This month’s net worth

Ah, the first of the month. Also know as Spreadsheet Day in the Fecundity household. You can see the results on my January NetworthIQ entry.

We were supposed to be having a party with all of my mom’s relatives today in celebration of my Gran’s 90th birthday; however the foot of snow we’ve been socked with put a damper on said family’s travelling plans. Downside: I’ll only get to see my almost 3-year-old Australian niece briefly for lunch tomorrow instead of for an entire evening and morning. Upside: We’ll save the $300+ that dinner, a hotel and a fancy brunch was going to cost. I’ll subtract what lunch tomorrow costs us from $300, and send it to the student loan.

The highlights...

Assets:

• The Emergency Fund is up significantly. We should be able to get this to $5000 by June without problems.
• Cash is up due to generous Christmas cheques from our families.
• Retirement funds are up slightly, mostly due to contributions rather than growth.
• Stocks slipped a bit further.
  

Debts:

• The credit card is up due to pre-Christmas spending. As always, the balance will be paid in full before the due date.
• Hubby’s remaining student loan is down significantly. We’re well on our way to paying it down by $5000 by Baby Day.

Current Net Worth:

$10,084.30

So, we made the goal of $10,000 by January 1st. Just. Yay!

Clearly the flaw in calculating net worth for short-term goals is that you can’t account for market fluctuations. But, since short-term goals are merely surrogates for desired long-term outcomes, and were're definitely moving in the right direction, I’ll live with it.

Happy New Year everyone. All the best for all of your goals of 2008!

The joys of unexpected expenses

Hubby lifted his left foot as he stood beside the snow-covered car, bracing his calf on his opposite knee. He peered down at his sole. “Huh,” he said. “I think I need a new pair of boots.”

Fecundity followed his gaze and snorted aloud. “I’d say you’re right.” She poked at the crack clearly visible across the ball of his foot, easily touching sock with the end of her finger. “Why didn’t you say something earlier?”

“I hadn’t noticed.”

As tempting as it is for me to get into a diatribe on how it shouldn’t be possible to miss a three inch hole in your shoe when there’s literally four feet of snow on the ground, I’ll skip it and instead talk about unexpected expenses in general.

Sometimes, as in this case, we should have seen it coming. Sometimes bad luck just falls on you from the sky, or, more likely, rear-ends you on the way to work.

The boot incident isn’t bad luck. Hubby bought cheap boots last winter. They wore out earlier than expected, but still should have been foreseen. I figure if I drag him into a decent shoe store this time, it’ll set us back $150-$200 and he’ll have boots which should last at least two full seasons, preferably five.

Our last round of actual bad luck (or, rather, bad luck leading to an emotional response which lead to stupidity) happened about two years ago. We were still living in an apartment, and we didn’t own a car. We were borrowing my parents second vehicle (which they’ve since sold to us, as they no longer need two after retirement). We came down to the parking lot and discovered that some of the delightful kids of the neighbourhood (did I mention the cheap rent?) had egged the car overnight for something to do. Cheaper and healthier than doing drugs, I suppose.

After much scraping (and swearing) to make it possible to drive said car, we were late, and Hubby was Angry with a capital A. We made a quick stop at a local deli to get some bagels I needed to bring to work, which made us even later. Hubby fumed a bit more, put the car into reverse, and promptly backed into another vehicle. Crunch.

Not wanting to up my parents’ insurance premiums, we didn’t claim the expense of having the victim’s vehicle’s bumper replaced, we paid for it ourselves, to the tune of $797.43 (the faxed receipt is still on my hard drive). Delightful.

How did we pay for it? Back then, we weren’t doing so well financially. I was making significantly less, and Hubby was still in school. We didn’t have an savings to speak of. We put it on the MasterCard, then paid the MasterCard (18%) off with our line of credit (7%). It probably took us three months to get rid of it entirely.

How would we deal with it now? Well, the boots are a relatively minor expense and shouldn’t cause more than a ripple in the chequing account. Another bumper cruncher would set us back a bit, but no use of the line of credit would be necessary, as I could suck any needed amount out of our emergency fund. Since our standard of living has increased significantly in the past two years, we’d have some room to save a bit of money by dropping back down a glutton level for a couple of weeks, which would allow us to build the fund back up quickly.

It’s my plan to build our emergency fund up further in the future. Right now we’re concentrating on getting it to $5000. I hope to have that done by the time I go on mat leave. Once Hubby’s student loan is gone and I’ve returned to work (the latter will almost certainly happen before the former), we’ll start slowly building the fund up to three month’s net income, which right now would be about $17,000. That’ll prepare us for bigger emergencies than a bruised bumper or a dead pair of boots.

My student loan is officially paid off

Originally scheduled to be complete in December of 2011, my student loan has officially sucked its last payment out of my bank account. With a final withdrawal of $27.36, I can kiss it goodbye forever. Hah!

I’m supposed to receive a Notice of Balance Paid in Full in about 10 days. I may frame it and hang it on the wall next to the degree it paid for. Tacky? Perhaps. Satisfying? You betcha.

A note to Chickie at Scotiabank: I called Christine at the National Student Loan Service Centre (NSLSC) yesterday. After giving her my account number and enough info to prove I was me, she graciously answered all of my questions about how to close out my loan, rather than acting as though she was doing me a favour by deigning to speak to me. She then gave me the option of waiting until the scheduled payment date of December 31st, or having her withdraw it immediately. Despite my not having a chequing account with them, she was still able to access my funds through a little technology some people call the Internet. Lo and behold, this morning my bank account was minus the exact amount she told me it would be, and when I checked the NSLSC website (which I can access all by myself), my account read a gratifying ‘Balance remaining = $0”. No need to wait for them to get around to acknowledging my payment. Christine also did not hang up on me, nor did she say anything rude. In fact, she congratulated me on paying off my loan, and wished me all the best in my future endeavours. You might consider learning a thing or two from Christine, but I have a feeling she’d have nothing to do with you.

Oh yeah. That was satisfying too. Though I should probably do something about this bitchy streak I seem to have before becoming a mother...

How do you feel about cross border shopping?

