Metro's Money Makeover: Will Beyonce Ruin Annick's Financial Plan?
The Challenge: At the start of January Metro’s financial guru Lesley-Anne Scorgie started performing a financial makeover on two young women. Annick, a Calgary-based 24-year-old, and Yolanda, a Mississauga-based 27-year-old, have just 12 weeks to get their financial houses in order and drastically improve their net worth (assets minus liabilities). Follow along @LesleyScorgie #MetroMoneyMakeover to see their progress. This Week: “What-if” expenses can throw you off budget and Annick must build up a financial buffer to weather these infrequent cash-crunches. Should these emergency funds be used for wants as well as needs? Next Week: Yolanda’s frugality is really paying off. She’s up to $600 per month in savings (outside of her pension) for her down payment. Can she afford to continue her generous donations to sponsor two children and tithe to her place of worship? Stay tuned. The Situation: Even if Michael Jackson came back from the dead, Annick wouldn’t pay as much to see him perform as she has to watch Queen Beyoncé in Edmonton this May. Tickets went on sale two weeks ago and Annick plus one friend, jumped on pre-sale seats for a whooping $322 a piece. What????? I get it. Beyoncé is killer in concert and Annick needs to reward herself every-so-often. But would $200 tickets have done the trick? The price of Annick’s Beyoncé ticket is equivalent to 11 percent of her outstanding consumer debt. In Annick’s 60/60/60 debt reduction plan, where she eliminates one of her consumer debts every 60 days, she’s earmarked $950 in March towards debt repayment. We ran the numbers and Annick needs to pick up extra shifts at her part-time job (she also has a regular full-time gig) this month to afford both Beyoncé and this month’s debt-payments. Over a virtual Skype handshake last week, Annick and I agreed that if she hasn’t made her target for debt repayment by March 15th, she’ll trade in her premium Beyonce tickets for the nose-bleed seats. I think she can do it! The Lesson: Even the most frugal and financially dedicated of people still need fun and entertainment in their life. Otherwise, they’ll end up with bags of money, flaky friends and lonely. The key however, is to strike a balance - aka frugal rewards – that fill your soul; not drain your bank account. One of the most effective approaches to frugal rewards is to build up a financial buffer. It’s similar to building emergency funds for legit “what-if” scenarios. You simply open a separate account from the one your pay-cheque gets deposited into, and contribute in regular automatic intervals such as $25 bi-weekly. That way, when trips to Miami or encounters with Beyoncé pop up, you can afford the purchase and shed any over-spending guilt. Annick requires two financial buffer accounts; the first is for fun splurges and she’ll start contributing $20 per paycheque into a high-interest savings account for that. The second, is an emergency fund that she’ll build within her TFSA by contributing $25 biweekly. Having both will ensure her “what-if” needs and wants are covered. When she’s consumer debt-free this July, she can amp-up her contributions to both. The Progress: Since starting the Metro Money Makeover in January, Annick has added $1,700 to her net worth by reducing her debt and starting to save for retirement in her Group RRSP through work. Annick’s Net Worth
| Mar-16 | ||
| Assets | ||
| RRSP | $600 | |
| Total Assets | $600 | |
| Liabilities | ||
| Student Loan | $58,500 | |
| VISA | $1,400 | |
| Master card | $500 | |
| Other Loans | $950 | |
| Total Liabilities | $61,350 | |
| Net Worth | ($60,750) |
https://youtu.be/sqGZrMVvT28 Published by Metro News March 7, 2016.