Happy New Year

Well, that's it for December and 2007, so I hope everyone enjoys their New Year's celebrations tonight and tomorrow, and I'll see you all in 2008, with lots of updates, goals, and other bloggy goodness.

Happy New Year!

The aftermath

Well, Christmas has come and gone, and we are now deep in the madness of "Boxing Week". For those who don't know what I'm talking about, Boxing Day is the day after Christmas, and is observed in several countries (including Canada but not the U.S.) as a statutory holiday. Being the day after Christmas, it also kicks off a period of major discounts at most retailers. There's always extensive news coverage of how many people are storming the malls for Boxing Week sales, and just how much they're spending. Ms. Loonie and I are taking it easy, as neither of us is too keen on braving the crowds or spending much more money this month.

Santa was good to the Loonie household this year, and we gave some gifts that really went over well. Ms. Loonie's parents got the Canon PowerShot A460, and just loved it. I spent a good deal of time on Christmas Eve and Christmas Day teaching Ms. Loonie's mother the basics of the camera. We have a couple of gift cards and cheques left to use to fill out our wardrobe and media collection, but basically we had a wonderful few days visiting with family and enjoying good food.

I've updated my goal bars and NCN Network chart with the effects of yesterday's paycheque. Thanks to this month's advertising income, it looks like I'm in good shape for my financial goals for the month. Most significant is the fact that all my gift purchases are paid in full, with no new debt. The blogging goals have gone less well, but I'll have a thorough post-mortem on December's goals next Wednesday.

Merry Christmas

Well, we're one sleep away from the big day, so I just wanted to wish you all a safe and happy Christmas.

We kicked off our visits and celebrations this past weekend, with visits my parents and Ms. Loonie's parents, and we'll continue by visiting Ms. Loonie's extended family tonight, and my extended family tomorrow. Then it's back home on Wednesday for a Boxing Day collapse.

If you're driving over the holidays, please be careful, and be sure to enjoy your time with loved ones.

Has anyone noticed that December is a busy time?

Apologies to everyone for the lack of posts recently. I've been a bit occupied with Christmas preparations, both at work, trying to wrap up projects before the holidays, and at home, trying to balance gift shopping and visit scheduling. I'm doing all right, but the blog has suffered a bit of late, and for that I'm sorry.

Astute readers will have noticed the text link ad at the bottom of the sidebar. Yes, that's right, Loonies And Sense has its first advertiser. That little bit of income was a nice early Christmas present, which will go straight to my line of credit.

In other news, Canadian Dream is running a series of interviews with PF bloggers, and he has included me in the series. I am a big fan of his blog, which has daily posts that are always entertaining and informative. He's also got a great, ambitious goal, namely to retire by the age of 45. We should all be so lucky.

I'm running behind on all my blog-related goals for December, with only 14 of 25 posts to date, and no posts on productivity or Getting Things Done. Will a Christmas miracle help me meet my goals? We'll have to wait and see.

Playing the 0% balance transfer game

It's hard to make it through a day without reading something online about 0% balance transfer offers from credit card issuers. Many bloggers have used these offers to make money using credit card arbitrage, wherein you take your interest-free loan and park it in an interest-earning vehicle until the 0% offer expires, at which point you "cash out" and take your interest winnings. Others use 0% offers to consolidate higher-rate debt, helping to accelerate their debt paydown.

From what I've read, these offers seem to be far more prevalent in the US than here in Canada. However, I've seen a lot of people talking about MBNA Canada's 0% promotional rate, and I thought I'd take a look at it. The offer is not listed on MBNA's website, but if you call a toll-free number and give a four-character promotional code (listed in the thread I've linked), they'll process an application for the card.

I called last night to apply for the card, and was approved on the phone. I was given a $15,000 limit, which I will use to consolidate a big chunk of my current revolving debt (which currently sits on my line of credit). This balance will sit on my MBNA card for 15 months, accruing $0 in interest (there's a one-time 1% fee for transferring the balance), which should save me over $1,000 in interest charges. This will really accelerate my debt paydown.

Obviously, transferring a substantial balance to a credit card is not without risks:

• By opening a new credit account and running it up to 100% utilization, I'll be hurting my credit score. However, I don't plan to apply for any new credit within the next couple of years, so I'm willing to take this temporary hit.


• If I miss a payment (or pay late) during the 15-month promotional period, then the interest rate will jump up to 19.99%. I'm not clear on whether this will be retroactive to the time I first transferred the balance, but either way, it's something to avoid. I need to keep a close eye on my payment schedule.


• Similar to the point above, I need to make sure that I pay off the card balance (or at least transfer it back to my line of credit) before the promotional period ends. I'll be setting lots of automatic reminders to make sure I stay on top of this.


• If I use the card at all for purchases, then those purchases will immediately start to revolve at a 17.9% interest rate, and will continue to do so for as long as there is a balance on the card (because payments are always applied to lowest-rate balances first). This doesn't affect me, as I will never use this card (or, in fact, even carry it in my wallet) for anything other than the initial balance transfer. However, it's an important point to recognize, as it's what MBNA is hoping I'll do.

These are the primary risks, as I see them. By recognizing them, and planning to mitigate them, I think the benefit of faster debt reduction still makes this plan worthwhile.

Have I missed anything? Has anyone else taken this approach, or used this card?

He's here! Quick, drop the rate!

Well, as of yesterday, my Emergency Fund is held at HSBC Direct.

As of today, HSBC's savings APR has dropped from 4.25% to 4.00%.

I'm trying to tell myself that 4.00% is still a good rate. It's 25 basis points above ING (who can't be far behind with a rate drop of their own), and my decision to move was based as much on HSBC's impressive access methods as on their rate, so I still think it was a good move.

I just wish the rate had stayed higher.

Maybe even for a whole week.

Payday and goals update

We got paid today, so my goal bars and NCN Network chart have been updated. With today's payment to my line of credit, I've passed 70% of my 2007 goal for revolving debt reduction. That's good on the one hand, because it represents a nearly $4,000 decrease. However, since there's only one payday left in December, it also means that, barring a Festivus miracle, I'm not going to meet my goal of $22,000 in revolving debt by the end of the year.

It's a little disappointing to know I'm going to fall short of this goal, but this is actually part of the reason I first started setting short-term goals. I wanted to make sure that I stayed motivated even if I didn't hit every one of my targets, essentially getting myself out of an all-or-nothing mindset.

When I look at how far I've come since I started this blog, it's hard to get too discouraged. Yes, it would be nice to have knocked off another $1,300 in debt, but I have to look at what I have accomplished. My goals for 2008 will need to be a little more realistic.

I'd like to buy a piece of mind...

When it comes to language and grammar, the Internet is the ultimate "snobs vs. slobs" battlefield. If you're lucky enough to have a decent vocabulary and a basic understanding of how to use language, then it's hard not to cringe at the atrocities committed online against the written word. By the same token, if you tend to misuse or misspell words, then you can always count on a self-appointed watchdog to jump on your every error.

One of the nice things about reading blogs on a subject like personal finance is that the bloggers take great care with (and pride in) their writing, and their readers are more interested in the actual topic being discussed than in correcting the author's occasional spelling and grammar gaffes.

I admit to having high standards when I read; it pains me to find spelling errors in my favourite writers' work (I love this entrance exam to the Internet, elitist though it may be). However, I also make more than my fair share of mistakes myself, so there's no way I can point to my own writing as a "safe haven" for erudite travelers.

I don't want to be the whiny jerk leaving "I think you mean..." comments (although feel free to leave these comments here when you spot an error), but I really want to comment on a few of the more frequent misuses I've seen. What's a guy to do?

I'll let this sentence sum it up:

"I'm loath to admit that it's the misuse of words that takes its toll on my peace of mind, but I loathe the idea of giving my respected peers a piece of my mind."

Any favourite (or favorite) mistakes you've spotted here at Loonies And Sense? Let me have it!

Choosing an Emergency Fund

After writing yesterday's post about moving my Emergency Fund to HSBC, I was interested to read what Paid Twice had to say this morning in her post describing her family's rationale for choosing a $1,000 Emergency Fund.

$1,000 is the most commonly recommended size for a starting Emergency Fund, largely based on the popularity of Dave Ramsey's 7 Baby Steps:

1. $1,000 to start an Emergency Fund


2. Pay off all debt using the Debt Snowball


3. 3 to 6 months of expenses in savings


4. Invest 15% of household income into Roth IRAs and pre-tax retirement


5. College funding for children


6. Pay off home early


7. Build wealth and give!
   Invest in mutual funds and real estate

The idea is that $1,000 should be enough to cover most emergencies that would otherwise derail your financial plan in the early stages.