We’re heading down to the States today with a few friends to do a little Christmas shopping. The timing seems ideal. The Loonie is still high, our local prices haven’t yet dropped, and the American ones haven’t yet risen in response to the sagging Greenback. I figure we can get a few good deals and have a bit of fun shopping in a new place. I’m also hoping the maternity wear selection will be better and cheaper.

That being said, I won’t be telling my parents we went.

Why? Mom and Dad have always been vehemently opposed to cross-border shopping. Well, opposed to Canadians shopping down South. They quite enjoy Americans bringing their money up here. Bit of a biased viewpoint, but understandable.

They have a few solid points, which apply no matter what border and which direction we’re talking about. Spending your money locally helps keep that money in the community. If you buy a gift from a local business owner, it helps keep him in business, which helps keep tax dollars and employment in your town. This is even true, though to a lesser degree, of shopping at the local outlet of a big chain store.

As an investment advisor in a small town, Dad was always very much aware of this. His clients were local. They were often local business people. If their profits were down, their available money for investing went down, and Dad’s paycheque went down. He was directly tied into the loop and he knew it.

Many others were also directly involved in that loop and for the most part, they knew it too. It was the ones who were indirectly tied to it that didn’t. The teachers and other government employees tended (and I’m generalizing here) to be the most active border crossers. They’re paycheques weren’t directly tied into the amount of money currently circulating in town. They were paid by the federal, provincial and municipal governments.

Ultimately, however, the prosperity of a town affects even them. If a business closes down, then those former employees have to look for work elsewhere. If enough of them leave, some of the schools will be closed due to the lack of kids, and government services will be cut back.

But cross-border shopping moves in cycles. When I was young, everyone crossed to the States to get better deals on things. When I was older and the Loonie took a dive down to 60-odd cents US, it was the other way around. Good deals could be found in Canada for Americans and their powerful dollar. Now it’s turned around again.

It might be said that it all evens out. It could also be argued that if we’re all equal, I shouldn’t matter where we spend our money.

I don’t go often, it’s probably been ten years, though that’s more to do with the currency exchange situation than anything else. I usually buy locally when I can, and I visit local chain stores when I can’t. I figure I can take the occasional trip across the border without too much guilt. I’m one of those indirect loopers, after all.

I still won’t be telling Dad.

What do you think? Would you cross a local border to save money, or is it taboo?

Link Roundup or What to do when writer’s block strikes.

I haven’t been feeling particularly well the last couple of days. I’m hoping it’s morning sickness’s last hurrah before getting lost for good due to my newfound second trimesterness, but I may be the victim of wishful thinking.

Anyway, the point is: I haven’t had much luck figuring out what on Earth to write about. I’ve been cruising the blogosphere in hopes of inspiration, and there have been some great posts recently...just none that have triggered a surge of creativity on my part.

So, I figured I’d cop out and link a few of the interesting ones instead:

Plonkee of Plonkee Money wrote a guest post on Get Rich Slowly about her money fears. She wonders how healthy her belief that money is security really is. I imagine this is pretty common, most especially among those of us who think and/or write a lot about finances. My personal opinion is that it’s a healthier character trait than soothing your emotions through shopping, but it’s still something that may be holding you back from enjoying your life thoroughly.

Generation X Finance posts about a CNN article on a woman in Nevada who is in danger of losing her house, apparently due to repeatedly using her home equity whenever ‘times were tough’. From the looks of things, her idea of tough times differs significantly from those of Gen X’s readers. It’s a good reality check on what your home equity should really be about, and it looks like the lady may be suffering from a skewed set of priorities.

Brip Blap has apparently done some calculating to figure out if college is worth it financially. He’s only posted a teaser so far, but I’ll be checking out his spreadsheet when he publishes it. I’m interested in the variables he’ll use, what the conclusions will be and, let’s face it, I’m an Excel geek and just want to play. I don’t know how it’ll turn out, but I do know one thing for certain: a Bachelor’s degree gained in four years is more financially sound than the same one in eight.

Lynnae from Being Frugal.net wrote a guest post on Blogging Away Debt about the kindness a stranger did her family when she was a child. It’s a heart-warming story that perhaps reminds us of a kindness someone gave us in the past, and hopefully also reminds us to do likewise in the future for someone else.

Ah ha! That’s what I can post about. Stay tuned tomorrow for my near-Christmas tale of a very kind stranger.

Picture from MS Clipart.

This month’s net worth

Okay. Time to crack out the statements and spreadsheets and figure out where all our money is. You can see all the numerical figures on my NetworthIQ profile for December 2007.

As for the highlights and excuses...

Assets:

• The emergency fund is down, since I used much of it to get rid of Hubby’s obnoxious PSL.
• Cash on hand is up a bit since a couple of our utility bills didn’t clear until after month end.
• We contributed $300 to our RRSPs, though most of that was negated by the market downturn. It'll go back up eventually.
• My stocks are also down a bit for the same reason.
  

Debts:

• Hubby’s PSL is gone, finished, zip, nada, nothing. My student loan is down to $27.25. I still have to call them to see how to close it out properly. We sent $814 to Hubby’s CSL in November.
• Because we pay our mortgage biweekly, it received 3 payments last month, and so decreased by $841.
• The credit card spending is down. Note that we pay the full balance every month on this, so even though I’ve listed it as a debt (which it is), we’re not paying interest.

Current net worth:

$8,370.11

All in all it was a very productive month. Two student loans are (practically) gone. An extra payment went to the mortgage. We spent less. Not bad at all. Too bad I can’t get paid three time every month.

We're on track to reach my net worth goal of $10,000 by year-end.

2008 financial resolution

I saw over at Brip Blap that Cash Money Life is holding a contest on establishing 2008 financial goals in order to promote the new Carnival of Financial Goals. The challenge is to write a SMART (see acronym spelled out below) financial resolution for yourself for 2008. If you choose to participate, you’ll be helping to set yourself up for financial success in the New Year, and you could win an iPod Nano or one of three finance books. Whether you choose to participate in the contest or not, I highly recommend you do the goal setting exercise.

