First Credit Union

Three Job Interview Mindsets

~ Jessica ~ 1 Comment

It’s the night before the interview. Your outfit is all laid out, your resumé is hot off the press and you’ve Google-Mapped your route. You’ve done your company research and you’ve practiced answering the tough questions. You are perfectly prepared—and you still feel like a nervous wreck.

That’s because, although we’re generally pretty good at anticipating and preparing for external challenges, we tend to be somewhat less great at anticipating internal challenges. We spend a lot of time thinking about what we need to communicate to our interviewer, but we don’t take much time to think about what we need to say to ourselves while navigating the interview process.

Even the most straightforward job interview is mentally demanding. You need to be alert and primed to listen. You need to think on your feet and be quick to recall relevant examples and experiences. You need to gauge your interviewer’s reactions and adapt accordingly. And while your brain is attempting to process all of this, you still need to smile and act naturally and somehow maintain a basic level of ease and confidence. It’s a tall order.

Luckily, there are a few observations you can make that will help ease the pre-interview jitters. If you’re looking for some nerve-calming, confidence-boosting thoughts, consider the following approaches to your job interview. Read them, reflect on them, journal about them—whatever it takes to make these concepts accessible to you throughout your interview preparation process. Along with your list of references, extra copies of your resumé and cover letter, and a stash of breath mints, here are three helpful mindsets to take with you on your next job interview:

  1. Your nerves are a sign of your excitement

It’s not uncommon for a friend or family member to say “Hey, don’t be nervous!” before a big presentation, performance or competition. The trouble is that this comment can make you feel even more nervous than you did before. Sometimes, the attempt to discount or ignore feelings of anxiety just ends up heightening them. Instead, it can be helpful to acknowledge the presence of that nervous feeling, to explore it, and then to reframe it as something positive. Instead of interpreting your anxiety as a fear of failure, you can choose to interpret it as genuine excitement. Maybe you’re nervous because, deep down, you know how potentially life-changing this opportunity is. Perhaps beneath the nerves, you can see all the good things that are waiting for you on the other side of a successful interview. In a recent study by Harvard Business School psychologist Alison Wood Brooks, it was found that reframing anxiety as excitement improved study participants’ performance in high-stress situations. So, the next time you feel your heart rate rising and your hands clamming up, see it as a signal that you’re excited for what’s to come!

  1. Your interviewer is secretly rooting for you

In the stressful time leading up to a job interview, it’s easy to picture your interviewer as an antagonist. You might imagine them trying to catch you off guard, trying to make you look dumb or deriving some sort of twisted pleasure out of exposing your weaknesses. The truth is that your interviewer wants you to do well—in fact, they’re hoping you’re the perfect candidate for the job. Take a moment and put yourself in your would-be employer’s shoes: hiring someone new can be an expensive, frustrating and time-consuming process. At this point, your interviewer may have already paged through hundreds of resumés  and conducted dozens of interviews with no end in sight. Your interviewer wants you to walk in and be the obvious choice. Consider that you are not in some sort of competition with your interviewer—a successful interview for you also counts as a success for your interviewer. Though it may not seem obvious in the room, your interviewer is your biggest (secret) cheerleader, so approach each question as an opportunity to highlight why you are, in fact, just what the company has been looking for.

  1. You get to decide whether or not it’s a match

It’s easy to stress about things you can’t control, which is yet another reason why job interviews can jump-start your anxiety. There are so many unknowns in the process (What will they think of me? What questions will they ask me?) that it’s hard to feel that you have any power in the interview at all. It’s important to remind yourself that, although uncertainty is a natural part of the job hunt, you do have some control. The interview is a chance for you to evaluate your potential employer at the same time your interviewer is evaluating you. Don’t be afraid to flip the script and ask your interviewer some questions. Ask about the biggest opportunities and challenges facing the department you’re interviewing for. Ask about next steps. Ask appropriate questions that will help you assess whether or not the company is a good match for you. Flipping the script gives you a turn at steering the conversation and serves as a little reminder that there’s more to a job interview than simply pleasing others—you’re also looking to create a fulfilling opportunity for yourself.

