November 29, 2008, 9:14 am

Financial Ramblings

by: The Financial Blogger    Category: Financial Rambling

Still doing home renovation (it’s been a month now!) and I’m getting pretty tired! In addition to that, I would say that, sometimes, results may vary when you want to change your house! While I didn’t always get what I wanted, the end result will definitely be awesome.

Have I been frugal in my renovation? Let just say that I tried to minimize the expression of my dreams 😉 Once it’s done, I’ll do a full post on the cost of renovating my basement.

Here’s what caught my attention this week:

Intelligent Speculator is giving us his opinion on Value Click. Check out his first recommendation on Baidu and Yahoo at same the beginning of the same post; already making 27%!

ABC of Investing wrote an interesting post on the definition of “interest”.

Money Ning is telling us that we are showing 8 bad things to our kids. Those are simple things but it’s hard to avoid them when you don’t think about it!

Is it the Death of Index Investing? Find out at Four Pillars ;-).

Find out how a bank can’t refuse a personal loan to pay off your credit cards even though you are making your payment at The Credit Toolbox.

Dinks is giving us some investment ideas.

The Digerati Life is talking about the “mystic” Black Friday.

Master Your Card is giving us 6 ways to get gift cards for less!

Enjoy your weekend!

Carnivals:

Carnival of Personal Finance

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November 28, 2008, 6:00 am

What I Have Learned About Home Renovation Part2

by: The Financial Blogger    Category: Uncategorized

– Deceptions and problem solving –

This post was written after my first day of home renovation. We actually hired someone to do the work as my 3 year old son is better than me with a hammer! I was so excited to come back home and see what has been done. I had my home renovation in my all day at work… Then I came back, drop my coat in the lobby, kiss the kids and saw the look in my wife’s face. “Did plan changed about the location of the home theatre door that we are doing?”. Obviously, the answer was no…



When I went downstairs, I saw that the hole for the door was done and it was opening exactly where I wanted to put my couch… Not very convenient! All right, another hole to be made tomorrow (and a few hours wasted doing it!).

Then, I look around and I don’t see much. There was the whole and the electricity that was done. Even though I know it requires time to set things up, most of his job has been done inside the walls so I couldn’t see anything. Quite disappointing.

Yipee! There was good news! He plugged my modem on the first floor so my desktop can have internet access again (you can imagine the fight when my wife wants to go on the internet and I need to “work” on my blog). Having 2 computers plugged on internet was a necessity. So I open my desktop and wait… no internet! I look at the modem and there was no signal. It was an old cable plug that I never used… and apparently it was not working! So I had to take my modem and rooter in the basement, covered by a piece of plastic.

So I learned that when you start renovations, there will always be uncontrollable stuff that will happen and that you must be very clear when you ask something to be done. Since I learned from my mistakes, I decided to draw plan of each room to be renovated. Since I am not home when the guy is working, this was the only ways for me to make sure he understands our needs and what I have in mind. Hopefully I won’t have any other disappointment in the upcoming weeks!!

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November 27, 2008, 6:00 am

What I Have Learned About Home Renovation Part 1

by: The Financial Blogger    Category: Properties

As you probably know already, we decided to open a daycare at home so my wife can stay with our kids and still make money. This is why we have to do some major renovation in the basement so it looks like a daycare instead of a bunker for kids 😉 We actually started the “daycare project” this Monday. I decided to write a series of post about home renovation as I learn stuff. So you will be able to follow my adventure without paying the high price of being stuck in the dust for a month 😉



How To Save Money On Home Renovation?

Home improving is all about how much you want to put in your house. There is virtually no limit of what you can do in term of renovation. However, your wallet (or your wife 😉 ) will certainly tell you something different! This is why it is important to negotiate every single penny. Here are a few tricks to get the cheapest price on renovation materials:

Plan your renovation in advance

We have been thinking about this project for a few months before we started. Even before talking about a daycare at home, I was looking at pictures of bathroom and home theatre that I liked. When it was time to actually purchase our materials, we knew what we wanted and we were able to only shop for the best price. For example, we bought our toilet a month before we started the renovation. We got it at 50% off!

Once you know what you want, it is time to look for flyers. For the past 2 months, we have been so excited to receive our pamphlets at home, it was like Christmas in July! You get to know what is the price of a package of 50 3’ ½” screws or 100’ of electric cable (you know, the day to day stuff 😉 ).

Negotiate

You think that negotiation is not possible anymore since we have to deal with supermarket such as Home Depot? Well it is actually one of the best places to negotiate. The thing is that you have to do it differently. We needed 2X4” of 8 feet long. However, the only ones remaining were the 10 feet long and they were a buck more than the smaller one. We went to see the guy and order another bucket of the right size. He didn’t have them so we stared at him and started complaining about the fact that it is completely ridiculous and we didn’t want to go around and shop in another store…. 2 minutes later we had a note authorizing the price of the 8 feet for the 10 feet. Trust me, employees will find a way so you can get lost as fast as possible 😉

Another trick is to deal with smaller places where you can talk directly from the owner. I spend 2 hours in a ceramic shop talking about tiles, flooring and how I will do my home renovation. At the end, I was able to save 14% off on the flooring (which I validated with a bigger store) and 10% on the ceramic. The funniest thing is that I didn’t have to negotiate with the guy. After the 2 hours, we got along and he just dropped his price. Since he manages his own business, he knows when its time to drop his price and for how much.