Okay. My SMART financial resolution for 2008 is:

Specific:
To pay down at least $5000 worth of Hubby’s Canada Student Loan by the time our baby is born (current due date June 19th). We’ll start this resolution on December 1st rather than January to jumpstart the New Year.

Measurable:
Once I’m back on my feet, I’ll calculate how much money we’ve contributed from December 1st to Junior’s birthday. If it’s over five grand, we’ve been successful. This is yet another reason not to be premature, kid. You hear me down there?

Actionable:
We’ll submit a large percentage of our Christmas cheques (unless they’re specifically intended for baby by the giver, in which case they’ll go to savings) and bonuses to the loan, and buy used baby gear for items we deem to be safe to do so (e.g. not the car seat). We’ll also start doling out a set allowance every two weeks for each of us to spend as we please rather than spending whatever we like when we like. This should cut down our spending quite dramatically and allow us to reach our goal.

Realistic:
We’ll have to send an average of $834 a month to the loan in order to reach $5000 by June 1st. This should be well within our abilities given our current income and necessary expenses.

Timely:
We’ll be able to tell monthly whether we’ve been reaching our average payment goal. If we’re ahead, great. If we’re behind we can step up the effort. The uncertainty of the end date will give us incentive to make larger payments early, which will help our overall debt reduction by chewing through more principal and thus reducing interest. Once we’re parents our expenses and income will change dramatically and I’ll have to set a new goal once I’ve become accustomed to the changes. This is why I’m ending the resolution at that point.

I’ll post our progress in a trackbar on my side panel.

Thanks to Cash Money Life for the great idea and best of luck to the Carnival.

Student Loan Status Update – the Continuing Saga

I’ve so far sent $1500 towards my student loan. $500 more will be sent tomorrow when I get paid. That will leave about $75. The lender will automatically remove $50 from my account on Monday as per our original consolidation agreement. Once that goes through I’ll be calling them to determine how to finish it off and close out the account. Woo hoo!

Next.

I’ve discussed previously how much I loathe Private Bank (pseudonym), which holds Hubby’s student loans. It’s reached a new level. I’m naming names.

Private Bank is Scotiabank.

I’m aware that some of the Canadians reading this probably love Scotiabank and hate TD. Or BMO, or Royal or CIBC. Everyone in Canada seems to have one of the Big Five that they refuse to deal with.

Scotiabank is mine. Here’s the latest reason.

We decided that we would use part of our emergency fund to get rid of the Provincial Loan (PSL) that is so irritating. Hubby called them to find out how to do so. After confirming his information and identity by putting him on hold after ever question (Last name? Please hold. Date of Birth? Please hold. Social Insurance Number? Please hold.) Chickie (who refused to give her actual first name, and so receives my arbitrary derogatory nickname) announces that it’s not possible to transfer funds directly to the PSL since those accounts are not online. Hubby points out that the consolidation forms state that they can automatically withdraw monthly payments from his account, therefore they should be able to withdraw the full amount from his account given his written permission. Hubby is informed that monthly payments can only be automatic if the chequing account is from Scotiabank.

Hubby is irritated but says that he will write a cheque, can he please be given the total amount of the loan including interest for the next three days? Chickie states that it’s not possible for her to determine what future interest will be. Hubby points out that they’re a bank and since their profits are tied to interest coming in it seems odd they’d be incapable of future projection. He asks what the daily interest was from yesterday, and says he’ll add that amount times five to the cheque.

He dropped the cheque off at a branch yesterday. The people at the branch had no access to his provincial loan accounts (since apparently they keep them securely locked in the Stone Age), so couldn’t process it themselves, but were kind enough to put his cheque, loan document and letter directing that the cheque be used to pay off the full amount into their interdepartmental mail. I have no quarrel with the people at that particular branch.

First issue solved, though with no help from Chickie.

Hubby then tries to set up payments on the much larger Canada Student Loan. This one sends out statements and is reportedly available to other banks. However Hubby had already tried to set up bill payments through our PC Financial account. Scotiabank CSLs were not one of the available bills. He called PC and was helped by Shaila, who said she’d be happy to set it up for us but Scotiabank had not supplied them with a merchant number for that type of account. If Hubby could have Scotiabank contact PC or get the merchant number from them himself, Shaila would arrange it.

Fast forward to Chickie. She laughed when Hubby asked why PC Financial didn’t have access to those accounts. Her response was that they only dealt with the other ‘old banks’ for these types of accounts. Apparently in her mind the old banks consist of Scotiabank, TD, and Royal.

I looked it up. The Bank of Montreal is older than any of those three, and all five of them (CIBC being the fifth) are over 140 years old if you don’t count name changes. Nice argument. Quite the snob for someone working phone support. Here’s a hint: If you’re going to be condescending, do try to at least have a clue what you’re talking about. It’ll make you appear merely rude instead of rude and stupid. Still, she’s right in saying that PC is a new bank. But since its services are run through CIBC, it should have access.

Hubby requested a merchant number for the account type and Chickie had no idea what he was talking about. She suggested that he open a Scotiabank chequing account and deal with the payments through it. Hubby valiantly refrained from telling her hell would freeze over first, and instead asked to speak to her manager since she couldn’t help him.

Chickie hung up on him at that point. I could understand if she hung up on me, because by that point I would have been rude, vulgar and belligerent. Hubby has infinitely more patience than I do, both through natural gifts and years of working IT phone support.

Anyway, what are we going to do?

We have a currently unused line of credit through TD, one of the two banks deemed worthy for Scotiabank CSLs to deal with. I’ll be sending payments to it from PC, and three days later sending payments from TD to Scotiabank. We won’t pay any interest on the line of credit, though we’ll lose out on the three days of interest from PC.

I’ll probably also draft a letter to their complaints department and cc Rick Waugh, the President and CEO. He deserves to know why we will never, ever get another service through his bank.

Good thing he’s 'richer than you think’, because I bet he won’t care in the slightest.

My big money mistake and how to avoid it

The Canadian Capitalist is running a contest in celebration of his third year blogoversary. He’s offering some truly snazzy prizes. Go check it out and recall your own biggest mistake for him. We’ll all learn from it.

My biggest monetary mistake was taking eight years to graduate from university. Yep. Eight. Impressive, no?

