We said “goodbye” to the super low 2.99% 5 year fixed rates last week and said “hello” to a still very competitive 3.08% 5 year fixed rate this week (source: Best Mortgage Rates Canada).

For most rate shoppers, this increase of 10 bps can be traumatizing. Consumers tend to drool over a mortgage rate that is even just a few percentage points (or more) below other advertised rates.  But let’s not forget that not all low rates are what they seem.  Some super low mortgage rates typically signal a no-frills product that isn’t fully loaded with the features and benefits that might be important to you.  Is shopping for a mortgage rate just like buying anything else; you get what you pay for?

2.99% vs. 3.08% … You Say Tomato, I Say Tomahto

At first glance why would anyone in their right mind opt for the 3.08% mortgage rate?!!  To the rate shopper, these are two very different numbers and the 2.99% rate is quite obviously the best choice.  But, they aren’t so different when you compare the monthly/bi-weekly payments of a $250,000 mortgage with a 25 year amortization:

@ 2.99%: $1,181.83mo/$545.46bi-weekly
@ 3.08%: $1,193.40mo/$550.80bi-weekly

Yes as expected there is an increase in the payment.  But, if this is going to make or break your monthly budget maybe you should re-think what you can afford!  And call me crazy, but I would want to know more about what each product offers before being shackled to the lower 2.99%.

BUYER BEWARE: Does the Rate Sound too Good to be True?

How are lenders able to offer such a low rate?  And what’s the catch, you might ask?  More times than not, lower rates are not offered on a standard product, rather it is a “no-frills” mortgage.  The no-frills mortgage might be a match made in heaven for you, it all depends on your need for flexibility and how important the 3P’s are to you (Pre-payment options, portability and penalties).  These products are also sometimes used in a bait and switch technique, so ensure that if you are in fact looking for a basic product that you aren’t up-sold into a more profitable mortgage (profitable for the lender that is).

No-Frills Mortgage

If you take away all the bells and whistles of a standard mortgage, what you’re left with is a no-frills mortgage.  No-frills mortgages are stripped down to eliminate features that add cost.  They are designed to appeal to frugal buyers who may not qualify at higher rates and are less likely to make lump-sum payments throughout the term.  When compared to a standard mortgage, no-frills mortgages offer:

• Minimal pre-payment privileges (0-10% vs. 10-20% with standard product)
• Minimal payment increases (0-10% vs. 20-100% with standard product)
• Quick close deadlines (30 days vs. up to 120 with standard product)
• Real deals only (no pre-approvals)
• A lack of portability
• Lower amortization (capped at 25 years vs. 30 years with standard product)

Is It Right for Me?

Just like any other big financial decision that you make in your life, the answer to this question is very much dependent on your personal situation.  What I can say is if you aren’t going to take advantage of the additional features offered with a higher rate and you are certain that your situation will not change over the course of the term (typically 5 years), then a no-frills product could be a great choice!  But without a crystal ball it can be hard to look into the future, you could get a promotion, you could lose your job or your family could grow and you might need to upgrade.  The lack of flexibility with the no-frills product could actually cost you more to get out of in the future than the interest savings you’ve captured.

Just keep in mind that the interest rate is not the only feature to consider when choosing a mortgage product that is right for you and in the current market there are still some great low mortgage rates available, fully loaded with features so you can have your cake and eat it too!

RateSupermarket.ca Week in Review

Wiarton Willie (Ontario) and Shubenacadie Sam (Nova Scotia) didn’t see their shadows on February 2^nd, 2012 and predicted that spring is on its way!  For Ontarians, this means that their mild temperatures should stick around which is exactly what low mortgage rates have done this week as well.  No big changes here!

*This chart is based on changes over the last week to our Best Mortgage Rates Canada page. Mortgage Rates may vary depending on Province.

