Find the money

How to come up with the cash you need when life hands you an expensive - yet welcome - surprise

Your third baby. An invitation for your son to play rep hockey next season. Your daughter’s acceptance letter to a premier ballet school. Some of the most important news headlines of your family’s life come with a sobering chaser: Will we be able to afford this? The average family’s budget is tight, with little room for those surprise extras. But here’s good news: There are ways to find the money you need, without racking up a crippling balance on your credit cards — and without having to make any permanent lifestyle changes. Here are five of the best.

Put your home to work for you

Chances are your mortgage is the family’s largest expense. While we can’t recommend a technique for making it disappear (aside from maybe winning the lottery), there are ways of using a home loan to your family’s financial benefit.

Borrow from the house

When you need more than a few thousand dollars for an expense that will add value to your family life, adding to your mortgage principal or taking out a home equity loan or line of credit is a smart move, says Patricia Lovett-Reid, senior vice-president with TD Waterhouse Canada and host of the personal finance television show MoneyTalk. A perfect example: constructing a third bedroom to the “starter home” that’s too small to accommodate the children you already have, let alone the baby you’re expecting next spring. Post-reno, you’ll be much more comfortable, plus your property’s resale value will have skyrocketed.

Borrowed money that’s secured by the value in your home is the cheapest you can get because lenders know that if you ever default, they can collect through the sale of your home. (Serious stuff — so use only as much borrowed money as you need, which will help ensure you can always make your payments on time.)

Should you bump up your mortgage amount or ask for a home equity loan? That is a personal decision that depends on a number of factors, including how much you still owe on your home, how disciplined you are with spending and what you need the money for. But a sit-down meeting with your lender can help you make the right decision, says Rick Jaques, a BMO Bank of Montreal district vice-president in Windsor, Ont.

Stretch out your payments

Need smaller amounts of money over a long period — for example, to squeeze in the cost of a second weekly ballet class for your budding Baryshnikov? Boost your cash flow by reducing your monthly mortgage payment. Ask to increase your amortization — that’s the number of years your total loan is spread out across. The longer you take to pay, the less you will have to shell out each month. Let’s say that you currently owe $200,000 on your home, with payments of $1,786.50 per month over the next 15 years. If everything else stays the same, including your seven percent interest rate, simply changing your amortization to 20 years will reduce your payments by nearly $250 a month. Change it to 25 years, and your payments drop by nearly $400 a month.

The downside is that more years means you will pay more interest overall. But you needn’t feel guilty, says Lovett-Reid. In the meantime, “you’re making your life more affordable. There’s nothing wrong with that whatsoever.”

Give yourself a job

Generations of cash-crunched parents have moonlighted to bring in more money. But why work outside the home and have someone else set a schedule that might take you away from your family more than you’d like? Vancouver financial planner and accountant Sylvia Lim says working from home offers far more financial and family benefits.

Not only can you choose a job “that you can do on your own time, like when the kids are sleeping,” but using your home as a place of business can trim your tax bill, Lim notes. For instance, if you use the home computer in your family room to type up resumés, you’re allowed to treat a portion of your usual home expenses, such as your hydro bill, as business expenses.

You also keep more of the money you earn from a home-based business in your pocket because you pay tax only on the net income you earn in your home office — after deducting all of your allowable business expenses.

For full details on what you can claim, and how, read up on business-use-of-home expenses in the Canada Revenue Agency’s Business and Professional Income Guide (cra-arc.gc.ca; click on Forms and Publications) or talk to an accountant.

Park your second car

You already know that four wheels are cheaper than eight, but you aren’t sure whether you’re ready to become a one-car family for good. Take a trial run by parking your second vehicle for a year, and you could free up $3,500 or more.

Step 1: Find a safe place where you can store the vehicle; a covered garage that you can lock is ideal. “You wouldn’t park it on the street,” cautions Gregory Ellis, co-founder of the online insurance research site Kanetix (kanetix.ca).

Step 2: Contact your insurance company and explain your plan. If the car you’re taking out of commission is still valuable, it’s a good idea to continue to pay for comprehensive coverage so you’ll never be out-of-pocket for major damage that may occur while the car is parked, Ellis says. That’ll drop the cost of insuring a six-year-old Toyota Corolla to as little as $50 for the whole year (depending on the insurer). If your second car is a beater, he says, you could simply drop the insurance coverage completely. Either way, this move will lower your insurance costs by about $1,000 a year.