Why did it take me eight years? A combo of reasons, the first of which is going to sound arrogant as hell. Apologies in advance.

I’m an intelligent person. It doesn’t always show (this being a case in point), but I score highly on IQ and other aptitude-type tests and breezed through most of my school years with no trouble at all. I never learned how to study because I never needed to. My parents never noticed the deficit. I was getting As, clearly I was doing all right.

My grades started to fall in my upper high school years as the work got harder. Sadly, this corresponded time-wise with my highest levels of teenage insensitivity and angst, so I didn’t even try to figure out what was going wrong. Consequently I still got into the university of my choice, but I didn’t get the scholarships my earlier marks would have assured me. Financial mistake #1: Not realizing the potential savings four years of free schooling would have provided. Luckily for me, my parents were prepared to pay for my first two years, and I had enough saved up to cover the other two.

Enter first year. Become overwhelmed with entirely new level of expectations and knowledge. Still fail to learn to study. Ergo, fail first year.

I made a substantial effort to learn more (and drink less) and scraped through my second year, earning the credits needed to pass the first year and ending the suspension the university had placed on me for failure. But I still had no study habits or methods that I could apply regularly. Financial mistake #2: Not taking full advantage of half a free education.

Then I got married. Hubby and I moved into our first apartment. We both went to school that year and scraped a few credits out between us. Seemed Hubby had the same problems I did, for similar reasons, only he wasn’t draining his savings, he was chewing through student loans. Financial mistake #3: Wasting my own money on an education I wasn’t paying enough attention to, and allowing us to become saddled with more debt than was necessary.

I spent the next two years going to school part-time and working full time in an effort to keep us above water before taking a year off to 'rest' (from school, not work). Hubby went to school and advanced slowly, graduating in computers just in time for the dot.com crash. Suddenly the streets were filled with out-of-work programmers who had way more experience and knowledge than he did. He ended up working at Timmies...not the most lucrative of positions.

I finally went back to school full time where I was fortunate enough to meet two important people. Erica was gregarious and naturally brilliant, and spent every spare moment sucking up spare knowledge and learning everything she could from everyone around her, be they biophysics professor or homeless man, because to do otherwise was a waste of time to her. Penny was not as quick at picking things up and not as brave, but she worked like a pack mule until she understood everything she needed. I learned to love learning for the sake of it from Erica, and I finally learned how to study from Penny. Together they were unstoppable, and after three years I finally graduated with an excellent upper year average.

Hubby went on to take a three year college diploma in computer engineering, which he worked very hard at. Guess he learned to study somewhere along the way too. I eventually landed a research position at a non-profit, and he recently started working for a now-recovered software company.

Financial mistake summary: In total I wasted four years of my life and ended up with a $4000 student loan and an $11,000 line of credit. We also had $22,000 in Hubby’s student loans to pay.

Couple of geniuses, that’s for sure.

Things you could learn:
1) If you’re good at something, you can always become better.
2) Don’t under-appreciate other people’s generosity, be it institutional or familial.
3) Make sure your children value and nurture their gifts as much as is possible, be they academic, artistic, athletic or otherwise. Ensure they’re not bored or coasting through life without effort. It’ll bite them in the end.
4) Watch the spending, particularly when your income is slim to none.

Any lessons in there that I missed?

Investing adventures

Moolanomy is hosting a contest on investing stories. I’m not interested in entering the contest, since I just won another one, but I thought it might be a good story to post about anyway.

Plonkee has recommended that all investing stories be boring, which is very good advice. My current RRSP investing strategy is somewhat boring, and will get more so as time goes by:

• I invested first in a Canadian equity fund. It’s doing very well.
• I then invested in a Canadian monthly income fund which DRIPs with satisfying drabbles back into itself every month. It’s not particularly high yielding, but it balances my otherwise heavy equity (higher risk) funds.
• Next I bought a global equity fund. It grew so fast that it’s now frozen to new purchases while its managers figure out what to do with all the spare cash lying around in it. High risk, but high profit so far.
• Since I couldn’t put more money into that fund, I spent another couple of weeks finding a second global fund to invest in, which I then did. I’ve only had it for a month. It’s up a bit, but that’s meaningless over so short a timeframe.
• My next set of cash will go into a low-cost S&P/TSX composite index fund. I’m just waiting until I have the minimum investment required for the one I want.
• I’ve been starting to check out bond funds for more diversification, but since I believe interest rates will rise over the next few years (and therefore bond prices will fall), I’m not sure it’s the best time for it. Correct me if I’m wrong on the logic of that sentiment; I’m certainly not a market expert, and I’m more ignorant of bonds and bond funds than I am of pretty much anything else out there.

I’m still fairly young. I’ll slowly move into safer investments as I age, but right now I want growth since I still have time to make up for losses.

I do have one interesting investing experience, however. One that thankfully was no risk to me, but cost my father quite a few bucks. He was an investment advisor before he retired, which he did quite comfortably I might add. I have the postcards from around the world to prove it.

When I was about 20, Dad had a look through my incredibly boring portfolio (about $10,000 in a single mutual fund, not tax-protected) and said “If I guarantee your initial investment, would you let me play the market a bit with this?”

Um, so if you lose money you’ll give me back my $10,000, but if you gain money it’s mine?

Duh. Go for it.

So he did. He sold my boring and low-yielding fund, and bought some shares in a software company. They did great. He sold at the right time for a tidy profit. Sadly, the next investment was not so well timed. The company in question was due to come out with this great new product. It tanked, as did their share prices before Dad could get back out of it, and my portfolio was down to a measly $1700.

Happily for me, Dad gave me roughly $10,000 in nice solid Royal Bank of Canada shares from his own portfolio. Since I received them, they’ve split twice. I paid for two years of university with them, and I still have about $11,000 worth, give or take a grand depending on the month. Nice.

Lessons learned:

• The market is tough, even if you’re a professional.
• I don’t have the stomach for buying and selling stocks. I prefer a buy and hold strategy of a solid stock from a solid company.
• I like the diversification inherent in mutual funds.
• Dad keeps his promises, even when they hurt.