Still, taking the search by storm are the 5 year rates!  Half of RateSupermarket.ca visitors searched, and searched, and searched for the 5 year fixed closed rates (maybe trying to find the expired special rate of 2.99%?).  The other half (48 per cent) searched for the 5 year variable closed rates, and the next leading searches were for 4 year fixed closed (0.7 per cent) and 10 year fixed closed (0.5 per cent).

Experts will tell you your debt-to-income ratio is one of the best ways to gauge your financial position. The media often quotes the Bank of Canada saying Canadians are at dangerously high levels of debt at 153 per cent. But what does that mean? I’ve spent countless dinner parties arguing how to properly calculate debt to income ratios and how can you tell if your in the danger zone. There are many schools of thought on how to asses your financial health.  Here are a few.

Your ability to service your monthly debt

Start by calculating how much fixed costs (debt) you have every month. These are costs you would pay even if you were away on holiday all month. This includes, mortgage, car payments, insurance, utilities, property taxes, minimum credit card payments and minimum student loan payments. Then calculate how much money you bring in as a household in one month. Your salary, your spouse’s income and any money you make from investments.

Take the first number (your debts) and divide it by the second number (your income) and multiply it by 100.

Experts say, ideally you want this number to be less than 30 per cent. If you’re between 30-40 per cent be careful where you are spending your money and if you’re creeping close to 50 per cent. You may want to cut back on some of your fixed living expenses.

Your total debt compared to your income

This is the debt to income calculation Statistics Canada uses to come up with that scary 153 per cent figure. Take your total debts, home loan, car loan, line of credit and credit card debt. Calculate how much money you would need to say “I’m debt free!”

Take that number (total debt) and divide it by your total annual household earnings after taxes (total income) and multiply it by 100.

Experts will say, if that number is under 130 per cent you are in good shape. 130-140 per cent you are in a vulnerable position. More than 140 per cent is getting close to the danger zone and more than 150 per cent means you’re operating at a debt level that would be hard to handle if interest rates were to rise 2-3 per cent.

Sorry! One more ratio

Canadians also need to look at their debt to asset ratios. This means the ratio of how much money you have if you sold everything compared to your total debt or liabilities.

Calculate all the debt you have outstanding. How much is left on your mortgage, credit cards, pesky line of credit and heck even your library dues. Who do you owe money to right now? Jot it all down. Then, add up how much your assets are worth,  your house, car, stock portfolio any other investments, even your 60 inch T.V! Anything you own with a re-sale value. Imagine you’re moving to Argentina to start a new life and you had to sell it all.

Take how much you owe to everybody (total debt/liability) and divide it by how much your stuff is worth (total assets) and multiply by 100.

Again, experts say the higher the number the fewer assets you have to back up your debts and that’s not very good. For example if you total assets are $1,000,000, but you owe $900,000. You ratio is 90 per cent. You have little equity in your home and you’re the fakest millionaire around. But on the other hand if you owe $100,000 but your assets are worth $250,000 you are well backed by the equity or assets you already have in your home.

No need for online calculators

I’m not going to give you a link to any online calculators, because this is easy math that most of us can figure out and frankly most of the calculators make the situation more confusing. If you do the math yourself it will help you understand where you may be spending too much and what these numbers really mean.

The better ratio

In my opinion the better ratio is the one that calculates your ability to service your monthly debt. That is the number most banks use to understand your ability to pay your mortgage. 

But that does not mean you should take a $1,000,000 loan just because the bank says you can afford the minimum payments. Calculate your affordability based on at least 2-3 percentage points higher in interest. This is the best way to protect your financial health.  Even if you’re on a fixed rate mortgage it means when your mortgage renewal comes up and interest rates are higher, you’re already well positioned to make those higher payments.

But my ratios are so high! Don’t worry so are mine

• Rubina’s household ability to service monthly debt: 50 per cent
• Rubina’s total household debt compared to income: 190 per cent (OMG)
• Rubina’s household debt to asset ratio: 44 per cent (yikes)

But, my husband and I are in our 30s. We pay our loans at a rate 3 percentage points higher than what the bank wants us too. If we were to lower our payment to the minimum, our monthly ratio would be lower as well. Also, we have no “bad” loans like credit cards or expensive lines of credit. We own our car and are conscious about our variable spending, so our ratio of household debt compared to income is decreasing every month. Finally, we bought our house two years ago and this is the most debt we will ever be in, as time goes on our debt to asset ratio will improve.

