Talk Money to Me

Save Well, Spend Some, and Feel Good About Your Money

Kelley Keehn

• Publisher: Simon & Schuster
• Year: 2019
• ISBN:
  9781982117566
• Topic: Personal Development
• Subtopic: Personal Finance

Learn how to save and spend wisely, feel good about money, and start living a more balanced life. No matter your age, salary, social or relationship status, money is an important part of your life. Yet, somehow, talking about your money situation is hard. Why is it that you know more about what goes on in your friend's bedroom than with their bank account? Do you know if your parents have a will or if they'll leave a legacy? How many of your colleagues are still paying off student debt but are jet-setting around the globe on multiple credit cards?Since no one is talking about it, you can't be expected to learn how to manage your money on your own. With years of experience as a personal finance advisor and educator, Kelley Keehn will answer your most burning questions about money and will talk you through how to avoid mistakes along the way. You can gain control of your debt, learn to save for your future, have a life, and feel good about money all at the same time. And—spoiler alert—you don't need a budget to do any of this! You'll learn: -How to build good credit ( and get rid of bad credit—especially credit card debt)
-What all these dreaded acronyms mean and how they can work for you—TFSA, RRSP, RESP, CFP, CPP
-How and when to invest for your future
-How to talk about money with your partner—and everyone else in your life
-How to save for a mortgage and then work towards being mortgage-free
-How to have fun, splurge once in a while, and still save moneyWith her unique blend of empathy and no-nonsense candor, Kelley takes you through the basics of personal finance with relatable anecdotes that expose the most common money pitfalls—and how to avoid them—so you can make financial decisions that are right for you.

1 Cash or Credit?

Lately, I’ve been noticing that stores are starting to accept only credit card payments, which always makes me stop in my tracks. I remember when stores accepted only cash, but that already feels antiquated. I don’t think either extreme is in anyone’s best interest, but it does raise the question of how do you determine when to use cash and when to use a card. I hope you’re not paying for everything in cash, but as I will advise throughout this book, it’s best to find the right balance.

Ian has always been good at saving money. He had a part-time job throughout undergrad and worked full-time during the summers to save enough for tuition. He was always frugal, and as far as he knows, he did everything right with his money. His hard work meant he didn’t need to take out any student loans. Some of his friends already had credit cards, but he was not tempted by aggressive credit offers from banks—instead, Ian had a second card from his mom’s account that he could use in case of emergencies. Otherwise, Ian only used cash and debit cards. He bought something only if he could afford it.

Now, Ian lives with his friends but wants to get an apartment of his own with the hope that Crystal, his girlfriend, will move in with him. Unfortunately, he just found out that a landlord will be looking for a high credit score, and he doesn’t even have a credit file. Everyone keeps asking for a credit check, but he has no credit to check!

Crystal keeps hitting roadblocks on her own foray into adulthood as well. She doesn’t have enough experience yet to land her dream job, so she’s thinking of starting her own business as a freelancer. She needs some starting capital, but the bank has refused her a loan because she has no credit. Her cellphone is still on her parents’ plan, and she, like Ian, has never had her own credit card. She’ll need a car for her business, but now she’s wondering if she’ll even be approved for a car loan without this seemingly requisite credit.

WHERE THEY WENT WRONG

Growing up, Ian always thought that cash was king, but he is rapidly learning that is not always the case. While it still makes sense to use cash at points in your life, not having any established credit or access to a credit card will quickly limit what is available to you as you navigate toward independence. There will be several times in your life when it might not be possible to save up for what you want (or even need)—like a new house or a car, for example. There are also some things that cash simply can’t buy anymore.

While Ian and Crystal are doing all the right things to avoid accumulating debt, they need to think about their future. Obtaining credit and building a great credit score will help them now and in the future. Credit cards don’t have to create unnecessary debt, and the reality is that we are moving rapidly into a cashless society. Without establishing a strong credit history, it will be difficult to get approval for major purchases or rentals. Plus, there are several advantages to using plastic, especially if you pay your bills off fully and on time.

Misstep #1: Heading Out into the World without (Good) Credit

Good credit will afford you more than just being able to buy a snack on a plane throughout your life. By not having any established credit, Ian and Crystal can’t gain any independence. Their credit will be checked (and required to be good) time and time again—when Ian tries to rent his own apartment, when Crystal gets her own cell phone, and when they apply for their car and home insurance, for example. A poor credit score will impede both big and small goals. Thankfully, having no credit is not as hard to correct as having a low score. If you, like Ian and Crystal, are just starting to build a life for yourself, it’s important to understand the importance credit plays in Canada. You need to learn how to play the game effectively for you and your family’s future.

Misstep #2: Not Getting Your Own Credit Card

Ian had access to a credit card that looks like it is uniquely his, which he mistakenly thought was helping him build credit. However, it was in fact a supplementary card for his mom’s account—she can get as many supplementary cards as she’d like, which is often the case for spouses, children, or personal assistants. A supplementary credit card can be helpful if you want your child to be able to make emergency purchases. In Canada, you need to be eighteen to apply for a card, so someone who is underage can get a card only if it’s attached to an adult’s account, as was the case with Ian’s first credit card. Or perhaps you and your spouse love reward points and you’re consolidating your spending on one account to maximize the benefits and minimize account fees. This makes sense, but again, it’s important to be aware that only the credit of the primary cardholder will be impacted—positively or negatively.

