tag:blogger.com,1999:blog-85546693002111864512024-03-13T03:16:10.487-06:00A Canadian and Her MoneyAn open examination of one woman's personal financesthe money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.comBlogger141125tag:blogger.com,1999:blog-8554669300211186451.post-75183931379841298032007-08-22T22:21:00.000-06:002007-08-22T22:59:57.636-06:00The Emotional Roller Coaster - Financial VersionThere was a comment on my last post that got me thinking... <blockquote>"When it comes to money one has to be a lot like the old Star Trek's Dr. Spock. Completely unemotional and totally analytical."</blockquote>Now that is a tall order! I understand where the commenter was coming from - he wanted to warn about avoiding groupthink and herd mentality. But I think it's an interesting topic anyway. How much do you need to keep your emotions out of your finances?<br /><br />Well, it depends which emotions and what context they arise in. Some could be highly beneficial. For example, the emotion of fear is well known to be one of the most powerful motivators. Personally, one of my greatest fears is being poor or dependent on others, especially in my older years. So this emotion actually helps me because it is so deeply imbedded in my psyche that even when I make conscious decisions to spend money there is a part of me that is saying "okay, now where can we cut back to make up for this?"<br /><br />Another emotion that could be financially beneficial is greed. Yes, it can lead to unwise choices too, but many people who chase money above all else actually end up getting it (and often nothing else, but we don't need to get into that!). And especially if greed is matched by a good work ethic, then I think financial success is virtually assured.<br /><br />However, if you talk about the stock markets, then both greed and fear can sink you pretty fast. They make you sell at the bottom and buy at the top, and make many other stupid moves along the way.<br /><br />So here's my theory: the context really matters. Emotions are just motivators - they basically cause you to take an action. If you have emotions plus luck or intelligence you get actions with positive outcomes. And if you have emotions plus bad luck or stupidity then you get negative outcomes. In other words, the emotions are neutral but because they motivate action they will expose your strengths and weaknesses much sooner and more decisively.<br /><br />If I'm right about this theory, then you don't need to control your emotions, you just need to become really smart financially so that every decision you make is a good one. Then when an emotion comes along and causes you to take action, you show off your genius!<br /><br />What do you think? Are emotions dangerous to finances or is ignorance the real danger??the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com33tag:blogger.com,1999:blog-8554669300211186451.post-14435447518166730312007-08-13T23:33:00.000-06:002007-08-14T00:01:30.773-06:00Sticking to Your StrategiesDon't join the flavour of the month club when it comes to your finances! While you may get away with it in the short term, I believe that shifting strategies too often will punish you financially in the long term.<br /><br />One reason for that is basic human psychology: you will want to chase the strategy that has already worked (and whose time may be past) and exit the strategy that is creating pain right now (which means leaving at a low point). Most reasonable financial strategies are designed for the longer term, so if you only implement them in the short term they won't always work.<br /><br />A good example of this is owning real estate. If you hold a property for less than five years, and the market stays flat, you won't have enough to pay off your mortgage after commissions and other expenses. Even a modestly rising market won't compensate you if you sell too quickly. A 5% increase in a year will translate to just paying off your mortgage with no profit on most properties after commissions. But as we all know, owning your own home can be a great cornerstone of financial independence. If you stay in the same home for 15 years and accelerate your mortgage payments modestly, you could end up dropping your cost of living by a bundle when that last payment is made.<br /><br />It's worthwhile to remember this fact when stock markets are falling, interest rates are rising and housing bubbles are collapsing in many areas. Your future does not depend on big gains tomorrow. It does depend on holding steady and keeping your eye on the goal - not the noise of today's market gyrations.<br /><br />One challenge for me right now is that my house is turning into a bit of a headache, with tenants and renovations to deal with. It's so tempting to just say "sell it!" and have a bit of cash in hand and a headache relieved without drugs. But I have a vision of one day owning both a rental property and a primary residence so that I have some cash flow that is unrelated to a job or the stock markets. So now I have to push myself to do some hard or unpleasant tasks that are going to be investments in keeping my future plans on track. If I change my strategy now, then I will be back to shopping for a first property instead of having one in place and being ready for the second when the time is right.<br /><br />One final word of warning though - I don't mean to imply that your plans should never ever change. They need to grow and adapt with your life circumstances so that you don't end up succeeding in 20 years at something you don't want any more. So set your goals carefully, review them annually, and in between put it on autopilot and let the plan proceed. If your strategy is sound then the little wiggles of the markets will either be buying opportunities or have no effect on you. And the best part is all the nights of sound sleeping that you will get!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com8tag:blogger.com,1999:blog-8554669300211186451.post-67493510442564086372007-08-09T19:08:00.000-06:002007-08-09T19:23:09.292-06:00Try to cancel... get a deal?!?I spent 45 minutes on the phone last night with my internet service provider, who happens to also be my phone company. The issue? I wanted to move my phone and cancel my internet. Sounds simple doesn't it?<br /><br />Well, to cut a long story short it took 45 minutes of talking, on hold time and other garbage, but in the end I was convinced to keep my internet with them due to an offer of $10 off my internet every month for the next year. That's a $120 rentention bonus!<br /><br />So first of all, this makes me realize just how much money they are making off me, but also it goes to show that a "good" customer does not get the best deals. If I just stay for years with the same provider, they will keep charging me the same rate (or raising it), while at the same time they are extending lower rates to people who try to cancel or change service providers. How unfair!<br /><br />I suppose that I knew about this practice on some level, but having it happen to me really brought it home that it pays to shop around on everything, all the time. Now, obviously it would be too much work to do this every month, but perhaps a yearly schedule of calling around for better deals would more than compensate for the time you spend on it.