the power back from the financial institution, here is what you can do:

You can setup a global HELOC that will contain your variable rate mortgage. Therefore, as the months pass, you will decrease the amount owned (capital) and increase the available limit of your HELOC. This will help you out building an emergency fund in a form of a line of credit. On top of that, if you are really taking the power back, you will keep the same payment and reduce your amortization to 20 years and get the 162K loan with the variable rate instead of a 184K mortgage.

If governments are trying to stimulate the economy by reducing interest rate, it doesn’t mean that you have to be the sheep that goes to the credit card slaughter house. Pay down your debt while people are struggling.

This is also a perfect timing to consolidate your debt under a variable rate loan. You can verify with your financial institutions as many of them allow clients to convert their variable loans (mortgage or personal loans) into a fixed rate financial product in the future without any penalties.

Why are they doing so? No, it’s not because they are nice people (even thought some bankers are ). It is simply because fixed rates are always higher than variable rate. So anytime you want to convert to a fixed rate, your financial institutions profitability will increase.

So don’t let people tell you that you can buy more or bigger, take the power back and become a smarter (black) sheep

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Regardless the reason, we have to design plan and help people that don’t even want to hear about budgeting. This is where somebody came with the idea of establishing a cost of living for each client. It takes about 2 minutes to write down and you have enough information to design a solid financial plan.

So how does this thing work?

Quite honestly, it is so easy that it really sounds stupid:

- Write down your income

- Deduct your taxes (in order to have you net income)

- Deduct your monthly (or yearly) savings

- You now have your cost of living!

In order to avoid any headaches, you can also skip the amount you pay in taxes and look at your saving capacity.

How does the cost of living replace a budget?

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  While I thought I would not be able to keep up writing every day during the Holidays, I realized that I feel guilty of not posting anything on a weekday. On top of that, it is a pretty boring day at work! I checked my email this morning. I deleted three emails notification of transactions that went through my bank account without even taking a look at them. Why? Because I totally lost the count! I don’t know what came through and what is coming in the following days. I lost the balance on my credit cards and I have no clue what my Christmas budget look like.

 I always use MS Money in order to keep track of all my accounts; banking account, lines of credit, credit cards, personal loans, investments, etc. However, Christmas is such a hectic part of the year that I had a hard time pilling up all my bills so I can key them in at one point in time. Since Dec 20^th, it has been out of control! 

What can I do? 

The answer is simple; wait! I’ll wait until Jan 7^th and I will log into all my accounts and put them up-to-date in MS Money. Right now, there is no point of trying to go back in time and find out where my money went. It is just too much time consuming. Thanks to Internet, I will be able to get everything on track within a few minutes once the Holidays are over. In the meantime, I will concentrate on spending less, stop eating out and get back to my normal habits. I am sure that once everything is updated, I will find out that I busted in several budget categories! Oh well, I am receiving my bonus in a few weeks so it will compensate at that point! 

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