THE BUCKET COACH

EPUB edition 2013

Published by
Fire Services Credit Union

ISBN for print edition: 978-0-9813358-2-7

This book and its contents exist thanks to the Fire Fighters who volunteered their time and advice, the Financial Coaches at Fire Services Credit Union and the FSCU Board of Directors. As is always the case, everyone is better off when we share the lifting. Thanks to every contributor.

Copyright 2013 Fire Services Credit Union, all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publishers. ® Trademarks are the property of their respective owners.

WHO IS ROCK SOLID?

We created a fictional, super-family to represent Fire Fighters, their loved ones, an enemy to focus on and our Coach who helps us overcome that enemy. We did this to have some fun—but also to focus your attention on tips and ideas that you won’t find at other financial institutions.

Rock Solid

Rock is a 30-something Fire Fighter with a young family, a great attitude and lots of good prospects ahead. He battles fires and the uncertainty of Volatile, the arch enemy of good, decent folk everywhere.

Nancy Solid

Nancy is Rock’s wife—married in ’99, she works part-time at a local business, helps Rock with the books in his business and together, they’re trying to give Little Rock the best start they can.

Little Rock

Is two years old and already wants to be a Doctor or a Fire Chief. Either way, he’ll need an RESP and maybe some financial education as he grows up.

Volatile

Volatile raises and lowers interest rates and stock market values in a random fashion which seems to be the norm these days. He undermines families and tries to undermine financial plans. Volatile can be overcome—but it takes a rock solid plan and a Coach to do it.

The Coach

The Coach works for Fire Services Credit Union. She helps the Solids with all their financial plans, their savings and budgeting, their RESP and RRSPs, and their goal to reduce debt while building their net worth. The Coach is a financial wizard with lots of expert friends to call in when required.

MESSAGE FROM THE CEO

When I started in this role in 2010, I did so knowing we had to add more value in our services. To be blunt, everyone at Fire Services Credit Union knew we had to become better partners in your total financial well-being; a service philosophy average income-earners don’t find at most banks (unless of course you get their attention with a big inheritance or lottery win).

We started out by talking to our members about money. We asked them what they know and don’t know about managing day-to-day; we asked them about investments, and we asked them to identify the advice they’d pass along to families just starting out.

What we learned (and more) is in this new book called The Bucket Coach. Funny title for financial education, but we think it’s appropriate and here’s why.

You have more demands on your money, your income, your cash flow and your ability to manage a home and a family than any generation before you. You have more investment choices, more banking choices, more credit, more debt, more costs and more complexity than your parents ever had.

You have more buckets to balance, fill, deplete and plan for than anyone could have imagined back in the day.

The Bucket Coach is our first response to that challenge. It starts with practical, step-by-step financial education. It’s not always nice and comfy—sometimes, it’s very simple common sense and sometimes that has to be blunt.

If all you do is read the book, that’s fine—it will help. But The Bucket Coach is more than a book and you may be interested in that too. The Bucket Coach reflects a change in philo-sophy at Fire Services Credit Union. We are becoming more effective partners in your overall financial well-being. We’re planning to take The Bucket Coach on the road in financial seminars. We’ll help with financial literacy education for your kids and families. We’ll provide a more conservative, practical approach to investments because that’s what works.

We’ll provide Financial Coaching—as you manage through all the stages of life—to ensure your net worth is always looking up as opposed to backing up time and again. Welcome to The Bucket Coach—your practical guide to managing the flow of money into and out of your home.

All the best!

—Kevin J. Connolly, CEO, Fire Services Credit Union

GIVE THESE PEOPLE A MEDAL

Financial well-being starts with your life and what makes it unique.

GIVE THESE PEOPLE A MEDAL: PART ONE

The vast majority of the men and women we’ve met in Fire Services will tell you they love their career choice. It’s a great job. But it’s also a very different way to make a living and that’s where the stresses appear.

Off the top, jumping into harm’s way on a moment’s notice qualifies every Fire Fighter for respect and admiration. You all deserve medals in our books (including this book). Your neighbours sleep more soundly, we all rest easier, because you and your team are on the job.

So that’s the part everyone knows and everyone talks about. The other stresses stay more in the Hall and around the kitchen table. Here are a few examples:

The job creates marriage stress. This in turn creates challenging financial situations. It’s no secret that we have higher instances of marital breakdown and it’s not judgmental to say we have to deal with it if we’re serious about your financial well-being. Hopefully, you won’t go down this road, but if you do, the information in this book will most certainly help.

Different shifts create different household roles. Dads providing primary childcare, parents living on different shifts and passing like ships in the night. This creates challenging situations.

You have a lot of time off; how you fill your time, either with play or a second income or both, creates unique financial challenges.

You share ideas and learning with your peers far more often and more openly than most workers in different situations. That can lead to good things and to that old saying; penny wise, pound foolish.

You have a solid, dependable income. You have an excellent pension and insurance program. All that is as it should be. But it also gives Fire Fighters a sense of security that can sometimes get them into financial hot water. Because you are so secure, you tend to over-spend without any plan for getting that spending under control. You have time on your hands and you want the toys to fill that time.

In the same context, major financial institutions love Fire Fighters because you have time for spending and you have a secure income to go with it. That makes you a great target for credit promotions and lending, services that contribute to those bank profits we all read about.

So in addition to all the usual and new financial challenges everyone faces, Fire Fighters have a unique blend of social and job-related challenges that make their financial well-being both easier and tougher to sustain. Which leads us to Part Two of Getting a Medal...

GIVE THESE PEOPLE A MEDAL: PART TWO

Your firefighting career may be an adrenaline-pumping, unpredictable ride at times. That doesn’t mean managing your money has to be.

Unfortunately, too many people in this fast-paced, credit-drenched world are conflicted by spending issues, keeping up with the Jones’, exceeding parental standards of living and more. We operate financially on a rollercoaster. Even retirement funds outside of pensions go up and down with too much frequency—unless you’re among the lucky few.

When we leave home and start spending like adults, we expect the standard of living we grew up with. Big-screen TVs, two cars, a nice home with four bedrooms—that’s what you expect when you get out in the world. Oops—it took your parents years to get there. But you can’t wait, so you borrow. See the statistics for Canadian household borrowing later in this chapter and you’ll see what we mean.

And it gets better. Too many of us don’t know where our paycheque goes every two weeks. We don’t have a clue what our spouses do with our income. We don’t pay too much attention to what our bills say because we have all the payments on auto-pilot. None of that is good.

Too many home owners chase mortgage rates and forget to pay as much attention to reducing amortization. The banks are okay with that; the longer you take to pay down your mortgage, the more interest they earn. They can afford to dangle the odd good rate—they get it back and then some because you didn’t reduce the amortization fast enough. That’s where the real savings are.

We spend a lot of time watching investments go up and down, but we don’t track our cash flow and net worth, the real path to and the real measure of financial well-being.

Each of the points above raises questions. It’s time to find answers because knowing where you stand is the first step to predicting where you’ll end up. Being financially savvy means your lifestyle doesn’t have to change when you can’t fight fires anymore.

It means you can take care of your partner, your kids and your parents without compromising the things you love to do.

This probably sounds a little daunting, but here’s the good news: We’ll work with you each step of the way, and by the end of this journey, you’ll have buckets of advice you can use every day to get ahead, stay ahead and retire with more than you anticipated.

Rock Solid TIPs

We asked veteran Fire Fighters for the three things they’d tell every new recruit about money if asked. Here are the three top bits of advice:

Pay attention to your cash flow.

Save (darn it).

Invest (in more than stock market investments and GICs).

ABOUT THE BUCKET COACH

If you read the introduction, you know why we called this book The Bucket Coach (because you have a lot of money in a lot of places flowing in a lot of directions and the only way to manage it is to contain it, understand it and take control).

Managing your finances is a huge subject and there are literally thousands of choices when it comes to advice and plans and get-rich-quick schemes. The Bucket Coach is none of that. We think you’re a unique group of people—you have some specific financial challenges. So we created a unique approach, put it in this book and made it available free to you (and your family).

Here’s How to Use The Bucket Coach:

Step 1: Just skim it for about an hour. It provides context for the rest of the book.

Step 2: Read it in detail, maybe one section a night for six nights.

Step 3: Get your partner to read it, too.

Step 4: Get on the same page (literally and figuratively) as each other and start implementing the steps to a brighter financial future.

Step 5: Seek help. If you feel overwhelmed or aren’t sure where to start, call us and set up an appointment to come in and talk.

Step 6: Commit! Make yourself a promise to change for the better. It won’t hurt. We promise.

FAMILY MATTERS

There are several things you have to get your head around when it comes to money and families.

First, it costs money to have a family. We hope that’s not a surprise. What might be surprising is that it also saves money to have a family. Two people can live cheaper than one and so on. So while those cute little bundles of joy may grow up to become very expensive university students, rule number one has to be don’t let money become the primary topic of conversation in your home. Contain the discussion, keep it open and honest between everyone involved and you will have fewer family financial issues than those who make money their only reason for getting up in the morning.

Second, save and spend as a team. By combining efforts with your partner, not only will your fortune grow more quickly, but you’ll be setting an example for your kids that they’ll take into their adult lives, and pass onto their kids.

Third, invest and plan as a team. Even though one of the perks of the job—a good pension—will likely ensure you get to enjoy some level of comfort when you retire, it isn’t enough to maintain the lifestyle you enjoy today. Get smart now, and your retirement lifestyle won’t have to suffer and may even improve!

