Tommy: November, almost over which means that the holidays are right around the corner. That means an empty wallet, bank accounts in the red, a whole mountain of debt to ring in the new year. Doesn’t sound too festive now does it? Our next guest, personal finance Guru, founder of Maxworth.ca, Lama Farran. Welcome back. First of all a personal question, how do you control your spending during the holiday season?
Lama: Uh, I plan and I don’t give into the pressure. You know there’s unspoken rules about the holidays is that you have to buy every single human being you know a gift. Really you don’t, you can make up your own rules. And I read something interesting the other day, it’s this family who basically came up with this very creative way of gifting for christmas. They said anything you gift either has to be handmade by yourself, or free or recycled. So that really forces you to become creative in the way you gift, instead of just going to the mall and picking up gifts and putting them in a box, it makes you think outside of the box.
Tommy: So give me some examples of what you can give as a gift.
Lama: Well let’s say for example you don’t have kids yourself, and you have a little bit of time and you have sanity, and your friend has kids. So you can for example make up a little gift certificate for babysitting. I promise you that your friend is going to love you for babysitting her kid, and she can have a night out with her husband and it doesn’t cost you anything.
Tommy: It doesn’t cost you anything and it’s worth 50-60 dollars for her.
Lama: At least, and this is something you can do. And get inspired by your hobbies. Let’s say you’re into photography, or you’re into scrapbooking or baking. So make things that don’t cost you anything.
Tommy: Yeah, if you’re into baking you can make a cake.
Lama: It’s personal and much nicer.
Tommy: What if you have people who, they are having trouble making ends meet or credit cards are maxed out. Christmas is coming, they are going to limit it and only spend $500 or $1000. Is that the right things to say?
Lama: Well, it depends what their situation is. But if you have the $500 in cash with you, and you’re okay with spending it with gifts then fine. But don’t put the $500 on your credit card, and the January comes and you’re like, how am I paying for this. If you go shopping with cash or debit card, you will be less tempted to go over your budget. Another way you can get things for free, or almost for free, is let’s say you have reward points with Aeroplan or Air Miles or any Loyalty program. You can exchange your points for gift cards with all of these program. You can order these cards and give them as gifts.
Tommy: And you’ve used up your own points and haven’t spent any money. But what about this suggestion, this texter is saying, Our family draws names and sets a spending limit.
Lama: Yeah, that’s very good. And also for the little gifts for little kids, they seriously don’t know the difference between a brand new top and a gently used toy from Kijiji. And if you have little kids that are 5 – 6- 7 years old, I strongly recommend to go buy second hand for tem and wrap them up and they won’t know the difference.
Tommy: Your son is six years old, is he listening to the show right now?
Lama: No he’s in school right now.
Tommy: Okay, so he’s in school. So what is he getting for Christmas?
Lama: He is getting one thing only. The thing is his birthday comes up in January, so right after. We talked about this already, for his birthday he wants to invite his school friends. We said no problem, but we agreed to ask the attendees to actually give money to charity and not bring a gift to his birthday. And I’m going to buy him one gift only.
Tommy:How is he about giving the gifts to charity and not to him for his birthday?
Lama: He wa s very okay with it once I e understood why we were doing that. I told him that there are many many kids who have absolutely nothing, and need more important things than him getting little toys. Are you okay with that? He said yes.
Tommy: And he’s six years old.
Tommy: And what’s his present going to be?
Lama: It’s a scooter. He lost his scooter and he loved it, so we are basically replacing it.
Tommy: So if you know, don’t tell him. Let is be a surprise. The whole idea is that many people say that they don’t have the money now, so they are going to put in on their credit card and pay it off slowly during the course of the year. What would you say to that?
Lama: I say do the opposite of that. Which is instead of paying it down from January to December, how about in January you start saving so that next December you have the money. SO let’s say for this December it’s kind of too late to plan ahead that much in advance, but let’s say at the end of December you realize you know what this holiday season cost me about $600. Well, $60 divided by 12 is about $50. So starting in January, put $50 aside in a savings account call it Christmas, and by December 2016 you’ll have you $600 ready. So you do the opposite of what you just said.