<br /><br />I'm sure that you will have some great examples of this to share. Where are the best (or worst) hidden deals to be found?the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com15tag:blogger.com,1999:blog-8554669300211186451.post-61197632500401079082007-08-07T20:51:00.000-06:002007-08-07T21:44:19.401-06:00Why a Full Time MBA?A few people commented about my plans, saying that I should be considering a part-time or executive MBA, and keeping my business going. There are two reasons two do this:<br /><ol><li>Money - to keep my income flowing, even if it is slower</li><li>Contacts/Clients - to stay in touch with my network</li></ol><p>The second reason is weaker than the first because everyone agrees that an MBA builds your network like nothing else can. However, the financial side of this decision is very interesting. I can afford to go back to school without going into debt. That is a tremendous luxury that many people don't have. But it will reverse the positive trend in my net worth for a couple of years, quite significantly.</p><p>As readers of this blog, you all know the gory details of my financial situation. Why do you think that I need to keep working during my MBA? Are you worried that I might not have a secure retirement if I spend $150,000 on an MBA and don't keep saving? If my net worth at age 35 is only $500,000 am I out of the game?? What if it's as low as $400,000? </p><p>The reasons that I want to do a full time MBA are a little bit less obvious:</p><ul><li>I'd like to live in another city. I've never done so as an adult.</li><li>I'd like to be able to have time to learn and enjoy. I have friends who have done EMBA's and you literally have to take 20-30 hours out of your week, plus a day and a half of classes every other weekend. There's not much room for anything beyond work and MBA at that point.</li><li>I want to do a complete career shift. I don't plan to go back to my old career in any way. So keeping my business going would be counterproductive relative to my career goals.</li><li>I believe that I will get more out of the whole experience this way. More knowledge, more exploration, more networking, more unanticipated benefits.</li></ul><p>These are mostly lifestyle and personal preference points. But isn't the point of money so that you have the freedom to do what you want, how you want? In a way, going back to school is like an indulgence for me. I love being in school. I am anticipating having a fabulous time there. And when I'm done, I will possess a qualification that will allow me to start earning money again. In fact, statistically, I should be able to more than catch up, but that is not something I am counting on.</p><p>So, in a roundabout way, this decision is about setting my own personal level of enough. I don't need to be the richest person around, and I have already succeeded financially beyond what I would have ever anticipated. I am now choosing to have my money do something for me, instead of me always doing things for money. </p><p>I hope that this post helps you to understand some of my reasons for making this decision. As always, I welcome your feedback and discussion!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com9tag:blogger.com,1999:blog-8554669300211186451.post-27690085499592757462007-08-03T17:58:00.000-06:002007-08-03T18:21:27.550-06:00More about my new plans...Million Dollar Journey asked yesterday what I plan to do after my MBA, and I realized that I haven't really put very much context around this decision so it must seem a little bit random. So here's a bit more background....<br /><br />I have been working in a computer related field for the past 8 years, and frankly I am feeling very burnt out by the low-level detail-oriented nature of this work. It is also very stressful because clients don't notice all the good things that are working as quickly as they notice even one thing that is not, so the ringing of my phone is not a happy sound. Putting these things together, I decided that I wanted to shift my career to a higher level, escape the evil world of details, and leave computers behind.<br /><br />After much thought, I concluded that I am quite good at working with management types to explore options and determine strategies, and this is something that will clearly satisfy my objectives. So I am heading to MBA school to become a management consultant in the area of strategy. Believe it or not, this is actually a genuine career. I hope to continue as an independent consultant, although I may work for a couple years for a large consulting firm after graduation if needed to get some good experience and pay off my MBA.<br /><br />The good news is that my financial position allows me some flexibility to go back to school full time. The bad news is that MBA's are very, very expensive so it kind of feels like I am cannibalizing my finances. But I have realized that a full retirement would leave me floundering a bit, so if I'm going to keep working then I need something new to do.<br /><br />And that's the story in a nutshell. I don't know where I'm going to school yet - I'm actually going to visit a couple of MBA fairs in September to try to narrow down where I might apply. And there are many other details to address over the next year. But I have set my general course, and now I feel much more invigorated and enthusiastic in knowing that I am moving forward in a positive new direction!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com8tag:blogger.com,1999:blog-8554669300211186451.post-33412409385511740802007-08-02T22:39:00.000-06:002007-08-02T23:24:15.804-06:00Making New PlansYou know what they say about the best laid plans of mice and men....?<br /><br />Well, after much thought, I have decided to back to school in September 2008 to do an MBA. This is going to be a huge undertaking in many ways, and financially is not the least of those. So now I am starting to look at my finances and make some preparations and adjustments to get ready for this step. Since there are so many variables, I am planning with the expectation of having to change or toss some of these ideas. But it is always easier to revise than to start from scratch, so I am going ahead even though there are still many unknowns.<br /><br />Today I am going to discuss housing and related issues. I don't want these posts to become ridiculously long, so I will break it down into a few pieces.<br /><br />The first part of my plan is that I am going to keep my house and rent the whole thing out. I have an opportunity to house sit for the next 5 months (paying only the operating expenses of about $300-$400 per month), and I am going to use this chance to move out and get my place fixed up and ready to rent. My goal is to have it fully occupied no later than October.<br /><br />I am hoping for monthly rental income of $3000, and my monthly principal, interest and taxes are $1825. I am budgeting 10% or $300 per month for property management and forecasting 1 month vacancy each year. I will also need to keep my house insured, and cover any repairs or maintenance. I am budgeting $200 per month for these categories. Using these numbers, I am expecting a net cash flow of $5400 which is the equivalent of $450 per month. This may be my only income while I am in school.<br /><br />Related to housing is my moving costs. It is going to cost me around $500 to move to the house sit because I have a few pieces that must be professionally moved, and I have to clean the carpets in the new house at a cost of about $200.