I have a $1,000 Emergency Fund. I started building this amount in May of this year, and crossed the $1,000 mark in October. For me, the decision of how much to save for emergencies was largely based on my 2006 tax return. I had under-estimated the amount of income tax I owed for the year, and when April 30 came around, I found myself with a $1,400 tax bill to pay. At the time, I had no savings (aside from my retirement investments), so this amount went straight on my line of credit. This represented an instant 6% jump in my revolving debt, all due to the fact that I was living completely paycheque-to-paycheque. Having a $1,000 buffer in savings would have made a huge difference.

Until this year, I've never had an Emergency Fund. Sure, there have been times when I've had $1,000 or more sitting in my account for a month or two, but it's always been spoken for, with a specific purchase (or debt paydown) in mind. Now, my savings and debt reduction are completely separate from my Emergency Fund. That $1,000 has no strings attached, and will only be used for an unexpected expense that I have no other way of covering. Over time, I'll gradually build this amount (it currently sits at $1,105.28), but I'm largely going to ignore the growth above $1,000, in order to avoid thinking of this as money that I can spend.

The other key piece of my safety cushion puzzle is my Freedom Account. This is the account that I use to cover predictable periodic expenses, such as car repairs, gift purchases, and license renewals. In the past, all of these expenses have generally qualified as minor emergencies, and have gone straight on a credit card. By putting aside money from every paycheque in my Freedom Account, I'm basically redefining what constitutes an emergency, and leaving my Emergency Fund to cover the truly unexpected expenses.

In my mind, I have $1,000 saved up for minor emergencies. That's more than I've ever had before, and it's an incredible boost to my feeling of security to know that I have anything saved up as a safety cushion.

What's your Emergency Fund strategy?

Moving my Emergency Fund

As it stands now, I have my Emergency Fund spread across four institutions:

• $896.46 with ING Direct


• $6.57 with HSBC Direct


• $101.02 with ICICI Bank


• $101.23 with Canadian Tire Financial Services

The reason the funds are spread out like this is that I used a portion of my Emergency Fund to investigate these online savings accounts, and I've simply kept the "exploratory" funds in their respective accounts, rather than transferring everything back into the ING "home base".

I've been doing some thinking about where I want my Emergency Fund to sit, and I've decided that HSBC is a good choice, because of its outstanding access methods, which include ABM, online transfers, and online bill payments. HSBC also has a great rate offering, currently at 4.25% (although this will likely drop in the near future, given the recent drop in the prime rate). Therefore, in the event that I need to get at my Emergency Fund quickly in, well, an emergency, I think it's a good idea to keep it at HSBC. So, I've decided to change the allocation of the fund to the following distribution:

• $0.00 with ING Direct


• $1,003.03 with HSBC Direct


• $51.02 with ICICI Bank


• $51.23 with Canadian Tire Financial Services

I will continue my bi-weekly $25 contributions to the ING account, which will give me a solid $1,000 in one place, with good accessibility, as well as token amounts earning interest in each of the other accounts. The idea here is that HSBC is my "first line of defense", and the other accounts are only touched if I really need them. The goal is for me essentially to forget about the non-HSBC savings, and let them grow until an actual emergency comes up. For my non-emergency savings, I'll continue to use ING as my primary account.

I've initiated the fund transfers, and I'll let you know how the new setup feels once the dust has settled.

'Tis the season for cash flow slip-ups

I'm trying very hard to keep this a "cash-only" Christmas. I've written about this before, but basically I'm trying not to create any new debt with this year's Christmas purchases. So far, I've been managing this well. I've been using my Freedom Account, and diligently tracking my holiday spending. I think I'll pretty much break even.

As a result of this "spotlight" that I've placed on my holiday finances, I've been moving cash between my accounts pretty much constantly. I've mentioned before that I use my line of credit as a sort of money merge account; every time I make a purchase with my credit card, I make a payment in the same amount to my line of credit, reducing the interest-bearing balance on that account, and then I pay my credit card in full using my line of credit at the end of the month. I've been making very good use of this system for the past few weeks.

In addition to my two chequing accounts, online savings accounts, line of credit, and credit cards, I have a savings account with my primary bank. In order to avoid the wait times involved with moving funds between my chequing and online savings accounts, I decided last week that I would use this "extra" savings account as a holding area for my holiday funds in between purchases. This account earns next to no interest, but it's convenient because it's at the same institution as my chequing and line of credit, so transfers are instantaneous.

Yesterday afternoon, as I made my third transfer in as many days from this savings account to my line of credit, I suddenly remembered the fee structure for this account. The account comes with two free debit transactions per month (including transfers to other accounts at the same institution), with additional debits costing $1.25 per transaction. My cash flow shenanigans had just cost me $1.25.

On the one hand, it's only $1.25, and I did catch on before I made more than one non-free transaction. However, it really rankles me that, when I thought I was being so clever and attentive to my finances, I could make a dumb mistake like this. It's entirely my fault, as I have known about this $1.25 cost since I opened the account; it just slipped my mind (mainly because it's been so long since I used the account).

Let's hope that I've learned my lesson, and this will be the last "stupidity tax" I see this season.

Will the six-month milestones never cease?!

I started formally tracking my net worth at the end of April, so my first data point is my April 30 net worth. With my September month-end results, I had six-month s of data to explore. One month later, I had my starting point plus six months of progress to report.

Well, it suddenly occurred to me that today is Loonies And Sense's six-month anniversary. Yes, it was six months ago that I opened my doors to the blogosphere. A lot has happened in that time:

• I've written over 100 posts


• I've hosted a carnival


• I've increased my net worth by $13,124.86 (90%), through a combination of $3,829.86 in asset growth and a whopping $9,835.00 in debt reduction (including $4,621.71 in mortgage payments)


• I've accumulated a $1,000 Emergency Fund


• I've re-allocated my retirement investments into low-cost index funds

I think this pretty much drains the pool of six-month milestones to celebrate, so expect the first round of one-year posts to surface in early April.

Credit card rewards can really pay off

I use a Mosaik MasterCard as my primary credit card. The Mosaik card is a "modular" product: you apply for the basic credit card, and you then select a card design and add features (like a rewards plan) à la carte. For my card, I have selected the "Gold" Air Miles reward plan, which gives me one Air Mile for every $15 that I spend on the card. Air Miles are redeemable for a wide variety of rewards, from travel purchases, to gift certificates, to electronics and kitchen gadgets. One Air Mile typically has a value of $0.12-$0.14, so with the Gold plan, this works out to the equivalent of about 0.9% cash back.

The rewards don't end there, however. With the Air Miles program, I also receive a free Air Miles collector card, which I present when I shop at Air Miles sponsors (including supermarkets, liquor stores, gas stations and several online merchants) to earn additional rewards. This earns me an additional Air Mile for every $20 that I spend at an Air Miles sponsor. By using my Air Miles MasterCard at an Air Miles sponsor, I'm actually "double-dipping" my rewards.

I was surprised to see how much these rewards actually add up. This year alone, I've redeemed Air Miles for the following rewards:

• $50 Chapters gift card


• $50 RONA gift card


• $300 in HBC gift cards


• $50 in Banana Republic gift cards

Obviously, Air Miles isn't the only reward program out there; there are several cards that offer cash back rewards. The point is that I've managed to use my rewards to purchase $350 in gifts ($150 of that for Christmas gifts), where I otherwise would have been out-of-pocket for this amount. If you're careful about how you use the card, and don't get caught up in the "I'm-getting-points-so-spend-spend-spend" mentality, then you can really make out like a bandit.

The 37th Carnival of Money Stories

Welcome to the 37^th edition of Carnival of Money Stories! I'm thrilled to be hosting this carnival. Thanks to everyone who submitted articles; there's lots of fantastic reading here.

Before I start, I'd like to wish a very happy 62^nd birthday to Roberta Bondar, Canada's first woman astronaut, who flew on the Space Shuttle Discovery in 1992.

Here are this week's carnival picks:

Inspiration

• plonkee presents a tale of two men - a guest post posted at plonkee money.


• Homelife presents I dare to win, no matter what posted at I am for Eternity.

Earning More

• Raymond presents Make Money By Letting Scientists Experiment On You posted at Money Blue Book.


• FMF presents Grow Your Career by Promoting Your Work posted at Free Money Finance.

Spending Less

• glblguy presents Why Do I Always Find a Better Deal AFTER I buy it? posted at Gather Little By Little.