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In preparing for a job interview, it’s easy to focus on how you’re meeting others’ expectations of you, instead of considering what expectations you have for your next job and future employer. The three mindsets outlined above serve as gentle reminders that, despite its unknowns and stresses, the job interview is ultimately an empowering experience that brings you closer to your career goals, and your life goals.

10 Years of Giving Back to Bowen Island

~ kevmanning ~ Leave a comment

My how time flies! Friday June 9th will mark the 10 year anniversary of the Bowen Branch of First Credit Union. I have been working for this branch since the beginning, and what still impresses me to this day is the credit union mandate of channeling profits back into the community. Though it took some time for our little branch to become profitable, First Credit Union still gave so much over the years—sponsoring local events, awarding local youth and donating to local non-profits. I believed in this credit union difference, knowing it would gain the support of our island community. Although we opened nearly 600 accounts in that first year we only had a few million in loans, but that began to change steadily. The people of Bowen got behind us and through their incredible support our ability to give back grew.

Bowen-Blog

I am so proud of all we have achieved and our continued presence as a top corporate citizen, community supporter and champion of our island culture and economic progress. Because of the wonderful support we receive from the community, we are able to give back each year in more and more meaningful and impactful ways. Today we have nearly 1800 accounts, 45 million in loans and 35 million in deposits. Our financial planner also has a significant book of investments on the markets. We have been able to improve the financial well-being of countless individuals and businesses on Bowen. As our support from the island grows, so does our contribution to the community – a wonderful formula!

To celebrate 10 years of giving back we are going to have a party at the branch on June 9th. On top of free food, beverages, balloons and entertainment, we will also be holding a fun contest to win one of ten $100 gift certificates to the Bowen Island business of the winner’s choice (open only to members)!

Come by on Friday, June 9th from noon until 2:30 pm for free lunch, listen to our very own Estella Woo perform, try and win $100  towards one of our many fabulous businesses, and celebrate 10 great years of giving back to the community of Bowen Island with us.

See you there!

Kevin Manning, Branch Manager
First Credit Union  |  Bowen Branch

Use Psychology to Build a Budget You’ll Stick With

~ Jessica ~ Leave a comment

When you start looking for financial advice (or any kind of advice, for that matter), experts will share their take on what’s “good” and what’s “bad”. In personal finance, there are some classifications that we can all agree on: Debt is bad. Emergency funds are good. Overdrawing your account is bad. Earning interest on your savings is good.

Aside from the obvious examples, the guidelines are a bit murky; plus, the financial advice gurus often contradict each other. One expert will tell you that spending money is “bad” and saving money is “good”. The next will say that saving money is “bad” and investing it is “good”. Another might tell you that there are some “bad” investments and some forms of “good” debt.

If you’re waging an inner battle of good vs. bad every time you whip out your credit card or peek at your monthly bank statement, it’s probably time to give your views on budgeting a shakeup. Start by losing the desire to classify everything as “good” and “bad”. There are good and bad ways to spend money, just as there are good and bad ways to save it. Following that logic, there are good and bad ways to budget.

A good budget is one that, quite simply, works for you. It allows you to meet your needs and plan for your goals, and—most importantly—it motivates you to keep on budgeting. Successful budgeting systems vary wildly in their approach and in the tools you need, but they tend to have the same three actions as building blocks:

  • PRIORITIZE
  • TRACK
  • REWARD

These building blocks not only help you organize your finances, but they also have the ability to boost your motivation (and there’s real science to back that up). Read on to see if your current budgeting system has all three building blocks in place.

  1. PRIORITIZE

What it means: Prioritizing your goals means taking a little personal reflection time and writing a few things down. Prioritizing your goals should not be confused with categorizing your expenses—we’re not talking about combing through your budgeting spreadsheet and pondering whether “fast food” and “takeout” should be combined into a single category. We’re not even talking about what you think you “should” be saving up for. No, we’re talking about your goals. What do you want your life to look like over the next few years? Is it your dream to train for a new career? To have an adventure in a foreign country? To throw an awesome wedding? To start your own business? To raise a family? Allow your goals to be a judgment-free zone—goals and dreams are as diverse as the minds and personalities behind them. In most cases, goals reach beyond the familiar trifecta of “pay off student loans, buy a house, save for retirement”.