<br /><br />I also have a 3 year contract on my internet that I will have to break either this year or next year when I go to school. That will probably cost me $300+ since they will make me return my incentives plus penalties. I may also need to break a 3-year cell phone contract, but I don't know what that will cost.<br /><br />The renovations on my old house are a bit of a question mark. I haven't been able to get a contractor lined up yet, and the last couple who looked at it were reluctant to give a price. I'm going to say that it will cost me $5,000-$10,000 to get everything done. I'm not doing any major items, but there are a lot of fix ups to do.<br /><br />I may end up having to store items or pay to move some things to my new city. At this point I don't have dollar numbers for these, but I want to capture them.<br /><br />Any finally, there is the cost of renting, or covering my house sitting expenses. I am going to plan on $400 per month for the house sit and $1000 per month after that. Again, these numbers could change when I get more information about where I will be going.<br /><br />So as I went through this list, I have been creating a little spreadsheet for all these numbers. For me, the words are great but the numbers make it all come together. Perhaps I'll post it once I'm a bit further along in this process. Tomorrow we will take a look at education costs....the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com6tag:blogger.com,1999:blog-8554669300211186451.post-58893439374537462502007-08-01T23:24:00.000-06:002007-08-01T23:56:41.246-06:00Planning WorksI must apologize for the infrequent posting schedule. I've been very busy this summer with all the changes going on in my world....<br /><br />Today I had lunch with an old friend and we talked about some of these changes and all the decisions that need to be made. I told him that once I made up my mind about the new direction my career was headed, it seemed to get easier to make the decisions along the way because I could tell which ones would further my objective.<br /><br />I was thinking about that conversation again and realizing how many areas of life this can be applied to. There are so many cases in which we are asked to make decisions - sometimes large, life-altering decisions - and we don't have time to think about it for weeks and gather advice and weigh our options. Some opportunities come very suddenly, and we can either grab them or let them pass.<br /><br />I believe that the key to making good choices under pressure lies in planning. Planning works on many levels and provides benefits that range from immediate to long term. And I think that your personal finances are perhaps one of the best places to apply this, for it will surely pay off. In addition to helping you make decisions, here are just three other ways that planning pays off for personal finance:<br /><ol><li>Vision<br />The road to financial freedom is very long when you are standing at the beginning. It can be tempting to fulfill all of today's wants and let tomorrow take care of itself. But with planning you can see a vision of the future that is more appealing than the seductions of the present. You can keep your eye on the goal and know that you are moving toward it.<br /></li><li>Updates<br />Good plans are never static. They are revisited on a regular basis, as well as whenever things change significantly. This may include things like updating your will and insurance when you first have kids, or adjusting your savings level to build in room for a sabbatical. You don't need to get it right once and for all, you just need to make a plan that makes sense right now and keep it up to date as you move through your life stages.<br /></li><li>Backups and contingencies<br />Planners are ready for emergencies. With planning, unexpected expenses may be inconvenient but they are rarely catastrophic. A good financial plan considers an emergency fund very early on. It may be an actual pot of money in the bank, or perhaps a line of credit waiting to be used only in special cases. But either way, a job loss or sudden large expense can be taken care of.</li></ol>I know that I need to update my financial plans and get ready for the next few years. I will post more on how I plan to do this in the coming days.the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com2tag:blogger.com,1999:blog-8554669300211186451.post-77033760489745710782007-07-23T23:27:00.000-06:002007-07-23T23:37:06.002-06:00Everybody loves a carnival!I just realized that my post on car-free living was featured in the <a href="http://www.fatpitchfinancials.com/610/welcome-to-the-110th-carnival-of-personal-finance/">110th Carnival of Personal Finance at Fat Pitch Financials</a>. In addition to my little contribution, there are numerous other articles covering all aspects of personal finance. This is a great way to discover new blogs and I would encourage you to check it out!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com0tag:blogger.com,1999:blog-8554669300211186451.post-2567014306448412662007-07-23T18:01:00.000-06:002007-07-23T18:38:48.158-06:00Give it Away!I'm getting ready to move out of my house sometime soon, and in preparation I am trying to severely reduce the amount of stuff that I own. After considering various options, I will be getting rid of most of this stuff by giving it away - i.e., I won't be getting any money at all out of it.<br /><br />Some of it is going to friends and family members, some is going to second hand stores that accept donations, and some of it is leaving through freecycle. (Aside: If you haven't found freecycle yet, you are missing out! This recycling initiative aims to keep usable items out of landfills by connecting people who want to get rid of stuff with people who can use that stuff. No money changes hands but both parties are usually very happy with the exchange. Simply brilliant! Visit <a href="http://www.freecycle.org/">http://www.freecycle.org/</a> to check it out.)<br /><br />Now, some of you might be wondering why I am not trying to sell more items or have a garage sale or take it to second hand stores that pay for your items. I can answer that by telling a tale of used books.<br /><br />A couple weeks ago, I cleared out a bunch of books that I no longer wanted. All were in good shape and I found a couple boxes and packed them up, loaded them into my car, and ventured down to the used bookstore. After finding and paying for parking, I lugged the boxes into the store, waited for about 20 minutes while the guy went through them... and then took most of them back, along with $10 for the few he wanted. The remainder went out in this week's recycling.<br /><br />To put it bluntly, used goods have almost no economic value in our country. Most people prefer to buy new, and to compete with this the used stores have very high standards. You don't get much money out of used items, and you have to do a lot of work to get the little bit that is available. If the store is consignment based, then you don't get the money until the item sells, which means even more trips, wasting time and gas.<br /><br />Garage sales are just as bad, in my opinion. Who wants to prepare for days, spend your weekend haggling over 25 cent items, and maybe bring in $200, most of which came from one or two items that you could have sold on their own with far less trouble?<br /><br />I have identified two items that I will try to sell, both of which are worth over $100. I may also try to sell a couple of items of furniture, but I haven't sorted out what I am keeping yet so I don't know about that. The rest is all going for free.