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April 25, 2013, 6:00 am

Things You Should Be Doing With Your Money but Aren’t

by: MD    Category: Assets and Net Worth

There are things that you should be doing with your money but just aren’t at the moment for one reason or another. It’s time to revisit my piece on 30 financial moves before 30.

Where does the time go? Over two years ago, back in January of 2011, I wrote about 30 financial moves to make before 30.

I wanted to start off with your contributions to this article and will follow up with a few additional thoughts…

Joseph added a great insight:

“I would like to make a comment about climbing the ladder (#7 & 8). As last year I took a promotion to a level just a step below the executive level at my organization. My career goals were always to make it to the “C” suite, and for all intents was on my way.

However, after working in this position I’ve began to realize the toll an executive level of job will take on a new marriage and starting a family. So might I humbly suggest to those setting career goals to also set family goals too.”

Megan joined the discussion with:

This is a great list. I’ve done many of these (I’m 28) and others aren’t going to happen before I turn 30 (my student loans and my mortgage are going to be around for a while, especially because I’m going back to school).

But it’s good to be thinking about these things, and it’s nice that someone has summed them up so well.”

Ken summed things up nicely:

“All good points, but the reality is, and what you’re actually getting at is the same as my own philosophy with life and money. Be debt free at all times unless the debt has a very high chance of returning more profit than the debt itself, live modestly and within our means, share, give, treat yourself every so often to the things we enjoy most in our lives, and put all our love into our children and family at all times. That’s my philosophy anyways…”

What’s your progress with this bucket list of financial moves?

I wanted to add a few items to this list today. Let’s add a few financial moves worth pursuing before you hit 30…

31. Master paying yourself first.

Have you figured out how to pay yourself first yet? If you ever want to get better at saving money, you need to learn how to pay yourself first and then stick to it. How do you do this? Go to your employer or your bank and ask them to take out X amount from every single paycheck. Then let the money accumulate. Eventually, you’ll be impressed with your savings from paying yourself first.

The trick is to master this. It might not be easy at first because you’ll be tempted to touch this money. Over time, you’ll come to appreciate this easy formula.

32. Figure out how to cut $100 from your monthly budget.

Most of us aren’t saving as much money as we should be. I recently went on a mission to cut $100 from my monthly budget as a starting point. I was impressed with how easy this was. You’ll be surprised by how much you can cut from your budget if you actually try.

What can you cut out from your monthly spending? Any useless subscriptions?

33. Invest in a small startup.

Do you believe in small business? Are you a fan of innovation?

You can take a small bit of money (or large) and invest into into a business startup. This is one thing that I’ve been meaning to do for a long time now. I just haven’t found an opportunity that’s the right fit for me yet.

Have you thought about investing your money into a new business idea?

34. Stretch a dollar to the max.

Are you getting the most out of your money? Sometimes I try to stretch a dollar to the absolute maximum just to see what I can do. This can be pretty fun if you give it a try.

35. Network as much as possible.

We all talk about networking, but so few of us actually do this properly. We just meet up with random friends and get wasted. It’s time to take networking and building relationships to the next level.

How can you improve your networking?

  • Attend events in your area.
  • Plan to attend one event out of town.
  • Take interesting folks out for lunch.
  • Get your friends to connect you with other friends.
  • Go to book launches.
  • Host a meet-up.

You should really build as many relationships as possible in your 20s when you’re full of energy. You never know how mutually beneficial these relationships can be until you jump in.

Those were a few additions to the original list. Did we miss anything? Is there anything that you would like to add?

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April 15, 2013, 5:00 am

The Discussion I Should I Have Had a Long Time Ago

by: The Financial Blogger    Category: Assets and Net Worth,Personal Finance

 

 

Some say money is the root of all evil, I say money is the root of all dispute

 

I’ll tell you upfront, I love money. Nah! That is not completely true, I don’t love money, I love what it brings: freedom, entertainment, comfort, security and good wine! My biggest financial goal is to be able to spend whenever I want. This is what I call financial freedom; living your life without having to worry about what’s left in your bank account.

 

I don’t expect to live an extraordinary lifestyle with a lot of expenses. But I don’t want to restrain my budget to the basics for living either. This is a balance that is quite hard to reach and I’ve been battling to find it lately. For the past 18 months or so, I’m on a crusade against debt. I’ve updated my net worth statement last week showing the first sign of real progress in almost two years. I’m proud of what I accomplished recently yet not proud of the time it took me to realize my problem.

