Budget Sense

This is arguably the one ‘money saving’ activity that takes the least amount of time and effort. Literally one second! that is the time it takes me to check the ‘FGPnow!’ app on my iPhone to see where gas prices are heading for the next day.

If you are constantly wondering or asking questions like “where are gas prices heading tomorrow?” , “How do I know if I should fill up today or wait till tomorrow” then, well, there is an app for that!

FGPNow -which stands for ‘Future Gas Prices Now- is available for the iPhone, as well as a new versions for the Blackberry. The application’s usefulness is in the ability to access it from your mobile phone, thus having virtual access to gas prices at all times.  This way, you can make the most informed decision you can have as to whether you should fill up or wait.

The forecasting is very accurate and reliable, so you can base your gas purchasing decision on this very app. I have been using it for over a year now and I can confidently say it has saved me hundreds of dollars.  It may save you a dollar or two per fill-up or so, but remember, every bit helps and adds up.

If the application is predicting gas prices to go up, I may choose to fill up that same day before it goes up. And vise versa when the prediction is for the rate to go down. The application doesn’t just tell you the direction, it also tells you the exact amount the price is changing by. So if you really need to buy gas, and the application is predicting the price to go down by a mere 0.2 of a cent, then it is not really worth waiting.

While the original version covered only three Canadian cities, the newer version has many more cities, including: Calgary, Kamloops, Kitchener, Montreal, Ottawa, Regina, Toronto, Vancouver, Waterloo and Winnipeg.

The application also gives price forecasting for diesel as well, but only for select cities.

One feature I would like to see added is the ability to set ‘alerts’ of prices changes. For example, you can create an alert to be notified, through your phone or an email, as soon as the price for tomorrow becomes available. This should save you even more time.

Visit http://www.fgpnow.com to download for your iPhone or Blackberry

Your friends or relatives are visiting from out of  town, and you take them for dinner, movies and other fun places and by the end of the night, you have already blown your entire ‘personal and pleasure’ budget allocation for the entire week. To make matters worse,  it is only Saturday and you still have over a week till your next paycheck!

Life happens. As much as we preach about the importance of being disciplined and having complete control over your budget, you will inevitably go through circumstances that will force you to lose that control.  But this shouldn’t be the end of the world, nor should it make you give up on your budget altogether and forget about it. The fact that life can be unpredictable sometimes should be a reason for you to sit back and relax. Here are some effective methods on weathering such inevitable budget turbulence and storms, and bringing things under control again:

• Take a deep breath and acknowledge the obvious: It is not the end of the world. Using a ‘health and weight loss’ analogy, occasionally, you will hit these bumps and splurges. Nothing wrong with it, as long as you don’t go through them every week. Like we already said, life happens, and there is nothing wrong with that.
• Look at the big picture and adjust: how many days are there left in your current budget cycle? how much money will you need to borrow from your other budget categories? which category can afford to borrow from? if you go through these questions and take the time to answer them properly, you should be fine for the rest of the week, until the next paycheck.
• Skip or cancel any big spending events: are you planning to hit the mall in the next few days? thinking of making a big purchase? you should forget about these until at least your next paycheck, unless the purchase was already budgeted for or is not big enough.
• In extreme needs, use a credit card: although I don’t usually encourage the use of credit cards, I may be OK with it in extreme cases. And by extreme, I mean really extreme. A time where you really need to pay for something without a delay.   And be sure to pay it back right when you get your next paycheck, hopefully just a few days away. In this case, not much interest should accumulate, if any, since you are only a few days from your next paycheck.

At the end of the day, you should learn from it all.  At times like these, you will come to appreciate how budgeting helps organize your life.  While it may seem limiting, it is actually quiet liberating. If a budget didn’t exist, you could run into situations like these more often.  But even with a budget, you will run into these situations every now and then, but much less often. But it is OK, and you can easily bring things under control by following some of the points we outlined above.

Remember, if you don’t go through these tough stretches, you won’t learn much.

When creating our first budget, we have to realize that it is not the final version, and you will have to change and revise it as you go along.

There are a lot of things that you may not remember to include right away, and will only be brought to your attention later on. One of these things is ‘donations’

The thing about donations, you are not only helping others, it is also good for your income tax, helping you lower how much tax you pay or increase how much you get back.  As such, it is important to include them in your budget if possible.  Donations, besides RRSP, is a perfect example of a tax-deductible item in your filing.

Different provinces in Canada have different charitable donation tax credit rates. For example, in Ontario, for the 2010 income tax year, the first $200 in donations entitles you to 5.05% provincial credit, and 11.16% for amounts over $200.  Click here for rates from all Canadian provinces and territories.

Here is an example from CRA’s website on how donations can be calculated in your income tax:

Example of charitable donation tax credit calculation

Danielle lives in the province of Saskatchewan and donated $400 in 2010 to registered charities:

1. The federal charitable tax credit rate is 15% on the first $200 and 29% on the remaining $200. Her federal tax credit is therefore (15% × $200) + (29% × 200) = $88.
2. The provincial charitable tax credit rates for Saskatchewan for 2010 are 11% on the first $200 and 15% on the remaining $200. Therefore her provincial tax credit is (11% × $200) + (15% × $200) = $52.
3. Her combined charitable tax credit is ($88 + $53) = $140.