Luckily, those lessons didn’t cost me a thing. Dad sucked up an $8300 loss, but it didn’t harm him too badly or for very long, and I think he had a bit of fun trying to make me rich.

Win some, lose some. Learn from it. Move on.

Now I just have to convince Hubby that just because his US equity fund is currently tanking it doesn’t mean the market is out to get him. It just means the American market is having a rough time, compounded by the change in exchange rates between our dollars. Two issues which I’m sure some of you have suffered as well.

Blogs for the financially frightened parent-to-be

I’ve been regularly cruising the blogosphere for a few weeks now and have happily stumbled upon or been lead to several excellent blogs written by financially savvy people who have had children and write about what expenses you may incur when you take the parenting plunge.

Here’s the ones I’ve found so far:

Trent at The Simple Dollar often writes about parenting issues, almost always from a financial standpoint. He even has posts where he’s tallied up the daily cost of having a one-year old, and subsequently a two-year-old. Although it’s from an American perspective, he’s broken down the costs in such a way that it’s easy enough to estimate what each category would cost in your area.

For example, because Canada has universal health care, and Hubby’s and my employers provide dental, drug and other coverage, our costs in that category will be much lower. However, it’s likely that our food, hygiene and entertainment and child care costs will all be somewhat higher than what Trent has to pay in the States. That may change if retailers start lowering their prices on imports to match our currently strong dollar, assuming it stays that way for a decent length of time.

Mike at Quest for Four Pillars has a great series on Baby Expenses. I must admit that I’ve only made it up to Lesson IV: Car Seats and Strollers, but it’s been very helpful, somewhat reassuring, and not-at-all painful so far. It has the added benefit for me of being written by a Canadian. Thanks for the point to the series, Mike. I’ll be reading the rest shortly.

J.D. at Get Rich Slowly has quite a few articles on raising financially savvy kids. A lot of his posts are on trying to avoid marketing aimed at your children. A topic I’ll be reading up on for several years to come, I’m sure.

I’m sure there are plenty more out there, I just haven’t found them yet. If you know of a good one, feel free to let me in on it.

Student loan issue resolved...at least for now

On the way home from work last night I finally got my husband to open up a bit about how he wants to handle his student loans. Turns out I was mistaken about what issues were driving him in his decisions.

I’m planning on having my student loan paid off by the end of the month. I’m on course to have this done, as I don’t think I’ll have any problem coming up with the roughly $1500 remaining on it out of the four paycheques we still have coming to us this month.

I’d planned on tackling his provincial loan next, which is currently about $4200 and must start to be repaid at the end of this month. I’ve previously written a rant a post about this loan. It has a somewhat lower interest rate than his larger Canada Student Loan (CSL), but it’s less accessible and much more irritating.

I can’t explain exactly why this loan bothers me so much. I think it’s the lack of control. I can’t look it up on the Internet or pull out the last statement to see exactly how much it’s worth at any given time. That drives me nuts. To the point that I want to use some of our emergency fund to pay it back in a lump sum, and then spend several months bringing the fund back up to $5000.

It turns out that my husband’s desire to pay back his larger CSL first was not driven by the larger interest rate, as I’d previously believed, but by the fact that he sees it as an albatross around his neck. The smaller provincial loan doesn’t bother him. He doesn’t see it as a problem or an issue, though he can’t quite explain why. He wanted to use the emergency fund money to make a large inroad into the CSL.

I balked at that. By using the fund to pay off the provincial loan, we’re completely getting rid of a monthly payment which means our absolutely required expenses will go down before I go on parental leave.

Current minimum payments are $50 (my loan) + $58 (provincial loan) + $181 (CSL) = $289. By getting rid of the two small loans, we’ll only be obligated to pay $181 a month.

I had every intention of putting at least $289 a month into the CSL until it’s gone, but I’ll feel much more comfortable if we have the ability to reduce payments if it becomes necessary.

So, we’ve compromised. I think my threat of making him call the Private Bank every month to get his provincial loan’s exact balance tipped the scales. I’m a meanie that way.

We’ll pay off my loan this month. We’ll pay off the provincial loan in full rather than signing up for monthly payments, and we’ll sign the CSL consolidation forms for $400 a month. Once the fund is back up to $5000, I’ll sock any extra money into the CSL.

My most loathed loan will be gone, he’ll see significant decreases in his most loathed loan, and the emergency fund will never drop below $1000. If we have income problems in the future, we can call the Private Bank and have them reduce withdrawals back down to $181.

It’s not perfect, but we can both live with it, and that’s what’s important.

Anyone else discover that they were looking at their debt issues in a completely different way than their partner? Did you resolve it? And if you did, how?

Can-Am mutual comprehension

There seems to be one rule in the blogosphere. If you have plans to write about something, someone has already done it before you, and done it better than you were going to.

Since some of my readers (yes, 2 out of the 4 of you, or [as I prefer to view it] 50% of you) are viewing my site from the US, I figured it would be a good idea to start thinking about having a glossary of some of the differences between the Canadian and American financial systems.

And so I discovered that someone with a readership level currently 600% larger than my own has already done just that. I present the four of you (and anyone else who has since stumbled their way here) with Loonies and Lexicons and Loonies and Savings Plans from the blog Loonies and Sense.

May it help the Americans understand this site and others like it, and the Canadians to understand the vast array of helpful, if foreignly confusing, American personal finance blogs.

The joys of grocery shopping with your spouse, or, Why I’m an idiot.

Last night on the way home from work we went grocery shopping. This was necessary, since food level in the house was getting low, particularly perishables.

But I must confess that I’m an idiot. Why am I an idiot? There’s actually quite a lengthy tabulation of ways, but only a couple are pertinent to last night, the first of which is that I went to the grocery store while hungry. And not only was I hungry, but my husband was hungry too. Everyone who’s ever done the remotest bit of introspection knows that two hungry people going to the grocery store is a colossally stupid idea.

Edit: To see a collection of things that may help you lose weight, see Brip Blap's 101 Thoughts on losing 100 pounds. A few of them will also save you money. Note number 75. Let that reinforce the idea that I am an idiot.

I had a shopping list.

It was a good shopping list.

If I’d stuck to said shopping list, I’d have saved myself about $30.