• Christine presents Being Frugal in France: Buying Cheap Theatre, Opera and Dance Tickets posted at Me, My Kid and Life: An American Single Mom Living in France.


• paidtwice presents And Now The Spouse Gets Tested posted at I've Paid For This Twice Already....


• JP presents Make coffee at home and save money posted at Watch Me Become A Millionaire.

Investing

• The Dividend Guy presents The Metamorphosis From Mutual Fund Investor to Dividend Investor posted at The Dividend Guy Blog.


• MoneyNing presents The Billionaire Investment Guru within Me Called Billy posted at Personal Finance Blog by Money Ning.

Holidays

• wealthy_1 presents The Giving Tree posted at collectingmycash.


• Ryan Russell presents It’s All Cash For Christmas! posted at My Money Thinks.


• Silicon Valley Blogger presents A Fantasy Shopping Experiment posted at The Digerati Life.

Money Mistakes

• Eric presents My First Debt And A $5 Lobster posted at A Penny Closer.


• David presents Money Mistake Monday - I Didn’t Have Enough Taxes Taken Out Syndrome. posted at My Two Dollars.

Other

• JvW presents Commission Backslide posted at The Good Life on a Budget.


• Mr Credit Card presents Amex Global Assist Experience - Left my car key in the car! (Ask Mr Credit Card’s Blog) posted at Ask Mr Credit Card's Blog.


• Super Saver presents Our Journey To Financial Freedom #9 - The Professionals We Used posted at My Wealth Builder.

Thanks again for all the articles this week; I enjoyed reading all your stories. Be sure to submit your article for the 38^th edition next week.

And the lightbulb goes on...

Last month, I wrote about the allocation of my budget to different categories, and how it differs from my "ideal" allocation. One of the biggest points that stood out for me was that I use 12.9% of my gross income for debt repayment.

Get Rich Slowly has a review today of the book All Your Worth, and there's a point made that really jumped out at me. The target budget allocation recommended in this book is 50% for "needs", 30% for "wants", and 20% for savings. The big eye opener for me is that they include debt repayment in the savings category.

This concept of debt-reduction-as-savings isn't exactly a new idea to me, but it doesn't seem to have sunk in, because I list my debt repayment under my "needs" category. If I look at it as part of my savings, then I am actually saving 22.3% of my gross income (9.4% actual savings; 12.9% debt reduction). I think it's fair to look at it this way, for a few reasons:

• These debts represent money that I've already spent, so I'm really saving up for these purchases retroactively


• Every dollar that I pay toward debt reduction is a dollar that my future self won't have to pay (actually, it's more than a dollar that my future self won't have to pay, because every dollar that I don't pay now will accrue interest over time)


• Once the debts are fully paid off, this is money that can be redirected toward "real" savings

So my budget allocation is actually a bit more in line with my target allocation than I thought.

December surprises

I've written a couple of times about planning for holiday spending. In previous years, I always "planned" my holiday spending by working out how much my year-end bonus would come to after taxes, and ensuring that my total spending did not exceed this amount. While this approach technically adheres to the "spend less than you earn" commandment of personal finance, it isn't exactly the best way to stay in control of your finances.

This year, I've been saving up funds specifically earmarked for the holidays, with the goal of not needing my bonus to pay for any of my holiday expenses. If all goes according to plan, my holiday purchases will all be bought and paid for before my bonus even hits my chequing account. We've done a good chunk of our holiday shopping this weekend, and we look to be on track to keep things under budget this year. That is a great feeling.

This afternoon, we were at a birthday party for a friend's 1-year-old, and we were talking with one of Ms. Loonie's closest friends and her husband. After a little while, the subject suddenly turned to New Year's plans, and what we are planning for ringing in the new year.

When it comes to New Year's celebrations, Ms. Loonie and I generally have a nice dinner with friends (usually at a friend's house), and spend the evening chatting and listening to music. It's pretty low-key, but it can be a lot of fun. Well, Ms. Loonie's friend suddenly decided today that we should all go away somewhere for New Year's. The current proposal is Mont Tremblant (a ski resort in Québec).

Now, our plans for the holiday season have not made any allowances for taking a ski trip to Québec. We simply haven't budgeted for this, and we really can't afford it at this point. It's frustrating that this is being brought up now; if we had known a few months in advance, we might have been able to save up for it, but with less than a month's notice, there's not much we can do.

I think we'll be passing on the ski trip, unless we find a really spectacular deal that will let us do this on the cheap.

It's funny how full of surprises the holiday season always turns out to be.

November update

Well, November is over. Interest has now posted to all my accounts, so it's time for my month-end review.

First off, here's how I did with my November goals:

• Grow my Emergency Fund to $1,100 - I met this goal, ending the month with an Emergency Fund of $1,104.62. Part of this was a $13 referral bonus for referring Ms. Loonie to ING.


• Finish November with $200 in my "short-term savings" fund - Ran into some trouble with this one. I had to use these savings to cover some expenses. This is really meant to be my "fun" money, though, so if I used it to catch up my Emergency Fund or debt reduction, then I don't view that as a failure.


• Reduce my revolving debt to $23,850 - I missed this by about $190. Ms. Loonie was planning to give me some money toward our Michigan trip, but some things fell through, and she wasn't able to. It's a minor setback, but we still made good progress, reducing revolving debt to $24,048.55.


• Blog 30 times in November - I nailed this one with a total of 32 posts in November. Now, whether you would consider all of those quality posts...


• Review two chapters of Getting Things Done - I just snuck this one in under the wire with last night's post. Follow along with my entire review here.


• Continue to blog once per week about productivity - Counting my GTD posts, I had 8 productivity-related posts this month, with 4 of them not involving my GTD review. So, on average, I got one per week, even if there was a week there with no productivity posts.

Now, on to my month-end update:

Assets:
Online Savings - $2,155.74
Self-Directed RSP - $39,479.44
Employer Group RSP - $2,175.00

Debts:
Credit Cards - $3,007.65
Line of Credit - $21,040.90
Student Loans - $30,637.99

Net Investable Assets: ($10,876.36)
Net Liquid Assets: ($52,530.80)

I grew my liquid savings considerably, mainly through Freedom Account contributions. However, the market simply hammered my retirement investments this month, so my investable assets basically held steady. Debts are down by $1,648.07, so I had increases of $1,623.59 and $2,787.94 in my net investable and net liquid assets, respectively. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage).

Finally, let's get down some goals for December:

• Grow my Emergency Fund to $1,160 (currently at $1,104.62) - I'm not really stretching this one this month, because of the holidays


• Reduce my revolving debt to $23,400 (currently at $24,048.55) - This basically means no new debt from holiday shopping. I'm counting on you, Freedom Account...


• Blog 25 times in December - I was going to repeat November's one-a-day goal, but time will be tighter with holiday preparations


• Finish my review of Getting Things Done - I want to review the other 12 chapters in the book this month


• Continue to blog once per week about productivity

If I can meet these goals, I'll be a happy camper heading into the new year.

Getting Things Done review: Chapter 2

Getting Control of Your Life: The Five Stages of Mastering Workflow

Initial expectations

This one's pretty straightforward: this chapter should cover the steps in the GTD process.

Chapter Summary

This chapter outlines the five stages:

• Collect
  The first stage in managing your workflow is to capture, or collect, 100% of the "stuff" you need to do. This means identifying every single open loop you currently have. 100% is not an exaggeration; it's important to identify everything, so that you can clear all this stuff out of your mind. Allen talks about a general "inbox", where stuff is collected. This will usually be composed of several different input channels, including e-mails, written notes, voice mails, etc.


• Process
  Simply collecting the stuff is not sufficient; you need to empty your inbox on a regular basis in order to make headway. Allen provides a simple decision process for dealing with every single piece of stuff in your inbox:
  
  
  1. What is it? - Identify the basic nature of the item.
  
  
  2. Is it actionable? - Either this is something that will lead to a direct action, or it isn't.
  
  
  3. What's the next action? - If it's actionable, identify the very next step that needs to be taken.
  
  
  4. If the item will take less than 2 minutes, then do it. Otherwise, either delegate or defer the item.


• Organize
  Here we deal with the "results" of the decisions made above:
  
  
  1. If the item isn't actionable, then do one of the following:
     
     • Trash it (if it has no value)
     
     
     • Incubate it (set it aside as a "someday" action)
     
     
     • File it (for future reference)
  
  
  2. If it is actionable, then determine whether it's part of a larger project. If so, add the project to a "current projects" list, and determine the next action. This next action is what you're now processing.
  