Tommy: Now if people are making their decisions, and they have issues of debt and at the same time trying to buy gifts. I’ve heard of cases where somebody says, we’re in pretty bad situation, there is money coming in but we have lot of debt on the credit card, I don’t want to tell my spouse, I don’t want to worry her about it. The less she knows the better. What would you say to that?
Lama: I really disagree with that. Like, honesty when it comes to financial well being is really important. If you can’t tell your spouse that you don’t have the budget for it, something in it, something deeper of an issue. Because it’s really important to be honest, not just with your spouse. Even if you have older kids, 13, 14, tell them. You don’t have to tell them all the debt that you have,but you can explain it to them. Things are different this year, money is not exactly where we were last year, and we’re just going to be limiting a bit more. And Then you can compensate with the quality of things or with the time, the family time, or with other things that are really what the holidays are about.
Tommy: And how do you get that. For people who are listening now, and they realize that they are in a dire situation. They want to get that conversation started with their spouse, how does that conversation get started?
Lama: Well, you can start with just laying, especially with your spouse, they have to know where your finances are, according to me. SO you can tell them, this is where we are, this is the debt we are dealing with, this is our situation, where do you think we can get the money for Christmas? So put the situation in their hands. If they can’t come up with the money, then there you go. Your job is done.
Tommy: Your questions for personal finance expert Lama Farran. What if you’re very tempted, you’re at the store and you see a beautiful gift. Do you just throw your list away when you walk into the store? Do you just buy it cause it’s very beautiful?
Lama: Yeah, I don’t think so. Well I have a spreadhseet o nmy website, if you go under tooks, Maxworth.ca under tools, it’s a spreadsheet you can download. And i recommend that you put the name of each person you want to gift too, an idea of the gift and an amount. And go to the mall with that list so that you can try and stick with the amounts. Even better, don’t even go to the mall. I mean if you do online shopping, you’ll be really less tempted to pick up things, you will be able to compare prices better cause you can jump from website to another, and you’re going to be in a better situation to stick with your budget as well.
Tommy: Your questions for personal finance guru Lama Farran. Her wonderful website, Maxworth.ca. Text your questions right now to 514800. Your questions for personal finance expert Lama Farran. Lots Of Questions coming in for you. When considering hiring a money coach how can we assure confidentiality, and how does a coach differ from an opportunity bank financially?
Lama:Well, I’m not a bank. I don’t look at your investments, I look at the bottom line. I look at how much money is coming in, where is it going, what are your goals and how can we match your goals with the money coming in. Confidentiality, I used to work at the bank and they are very big on confidentiality, and I keep all my client information very safe and I never discuss anything. It’s all anonymous. Even my testimonials on my website it’s all initials, I don’t even put names.
Tommy: This texter John says, we used to do afiedt exchange but now we pool our money and make a donation to a needy family. Much more satisfying.
Lama: This is what the holidays are about. It’s about giving and getting satisfaction from giving. If you’re giving and getting stressed out, cause you’re giving gifts with money you don’t have, what’s the point really?
Tommy: And in many cases your giving gifts that people don’t really want. They are embarrassed to tell you that they don’t it, and they regift it anyways.
Lama: Exactly, or they are going to go return them. And a year later they are not going to remember what you got them.
Tommy: This texter also weighing in on this subject. Money is tight this year because of a big basement renovation that was unexpected. I have taken up crochet and have been making goodies for my families. I can’t wait to give these gifts, i feel proud of them both financially and artistically.
Lama: Yes, it is like what I was saying, use your hobbies. Even myself, a couple of years ago I got into knitting. Right, and I knitted so many scarves for everybody and they loved it. And i had these hand made tags that I added. You can get creative and give gifts, People will appreciate it more.
Tommy: How do you control how much you spend on children. What tips do you have for a “sensible” amount to spend?
Lama: Children don’t know how much you’re spending. Honestly if you buy them a gift for $10 or $50 they won’t know the difference.
Tommy: Depends on the kids.