I decided that instead of making macaroni and cheese from scratch, we’d try the fresh tortellini with cheese sauce the store had on sale. I’ve always thought it looked good and have been wanting to try it for a while. Because it was on sale, it wasn’t that big a splurge. It cost about $7.00, which isn’t too bad considering the mac and cheese would have cost about $4.00 to make, what with all the cheese. Not the most frugal choice, but I could have lived with it.

If I’d stopped there.

But instead of stopping I made my second idiotic move of the night. I let these five words escape my mouth: “Do we need anything else?”

Why, yes. Yes, we did.

We apparently needed some fresh crusty bread for the pasta. We also needed a frozen pizza, some pop, some chips and dip, some crackers and some cookies. I caved on each of these except the crackers, which were wholly my idea.

This falls safely into the category of ‘you win some, you lose some’, right?

We’re moving on today. I have a lunch of leftover pasta and bread. We’ll be having the pizza tonight and while it’s cooking we’ll put the ingredients for a nice, hearty, frugal beef stew in the crock pot so it’ll be all ready to go tomorrow morning. Thursday night we’ll eat out somewhere inexpensive as we have a pre-natal class which starts too early to go home in between.

And on Friday we’ll make homemade macaroni and cheese with four dollars worth of ingredients which we already own.

The ever-dreaded Christmas budget

I’ve been pondering our Christmas budget this year.

This is the first year that both my husband and I have been employed simultaneously with decent jobs. The decent is of course relative, but for us it means each job A) required those expensive pieces of paper we have hanging on our wall, B) provides benefits like dental and/or a pension, and C) pays significantly better than we were making when working retail.

Since this is the case, I’d planned on being more generous with the Christmas spending than we have been in the past whilst starving students.

However, now that we’re pregnant, my priorities have changed. Now I want to maximize our debt repayment and savings because my income will drop when I go on Canada’s (much appreciated) year-long parental leave.

So, it’s with somewhat heavy heart that I’ve budgeted a mere $500 for Christmas shopping. This includes our four parents, three surviving grandparents, a brother, eight friends (six of whom are couples and therefore cheaper/easier to buy for), a niece, two kids belonging to friends, and my father’s and grandmother’s birthdays.

That being said, I won’t be too upset if we go a bit over budget here and there, but I think we can get reasonable gifts for these amounts. I’ll be starting to look online this weekend.

How much are you budgeting this Christmas (or other holiday) season, and how many people are you buying for?

How much is it worth to keep giving money to a bank you hate?

My husband’s student loan consolidation forms came in the mail on Friday. He has two loans. A Canada Student Loan (CSL) of $17,800 which is at Prime + 2.5% (currently 8.75%), and a Provincial Student Loan (PSL) of $4,200 at Prime + 1% (currently 7.25%). To add to the confusion, the interest on the student loans is tax deductible, which at my husband’s tax rate would make the true interest rate approximately 6.02% and 4.99% respectively.

This doesn’t look too confusing yet. We could either take Dave Ramsey’s advice and pay down the smaller PSL first to get rid of it as part of a debt snowball, or we could pay down the CSL first, since it has the largest interest rate.

The true issue is annoyance factor. My husband first took out these loans before the government set up the National Student Loan Service Centre (NSLSC) to administer them. Unlike more recent student loans (like mine) which are held through a subsidiary run by the government, my husband’s are held by the one Private Bank that was allowed to administer student loans before the de-privatization. The two loans were mandated at two different levels of government, and thus have different rules. The Private Bank will only follow these rules to the lowest effort legally required.

The CSL is legally required to have statements mailed monthly. This allows us to easily see how much we owe, and what we’re paying in interest each month. The PSL does not have this requirement, and thus the Private Bank refuses to send statements. Nor has the Private Bank enabled any way for the PSL balance to be seen online. The only way to know how much the loan is currently worth is to call their 800 number, or to go into a branch. Since the even the most convenient branches are only open until 5, realistically it means my husband would have to call them and wait up to an hour on hold each time, unless he wants to take time off work.

Because they are no longer in charge of any new student loans, the Private Bank has no reason to switch their policies. The customers affected dwindle each year and are not replaced by new ones. There’s no payback for them to switch over to a less draconian policy.

Nor can my husband switch the loan to another bank without penalty. They are the only Private Bank able to cover student loans. The moment he switches, the loan loses student loan status and thus loses tax deductibility on the interest.

This is the point in time where I thank my lucky stars that I took out my loan after the government had taken over. My loan is accessible online. I can send them electronic payments and know exactly how much I owe any time of the day or night. I see a daily tally of how much interest I’m paying and what part of my payments went to the principal.

Now comes the decision. My original plan was to finish paying my loan (on track to be done by the end of the month), then to start on my husband’s PSL and finally to tackle his CSL. This would follow the ‘debt snowball’ plan and get rid of the lowest balance loans first.

My husband would rather get rid of the higher interest rate loans first, and I’m willing to do that since it is more financially optimal. I think the psychological aspect will still work for me as long as the total number in the NetWorthIQ student loan section is going down significantly each month.

But how do we measure the annoyance factor? By paying the CSL off first, we would be minimizing the interest we pay, but we’d also be maximizing the profit the Private Bank is making off its poorest service account. Every time I want to calculate our net worth, my husband will have to spend an hour of his time on the phone waiting to speak to a Private Bank “customer service representative” (insert eye-roll here). That’ll be once a month.

Personally, I’m leaning towards using our $5,500 emergency fund to pay off the $4,200 loan in one shot to save ourselves the headache of dealing with it, and then spending the next couple of months pouring our money back into the fund. The emergency fund will never drop below $1000, and the interest rate its earning is 4.25%, lower than either of the loans.

Since they are my husband’s student loans, ultimately it’ll be his decision on exactly how we want to repay them. I just want to present the options and my viewpoint.

Does anybody out there have any other solutions or thoughts on the issue? Anything I’m not taking into account? I’d be very interested in another perspective.

First big payment sent in on my student loan

This morning I sent $500 sailing from my chequing account to my student loan. Since the test dollar I sent earlier this week took three days to arrive, it should get there by next Tuesday.