Why it works: Prioritizing your goals gets you buzzing about what your money can do for you. There are a couple of motivating factors at work here. Number one: by prioritizing your goals, you are asserting your beliefs and your values. You are also reminding yourself of why you’re willing to adopt a budgeting system in the first place. Studies show that you’re more invested in activities that you see value in—and although budgeting literally deals with values (the dollars-and-cents kind), including your personal values in your budgeting system is what generates determination and stamina. Creating and sticking to a new routine is a pain if you think you have to or you should do it; it’s a lot easier if you’re mindful of why you want to do it. Number two: prioritizing your goals is a great starting point because it reminds you that you’re in charge. You have a say in where your money goes. Social scientists point to autonomy as being a critical element to sustain motivation—and what’s more autonomous than realizing that your budget is a collection of choices you make in order to create the life you want?

Get started: Grab a pencil and paper. Ask yourself what you want. Think about it for 10 minutes. Write the answers down. Realize they are achievable.

  1. TRACK

What it means: Tracking your expenses means being aware of where your money is going as you spend it. This is the part where financial advice experts start to disagree again: some swear by tracking your expenses with good ol’ pencil and paper, others swear by budgeting apps and spreadsheets, and some push more unique approaches like portioning your spending money into envelopes. The good news is that it doesn’t really matter how you go about doing it, but just that you do it. When you track your expenses, a couple of things come to light right away. You start to realize that every transaction, no matter how big or how small, is either contributing to a goal or taking away from it. There’s no such thing as “buying a pumpkin spice latte just because”. You will soon see that the cost of your fancy coffee comes out of somewhere—ideally out of your budgeted spending money, but potentially out of your vacation fund or your groceries or your student loan repayment plan. The second thing you’ll notice is that the longer you’ve been tracking your expenses, the more you’ll see evidence of your progress.

Why it works: Yet another critical element in sustaining motivation is competence, or your ability to do something well. As it turns out, we thrive on being reminded that we’re improving. On the surface level, tracking your expenses helps you to identify your spending patterns and to course-correct when necessary. More importantly, by tracking your spending, you’re also tracking your efforts. You’re creating a record of your progress along with a record of your transactions. Before long, you’ll have tangible evidence of how your actions and your follow-through are contributing to a calmer, happier financial life. You’ll see how capable you are of budgeting. You’ll find it easier (and even exciting) to keep your budgeting winning streak going.

Get started: Try out a new budgeting system today. Browse the App Store or do a quick web search, or pick up a book on the topic. Don’t spend much time evaluating or comparing budgeting approaches. Just pick one and try it out.

  1. REWARD

What it means: Rewarding yourself means encouraging and celebrating your progress as you create healthier financial habits. Don’t be afraid to use some creativity when defining your personal finance milestones and rewards. Milestones can be time-based (e.g., using a budgeting app every day for 30 days), achievement-based (e.g., paying off all credit card debt) or increment-based (e.g., having your emergency fund reach $500, $1,000, $2,000…). Rewards can take on many forms as well; material rewards are the most common, but consider incorporating time- and experience-based rewards into the mix too (for example, you can list “permission to spend an entire day just vegging out” as a reward).

Why it works: Quite simply, rewards feel good. They highlight our achievements and renew our commitment. As kids, we loved earning those gold star stickers, and although that familiar achievement/reward structure practically disappears in later years, it doesn’t mean that rewards are any less effective in adulthood. By assigning rewards to the milestone of any given goal, you’re creating added incentive and boosting your motivation. When you earn, claim and enjoy a reward, your brain gets an extra hit of dopamine, which in turn increases your focus and drive.

Get started: Set a timer for 10 minutes and brainstorm two lists: a list of budgeting milestones and a list of possible rewards. After the 10 minutes are up, assign the rewards to your milestones. They should reward your effort realistically and be super exciting to work toward at the same time. When you reach your milestones, claim your rewards.

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The act of creating a budget contributes to your ability to follow it through. It solidifies your values, it promotes competence and it highlights your achievements as you work through it. Incorporating Prioritize, Track, Reward into your budgeting method of choice will boost your motivation while tackling your personal finance goals at the same time.