It’s a fact that Canadians don’t discuss money openly—it’s also a fact Fire Fighters do. Take that part home with you. Include your kids in your financial planning discussions so when they become adults, they’re better prepared. Focus on the upside, not what you can’t afford. If there’s one message you take from The Bucket Coach, that’s it.

Kid Stuff—Just for Fun!

Here are some of the expenses Rock Solid and Nancy had to think about once Little Rock came into their lives:

University Undergrad Tuition: $6,307 (average in Ontario in 2010, not including residence costs and other expenses of living away from home—from Statistics Canada).

Ballet lessons: $250+ plus $150-$250 for costume

Nintendo® Wii™: $200 plus approx. $50 per game

Laptop computer: $500-$2,000

AAA hockey (average, one year): $10,000-$20,000 including skates, six sticks, gas/hotels for tournaments, trainer, league fees, player fees

Quinny® Buzz™ stroller: $600

Peg Perego® infant car seat: $300

Classic Pooh® crib bedding set: $420 (window valance, diaper stacker, blanket, lamp and mobile)

Backyard wooden play set: $900

Centauri Arts camp, one week: $1,560

SPEND, SPEND, SPEND

Before the mid 1960s, consumers didn’t have the kind of credit options we have now, so they had no choice but to spend within their means. They got loans for houses, maybe a car, but that was it. They couldn’t pop over to the bank machine, they didn’t have a wallet so heavy with credit cards they needed a chiropractor, there were no lines of credit, and don’t-pay-a-cent events didn’t exist (thankfully). It’s no wonder we, as a population, haven’t figured out what to do with all that available credit. Historically, it’s a brand new problem.

By 1990, most Canadians had debts totalling 91% of their disposable income. By the next decade, in 2010, that number was a bloated 150%! Canadians are spending $1.50 for every $1.00 they earn! You don’t have to be a financial whiz to see how screwed up the new math is.

The number of Canadians who declare bankruptcy at the age of 55 or older has gone up 560% in the last two decades. That means we stop working before we finish paying off all the stuff we bought when we were working. We haven’t put aside enough to get us through the rainy days. And there will be rainy days.

Have you given any thought to how much it will cost you to retire?

Have you worked out the same kind of math for educating your children or paying down your mortgage? The good news is you can figure it out, starting today, without too much pain. It comes down to three simple steps: (1) Have faith that being smart with money doesn’t mean the end of all things fun. (2) Take hold of your finances. (3) Spend less than you earn. Seriously.

WHAT TO TAKE AWAY FROM THIS CHAPTER

The very characteristics that make you a good Fire Fighter will make you a good money manager. And in its own way, it will be almost as rewarding.

By starting today, you are taking the first step towards creating a stress-free, secure home for your family.

Your income (plus that of your partner and any side businesses) is sufficient to build a level of personal wealth you may not have thought possible.

TAKE CONTROL

What we’re going to do here is get everyone on the same page, identify all income, all spending and make the whole thing make sense. Ready?

Let’s face it, you don’t run into a fire without assessing it first, so we certainly don’t expect you to tackle the future of your financial health without a little reconnaissance.

The key to getting ahead financially isn’t necessarily to make more money. There are people out there making six figures who are just getting deeper and deeper in debt, and people making a lot less than you do, who manage to save 10% of their income. The key is simply to spend less than you make. To do that, you need to know both what’s coming in, and what’s going out—your cash flow.

But the very first step, even before we figure that stuff out, is to get everybody on the same page. You need to sit down with your partner if you have one and agree to get along with your money. That means sharing responsibility. It means involving your kids when they get old enough. And there’s no way around this.

Money Mistakes Couples Make

Rock and Nancy say: You have to work together. Watch out for these common mistakes couples make.

Failing to plan. You need to plan both what you’re going to spend (what some people would call a “budget”, but not us) and what you’re going to do when something bad happens. Note, we said “when”, not “if”. Life comes with curves and you’ll experience your share. Being prepared softens the blow.

Keeping secrets. Whether it’s hiding a bag full of new clothes in the car until after he’s in bed, or blowing a wad playing poker, if you can’t be honest with your partner about where you’re spending your money, get help. Seriously.

Letting one person take on the entire financial load. This is about more than paying bills and managing cash flow. Both partners need to know what’s going on and come to an agreement on how to handle things.

Living in denial. Pretending you’re not in debt isn’t going to make it go away, and whether it’s a wedding, a vacation or a new car, putting out vast sums of cash you don’t have for things you can live without is what undermines entire families.

Sweating the small stuff. Seriously—if she freaks out when you have a burger with the boys or he freaks out when you buy that new lip gloss, you both need to get a grip, get back to the plan, define each other’s fair allowance and get over it.

There are two methods for dealing with it:

(1) Divide responsibilities evenly. Then communicate monthly about what came in and what went out. Note that we said communicate instead of debate or argue. Seriously, if every expert in the world says money is a huge issue between spouses, learn something from that.

(2) Appoint an annual Chief Financial Officer (CFO) of the home. Rotate the role every year so there’s no resentment. The CFO pays the bills and moves the money from bucket to bucket. The CFO calls the monthly meeting and an annual meeting to ensure everyone stays on the same page. You may think this is a little autocratic, but we assure you it’s not if you’re open and inclusive every step of the way.

In the end, choose the method that fits your family personality best. But make a choice and get it done so you can build a future that works.

After you figure out who’s managing the inflow and outflow, you also have to figure out who gets what. You have to agree to allowances—for the adults too. You have to create a shared account for paying expenses—you have to work as a team. We can’t stress that part enough.

You both need some money to spend as you please, or you’ll drive each other nuts. Talk about the big-ticket items each of you would like to buy in the next five years or so. If you want a tool shed and she wants a new couch, or you want a vacation and he wants a jet ski, you’re going to have to reach some kind of agreement.

Kids are Learning Sponges

Nancy says: Most kids love learning with their parents, especially before the teen years (when they’d prefer walking on hot coals to being with their parents). So get ‘em young, engage them in the fun side of money, let them see you both contributing in a positive way, and reap the benefits of the time you spend with them for years to come. Here are some things to try:

Let your kids pay the bills with you every month. Let them open mail (online files) and let them learn what energy costs, TV and cable, water and taxes. As they get older, let them see more.

Pay your kids a bi-weekly allowance ($1 per week per year of age is a common amount) that is matched to either behaviour or contributions you want them to make (cleaning their room, etc.). Around the age of 9 or 10 encourage them to start saving 10% of what they earn—maybe giving some to charity annually.

As they get a little older, starting around 6 or 7, encourage them to imagine and start little businesses like lemonade stands. Then let them spend the money against a plan.

If there’s something they want that’s a bigger ticket, get them to help you research it and participate with you in saving for it.

When your teen is old enough to work, do them and yourself a favour and encourage the practice. This forces them to earn it, save for their own ‘wants’, understand the costs of their ‘needs’ and more.

COMING AND GOING: CASH FLOW

OK, now that your partner and your kids are lined up, let’s find out how much money’s coming in and going out. To do this, we’ll be using the Money Tracker.

(To get a copy of the Money Tracker, visit our website at www.firecreditunion.ca, where you can download it as a PDF, Excel File, or OpenOffice file.)

Step 1: Look for after-tax (net) income. Get out your pay stub. If you’ve got a second job or make some money on the side, tally it all up.

Gather up whatever you have that relates to your income, whether it’s T4s, financial statements showing how much interest you earned on any investments, whatever you’ve got.

Step 2: Add the numbers to the Money In section of your Money Tracker.

That’s the easy part—and sometimes the fun/scary part. When you actually stop to tally how much you make, it can be quite a revelation.

Now let’s see how much you spend. You probably do know the bigger stuff, like your mortgage and your car payment. But what about all the bits and pieces? All the bills and deductions on automatic payment, all the take-out coffees, Grey Cup bets, pizza nights and toonies for the kids?

Grab your banking records, withdrawal chits, chequing account statement and credit card bills.

You probably don’t have receipts for every dime you spent last month, especially if you paid cash, so on the first of this coming month, start keeping track of it all. Boring and mind-numbing? You bet. But necessary. You’re also going to have to calculate the money you spend on annual purchases, such as birthday presents, vet check-ups and vacations, so make a list of those, and divide each by 12 to see how much they cost you per month.

Step 3: Keep track of everything you spend for one month. Then repeat the measure again in six months after we’ve got things under control. Month 1 is your baseline starting point and Month 6 becomes your progress report.

Step 4: Use the Money Tracker to keep track of it all—ask your Fire Services Credit Union Coach for extra copies in case you need them or want to share them with friends—misery loves company :-).

Remember, you’re working as a household here, so your partner needs to keep track too.

NET WORTH: A TRUE MEASURE OF PROGRESS

Okay—now you know what you have coming in and what you have going out. Some of it may be surprising, some of it shocking, some of it you may be seeing for the first time.

It’s what you do next that matters most. Do you run around with your arms in the air and make life miserable for everyone? Or do you make plans for getting ahead, one step at a time, year in and year out, until the worries become memories?

This is your choice point. We’d suggest you accentuate the positive.

Because no matter where you’re starting, the joy of your new path is you can get on track and make progress.

The net amount you have on your Money Tracker is where you are in cash flow. Even if the number is negative, and it likely is depending on what stage of life you’re at, you can get in the black quickly if you follow The Bucket Coach.