<br /><br />Giving stuff away is good for you. It is good when it goes somewhere that it is wanted and needed. It is good when that person thanks you sincerely for giving it to them. It is good when it stays out of the landfill. And it is good to remind you that most of the money that you spend is permanently gone - your possessions that you worked so hard to buy are almost literally worthless once they leave the store.<br /><br />But the best feeling for me, is the freedom. When an item leaves, I no longer own it, and it no longer owns me. I don't have to provide space for it, dust it, move it, display it, store it, feel guilty about not using it or anything else. Less truly is more, especially when it comes to owning stuff.<br /><br />So what is the approach that I favour? Commit to save your money and space for stuff you truly love and need, and freecycle the rest. It will be the best commitment you've ever made.the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com7tag:blogger.com,1999:blog-8554669300211186451.post-33654391440877326152007-07-20T16:08:00.000-06:002007-07-20T16:28:29.961-06:00More On Housing Strategies - Renting Out a Part of Your PropertyIn response to yesterday's post, Rositta made a suggestion about how to buy more house for your money by purchasing a home with a basement suite and living in the basement while renting out the main floor for a few years.<br /><br />As regular readers will know, I do own a home with a basement suite and I have tenants living below me. The person who bought my last house has roommates living with him as does another friend of mine. Someone else I know is renting out her garage, and a condo owner rents out her parking spot. All of these strategies are ways to lower your monthly costs by only using the portion of your property that you really need. And financially they work very well.<br /><br />However, I can tell you from my own experience that there is more to these arrangements than the financial. Renting out space is basically like starting a part-time business. You need to find your customers, collect the money, take care of repairs and maintenance and sometimes much more. While you may get lucky and find someone who rents from you for years without causing any trouble, this is not the norm and you should be expecting to do a decent amount of work.<br /><br />Also, you are sharing your space, with all that entails. You may have more noise, less privacy, and possibly inconvenience or even damage.<br /><br />And from a financial planning standpoint, it is important that any of these strategies should be considered as increasing income instead of reducing expenses. Because your expenses will still be there if the person stiffs you one month or if you can't find tenants. So you need to be sure that you can make your monthly budget even if your income from the rental portion of the property fluctuates.<br /><br />In summary, if this is something that you want to do for extra income, then treat it like a part time job and do it right. But you are still the person on the hook for the entire mortgage payment each month, so be sure that you plan for vacancies and repairs when making your business plan and don't overextend yourself when buying.the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com5tag:blogger.com,1999:blog-8554669300211186451.post-84328662871687234542007-07-19T18:26:00.000-06:002007-07-19T23:02:38.452-06:00Housing StrategiesWell, once again a reader comment has me thinking! This time I'm wondering about housing costs. Yesterday I advised saving money on housing by choosing a place that was less desirable and therefore less expensive for one of three reasons that housing is priced on:<br /><ol><li>Size</li><li>Beauty/quality</li><li>Location</li></ol><p>So if you rent, I think that you know what I mean immediately. Those of us who want to achieve financial independence have to go against the grain. So we play with these three factors and find somewhere that not everyone else would want but suits us just fine. Often at half the price of what our friends are living in.</p><p>(By the way, I though of another way to save big money on rent: stay put! My own experience and every landlord or tenant I have ever talked to supports the fact that most landlords would rather keep a good tenant than raise the rent and risk losing him/her. The longer you stay, the more this pays off! Come to think of it, there are enough costs associated with moving and buying and selling homes that staying put is good advice for most people looking to save money, even if you own your home.)</p><p>But what if you are buying your house? Is it worth the trade off on these factors when you will eventually want to sell the house again in the end? Again, I think that the answer is YES. </p><p>Buying more space than you need doesn't make any sense. If you have extra money to spend on space, it is better off being invested somewhere. Get into the right size of place and save yourself a bundle!</p><p>Paying for someone else's decorating or renovations is fine if you can't or don't like to do this stuff yourself. But chances are you will want to make changes anyway. Why not start from something that saves you money when you purchase it? Bonus: when you go to sell, the ugly discount will no longer apply.</p><p>And then there's location. The one thing that you can't change, right? Well, sort of. You can't change it, but time can. Savvy buyers have always known to look for up and coming areas that aren't as desirable now but have indicators that they will be down the road. Or it's possible that you don't want to live where everyone else does. So you can save yourself a bunch by buying somewhere that works for you!</p><p>But this brings us to the big question: what about when you sell? My answer: Fuhgeddabowdit!</p><p>The real estate market is fickle, just like the stock market or any other market. Your care of the house and upgrades or improvements will count, your size and location will count, but in the end the market forces will still play the biggest role in determining the price of your house. </p><p>And you have been paying down your mortgage the entire time, right? In fact, you probably accelerated it and it's paid off now. And you had to live somewhere all those years. And because you were smart about not paying too much for housing you were able to save and invest more, right?</p><p>So look after the things that you have control over and don't fuss about the rest. Chances are good that you will do more for your finances by pushing your monthly expenses down and staying in the same house for 20 years than by trying to chase profit in your primary residence. If you mean to be a real estate investor then use the money you are saving to start investing in other properties!</p><p>And remember to keep your eye on the ball. If financial independence is the goal, then lower expenses mean that you need less to get there, and everything snowballs and gets easier and easier!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com6tag:blogger.com,1999:blog-8554669300211186451.post-51913568027759666922007-07-18T17:37:00.000-06:002007-07-18T18:07:52.990-06:00Bold Choices and Big Steps for Controlling CostsThanks for so many great comments on the car-free living topic yesterday! It really makes me think about what other choices we have that can have large financial impact. I think that to have big impact you need to make bold choices - often the ones that other people can't or won't make. Not every one will be an $8000 per year elephant like the car, but I would be willing to bet that most financially conscious people do a number of fairly significant things to save money.