The Credit Union Lady, 1914-2017

~ Jessica ~ 1 Comment

It is with heavy hearts that we share that Ruth Allan, known as ‘The Credit Union Lady’ has passed away at the age of 102. Ruth affectionately became known as The Credit Union Lady while administering the School Savings program for First Credit Union, formerly known as Powell River Credit Union, beginning in 1957. After 23 years, Ruth retired from the School Savings program in 1980. More than 35 years after her retirement people still stopped her in the community to recount their memories of her and those School Savings program days. It was a legacy she cherished. Central1 captured the essence of Ruth’s story as ‘The Credit Union Lady’ in this short endearing video released last year.

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Ruth’s impact on the lives of thousands of children was significant and long-lasting. In First Credit Union’s 76 year history no one has influenced the lives of so many or been remembered so warmly; her spirit will live on in the hearts of those she touched.  In honour of her impact and her significance in First Credit Union’s history, a $1,000 scholarship will be introduced in her name. The Ruth Allan Scholarship will be awarded to a member in grade 12 in the Powell River area who has demonstrated the capacity to save for and contribute to the cost of their education, and who has made a commitment to making a difference in the lives of others.

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Image of 3-year old Phil Carriere and Mrs. Ruth Allan with other children from Kelly Creek School, 1963. Photo provided by C. C. Searle Photographs.

 

 

History of How “The Credit Union Lady” Came To Be

(Sourced from: Start Small, Dream Big – The 75 Year History of BC’s First Credit Union by Linda Wegner):

Following the death of her first husband, Ruth Allan and her two sons moved to Powell River to be near her sister. Her first jobs in Powell River included being employed at a local five-and-dime store, at Powell River Paper during World War II, and later, in the Mill’s paper plant. She remarried into a family of credit union members and consequently joined the Powell River Credit Union in 1949. Ruth was once again widowed when her second husband, Peter Alton, died in an accident at the Mill. A daughter had been born to the couple and now Ruth was left to support herself and her three children.

Ruth was asked if she would like to take over the School Savings program in 1957. Ruth recalls the Directors of Powell River Credit Union visiting her to ask if she was interested. It was an opportunity that proved providential in meeting her financial needs and demonstrated yet more evidence of the commitment of the credit union to care for its members. “It was absolutely perfect for me, being able to be home when my daughter came home from school”, explained Ruth when interviewed for the First Credit Union’s 75th anniversary book.

Ruth’s daughter Evelyn recalls that being the child of The Credit Union Lady carried  responsibilities. “Everyone in town knew her and if I was bad they’d tell on me; I could get away with nothing!” she said, laughing.

When she first began with the School Savings program, each student had a card with their name on it. When students brought their money, the appropriate card would be pulled and deposits recorded by hand. With the assistance of other volunteers, Ruth’s responsibilities included visiting ten schools each week. Ruth remembered many good things about her time with the School Savings program including the little boy who used to come, barefoot, across the field to bring her his nickel. Ruth attended his graduation and saw him go off to university.

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At First Credit Union’s anniversary, one former student fondly shared Ruth’s impact on her life. The student developed the habit of saving through the school program. She would bring her twenty-five cents to school each week and saved enough so that when she got married, she had enough money to purchase her husband’s wedding ring.

 

Ruth, The Credit Union Lady, remained as administrator of the program for twenty-three years and a passionate First Credit Union member for the duration of her life. She will be greatly missed, and fondly remembered for her legacy as The Credit Union Lady.

 

Keep or Toss: How Long Should I Hang Onto My Financial Documents?

~ Jessica ~ Leave a comment

Every year, it’s nice to do a bit of “financial spring cleaning” and declutter your filing cabinet, your desk drawers, and the various hiding places where miscellaneous scraps of paper tend to accumulate and multiply. Read on to find out what you should be saving, and what’s OK to shred.