On top of this we’re well prepared, in the last year we have built a 6 month rainy day fund and we both have substantial retirement portfolios and good job prospects.

You need to take all of this into account when you calculate your own affordability. The ratios are important, but always put them into perspective with your unique situation.  Never live beyond your means.

The countries richest CEOs earn 189 times what the average Canadian does. According to the Canadian Centre for Policy Alternatives the average annual salary in this group is $8.38 million. By the time you read this, Canada’s top-100 earners have been paid in two weeks what it will take most of us 10 years to make.

“The gap between Canada’s CEO elite 100 and the rest of us is growing at a fast and steady pace, with no signs of letting up,” says economist Hugh Mackenzie, who authored the report.

I promote saving for a rainy day and being financially fit, but admit I feel a little downtrodden when I hear the disparity of incomes in Canada. How can I tell someone who makes a decent living at $80,000 a year and supports their family, to diligently save for retirement and have an emergency fund, when there are people who might work in the same building as us making almost 200 times.

When it comes to saving, we just need to remember that our salary, like most other things in our life, is relative to our surroundings.

No Matter What You Earn: You Have To Save

We can never live beyond our means. If we make $3500 per month or in the case of Canada’s riches CEO’s Close to $700,000 per month the same principals apply. Save 10 per cent in your emergency fund, save 10-15 percent for retirement and have at least 3 months of surplus in your bank account to pay your month-to-month bills.

So, if the CEO of Bombardier lost his job today he could survive with the same lifestyle for 3 months as he looked for a new job.

Am I Too Rich to Save?

Recently I was invited to speak at a personal finance event held by ING Direct. The topic was the state of savings in Canada.  After the event a well dressed older lady asked me, “when can I just stop saving and start spending?”

I had never thought about this sweet dilemma before. She went on to explain that she has assets worth a few million and another million in the bank and now she wants to spend without shame. I asked her if she wants to leave an inheritance to her children, she replied “no way,” my kids are financially secure they don’t need my money.

It had me pondering the idea if we’re ever too rich to save? The answer is no! Savings is part of our life -  all our life.

Save In the Good Times… for the Bad Times

You only have to pick up the latest Hollywood Gossip magazine to find proof of what not saving can do to you. There’s always some story of one used to be rich and famous person who’s bankrupt. Imagine they had bought one less house in Beverley Hills or one less one-of-a-kind luxury car. Maybe giving all his friends Rolexes for Christmas was a bad idea. If they had been more careful when times were good, they would be much better off today.

We all have a responsibility to protect our future if we expect to live the same lifestyle, or even improve it in the future. We have to spend relative to what we make.  It can be frustrating to hear about Canada’s richest making 200 times the average Canadian, but that doesn’t mean you should destroy your chances of being financially secure.

No Matter The Salary The Rules Are The Same

Here is my message to all Canadians even the richest CEOs. Always have enough money in your rainy day account to get you through 3 months of bills and living expenses. Save for retirement, even if you’re already retired. Never put anything on a credit card that you can’t afford to pay with cash. Only go into good debt, like a mortgage or education. Extras like vacations, clothes and going out for dinner with friends must always be paid in cash. Never spend money this month anticipating paying it off with money you’re making next month.

Simple rules no matter what your salary.

It’s a classic hectic January shopping moment: you’re at the checkout, about to drop a pile on some last-minute deals, and the cashier asks if you’d like to sign up for the store’s credit card.

The application process won’t take but a minute and better still you can get an even better deal on your purchase. Maybe a percentage discount, or a don’t-pay-for-x-number of days thing.

Why not? Because there are some serious problems with store credit cards. They offer a sneaky way to reduce your credit rating, get yourself into debt and entice you to shop more.

