This post is part of the Blog for Financial Literacy campaign started by Glenn Cooke of Life Insurance Canada.com. Glenn asked dozens of bloggers to devote their November 15 post to sharing their “single best financial tip,” in recognition of Financial Literacy Month. I am not a financial blogger, but I couldn’t resist adding my tip to the pool.
“Talk About Money“, pretty simple but requires you to take an active approach to discussing this topic. For many families and individuals it’s taboo to bring the subject of money up. While discussing the full details of your financial situation might be too uncomfortable there is the chance to start small. The discussion isn’t about how much money you make or your net worth but more about your approach to saving and spending.
I encourage you to ask your parents about their financial situation. While you may get push back to begin with, stick with it. If your parents are older then you might be suddenly responsible for their finances. Better for you to have an idea now where things stand.
Talk to your friends about what they are doing to save money. Learning how they have reduced cable bills, mortgage rates and setup discount brokerage accounts will put money in your pocket. Which you can then use to buy your friend drinks, preferably beer.
If talking with family or friends isn’t an option then the internet is a great resource of information. Many bloggers cover financial topics of a specific nature. Find one that covers an area you are interested in learning more about and ask questions in the comments if you need more information. All of the financial bloggers I have talked to are very keen to answer reader comments, sharing information is why they started blogging in the first place. No question is a dumb one, you can ask Dan Bortolotti of Canadian Couch Potato, about a few of my questions. The Blog for Financial Literacy has a great list of finical blogs to get you started.
I believe one of the failings of our schools is that they turn out educated members of our society without giving them any idea of how the financial world works. When it comes to negotiating job offers, getting a descent mortgage rate, saving for the future or understanding taxes, many people leave school with no idea how these important things work. We all seem to be learning on our own, by trial and error. My solution is to start talking about money, you can start now by commenting below.
When I bought my house at age 24 I was clueless about mortgages. I walked into my bank and asked for a mortgage. I was so amazed when they said yes that I agreed to all the banks conditions, without any negotiation. With increased age has come increased wisdom about financial topics, like mortgages.
So if you are in the process of renewing your mortgage then here is my method that can save you money. I recommend that you do this yourself, but if you feel uncomfortable with negotiating then seek the services of an independent mortgage broker.
- I suggest that you go with a variable rate mortgage. A variable rate will save you money, there has been lots of research to back this up and historically a variable rate has always outperformed a fixed mortgage. Read more about fixed vs variable mortgage on MoneySense.
- Next find out what rates are available, there are web sites that have done all the work for you, I like the type that provides a list of current rates, with out selling you anything. Print out the list and highlight the low entries for the type of mortgage you want. There may be special lenders that you might not qualify for, so look for banks and credit unions in your area.
- Next head into your current bank/mortgage lender a month or two before your current mortgage comes up for renewal. They will have sent a letter offering to renew your mortgage at their current posted rates. This is their first offer, it is time to make your initial counter offer.
- Dream big. Ask for a fully open variable rate mortgage with the lowest discount from the rate list you printed and highlighted, which you should now also place on your account managers desk. Once in 5 negotiations have I actually gotten my bank to take this offer. A five year open variable mortgage at -0.75%, in the middle of the last recession I was paying 1.5% on my mortgage! The reason I open big is it starts the bank in the uncomfortable position of having to tell a client NO.
- At this point I suggest withdrawing your request for open variable and ask for a closed variable at the same low rate you started with. If you are a reasonably good client of your bank, then they should match the rate you found.
- If your bank still has not agreed to your offer then you have a few options to try. Remember to always keep calm and remain respectful as you lay out your arguments.
- Sell the bank the your future self. The future you has large amounts of savings and investments – from a new job or an inheritance. The future you will need some place to keep all your savings and investments. Your bank likes the future you, so they are willing to give the present you a break to keep you around.
- You can play hardball, threatening to take all your business, along with your mortgage, to a new institution. I only suggest doing this if you are actually going to follow through. This might get the bank to agree to mortgage rate demands in order to keep your other accounts.
- If they are offering you a rate just above what you wanted, see if they are willing to throw in some extras to make up the difference. Refund bank fees, waive annual credit card fees or upgrade you, at no cost, to their VIP banking service. I have actually gotten more refunds then what I lost by a slightly higher rate.
- At this point if your current lender still won’t agree to your demands then it is time to find a lender who will. You already have a list of banks or credit unions to check out, some with better mortgage rates then you were offered. It is more work but a lower rate will save you money.
- Final tip, stay away from any mortgage gimmicks. This includes low introductory rates, which won’t save you money in the long run.
I hope these work for you as well as they have for me. Put your results and other tips in the comments below.
Collector Coin Card available at Mint.ca.
Every once in a while the nice people at the Canadian Mint offer free collector cards. The problem is usually finding them on the website. The link above will take you directly to web form to order one a collection card for the Vancouver 2010 Olympic coins.
I was complaining to a coworker the other day about stock sites. They seem to have not caught on to what the web is good at, giving data to people in useful ways. For example stock charts. Most sites have the standard 3 month, 6 month and year charts. They are pretty static and down right old school. Not much different then what gets printed in a paper. While complaining I said this is an area the Google would probably do right. They have in the past changed how users interface with maps, email and calendars. Well my wish has been granted in Google Finance which features the very slick interfaces you would expect form a Google product.
Every once in a while the Canadian Mint comes out with a nice collector card to a circulation coin set they are about to release. There are limited numbers so you have to act quick if you here about it. Right now it is the Vacouver 2010 card but there are none left. Regardless here is the link for future reference.