Keep forever

If you’re long overdue for some organization in the paperwork department, start here! This category includes all the super-important life stuff that’s usually issued to you only once (and therefore is total pain to replace):

  • Birth and death certificates
  • Social Insurance cards and ID cards (even expired versions)
  • Passports (even expired versions)
  • Marriage licences and divorce decrees
  • Copies of wills, trusts, and powers of attorney
  • Adoption papers
  • Records of paid mortgages
  • Safe-deposit box inventory

 

Your “keep forever” documents should be kept in a secure place. A locking file cabinet in your home is a popular choice, but consider upgrading to a safer alternative, such as a fireproof safe in your home or a safe-deposit box at your credit union or bank. Also consider scanning these documents and having them backed up on the cloud (and password protected, of course) so that you can access them remotely and quickly in an emergency.

Keep for 6 years

This category includes all supporting documents for your income tax return, plus a couple of other odds and ends. This may seem like a long period of time, but it’s not an arbitrary number—6 years after filing a return is how far back the Canada Revenue Agency (CRA) can go to audit a tax return.

An audit is an evaluation of your tax return to verify its accuracy and to ensure compliance with tax laws. Many people associate being audited with having committed tax fraud or some other shady financial behaviour but, in fact, a number of taxpayers are audited on a random basis each year. If audited, you are required by law to provide the documentation that supports the claims made in your tax return. In some cases, additional information may be required in order to verify a claim you’ve made—it might just be a matter of providing a cancelled cheque, a receipt or a bank statement. In other instances, the audit may take place on-site (meaning at your residence or workplace) or at a CRA office. Being well-organized is the best way to make the process as quick and painless as possible.

So, what sorts of documents should you hold onto for 6 years?

  • Income tax returns
  • Any forms that support income or a deduction on your tax return (e.g., receipts, cancelled cheques, T4 slips)
  • Records of selling a house or stock (documentation for capital gains tax)
  • Records of paid-out loans
  • Records of sold investments
  • Mortgage documents
  • Medical records (including bills, prescriptions and health insurance information)

Keep for 1 year

This category mostly consists of monthly statements. A good rule of thumb is to keep your monthly statements for the current year, and then shred them once you’ve reconciled them with an annual statement. The exception is any statement needed for tax purposes—those get grouped into the “keep for 6 years” category.

  • Bank statements
  • Pay stubs
  • Quarterly investment statements
  • Cancelled cheques

Keep for 45 days

  • Credit card statements

Shred credit card statements after 45 days, but hang onto those statements that you may need for business, for taxes, as proof of purchase, or for insurance.

Keep for 30 days or less

  • ATM slips
  • Utility and phone bills

ATM slips can be tossed once you’ve checked them against your monthly bank statement. Utility bills and phone bills can be shredded after you’ve paid them, unless they contain tax-deductible expenses.

Keep as long as active

This bonus category is a catch-all for agreements and contracts that are active for varied amounts of time:

  • Warranty information
  • Insurance documents
  • Vehicle titles and loan documents
  • House and mortgage documents
  • Pension records/retirement plans

You’ll want to hang onto the records in this category for at least as long as you own the asset. For major purchases, stapling the original purchase receipt to the user manual or warranty information will keep everything in the same spot, should you need to make a warranty claim. Documents relating to improvements and upgrades on your home or vehicle should also be saved alongside your title and loan papers.

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Sorting through financial documents is a pretty straightforward process once you figure out how long you need to hang onto specific types of documents. Doing a periodic cleanup will save you time and hassle in the long run, and will keep your desk drawers and filing cabinets clutter-free in the meantime!

We’re Hiring!

~ Jessica ~ Leave a comment

admin-assitantAre you or is someone you know looking for an administrative role with a great organization? We are searching for an awesome new member to join our team as Administrative Assistant at First Credit Union in Powell River!

Do you…

  • have great organization skills?
  • work well independently?
  • exercise good judgement and communication expertise?
  • have post secondary education in office administration?

Our Administrative Assistant position might be the perfect role for you!

Check out our latest posting to apply or for more information.

Finding The Loan That’s Right For You

~ Jessica ~ Leave a comment

Loans help finance some of our biggest goals in life. They can provide access to possibilities that we can’t afford upfront—possibilities like going to school, buying a home or starting a business (to name just a few).

A loan is also one of the biggest financial commitments we make in our lifetime. Rushing into a loan without fully understanding how it will affect your budget can create a very stressful situation that can quickly spiral out of control.

The good news is that you can avoid this stress entirely by choosing the loan that’s right for you: a loan you can afford, from a reputable lender, with a payment schedule that makes sense.