<br /><br />Here is a sampling of things that are outside the normal way of doing things in North America and will have a substantial impact on your expenses:<br /><ol><li>Pay less for housing. Rent and housing prices are basically determined by three things: how big the place is, how nice it is, and where it is. If you can avoid paying for any of these you will end up ahead. You can live in a smaller space, choose an ugly space and fix it up yourself, or live somewhere that works for you but may not be as desirable for others. The more you go against the crowd, the bigger the payoff.</li><li>Give up your car. See <a href="http://themoneydiva.blogspot.com/2007/07/is-living-car-free-path-to-financial.html">yesterday's post </a>for more details and great comments, but the short version is that this could save you many thousands every year. Huge impact from one decision!</li><li>Live without television, cable, super cable, pay per view and similar services. Use cheap long distance or skype for free. Savings that happen every month are worth far more than one time savings, even if it's only a few dollars!</li><li>Never buy what you can borrow or rent for cheap. This includes books (I love the public library!!!), movies, CD's and magazines. I also prefer to borrow tools and kitchen gadgets that I don't use very often.</li><li>Shop second hand. Consignment stores often carry designer clothing, garage sales sell things for pennies on the dollar, and your local classifieds or craigslist is a treasure trove just waiting to be opened. You will received discounts of 30-90% and also find things that are more interesting and unique than the malls can ever offer. </li><li>Volunteer. Instead of paying for your entertainment, be part of the action. You will get free tickets, food, t-shirts and many other perks. And of course, there are all the cool people that you will meet along the way...</li><li>Have a garage sale. Not for the money but for the reality check about what your stuff is actually worth. I can guarantee that once you have received pennies on the dollar for your nearly new designer junque you will start to shop with very different eyes.</li><li>Stay in touch with reality. Don't hang out with people who have money to burn, or act like they do. Even while you try not to, you will find they socialize your spending upward. Instead, spend time with people who have less than you do. Not only will they not tempt you to spend, you will also feel more grateful for what you do have.</li><li>Stay out of the malls. It's a fact: people who visit the malls spend money there. So don't go if you're bored or to socialize or to window shop. Only go when you need something specific. And then only go to the store(s) that has that item. Temptation is easier to resist when it isn't there.</li></ol><p>Any other bold moves that you can suggest? What have you done that has had large impact on your finances? Sissies need not apply - I want strategies that rock my world!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com6tag:blogger.com,1999:blog-8554669300211186451.post-61792353446708878112007-07-17T18:09:00.000-06:002007-07-17T18:13:45.077-06:00Golden Blog Award!!I just noticed that I won a <a href="http://themoneygardener.blogspot.com/2007/07/golden-blogs.html">Golden Blog Award </a>from the Money Gardener's site on Friday the 13th! I won in the category of Most Impressive Net Worth... and for looking good in a dollar sign medallion. :)<br /><br />A million thanks, Money Gardener!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com1tag:blogger.com,1999:blog-8554669300211186451.post-10827842906383837112007-07-17T17:22:00.000-06:002007-07-17T17:58:27.185-06:00Living Car-Free: The Path to Financial Independence?A book caught my eye at the library yesterday and I have been steadily making my way through it ever since: "How to Live Well Without a Car"<br /><br />I thought I would blog about it here because one of the author's major arguments is that owning a car costs so much that it may be preventing you from saving, buying a house (or a better house) and even reaching financial independence. All of which makes for rather intriguing contemplations. Is a car really that big a deal, financially?<br /><br />Well, let's take a look at my numbers. I spend $412 per month on my lease, $100 on insurance, $100 on gas and $10 on car washes. I also figure that regular maintenance for an almost new car will be covered by about $300 per year for oil changes and the like. This is a total of $7,764 per year, without parking. Parking costs me a tonne of money because I have to park downtown to meet with my clients and I get lots of parking tickets, but since it's a company expense I won't count it. To be fair, I probably should include another $20 per month for miscellaneous personal parking, which will bring the total to $8,004 per year.<br /><br />Wow! EIGHT THOUSAND DOLLARS PER YEAR TO OWN AND OPERATE A CAR!!!<br /><br />And I don't drive a luxury car or SUV, and I drive an average of 14,000 kilometers per year, which is well below average. So for many people this number may be much higher. That is simply incredible. I think that for myself personally, I only ever considered the monthly expenses, and never gave any thought to how things were adding up.<br /><br />And to make matters worse, there is depreciation. Each year, while I may be building "equity" (if I weren't leasing) my car is losing part of that value, and I am basically "spending" this money because I can't get it back. So the true cost of owning my car might be closer to nine or even ten thousand dollars per year.<br /><br />Now, of course there is more to the decision than just the cost of owning a car. There is the cost of not owning a car, whether that is a bus pass, car rentals, taxi rides, bicycle purchase and maintenance, running shoes or something else entirely. There is the convenience and lifestyle factor. There is the personal enjoyment and attachment.<br /><br />But when it comes to the purely financial argument, I would say that living car-free is a slam dunk. There is simply nothing else that I could do to save around $8,000 so easily and quickly. And yes, spending $8,000 less per year would be enough to significantly increase savings, buy a house or reach financial independence much more quickly. It is certainly a large enough amount to impact any financial goal that I might have.<br /><br />So is this even possible? Do any of my readers live car-free? Is anyone considering it? Any stories to share? I would be very interested to hear about real experiences with this strategy (and where you are/were living).the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com14tag:blogger.com,1999:blog-8554669300211186451.post-20398054609875708342007-07-12T17:41:00.000-06:002007-07-12T18:04:37.137-06:00Leftovers!So yesterday I discussed my turkeys and today I'm eating turkey soup. It appears that nobody really likes my investing strategy... sigh.<br /><br />Actually, I'm not surprised - I don't like my investing strategy either. For those of you who read this blog and think that I've got it all together, please don't think that. I have certainly managed to earn money and save money, and I've done well with a couple of real estate transactions, but as an investor I am still really green.