Pay yourself first. This tip, expounded by David Chilton in his classic book The Wealthy Barber, lets you save money even
if you hate to budget.
You ask your bank or employer to deduct a portion of your take-home pay. Then, you put it into an account that is
hard to tap.
Paying yourself works wonders, as I found after retiring our mortgage and directing the same amount into savings
each month. When confronted with a $5,000 dental bill last month, I had the cash to pay it in one shot.
Here are four more tips that can improve your financial wellbeing. All begin with the letter C.
Credit reports can hurt you.
Your credit granters are talking about you behind your back. What they say can hurt you when you need credit.
I once heard from a couple who were buying a house. At the last minute, their mortgage was turned down because the
wife’s credit history had been mixed up with a different woman’s credit history.
You want to know about potential problems before you apply for a new credit card, loan or lease. You will have time
to correct the misinformation before facing an urgent deadline.
My advice: Check your credit report every year or two. It’s free when sent in the mail. However, it costs money if
you require instant online access.
You can order a credit report, which you are entitled to under the law, from Canada’s two credit bureaus, Equifax and TransUnion.
Customer loyalty is worth a lot.
Large companies offer lucrative discounts to new customers. But they also want to keep long-term customers, who will
stay after the bargain hunters depart for juicier discounts elsewhere.
If you’re a loyal client, don’t let suppliers take you for granted. Call your banks, insurers and telecom companies
to see if you can get a better deal.
Check the deals offered by other suppliers. Then, ask your supplier to match these prices or give other concessions.
Never accept the first offer. Ask to be escalated to the loyalty or retention department, where staff members can do
whatever it takes to keep you if you’re ready to leave.
Be polite, friendly and non-confrontational. Stress your long-term loyalty and ask the supplier to confirm it. Just
a hint that you’re ready to defect may be enough to get you the better deal you want.
Contracts can be complex and restrictive.
Many of the consumer complaints I receive are about long-term contracts. They may involve mortgages, wireless
phones, fitness clubs, furnace plans, lawn care, satellite radio or antivirus software.
Many companies use verbal contracts agreed to by phone and recorded. Don’t assume you’re OK because you haven’t
signed a piece of paper.
If a telemarketer calls to offer a deal or an online marketer has a free special, always ask exactly what you’re
agreeing to before giving your final answer.
Is there a length of time you have to stay? What if you leave before the expiry date? How much does it cost to get
out early?
Watch out for contracts that can be renewed automatically each year without your express consent. Keep track of the
expiry dates and make sure to cancel with lots of advance notice if you don’t want to extend them.
Compound your investment gains, not your costs.
Mutual funds are a wonderful invention, allowing smaller investors to earn stock market returns without having to
buy and sell stocks on their own.
However, mutual funds can be expensive to own because of all the fees charged by intermediaries – such as fund managers, investment salespeople and custodial agents.
Mutual funds tend to trail the market index by two or three percentage points a year, an amount directly related to
their management costs.
Of every $100 worth of investments you own, you give away $2 to $3 a year to the professional managers.
This sounds like a trivial amount, but think of it another way. With $100 in a mutual fund that gains six per cent a
year (or $6), you pay $2 to $3 for the management costs. You actually give away one-third to one-half of the gain.
Companies love to talk about the magic of compounding investment returns. They don’t mention the flip side of the
equation – that you can lose much of your gains to the tyranny of compounding investment costs.
Check the management-expense ratios (MERs) of your funds. Are they higher or lower than average?
Consider switching to exchange-traded funds that follow a market index. They are cheaper to manage and cut your
annual costs to 25 or 50 cents on a $100 investment.
Finally, ask your investment advisers how they are paid. If they earn fees each year from the fund manager, ask them
to justify the services they offer. Make sure you get your money’s worth.
ENDEllen Roseman writes about
personal finance and consumer issues. You can reach her at eroseman@thestar.ca or www.ellenroseman.com