  
  3. If the item will take longer than two minutes, then do one of the following:
     
     
     • Delegate it (if you're not the best one to complete it)
     
     
     • Defer it (either to be done at a specific time, or as soon as possible)


• Review
  The gist of this is that you need to have a periodic, consistent review of your next actions (Allen recommends a weekly review), to ensure that nothing is falling through the cracks. Think of the way you feel just before you take a vacation: everything is wrapped up and ready to go. Why not have this feeling at the end of every week?


• Do
  Allen basically runs through some models for working through your next actions list. How do you prioritize the items to make sure they actually get done? We'll get more details later in the book.

Did this chapter deliver?

This is a very nice, concise summary of the basic process of GTD. It seems very simple, but it makes sense. The whole premise of the book is that productivity doesn't have to be stressful or confusing, and the system that Allen lays out in this chapter certainly seems intuitive. I think the core is really the review step. I'll be interested to get into the details in future chapters.

Overall, this chapter provided just the right level of detail. The flow charts outlining the process and organize steps will be extremely useful for future reference.

Want to read more?

Go to my GTD review index page.

Loonies And Carnivals

Just wanted to let my hordes of regular readers know that Loonies And Sense will be hosting its first carnival next week!

Be sure to tune in next Tuesday, December 4 for the 37th edition of Carnival of Money Stories. If you have an article you'd like to submit, you can do so here between now and Monday (December 3, 5:00pm Eastern Time).

Stay tuned!

Payday update

Ms. Loonie and I got paid today, and it's nearly the end of the month, so there's lots going on. I've updated my goal bars and NCN Network chart.

As far as my November goals, I've met my Emergency Fund goal of $1,100 (I'm currently at $1,101.59, and interest hasn't posted to the account yet). My short-term savings goal of $200 is completely out the window; I had to use these funds to cover some expenses we had earlier in the month. This doesn't bother me too much, because the Emergency Fund and debt reduction are far more important to me than having a couple hundred in "fun" savings. Speaking of debt reduction, I won't be meeting the $23,850 goal, but I have taken a big chunk out of the debt, so at least there's consistent forward progress.

I seem to be on track to meet my blogging goals (30 posts in November, two chapter reviews of Getting Things Done, and one post per week about productivity), which feels good.

Getting Things Done review: Chapter 1

A New Practice For a New Reality

Initial expectations

From what I've seen so far, I expect to hear how yesterday's methods don't work in today's world. In our jobs and personal lives, we have so many responsibilities to keep track of, that we just can't trust ourselves to remember exactly what needs to be done when. We spend so much time and energy trying to keep a mental tally of our tasks, that we can barely find the bandwidth to focus on the actual tasks themselves. I'm thinking this will be Allen's "pitch", where he lays out exactly why we need the GTD system.

Chapter Summary

Allen breaks this chapter into four sections:

• The Problem: New Demands, Insufficient Resources
  Our definition of "work" has changed, and the old methods of keeping track of our commitments are no longer sufficient. It's much more difficult today to identify when a project is "done". At the same time, there is a push to "think of the big picture", although this actually works against our ability to deal with our day-to-day tasks.


• The Promise: The "Ready State" of the Martial Artist
  Here we have the promise of the GTD system: have total control of every level of your personal management system, at all times. You will maintain a "mind like water", having a perfectly proportional and productive response to all new information that you encounter.


• The Principle: Dealing Effectively with Internal Commitments
  Here Allen talks about the "open loops" in our mind: anything that does not belong where it is, in its current state. He has the reader go through an exercise to illustrate this:
  
  
  1. Think of a project or situation (i.e. an open loop) that is currently weighing on your mind.
  
  
  2. Think of what the state of that open loop would have to be in order for you to consider the project "done".
  
  
  3. Determine the very next step you would have to take to make progress toward closing this open loop.
  
  The essense of GTD is this process of identifying outcomes and next steps, and then putting reminders in a system you trust (so you don't need to trust your brain to remember them).


• The Process: Managing Action
  Here Allen underscores the importance of getting this "stuff" out of your head. The GTD system is all about recording outcomes and actions so that you don't need to remember them: you can refer to them. You then spend your effort on doing rather than remembering. This is a very "bottom-up" approach to projects, and Allen argues that there is a lot of value in looking at work this way, as it can actually free up your creative energy to do some "top-down" strategic thinking.

Did this chapter deliver?

This chapter has me excited to learn the details of the GTD system. That alone qualifies it as a success: it's hooked me into reading the rest of the book. Based on the level of detail that's been provided so far, the basic tenets of the GTD system seem to make sense. It's up to the rest of the book to deliver on the promise of being in total control of everything at all times.

Beyond the actual content of the chapter, I'm impressed with Allen's writing style. He has a very conversational yet professional style. He also includes numerous quotes in the margin to underscore the points made in the main text. So far, these have been interesting sidebars; I'll have to see whether these become a distraction as I read through the rest of the book.

Overall, I enjoyed this first chapter, I like the tone of the writing, and I'm excited to read ahead. Not a bad start to the book.

Want to read more?

Go to my GTD review index page.

Discovering common sense in investing

Since I converted my RSP from a concentrated stock position to low-cost index funds, I was pleased to see that, in the following weeks, my "old" portfolio performed significantly less well than my new diversified holdings. Given that my old stock holdings were banks, it's not surprising that they've been in relative free-fall for the past couple of weeks, in anticipation of the end of this "all-about-sub-prime" fiscal year. I have to admit that, as I've watched my index funds hold steady relative to the sliding bank stocks, I've felt more than a little cocky about my decision to diversify.

Well, today I've had a dose of common sense to cut me back down to size. Canadian bank stocks are on the rebound in the wake of Bank Of Montreal's year-end results, as investors can finally start to quantify the impact of the sub-prime mess on the Canadian market. I'm now seeing the down-side of a diversified portfolio: just as index funds drop in value more slowly than individual stocks, they are also slower to rise in value.

There's no question in my mind that diversification was the right move. My exposure to radical price swings in individual stocks is greatly reduced, and the fact that 90% of my holdings are in equities means that I still have a pretty aggressive portfolio. I just have to accept that, although I should do well in the long-run, there may be times where my "old" portfolio will leave me in its dust.

A great use for an ING sub-account

Get Rich Slowly posted today about a fantastic way to use an ING sub-account: create your own extended warranty fund. When you make a purchase, instead of buying the offered extended warranty protection, set aside the price of that protection in a dedicated ING account. This amount will earn interest over time, and if you end up needing to repair or replace the item, you will have money set aside for just this purpose. The assumption is that, if you do this every time you have the option of purchasing an extended warranty, the account will grow considerably, since the odds of you needing the warranty protection are low. This assumption that you are unlikely to use the warranty is exactly why stores offer this protection in the first place: the warranty premium ends up being pure profit in most cases.

This is very similar to what Ms. Loonie is doing by saving up her tax payment rather than having income tax withheld by her employer. I really like this idea of paying yourself rather than giving the store an interest free loan (at best) or an outright gift (at worst).

Obviously, the success of this approach hinges on two things:

• You only use the "warranty" account to repair or replace defective items


• The expected failure rate of the item in question is low enough that declining the warranty is a "good bet"

The first point above simply requires diligence on your part. The second point is more up to chance, but some research can help to determine whether the warranty is a good buy. However, even if you end up "losing" the warranty bet, you will still have some money set aside to pay for the repairs.

Avoiding a financial free-for-all

Since I started this blog, Ms. Loonie and I have taken three vacations. One was a week-long trip to visit friends in Illinois, the second was a week spent at our family cottage, and the last was a long weekend spent in a small town in northern Michigan. For each of these trips, we tried to keep things as cost-effective as possible. We drove to Illinois, and stayed in our friends' parents' condo. At the cottage, we shared food costs with my parents and extended family. We also drove to Michigan, although we ended up staying in an historic hotel.

However frugal we tried to be on these trips, we still seemed to fall into the "I'm on holidays" mental trap, and found ourselves splurging, whether on dining out, buying beer and wine, or stocking up on souvenirs to give to friends and family when we got home. I'm sure we're not alone in this vacation mindset, but it's frustrating to watch months' worth of savings evaporate during a week away from home.

As we head into the holiday season, I'm trying to avoid falling into the same trap. One thing I have going for me is that I've been socking money away in my Freedom Account to cover Christmas gift purchases; I should be in good shape to pay cash for most of my holiday shopping. The main thing I'm keeping an eye on, though, is the little Loonie devil that sits on my shoulder and whispers, "you can afford it... it's the holidays!" That guy is trouble.