Not sure where to start? The five tips below will help you shop smarter for the loan that’s right for you.

#1: Take your time

Reading the fine print is not fun, researching loan options is not exactly exciting and asking financial questions can feel intimidating—but these all play an important part in helping you find the right loan product. The process is not easy, and if you’re tempted to rush through it, just remind yourself that being thorough now can save years of financial stress down the road. You should never feel pressured to sign anything on the spot. Remember: this is your loan and your future—you’re in control!

#2: Be honest about your budget

In order to choose the right loan, you need to have a clear idea of how much you can comfortably afford to borrow. Spend some quality time with your budget (if you don’t have one, now is a great time to make one). You’ll want to come up with a range, so calculate a few different scenarios:

  • If your income and expenses stay exactly the same as they are now, how much of a monthly payment could you afford?
  • If you suddenly lost your job, how many payments could you make before running out of cash? Do you have an emergency fund in place?
  • Is there an area of your budget where you can reduce spending to cover a planned (or unplanned) increase in your monthly payment?

Picturing your loan payment alongside your other budget items will give you a sense of what you can realistically afford so that you can confidently shop for a loan without worrying about the financial effect on your lifestyle.

#3: Give yourself some credit

Your credit score plays a huge role in determining the loan rate you qualify for. Additionally, knowing your credit score before you go loan shopping will save you some time by making it easy to weed out offers you’re not eligible for. In the meantime, keep up those good credit habits: pay your bills in full and on time, and try to use only 10% of your available credit limit each month.

#4: Do some research

Start with brushing up on some basic loan terminology and then move on to learning about different types of loans (such as secured loans, unsecured loans, fixed-rate loans and variable-rate loans). Research loans online to get an idea of the interest rates for the products you’re interested in. When comparing various loans, look at more than just the Annual Percentage Rate (APR). Consider the fees, the payment schedules, the eligibility requirements, and the application and approval process. Also, check out the history and reputation of the various lenders—especially if you stumble upon offers that seem too good to be true.

#5: Check in with your credit union

Credit unions are known for offering competitive rates on loans. You may also qualify for discounts based on your existing membership or because you have other banking products with your credit union.

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Once you’ve done your research and you know your budget inside and out, then arrange to meet with a loan officer. And bring a ton of questions with you! Don’t be shy—ask about any wording you don’t understand. Ask for your lender’s opinion and ask if they’ve worked with someone in a similar situation as yours. To really put your loan in context, ask a variety of “What happens if…?” questions:

  • What happens if I miss a payment?
  • What happens if I default?
  • What happens if I want to pay off the loan faster than expected?
  • What happens if I pay weekly instead of monthly?

The most important thing to remember is that taking out and repaying a loan is not intended to be a stressful experience—it’s intended to make large purchases or investments affordable for you. It’s easy to get sucked into horror stories about things like foreclosures and student debt, but a little knowledge and preparation will make your own loan story a lot happier and a lot less dramatic. So study up, focus on your specific needs and ask around—your perfect loan is out there!

We’re Hiring!

~ Jessica ~ Leave a comment

We are looking for a new member to join our awesome First Credit Union team in Powell River!

  • Do you have great customer service skills?
  • Are you team-oriented?
  • Do you thrive in a fast-paced environment?

Then you should check out our latest posting for a Financial Service Representative:

https://can850.dayforcehcm.com/CandidatePortal/en-US/fcu/Posting/View/11

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First Credit Union was recently recognized as one of BC’s top 100 fastest growing companies and Employer of the Year. We’re always searching for great people to add to our team; if you’re an enthusiastic, dynamic individual looking for professional growth, think about joining the First Credit Union team. Our flexible, respectful, and engaging environment that facilitates your developing career could be the perfect place for you.

To Lease or To Finance: That is the Question!

~ Tara ~ Leave a comment

When it comes to buying a new car, you have three options: purchasing it with cash, purchasing it through a loan (also known as financing) or leasing it. For most shoppers, the decision comes down to buying or leasing.