<br /><br />However, I do think I was perhaps a little bit more maligned than I should have been. Here are a few things that I think I am doing better than I was given credit for.<br /><ul><li>Diversification: Six months ago that entire portfolio was in Canadian Equities, so I am trying to diversify and progress toward a better asset allocation. Unfortunately, the international equities purchases have not been rewarding my good intentions.</li><li>Long-term view: This portfolio has also not seen a single sell order since inception (March 2005) so the comment about flipping was rather bruising. Monitoring performance is not the same as flipping and only someone with a very short-term memory could monitor long-term performance, since it stays fixed, so of course I'm looking at short-term performance.</li><li>Research: At least I do it. Maybe it isn't in the depth that some might like, but I'm not using a dart board and I do look at more than just last year's return. The Globefund site has a tonne of metrics on the funds.</li></ul><p>The bottom line is that investing is complicated, and amateurs can't generally come even close to the level of detail that the pros do, unless they are exceptionally interested and dedicated. Until I reach the point when I have a massive portfolio that I can turn over to a really good manager, I am not going to waste my money on the monkeys that pass for financial advisors in most places. (And screening the monkeys for a good one would be more work than learning how to invest better myself!)</p><p>Besides, even though my investing strategy is full of holes, this approach has worked better than most I've tried. My original contribution from March 2005 is up 75%, while the TSX is only up 45% over the same period. Sometimes turkey soup doesn't taste all that bad!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com8tag:blogger.com,1999:blog-8554669300211186451.post-87081093685164126772007-07-11T19:42:00.000-06:002007-07-11T20:08:46.018-06:00Tossing the turkeysNow that mid-year numbers are available for my portfolio, it is time to examine my holdings critically and see how they are really doing. I own 7 mutual funds in my main portfolio with a total value of $248,600 at close today.<br /><br />Two are large cap Canadian Equity: $83,500<br />Three are small cap/mixed cap Canadian Equity: $124,400<br />Two are international equity: $40,700<br /><br />I like to use globefund.com for it's free tools for monitoring and selecting mutual funds. It tells that 4 of the 5 Canadian Equity funds are in the top quartile for their class for year to date performance. The fifth is in the bottom quartile. Not good. But it does have a five year history of ranking in the top quartile for its class, so I'm not sure that I should dump it on a bad 6-month period. It will go on my watch list though and if it's not better by the end of the year I may take action.<br /><br />The two international equity funds are frustrating though. I bought them in February for $20,000 each and as you can see they have gone nowhere. In fact, they have been down much of the time I owned them. Again, they have a track record of top quartile performance, but...<br /><br />In the end, I think that I won't be making any moves at the midyear mark this year. I have identified my possible turkeys though, and come the end of the year there could be heads on the chopping block. Life is too short to own underperforming funds!<br /><br />For any others who are invested in mutual funds, don't let your funds' performance surprise you. Find out how they are doing and make sure you own the best that you can. There are no guarantees, but I like the five star ratings at Globefund for helping to narrow down the field after you have picked an asset class.the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com8tag:blogger.com,1999:blog-8554669300211186451.post-75001391879407460142007-07-05T12:31:00.000-06:002007-07-05T13:27:19.290-06:00Interview with a Diva and Opportunity CostWell, I'm feeling popular today! Check out the <a href="http://blog.canadian-dream-free-at-45.com/index.html">interview that Canadian Dream did with me at his blog</a>. It turned out pretty nicely, I'd say. Thanks CD!<br /><br />I want to talk a bit today about opportunity cost. Now, I have to admit that I slept through my first year economics and then steered clear of the subject for the rest of my degree, but my understanding of this concept is basically that when you choose to do one and you aren't able to do another thing then there is a cost to the lost opportunity. (If I got it wrong, feel free to correct me, but I'm running with it!)<br /><br />Now this is a really interesting concept because it points out to me that there are several things to do with my money, but once I put it in one place, I lose out on the benefit of any other alternative. We all know this at some level, but how much do we really analyze what it means to us?<br /><br />Here are a few examples. The opportunity cost of:<br /><ul><li>leaving too much in your chequing account is interest that could be earned in a savings account</li><li>buying a new car this year instead of waiting one more year is one year's worth of payments (less repair costs to keep the old car running) that could have been saved and invested</li><li>buying a GIC is not participating in the higher expected long-term growth of the stock market</li></ul><p>I'm sure you can think of more, and better ones!</p><p>This relates back to my housing musings earlier this week. You see, if I can rent out the space I'm living in for $1200 and move into a place that would be just as good for me at a cost of $800, then staying has an opportunity cost of $400 per month. The numbers may be fictional, but I believe that the concept is valid. I need to figure out what the <em>best </em>use of my available resources is, including the space that I own (my house), so that I am not wasting without even realizing it.</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com2tag:blogger.com,1999:blog-8554669300211186451.post-61744981377695308102007-07-03T09:40:00.000-06:002007-07-03T17:51:48.132-06:00Rethinking my asset allocationWell June's net worth was down - no surprise there as I had to write much larger cheques to CRA than I hoped. And I still have more pain to go through as my installments for this year are larger and I need to do some catch up payments. Plus there was another big expense that came through this month... yup, all down.<br /><br />Okay, enough of that topic!<br /><br />I've been thinking about where I have my money and wondering if I am doing it right. Using June's numbers, I figure my asset allocation, in broad terms, looks like this:<br /><br />46% - stocks and stock-based mutual funds<br />37% - home equity<br />7% - cash<br />6% - retirement accounts<br />4% - assorted other stuff<br /><br />When you consider that my retirement accounts are also stock-based mutual funds, you can see that I have over 50% of my assets in this category. So what I'm thinking is approximately this... what if I took some of this money out as a down payment on another property?<br /><br />Why would I do this?<br /><p>Well, first off, the house I'm living in right now would be better off as a rental. If I moved out it would be cash-flow positive, probably by $1000+ a month. That's huge. In fact, including the principal amounts that the renters would be paying, I would be expecting 7-10% return on the equity that I have in the place. Even with vacancy, it would stay cash flow positive.