Net worth is a different matter. Net worth is a snapshot of your financial well-being. In its simplest terms, your net worth is what you own less what you owe. If you own a home worth $300,000, and your mortgage is $230,000, then the difference (your home’s equity) contributes $70,000 to the upside of your net worth. If your mortgage on the same house is $310,000, you have a $10,000 deduction from your net worth.

So go for it—add up what you own versus what you owe (including credit card balances and lines of credit, your mortgage, your investments, RRSPs, TFSAs, RESP and so on). Calculate your net worth and determine where you stand.

(To get a copy of the Net Worth Statement, visit our website at www.firecreditunion.ca, where you can download it as a PDF, Excel File, or OpenOffice file.)

At the basic level, a positive net worth is better than a negative net worth, and the higher the net worth the better. Don’t be too disheartened if you ended up with a negative number at the end. Just look at it as the perfect place to start making changes—and progress from there. You don’t start working out with perfect abs and perfect technique. You’ve got to work up to fitness, and that goes for your finances as well.

Rock Solid TIPs: About Net Worth

Be careful about including assets like old toys (that 1999 vintage snowmobile), clothing, furniture unless it’s a genuine antique and so on. Too many people believe their everyday possessions are worth something to someone else. Have a garage sale—you’ll find out how valuable that painting in your basement really is.

Be conservative in your calculations. Under-estimate your assets and over-estimate your liabilities. That way, the surprises are always positive.

Keep your pension and insurance separate for now even though a formal Net Worth Statement would include both. Including them makes this more complex than it has to be. We’ll include your pension when we get to planning for your retirement income.

If you’re not sure of the value of your home, use www.mls.ca to have a look at comparable listings in your area, or call a real estate agent and have them give you an estimate.

BREAK THE CYCLE

You can positively impact your net worth in two ways: by growing your assets or shrinking your liabilities. Yes, a lower income may make it harder to build your net worth, but if you’re looking at a negative number, chances are spending beyond your means is to blame.

What many people forget is that paying off debt is as important to a positive net worth as is growing investments. So when was the last time your advisor was interested in helping you pay off debt?

It’s common enough these days. The lifestyle we inherit is something we take for granted, instead of something we work towards. Our standard of living is based on negative cash flow that gets higher and higher with each generation. It makes spending less really difficult.

But by finding the strength to break that cycle, you can turn around a pattern that will take your kids and their kids into an otherwise debt-ridden future.

We’re not talking about spending nothing. We’re not putting an end to life as you know it, a moratorium on fun. We’re simply suggesting that you buckle down for a while, so that your kids (and their kids) can all be better off.

PLAN TO SPEND

We’ll bet you cringe when you hear the word: ‘Budget’. It feels like punishment. In fact, the idea is for you to be rewarded, and handsomely, for years to come. So while you’re in your family meeting, have some fun coming up with something else to call your budget. We like SPENDING PLAN. You can call it what you like—Operation Cash Flow or have the kids name it (The Money Tree). Once that’s done, start to work.

When you tracked your spending, you learned where your money was going. If you ended up with more coming in at the end of the month than you had going out, congrats. That’s a wonderful thing. But you’ll still want to have a good look at where the money is going, then, in conjunction with your Net Worth Statement, make some decisions about what you’re saving and investing.

If you ended up in the negative column, you definitely have some changes to make. Start playing with the numbers until you get to a positive position. If you’re more than about $500 in the hole every month, you may need to get some help. Slashing a couple of coffees is unlikely to cut it. (Call your Financial Coach and she’ll help you make the right changes.)

If you really love everything you’re spending money on, just not quite sure how much, then just lop a few bucks off every category except savings (and, for now, insurance). Think of it as drafting for your finances—that money’s got to come from somewhere. It’s another great time to get the whole family involved. You may find there are some things you can completely do without, or cut way back on.

Simple Rules for Spending Less Than You Earn

Coach says: Here are five ways to get your cash flow under control.

Decide who does what. Sit down with your partner and older children and decide how the money is going to be managed, whether it’s with one person as household CFO or a division of labour—make a decision and get to work.

Follow the money. Take one month now and one month six months from now and keep track of everything the family spends.

Build a budget, just don’t call it that.

Start living bi-weekly.

Divide your savings into several buckets. One for each expense category.

Rock Says: Find savings each month of up to 5% of your (after tax) income. Boost that to 10% in about six months. (If you’re already there, you’re on your way!)

WHERE IT SHOULD GO

A good rule of thumb for dividing your expenses is as follows:

Housing: 35%

Savings: 10%

Transportation: 15%

Debt Repayment: 15%

Everything Else: 25%

SYNC UP YOUR SPENDING

Live bi-weekly

One of the smartest things you can do for your Spending Plan is to align it with your pay schedule. We asked you to keep track of a month’s worth of expenses because that is a time period likely to include all the things you pay, such as your car payment, life insurance or mortgage, at least once. But since you get paid bi-weekly, start matching your spending with your cheque; put aside half your car payment or your home insurance every paycheque instead of scrambling on the first cheque and squandering on the next. Make a plan to spend a little time every pay day (or as close as you get to it) going over your bills and your spending plan, and just generally making sure that everything is on track.

There’s another trick to living bi-weekly that is nothing short of a happy little miracle, and it involves your mortgage. If you’re paying it monthly now, you’re making 12 equal payments every year. Theoretically, if you made a payment of half as much twice as often, you’d be making 24 payments every year. But what if you started thinking of your mortgage in terms of weeks instead? There are 52 weeks in a year, so to make payments bi-weekly, you would be making 26 equal payments. Without feeling any pain, you can pay off more of your mortgage each year.

Say your mortgage payment is $1,000 a month, but instead you decided to pay $500 every two weeks. Over the year, you’ve made $13,000 (instead of $12,000) in mortgage payments. That extra $1,000 comes directly off the principal amount of your mortgage, which can accelerate your mortgage’s amortization period dramatically. Depending on the term of your loan, one extra payment a year (two bi-weekly payments of half as much) will cut an average of six to eight years off your amortization schedule.

Month 6: Progress Check In

Come back and look at your cash flow and net worth again carefully in six months. Track one month’s expenses again and see if you’ve managed to make the spending reductions you put in your plan.

After you reset your budget, up your savings to 10% of your net income, and tweak the numbers again to make it work. We’ll bet you didn’t even miss it when you had to give up a few coffees and some drive-thru burgers the first time. If you’re not quite there, take baby steps every month over the next six to make it happen.

Why do this when you’re just starting out and you have no expenses, maybe even no family yet? Your child’s first year of life will cost you about $11,000. The next 17 years will cost you in excess of $182,000*. Get ready.

(* Figures from 2004, Canadian Council on Social Development. Indexed at 5% annually to reflect today’s numbers.)

CHERRY-PICK YOUR SAVINGS BUCKETS

One thing we’d like you to consider is the use of savings buckets. Ask your financial institution if they’ll let you open multiple savings accounts where your paycheque is automatically split up and deposited every two weeks.

Break it down as broadly or as specifically as you like. Open a ‘bucket’ for home improvements, vacations, bills, education, clothes and shoes, emergencies, kids’ sports, new car—whatever is important to you. You’re probably trying to do this in some way anyway, so why not make it official and use the banking system to help you protect yourself from overspending?

Talk to your Coach (more on that in Chapter 6, Find a Coach) about setting up savings buckets.

Your Accounts

Coach says: Speaking of bank accounts, do you actually know what features and services you’re getting? Time to find out. Have you got fee-free chequing? Are you paying monthly fees? Are you taking advantage of senior status if you can? How much are your deposits and withdrawals costing you? Are you using the best accounts for your goals? Just like tracking your spending and knowing your net worth, being acquainted with the conditions of your accounts is part of getting aware, the first step in getting financially fit. And you can save money in the process which has an impact on your monthly finances.

SO MUCH COMPLEXITY

We could write entire books on estate planning and insurance alone as individual topics. We decided to focus The Bucket Coach on the basics of having enough money to get by every month, get ahead and have a life too.

But that doesn’t change the fact that financial well-being includes many topics beyond cash flow and net worth. Here are a few sections that you should discuss one-on-one with your Financial Coach.

Estate planning and inheritance

Part of your estate plan is a will, and you need to have one. Now. Your estate plan may also include powers of attorney (which appoint a person to make your financial or medical decisions if you become unable to), a guardianship appointment (which decides who will raise your kids) and/or a trust (which are usually set up by wealthy people to maintain some control over what happens to their money).

Dying ‘intestate’ (without a will) in Ontario means the government will dictate who gets your money, and tie it up for a while before they get it. But we’re not lawyers. We’re money people. And this stuff requires a lawyer. Seriously, put it in your spending plan, ask your friends for a recommendation, and get a lawyer.

Help Yourself Help Yourself

Don’t beat yourself up if you can’t quite get your savings up to 10% right now. Anything is better than nothing.

Make your savings hard to get at. Don’t connect your savings accounts to your bank card. Look at accounts that take 24 hours to withdraw from.

Your emergency fund is for emergencies. Don’t squander it. But don’t be afraid to dip into it for genuine emergencies, either, whether it’s an unexpected car repair or a flight home for a funeral.

Rock says: If you’ve been left an inheritance or some other windfall, here’s an idea: Don’t spend it until you have it. And if you can possibly avoid it, don’t spend for quite a while, like six months or a year, until you have a handle on this stuff and really know what you should do with it.