On the surface, the differences between leasing and buying a vehicle seem fairly straightforward. Leasing a car means you’ll usually have access to a new set of wheels every few years; buying it likely means that you plan to drive the same car for a much longer period of time. Leasing usually includes a warranty that covers most of your repairs; buying means accepting larger repair costs, which are inevitable as the car ages. Leasing agreements can limit your mileage and your ability to customize your ride; buying means you can put as many kilometres as you want on the car and customize it however you’d like.

Looking only at the comparisons above, you might conclude that buying a car is a more practical and economical option than leasing a car—but if that’s really the case, why are monthly lease payments so much lower (often 40% lower!) than monthly loan payments? Why is leasing considered more expensive in the long term if you’re paying less on a month-to-month basis? To answer these questions, let’s take a look at the concept of depreciation.

Depreciation means a loss of value over time. New cars are a textbook example—you’ve likely heard that a car loses thousands of dollars in value the moment you drive it off the lot. That’s accurate, and that’s depreciation at work (and yes, it can be kind of depressing).

All cars depreciate in value over time, but the steepest drop happens in the first three to five years, as you can see below:

  • Brand new to 5 years old—the car depreciates by 15% to 20% of its value each year
  • From 5 years to 10 years—the rate of depreciation slows slightly to 10% to 15% of its value each year
  • 10+ years—the rate of depreciation tends to level out to less than 5% a year. By this time, the car is usually worth less than one-fifth of its retail price!

Depreciation takes its toll on the value of every vehicle. However, your decision to lease or buy will have an effect on how that depreciation influences your finances.

When you finance a car, you own it once you pay off the loan. This means that you personally take the hit on its depreciation, but it also means you also “own” its residual value. Although that value depreciates over time, if there comes a time when you’re ready to sell it or trade it in, you get the benefit of that resale or trade-in value.

By contrast, when you lease a car, you never actually own it. The company that leases the car to you is responsible for selling the car once you’ve completed your lease term. The leasing company also ultimately deals with the car’s depreciation in value. You get to drive a brand new car without needing to think about its loss in value. That sounds pretty great, right? In reality, even though the leasing company deals with the eventual sale of the car, you’re the one who makes up for its loss in value through your monthly payments. That payment includes an estimate of how much the car will depreciate by the time your term is up. Monthly payments are lower because you’re not paying for the entire car—you’re just paying for how much the car will depreciate in those few years that you’re driving it (a period of time when, coincidentally, the car depreciates the most).

When you finance a car, the monthly payments are higher because you are paying for the entire car, plus interest on the loan. When you pay the loan back, your monthly payments stop (unlike leasing payments, which continue as long as you’re still leasing) and even though your car will have depreciated in value by that point, you will own the remaining value.

As with any major financial decision, there are also other factors that come into play. You need to be realistic about your budget and honest about your lifestyle, and you need to figure out what’s most important to you as a new car owner. How comfortable are you with the limitations set by a lease agreement? How prepared are you to pay for eventual car repairs? Will driving a new car every two to three years be worth thousands of dollars more in the long run? To some people, it might be—it all depends on a combination of your personal needs and preferences.

Be Prepared, Because Life Happens!

~ Rachael Barton-Bridges ~ Leave a comment

An emergency fund is an essential part of your personal finances. Its importance is stressed in almost every personal finance book and budgeting blog, and yet 27% of Canadians have one month or less of expenses in their emergency fund.

If an emergency fund is, in fact, so important, why doesn’t it seem that way? Why is it so easy to procrastinate on emergency-fund saving?

The term itself could be a source of confusion. The word “emergency” brings to mind images of car crashes, natural disasters and terrible accidents—and although these are valid examples of emergency expenses that affect people all across the country every day, they’re extreme enough that it’s difficult to imagine ourselves in those situations. It can be difficult to set aside a large chunk of change for emergencies when you “just don’t feel that your car is going to break down today”. Our wants (or discretionary spending) often feel more immediate than our need to cover hypothetical and unpredictable emergency expenses.

The reality is that emergency expenses come in many forms and that there are less traumatic examples out there that would be equally good at messing up your financial situation, so it might make more sense to think of your emergency fund as a “life happens” fund.