This will bring my student loan down from $2072.91 to $1572.91. It’ll save me $3.49 in interest this month, or approximately 11 cents a day.

I’ve also discovered that I get paid three times this month. This is good for two reasons:

1) I’ll have some extra money to split between paying off our loans and buying Christmas presents.

2) Since the mortgage is automatically withdrawn on the same date as my paycheque, we’ll be making three payments this month, nicely reducing our principal.

I’ll pay another big chunk of the student loan after the 15th, which is when my husband gets his paycheque. With any luck I can get rid of my loan entirely by the end of November, which is just in time for us to start payments on his student loans.

What we owe, and to whom...

Today’s the day I catalogue our debts and savings goals. I have no doubt it’ll be a thrilling post for all [insert eyeroll here].

First, I prioritized what I wanted to accomplish. I’m roughly trying to follow what I’ve gleaned from other blogger’s discussions about The Total Money Makeover, but as I’m still waiting for the copy I’ve reserved from our local library, I’m winging it for now.

Dave Ramsey recommends starting with a $1000 emergency fund. Luckily for me, I already have $5000 sitting in a savings account. We saved it up during my husband’s co-op semesters in college to help get us through his last four months of in-class studies and the time it took him to find a job afterwards. We didn’t use it all, and thus I’m happy to call it our enhanced safety net. I’m torn between using all or part of the extra $4000 towards some of our debts, but I think for now I’ll leave it where it is. It’s giving me some peace of mind. Since I’m already morbidly worried about stuff (side effect of pregnancy, apparently), I’ll take what little I can get.

Next come our debts.

We have no credit card debt, as we pay off our balance on our cards every month and we’ve already cleared out the line of credit we used as a safety net for much of our university years. So, happily, we can move on to that other remnant of university life, the glorious student loans.

My consolidated loan - $2,072.42 – minimum $50 monthly, automatically withdrawn.
Husband’s smaller loan - $4,435.19 – minimum $53.94 monthly, starting Dec 1st.
Husband’s larger loan - $17,823.39 – minimum $181.11 monthly, starting Nov 30th.

Hoo boy. That last one’s a whopper. My goal is to have mine polished off by the end of 2007, and his smaller one by April 1st, 2008. I’m not going to make a guess how long that big sucker (change the ‘s’ to an ‘f’ and you get my true feelings for it) will take until I’ve had a true look at how our income will be impacted by my upcoming maternal and parental leaves.

After the student loans are gone comes saving 3 to 6 months of expenses. To simplify it for myself, I’m going to call 3 months of income 6 months of expenses. For us, that’s roughly $17,500, which will be $12,500 if we leave the emergency account where it is.

Next is our retirement savings. Ramsey apparently advocates 15% of income to Roth IRAs or other pre-tax retirement plans. I’ll translate that to make more sense for me as a Canadian.

I have about $22,000 of unused contribution room in my RRSPs. My husband has about $18,000.

Every year the Government of Canada allows you to contribute 18% of your income, minus pension deductions, up to a maximum amount (which doesn’t apply to either of us). Anything unused is carried over indefinitely. This year, that means approximately $5454 ($9090 is the 18%, my company pension paycheque deductions total $3636 a year) will be added to my contribution limit, and about $9900 will be added to my husband’s.

I’m currently treating these as a debt, with a minimum payment of $50 to each of our accounts every 2 weeks (average: $216.66 monthly). On the downside, until we finish paying the student loans, we’ll be falling further and further behind with the RRSPs. On the upside, when we do start rolling the money snowball that was previously being used to pay back student loans, we’ll be in for a whopping tax refund that can be shunted right into the plans as well.

After we’ve caught up, we’ll continue to contribute 18% of our income annually (minus any pension plans we have at that time).

Next on the list is an RESP for our child-to-be. Since the first $2000 we contribute every year is eligible for a 20% grant from that (sometimes) generous government of ours, we’d be stupid not to take advantage. What’s the likelihood of finding an automatic 20% return anywhere else? Any returns we get on the investments we choose are gravy at that point. So, once our kidlet is born, we’ll be socking away $166.66 a month for his/her education. (Mental note: determine what dates mark the end of a year for this: calendar, fiscal, or child’s date of birth).

After the retirement and educational savings are up-to-date, it’s time for the mortgage. The current balance is $153,328.57, with a minimum payment of $505.99 every two weeks. We can pre-pay up to 25% of the principal each year as a lump sum. This is 25% of the initial principal, not what’s left at the time. We can also increase our biweekly payments by up to 25%.

And, finally, there’s a $100,000 gift we received from family to help us buy a home. It allowed us to give a whopper of a down payment, and to buy a house that has room for children in a neighbourhood where I’d be willing to raise them. The gift had the qualifier that if the givers are ever in serious financial difficulty, they might come to us for (at least) partial repayment. I don’t see that ever happening, as the family members in question are quite well set up and are very financially savvy. But you never know. I’m keeping the possibility that I might have to repay this open.

All of this information is being tracked with NetworthIQ. If you want to see my profile, it’s in a link on the side. Seems to be quite a handy little tracker, though you could do the same using Excel or any number of other programs.

And now, to start on this marvellous plan. I have several hundred dollars in my chequing account awaiting transfer to my student loan to get the ball rolling. Since I just set up the bill in online banking, I’m just waiting for the test dollar I sent to make it to my student loan account so I know everything is hunky dory.

We’ll soon be off and running.

The One Day Committment

Today I’m not going to spend money needlessly.

That’s it. No long-term plan. No cutting the extras out of my life permanently. Just today.

This is by no means an original idea. The Simple Dollar has discussed it. I’m sure countless others have as well.

This morning, I didn’t stop for a muffin and tea at Tim Horton’s or the cafeteria downstairs. I packed a lunch from home, so no hitting the cafeteria at noon either. I will be stopping on the way home to make some purchases, but they will be groceries that we need (got my list) and some gas for the car (sadly empty).

After the groceries and the gas station, I’m going to go home and make dinner rather than stopping by McDonald’s as has become my habit lately. Cheaper and healthier. After that, I’m going to curl up with a book I’ve been meaning to read for ages and haven’t quite gotten around to. I paid for it months ago. Actually, come to think of it, I bought it with a gift certificate I was given as a house-warming present, so it didn’t even cost me any money back then. Sweet.