Don’t think you can stick to a single-car lifestyle for the full year? Some companies will allow you to try this for as little as a month. (Every policy is different, so talk to your insurer about the specifics of making this idea work for you.)

Step 3: Sit back and count the big bucks you’ll save by not driving that second car; assuming you’d drive 18,000 kilometres, that’s about $2,500 a year in fuel and maintenance for a four-door sedan, according to the Canadian Automobile Association. And with gasoline prices hitting record highs in 2008, you could save even more.The extra money in your pocket may even motivate you to ditch that car for good.

Get house guests with benefits

If you have a bit of extra space in your home, you may have already thought about getting a “mortgage helper” — a tenant whose rent cheques cover a portion of your monthly bills. But many families stop short of placing a “space for rent” sign in the window, either because they aren’t sure they want someone living under their roof long-term, or the basement space they might offer a tenant doesn’t meet strict municipal rules.

For an income-boosting alternative that doesn’t require as much commitment, consider becoming a billet or homestay family. You don’t need to have a self-contained apartment space — just a furnished spare bedroom and a willingness to share your home, meals and family life with a student or young sports star.

Barbara Sergius, a Surrey, BC, mom of two school-agers, gets a real kick out of billeting Junior A hockey players in her home. “I love hockey,” Sergius explains — so the Surrey Eagles family season tickets that come with the gig have even more value to her than the $11 to $20 per day stipend she receives for each player under her roof. And her hockey-playing 10-year-old son is thrilled by the chance to hang out with honest-to-goodness pros.

Want to learn more? Check the websites of minor-league hockey clubs that operate in your area for information on how to become a host family.

If your family is interested in exploring other cultures, but you don’t have the dollars to travel (yet!), you might look into hosting an international university, college or language-school student.

Host families provide more than meals and a place to stay; their job is to ease young students into North American culture, help them learn to get around the city and offer plenty of opportunities to practise their English. You “really need to think of this person as part of the family,” says Ann Friesen, homestay coordinator with the University of Manitoba in Winnipeg.

Compensation varies across the country. University of Manitoba families receive $600 per month, while the College of the North Atlantic in Newfoundland pays about $500 per month; English-language schools in pricier Toronto offer upward of $700 for a four-week stay. (Exactly how much of that stays in your pocket will depend on how much your student eats, and whether she likes to take long, hot showers!)

Unlock a few “treasures”

So that bangle in your jewellery box was left to you by Great-Aunt Alison — but you’ve never worn it. Instead of sitting on it, Lim says, selling unused valuables may help you find the money you need without getting into additional debt.

“Look at things you are willing to part with, that don’t have too much sentimental value for you,” she recommends.

Community classifieds or online resources, such as Craigslist (craigslist.org), can put you in contact with buyers for household items like the second fridge in your basement or furniture you’ve had in storage. But Lim recommends you contact a reputable dealer to appraise and help you sell items involving precious gems or metals.

“Gold is the main thing that has cash value, and every household will have some little piece of gold somewhere — I guarantee you,” says Toronto dealer Russell Oliver, who’s been buying and selling jewellery for more than 38 years.

To determine what’s worth having appraised, he says, “you want to look for the stamp on the item. Sterling silver will say 925,” he notes, and its value is generally “infinitesimal.”

On the other hand, unloved jewellery stamped with 10K, 14K, 18K or, best of all, 24K is made of gold and a rich source of what Oliver calls “dead money — because it’s just sitting there.”

And if you’re worried about what Great-Aunt Alison would think, just imagine how happy she’d be to have contributed to the joy you feel every time you use a new kitchen faucet that actually works.

Don’t forget to save!

Building a “rainy day fund” can feel impossible when you’re dealing with all the expenses that come with raising a family. But Vancouver financial planner Sylvia Lim says if you have change in your pocket, you can save $1,000 a year. Scrape together $2.75 a day between you and your spouse, and drop it into a clear container so you can watch the money grow. Once you’ve accumulated $20 or $50, deposit it into a high-interest savings account for even faster gains.

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