 

It’s Been a While that I have Known

 

I’ve been aware that I was living over my budget for almost the past four years. This is exactly when my wife quit her job to stay home. At that time, I was working a project of mine called The $1,500 project. The goal was to generate an additional $1,500 in net revenue stream so my wife could quit her job and we could live a better life. I did find the money but additional expenses came into play as well. I didn’t budget that part properly.

 

I haven’t accumulated too much debt over the past four years for a guy who lives beyond his means. The reason is quite simple; I also generated some sizable bonuses since I work in the financial industry. My average bonus over the past four years is $37,750. Even after taxes and RRSP contributions, I still have about $12K in my pocket each year to tackle my budget. That’s another $1,000 per month. With this money, I was able to pay back a part of my debts. My total debts are showing $312K and the highest I was in the past four years was when I bought my RX-8. In June 2010, I had $334K in debts. So in the past three years, I’ve paid down 22K in debts while I increased my assets from $480K to $565K.

 

When I look at my situation over the past three years, I can’t say that I’ve headed in the wrong direction. My net worth has jumped by 100K in 36 months, that’s pretty good! But the problem remains the same: I have to count on my bonus to bring my debt level down. I’ve been working on this problem for a while and found it very hard to find a solution until I had a discussion with my wife at the beginning of the year.

 

The Discussion I Should Have Had a Long Time Ago

 

After we came back from Disney, I realized that I had to speak with my wife about a touchy topic; money. Since I work in the financial industry and my wife has little interest in finance, I manage all the financial aspects. I don’t update her very much about our situation since she is very insecure about money. Since I’m a big leverage fan and used our line of credit several times in the past to fund projects (trading on the market, start my online company, etc), I thought we were better off this way.

 

The problem is that she didn’t know that I was actively battling against our debts and that I was looking for a way where I can pay down my debts on a monthly basis within our budget instead of waiting for my year-end bonus. She is definitely not the type of woman who spends without counting. She is very careful with the household expenses. Still, managing a household of five can lead to more expenses when you don’t keep a close record of them.

 

It wasn’t easy to tell her that we had to take a closer look at our budget and cut down on our own expenses. We used to go out to the restaurant once in a while and treat ourselves; this time is over for now. It sucks to tell your wife that you are not going to go to the restaurant or the spa next weekend, nor in the following weeks months.

 

Since I’m the only income earner of the family, I feel a pressure to bring in enough dough for everybody. We can’t complain as we are living a great life. But I live the pressure of maintaining the same level of lifestyle alone. Having this discussion with her felt like I haven’t been able to complete my part of the deal. I wasn’t making enough money so we could spend as we want. In the end, it was admitting a failure on my part.

 

I also tend to enjoy life and rarely think twice before spending. This is why it was so rough to explain my wife that I changed and wanted to slowdown with our expenses. However, my wife didn’t take it badly at all. At first, she was worried about our financial situation. But I explained to her that it wasn’t that bad but we needed to take control of our budget today and not wait for bad luck to happen!

 

I now feel better about this whole story since we are now a team facing our debts, I’m not alone anymore and this makes a big difference for me! We are now working together to find alternatives and ways to save money and the results are showing already. I should have definitely not taken that long to speak with my wife about money management!

 

 

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April 8, 2013, 5:00 am

Q2 Net Worth Update: The Plan is Finally Working! +2.20%

by: The Financial Blogger    Category: Assets and Net Worth

 

 

I was half excited, half scared to write this article. Since I don’t track my debts anymore, I was hoping that my balance sheet would look better after the first three month of 2013. Since we have come back from Disney, we are very cautious about our budget. I’m glad it’s paying off! Here’s my net worth statement:

 

Assets: $565,796 +0.40%

 

ASSETSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CHECKING ACCOUNT$1 000$1 0000,0%
EMPLOYER STOCK
ACCOUNT
$2 507$3 85353,7%
RRSP ACCOUNT$35 573$37 7346,1%
RESP$2 003$2 63331,5%
PENSION PLAN$26 131$26 1310,0%
HOME$351 640$351 6400,0%
COMPANY SHARES$131 521$131 5210,0%
MAZDA TRIBUTE$12 586$11 284-10,3%
MAZDA RX-8$800$--100,0%
TOTAL$563 761$565 7960,4%

I must admit that my assets were helped by the great bull market. My RRSP gained 6.1% in value since I made my contribution in January. This is all paper profit but we are going to take it for now J. I’m very happy about my Dividend portfolio and my investing strategy is now paying off big time.