</p><p>Secondly, this place is really too big for me. I am taking up space that is worth more than I would be willing to pay for just myself but I don't even like being in a big place. I'd rather move into a smaller house or even condo and have only the space I need.</p><p>Thirdly, I don't like living above my basement suite. I'd like to be either in a house on my own or a concrete building where I don't hear my neighbours.</p><p>And then there is the asset allocation side. I feel that perhaps I have overweighted myself in equities. Also, real estate seems to be better at producing cash flow than the stock market and with my declining earnings this is a factor for me. And it is the investment with the benefit of providing a place to live.</p><p>And finally, there are the tax advantages. I need to check with my accountant, but I believe that the plan would be to sell my house to my company, triggering a tax free capital gain for me personally and building up a large amount of money that the company owes to me and that I may withdraw tax free.</p><p>So this is something that I have just recently started considering very seriously. I will probably be able to provide further updates over the next couple weeks as I start to look into it in more detail.</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com4tag:blogger.com,1999:blog-8554669300211186451.post-31265405248380051602007-06-28T20:14:00.001-06:002007-06-28T20:18:25.955-06:00Get a Line of Credit Before You Need It!I just spoke with a friend who had been turned down for a line of credit, secured by her fully paid off house, due to low and sporadic income. I find it hard to believe that a bank wouldn't love to repossess an entire house to recover half its value, but it goes to show that banks do not think the same as us mere mortals.<br /><br />Given my plans to change careers, I have now decided to get a line of credit approved against my house right away. If I never use it, then great. But I don't want to be caught making some awkward decisions that could have been avoided with some forethought.<br /><br />It also makes me wonder what else should be done while my income looks better. Any suggestions or ideas would be appreciated!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com7tag:blogger.com,1999:blog-8554669300211186451.post-2860437242295893182007-06-27T22:02:00.000-06:002007-06-27T22:18:13.993-06:00Keep steering the shipDo you think that a lot of people ignore their personal finances? I suspect that they do, although perhaps not completely. Maybe they do pay their bills and renew their mortgage and maybe even contribute to their RRSP... but I think that a lot of people allow their overall understanding of their financial picture to get out of date. And when that happens, it is almost certain that you aren't making the very best choices for yourself that you can.<br /><br />What I'm getting at is that your money life goes on with or without you. Interest accumulates on your debts, the stock markets rise and fall, your salary and inflation move forward (hopefully the right one goes faster). And your personal circumstances change. Married, divorced, kids, education, medical costs - it's all different every year.<br /><br />So this year's financial plan will need some tweaking next year. If you don't do it for one year it may only be off by a bit, but if you leave it for three years I can almost guarantee that you will feel like throwing it out and starting again. The best way to steer a large ship is by making small, frequent course corrections. Your financial plan will benefit greatly from the same approach.<br /><br /><em>Disclosure: I have never steered a ship of any size in the real world!</em>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com3tag:blogger.com,1999:blog-8554669300211186451.post-9091568098666661702007-06-25T19:00:00.000-06:002007-06-26T10:30:47.109-06:00What are my goals?We are reaching the midpoint of the year and it is time to contemplate some goal setting. I am not going to focus on net worth goals for the next while, because of my career change. This is a big shift for me in so many ways, and I'm still playing catch up on the implications. I need to look at getting back to basics which were somewhat obscured when my earnings were higher.<br /><br />Goal #1 - A New Career<br />This will probably resemble a financial setback, but I am considering it an investment in myself and my future career satisfaction. I need to come up with a strategic plan for this change so that I consider all the angles and know exactly how to proceed. I am going to try to change careers without minimal negative impact on my net worth, although that may be very difficult if I take further education. I am hoping to keep one of my part time contracts going until the time that I am ready for a full switch.<br /><br />Goal #2 - Financial Administration<br />I hate to admit it, but I have become very slack about taking care of my finances. I have a "few" unpaid parking tickets that I need to take care of, I have a vacant room in my basement that is not generating revenue for me, and I still have not tracked my finances in detail for a month like I wanted to. I am aiming to take care of these three things in particular and to improve my administration skills in general this summer.<br /><br />Goal #3 - Work on Monthly Expenses to Reduce Cash Flow<br />The house is killing me with something new every month, but I know that there is a way to get this under control. I need to do some expense tracking (ties in with #2 above) and figure out where the leaks are....<br /><br />This summer is also going to be a period of rest and not pushing too hard. I think I got a bit burnt out and I'm ready to slow things down. So my goals are fairly modest right now, but will give me a framework to focus on.the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com2tag:blogger.com,1999:blog-8554669300211186451.post-65047416806346556512007-06-21T23:39:00.001-06:002007-06-22T00:00:33.030-06:00Financial Planning by Life Stage - or Not?Investoid has an interesting post up today about <a href="http://investoid.com/2007/06/21/is-avings-when-youre-young-foolish/">saving when you are young</a> and it made me start to think about how financial advice tends to be grouped by age. To a certain extent this makes sense, but we all know that people take wildly different paths and one person may be working with 10 years of saving under thier belt at age 30 while another may be just finishing up their medical internship with tens of thousands in debt.<br /><br />When I read financial planning advice aimed at "people in their 30s" I am always thinking about the numerous ways that I am different. I am single, which puts me in with "people in their 20s", but my financial milestones are in other ways closer to "people in their 40s".<br /><br />For this reason, I was thinking about what other ways we could categorize life stages apart from age for the purpose of financial planning advice. Here are a few other options I came up with:<br /><ul><li>By net worth - this is an obvious one and works well to a point, but inflation and differences in cost of living may make absolute numbers seem too arbitrary. I would try to improve it by measuring net worth in multiples of annual income. For example, stages could be negative net worth, zero to one year's salary, 1 to 3 years salary, etc.