Talking Dollars and Sense

A few weeks ago, I was interviewed by a national newspaper (more details on that when the article comes out in February). The writer was looking at how the economy has impacted spending on renovations. Turns out HandyMan and I seem to be prudent and a bit of an anomaly. When we bought our house last July, we set aside a hefty renovation budget. We chose to make a smaller down payment and take on a bigger mortgage… in exchange, we’d be able to pay for most of our renovations in cash instead of taking out a loan to pay for them. We knew we’d be making changes right away and spending that cash in the short term so taking on a longer term loan + interest didn’t seem wise. Most other folks, it seems, take on loans or borrow against their equity to make renovations. With the slowing down of the market though, the question was whether a loan (interest rates are still relatively low) was still the financing source of choice for renovations?

I’m not sure what my neighbours are doing, but HandyMan and I will continue along our conservative track. By spending only what we have, and spending it slowly (we’re doing a room by room renovation), we’ve discovered a few benefits:

• We are able to save and contribute to the budget at the same time as we spend it
• We can earn some interest on what’s left in the budget
• We are better able to prioritize what we want to spend our money on and don’t feel the pressure to “do everything at once”
• We can take the time to find good deals

As the economy continues to worsen, there’s even more reason to keep to our plan. Losing our jobs is a small but growing concern so sticking to a cash budget minimizes our risk of not being able to pay down any outstanding debts. The housing market in Toronto has also slowed considerably… while houses in my neighbourhood still sell relatively quickly it is not the same as even six months ago with multiple bids and prices way above asking. One house on my street (exact same model) sold for 32% more than the price we paid 10 months earlier! I wonder if those folks are regretting their purchase now that prices have fallen back down to earth.

I’m guessing there are many others out there who have had to reconsider their renovation plans. Has the current economic situation affected you? Are you holding back on spending or not? Or do you consider your home a long-term investment and choose to spend now and reap rewards later?

Frugal Tips

Came across this article via shakhammer.com. Its got a good list of $ saving tips... and with the kitchen reno budget ever growing, I need all the help I can get!

Some of my favs:

• Unplug appliances you’re not using. Even if an appliance is turned off, it still uses a small amount of energy, if it’s plugged in. This is especially effective if you're going out of town.
• Have an energy audit performed on your home. Many electric companies offer energy audits free. You can call and have someone come out to your house and tell you about changes you could make to make your home more energy efficient.
• Keep your freezer full. It uses less electricity that way. If you have extra space, fill it with plastic water bottles.
• Put a half gallon water jug in your toilet tank.
• Reuse dryer sheets to dust electronics like the TV and computer screen. The anti-static in the dryer sheets will repel dust from your appliances.

On the energy audit front, HandyMan and I need to do some research on the government's ecoEnergy Retrofit program. Homeowners can receive up to $5000 a year by improving the energy efficiency of their homes and reducing their home's impact on the environment. Money in my pocket and saving the environment? How cool is that! Read more here to see if some of your own home improvement plans qualify.

Navigating the Financial Waters

Buying a house is not all sunshine and lollipops. Sure, its exciting to be moving into a new house, thinking about all the things you want to do to make it into a "home"- but even before you cross that threshhold into new home ownership, you need to swim through sometimes daunting financial waters.

HandyMan and I were lucky to stay afloat. The waters we were treading in were more like a tsunami about to hit... in a one month span, we had to renew the mortgage on the old condo, arrange for a mortgage on the new house, secure bridge financing for the gap, close the old condo, and deal with all the agent fees, lawyer fees, land transfer taxes, and adjustments that involved. Whew, I've never had to make so many financial decisions at one time! Pile on top of this all the mini-decisions you have to make -- should we get additional life insurance? What about home insurance - need to shop for quotes and get that arranged! How about closing costs...how much do we need to sock away? And we must remember that we need to have enough to pay two mortgages while we hold both the properties. It can be overwhelming...and I have a degree in Finance!

Luckily we have a great lender who guided us through this process. But I became accutely aware that its very important, as a couple, to be of the same financial mindset before you even start to talk real dollars and cents. People always say that you should have "the talk" (financial, that is) before you get married. I think it’s a definite must-do. People approach and value (no pun intended) money in different ways. You’ve got to figure out all those differences, and work through them, in order to come up with a financial plan that is best for everyone involved. The thing to remember too is that this is an ongoing team effort; you shouldn’t just put a plan together and then be okay with one person saying “Its okay dear. I’ll take care of the finances”.

I’ve heard of couples where one dies and the other partner is left knowing absolutely nothing about the bills or where the money is. In today’s information-rich society, I think it’s a shame since there is so much knowledge and expertise available to help make each person feel comfortable with the topic. So just like HandyMan and I will lay every tile and paint every wall in our new house side by side, so too will we lay down the foundation for a secure financial future together.