Here a run down of the downsides:

High interest rates

These cards have rates in the 25% to 30% range. Your regular credit card should be lower than that! So if you leave a balance on your purchases it could take months or even years to pay it off, as that interest keeps building when you have a balance.

Your credit score

The more credit you have to your name, the higher your debt load, and the worse your credit score. This is particularly a problem if you get pulled into signing up for several in-store cards with high limits. This can compromise your chances of getting loans, even if your balance is at zero.

Managing your debt

When you have numerous cards — plus a car loan and a mortgage, for instance — your debt is all over the place and is much harder to manage. You may focus your efforts on paying down your main card and think all is well. Then, bam! You get that store credit card bill in the mail and there’s money owed there too.

Buying more

When you have a store card, you’re tempted to dash out to that store more often and make use of the promotions, points and bonuses offered through your card. Those promotions are great: but there’s a big chance they encourage you to shop more, get stuff you don’t need, and even purchase items at higher prices than you would pay elsewhere.

Initial deals

When you sign up for a store card, you often get 10% or 20% off your initial purchase. That’s great. But what if you’re just making a small purchase that day and head back to buy a couch or all your kids’ spring clothes a few weeks later? You’ll likely throw away that great initial deal if you sign on for a card on the spur of the moment.

Making store credit cards work for you

So, how to make the most out of those store credit cards?

• Only sign on for a card for a company you truly use. Gas cards, home reno store cards if you are doing a lot of fixing up, come to mind. Get one of these cards, two max, and leave it at that.
• Know the points and rewards systems on the few cards you have and truly take advantage of them. If there’s a cardholders discount day, hold off on purchases until that day. Keep track of and redeem your points.
• Read your bill statements every month and make sure your credit limit is low, your interest rate is being fairy charged and you’re not falling prey to any find print you missed reading when you got the card.
• Fully pay off these cards each and every month. If you can’t do that, get rid of the card or consolidate your debt with a loan or line of credit.

Store credit cards are like any other form of credit. They can be great by allowing you access to the stuff you want and need, often at a discount. But they have their perils — so buyers beware.

Increasingly Canadians looking to buy a house are seeking more information from the professional helping to secure their mortgage. They look to their mortgage expert for good financial advice, guidance and some level of consultation on what most likely is the biggest investment of their lives.

The Role of Mortgage Professionals

A survey by Maritz Research Canada conducted for the Canadian Association of Accredited Mortgage Professionals (CAAMP), shows mortgage brokers in particular are expected to provide clients with options and support through the complicated mortgage process. There’s also an expectation clients will be offered competitive mortgage products, recommendations on product details and lenders, and in general a high level of customer service.

Mortgage experts are now on the front line when giving advice to new homeowners on how much they should borrow and at what rate. They’re committed to getting the best rate and product possible for the mortgage term a homeowner is seeking.

Here’s the Good News

Canadian home prices have held up surprisingly well despite the economic issues that have plagued the world in the last 3 years. The Canadian housing markets remains stronger compared to the U.S and appears to be a far better investment than the stock market. On top of this, Canadians have roughly 68 per cent equity in their home, compared with 43 per cent  in the U.S. an indication our housing market remains much stronger.

In the same survey Canadians admit they could handle a $200 a month increase on their mortgage payment if interest rates were to rise. If that’s the case then we should be putting more money towards our mortgage right now.  It will lower our principal and our loan will be much smaller when rates rise. Don’t borrow money in anticipation of making higher payments in the future. Ask your mortgage professional how bigger payments will reduce your amortization. You will be pleasantly surprised.

This is My Concern

Interest rates still remain historically low, making it easier and more comfortable for Canadians to borrow more money then they should. Canada’s rules are not as lax as the U.S. when it comes to lending, especially after new stricter guidelines were brought in by Finance Minister Jim Flaherty in 2010.  But that doesn’t mean homeowners aren’t full of false confidence they can borrow more than they can manage.