 

My employer’s stock keep going up as I invest $603 per month in them (part of it is paid by my employer). My goal is to wait as long as possible before cashing them out and paying off more debt with them. I’m allowed to withdraw 75% of the total of my shares annually and still  keep the plan up and running. If I can make till the end of the year, I should have around $9,000 in this account. At 75% of the value, this is another $6,750 I could put on my debts. So this is obviously a big part of my plan of paying down $16,000 in debts this year.

 

I didn’t update my pension plan as I will probably receive my “employee booklet” in May with the new value. As for the online company shares, we will use the same method to value them in a few weeks (3 times the annual gross income – debts). I expect the value to be similar as our gross income slightly dropped over the past 12 months while our debts are down too.

 

As for my house, my biggest asset, I do not plan on increasing the value in 2013. I’m definitely concerned about the housing market in Canada and I would not be surprised if we take a 10% hit during a price correction. This is why I keep my house undervalued in my balance sheet. If I had to put it for sale today, I would probably list it around 375K and sell it around 365K.

 

Debts: $312,303 -1.1%

 

DEBTSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CREDIT CARD$6 831$5 092-25,5%
LINE OF CREDIT$19 597$19 9181,6%
HELOC$263 015$262 803-0,1%
CAR LOAN$12 586$11 284-10,3%
Personal Loan$8 333$7 916-5,0%
Pool Loan$5 370$5 290-1,5%
TOTAL$315 732$312 303-1,1%

Yippee! I’m down by almost $3,500 since my last update! The original plan is to pay off $16,000 this year. This makes for an average of $1,333 per month to pay off. After three months, I’m only $500 behind my main goal while I’m putting money aside in my employer stocks. Technically, if I can keep up and not use my employer’s stocks until the end of the year, I only need to pay $770 of debts per month to reach my objective. With this number in mind, I’m way ahead of my debt repayment plan!

 

I must admit that my tax return had played a great deal in the equation this year. I’ve accounted for the checks I’ll be receiving in a few weeks in this update as I received confirmation from my accountant about two weeks ago. I will be using my whole tax return to pay off debts and this is why I show such strong figure. If I forget about my tax return, I would be showing a smaller debt repayment of about $1,200.

 

What’s Coming

 

When I take my tax return out from the equation, my debt repayment plan seems to be in a slump. But this could be explained by the fact that my income in this beginning of the year is a lot smaller than last year. Since we are aggressively paying down our corporate debts, I haven’t taken any dividends from my company. I used to pay myself a few hundred per month to keep up with my budget. I don’t have this money anymore. So I’m spending less, but I’m also earning less money too!

 

The good news is that starting in May, I’ll be done with a part of my taxes taken from my pay check. I will reach the maximum for pension and unemployment contributions. Therefore, my pay check will bounce up by $200 net bi-weekly. In addition to that, a small raise should be coming in June. This should be enough to bring back my budget on track and add more money to my debts.

 

I will also start a TFSA account to fund my kids private school tuition. I want to send my kids to a private high school and my older son will reach high school in 5 years. I wish to put $100/month in this account for now so I can have a small buffer of two years when he enters school.

 

Debt Loss = Weight Loss?

 

Another of my goals for 2013 was to lose weight. On January 1st, I stepped on the balance and showed 196 lbs. This is definitely way too much for a man who’s 5’9’’! My plan to lose weight was similar to my plan to pay off my debts: concentrate on doing more activities (or more cash) and try to improve my eating habits (and my spending habits!).

 

I can say I’ve done a better job at dropping down my debts and eating less! I’m now trying to be careful throughout the week and eat what I want over the weekend. However, I’m darn steady with my workout program. My goal is to run 500 miles in 52 weeks. Considering vacations, it’s like running 10 miles per week.

 

After 12 weeks, I’m showing a total of…. 126 miles ran! It was hard at first since I was lagging with my plan due to my Disney vacation but I didn’t want to bring excuses on the table. Now that I’ve stabilized my running schedule, I started to lift weights again. I now run 3.2 miles 4 times a week + 25 minutes of weight lifting each time.

 

I weight myself each week to have an idea of where I’m heading. My weight is going up and down mainly due to my eating habits (plus wine over the weekend obviously!). However, I’m proud to say that I’m now showing 186lbs so I’m down 10 lbs in12 weeks. Ultimately, I would like to reach 170-175lbs. Another 16 pounds in 40 weeks seems achievableJ.

 

If I can simply cut down on wine I would probably reach 2 objectives at the same time: losing weight… and losing debts! Hahaha!