Also, I'm exhausted, so an early night with no TV will be good for me.

As for tomorrow, we’ll see what happens. One day at a time, right?

Credit Cards – Useful tools, or evil debt traps?

Most finance books and blogging gurus that I’ve read seem to hold the opinion that the best way to get out of debt is to chop up all your credit cards.

They have a good point.

Many people find it difficult to control their spending if they have access to easy credit. My grandmother has never had a credit card. She’s terrified of them. My in-laws got rid of theirs after digging themselves into a financial hole which is still threatening to eat them alive (the fact that their elderly days may be financially strapped is something that often weighs heavily on my mind, but that’s a tale for another day).

If you have difficulty treating purchases on credit cards as real money, or if you’re prone to impulse buying, then this is certainly a valid strategy, and will no doubt help you immensely.

My problem is I tend to do the opposite. Cash that’s in my wallet has already left my bank account, so I tend to think of it as already spent. I therefore have very little difficulty parting with it. Purchases going on my credit card increase my balance, and end up detailed on my paper statement. An ATM withdrawal of $100 is just an ATM withdrawal. A purchase of $97.96 from VideoGamesRUs goes down in the annals of family history as the waste of money that it is.

I tend to view our main credit card as a tool. It’s a no fee MasterCard that has a 18.97% annual interest rate. We pay off the full balance every month, since I'd rather swallow paint thinner than 19% interest.

While my husband was in school and I was working a crappy retail job, I must confess that we weren’t always able to pay off the full balance with cash on hand. For that we had an unsecured (since we had no assets) line of credit with an interest rate of about 7%. Once we were both working, it took us about 6 months to pay off that line of credit.

Used the way we do, our credit card gives us a 30-day interest-free loan every month. It also provides us with 1% back in groceries. In the past we’ve tended to cash that 1% out during the summer for the expensive meats we love to barbecue. This year we’ll probably store up the credit and use it to buy baby supplies. I’m thinking the 40-odd diapers people say you go through the first week would feel slightly better if they were free.


In addition to the free groceries, I also like the credit card because it provides immediate mergency funds when necessary. Now, I would never suggest that you rely on a credit card for your source of emergency funding. That's not smart at all.


What I'm saying is that a credit card allows you to instantly pay for emergency needs while maintaining a slightly less liquid true emergency fund.


For example: We have just over $5000 in an account set up for emergencies. It's in a high-interest savings account currently making 4.3% interest. Unfortunately, while I can instantly transfer money to it from my chequing account, it takes 24 hours to get it back out again. This means that if I needed to access that money in order to remove my car from a ditch, I'd have to wait a day.


Not helpful.


However, with my credit card, I pay the nice tow truck driver when I need him. Then, when the credit card bill comes, I transfer the funds from my emergency savings account to my chequing account, and from there to Mr. MasterCard.


Note that in order for this to work well, you need to pay the balance on the credit card off in full every month. Otherwise you're being charged an astronomical rate of interest while you're paying the nice tow truck driver. Talk about adding insult to (hopefully) metaphorical injury.

In addition to our main MasterCard which has my husband as the primary cardholder, we have a much smaller Visa in my name. This is because I discovered a few years back that I had no credit rating. That was a thrilling moment, let me tell you.

When my husband and I were first signing up for our accounts and credit we put the chequing and savings accounts in my name primarily and the MasterCard in his. It was an arbitrary decision and seemed fair. A little while later we had an offer for a line of credit which came in his name. Because money was tight while he was in school, we accepted.

Three years ago I applied for a separate credit card because I intended to start my own hobby business. I was only applying for a $1000 credit limit, so imagine my surprise when my bank turned me down.

I couldn’t understand it. I’d occasionally paid a bill a bit late, but nothing had ever gone into arrears for longer than a couple of days. We always paid at least the minimum due on everything, none of our cheques had ever bounced. Why on Earth couldn’t I get a little bit of credit?

It turned out I couldn’t get credit because I hadn’t had any in my name for over seven years. I was the secondary cardholder on the MasterCard, and while any failure to pay would reflect badly on me, I didn’t benefit from my husband’s (i.e. my) good record of payment. A good history of writing cheques was meaningless, only a bounced one would affect my rating. My student loan wasn’t large enough and hadn’t been in repayment long enough to be meaningful.

My first thought when getting this information remains unprintable.


My second thought was to panic because I knew that in a year or two we’d be looking at buying a house and if I had no credit history that was going to be difficult.

The bank I tried first is a good online firm for the most part. They give relatively high interest rates on savings, they have no-fee chequing accounts. They’ve saved us a lot of money. They are, however, completely inflexible. Because everything is done online or by telephone, they adhere to strict formulas and rigid schedules about who qualifies for what. There’s no wiggle room. They wouldn’t help me.

Our line of credit is through a brick and mortar bank. I decided to call them next. They were remarkably more helpful, but even so I had to have my husband co-sign my $1000 Visa card with them. As the sole breadwinner at the time, it was unbelievably grating, let me tell you.

It all worked out in the end. I now have a credit rating. We successfully acquired a mortgage last year and it’s in both our names. My husband is still the primary holder of our large MasterCard. I still hold the smaller Visa. We regularly pay everything with the MasterCard so that we earn the free groceries, and so our expenses are easier to track. I put one to two purchases on the Visa monthly to keep it active and to show that I can regularly pay it off. We have no need or desire to have any other credit cards.

I understand why cutting up all credit cards can be the best solution for many people, but you might consider having at least a small one to maintain your credit rating if you can practice discipline. You can always ask your lender to reduce your credit limit to $1000 or even $500, so that you can never dig yourself too deep.

Just remember to ignore all the other ‘great’ offers you’ll likely receive in the mail once you have a good credit rating.

November 10th Update: Guess who called me last night to offer me a $15,000 credit card?

If you guessed the bank that turned me down three years ago when I begged them to give me a $1000 credit limit after having been a customer for four years, you'd be right.

Now, guess who had me laughing uproariously in their ear? Go on. Guess.