Wednesday, July 4, 2007

Happy belated Canada Day! (on Independence Day)

OK, so nearly a month between my first and second posts may not be an auspicious start, but here I am with post number two. June was a hectic month, as my better half and I spent the end of the month visiting friends in Illinois. We drove back to Toronto on Sunday, and managed to take in the Ashbridges Bay fireworks with some friends of ours. It was a nice welcome back to our home and native land.

Let's get down to business.

I have a good job, with a good salary. However, like so many other young professionals, I have been slow to develop a true picture of what this salary can actually buy. I have spent a number of years living well beyond my means, chasing raises and bonuses to try to catch up to my spending. This lifestyle inflation has really hurt my financial picture, as I now find myself in my thirties with huge debts and no liquid savings.

At the end of April, following a hefty tax bill and several months' worth of pricey car repairs, I finally took a hard look at where I stood financially.

Here was the gist:

Self-Directed RSP - $5,889.52
Employer Group RSP - $30,197.91

Credit Cards - $3,267.26
Line of Credit - $24,343.48
Student Loans - $7,687.35

Net Investable Assets: $789.34
Net Liquid Assets: ($35,298.09)

Our condo (with mortgage), and our car (owned outright) are not included here, in order to focus on "real" dollar amounts, and I consider the condo and mortgage as offsetting each other.

So I'd been out of school and gainfully employeed for six years, and I had $789.34 to show for it. Not to mention that, in terms of actual liquid assets, I was over $35,000 in the hole. That realisation sent me scrambling to set things right, beginning immediately in the month of May. I decided that my biggest problem was poor tracking of credit card expenditures, so I began diligently recording every purchase I made on credit, and setting cash aside to pay that amount off when the statement came. I opened online savings accounts with ING and HSBC (HSBC is giving a $50 bonus for new customers until July 9), and I took advantage of the three paydays in May to throw extra cash at my debt. I also worked out a new budget, one that plans for periodic (i.e. less frequent than monthly) expenses, such as car repairs, license renewals, and gift purchases, by setting aside a fixed amount each month. On top of this, I really reined in my spending on eating out, one of the single biggest drains on my finances. For the first time in years, I was actually living within my means.

At the end of the month, when I took another look at my finances, here is what I saw:

Online Savings - $908.59
Self-Directed RSP - $6,141.96
Employer Group RSP - $33,116.91

Credit Cards - $1,056.55
Line of Credit - $25,298.84
Student Loans - $7,544.44

Net Investable Assets: $6,267.63
Net Liquid Assets: ($32,991.24)

I was speechless at the difference one month had made. Granted, the stock market accounted for a big part of the asset growth, and the debt reduction was largely due to a third paycheque in May, but this was a huge motivation to continue on this path. I still have a long way to go, but I've seen what one month can do, and I'm excited to see where this road takes me.


Super Happy Jen said...

Don't forget that money is for spending. Ebeneezer Scrooge never lived beyond his means and what did he have to show for it? Disgruntled employees, an estranged ex-girlfriend, and a bunch of ghosts telling him the true meaning of Christmas.

Happy Canada Week.

Loonies And Sense said...

Point taken.

I'm not trying to emulate Scrooge, but I do want to put more thought into how I spend my money, and ensure that I don't sacrifice what's important in favour of frivolous consumerism. My goal is to live within my means, not necessarily below them.

Thanks for reading!