Registered Retirement Income Funds (RRIFs)

A Registered Retirement Income Fund is what your RRSP will become when you turn 71. It can still grow tax-free, but you can’t contribute to it anymore, and in fact must start taking money out and paying tax on it, which you deferred by socking your money into an RRSP in the first place. An RRIF gives you an income out of your savings, and pays back the taxes you deferred. Most people’s incomes are reduced by that time, so they pay less tax than they would have at the source. And your FSCU Coach can help you determine additional strategies that may help reduce the income tax payable even further. Neat, huh?

Insurance

You know your insurance policy better than anyone. So right off the top, this is a subject to consider separately. Talk to your advisor about it, review your work policy—and then if required, read the rest of this section:

In a nutshell, you need to insure those things whose loss would cause catastrophic financial circumstances, for you, your partner or your children. That means your car, home, earning ability, business, health and life. And that’s about it. Stay away from the piddly little policies stores try to sell you when you buy a washing machine. To keep costs down, get the highest deductibles you can afford. And don’t (please) over-insure.

Keep in mind that people who sell insurance work on commission (your brother-in-law or co-worker included). That said, they often give discounts for multiple policies—working as a family team means leveraging all the business you can bring to one relationship.

Through the Ages

If you’re...

In your 20s: Start saving 10% of your income. Consider high-risk, higher-reward investments. Start building good credit with a small loan or credit card.

In your 30s: Pay off your debts and step up your RRSP contributions. Get insurance.

In your 40s: Start thinking about estate planning. Get life insurance if you have dependents. Have a look at your investments and reassess your risk tolerance.

In your 50s: Max out your retirement savings. Pay off your mortgage.

In your 60s: Continue contributing to your retirement plan—your retirement could last for decades! Scale down your living costs. Consider moving to a smaller home or condo. Finalize your estate plan.

WHAT TO TAKE AWAY FROM THIS CHAPTER

Make money a family affair. You have a much better chance of success with your partner and your kids on the same page. Involving your children in your financial affairs is good for them.

Before you can get right, you need to get real. (Wow, do we sound like Dr. Phil or what?) Know how much you’ve got coming in, and how much is going out. Know where the money goes.

Plan to spend. Figure out where you want your money to go, and direct it there with intent.

Live bi-weekly, and pay your mortgage bi-weekly too.

Use savings buckets to help you get the things you want.

You owe it to your family to plan your estate, and you need a will right now, today.

You need insurance. (But not too much!)

Cutting down in simple ways can make a big difference to the big picture.

REDUCE

Before you can expand your financial well-being, you have to reduce your financial waste. It’s not all bad news—it might even be fun!

DEBT kPa: START WITH CAUSE AND EFFECT

When you’re starting a family and a household, there will be credit pressure. First mortgage, baby costs—it all adds up and you still want to escape every now and then too. You’ll need credit to make ends meet at least sometimes.

That’s one kind of debt pressure and we all go through it. How you come out of it is what matters. The other kind is less about stage of life and more about lack of self-discipline. You need to spend less than you earn. That’s a simple fact.

Managing cause and effect comes down to separating needs and wants, and becoming brutally honest with your self and your partner on the subject. It isn’t fair to work hard for your money and not get to enjoy life. But you need to be smart about how you do it.

For example, stop using credit to buy things that have little or no value after you make the purchase—clothing, dinners out and movies, even most vacations. Save up until you can pay cash in full. Here are some other ideas to consider:

SPEND SMARTER

Until you have everything under control and good habits that lead to growing your net worth, consider many of the ideas here for reducing costs before you start carrying too much debt outside your mortgage.

1. Food

Don’t eat out (or take out) too often or too lavishly. It’s the same as paying someone else to shop, cook and clean for you.

Consider buying staples in bulk at wholesale superstores.

Shop with a list, and don’t deviate from it.

2. Shelter

In the long run, owning is generally cheaper than renting.

Consider creating an income property in your home, such as a basement apartment.

Don’t let adult kids have a free ride.

Appeal your property tax assessment if you bought your property when prices were higher.

3. Transportation

When you buy a car, look past the sticker. Take into consideration insurance costs, gas, maintenance and repairs.

Pay cash for your car. BUY USED!

Downsize to the smallest vehicle that suits your needs.

Keep your car healthy with regular maintenance.

4. Energy

Don’t make your family nuts, but do pay attention to lights left on, unused appliances left plugged in and your teenager’s 30-minute showers. Put on a sweater before you put on the heat.

Keep your appliances, heaters, air conditioners and furnace healthy with regular maintenance too.

When you do have to buy new, look at energy efficiency.

5. Clothes

Don’t only buy clothes that need to be dry cleaned.

Spend the bulk of your clothing allowance on well-made classics, and just update them each season with a couple of inexpensive items.

6. Entertainment

Challenge yourself, your partner and your kids to take turns coming up with fun things you can do on the cheap.

See movies and plays during off-peak hours or on weekdays, when they’re often cheaper.

Pack a picnic when you go to outdoor concerts or amusement parks instead of buying food on-site.

7. Vacations

Pay cash. It’s no fun to have to keep paying for a vacation you’re not on anymore.

Use points to travel.

Get to know Canada better instead of always going south or overseas.

Travel during the off-season.

8. Technology

Enforce cell phone limits on your kids, and consider prepaid plans with no obligations.

Don’t be first. New technologies always come down substantially in price over time.

Do your research. If you’re buying a new computer, camera, tablet, e-reader or whatever, know which features you need and which ones you can live without, as well as keeping an eye out for sales.

CREDIT ISN’T BAD—HOW WE USE IT CAN BE

Credit can work for you, not against you, if you use it properly. Some carefully managed debt is the best way to improve your credit rating.

So, now that you’ve got a handle on your cash flow, it’s a good time to get into debt. (Not literally, of course!)

There are two basic types of credit: Structured and Revolving.

Structured credit comes in the form of a loan of a certain sum, a pre-determined payment amount (that includes principal and interest) and schedule, so you know exactly what you’ll pay when, and the precise date the loan will be paid off.

Revolving credit comes in the form of credit cards and lines of credit. You have a certain limit, up to which you can spend freely, and your only obligation is to make a minimum payment by a certain date, usually monthly.

It’s revolving credit that gets us into trouble.

Lines of credit mean interest-only payments, so you don’t have to touch the principal amount. Credit cards are the same, though with minimum payments that string you out forever.

Don’t fall for the credit card tricks either—the ones that attract you with minimum interest on transferred balances and then whack you with huge interest as soon as the deal ends. (What got you a balance is not an interest rate—it’s your spending rate.)

How to Use Your Line of Credit

Coach says: Here are some good habits to get into when using your line of credit:

Use it only for assets that hold their value, such as home improvements. If there’s no value, use cash.

Make arrangements with your lender to pay more than just the interest each month, so you’ll chip away at the principal. (It’s handy to set up an auto-matic payment that comes directly from your chequing account.)

Lines of credit generally carry lower interest rates than other types of loans, but keep an eye on them because they go up and down with prime.

You don’t have to use it at all. You can set one up and keep it for emergencies.

There are usually no annual fees for lines of credit. If you secure it against your home, you may need an appraisal, but often your financial institution will waive any fees for that if they also hold your mortgage or chequing/savings accounts.

Like any loan, the cost of borrowing goes down the quicker you pay it off.

YOUR CREDIT RATING

The way you handle credit, particularly revolving credit, reflects on your credit rating. In Canada, most lenders turn to Equifax and TransUnion for your score. Both are basically information repositories to which creditors report information each time you’re involved with borrowed money.

Your homework for today is to go www.equifax.ca and order a copy of your credit report. When they mail it, it’s free; online, you actually need a credit card to order it.

Go over the report carefully to make sure it’s free of errors; for example, you may have paid off a credit card that didn’t get reported, so your credit history shows that you’ve defaulted on the payment. Errors are usually pretty easy to correct, especially if you have a record of the disputed transaction. You can even sign up to get an e-mail alert anytime a change is made on your report. And, it’s a good early warning system if your identity has been tampered with.

If you’re not sure what it all means, or if there’s an error you’re not sure how to address, your FSCU Coach can help. Take it seriously: Your credit rating impacts two things—how much you pay for credit and whether or not a quality lender will serve you.

HOW WHAT YOU DO AFFECTS YOUR CREDIT RATING

It seems self-explanatory—pay on time and your rating will be good. Be late or default and it will get worse. But there are quite a few things that affect your credit rating of which you may not even be aware. Here are the best practices to keep your score high.

The Coach says DO:

DO Borrow money. Seems a little odd, but without having actually borrowed some money, you won’t have a credit history at all, and lenders don’t like that either. Borrow moderately and pay promptly.

DO Repair bad credit. Even if your credit rating is terrible, you can apply for a secured credit card, which means you give the issuer the amount of your requested limit to hold in a special account. The card otherwise works like any other card, and if handled properly, reflects well on your credit rating.

DO Mix up the kinds of credit you use: credit cards, loans, lines of credit. A good mix reflects well on your score.

DO Consider a consolidation loan if you’re having trouble keeping up with payments, or are simply looking for a lower interest rate. Do it wisely.

DO Make your payments on time, even if you can only pay the minimum. Timely repayment counts for 35% of your credit rating.

DO Check your credit report regularly once a year.

The Coach says DON’T:

DON’T Rack your cards or credit lines up to their limits. Potential lenders call this debt utilization ratio or a debt-to-credit ratio, which means how much debt you have compared to how much credit you have available. It’s an important factor in determining whether you will be granted a loan, as well as what interest rate you’ll get. Add up all the credit you have available and all the debt you have accumulated, and aim for the debt never to go above 20% of what you have available.