Before you meet with your mortgage broker or the mortgage specialist at the bank understand based on your financial situation how much you want to borrow. Remember when you borrow money you’re buying the right to pay that money back in a per-determined amount of time.  Don’t get pushed out of your comfort zone when it comes to your mortgage.

We’re quickly moving into the busiest time for mortgages in Canada. Springtime is when real estate sales ramp up as homeowners try to buy a home they can move into during the easy summer months.

It is easy to convince yourself to borrow more to get into a “dream home.” This is especially true for buyers who previously lost out on a home because they were out bid by another buyer. Remember if that dream home is out of your budget it can quickly becoming a nightmare if house prices fall even slightly and when interest rates start to rise.

Do Your Own Research First

My advice is to decide how much you can afford to borrow before you meet with your mortgage professional. Remember nobody cares about your money as much as you do.  Getting better service and good advice is imperative, but do your own research to make sure the mortgage amount is best for you.

Mortgage professionals are there to guide you through this complicated process and give you the best advice they can, but ultimately the decision about how much you want to borrow (after you know the amount you can qualify for) is up to you.

RateSupermarket.ca Shows Credit Card Shoppers How to Save Hundreds This Holiday Season

TORONTO, November 24, 2011… RateSupermarket.ca, Canada’ s go-to-website to compare and save money on credit cards, mortgage rates, and savings accounts, is challenging consumers to rethink their credit card strategy this holiday season. Credit cards aren’t just for spending money, but for saving money as well.

A recent poll from CIBC suggests only 31% of Canadians plan to use their credit card for holiday shopping this season. According to RateSupermarket.ca, that number should be higher.

“It’s very easy to spend money on your credit card and rack up a larger bill than intended,” says Kelvin Mangaroo, president of the rate comparison site. “But, if you can stick to a budget and pay off your credit card balance on time, then yes, consumers should be putting more of their Christmas purchases on plastic.”

Why? The rewards. Particularly cash back rewards. Not only are cash reward programs easier to determine how much you’re really getting back (because we ALL know the value of $1 vs. 700 points), but cash can be spent on whatever YOU want… in other words you aren’t limited to a rewards catalogue.

Based on average Canadian household spending patterns from Statistics Canada, a typical household can save $562* in the first year by using a cash back credit card for their purchases. Over 5 years, that savings jumps to $2,382*.

Get even smarter with your cash back and you can turn your $2,382 in savings into even more. Pay off your mortgage faster with lump sum payments and save yourself an extra $685** in interest. Or put that cash in a high interest savings account and bank an extra $153***.

A new toaster or a movie voucher can’t do that.

All the reasons why Cash is King are laid out in this handy infographic:

http://www.ratesupermarket.ca/blog/cash-back-rewards-credit-cards-infographic/

“With the holiday season right around the corner, consumers will likely go over their normal average monthly spend. I say, be smart when you spend, use a cash back credit card and start racking up the savings,” says Mangaroo.

* Refer to infographic for calculation details: http://www.ratesupermarket.ca/blog/cash-is-king-infographic/#INFO
**Annual cash back was put towards annual lump sum payments on $250,000 mortgage, amortized over 25 years at a rate of 3.52% (the average best 5 year fixed rate from Sept 2010 to August 2011 as seen on RateSupermarket.ca.)
*** Annual cash back was put into a savings account with a 2.00% interest rate.

About RateSupermarket.ca (http://www.ratesupermarket.ca)
RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada. Founded in May of 2008, their easy to use comparison engines provide much needed transparency into the Canadian financial market and allow visitors to quickly find the best rates. Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.

Yesterday, Melanie told you about some of her top issues with Canada.  Now, let’s show this country a little more love and celebrate the great things about Canada and its financial checks and balances.

While we might have an international reputation for being too gosh-darn polite, bordering on bland, this middle-of-the-roadness sure bodes well for us in the practical ins and outs of life.

Here’s a list of what’s awesome about Canada.