</li><li>By debt level - I'm not positive about this but it seems like it should be part of the picture. For example, if you have $200,000 net worth with no debt or $200,000 of net worth with $400,000 of debt then you are in two very different positions. The debt level has a direct impact on cash flow, which is a very big part of financial planning.</li><li>By career/family stage - this is closer to the traditional age-based approach but would use milestones such as graduate university, get married/have kids, buy property, etc. so that non-traditional timelines would still find their fit.</li><li>By timeline to retirement - someone who wants to retire in 10 years has certain things that they have to take care of regardless of their age or other factors. Perhaps <a href="http://blog.canadian-dream-free-at-45.com/index.html">Canadian Dream (free at 45)</a> has more in common with a 48 year old planning to retire at age 65 than with most other 28 year olds.</li></ul><p>I think that all of these approaches could offer improvements on the age-related financial advice that we see so much of, and some could be combined for even better fits. The problem is how far to go. We don't want to have 100 categories, each with slightly different plans and advice, and we don't want it to be too confusing for people to find their correct category.</p><p>My solution? I think that the best way is to decide how many categories you will have - I think that seven would be sufficiently detailed - and then give people a short quiz that puts them in the right category. This is a free brilliant idea for someone who needs a new angle on personal finance book writing... any takers??</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com4tag:blogger.com,1999:blog-8554669300211186451.post-33431502583531142242007-06-20T22:15:00.000-06:002007-06-20T22:39:22.753-06:00Expansion and ContractionI have noticed lately that a lot of my thoughts are about ways to contract instead of expand. For example, I have recently got the de-cluttering bug again. I'm looking at selling, junking or donating my stuff. My focus in my work is more about cleaning up and finishing off projects than working on new ones. Also, I am thinking more about ways to save money than earn it. All of these point toward a general decrease in my lifestyle and finances - and the interesting thing is that I'm not fighting it.<br /><br />At first I didn't connect the dots but now that I have noticed this pattern I am seeing it in many of my interests and choices right now. This is an interesting phenomenon and there are a few very useful things that I am doing in this process:<br /><ul><li>Removing unwanted items including email, clients, projects, items in my house and more</li><li>Evaluating to make sure that I am keeping what is important to me</li><li>Setting priorities and preparing to make next steps and decisions</li><li>Planning and strategizing (to take over the world!!)</li><li>Recovering and enjoying some lovely mini-vacations and downtime</li></ul><p>I like to compare it to the stock market. Even during the strongest of bull markets, the chart never goes straight up. Sometimes it will go sideways or even down for quite some time before gaining new strength to push to its next high. Despite the fact that I have clearly lost some momentum from my pace of earlier this year, I am confident that this is not wasted time but a necessary breathing space before I start climbing toward my goals again.</p><p>If you have had a setback or resting period and then moved on to great things, I'd love to hear your tips or stories!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com2tag:blogger.com,1999:blog-8554669300211186451.post-37995422822374686922007-06-14T18:21:00.000-06:002007-06-14T19:24:39.708-06:00Second Hand is the Best Discount StoreI would be fascinated to find some statistics on how many Canadians buy second-hand items on a regular basis. When I was young, my mother was very frugal (out of necessity and upbringing) and I learned about shopping in the context of being cost-conscious at all times. As I grew up and moved out, I bought many of my household items at garage sales, and for a long time there was no furniture or accessory in my house that was new except for a cheap Ikea bed.<br /><br />I have started to buy new more often now, but I still love a deal and can spend hours on craigslist or ebay. Recently, I bought a car second hand through canadatrader.com, a used lawnmower from a family run business, and a used Axim (PDA) off craigslist. Each of these are significant purchases new, and I have saved 15-75% by being willing to buy used. At a garage sale, I would expect to save 60-90% off list prices, but usually I can only find smaller items.<br /><br />It's not all roses however. You need to be patient and willing to hunt for your deal. You need to be a bit flexible about what you want. (That's why I can't seem to buy a used couch - I'm too picky about how it looks.) You need to be persistent and keep checking back for new listings or stock. And you need to be willing to accept the inevitable quirks that come with the territory, such as the occasional wasted trip, oddball seller, or item that doesn't live up to it's billing.<br /><br />But overall, I'm convinced that buying used saves you a bundle. And for those who love shopping - this is more real than the mall. You get the thrill of the hunt, the big find, and yes... even the one that got away. (I'm still wishing I checked my email the day my friends decided to sell their practically brand new snowblower!!)<br /><br />I am going away for an extra long weekend. But while I'm gone, please share your best bargain story, or tips on where/when/how to find the best deals. Happy hunting!the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com6tag:blogger.com,1999:blog-8554669300211186451.post-82550961031389785352007-06-13T16:01:00.001-06:002007-06-13T16:15:38.674-06:00Seven Ways to Dummy-Proof Your Automatic PaymentsYesterday I put out a call for people's best tricks for managing automatic payments so they weren't short when the due date arrived. I received such an amazing response that I wanted to summarize them all in a post rather than hiding them in the comments. My readers are so good at this, it feels like I'm preaching to the choir!<br /><br />Some of them were using a cheque register, or spreadsheet, or just keeping track, but I wanted ways that were more dummy-proof than that. So here are seven ways that my readers keep track of automatic payments and make sure they have enough money for them:<br /><ol><li>Schedule the payments in your Outlook Calendar</li><li>Use alerts in Microsoft Money or Quicken</li><li>Link your bank account to your line of credit or set up overdraft protection</li><li>Use a product such as Manulife One (bank account, line of credit and mortgage all rolled up together)</li><li>Have the payments come off a Visa with a large enough limit (and get points)</li><li>Deduct all payments at the beginning of the month in your tracking system</li><li>Keep a minimum balance in your account</li></ol><p>I think that if you use any one of these methods consistently, you should be able to say goodbye to bounced payments forever. So choose the one that works for you, and then sit back and let the rest be automatic!</p>the money divahttp://www.blogger.com/profile/02728722430433817334noreply@blogger.com2