The key here is to have an enjoyable and memorable holiday season without undermining my financial goals. I think I've got a plan that will work, but the next several weeks will determine whether I actually succeed.

Navigating my Getting Things Done review

As I review David Allen's book Getting Things Done, I'll be updating this post with links to the corresponding chapter reviews. The following is a list of all the chapters in the book, and as I complete each chapter, I'll turn the chapter title into a link to its review.

Getting Things Done

• Initial expectations of the book

Part 1 - The Art of Getting Things Done

1. A New Practice For a New Reality


2. Getting Control of Your Life: The Five Stages of Mastering Workflow


3. Getting Projects Creatively Under Way: The Five Phases of Project Planning

Part 2 - Practicing Stress-Free Productivity

4. Getting Started: Setting Up the Time, Space, and Tools


5. Collection: Corralling Your "Stuff"


6. Processing: Getting "In" to Empty


7. Organizing: Setting Up the Right Buckets


8. Reviewing: Keeping Your System Functional


9. Doing: Making the Best Action Choices


10. Getting Projects Under Control

Part 3 - The Power of the Key Principles

11. The Power of the Collection Habit


12. The Power of the Next-Action Decision


13. The Power of Outcome Focusing


14. Conclusion

Getting Things Done

• Final impression of the book

Bookmarking this post will eventually provide links to the entire review.

Getting to reviewing Getting Things Done

Nearly two months ago, I decided to read and review David Allen's Getting Things Done. There are two reasons for this decision:

1. Everything I've heard about this book and the whole GTD system indicates that it really does help to get past the mental muddle that comes from juggling multiple tasks, and allows you to be confidently and consistently productive. This is just the sort of thing I need in my work (and, frankly, in my personal life, as well).


2. By reviewing the book on the site as I read it, I hope to internalize the material to a degree I might not be able to match by casually leafing through the book before bed.

I've never reviewed a book before, so I'm interested to see how this pans out.

At any rate, the structure I proposed for my review was the following:

1. Before reading, post my thoughts of what I expect to get out of the book/chapter.


2. Read the book/chapter.


3. Report on what I actually got out of the book/chapter.

I want to to take this approach, because I'm interested in the contrast between what I expect to take from the book, and what it actually delivers. After all, I'm hoping to come out of this with a working personal productivity system, so I'm very interested in what I get out of it.

So, without further ado, here is what I expect to take away after reading Getting Things Done, based on what I've gleaned from the grapevine:

• A general philosophy of dealing with information as I encounter it, and taking the appropriate action immediately. As I understand it, this is the core of the GTD system: every new piece of information should be "processed" to determine what action needs to be taken. This action is then planned, and dealt with based on its importance.


• A decrease in the amount of "loose" information bouncing around in my mind. One of the tenets of GTD is that you take the pressure off yourself to remember the tasks you need to do, and instead rely on lists to do the remembering for you.


• Diminished stress and increased productivity, both at work and in my personal life. The consensus seems to be that, if you stick to the GTD system, you will be more productive, and you will find yourself less stressed. Essentially, GTD provides a framework for planning your tasks and actions, and lets you focus your brainpower on actually accomplishing those tasks, rather than on remembering what needs to be done.


• A better sense of just what the heck all the GTD terminology actually means. All through the blogosphere, I hear terms like "emergent action", and "process your inbox", and although I can take a guess at what these things mean, I'm looking forward to knowing exactly what people are talking about.

If I get all that out of reading this book, then I will be one happy camper.

Look for my reviews of the first two chapters this week.

100 cents to a Loonie; 100 posts at Loonies And Sense

As the title so subtly suggests, this is my 100th post. I wracked my brain to come up with a more clever title for this post, but I'm afraid that's the best I could do.

A post count of 100 doesn't exactly take me out of the newbie camp, but it is a significant milestone for me. When I started the blog, I wasn't sure what kind of posting schedule I would keep, or how long I would even manage to keep the blog running. Just look at the 27-day gap between my first and second posts.

Since then, I've graduated into something resembling a regular posting schedule, and I've gained about 30 regular readers through RSS subscriptions. Still small, but growing. Knowing that people out there actually read the blog has really helped to keep me honest with respect to my goals. I may not always achieve the goals I set for myself, but having to answer to my audience means that I keep these goals in mind as I go through my day-to-day life. Thanks for being there to keep me accountable.

I wanted to celebrate my 100th post with a quick retrospective of my ramblings since my "hello world" post on June 7:

Canadian Stuff

• Loonies And Lexicons - In this post, I explored the parallels between Canadian and American personal finance terminology


• Loonies And Savings Plans - In this follow-up, I looked specifically at the education and retirement savings options available north and south of the border


• Loonies And Greenbacks - This September, the Loonie reached parity with the US dollar for the first time in over 30 years


• Canadian Black Book® and Free credit reports in Canada - These links allow Canadians to assess their vehicle's value, and obtain their free credit report

Family

• There's no "I" in "Personal Finance" - Ms. Loonie and I decided to take a joint loan to consolidate her student loans at a low rate


• Welcome back, home cooking and discussing finances - Ms. Loonie opened an ING account to save up for her tax payment next April

Mortgage

• So long, CMHC - In July, we finally paid off the last of the CMHC premium on our mortgage


• Demystifying Mortgage Rates - I looked into how mortgage interest is actually calculated based on the posted rate

Savings Wars

• Canadian High-Interest Savings - A New Hope - I looked at the process of opening and funding an account with ING Direct, HSBC Direct, Canadian Tire Financial Services and ICICI Bank


• The Canadian High-Interest Savings Strike Back - I compared the web interfaces and fund transfer processes at each of the above institutions


• Return of the Canadian High-Interest Savings - I compared the access methods for these institutions, and provided a final verdict on the account of choice

Investing

• Allocation on the Brain - This summer, I realized just how risky my asset allocation was, and decided to diversify


• Market timer extraordinaire! - I finally sold my two stock holdings, which triggered some brief seller's remorse


• Perspective on my market timing - The relative performance of my new index fund portfolio against my old stock portfolio has me feeling much better about my investments

That's just a handful of posts that I think give a flavour for what the blog's all about. Do you have any favourites that aren't on the list?

30 days to go...

Christmas Day is exactly one month away. This weekend, Ms. Loonie and I decorated our condo for the holidays. This involved putting up our (fake) tree and assorted (fake) pine boughs, and a whole lot of snowman figurines. Ms. Loonie is a bit of a snowman junkie, and the consequences can be seen all over our living space.

Have you sorted out how you'll be handling the holiday season? From parties, to shopping, to general schedule management and deciding who you're going to visit when, there's a lot to get straight before the second half of December hits.

I've got my Freedom Account humming along, absorbing the impact of the few gifts that I've bought so far, and at the risk of sounding hopelessly naïve, I think I might just be able to manage this without incurring any new consumer debt. The December update that I post on January 2 will tell the tale, but for now, I'm just doing everything I can to prepare.

What are you doing to prepare for the holidays?

My Money Mistake and How to Avoid it

Canadian Capitalist is three years old. As part of his birthday celebrations, he has asked fellow bloggers to post about a money mistake they've made, and how to avoid falling into the same trap. For me, the choice is obvious:

Lifestyle inflation.

I managed to make it through university with minimal student loans, and although I used a credit card while I was a student, I always paid the balance in full at the end of the month. While I was getting by on a student's wages, I seemed to have a pretty good sense of how much money was available to spend.

When I graduated and started my first full-time job, my income nearly doubled. This seemed to throw a switch in my brain, and I decided that I was suddenly rich, and could buy anything and everything I wanted. I had it in my mind that I was a responsible credit card user, so I started charging up a storm on my card, "knowing" that I would still be able to make full payment. At this point, a few factors came into play:

• I financed a new car


• Student loan payments started within a few months


• Higher income and fewer tax deductions meant that my "twice-as-high" salary didn't actually represent twice as much money in my paycheque

Suddenly, I started revolving a balance on my card, and even made some late payments. I started playing the balance transfer game, moving balances from card to card and chasing rate offers. Over the years, I've developed a more responsible approach to my finances, but it's only within the last few months that I've really started to turn the tables on my debt. It's really amazing how long the consequences of getting into debt can stay with you.

Here's my advice on how to avoid the same mistake:

1. Know your spending. From the time you first start to earn an income, keep track of how much you spend, and what you spend it on. This will be very important throughout your life.


2. Know your income. Always know exactly how much your actual take-home income really is. Don't get fixated on the annual salary you're offered; if you start a job at $50,000 per year, you're actually going to see less than 75% of that money after taxes.