DON’T Close unused credit card accounts if doing so will drive your debt-to-credit ratio over 50%. It sounds odd, but having a higher limit can help your ratio if you’re carrying a lot of debt on your other cards. Don’t use empty cards either.

DON’T Apply for too much credit. Every time you apply for credit, a “hard inquiry” goes on your report. Too many inquiries reflect poorly on your rating.

DON’T Let your overall debt exceed—at the very most—40% of your income. This one’s called a debt-to-income ratio, and it’s another factor in determining your credit worthiness. Your overall debt includes your mortgage, car payments, student loans, even child support as well as loans, lines of credit, and credit card debt.

DON’T Keep using your credit cards after you get a consolidation loan! (You’d be amazed how many people do it.)

DON’T Go bankrupt. If you declare bankruptcy once, your credit report will be “R9” for six years. If you declare more than once, every bankruptcy will be reflected on your credit report forever.

What Your Credit Report Might Say

R0: Too new to rate; approved but not used

R1: Pays (or paid) within 30 days of payment due date or not over one payment past due

R2: Pays (or paid) in more than 30 days from payment due date, but not more than 60 days, or not more than two payments past due

R3: Pays (or paid) in more than 60 days from payment due date, but not more than 90 days, or not more than three payments past due

R4: Pays (or paid) in more than 90 days from payment due date, but not more than 120 days, or four payments past due

R5: Account is at least 120 days overdue, but is not yet rated “9”

R7: Making regular payments through a special arrangement to settle your debts

R8: Repossession (voluntary or involuntary return of merchandise)

R9: Bad debt; placed for collection; moved without giving a new address

You can also order an instant credit score online. This is a number system that takes into account payment history, outstanding debt compared to available credit, recent inquiries, and the types of credit you use (a healthy profile uses a mix of credit accounts and loans). A score of more than 650 means you will likely qualify for a standard loan; under 650 means you may have trouble getting credit. A score over 750, some investments and your own home means you will have your pick of the best rates and terms from lenders.

IT’S IN THE CARDS

Credit cards are useful tools. These days, they’re practically a necessity. Not only is smart use of credit cards good for your credit rating, but they also allow you to shop online, hold hotel reservations, use the mini-bar and automate payments on such things as gym memberships. A few simple guidelines, if you actually follow them, will keep you out of trouble.

Know your interest rate on each of your cards, and pay off the higher-interest cards first.

Don’t carry a balance if you can possibly help it. When you do, interest is triggered as soon as you make a purchase. If you don’t, interest doesn’t start accumulating until your monthly payment is due.

Stay away from store credit cards and other specialty cards. They usually charge much higher interest than the big-name cards.

Add any annual fees to your interest charges for a true picture of what borrowing on your credit cards is costing you.

If you have problems with impulse spending, put your cards into a container of water and freeze them. By the time they thaw out, the impulse will have passed.

Never use credit cards for cash advances. Not only does interest start accumulating immediately, but cash is too easy to fritter away.

COMPOUND INTEREST: BOTH FRIEND AND FOE!

Compound interest on investments is your best, best friend. Compound interest on your debts is bad to the bone. Let’s fix the latter first.

Let’s say you have a balance of $1,000 on a line of credit and you’re paying only the interest each month. It carries an interest rate of 12% annually. Doesn’t sound so bad, does it? So your $1,000 debt costs you $120 over a year. Big deal. That’s only $10 a month. But wait. That interest is compounded monthly. An annual interest rate of 12% means a monthly rate of 1%. So, in month one, it costs you $10. But then, in month two, the interest is compounded, so you’re paying % not on the original $1,000, but on $1,010. So month two’s balance is $1,020.10. Month three’s balance is $1,030.30. And so on...

It still may not seem like such a big deal on a small amount with a not-outrageous rate of interest. But imagine what it does for, say, a $20,000 credit card balance at 28% (which isn’t an unusual rate for some store and specialty cards) when that interest is compounded monthly. Minimum payments are often calculated as an average of 4% of the balance. If you make only the minimum payment each month, you will pay $27,779.56 in interest (that’s on top of the original $20,000 debt), and it will take you nearly 25 years. Yes, years. Every month, because the balance amount goes down ever so slightly, your minimum payment does, too.

Now, if instead you were to make a fixed payment of $800 (which is 4% of $20,000), the same $20,000 debt will cost you $10,365.30 in interest, and you’ll have it paid off in a little over three years. Kinda leaves you breathless, doesn’t it?

Contain and extinguish

At last, another chance to use a firefighting metaphor! When it comes to fighting debt, you must first contain and then extinguish.

You contain it when you stop spending. You extinguish it by lining up your debts in descending order by interest rate, so you take aim at your highest-interest debt first, and your lowest-interest debt last. Each month, by the due date, you make the minimum payment required on each debt, except the one with the highest interest rate. On that one, you make the minimum payment, plus whatever set amount you’ve decided you can afford.

When that debt is paid, you apply its monthly payment to the debt with the next-highest interest rate. It’s called ‘rolling down’ your debt.

HOME SWEET MORTGAGE

Being mortgage-free seems to many of us like the impossible dream. After all, your home is the most expensive purchase you’ll ever make, and your mortgage the biggest debt you’ll ever carry. Many of us have a love/hate relationship with our mortgage. Without it, we’d be renting, but sometimes it feels like an albatross around your neck.

Here are a few gentle reminders of some stuff you might already know about home buying:

If you can’t afford a decent down payment, buckle down and save. Wait another six months or a year, then buy.

Get pre-approved before you shop.

Just because your mortgage lender says you can afford $400,000 for a house doesn’t mean you can. It’s up to you to decide what you can realistically pay based not only on how much you earn, but what you want your lifestyle to be.

Remember that your home will cost more than just your mortgage payment. Generally speaking, the more expensive the home, the higher the taxes, utilities, maintenance and repair costs.

Your first home likely won’t be your forever home. Buy what you can afford today, and use the equity later to move up. You may have to move up two or three times.

Some Tough Love

The Canadian government says the average Canadian family owes more than $20,000 on cards and credit lines—a pretty substantial debt that doesn’t include a mortgage. Yikes!

You don’t need to have more than one or two credit cards to further your financial aims; that is, getting and keeping a stellar credit rating, covering emergency expenses (like a car tow, for example) and making reservations or online purchases that would be impossible otherwise.

Be honest with yourself. If you can’t use credit wisely, lower your limits to an amount you could pay off on time, even if your income disappeared for a month.

Making late payments or missing payments kills your credit rating and costs more in the long run.

Spending beyond your means (having more going out than coming in) is a cycle you have to consciously break, and keep broken.

There is no excuse for not knowing what you make, what you spend, and the difference.

Making financial decisions that don’t further your goals may happen (who hasn’t lost a job, gained an in-law or gotten stuck in a rough spot once in a while?), but don’t make it the norm.

Reserve credit for things that have lasting value. Dinners out create memories, not tangible value.

MAKING YOUR MORTGAGE MAKE SENSE

Here’s the lowdown on mortgage basics.

If you’re a first-time home buyer or haven’t owned in the last 5 years, you can use up to $25,000 from your RRSP ($50,000 per couple) for a down payment, then pay it back over 15 years. If you’ve got it, use it. You will likely pay more on your mortgage in interest than you would earn in your RRSP.

Do the mortgage math. You don’t have to be a financial whiz, and there are lots of mortgage calculators online. You should be the one to decide what you can afford.

You can put down as little as 5%, which may (or may not) make more sense than renting, but you should aim for 20%.

When it comes time to renew your mortgage, take it as seriously as you did your original purchase. Do your homework.

Keep an eye on interest rates—1% on $100,000 over 25 years costs $13,034.99.

Ask your Coach to help you decide between fixed and variable-rate mortgages. Fixed rates are usually higher, but will give you predictable monthly payments for the mortgage term. Variable rates are lower, but if interest rates spring up, you can end up with a monthly mortgage payment higher than you counted on.

Make mortgage payments bi-weekly. This strategy increases the amount of money you put toward the principal which reduces the interest you pay over time. Done right, it even helps you reduce the number of years you hold a mortgage (and that’s the ultimate way to save money).

Look for a mortgage that lets you make lump-sum payments periodically. If you put an extra $5,000 on your mortgage every year, you will save more than $33,000 in interest (based on 4%) over 25 years, and cut your amortization period by more than 14 years.

The actual cost of your home is not what you agreed to pay for it; the actual cost is what you pay for it by the time you pay it off. For every $100,000 on the price of your home, paid off at 4% over 25 years, the cost is actually $157,667.

Amortization—The Big Win!

Amortization is the process of gradually reducing your mortgage debt through instalments of principal and interest over a period of years. Here’s what amortization can mean to you on a $250,000 mortgage at 5%.

15 Years: Monthly payment $1970.32; total amount paid $354,656.74

20 Years: Monthly payment $1642.82; total amount paid $394,276.40

25 Years: Monthly payment $1454.02; total amount paid $436,205.48

Coach says: Do the math. Paying off your mortgage faster saves you more than most rate discounts. Focus on what matters to you instead of focusing on financial institution offers.

Mortgage Summary

Look at your Net Worth Statement again to see the value of home equity. Remember your bank doesn’t profit from you paying off your home, which is why they’re usually quicker to suggest investable, liquid assets like mutual funds. But you’re in charge, not them. Work with a Coach who values paying down debt at least as highly as building up investments. Arm yourself with the knowledge to make the right decisions for you.

Nancy says: No mortage = financial freedom.

WHAT TO TAKE AWAY FROM THIS CHAPTER

You don’t have to do without. Reduce a little bit from every segment of your spending for big results.