In other words, you are getting almost one third of what you donated,  as a tax credit or deduction. Not to mention, the social and charitable benefits of your donations.

When making a donation, be sure to get an official tax receipt from the organization that you are donating to. Ensure it has a proper registration number and that it is not a fraudulent one.  And like everything else, if it sounds too good to be true, it probably is. This applies to situations where you are promised returns much greater than what your donation officially entitles you to-according to CRA calculations.

Therefore, given all the good benefits of donations, set a certain amount in your budget for donations. Once you have set the amount, decide on which organizations or charities you will donate your money to. Personally, I have one or two fixed places that I donate to, and the rest will vary according to unforeseen natural disasters and the arising needs to meet the challenges by different charities.  Be sure to ask for an official receipt for every donation you make-no matter how small-and put it in your income tax folder for that year.

If you only make one or few donations a year, and don’t see a need to crate a whole category for donations, then you could incorporate it into another category. This could be your ‘Emergency’ category or even ‘Personal Spending’. Just remember to note it down so you can remember to make the donation and deduct it from the right category. Update: as I was finalizing this article, a very catastrophic earthquake and a resulting tsunami devestated Japan. This very unfortuate but coincedental event stresses the need for our budgets to have a room for donations. We have to be there for other people when in need and hopefully they will be there when we need them as well.

Inflation? what inflation?

It is mind-boggling that I still see people paying the full price on things like electronics, cars, clothing, books and lots more. And in some cases, not only do people pay full price, they pay premium. These people could have easily saved lots of money if they took the effort and looked around.  With so much competition from businesses for your money these days-with the exceptions of things like gas, electricity-you shouldn’t pay full price for anything!

These days, you can find savings and discounts everywhere you look. Whether it is electronics, books, clothing, food, savings are everywhere.  The first and best place to find them is online. Let us go through some of the channels where you can find savings and discounts on the items you are thinking of buying:

Weekly flyers: where I live, we get a bag full of flyers for more than 10 different stores, every Thursday evening.   I and my family make full use of these flyers. On average they save us $25-100 every week in grocery and other shopping. These flyers include food, electronics, hardware, auto parts and other general purpose stores.   If you get these flyers where you live, make full use of them and go through them. Chances are, you may find something you like, want or need on sale. Not checking these flyers before going grocery shopping is like blind shopping.  If these flyers are not delivered to you, no worries, you can simply find them all on flyerland.ca .

-Group Buying websites: websites like Groupon, DealFind, Canadian  TeamBuy and others, have made it easy for people to find a different deal on a different item everyday.  These companies look for businesses such as restaurants or beauty salons that are willing to give special deals and discounts to consumers. The group buying websites then feature one of these special offers from different companies on their website everyday.  Most of them make it easy and email you the offer as it opens.  Sign up with one of these sites and try them out for a few weeks. You may get offers that are of special interest to you and end up saving you lots of money.

Online auction and merchant sites: whether it is Ebay, Kijiji, Craigslist, or others, the competition for your money is massive and that can only mean more savings for you.  Using these websites, you can find new or used items, with the latter saving you lots of money, sometimes more than half of what you would pay for a brand new version of the same item. Other websites like Amazon have pioneered the selling of books and electronics at very affordable prices, usually a lot less than what you would pay for at regular stores.

Sign up for special store email offers: if you have a favorite store or brand, head up to their website and sign up for their special offers mailing list.  If you are not in a rush to buy a certain item from your favorite store, simply wait for the right time and offer before making your purchase.  Two summers ago, I was searching for a certain part for my car, but there was no urgency to get it right away. Being a recipient of special discounts from a local auto parts store, I finally got an email where the product I was looking for was discounted by about 40%, and that is when I made my purchase and saved a lot!

Twitter and Social Networking: Twitter is all the rage now, and it is a great place to find discounts on literally thousands of items.  Simply search for the product you are interested in, and chance are, you will find lots of results.  Twitter is quiet effective given its use of real time results, so the discounts and offers you find, are as up-to-date as possible. For more information about using Twitter to save money, visit our article here.

Special Community Forums: these days, it is all about the power of community and people coming together and sharing what special deals and offers they have come across.  In Canada, RedFlagDeals.com is a perfect example.  As you visit these websites more and more, you will find new discounts and offers on things that you may have never been aware of. You are taking advantage of the collective leveraging of a big community’s coming together and sharing money saving ideas.

Haggle and Shop Around: yes, you have heard this before. But there is a slight difference in what we mean. Let me explain.  We are still in tough economic times and are not out of the woods yet. This means companies are desperate to keep business going, by selling as much as they can. This often means lowering their prices to keep demand high. This all works in your favor. Look at prices for electronics, cars, books and clothing around you. Most of it have gone down in the last two years. Of course, it is not just the economy, other things like the high Canadian dollar is another factor working in Canadians’ favor.  The point is, businesses are still looking to keep afloat and survive the downturn, and they will do anything to sell products and services.  And as mentioned earlier, the competition from different sources is stronger than ever before.