But, whatever name you give it, absolutely everyone needs an emergency fund in place because no one is exempt from life’s surprises and obstacles—and while we can’t completely prevent emergency situations, we can at least limit their potential damage. An emergency fund allows you to respond immediately to financial emergencies, which allows you to handle the situation without having to deal with additional stresses like struggling to make ends meet or spiraling into a cycle of debt.

If an expense is unexpected (or it results from an unexpected circumstance) and it has the ability to derail your regular cash flow, then it’s an emergency expense. By that definition, a delayed insurance reimbursement is as much of an emergency expense as a meteorite landing on your car. The important part is being prepared for those expenses, no matter how mundane or how extreme they turn out to be.

Let’s look at what types of expense should—and shouldn’t—be dealt with by an emergency fund.

Expense Type #1: Known unknowns

“Known unknowns” are situations that we can partially anticipate—so this is the type of expense that should not be dealt with by an emergency fund. These situations are on our radar (known), even if we don’t know exactly when they will happen (unknown). For example, if you own a vehicle, you know that at some point it will need repairs, just like you know that your home will eventually need a new furnace or that your pet will eventually need a visit to the vet.

A good budgeting exercise is to make a list of all the known unknown expenses you can think of. Then compare the list to your budget and see if there are any categories you’re not currently saving for. Odds are that there are probably a few areas your current budget doesn’t cover, so you’ll want to adjust it to include these additional categories.

Expense Type #2: Unknown unknowns

“Unknown unknowns”, which are the types of expenses that emergency funds are truly designed for, are situations that take us completely by surprise. We don’t know when they will happen, how much they’ll cost or even what they will be until they’ve happened. For example, a family member could suddenly fall ill and you need time away from work in order to care for them. Hopefully, you’ll never experience an unknown unknown, but if you do, the knowledge that you have an emergency fund to cover additional expenses will undoubtedly help to ease a stressful situation.

Expense Type #3: Underestimated known unknowns

Although your emergency fund is not intended to cover known unknowns, if one of those situations has spiraled into a bigger-than-expected expense, that is something your emergency fund would be able to cover. For example, although you have a budget for regular vet visits, you discover that your beloved pet needs surgery, which will cost $2,000. Or you might have savings to cover your car insurance deductible, but it takes three months longer than expected to receive reimbursement from the insurance company. In these situations, it makes sense to dip into your emergency fund to cover an underestimated known unknown.

How much money should be in your emergency fund?

Emergency funds vary widely from person to person. The regular recommendation is six months’ worth of expenses, but some prefer having nine months’ or a year’s worth tucked away. It’s a significant amount, as it should be—it’s what you would be living off if you didn’t have an income for an extended period of time. Whatever amount you choose, it’s a hefty savings goal and it will take time to meet it, but it will make all the difference in tough times. When setting your emergency-fund savings goal, consider the following:

  • Set mini-goals: Saving six months’ worth of expenses might sound downright impossible right now—and that’s a completely normal reaction. Instead of feeling overwhelmed and giving up on the idea, choose a smaller goal and then gradually increase it over time. When you’re just starting out, aim for $500 in your fund; once you’ve reached that goal, congratulate yourself and then set a new goal of $1,000. Once you get there, consider setting weekly or monthly contribution goals to stay on top of your savings.
  • Avoid wishful thinking: According to a 2014 Workopolis survey, it takes four months on average to find a new job. When planning your emergency budget, you might like to think that if you lost your job, you could turn it all around in two weeks—but that could be setting yourself up for a very stressful situation. It’s not fun to think about a worst-case scenario, but when it comes to emergency-fund planning, that kind of thinking can help you come up with a more realistic savings goal.
  • Imagine your lifestyle: If you had to quit your job in order to handle an emergency situation, what would your lifestyle look like? Would you be willing to rough it until you found a new job? Or would you need things to stay pretty much the same to stop your stress levels from skyrocketing? Consider your desired lifestyle carefully when planning your emergency fund. If maintaining your current lifestyle in times of emergency is a priority to you, you may want to save nine months’ worth of income, rather than nine months’ worth of expenses. But if rolling with the punches and going back to a diet of ramen noodles while you figure things out is more your style, then a smaller emergency fund would likely be able to meet your needs.

Ultimately, your emergency fund is about your peace of mind. Design it to fit your specific needs.