Budget Sense

In a CGA-Canada survey, more than half of the people surveyed had no idea how much interest they were paying on their credit card balances, thinking it was 3-4% like prime rate!

How disappointing is that? Sure this may not be something that everyone of us know to the cent, but don’t people look at their statements to see what the percentage is or what they are paying on their balances? Such ignorance lead you to believe that people pay the interest on the balance without much thought.

This lack of basic financial knowledge is very worrying and could easily push Canada towards the same financial disaster that the US got trapped in during the 2008 economic melt-down.

The government of Canada recently introduced new rules for credit card companies that make it mandatory to include information about balance repayment. More specifically, on every credit card statement, you will find specific time details as to how long it will take you to pay the balance, assuming you keep on making minimum payments only.

It is astounding why our education system doesn’t pay more attention to this and offer more courses in basic finance and budgeting for students? I believe that giving high school students the basics of personal finance and budgeting will help them avoid the many costly mistakes that we make later in life.  Education and awareness about financial literacy is one huge step towards correcting our national dependence on debt and the problem of spending beyond our means.

It is best to teach something as important as this, early in life. We need our kids to pick up the right finance habits and attitude, so they are ready for the real world when they become adults and form their own families.

We have a whole new generation-falsely manipulated by banks and credit card companies-that has grown to almost believe that the money they use from credit cards is their own money. In other words “pay it now, and don’t worry about paying  it back later!”

One of the basic lessons that we have to teach every teen and young person, is the basic difference between a debit card and a credit card.  With the first one, the money you spend is your money. With the second one, the money you spend, isn’t your money, and you will have to pay it back with interest!
You knew that already? sure you do, but are you treating them as such? do you find yourself using your credit card more often to get points, only to forget to pay it back, thus accumulating interest?

Living beyond our means, aided by such things as credit cards and refinancing our mortgages, can only last for so long. Eventually, everything has to come down and every penny has to be paid back, with interest. So if having to pay back money that you didn’t have doesn’t bother you, how about adding accrued interest on top of that?

Of course, not everyone falling in the trap of debt is financially illiterate.  In fact, some know full well how the whole system of credit cards and the concept of borrowing works. The issue is with the whole notion of ‘instant gratification’, where we want everything now, regardless of whether we can afford it or not. And that could be even worse than being ‘financially illiterate!’

Enough being a kid when it comes to spending your money. Grow up and take charge of your finances, and while at it, help educate your family and friends too. They will thank you later in life!

It seems like the higher gas prices go, the more efforts we exert to try and find ways to save money on it. We have to, unless we have infinite supply of money or our cars run on some futuristic solar energy source.

There are lots and lots of websites out there, offering different tips on how to save gas and make your car more fuel-efficient. You know them, ‘drive slower’, ‘don’t idle’, ‘use the AC sparingly’ and so on. But I am sure we have heard all of these and most of us are applying them. But is there anything else we can do to maximize our fuel savings and efficiency ever more?

There is, in the form of a book by Jim Davidson: “75 Ways to Save Gas.“

Jim Davidson, a Canadian author, offers 75 tips and explains each one of them and how it can save you money on fuel. For example, we often hear that to save gas, you have to drive slower. But what it the reasoning behind it? Jim goes into details explaining this and the ideal speed at which to drive and which speeds at which-and beyond-do you waste the most gas. The more we know about how applying a specific tip helps save on gas, the easier it becomes to apply it and get the intended objective from it.

For each tip presented, the author gives a percentage of how much you will save from applying that method. For example, one of the tips offered is to use ‘synthetic (factory-made) oil.’ By doing this, you can save up to 10% on gas.

It is interesting that one of the tips presented is to ‘sell your car for a more fuel efficient one’ which we have written about here on Budget Sense recently.

Not everyone of the 75 tips may make sense or sound appealing to everyone. You may disagree with some of them, and by all means, you don’t have to apply all of them. But I can almost guarantee that if you read every tip in this book and apply the ones that make sense-or at least experiment with them-you will end up saving on gas.

These days, with gas hovering around $1.50 per liter in Canada, and some 4 dollars per gallon in the USA, any savings we can get is a good thing for our budgets.

-You can buy the book on Amazon.com or at your local book store.

I don’t know when will people realize that oil is in an ever declining supply, and as a result, gas prices will only go up. So why do we have to wait for a hurricane, middle east unrest or other unforeseen events to make us realize that gas is too expensive and we just can’t afford it anymore?

It is time you did! I am telling you now, the general future trend for gas prices is to keep going up. Until a substitute becomes available and in mass production, but that day is at least a decade or more away.

Having said that, ‘fuel efficiency’ should be your top priority when making your next car purchase decision. In fact, I will go as a far as recommending that you replace your car with a more fuel efficient one, if your current one is breaking your budget.  In other words, you may need to act now.

Think about it. The difference between how much gas a car consumes compared to another could be in the hundreds of dollars monthly. If that is not enough incentive for you to look for a fuel efficient car, I don’t know what is?

Once you have made up your mind that you need to get or replace your car with a more fuel efficient one, it is time to do a thorough research on what is available. Settle on three cars and then compare their fuel efficiency as well as other features. For each car, try to find at least three drivers that drive the same car and ask them about fuel efficiency and take an average. Or you can use a community website like http://www.fuelly.com to get more input from hundreds of drivers about a specific car fuel efficiency.

Just before you make your purchase, be sure to check your insurance rate for the new car. You don’t want to find out after you bought the car that you will be paying a lot more on the new car, which could make your saving on fuel pointless.

If you can afford them, and if you plan to keep the car for years and make good use of it, then consider a diesel or even a hybrid option.

Enough worrying about how many cup holders your future car holds or how shiny the rims look. While it doesn’t hurt to have these options, they should take a back seat to that of how fuel efficient your new car will be.