Our Banks

Yes, they make gobs of money and yes often they take advantage of us with high user fees and too many lines of credit. But overall our banks are a model of stability in this very unstable financial world. Unlike US banks, ours never got into the high-risk mortgage business. (Thanks to new rules, they’re even tougher about mortgages: goodbye 35-year loans!).

Meanwhile, we have just a handful of large lending institutions. Unlike in the US where there’s a different bank on every corner, and some of the little ones have been known to tank. You join a bank here, you know it’s not going anywhere.

Our Home-Buying Incentives

For those of us who want to buy a home for the first time, Canada is right behind you on it. You can get the $5,000 First-Time Home Buyers’ Tax Credit — a nice bonus the year you buy your first home. Tax rules also help you get there: under the Home Buyers’ Plan, you can borrow up to $25,000 on your RRSPs a year to finance a down payment. Then there’s the existence of the Canadian Mortgage and Housing Corporation.  This group provides both great info to homebuyers and, critically, offers affordable mortgage insurance for those with less than the 20 per cent down payment required to buy their first home.

Our Health Care System

Say what you like about private health care and having to wait for months for tests or surgeries. In the US, if you don’t have really great health coverage through an employer and you get a serious disease, it can lead to financial ruin for you and your family. Here, we get the odd story of people who are denied drug coverage and the meds they need, but generally speaking our system takes care of us no matter what challenges our bodies throw our way. As well, you can claim medical expense on your taxes to alleviate costs when you do have medical bills.

Our Credit Card Rules

Our government has a history of keeping tabs on loan scams and they’re constantly responding with new rules to limit them. In particular, they’ve been targeting the credit card industry and making sure you’re not getting ripped off by your card company. New rules introduced in 2010 mean credit card bills in Canada must be clearer, that new purchases get a 21-day interest grace period and your company can’t up your interest rate without telling you in advance.

Our Stability

The upshot of everything great about Canada is that financial life here changes little. Too dull for you? Better to be here than in Greece! Our dollar moves, but is essentially one amazingly stable currency. Our bank rates move cautiously. From one day to the next, we know our system is working and our economy, while not perfect, is still humming along.

This is a fine place to live, save and thrive.

I’m going to let you in on a little secret. I came to RateSupermarket.ca as an experienced writer who specialized in real estate and mortgages. I didn’t have a whole pile of personal finance writing under my belt; it wasn’t a prerequisite. In order to be a good writer, you don’t have to be an expert on a given subject, although it is an added bonus. You just have to be able to conduct thorough research and turn that research into something readable for others. That, I can do.

Admittedly, up until a year ago I was just as financially illiterate as the next guy. My monthly bills were too high; I had bad credit card debt and virtually no savings. A year later, my savings have grown substantially, I have freed myself of nasty credit card debt and I have cut back on unnecessary monthly bills. And guess what? You can do it too.

This week is Financial Literacy Week. Help yourself get financially ahead and take the pledge. I dare you!

What is Financial Literacy Week?

According to ABC Life Literacy Canada, “Financial Literacy Week is a national
 awareness and engagement campaign that seeks to increase the financial literacy and math skills of Canadians through access to tools, resources and community events. It will be celebrated from October 30 to November 5, 2011.”

Why is this important?

Based on how many times it has come up in the news this year, it seems Canadians have a hard time managing household debt. Money is such a taboo subject in our society, which makes it difficult for most of us to talk openly on the subject. But if we don’t talk, how will we ever learn? And that’s what RateSupermarket.ca and Financial Literacy Week is all about – talking, learning and taking those first steps.