More options means more savings: the availability of more than one place to buy what you want means more competition for your money. A perfect example is ‘travel packages’ You have at least 10 discount travel websites to choose from, not to mention all the other ‘last minute deals’ sites. With more options available to travelers than ever before, I don’t know why would anyone pay the full price or go with the first package they find.

The days of buying something from the first look are long gone. People should take full advantage of all the tools and channels outlined above to find special discounts and savings on the products they are thinking of buying. Doing your research will put lots of money back into your pocket.

The eventual objective of your budget is to have leftover money, after you have accounted for everything else. That is, you need to make sure that you are maximizing your income and minimizing your expenses. How? let us find out:

-Minimizing your Expenses

• Review your budget first: go over every item, line by line, and see which ones can afford some reductions.
• Find a better and cheaper insurance. This could save you hundreds of dollars a year. Better yet, if possible, bundle your home and auto insurance to maximize your savings.
• Cancel any entertainment or media packages you don’t need. Do you need your TV cable as well as a Netflix plan at the same time? Or, do you need two cell phone plans?
• Driving less or even commuting to work with others will save you money on gas.

-Maximizing your Income

• Sell something online: do you have any items, books, electronics sitting around that you could sell? list them on Ebay, Craigslist and you may be surprised to see how many people will express their interest in buying them.
• Working in a PT job: if you have a lot of free time, why not look for a PT job, one or two days a week?This will certainly maximize your earnings.

These were just some examples you can follow to minimize expenses and maximizing your revenues. You may think this is all common sense, and it sure is, but you may not be applying it to your life already. You need a reminder or to read about it before being able to actually applying it to your situation.

The more you maximize your earnings and minimize your expenses, the more money you will have left in your budget for you to enjoy and save. So it is worth taking the time to review your budget and finding areas to tackle for savings or reductions.

Although there are lots of variables to account for, and life changes can be unpredictable, your budget of the future should have a positive net income. In other words, as you move forward, your expenses should be brought under control and reduced, while your earnings are maximized. With some planning, you can reach this ideal situation.

The current uprisings in the Middle East, the latest and most dangerous of which is now raging in Libya, has made gas prices shoot up by some 7 cents per liter, in less than a few days. That is an extra $5 or so for every fill-up.  For some, this may still not be a life changing increase, but for others, it already is. It is making them drive less, spend less on other things to afford gas, and making other changes to their lifestyle.

With the future being uncertain, and not knowing when gas prices can go down again, what can you do about it? Here are some strategies, in addition to all the common ones, to cope with current high gas prices:

-Don’t fill up, just top up: With things changing everyday, so will gas prices. In general, they have been going up for the most part, although they could go down as well. In fact, with things moving so fast, and one regime falling after another, gas prices do go down once a stubborn regime or leader eventually falls.  When the Egypt uprising started, gas prices went up, and as the president fell from power, gas prices came down. But once the Libyan uprising started (a much bigger exporter of oil) , gas prices spiked back up, and very sharply. But you can bet that once the regime falls, prices should come down.

-Check gas price forecasting websites: if possible, and unless you need to fill your car immediately, make it a habit to check the various gas prices forecasting websites, to see where prices are heading.  I have been doing this for years now, way before the current Middle East uprisings, and has saved me hundreds every year. Simply check to see if the price will go up or down the next day. Depending on the direction it is heading, that is how you will make your decision as to when you should buy gas.  Check GasBuddy or Tomorrows Gas Price Today for gas price directions.

-Make use of your ‘sick’ or ‘off days’: it may sound crazy, but if you have long commutes, take a day off to stay home, relax or get things done. Again, if you have a long commute, and given the high price of gas these days, you will actually gain from this. Of course, this is assuming that you are a salaried employee and do have paid vacation or sick days. In other words, if you are going to take them anyway, why not take some of them now?

-Put off unnecessary long trips for now: as we mentioned, these uprisings are temporary, and gas prices should come down eventually, so try to reschedule any trips that involve driving for long distances and wasting lots of money on gas.

-Share a ride or take the bus: if you haven’t shared a ride or been on a bus in a long time, or ever, it may be time to do it now. It will save you money on gas, and is a chance to try something new. Find out who in your company lives close and coordinate with them to drive each other to work, and alternate every other day or week.

-Ditch loyalty in favor of a cheaper price: if you are used to going to a specific gas station to get their loyalty reward program points (i.e Airmiles), you may put that off for now and look for the station with the cheaper price. Where I live, there is a gas station that has no loyalty program, but the price is always about 3 cents cheaper than other more well-known stations with loyalty point programs. At 3 cents, you are looking at some 2 to 3 dollar per fill-up. And as per our ‘5 principles of Financial and Budgeting Success‘ , every bit helps, right?

With gas being a very significant item in your budget, it is important to stick to the amount you have allocated for it and not exceed it, even if gas prices have gone up sharply. By following some of the tips we have outlined above and careful planning, you will avoid any major hit from these spikes.