For 12 years as a financial professional – and more recently as host of "Burn my mortgage" on the W Network – Kelley Keehn witnessed first-hand the problems so many of her clients had with money. She also admits to having a few of her own.
“By my mid-20s, I had amassed more consumer debt than I was comfortable with and my credit was less than great,” Keehn told me in an interview. “I vowed to clean up both. And today, I appreciate being intelligently frugal.”
Keehn shares her simple strategies for success in The Money Book, one of her 9 books on personal finance. It’s a simple, engaging read filled with real-life stories that covers all of the basics Canadians need to know about credit, debt and investing.
The book provides much-needed advice. It points out that “Canadians are saddled with over 1.4 trillion dollars in consumer debt and less that 75% have three months’ savings in an emergency account.”
But the book is also filled with nuggets of valuable information that even the most financially astute may be unaware of, such as:
1. Some bill payments affect your credit score more than others
Keehn says many Canadians are surprised to discover that conventional mortgage payments are usually not included in their credit report. “So, it's even more vital to ensure that credit card payments, loans and lines of credit are paid on time every month as those debts are reported regularly on your credit report.”
She also cautions that if any of your accounts end up in collections, even a minor amount would hurt your score.
2. Not all VISA and MasterCards are the same
Most of us are aware of the difference between store credit cards and bank credit cards. But what about the difference between store-issued and bank-issued VISA and MasterCards? If you think the only difference is the rewards offered, think again. Keehn points out that store-issued cards tend to have higher interest rates and aren’t always recognized as major credit cards.
She tells the story of a colleague who tried to use a department store MasterCard to check in at a kiosk at the Toronto airport, and it was refused.
Key takeaway:Always travel with a bank-issued credit card as they are more widely accepted.
3. Being just a little late can cost you more than you think
We all know falling behind on our credit card payments means we’ll be hit with interest rate charges. But Keehn points out it can also increase the rate of interest we’re being charged – in the case of one of her clients who was always a few days late, by over 10%.
Key takeaway: Always pay your credit card by the due date. If you don’t, some cards will hike your interest rate until you’ve made six months of consecutive minimum payments.
4. Interest on student loans begins the day you graduate
Keehn says, “Although student loans give you a six-month grace period to begin paying down the loan, interest on the loans starts to accumulate the day you graduate.”
Key takeaway: Pay off student loans as soon as possible by continuing to live like a student after graduating to keep your costs to a minimum.
5. There are important differences between life insurance and mortgage insurance
“Mortgage insurance is sometimes thought of as life insurance,” says Keehn, but it’s not. While life insurance proceeds are tax-free and payable directly to your beneficiary, mortgage insurance is paid out to the lender to cover only the remainder of your mortgage.
Key takeaway: When it comes to insuring your debt, mortgage protection insurance (a combination of life insurance and critical illness insurance) can provide you with more control over the costs and who will benefit, than mortgage insurance offered by your lender.
I asked Keehn if there was one key piece of financial advice she would like to share with readers after having written The Money Book. She said, “It would be to never, ever look at anyone and compare yourself financially.”
“Most individuals have no clue what their friends and neighbours are worth. The advent of easy credit creates illusions that couldn't exist just a few decades or centuries ago. Not long ago, if you didn't have the cash for something, you didn't buy it. Now, you can look very wealthy, but like everything, the time of reckoning eventually comes.”
For more smart money tips, check out Keehn’s latest book: Protecting you and your money: A guide to avoiding identity theft & fraud.