Small changes add up

As the ABC Life Literacy site says, “small steps lead to big changes.” The site provides tips, tools and resources to help boost your financial know-how. The financial literacy glossary lets you test your knowledge of financial terminology. Print off the activity worksheets, create a budget or see where all your money goes each week. The tips and resources section also includes the following helpful items:

• Spending plan worksheet
• Track your spending activity sheet
• Budgeting and saving tips
• Financial life skills for parents and children
• Savings plans
• Ways to borrow money
• Saving for your child’s future
• Games, including a word search and crossword puzzle

Along with these great tools, you can also sign up for a weekly newsletter to help keep you on top of your financial game. At RateSupermarket.ca, we offer similar tips and tools. Check out our Learn section and read our Weekly Blog. Are you or someone you know thinking about buying their first home? Sign up for our First Time Homebuyer’s Guide and let us walk you through each step so you know what to expect when the time comes.

I promise to…

The “I Promise to” pledge page asks you to take action and make a personal promise to learn something new about personal finance. It will not only help you to better manage your finances, but also give you more confidence when it comes to spending and saving your money. You can simply check one of the boxes provided, or add your own personal promise. Enter your email address for further helpful tips and resources.

My promise

Yup, I took the pledge, too. I figure there’s always more to learn.

My pledge: To find a financial planner and/or small business accountant who can help me prepare for tax season and invest my money somewhere smart. I also pledge to eat from home this month and to contact my financial institution – I’m still paying too much in monthly fees.

What’s your pledge?

It’s Friday. You’ve worked hard all week and you’ve just been paid, so you’re ready to hit the town. Over the weekend, you go out for a meal with friends, see a movie, buy yourself a couple treats and go to a hockey game. Life’s too short to not have fun on the weekends, right? But come Wednesday, you wonder if the gas in your tank will make it ‘til Friday.

Where did all your money go?

According to Statistics Canada’s survey on Spending Patterns in Canada, the average Canadian family’s total expenditures run $71,117 per year. The survey doesn’t say how large the average family is; it just says ‘average’.

Canadians spend a fair bit on their homes and keeping those homes running. Let’s see how much of our pay cheque is going towards the home.

• Shelter: $14,095 (mortgage and rent expenses)
• Water, fuel and electricity for principal accommodation: $2,204
• Household furnishings and equipment: $1,896

We also spend quite a bit of money on living expenses, including cell phone service, internet, cable and other household operations.

• Household operations: $3,428
• Clothing: $2,841
• Communications: $1,583
• Personal care: $1,200
• Childcare expenses: $398
• Pet expenses: $420
• Other: $1,032

There are no examples provided for ‘household operations’ or ‘other,’ but one can assume that they are the day-to-day costs for upkeep, maintenance and repairs.

We spend a lot of money on recreation – and why not, since we work so hard? Here’s a breakdown of some of our other expenses.

• Recreation: $3,843
• Reading materials and other printed materials: $232
• Education: $1,238
• Gifts of money and contribution: $1,715
• Tobacco and alcohol: $1,506
• Games of chance: $255
• Miscellaneous: $1,180

The average family spends a fair bit on transportation, health and food as well. In fact, we spend more on transportation than we do on food. It should be noted that this survey was conducted in 2009 when gas prices were much lower. I’m sure that the combination of the current gas prices and inflation has brought these costs up – a lot.

• Food: $7,262
• Transportation: $9,753
• Healthcare: $2,004

Let’s not forget taxes, pension plans and insurance. Here’s a breakdown of what we spend in those departments.

• Personal taxes: $14,399
• Personal insurance and pension plan contributions: $4,269

Total expenditures: $71,117

Breakdown by family size

The survey did break down the results into other categories, including couples with children, renters, senior citizens (65+), single people and single mothers. Couples with children had the highest costs, next to homeowners. Single people, by comparison, spent much more per person than couples and families did. Those with the lowest costs were the renters.

Single mothers and senior couples (both 65+) had very similar spending habits. Seniors spend more on food, transportation, education, health care and recreation, but less on household operations, clothing and shelter. Surprisingly, spending was similar in both urban and rural households.

Read the rest of the survey here.

How much should I be spending?