3. Keep your spending below your income. By knowing your spending, and knowing your income, you will know what you can afford to buy. If you always keep your spending below your income, you will avoid debt, and build your savings.


4. Keep your spending at a lower rate of growth than your income. Every time you receive a raise, you have more money available. If you send a good portion of this new money to savings rather than increasing your spending, then you will always come out ahead.

If I could only find my inbox...

I've written before about using paper for productivity, but I have to admit that, when it comes to paper, I am hopelessly disorganized. My desk (whether at work or at home) is a mess, and I am constantly battling the inflow of new paper into my life. Whether it's bank or credit card statements at home, or project request forms at work, I always struggle to keep on top of all this paper.

This afternoon, I am determined to get my work desk into some semblance of order. This will involve recycling a considerable amount of paper, and filing even more. Once I've done this, however, I'll be in a much better spot to think about that filing system I'm so keen to develop.

Wish me luck...

Credit as a relationship

The Financial Blogger has a very interesting and creative couple of posts on viewing credit as a relationship. The first post draws parallels between applying for credit and wooing a potential mate, and the second equates credit problems with the relationship going sour.

This is a very interesting (and important) way of looking at your relationship with a lender. The posts repeatedly underline the fact that credit is all about trust. Banks are willing to loan you money only if they believe that you will pay them back. The cynical (or realistic?) among us might amend that to say that banks are willing to loan you money only if they believe that you will continue to make the minimum payment indefinitely, but it all comes to the same thing. Your lender is trusting you to make payments according to your contract with them. Without this trust, they will not lend you the money.

Too often, I think people overlook this trust aspect of a credit relationship. It's all too easy to complain about our credit card payments, and resent the money the bank is charging us, but the fact remains that we did borrow this money, and we did promise to pay it back.

I'm currently married to a considerable amount of consumer debt. In the context of this relationship, I guess you could say I'm working to "put the kids through school". Once they're out of the house, I hope to end this relationship amicably. I hope my bank will understand, and I'm sure Ms. Loonie will be happy to have me back as a one-woman man.

Keeping on top of flexible tasks

An interesting productivity tool that I've recently seen discussed online is Sciral Consistency. This application has been around for a while, but an updated version was recently released, and it's this announcement that brought it to my attention.

The basic functionality of this program is to manage "fuzzy" interval tasks that don't have a concrete due date. Examples of this are "check my credit report once a year", "get a haircut every 3-5 weeks", or "water the house plants every 3-5 days". The application lets you set a range of days during which the task should be completed, as opposed to a specific due date. You get a tabular view of your tasks and their corresponding time ranges, and the colour coding indicates how consistently you have been completing each task.

There is a free, unregistered version available at the Sciral website, and certain limits (presumably on the number of tasks you can enter at once, etc.) can be removed by paying $25 to register the product. For those who struggle with staying current with their more loosely-scheduled tasks, this looks like it might be really useful.

The balancing act

Meg at The World of Wealth posted this week about why she uses two chequing accounts. Basically, she uses one to cover her committed expenses (including savings, donations and bills) through automatic payments, and the other for her discretionary spending. The idea is that she can spend as much of the discretionary money as she wants, because all of her savings and monthly bills have already come out of her primary account.

I manage my cash flow in a way similar to Meg's system. Ms. Loonie and I have a joint chequing account, and my paycheque goes into this account every two weeks. All our monthly bills come out of this account, and I transfer my leftover funds into my secondary account. Having my discretionary income sequestered in its own account like this means that I know at a glance how much cash I have left before my next pay, and it was a nice affirmation to read that someone else uses a setup so similar to my own.

In another post, Meg goes into how her budget actually works, including the details on what percentage of her income she allocates to each category (savings, donations, bills, and fun). This was where I started to see just how much room for improvement I still have. Meg targets a split of her gross income into 20% savings, 10% donations, 60% bills (including taxes), and 10% fun. When I look at my own allocation, I'm currently sitting at 9.4% savings, 1.4% donations, 78.4% bills, and 10.8% fun. A few things stand out here:

• Debt reduction (revolving debt and student loans) accounts for 12.9% of my gross income. Once I've paid off my debts, a big chunk of my "bills" allocation will be moved into other categories.


• My charitable giving is anemic at best. This is where I'm the most off the mark, giving less than one fifth of the generally recommended 10% tithe. When my debts are gone, this is the first area I'll look to increase.


• The definition of the categories is somewhat subjective. For example, I think housing and groceries should go into the "bills" category, since they're really basic living expenses. Vehicle maintenance/insurance/licensing costs probably belong here as well, although they're not strictly essential. I include cable/internet/phone in this category, because they are committed expenses, even if they are really luxuries. The way I look at it is that they're living expenses, but if need be, they can be pruned.


• Although I like Meg's target allocation, it's not gospel. I need to determine an allocation that matches with our own values and goals.

The message here is really that there are two requirements for a truly balanced budget:

1. The budgeted total across all spending categories is less than or equal to your total income


2. The budget allocates spending to categories in a way that matches your values and goals

My budget meets the first requirement, but I have a way to go before I really line up my budget with my goals.

PC Financial

A couple of commenters have asked why I haven't included PC Financial in my comparison of online savings accounts. There are a couple of reasons, so I thought I'd clarify my rationale.

Here's a summary of the relevant PC Financial product offering:

• No fee bank account - As the name suggests, this is a chequing account with no monthly fees, that provides free online/telephone banking (including bill payments), unlimited chequing, free ABM transactions at PC and CIBC machines, and free Interac® Direct Payments.


• Interest First™ savings account - This is their "no minimum" savings account, which currently offers a 3.05% APR and no banking fees.


• Interest Plus™ savings account - This is their "premium" savings account, which offers a 4.10% APR if you maintain a minimum balance of $1,000.01, and a 1.00% APR if your balance is $1,000 or less. As with the Interest First™ account, there are no fees.

When I set out to do this comparison, I was looking for savings accounts that offer competitive rates, and have no minimum balance and no monthly or transactional fees. Technically, the Interest First™ account meets these criteria, although its rate is significantly lower than the four accounts that I used for my comparison. The Interest Plus™ account has a competitive rate, but the minimum balance is a requirement that none of the other accounts have.

If you're in the market for a chequing account as well as a high-interest savings account, then a PC Financial chequing/savings mix is certainly an attractive option. The penetration of PC/CIBC ABMs is comparable to that of HSBC/BMO, so you can expect easy access when you need your money. However, HSBC provides most of the "chequing-like" functionality (with the exception of actual cheques) under the umbrella of a single savings account, so you don't have to open multiple new accounts to get what you need (especially if you're happy with your existing chequing account). When you consider that HSBC has a higher rate and no minimum balance, there's no reason to choose PC on the merits of its savings accounts alone.

Basically, although PC Financial has some great products, I don't really feel that they fit with the options that I included in my analysis.

Just my $0.02...

Return of the Canadian High-Interest Savings

A long time ago, in a blog not so far away, I wrote about opening an account with ING Direct, HSBC Direct, Canadian Tire Financial Services and ICICI Bank. I also wrote about using each bank's online interface to move money in and out of the accounts. ING came out on top in both of these comparisons, due to its speedy and painless account opening process, and its slick web interface and clockwork fund transfers. I wanted to finish off this comparison by looking at the access methods available for each of these accounts.

Online/Telephone Banking

This is the core access method for all four institutions. In order to get any access to your account, you first have to activate online/telephone banking. I haven't tried telephone banking, but the functionality is the same as for online banking. The only differentiator here is that HSBC provides online bill payment from your savings account. Other than that, all four have the same core set of features.

Advantage: HSBC wins, as the only institution to provide online bill payment from the savings account.

ABM Network

ING, HSBC and ICICI all provide surcharge-free transactions from their own ABMs. Canadian Tire does not have an ABM network, and in fact does not even provide an access card with the account. While I have never seen an ING or ICICI ABM, HSBC also provides free transactions at Bank Of Montreal ABMs, which are pretty much everywhere. HSBC is the only institution to provide an access card by default.

Advantage: HSBC is a clear winner, with very high ABM availability.

Writing Cheques

None of the four institutions provide the ability to write cheques.

Advantage: None.

Branch Network

ING has four offices in Canada, so technically they provide the option for face-to-face banking. HSBC has an extensive branch network, but their Direct Savings account is not accessible through branches. Canadian Tire and ICICI, as far as I can tell, do not even have branches.

Advantage: ING, for at least making a token effort to provide face-to-face banking.