Avoid the “since we are at it”

This is probably the biggest money eater: “since we are doing a new bathroom, maybe we could put a marble counter”. It would be nicer ;-). Temptation is everywhere when it comes done to renovation. Stores will offer catalogues, renovation software and built demos. You need to make a budget before you go in the store and then, stick to it! My dad told me this golden rule:

“When you want to buy something worth more than a thousand dollars, you better talk to your wife first”.

I followed his advice and we are now ready to start our renovation as a happy couple 😉

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November 26, 2008, 6:00 am

Money falling from the sky?

by: The Financial Blogger    Category: Investment, Market and Risk

Is it me or does it sound like every day more money is being given out by the US Government (as well as other main central banks) to try to buy themselves out of this big problem. A few years ago, now Fed chairman Ben Bernanke said in a speech one way to combat deflation would be to throw money out of helicopters. Metaphore? Yes of course. But it sure looks like what is happening right now.

Although deflation is not the main worry but rather a major worldwide recession, the banks are trying to use active measures in very aggressive ways to avoid the worst of the after effects of the subprime collapse as well as the US housing collapse.

The Fed had made major headlines asking for $700 billions a few weeks ago for the TARP fund in order to unfreeze borrowing nationwide. With over half of the funds still unused, the strategy is now questioned by all, even by the FED. So today, the Fed took additional measures, announcing a new plan that could use up to $800 billions!!

Of that amount, for the first time, a portion (25%) is geared towards the US consumer to support them as well as small businesses that are suffering from the liquidity squeeze.

Oh and if you missed this weekend’s latest rescue, the US government is going to “bail out” Citigroup, the flagship of the US banking sector as its share price went under 4$ and it was in major trouble as creditors started getting worried. Was it the right decision? Absolutely. If the failure of Lehman brothers is now being marked as a tipping point by some because of its effects on the stability of the entire system, it seems clear that letting Citi fail never could have been even considered possible.

But the problem is what’s next? GM, Ford and Chrysler are all asking for money and the problem is spreading throughout the economy. At what point does the government say no?

While there is no such situation right now, there are some specialists who have started to look at how far the Fed and the US government can go. As long as the market believes they can get their money back, the spending limits are very very high. But like everything else, there are limits and with the Obama administration now getting ready to take on, the situation has not been worse since probably the 1929 depression….

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November 25, 2008, 6:00 am

Cash Down For a Mortgage: The RRSP Loan Switchback – How to Avoid CHMC Insurance Premium

by: The Financial Blogger    Category: Banks and You,Properties

A few weeks ago, I wrote 2 posts on how to accumulate sufficient cash down to buy a property. Since the recent credit crunch, banks are getting more difficult in regards to accepting mortgage loan applications. And Since they are afraid, they might not take the time to look at the bigger picture. This post is obviously for people who know how to control their budget and that they are in full control of their personal finance. Please take note that we are not telling you to do what is following, we are simply telling you that it is being done and how to do it.



The RRSP Loan Switchback technique

The technique is simple. If you are young, making a good income but didn’t have time to build up your cash down and you still want your mortgage right away; this is for you. Under the Home Buyer’s Plan (HBP), the Canadian government allow first time home buyers to withdraw money from their RRSP up to 20K per person in order to purchase their property. You have 15 years (plus 2 years of grace period without payments) to put your RRSP money back.

You don’t have enough RRSP investments yet? There is a solution! Let say that your marginal tax rate is 38% and you have 20K in RRSP unused contribution. If you plan on buying a property within the next six months, here is how you can do it: you take an RRSP loan for 20k with a differed payment option in 6 months (interest will still run since the date of the disbursement but your first payment will be in 6 months only).

Around May or June, you should receive a tax return of 7,6K (38% of 20K). Then, you use your tax return as cash down for your mortgage. If you are a couple, you will be able to put 15,2K as cash down for your mortgage. With the 5% cash down rule, you can go up to a property of 300K (if you qualify for such mortgage!).

You may use this money as extra cash down in addition to what you accumulated so far and put 20% cash down on your property. Therefore, you would avoid CMHC insurance premium.

What about the 40K RRSP loan? Are we not increasing our debts?

Not really. In fact, when you purchase your property, you are allowed to withdraw money from your RRSP (once withdrawn, you are not forced to use it as cash down). Then, you pay off your RRSP loans. The only cost of this technique will be the interest charged on the loan between the moment you contracted the loan and you pay it back.

The advantage of this technique:

– You get your property faster

– Since you buy your home now, you avoid the risk of seeing the same house value increasing by 10% by the time you accumulate your cash down.

– You will be forced to reimburse your RRSP contribution which is a good thing for retirement planning.

– May avoid CMHC insurance premium.

The disadvantage of this technique:

– You have to pay interest on a 40k loan for a few months

– Since you are forced to reimburse the 40k in your RRSP over 15 years, which makes additional payment of $2,700 a year ($225 a month) over the next 15 years.

– You better make sure you are qualified for a mortgage and that you want to buy a house. If not, you will be stuck with the payment of 2 20K RRSP loans.

Overall, this is not a bad technique, however, there are definitely pros and cons and it doesn’t suit everybody’s financial situation.

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