There is no magic formula for how much you should be spending or saving – but there are guidelines. Most of us look at our spending – and then our savings – and shudder at how little we set aside. Here’s a cool formula (based on your income after taxes) to give you an idea of what you should be doing:

• Spend no more than 50% of your income on NEEDS
• Spend the remaining 30% on WANTS
• Put 20% aside as SAVINGS

What constitutes needs? Needs include housing, food, utilities, insurance and transportation costs.

What constitutes wants? Your wants include the non-essentials, such as cable TV, entertainment costs, unnecessary clothing and toys, such as iPods and sporting equipment.

How does the average Canadian add up?

It was really hard to decide what fell under needs and wants. I think, for argument’s sake, we’ll say that pets fall under wants, and personal insurance and pension plan contributions fall under savings. Taxes fall under needs (because no one wants them, but they’re necessary), but we won’t be calculating them here since the formula is for income after tax.

According to the Statistics Canada survey, after taxes, Canadians spend:

• NEEDS: $42,479 or 74.5%
• WANTS: $9,969 or 18.5%
• SAVINGS: $4,269 or 7%

After looking at these numbers, it’s obvious that we’re spending way too much on our needs, or many of us are living well above our means, even if some of those numbers could easily fall under the wants category. And we’re not setting nearly enough money aside for savings. Certainly we could be doing better in this department.

If you’re concerned about your savings, do an evaluation of your own spending and see just how you stack up in comparison to the average Canadian family.

Save over $65,000 on your mortgage with RateSupermarket.ca’s 3 Simple Steps

TORONTO, September 30, 2011 – If you REALLY want to save money, forget about scanning the discount flyers and bringing your lunch to work, just take a look at your mortgage to get the biggest bang for your buck, says RateSupermarket.ca, Canada’s go-to-website for comparing mortgage rates.

In three simple steps homeowners with a $300,000 mortgage can save $65,541 over 25 years.  It’s all laid out in this handy infographic:

http://www.ratesupermarket.ca/SAVE/

It works like this:

Step 1: Shop before you sign.

After looking at over a year of data, RateSupermarket.ca found that the mortgage rates listed on their site from September 2010 to August 2011 were 72 basis points (0.72%) lower than the average big 5 banks’ discounted rates.  The banks’ average discounted 5-year fixed mortgage rate was 4.24% versus RateSupermarket.ca’s 3.52% – which adds up to a total interest savings of $34,907.  Bottom line – if you shop around, you’ll get a better deal.

Step 2: Adjust your payment schedule.

Abandon the typical monthly mortgage payment schedule for bi-weekly rapid payments and you’ll save a whooping $19,887 in interest.  Bi weekly rapid payments let you pay half of your monthly payment every other week so you end up making an extra payment each year.

Step 3: Make regular payments.

If you put down even $1,000 each year against your mortgage, you’ll save yourself a totally of $10,747 in interest.  That’s only $83.50 per month (or 17 lattes!).

“When people think about saving money, they tend to think about clipping coupons, giving up coffee shops or opening a high interest savings account,” says Kelvin Mangaroo, President of RateSupermarket.ca.  “But the really big savings is looking at your biggest debt, and making sure you pay the least amount of interest over the course of your mortgage.  These 3 steps help you do just that.”

P.S. Don’t have a $300,000 mortgage?  Well, the savings available for lower mortgage values is nothing to ignore.  Take a look:

* Comparison using the average top 5 banks’ discounted 5 year fixed rate from Sept 2010 to Aug 2011 for a mortgage amortized over 25 years and paid monthly.  In all cases assume the interest rate remains constant over the course of the mortgage.

About RateSupermarket.ca (http://www.ratesupermarket.ca)

RateSupermarket.ca is the largest impartial rate comparison service for personal finance products in Canada.  Founded in May 2008, their easy to use comparison engines provide much needed transparency into the Canadian financial market and allow visitors to quickly find the best rates.  Their new Mortgage Tool App for the iPhone also allows house hunters to compare mortgage rates on the go with their Smartphone.  Over 1.5M Canadians have turned to RateSupermarket.ca to save money on their mortgage, insurance, credit cards and GICs.