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February 21, 2013, 6:00 am

The Art of Hustle For Parents of Lazy 20-Somethings

by: MD    Category: Assets and Net Worth

Do you have a lazy kid?

At one point or another there’s going to be the need for hustle. This is time that I could be spending on anything else but writing. Yet, I love doing it.

Your kid is going to have to hustle hard at one point. There will be the phase where they’re forced to work hard. This will hopefully be followed by the stage where they enjoy working hard. Take it from me personally, I never imagined that I would look forward to working. Now I don’t even want to call it work because I enjoy working on my projects so much.

I have a feeling I know what you might be thinking:

My son watches TV all day, there’s no way he’s going to hustle.
My daughter hangs out with her useless boyfriend all day, I can’t picture her working.
My kid’s biggest accomplishment is reaching the highest level in a PS3 game.

All I have to say is that my parents probably said this about me and my brother at some point. We all go through our lazy phases. We all also wake up eventually and realize that we need to work if we want to get anything done.

Let’s get right into the important stuff. How can I get my kid to actually work?

Goals.

Let me ask you a quick question: if you don’t know where you’re going, how do you know when you get there? I find that the main problem with saving money in your 20s is that you really don’t know what you’re saving for and why you’re saving money.

I didn’t start saving my money until I got the idea to purchase a condo. We all need goals. Goals are essentially a dream with a deadline (I remember hearing this in some corny movie, but it’s still true!).

We need some sort of goals to strive towards. A lot of my friends don’t care for saving money because they don’t think that they have anything to save for. Once you develop this type of an attitude it will kill any saving bone left in your body.

What’s the point of saving for something if you don’t feel the need to?

This is why I always stress the importance of setting money-related goals. This can be something as simple as saving $1,000 for a trip or something a little more complex like saving $5,000 for a new car down-payment.

This is why I suggest that you sit down with the young person in your life and discuss the idea of setting money goals. You can ask the following questions:

What do you want to have in X amount of time?
How much money do you need for your dream trip?
How much money would you like to have in your bank account?

These are just a few quick questions that I thought of from the top of my head. I’m sure you can come up with many more.

The end point is to help the young person set some money related goals. Then we can move on to the next part.

Reward.

There has to be a clear reward somewhere down the road. If we don’t see any results we’ll either just give up or stop caring. Why save money or work on something if there’s no reward? This is why cheat days are so huge with most diet plans.

This is why I believe in tangible rewards. Storing money so that you can keep it in a savings account is cool, but it’s not all that exciting for the typical 20-something.

This is why I gave the two examples in the paragraph earlier: saving for a trip or a car. When you see the reward for your financial goal it entices you to get into the habit of saving money.

What young person wouldn’t want to go on a trip? By saving up for their first trip or major expense, they’ll learn the important of setting goals and how they can be rewarded.

Challenge.

Once goals are met and rewarded, a new challenge needs to emerge or else money management will become boring again.

I recommend constantly looking out for new financial goals so that your kid will always feel challenged. You can also create a challenge within a current goal.

For example, I’ll do this by trying to find ways that I can make some more money or cut back on useless expenses so that I can meet my goals quicker, and reap my rewards sooner.

If I want to go on a trip sooner (after a huge snow storm) I’ll see if I can pick up more shifts at work or sell more of my crap to have more cash available to me. It’s really amazing to see how much momentum you can capture from a few quick wins.

Keep the challenge alive! I’m sure that this is the same advice that relationship experts and personal trainers offer.

That’s all I have to say about getting the college kid in your life to actually work and save money. It’s time to get working and saving!

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January 21, 2013, 9:13 am

Q1 Net Worth Update

by: The Financial Blogger    Category: Assets and Net Worth

 

Believe it or not…., not paying off debts… pays off!

 

My last net worth update is dated as at August 2012. Back then, I was just “surviving” a tough period where I had to pay for over $5,000 in car repairs and $10,000 for my pool. The first expense was unexpected (I usually budget $1,500 in car maintenance per year) and the later was poorly budgeted (I was expecting $5,000 for the pool).