Credit is your friend if you use it properly. Carefully managed debt is the key to a good credit rating.

Reserve lines of credit for things that hold their value.

Look at your credit report regularly and do what it takes to preserve your good score.

Compound interest on your debts is the enemy and should be avoided.

Roll down your debts for fast results and substantial savings.

The amortization period of your mortgage has a huge impact on how much you pay for your house. Paying bi-weekly is a great way to chop years off your mortgage.

EXPAND

Cutting your spending is one way to get your finances flowing in the right direction. The other is to make your money earn its keep through investing.

Investing doesn’t have to be intimidating. You don’t need to be a math whiz or a tycoon to get ahead. You can get great Coaching without having hundreds of thousands of dollars free to invest. You can go at it slowly—like the tortoise. In fact, there are some schools of thought that say now more than ever, investing conservatively is the right course of action.

Market volatility isn’t going away. It wasn’t all caused by the banking industry in the U.S., and as long as markets go up and down in increasingly short bursts, you might be better off staying in the safe zone.

Straight-forward is the right philosophy. Only invest in what you understand. And don’t kid yourself—even seasoned pros are just guessing when it comes to futures, hedge funds and the real deep stuff. You don’t even have to invest in investments. You can invest in real estate and other assets, like your own business.

Just keep it simple—and keep the numbers going mostly up. Understand that a long-term goal of 5% to 8% growth is about right That’s the start of a good plan. Here’s the rest...

OFF-THE-TOP INVESTING

You should treat your savings and investments as a financial obligation, not a whimsical when-I-feel-like-it proposition. Since you’re living bi-weekly now (you are, right?), you need to start by taking the right amount right off the top of your cheque every pay day.

That’s the 10% we helped you find in Part Two of The Bucket Coach. That 10% is your investment bucket. Like debt repayment, it’s part of your budget, planned for and, except in special circumstances (and by that we mean your transmission just fell out onto the ground, not that U2 is in town), paid on time and in full.

One of the best ways to make sure this happens is to set up an automatic withdrawal that comes off the top the very day your cheque goes in, and is directly deposited into your RRSP, an RESP for the kids, a money market account, or whatever combination of investments you choose. Not only does this ensure you’ll invest that money, but if the money is gone before you can get your hands on it, you will very quickly find that you don’t miss it, don’t think about it, and can easily live without it.

GUIDING PRINCIPLES OF INVESTING

1. Invest in yourself

Your investments are first and foremost about you. Not advisors, not your neighbours, your co-workers and not your estate. It’s your annual vacation, your kids’ education and your comfortable retirement at stake.

2. Invest in your kids

Starting when they’re young, invest part of that 10% you put aside every month in a Registered Education Savings Plan (RESP) for your kids’ education. The investment grows tax-free, plus the government chips in up $500 per child per year.

3. Invest in next year

Investing isn’t just for retirement. Short-term goals benefit from smart investments, too. Set up a high-interest savings account for your annual vacation or some new furniture. Invest in a two-year GIC for a kitchen renovation (the interest buys the granite!).

4. Invest in the future

No matter how young you are or how far away retirement seems, open a Registered Retirement Savings Plan (RRSP) today, and contribute regularly. A puny $300 a year (that’s $25 a month) starting when you’re 25 turns into more than $46,000 by the time you’re 65 (assuming a steady 6% return). Investing for 40 years doubles the gain and halves the pain of investing for 20 years at twice the rate of investment.

HOW MUCH DO YOU NEED TO RETIRE?

Your pension already gives you 70% of your salary in retirement. That’s nice. So reduce what you take home today by 30%. And remember, it’s not just your income that goes away in retirement. What about your spouse’s? You need a real calculation of what your lifestyle will cost. You have time off now and it costs a lot—what if all your time was off?

Here’s Some Simple Math

The government will give you $9,776 (OAS and CPP after taxes)

Your Pension will give you $42,000 (70% of $80,000 less 25% taxes)

Total: $51,776

Divided by 12: $4,312/month

If you’re debt-free and only take one really big trip per year, that’s probably enough to keep you from flipping burgers. Figure it out for sure:

Your Total Monthly Money Out (Guess) Age 65

Food: $___

Clothing: $___

Utilities: $___

Mad money: $___

Entertainment: $___

Taxes: $___

Home maintenance: $___

Grandchildren: $___

Firewood: $___

Travel fund: $___

TOTAL $5,000 (just a guess)

Based on these calculations:

You need $60,000 per year (after tax).

Your pension and security adds up to $51,776 per year.

You’re short 8,000+ per year.

You need 25 years of retirement income. (Or $200,000 without adjusting for inflation.)

$200,000 comes from: Spousal RRSP or Pension, Your RRSP, Real Estate Sale

This is a very simplified approach, but it gives you an understanding of why your Coach will advise you to invest carefully but faithfully in an RRSP or other investment strategies that add to your pension without hampering your current lifestyle.

ABOUT INVESTMENTS

There are approximately a bazillion websites and books with millions of words devoted to investing, so there’s no way we’re going to cover it all here. Consider this a crash course, and make it a point to learn more about the concepts that suit your situation the best. Aside from savings accounts, the primary ways to invest in financial products are:

Term Deposits (GICs): These are guaranteed investments that return less but allow more sleep.

Equities: These are market-based investments like mutual funds, ETFs, bonds and stocks that have more potential upside but no guarantees.

The rate of return is how much of a profit your investments make for you. Naturally, those with the highest risk (like stocks) stand to earn a higher rate of return than very safe investments (like a savings account).

IT DOESN’T GET ANY CLEARER:

It’s easy to talk about paying yourself first. It’s difficult to do without a plan. So follow the steps in Part Two of this book. Get your family onside, your spending under control, your net worth pointing up, and you,ll have all the stars aligned to pay yourself first.

Start early and go long. The longer you contribute, even a small amount, the more you will earn.

Contribute: $500 a year for 40 years = $77,381 *

Contribute: $1,000 a year for 20 years = $36,756 *

(* Based on a consistent 6% rate of return.)

RISKY BUSINESS

To help decide your own risk tolerance, ask yourself these questions:

How old are you? Your risk tolerance decreases as you age. The further you are from retirement, the more time you have to recover from any losses.

How far are you from your goal? Whether it’s retirement savings (you may hold for 40 years) or your in-ground pool fund (which may take a year), the longer the term of the investment, the more risk you may be prepared to withstand.

What’s your comfort level? This just boils down to personal sensibilities. If you’re going to lose sleep and tinker with your investments every time you lose a few bucks, don’t go high risk. If you are prone to making emotional or impulsive decisions, don’t go high risk.

What will happen if I lose this money? Don’t play fast and loose with the things that really matter, like your kids’ college funds.

Rock Solid TIPs: Ladder Your Term Deposits

Ask your Coach to help you build a ladder to get the flexibility of one year terms and maximum interest of 5-year terms. Here’s how:

Divide all your term deposits into five equal parts.

Invest the parts into 1, 2, 3, 4, and 5 year terms.

When each term comes due, reinvest into a new 5 year term.

After 4 years, all your money will be in 5 year terms with 20% up for renewal each year.

COMPOUND INTEREST

Albert Einstein called it “the greatest mathematical discovery of all time.” When you invest your money, you make interest on the capital. The next year (or month, depending on the investment), you earn interest on both the original capital and the interest you earned previously. You’re earning interest on your interest, which over time does miraculous things.

Compound interest works on two variables: rate and time. But, as with paying down debt, it’s time that really makes the difference. Assuming a consistent $250 monthly investment, here’s an idea of what it can do:

Over 10 Years

2% Return: $33,179.91

5% Return: $38,820.56

10% Return: $51,211.24

Over 25 Years

2% Return: $97,205.28

5% Return: $148,877.42

10% Return: $331,708.35

Over 40 Years

2% Return: $183,608.90

5% Return: $381,505.03

10% Return: $1,581,019.89

MIXING AND MATCHING

Your investment mix should reflect the lifestyle you have today and the lifestyle you want tomorrow. You need to calculate what that might be and then use the investments you have outside your pension to achieve that goal.

There’s far too much here to get into everything, but remember these basics:

Get a Coach who has more on his or her mind than making sales.

Determine your risk tolerance and then come in slightly below it. Be conservative. Sleep better.

Think about investments in three categories: Growth—where risks and rewards are higher, Balanced—a blend of safety and adventure, Income—mostly safe / principal protection. Where you are in life and what your needs will be should point you in the right direction.

Watch out for fees and trailers that are somehow attached to almost all investments. Everyone deserves to make a living—just make sure it’s fair. Ask good questions—expect more than evasive answers.

Be sure your source of advice is bias-free. That includes your brother-in-law and co-workers. Or look at it this way; if a co-worker talks you into a stock and it goes south, will you really want to share dinner with him next week?

If you like the idea of stock picking (serious or hobby), consider Credential Direct®, one of the best, lowest cost sites in North America and available through your FSCU web site.

Learn about and blend the right tools for your comfort zone: Savings Accounts, Money Market Accounts, Bonds (all kinds), Stocks (individual), Mutual Funds (wraps), ETFs (exchange traded)

Connect with any FSCU Financial Coach for insights into each set of tools that goes far beyond a glossary. Understanding is everything.

Terms to Know

Asset Allocation: This is how you choose to spread out your investment through different investment vehicles, such as stocks, bonds, GICs, savings accounts, etc. Refresh your allocation as your life changes and your timelines evolve or as markets dictate within your comfort zone.