Overall

HSBC has the most impressive access methods. In fact, aside from the lack of paper cheques, the HSBC account could almost serve as a primary chequing account.

Final Verdict

ING has the most "feel-good" account. Setting up and using the account is a breeze, and transactions are processed exactly according to their stated timelines. They do, however, have the lowest interest rate of the four, and their access methods are pretty much limited to transferring funds in and out of your account online or over the phone.

HSBC has the best combination of rate and access methods, but you have to put up with a less-than-stellar web interface and account opening process.

Verdict: A tie between ING and HSBC. The choice between these two will really depend on how important the various features are to you. The good news is that, with no fees and no minimums, there's nothing stopping you from opening an account with more than one of these institutions. I have an account with each of the four. If you're not sure which one you want, I'd start with ING, and see how you like it. If you find that you need more access methods, then give HSBC a shot.

A new credit report to check?

Today in the RedFlagDeals.com forums, I found a link to the Financial Consumer Agency of Canada website. This site has a number of useful interactive tools, including quizzes on credit reports and scores, credit cards and mortgages. There is also a mortgage calculator, and a "Cost Of Banking Guide" to help select the bank account that's right for you.

One interesting piece of information I found here is a link to a Canadian credit reporting agency that I didn't even know existed. Apparently the three credit agencies in Canada are Equifax, TransUnion, and Northern Credit Bureaus. As with Equifax and TransUnion, Northern Credit Bureaus provides a free copy of your credit report delivered by mail. The FCAC recommends obtaining a credit report from all three agencies at least once a year.

I've updated the "Free credit report" post linked in the sidebar to reflect this new information.

Developing (and sticking to) a system

Trent at The Simple Dollar has a fantastic post today providing a visual tour of his organization system. I'm struggling myself with developing a system for managing my information and workflow, and Trent's post has given me lots of food for thought. He has a really slick mixture of paper and on-line information capture that I think I might be incorporating into my own system.

There must be something in the air, because Tim at Canadian Dream is also writing about developing a filing system for the paper in his life.

I think the most important part of setting up a system like this is having the ability to stick to it. Trent's system in particular hinges completely on how diligently he follows it. This is as true of a productivity or organizational system as it is of a budgeting or financial tracking system; if you don't keep things up-to-date, you really don't know where you stand, and the system is essentially broken, no matter how elegant or straightforward it may be. Lifehacker linked to an article yesterday on ways to fall off the Getting Things Done bandwagon. It's a humourous post, but there's a lot of truth there.

Emergency Fund update

I've made another minor update to my Emergency Fund goal bar. Last night, Ms. Loonie and I called ING to follow up on our referral bonus. I had sent her a referral early in the summer, and after she opened her account at the end of August, neither of us had received the $13 incentive. After calling in last night, each of us received a $13 credit to our primary account. I rolled this straight into my Emergency Fund, which now sits at $1,071.57, or 53.6% of the $2,000 goal.

This puts me within spitting distance of my November EF goal ($1,100).

Another cross-border parallel

The recent rumblings about E-Trade's credit loss woes have a lot of investors (specifically, E-Trade's brokerage customers) worried about what might happen if E-Trade were actually to go bankrupt.

This is not the same thing as a bank failing, where cash deposits (up to the applicable limit) are insured under either the CDIC or FDIC (depending on which side of the Canada-US border you frequent). Investment assets (such as stocks and bonds) are not covered by CDIC/FDIC.

However, I was interested to read at My Money Blog that there is a corporation that protects investment assets. The SIPC provides protection of investment assets up to a limit.

Thanks to Canadian Capitalist for pointing out that, once again, we Canucks have a similar corporation, namely the CIPF.

So there's one more piece of cross-border financial arcana sorted out. Here are the links to the two corporations' websites:

CIPF
SIPC

November goals update

Today was payday, so I've updated my goal bars and my NCN Network chart. The biggest change is that my Freedom Account balance jumped from 8.8% to 46.1% of the $3,000 goal. This is not due to a windfall or any particularly fancy footwork on my part; I've simply re-configured how I fund and use the Freedom Account. As before, the "target" balance for the account is not a sum I actually expect to have sitting in the account; it's simply the total of all fully-funded Freedom Account categories. As a cash flow tool, this account will always be in flux.

I've made some progress with debt reduction, although the pace this month is not as swift as I'd hoped. I had some unexpectedly high expenses in the past couple of weeks that slowed me down, but I'm hoping that I'll be able to tighten up for the remainder of the month, and meet my November goal of $23,850 in revolving debt.

I was sick last week, and the effects have lingered into this week, so I've been a bit behind the 8-ball, and haven't had much chance to post. I have some catching up to do on my blogging goals for November, so I really have to pick up the slack.

Loonies And Savings Plans

Back in August, I wrote my Loonies And Lexicons post, which attempted to draw parallels between Canadian and American personal finance terminology. I wanted to follow up with an exploration of the different savings plans available in Canada and the US. Specifically, I'll be focusing on the education and retirement savings plans that offer a tax advantage.

Education

In Canada, parents can save for their children's education using an RESP, whereas the American equivalent is the 529 plan (named after section 529 of the Internal Revenue Code). The basic idea of the accounts is the same, but the details are different:

RESP

• Contributions are made with after-tax dollars


• Interest and other investment income in the account are taxed upon withdrawal, at the recipient's tax rate. Since the recipient is a student, their tax rate will typically be in the lowest bracket (if not zero), due to their low income and education tax credits. This means that the growth of the account is very tax-efficient


• There is a lifetime contribution limit of $50,000; any contributions over this limit will be subject to taxation


• Through the CESG, the government will match 20% of the first $2,000 in annual contributions to the account. Note that the CESG match is taxed as interest when it is withdrawn by the recipient

529 Plan

• Contributions are made with after-tax dollars


• Interest and other investment income in the account are not subject to federal tax upon withdrawal


• Two types of plans are available:
  
  • Prepaid Plan - Tuition "credits" are purchased, at today's rates, to be used in the future. Think of this as a defined-benefit plan, with performance based on tuition inflation
  
  
  • Savings Plan - Contributions to the plan are invested, and their future value is based on investment growth. Think of this as a defined-contribution plan


• Specific plan details vary from state to state, but investors can choose to join an out-of-state plan. Several states, however, offer state tax advantages, as well as matching grants, for investors who participate in their own state plan

Note that the tax treatment of 529 withdrawals can be much more favorable than that of RESP withdrawals. Canadian Capitalist, Quest For Four Pillars and Million Dollar Journey have written extensively on how to navigate RESPs.

Retirement

In Canada, the only tax-advantaged retirement plan is the RRSP, while the US offers a variety of IRA options.

RRSP

• Contributions are made with pre-tax dollars, and withdrawals at retirement are fully taxed as income


• Employers will often offer employee savings plans, with contribution matching via a DPSP, which are treated as RRSP contributions when withdrawn at retirement. DPSP contributions are typically subject to a vesting period


• Annual contribution limit is 18% of previous year's earnings, up to a maximum ($19,000 for 2007)


• If an individual participates in an employer's pension or DPSP, then they receive a pension adjustment which reduces their contribution limit for the next year

IRA

• Two flavours of IRA are available:
  
  • Traditional IRA - Contributions are made with pre-tax dollars, and withdrawals at retirement are fully taxed as income
  
  
  • Roth IRA - Contributions are made with after-tax dollars, and withdrawals at retirement are not taxed


• Annual contribution limit for 2007 is $4,000 if under 50, and $5,000 if 50 or older. If an individual holds both a traditional and Roth IRA, then the limit applies to the combined total of contributions to both plans


• Employers often offer a 401(k) plan, which is also available in both traditional and Roth varieties. 401(k) plans often include an employer match on employee contributions. As with the 529 education savings plan above, the 401(k) is named for a section of the Internal Revenue Code. 401(k) contribution limits for 2007 are $15,500 if under 50, and $20,500 if 50 or older


• Certain kinds of employers may not be eligible to provide a 401(k) plan, but may be able to offer a 403(b) or 457 plan as alternatives

Canadians do not have an option equivalent to the Roth IRA; income from investments made with after-tax dollars is subject to applicable taxes (whether interest, dividend, or capital gain). Note that the 2007 contribution limits for Canadians and Americans under 50 are roughly equivalent ($19,000 and $19,500, respectively).

Check out that Loonie...

The Loonie opened above $1.10 US this morning. I have to admit that I'm completely lost when I try to keep track of all the factors at work here, but the net result is that we here in Canada have a very strong dollar heading into the holiday season. Mix this with some of yesterday's tips on holiday shopping, and Canadians could make out well this December.