Lama:Well yeah, even if you buy it second hand I assure you that they won’t even know. I know because I take care well my kids take care of their toys really well. And I keep the boxes, and when they are done with the toys I put it back in the box and I sell them. Just last week I sold four toys, and people are going on to Kijiji to buy gifts for their kids, because they are really in very good shape. In the original box with the instructions and everything is there. So go that way, the kids not going to know how much you spend.
Tommy: When you’re selling stuff on Kijiji. Are they coming to your house to look at the toys? You’re not nervous with strangers coming to your house?
Lama: Not really, especially kids stuff. Usually it’s mom’s who come by or, I find it okay from safety perspective.
Tommy: Personal finance expert, my guest Lama Farran. Should you include, if you’re making a budget, should you include all the extra like decorations or food for Christmas supper?
Lama: Yes fuo sure, those add up. Especially the greeting cards, stamps, shipping. YOu know you have family in Ontario, stamos went up this year. You have the wine, chocolate boxes, the new clothes you need. The list is endless. You have to sit down, use the spreadsheet I have on my website to think of all these things, and I have some of them listed to not miss any.
Tommy: This texter wants to know, with credit card debt is paying for balance protection insurance a good idea?
Lama: That is the worst idea ever. If you use the money from the credit card insurance and put it on your credit card you’ll be must better off.
Tommy: And they are expensive aren’t they.
Lama: They are very expensive, and they use people’s fear that they are going to due and they are still going to have the credit card. Don’t give into this fear, if you have decent life insurance, you don’t need credit card insurance.
Tommy: My wife always buys me gifts that she gets to use more than I am. So this year I told her that her Christmas gift will be a new microwave. Text your questions to Lama Farran, my guest. This texter wants to know what’s your guests website, I just tuned in. It’s Maxworth,ca. This texter says, we have neighbors that have kids who always let everyone know how expensive their toys were, its so sad that the parents taught them that this means value.
Lama: Yeah, well not everyone is a good role model. It’s not about the value of the gift and the price, it’s differentiating between the price and the value. So those parents were more focusing on the price.
Tommy: What’s better, cash or debit card when you go shopping?
Lama: Really I think cash, because it’s hurt more. When you pull it out of your wallet and you put it there, you have a sense of what you’re doing. I always compare it to when you go to the casino, they don’t let you gamble with cash because they want you to pay more. So they give you little chips that you have no emotional connection to. So it’ doesn’t hurt as much.
Tommy: A $100, or a $5 chip, is the same weight but different colour. We were talking more about kids, you mentioned Lama that kids don’t know the price of toys. This texter is saying, kids don’t know but parents know.
Lama: Yes, well it’s the parent’s job as role models to teach the kids it’s not about how much it costs but what it’s bringing to you. So it’s really the parent’s job to do a better job with their kids.
Tommy: A month away from christmas, from what you’ve done over the last couple of years as a financial consultant, what’s the biggest mistake that people make at this time of year.
Lama: Really, they cave in. They feel the pressure that they have to go with whatever society is telling them. Look, we didn’t even have Black Fridays, now retailers are jumping on Black Fridays so you spend more. Really you don’t have to believe in Black Friday or Boxing Day, you can stay at home and be okay.
Tommy: This texter says we are a couple, and we make a good income but we struggle week to week because of debt. What would we expect to see, or what do you expect to see from the people you coach?
Lama: Well, I see, it’s really deciding on the how disciplined the person is, but if one day you follow the open that I set out and they do the work, and they are ready to get out of their comfort zone they really see results. I’ve seen people completely flipping after the first few months.
Tommy: And, what are some of the first things that they would do to start if they were starting with you.
Lama: I would tell them to start tracking, I want to know where their money is going today. And From today we will come up with a plan to better allocate that money. If you come to me and tell me what I have no clue where my money is going, the first step I will tell you is that I need you to track for the first few months.
Tommy: Do many people not know where their money is going?
Lama: A lot of people. It’s the biggest mystery ever. It’s like, i don’t know where my money disappears.
Tommy: Thank you very much Lama, always a pleasure. Lama Farran a personal finance expert, her website Maxworth.ca. If you have something on your mind, our inbox is waiting for you. The email is email@example.com. If you need information on any of our guests, go to my show page.