Dollar-Cost Averaging: Rather than taking a big lump of money and investing it all at once, this strategy involves investing equal amounts regularly and periodically over a specific time period (such as $100 every month over five years) so that more shares are purchased when prices are low and less when prices are high, which lowers the average cost per share of the investment.

Rock says: You only know your true risk tolerance after something bad happens. Otherwise, we tend to kid ourselves about being more savvy and more adventurous than we actually are. It’s a little like poker—only play with what you can afford to lose. As many people found in the last recession, they weren’t as all in as they expected.

THE GOVERNMENT IS IN!

There are three government-inspired programs you need to know more about and utilize:

Registered Retirement Savings Plans

RRSPs are accounts that allow you to defer taxes until you retire, at which point you’ll probably get to keep more of the money if you dole it out slowly. You can invest up to $20,000 per year depending on inflation and unused contribution room is carried forward to the next year. You can even contribute to your spouse’s RRSP and defer more income. We know you have a pension and that’s a very good thing. But we think you’ll be surprised by how much an RRSP can help your pension go further while giving you tax relief today. You can hold almost any market investment in an RRSP account.

Registered Education Savings Plans

RESPs are also holding accounts. The government will give you $500 per year for every $2,500 you contribute per child. Contribute for 10 years and that adds up to $5,000 from the government—almost a full year of tuition in today’s dollars. Everything you put in grows tax free.

Tax-Free Savings Accounts

TFSAs allow you to invest up to $5,000 per year in an account. Any interest gains are tax -free and you can withdraw those gains every year.

Rock Solid TIPs

Your investment strategy needs to include a blend of Tax-Free Savings Account (TFSA) and an RRSP in addition to your pension. Think of it as 30 years of ‘mad money’ in addition to your normal lifestyle. The strategy will determine how much money you can access without triggering taxes.

INVESTING IN REAL ESTATE

Owning a home and investing in real estate generally pay off well over the long run. Buying a home for yourself and your family to live in is definitely the first real estate investment you want to consider, but if you’ve done that already, think about the other two ways to invest in real estate: buying to flip (fix up and sell quickly) or buying to rent out. Both have their pros and cons.

In general:

Anything bigger than a four-plex is considered a “commercial” property and the mortgage qualifications are very different.

You may think you want to put as little down as possible, but remember that you have to pay mortgage insurance whenever you put down less than 20% (it’s called a ‘high ratio’ mortgage), which can get expensive. Also, if the property value falls, you may have a mortgage amount that’s greater than what the property is worth.

Long amortization periods on investment property mortgages has one advantage: the interest paid on the mortgage is tax deductible.

Your Coach

Pick a Financial Coach who demonstrates that your interests are the only priority. A Coach is interested in your entire financial well-being, not just your investments. A Coach provides a balanced plan—both debt management and investment management. A Coach will help you invest in real estate instead of market investments.

A Coach will help you grow your net worth not just a portfolio.

WHAT TO TAKE AWAY FROM THIS CHAPTER

Your investments will not deliver 25% growth per year, year in and year out. You’ll be lucky to hit 10% consistently. Have realistic expectations.

Save and invest off the top of your income, not when and if you feel like it.

The earlier you start, the more you’ll make.

Your pension may cover your basic living costs in retirement, but if you want to enjoy a good lifestyle, you’re going to need more.

Know your real risk tolerance before you choose your investments.

Compound interest is one of the great wonders of the world.

Listen to your instincts if you think your advisor is motivated by something other than your best interests.

Your investment mix should include some safe, slow, steady earners.

Take advantage of government-aided investments.

Real estate is as much of an investment option as anything else.

BETTER BUSINESS PRIMER

Starting a business is easy. Staying in business is the tough part. This brief guide offers sage advice from people who’ve succeeded, and refers you to reference materials that offer tailored guidance.

It’s true that many Fire Fighters supplement their income with second jobs or small businesses and contracting businesses. You have your primary income that pays for the fundamentals of a good lifestyle—while your secondary income pays for comfort costs and future expenses; like education for the kids, vacations, grown-up toys and your supplementary retirement fund.

For many, this is a good way to fill that idle time; to earn more than you spend and have a good buffer between your savings and the end of every month. But there are traps too:

The temptation with two income streams is to spend to the maximum of those streams—it’s human nature to increase spending to match earnings.

The other temptation is to lose balance in your lifestyle. First you get married to the additional income—then you get married to the challenge of that entrepreneurial life. Very quickly it can all get out of balance, taking away from family time, downtime and focus on the job when the risks to life and limb are very high.

Sure you’re a Fire Fighter and risk is in your DNA. But the risks of additional income and entrepreneurship are within your control. And that’s what this Better Business Primer is about.

Rock’s Business Rules, No.1

A business without managed, controlled cash flow is not a business. Take care of your cash flow and it will take care of you.

GETTING STARTED

Write a plan. No matter what you choose to do in your new business, no matter how simple or casual it is, write a plan. Most business owners that fail, do so because they do not have a plan or they do not renew their plan annually.

Now at this point you might be thinking; “slow down a bit—this is just a landscaping business with some snow removal in the winter; nothing to get fussed about”. And to some extent you’d be right. But here are some financial issues that can arise without proper planning:

YOU end up in a tax bracket where it costs you more to be in business than what you’re getting out of it.

YOU run the business from start-up on negative cash flow and that eats into your everyday savings. You have no plan, so no way of getting out of the negative situation.

YOU have expenses that you forget to claim against taxes—or you have too many questionable expenses and you get audited.

YOU have no idea where your next customer is coming from, but now you have financial expectations and the pressure is on.

YOU walk into a financial institution for a mortgage that is partly based on the income from your side business; trouble is, you have no plan, so no way to show the mortgage people that you have everything under control.

Rock says: According to “Business Plans for Dummies”, companies with a business plan make 50% more profit than those that don’t. That should be reason enough to do one.

Download a great Business Planning Guide at www.canadascreditunions.com/creditunions/planner

Plan your work—work your plan. It may not make you rich, but it will protect you from becoming very poor very quickly. Your business plan should include: a summary of the business and its aims; an overview of the industry and its current trends; the features and benefits of your product or service; analysis of your target market and the competition; your marketing/promotional strategy (how and where you intend to find customers); your operating plan (hours, prices, suppliers, etc.) and, last but not least, your financial plan.

Rock’s Business Rules, No.2

Follow these easy steps before you start your first day in your new business:

Make it your business. That means researching the category of business online, talking to others who have done that type of business and getting a lay of the land. Do it yourself—that’s how you get to know what to expect.

Get an accountant. Don’t do it yourself. A CA or CGA is your best friend when it comes to setting up the books, reporting to the CRA (formerly Revenue Canada) and keeping control of the money.

Get a lawyer to set up your business in the right way (partnerships, sole proprietorships, incorporated, etc). Setting up properly from the beginning makes it easier to sell (if applicable) down the road.

Pick the right banking partner. In your case, the sponsor of this book can help. Interview your Account Manager. And because you’ll have a solid business plan, an accountant, research to back it up and a Cash Flow plan, YOUR CHOICE of financial partner will be more than delighted to be of service.

FINANCIAL PLANNING, FOR BUSINESS

One good piece of business advice to start this off is to keep your business finances separate from your personal and family finances at least on paper. That way, you know if it’s working or not, and you have your lifestyle and household costs isolated from your business expenses.

Apart from that, you need a big picture, a few goals in mind and (at the risk of sounding like a broken record) a plan for achieving those goals.

Like all financial planning, the ‘wealth’ you grow as a result of your business should be actively managed as opposed to just letting the chips fall where they may.

Grow and keep enough equity in your business that it becomes self-financing. That way, you only need loans or access to your line of credit for buying bigger assets with real value (like your personal life, don’t use credit for dinners out or schmoozing customers—do use credit for buying a new truck, stainless tools or a new computer system). Invest the equity you keep in your business in low-risk investments and keep it as liquid as possible. What you sacrifice in returns you’ll make up in flexibility.

After you have the financial base in place, work with your accountant to start taking money out of the business at as low a tax rate as you can (within acceptable legal guidelines). Complain about taxes freely—don’t evade them!

After you have your cash flowing in the right direction, your foundation in place and your tax situation under control, then (and only then) should you start thinking about investments. There are three stages to consider: Creating Wealth, Managing Wealth and Spending Wealth. Your Fire Services C.U. Financial Coach can help you plan and practice all three stages.

Spend and save secondary income or wealth with as much care as you (hopefully) do with your primary income. Invest a high percentage of your business earnings after tax. Don’t make your lifestyle totally dependent on those earnings. Be sure your plan accounts for topping up your post-retirement income (it will need to add up to 30% of your monthly income after tax if you want to maintain your lifestyle after retirement).

And let’s face one final thing. Because most of you will retire in your mid-to-late fifties, you’ll need more income longer than most people. Keep that in mind when planning your wealth management.

Your Credit Union has access to a great little book of business owner tips and advice. It’s called What Would Harold Do? and the contents are based on the opinions and practical advice of 102 small business owners just like you. Here are two little gems:

“Those who understand interest collect it—those who don’t pay it.”

“Understand the difference between the businesses’ money and your money—they are not the same.”

GETTING FINISHED

Sooner or later it will be time to either sell your small business or simply wind it down. This is not as straight-forward as it sounds.