 

At that time, my total liabilities added up to $320,080. I was worried about my balance sheet at that time. The problem wasn’t the amount. It wasn’t even the fact that I was definitely not in line with my objective of going under the mark of $300,000 in debt for 2012. The problem was deeper; for the first time in a while, my consumer debts were growing. If you have been following The Financial Blogger for a while, you know that I have no problem with carrying a large amount of debt and that I’m always willing to borrow money if there is a good investment somewhere. But my blunt attitude towards debt has backed me into a corner; I started to borrow money for the wrong reasons. I think it’s okay to get a mortgage for your home when you are young (I’m only 31!) and it’s a good idea if you borrow money to invest in the stock market or to fund a business (as long as you can afford it!). But it’s definitely stupid to borrow money to put a pool in your backyard, to go on vacation and to buy a new car. This is where I landed; in the world of stupidity!

 

At that time, I stopped producing my net worth update on a monthly basis. There were two reasons for this:

 

  1. There is no point of updating something monthly when you write the same BS over and over again.
  2. I was tired of looking at my debt level each month and being ashamed.

 

So for the sake of my own psychological health, I decided to not pay debts anymore. I completely stopped focusing on my budget and debt level and moved towards what I do best: making money. I took a serious bet; by not looking at my debts for a few months and focusing on growth (of my income) instead of restraining (my budget) I would be able to show a better balance sheet in January. So here we are! It’s time for some accountability!

 

Assets: $563,761 +0.06%

 

ASSETSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CHECKING ACCOUNT$1 000$1 0000.0%
EMPLOYER STOCK
ACCOUNT
$2 139$2 50717.2%
RRSP ACCOUNT$29 703$35 57319.8%
RESP$503$2 003298.2%
PENSION PLAN$26 131$26 1310.0%
HOME$351 640$351 6400.0%
COMPANY SHARES$131 521$131 5210.0%
MAZDA TRIBUTE$14 756$12 586-14.7%
MAZDA RX-8$2 800$800-71.4%
TOTAL$560 193$563 7610.6%

 

It’s pretty hard for me to improve my assets at the end of the year and here’s why: each month, I’m losing $834 in asset value as my cars are depreciating. My 2009 Tribute value is following my car loan so the asset is just in my balance sheet to offset the impact of my car loan. As you can see, my RX-8 will be set to nothing in two months as I’m depreciating the value of this car by $400/month. I don’t believe in cars’ value on a balance sheet but it’s still important to use them to offset some debts incurred to buy them. If I was to sell my car tomorrow, I would get between 6K and 7K as I see similar cars for sale at 8K-9K right now. But since this money would be used to buy another car anyways, I would rather put a $0 on it!

 

The other factor that doesn’t contribute to my asset increase at the end of the year is the reassessment of my 2 biggest assets: my house and company shares. I already updated my house value in the middle of 2012 when I added the pool. A similar house to mine has been appraised at $375,000 just two months ago so I’m pretty confident with a value of 351K on my balance sheet. This value will be updated during the summer of 2013 according to inflation (around 2%). I would rather stay conservative.

 

In regards to my company shares, we evaluate them once a year around May during our yearly meeting. 2012 was a “rough” year in a sense that we didn’t see growth similar to previous years. However, I know that my shares will go up again in May because the company is still in better shape than it was a year ago!

 

Finally, I’m quite happy to see my RRSP and RESP going up so fast. I have contributed another 5K to my RRSP and I continue to put $200/month in the RESP for kids. This is a great progression and I hope it will continue year after year!

 

Debts: $315,732 -1.4%

 

DEBTSPREVIOUS
MONTH ($)
CURRENT
MONTH ($)
CHANGE (%)
CREDIT CARD$7 607$6 831-10.2%
LINE OF CREDIT$19 517$19 5970.4%
HELOC$263 279$263 015-0.1%
CAR LOAN$14 756$12 586-14.7%
Personal Loan$9 374$8 333-11.1%
Pool Loan$5 547$5 370-3.2%
TOTAL$320 080$315 732-1.4%

This is a huge win for me! The 1.4% drop is not super impressive but the fact that both my Disney trip and my Christmas shopping has gone through my budget over the past 3 months makes it more substantial!

 

My consumer debts are going down and I’m quite confident that I’ll be able to pay off over $16,000 in debts in 2013 to go under the psychological level of $300,000. Technically, I need to drop my debts by $1,333 per month for 12 months to reach $16,000. I think it’s quite feasible!

 

What will help me this year is that I have no spending projects. Nothing is due on the house, my cars should be in good shape (HOPEFULLY!) and my 2013 vacations are already behind us. So over the months, I should be able to master my budget and keep my pace.

 

I will keep my focus on producing income instead of paying off debts and we will see where it leads me to the next quarter! What do you think? Do you think I’ll be able to reach my goal and pay off $16,000 in debts without even looking at them?

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