I'm home fighting a bad cold, so this will be it for posts today. Hopefully I'll be up and about tomorrow.

'Tis the season...

It's that time of year again: stores everywhere are putting up their Christmas decorations. In many cases, this started even before Hallowe'en had come and gone. In downtown Toronto, the Bay already has its animated windows set up, with "seasonal" tableaus in all their animatronic glory.

I'm as much a fan of the Christmas season as the next guy, but it's always a shock just how early the retail season begins. Anyway, with the onset of holiday advertising, what better time to post some tips for enjoying the holidays without breaking the bank?

First off, if you haven't already done so, it's time to start saving for holiday gift shopping. Figure out how much you plan on spending on gifts, and split this amount into chunks that you will save up between now and Christmas. You have exactly seven weeks left between now and the big day, so that's some time to prepare. Ramit at I Will Teach You To Be Rich underlines this point in his post on planning for Christmas:

“But Ramit,” you might say, “It’s already November! I can’t do this now!” This is the Shrug Effect ... Would starting last month have been better? Yes. But starting now is better than not starting at all.

I contribute an amount from every paycheque to the gift compartment in my Freedom Account, and although I started late this year (I only started the account in May), I'm certainly better off than I would be if I were just hoping to have enough to buy gifts.

Grad Money Matters also recommends that you use a credit card for your purchases. The two advantages of doing this are

• easy record-keeping
• credit card rewards (cash-back, points, etc.)

Obviously, only follow this particular advice if you are paying your card balance in full every month; paying interest on your purchase would negate either of these benefits.

Finally, for those looking for ideas, Trent at The Simple Dollar posts a list of Consumer Reports' gift recommendations for 2007. It's a great list, and I am personally planning on giving the Canon PowerShot as a gift this year.

Investing and the perception of risk

Money Smart Life has an interesting post today on extreme investing. Basically, the idea is that you take a small portion of your investable assets, money that you are willing to lose, and invest outside your usual comfort zone. The key here is that everyone's comfort zone is different, so this doesn't mean making margin trades on penny stocks for everyone; rather, take your "extreme" money and use it to try a new kind of investment.

This post got me thinking about the recent change in my own investment "strategy". For the last seven years, all of my invested money has been in my employer's stock. I didn't feel that I understood enough about investing to make smart choices in allocating my investments, so I left the money in the stocks (two stocks because I've had two employers). It wasn't until September that I sold the stocks and purchased index funds, coming up with something resembling a real asset allocation. It took a lot of hemming and hawing to make this switch, but I'm happy with the result.

The irony, of course, is that I was thinking of this switch in asset allocation as somewhat risky, when in fact I was significantly reducing the risk in my portfolio. I've gone from being invested in exactly two stocks to owning five index funds. I still may not have the ideal allocation, but my eggs are now spread across several baskets, which is a nice feeling.

I just found it amusing that my "bold move" served to diminish my risk. Extreme? maybe not. But I'm sleeping better now.

Loonies And Nuptials

My brother got married on Saturday. It was a great day for a wedding, and the ceremony was beautiful. The day was fantastic all around; friends and family all had a great time.

In the months leading up to the wedding, I've been spending a lot of money, between gifts and the bachelor party. The day itself, however, turned out to be very wallet-friendly; I had a $20 cab ride to meet up with the groom, MC and ushers, followed by a $20 tab at the hotel bar, and a $20 tip to the bar staff at the wedding proper. Without worrying about the day's spending, I was able to just enjoy celebrating with my brother.

Planning for my brother's wedding has got me thinking about tying the knot with Ms. Loonie. Expect to see a whole slew of new goals showing up in the next few months.

How'd that happen?

This morning, I thought I'd check my Google Page Rank. I've checked it sporadically over the last few months, and seen it go from "NA" to zero. I'm not sure whether there's actually a difference between these two values, but I interpreted NA as "not worth measuring", and zero as "on the scale, but at the very bottom".

Imagine my surprise today when I found that Loonies And Sense has a Page Rank of 3.

To put this in context, Amazon and eBay have a Page Rank of 9, while The Simple Dollar and All Financial Matters have a Page Rank of 5. I'm still a noob, but I'm growing.

To double-check my increased ranking, I searched Google for loonies and sense (no quotes), and found that my site is the number one result. I used to get this result when I used quotes, but not without. That's definitely an improvement.

Thanks to everyone who's linked to me, and made this happen.

Paper and productivity

43 Folders is a great source for productivity tips, although much of the information provided tends to be targeted toward Macintosh users. The Quicksilver application in particular is a favourite topic at the site.

In addition to the tips, tricks and hacks for optimizing Mac productivity software, however, the site is also home to loads of posts on the virtues of paper. This is where Merlin Mann first introduced the Hipster PDA. Initially created as a bit of a parody of the ubiquitous Crackberry, the Hipster is essentially a stack of index cards held together with a bulldog clip, carried in the hip pocket for note-taking and list-making. Whether Merlin meant for this idea to be taken seriously or not, the Hipster has become widely adopted as a low-tech, low-cost information processing solution.

A post yesterday on using Apple's iCal to create a paper agenda got me thinking about the PocketMod site that I found a few years ago. This is a simple Flash application that allows you to create a custom pocket planner, which you then print onto a single sheet of letter-size paper, and fold as instructed. You end up with a booklet that fits in your pocket, that is tailored to fit your note-taking and list-making needs.

I find it fascinating how high-tech and low-tech can come together to create solutions to everyday problems.

Six months in, how far have I come?

Wow, I don't think I've ever had to "fix" a post as many times as I had to tweak this morning's month-end update. After at least five edits, the numbers are now all correct, and the goals are official.

The issue was that I got mixed up as to the "effective" date of my balances. Today is the first of three paydays in November, and my initial posting incorrectly included some of today's debt payments in my October net worth calculation. This resulted in over-stating my net worth and debt reduction progress. I've sorted it all out, and the numbers are accurate: the goal bars and NCN chart reflect November 1 status, whereas the month-end update and NetworthIQ profile reflect October 31 status. It's splitting hairs, I know, but I want to keep a consistent methodology for tracking my progress. To be clear, here is the "official" update schedule:

• Goal bars and NCN chart: updated every two weeks, on payday


• Month-end update and NetworthIQ profile: posted on the first business day of the month

Just wanted to take care of that housekeeping issue...

I posted a month ago that I had accumulated six months' detailed financial history, and gave a break-down of the progress that I had made since April 30. With today's update, I now have six months' progress since I began tracking my performance, so I thought I'd touch on my first six months.

The following are the financial highlights:

• My net worth has almost tripled in the last six months. I've seen an increase of 197%, or $16,444.79, in six months. Very encouraging.


• My net investable assets have increased by 49%. That's an increase of $12,197.57 since April 30. The difference between this number and the net worth figure is the mortgage principal paid, since NIA includes only liquid and retirement assets, and non-mortgage debt. It's good to know that only 26% of the net worth increase represents home equity growth; the rest is all from savings and debt reduction.


• My net liquid assets have increased by 9%. That's an increase of $5,466.21 in six months. The difference between this and the NIA is retirement savings growth. Most of the improvement in NLA represents debt reduction.


• I have an Emergency Fund of over $1,000. For the first time in my life, I have $1,000 sitting in a savings account, with no strings attached. This money will sit there, earning interest, until something unforeseen (and, ideally, unfoeseeable) happens. That feels great.

In addition to this financial progress, I have a few other milestones:

• My retirement investments are diversified across a number of low-cost index funds. This is a major change from earlier in the year, when I had over 80% of my investments in two stocks. My new, re-allocated portfolio is now worth more than $2,500 more than the old, concentrated portfolio would be today. I know this gap will fluctuate greatly over time, but it feels good to have my eggs in a few more baskets.


• My net worth is now roughly equal to the amount of my revolving debt. This isn't particularly meaningful, but psychologically it's a big boost to know that, if I were to throw all my assets at my liabilities, I would come out ahead by the current amount of my "bad" debt. This point serves as a huge encouragement to continue my debt reduction. I really feel that I can eliminate this debt, and correct the mistakes of my former self.


• I have a blog that I enjoy maintaining, with a small but loyal readership, and more than twenty RSS subscribers. It is a great feeling to be part of the PF blogging community, and to see that someone is actually reading the stuff that I put out there. Thanks to everyone who has visited the site even once.

That's a snapshot of how I've progressed over the last six months. I'm excited to see what the next six months bring.