50 — Wednesday, February 8, 1989

Don't succumb to spending, borrowi

- North Shore News

WHAT A difference 244 years can make! And how quickly
idealistic goals can succumb to the realities of everyday

spending and borrowing.

The last time I spoke to Brad
Scharfe — it was the summer of
°86 — he was off to Toronto with
$460 savings in his pocket to start
his first full-time job, as a
management trainee with an in-
surance company. At 22, he had
graduated from universitv and. he

dollars
and sense

Michael Grenby

told me, wanted ‘‘to be able to do
sestcthing with my money, not
fust sraste it.”

Scharfe planned to share an
apartment, “‘I’ll buy a futon and a
stereo but otherwise I won't need
much,’’ he sdid then. Within 15-20
years, he added, he heped to save
enough money to become a partner
in a restaurant or clothing store.

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But more than two years of the
working life have changed
Scharfe’s views. And what he has
learned could help anybody who
wants to gain more control of his
or her finances — at any stage of

life.

In 1986, Scharfe and I reviewed
some guidelines to help him
manage his money most effective-
ly. Briefly, they were to:

© List income and expenses in
order of priority.

® List objectives by priority,
with achievement dates and steps
to be taken.

® Learn about personal money
management, especially tax plann-
ing, investing and insurance.

© Realize the cost of credit.

© Bargain for financial products
and services.

© Pay yourself first — through
an automatic savings/investment
program — and live cn what’s left.

* Review all the preceding steps
regularly and adjust as necessary.

“Well,’? said Scharfe when I
spoke to him the other day, ‘‘I
found when I started to work $100
didn’t mean as much as it used to
before I had a regular job. It’s
much easier to spend money when
you know you can always earn it
back.

“And although I had looked in-
to a monthly contribution program
to buy mutual funds, I found that
wouldn’t leave me much extra
money. So I decided I would
rather enjoy life for a while instead
of saving.’’

And enjoy life he did: clothes, a
car, eating out — and when he

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didn’t have the cash, he borrowed.

“I didn’t really stick to any fi-
nancial objectives,’’ he said. ‘‘And
I was going into debt simp!y on my
month-to-month spending.”’

Scharfe got into the stock mar-
ket, made some fortuitous invest-
ments and paid off his debts.
“Then things got worse,’’ he said.
“*T started spending again, moved
home, borrowed for a car and was
going out a fair bit.

‘*By January of last year, I was
$10,000 in debt — $5,000 on my
line of credit and $5,000 on my
credit cards. I discovered I wanted
certain things and I wanted them
now. With credit, I could have
what I wanted.

“But I also found while I could
afford the payments, 1 couldn’t
afford to pay off what I owed.”’

Two months later, Scharfe sat

down and had a serious talk with
himself. ‘‘I told myself I had to
work this out,’’ he said. '‘I decided
by the end of 1989, I wanted to be
out of debt, have $20,000 in my
RRSP, have another $20,000 in
savings and be looking at buying a
home with a couple of other peo-
ple.””

Scharfe devoted more time and
effort to his job to increase his in-
come (he’s a stockbroker with
RBC Dominion Securities) and
now is well on the way to his goal.
Debts are down to $4,000 and he
has $5,000 in his RRSP plus
another $5,000 in his market ac-
count. And he’s still driving the
°79 Volvo he bought.

“You bring your financial af-
fairs back under control when you
realize you have to,”’ said Scharfe,
who will be 25 in July.

ng

He doesn’t condemn our easy
credit society. ‘‘It’s simply a mat-
ter of learning how to handle cred-
it cards, and understanding how
quickly you can spend and get into
trouble,’’ he said. ‘‘A line of credit
can also cause problems because
it’s so easy to make only the min-
imum payment.”

Scharfe’s main advice:

“Set your objectives but
recognize you are human. For ex-
ample, I feel an RRSP is one of
the best ways to build a sound fi-
nancial future — not only because
of the tax breaks but also because
of the psychology: the money is
harder to get at so you are more
likely to leave it to grow.”’

Scharfe believed that saving to
own a home, or a share in a home,

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