Selling your business requires:

a set value for the business and its assets

a purchaser with the skills/money to make a go of it, especially if your future income is tied to the ongoing success of the business

a tax plan

a legal transition

a payout process that could include different people

Winding your business down requires:

a tax plan that includes your other income and possible windfalls

careful management of reducing cash flow

a personal investment plan (because after you wind the business down, the money that’s left finally becomes your money)

Rock Says: Succession Planning is a big deal. Don’t leave it to your pals at the hall or your brother-in-law. Get professional guidance if your business is more than a truck and a few hundred dollars in the bank.

BUSINESS BANKING

You may need an operating line of credit to get your business off the ground, but make sure you don’t ‘overbank’. Check out a streamlined small business loan or line of credit rather than a full business banking package if you need less than $25,000.

Your Fire Services Credit Union Coach can offer good advice about choosing the right business banking partner. Here are a few tips:

If a bank keeps changing your account manager, change your bank.

If you’re self-employed, make sure you don’t pay a penalty for it.

If your banking partner emphasizes the word ‘small’ in small business, walk away.

If they try to over-lend you, walk away.

And when all is said and done, choose a Credit Union as your business banking partner. Sure we’re biased—but that’s after years of watching business owners get pushed around by Canada’s banks. Learn about the business banking solutions they offer, such as business accounts and ways to accept payment from your customers, like debit or credit cards. If you have employees, talk to your FSCU Coach about group plans and payroll services.

Canada Business, a government service for entrepreneurs, is a good resource on everything from starting and growing your business to hiring staff to market research to sales and marketing: www.canadabusiness.ca.

Taxes

You should definitely have a professional doing your business taxes. There are so many large and small deductions and credits you may never find on your own, and every one of them is worth taking advantage of.

At your initial meeting, find out what books and records you need to keep, and remember to keep every single receipt for everything you spend in your business, whether it’s $2 for parking or thousands for computer equipment. Ask your accountant about how best to organize them.

Books, magazines and courses on your area of expertise, part of your home maintenance or even your mortgage, your car payments, toner for your computer—anything you use to run your business has the potential to impact the taxes you pay.

Ask about choosing a financial year-end for your business, and how (and when) to collect HST. Do you need to incorporate? Do you need to file your business return separately from your personal return? How do you make the most of your capital cost allowance? Ask, ask, ask.

MARKET YOURSELF

The marketing gurus will tell you—it doesn’t matter what kind of business you’re in, if you want to be really successful, you’re in the marketing business. It doesn’t matter how great your service is if nobody knows about it.

Have a plan. Do some reading and decide how best to allocate your marketing budget—both your time and your money.

Don’t cast too wide a net. Pick your target market and go after it.

Direct your marketing message at solving a problem or fulfilling a desire of your potential customers. If you’re in the landscaping business, you’re actually in the business of saving your customers time (and backache) and fulfilling their desire to have the prettiest lawn in the neighbourhood. Play on that.

Use social media to your advantage. Facebook, Twitter and LinkedIn are all great for making connections and stirring up business.

Don’t put all your eggs in one basket. If you do have some budget for marketing, don’t blow it all on one flyer. Spread it around.

Look for opportunities to network, and follow up with the contacts you make. Look for trade shows, industry-specific events and local business organizations.

Tell everyone you know about your business. Referrals can account for a big chunk of your revenue.

Develop an electronic mailing list and keep in touch with existing customers.

Get to know your local media. Writers at your local paper, radio and TV stations are always looking for experts to comment for stories they’re working on. Position yourself as an expert.

Set up joint promotions with other small businesses. If you’ve got a window-washing business and your friend is doing duct cleaning, pool your resources for a ‘spring cleaning’ promotion.

WHAT TO TAKE AWAY FROM THIS CHAPTER

The qualities that make you a good Fire Fighter are useful as an entrepreneur, too.

Use your salary for your core lifestyle, and your business income to enhance it.

Do your research and know the ins and outs of your business.

Get professional legal and accounting help.

Pick a banking partner who treats you as more than a number.

Pick a business you can be passionate about.

Know the market and what your competition is doing.

Have a business and financial plan.

Learn how to market your business.

Have a little patience. Building a strong business takes time.

FIND A COACH

Actually, we didn’t have to write a whole section for this. Your Financial Coach is standing by at Fire Services Credit Union. What this section does explain is all the reasons you should care.

What’s the difference between a Financial Coach and a banker? A Coach helps you achieve your goals. A banker is focused on his employer’s goals. A Coach is all about taking small steps to financial well-being and independence - a banker is all about selling you loans and investments. A banker works for the bank. A Coach works for you.

And the only place you’ll find a genuine Financial Coach who is dedicated to understanding your needs and committed to your financial well-being (and your family’s well-being) is employed by Fire Services Credit Union.

This is the part of The Bucket Coach where we get off the general advice for the last few pages and get into the part about how we’re changing to meet your needs.

Thanks, Rock

We created Rock Solid to illustrate a smarter approach to banking and money without losing a personal touch and a sense of humour. Your life has enough challenges and risks; our role is to help you mitigate those risks and meet your challenges outside the firehall. We’ll do our best to do that with a smile, with positive reinforcement, with a little tough love when required and most of all, with a can-do attitude that makes Rock one of you in spirit if not reality.

CHOOSE A COACH

We’re training and being encouraged to act more like Coaches every day. We think that’s a positive improvement over traditional banking services - you get the basics you’d find at any financial institution and you get more personal, focused and tailored attention, like you only find at Fire Services Credit Union. A FSCU Financial Coach...

Puts you and your family first as opposed to shareholder returns first. We’re here to serve before we sell.

Coaches are free of product and incentive bias. We aren’t rewarded for selling what you don’t need - we’re not rewarded for throwing more credit at your family than it can handle.

Coaches are about education. This book is proof.

Coaches are about net worth growth over time rather than short-terms gains and endless financial uncertainty.

Every Fire Services Credit Union member deserves and gets a Coach. We do our best to keep Coaching consistent over time and we do everything we can to make banking at FSCU as convenient for you and your family as we can.

All the Banking You Need

At FSCU, yes you can...

Invite your entire family to bank at FSCU

Bank online here

Access your money through 2,400 ATMs without fees

Find the closest ATM to wherever you are just by calling us or visiting the web site

Get all the professional Financial Planning help you need right here

Get NO-FEE Chequing

Set up your budget, your savings accounts and your plan for the future here

Get a mortgage, a line of credit and other loans that are tailored to your lifestyle

Start an RESP and get the help you need to grow it

Get a small business start up line of credit

Open a Tax-Free Savings Account

Get all the investments and insurance you need

Earn valuable loyalty rewards on your Credit and Member Card purchases

Benefit from our alliance with strategic partners to help save you money on your car, home insurance and out of province medical insurance; we can even help you save money on your next vacation with our VIP Travel Program!

In short, FSCU is all the banking you need without ever needing a bank again.

THE CREDIT UNION DIFFERENCE

A Credit Union is a co-operative financial institution that is owned and run by its members, unlike a bank that is owned by an enormous corporation. Where banks are motivated by making profits, Credit Unions have the sole agenda of furthering the aims of its members - helping them save, buy homes, run businesses and get credit at reasonable rates. In fact, Credit Unions are not-for-profit enterprises by definition, and the only goal of earning money is to be able to continue to serve its members, build new services and contribute to the community we all serve. Our board of directors is elected by the members, and every member gets an equal vote, regardless of how much money they have. Because only members can bank here, you get a personal level of service a bank could never hope to match.

ABOUT FIRE SERVICES CREDIT UNION

Fire Services Credit Union (FSCU) has been offering financial services to your brothers and sisters since 1941. Active and retired employees of Ontario’s fire departments, as well as their extended families, are welcome to become members. When you decide to become a member, you pay $100 for your share in the Credit Union. It remains on deposit with the Credit Union, and that share allows you voting privileges in all aspects of operations.

FSCU offers competitive financial products and services while building and nurturing enduring relationships with Ontario Fire Fighters and their families.

At FSCU, we are...

part of the family, with a common vision of co-operation and achievement.

accountable to one another and ourselves.

committed to delivering superior service with honesty, integrity, respect and a smile.

devoted to continuous improvement and innovation.

driven by a desire to help you achieve your financial dreams.

learners who thrive in a challenging and fast-paced environment.

dedicated to making a difference for our members, every day.

Visit www.firecreditunion.ca and discover the difference for yourself.

THE BEST 4 STEPS YOU CAN TAKE ON YOUR LIFELONG FINANCIAL JOURNEY:

Get control. Know what’s coming in, what’s going out, and build your net worth over time. Include your family financially and build a solid foundation for generations to come.

Manage credit. Credit can be good. Debt can be bad. Live within your means and use credit to your advantage.

Invest in yourself. Work with a Coach who knows you and knows what they’re doing.

Make a plan. Make a plan to spend, to save and invest, to educate (and be a role model for) your children, to prepare your estate, to work together with your partner.

COLOPHON

Preparation

This edition of The Bucket Coach was produced by IndieBookLauncher.com in EPUB format on 4 June 2013.

The EPUB edition is based on the original print edition created by Tenzing Communications Inc. and distributed by Fire Services Credit Union.

The ISBN of the print edition is 978-0-9813358-2-7. No ISBN has been assigned to the EPUB edition.

Credits

The following people contributed to the production of this e-book:

Cover design, interior illustration, and original text by Tenzing Communications Inc.

E-Book markup, typesetting, and graphic design by Saul Bottcher for IndieBookLauncher.com

Typefaces

The typeface used for the chapter headings is Verb Black by Yellow Design Studios.

(The typefaces used for body text are the default serif and sans-serif typefaces in your e-reading environment.)