Although it’s a supplementary card, Ian understandably thought that it was his own—supplementary cards will have your name on them, as well as a unique card number and PIN. However, Ian was not building credit in his own name. In fact, there’s no record of his card activity on his credit report. If you don’t apply for the card, its activity will not be reported on your credit file, which means it won’t help (or hurt) your credit. Unfortunately, this also means that if the supplementary cardholder racks up a bunch of charges, there are only repercussions for the primary cardholder. It’s important that you trust the person to whom you’re giving a supplementary card and that they’ll respect your limits. The good news is that you can cap how much your supplementary cardholder can spend. If you have a card with a $5,000 limit, for example, you can choose to get a supplementary card on your account with a limit of $1,000. You can of course also cancel the second card at any time.

If you, like Ian, are dependent on someone else’s account as the supplementary cardholder, you should work toward getting your own card to build a credit file and to use in case of emergencies, especially if you’re hoping to become more independent.

Misstep #3: Not Knowing When You’re Building Credit

Ian and Crystal didn’t know they had to build credit, let alone what contributes to a credit score, so let’s try to clear that up. You’ll pay a lot of bills over the course of your life, so knowing which ones contribute to building your credit is helpful. Here’s a handy checklist:

Bill	Does It Affect Your Credit Report?
Mortgage	Yes*
Line of credit	Yes
Credit card(s)	Yes
Student loans	Yes
Car loans	Yes
Cell phone	Sometimes**
Gas and electric	No***
Bank account	No***
Car, house, or tenant’s insurance	No
Prepaid credit card	No
Debit card	No
Supplementary credit card	No

*If you have a mortgage today, it should appear on your credit file and count toward your score. However, because mortgage payments previously weren’t reported, your credit file may not reflect mortgage payments.

**At the time of the writing of this book, only Rogers and Telus report your cell phone bills to your credit file.

***If you’re late making a bill payment, it can be listed in the “collections” section of your credit file. This will affect your score. If your payments are in good standing, the bills would not be listed on your file or affect your score.

Misstep #4: Relying Solely on E-transfers, Cash, and Debit Cards

By relying solely on cash and debit cards, Ian and Crystal are able to keep a close eye on their money and never have to rely on borrowed funds. What they don’t realize, however, is that there are benefits to paying with a credit card that could save them from unnecessary stress.

When you pay with a credit card, you can be confident that your purchases are safe thanks to the protection of your bank’s coverage. If something goes wrong with your purchase, an item doesn’t arrive, or there is any fraudulent activity on your account, you won’t be held responsible (so long as you adhere to the terms and conditions of your credit card agreement). Each bank and credit card company specify the period within which you have to report a fraudulent purchase—it can range from thirty to sixty days—so it’s always a good idea to check your account statements regularly. The benefit of purchase protection that comes with paying by credit card may outweigh the benefit of not borrowing money and paying by e-transfer, money wire, Western Union, Bitcoin, or another untraceable method.

As cash becomes increasingly scarce, I’d recommend that you be wary of making purchases where paying with a card is not an option. It doesn’t necessarily mean that you’re being scammed, but it is worth thinking twice before you make that payment.

THE SOLUTION?

There are plenty of reasons why you might be interested in building a stronger credit file: you’ve never had a credit card and are just starting out, you’re trying to repair and rebuild your own credit, or you’re just realizing you haven’t been building credit for years. There are steps you can follow to set a solid foundation, but there are no fast-track hacks. A slow and steady process will win this race.

For better or for worse, your credit score is fluid. Every month, as you do the right or wrong things, it will change. If your credit score is good, keep doing what you’re doing. If it’s not, be patient. With the right steps, you can dramatically increase your score within six months to a year.

Step #1: Get Your First Credit Card

If you already have a bank account, that’s a great place to start. They’ll tell you about the process to apply for a credit card—you’ll have to fill out an application form, provide photo identification, and go through a credit check—and you may be pleasantly surprised that you’re offered a card with little effort. If you get declined, you can find out why. Possible reasons include you have no credit or bad credit, or your income is not high enough to qualify. No matter the case, your bank should tell you why you don’t qualify and the steps you can take to rectify the situation.

If you don’t currently bank with anyone, then that’s your first step. If you’re a student, senior, entrepreneur, or new to Canada, shop around at different banks before applying for an account or credit. Many banks have incentives for certain demographics—students may get their bank fees waived, for example—so it’s worth the effort to do some research to find a bank with a mandate that suits your needs.

Finally, if you’ve only ever been a secondary cardholder, then it’s time to get your own card!

Do I Need a Secured Card?

If your credit score has taken a severe hit or you’re otherwise having trouble getting approved for a credit card, you may need to get a secure credit card at your bank or with a company like Home Trust or Refresh Financial. A secure card simply requires that you deposit money with the bank as a form of security for the bank if you’re unable to make payments. If you want to get a credit limit of $300, you would need to put $300 in the bank in advance. It sounds a bit like giving yourself a prepaid credit card, but as you make your payments on time, you will be establishing credit and can work toward getting a standard credit card.

If you’re looking for another way to repair or build credit, Capital One offers unsecured low-limit credit cards, which have an easier approval process and are ideal for those with a poor credit score or those just starting out.

As with all credit cards, you ideally want to use the secured card often and pay it off entirely by the d...

Table of contents

• Cover
• Title Page
• Dedication
• Author’s Note
• Introduction
• Chapter 1: Cash or Credit?
• Chapter 2: Shopaholic Anonymous
• Chapter 3: Leaving Money on the Table
• Chapter 4: All Show
• Chapter 5: The Car Trap
• Chapter 6: Sharing Is Caring
• Chapter 7: Burn Your Mortgage
• Chapter 8: Going Solo
• Chapter 9: The Sandwich Generation
• Chapter 10: The Pandemic and Business Ownership
• Chapter 11: COVID and Your Family Finances
• Chapter 12: Where Are You Now?
• Acknowledgments
• About the Author
• Glossary
• Notes
• Copyright