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Awkward money conversations

We’ve all had to have 2013-05-03 09.09.21awkward money conversations at some point in our lives. I will admit that I’ve gotten more confident in having them, but as an awkward, introverted person by nature (I’m the person who takes the stairs in order to avoid conversation in the elevator), it’s never easy.

Here are examples of 6 recent awkward money conversations I’ve had over the last year:

1. Having the money talk with RD

When you start to get serious with your significant other, the money talk will inevitably come up. RD had mentioned beforehand that he was debt-free, and I could tell by his spending habits that they were similar to mine. But I wanted to know all the juicy details: salary, retirement, savings, and future financial goals. I think it’s really good in any relationship to get all of that information out in the open so that you can be sure your current lifestyle and future goals will align properly. But even though I knew we had to talk about it at some point, I actively started and stopped the conversation a few times before I got the courage to ask.

Related: When do you have the “money talk” in a relationship?

2. Answering why I’m renting instead of owning

I don’t know many people who have owned a home and gone back to renting. So it was interesting to see how people reacted when they found out I wasn’t buying another place. My default answer is “the commute was horrible, and it also just made more financial sense to rent,” which most people seem to take as me saying I couldn’t afford to buy.

What seemed to always impress people was that I was a homeowner. Since I was able to borrow a quarter of a million dollars from the bank, I somehow had my life put together … because the natural assumption is that people who are renting are only doing so because they cannot afford to buy.

And that’s just not true. I could have bought an overpriced condo on my own in Vancouver. But why would I want to? The topic of real estate is already a touchy subject in Vancouver, so in order to avoid any awkwardness, I usually just let them think what they want to think about my finances. If they really are interested, I’ll answer truthfully.

 

3. Negotiating my starting salary at my new job

Salary negotiations can be stressful. I had such anxiety about it when I first entered the work force, and since then I’ve been called everything from greedy and bossy, to confident and assertive. But asking for fair compensation does not make you greedy or bitchy or aggressive – it makes you smart because you’re asking for what you rightfully deserve. Salary negotiation is a game you’re expected to play, and if you don’t, you’re potentially leaving thousands of dollars on the table.

I have never taken a job offer without negotiating first, and I’ve never been turned down. Sometimes I have it written in my contract to get an automatic raise after a certain period of time, a year-end bonus, or even an extra week of vacation. A few thousand dollars may not seem like much now, but in the long run, it can add up. Your raises, bonuses, and future earning power are dictated by how you negotiate your starting salary with a company. And that few thousand dollar gap has the possibility of becoming bigger in the future – leaving you farther away from how much you’re truly worth.

When I got a job offer last month, the compensation was at the lower end of the salary range I gave them. I thought about it for a day, exchanged a couple of emails with HR (asking about overtime policy, bonus structure, etc.), and after much consideration to the overall package being offered, I countered at the highest end of the salary range I gave them (about 6% more than they offered) – which they accepted. Had I not done that, I would have ended up thousands of dollars behind.

4. Being honest about my compensation during my exit interview.

At my old position, my salary was fair for the work that I was doing, but I felt underpaid given the marketing skillset I brought to the company. Salary didn’t play a big factor into my decision to leave, but it was something I felt needed to be brought up. And finding a new job that offered more opportunity for growth ultimately resulted in a salary increase.

5. Billing a freelance client who failed to utilize my services.

This was a tough one for me, because I dreaded a potential awkward conversation with them. I signed an exclusive one-month contract with a client to work up to 20 hours for them. But nearing the end of the contract, they had used me for no more than 5 hours of billable time. I thought that perhaps I should pro-rate my contract amount, but after speaking with people in the industry who are much smarter than me, I ended up billing them for the full amount of the contract – and they paid my invoice without batting an eyelash.

6. Asking someone to lower their rates.

About a year ago I wanted to hire someone who billed $180/hour. It was about average, but was way too much for my budget – so I asked if she was able to lower her rates if I guaranteed her X amount of hours billed. I asked politely and made sure to emphasize that I totally understood if she couldn’t. She ended up agreeing, and lowered her rates by $30/hour.

Have you had any awkward money conversations lately?

2016 is the year of the emergency fund

Rob Carrick recently proclaimed 2016 as the year of the Emergency Fund. I’m a huge fan of having at least 3-6 months worth of living expenses set aside should you have to face any financial setback. Rob said it best when he wrote, “think of an emergency fund as insurance against a short-term setback that affects your long-term financial goals.”

My Emergency Fund isn’t something I have thought about much over the last couple of years. But I’ve certainly used it – like when I got laid off, when my laptop needed repairs, or when I accidentally cracked my car windshield and needed to pay the ICBC deductible. Then, once life settled back down, I topped the EF back up to its original amount, and stopped thinking about it again.

Related: When is it okay to use your Emergency Fund?

Right now my $10,000 EF sits in a high-interest TFSA – this represents about 5-6 months of normal living expenses, and it’s the amount I’ve always been comfortable with. I’m confident if I lose my job, I’ll be able to get a new one within a couple of months. And I don’t see a one-time emergency costing more than $10k at the moment (since I’m renting).

It took me 6 years to save up to $10,000. I started saving $25/month back in 2006, got to $5,000 in 2011, and finally hit $10,000 right before I left for Germany in 2012. It was not a fast process, and I had a bunch of setbacks along the way… but it was definitely worth it. So don’t feel discouraged if you feel like it’s taking forever to fund your EF (I felt that way too). Even just a little bit of cash saved up is better than nothing, and you’ll get there eventually. :)

Instead of keeping a chunk of money for emergencies, a lot of people will consider using a line of credit or a credit card if an emergency takes place. I personally really dislike the idea of going into debt in order to take care of a financial emergency, or relying on a bank to get you through. With cash, you don’t have to worry about payment schedules, interest rates, or creating a potential mountain of debt. Having your own money on hand gives you options. You can all of the shots, and that’s a huge step towards creating financial independence. And personally, I’m okay with the low interest rates in my “high interest” TFSA – because like Rob said in his article, “the emphasis is on safety over returns.”

Related: Creating a bare-bones budget

How did you determine what amount was right for your Emergency Fund?
Or are you using the line of credit/credit card method instead?

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