Monday, June 30, 2008

Enter the TFSA

Checking my account balances online this weekend, I noticed a link on ING's front page to information on the Tax Free Savings Account that will make its debut in Canada in 2009. The folks at ING have included a top-10 FAQ on the TFSA, and their tagline for the product, "Great news. Now even the Government wants you to save your money!" illustrates the reason I love this company: they want to get people excited about saving.

I'm not so naïve that I can't see ING's financial motivation here (I do work in the banking industry, after all), but they really seem to put a lot of effort into making these saving products attractive to the consumer. I personally consider opening an ING account one of the most important steps I took to start my financial turn-around last spring. Saving for saving's sake was something new to me, and I have to say they've got me hooked.

One of my favourite things about ING is the way their products "cooperate" with accounts at other institutions. It's dead simple to move funds between your brick-and-mortar accounts and your ING account, and this gives their products a clear place in your financial portfolio. Their focus (at least in Canada) is not on meeting your chequing and day-to-day spending needs, but they do a great job at providing a convenient savings product.

ING is the first bank I've seen openly promoting the TFSA, and I can't wait to see when and how the other institutions start to promote their own accounts.

Thursday, June 26, 2008

Payday update: Decisions to make

Today was payday in the Loonie household, and I've updated my progress bars and NCN Network chart to reflect my current debt reduction and savings progress. No big changes this month, as I'm largely treading water on my ongoing goals. However, there is a significance to today's paycheque that I need to consider.

Today marks the last time (at least for the foreseeable future) that Ms. Loonie and I will be on the same pay schedule.

When she starts her new job next month, Ms. Loonie will switch from our current routine getting of paid every two weeks, to a two-paydays-per-month system. There will be times in the future when our respective calendars will line up and we'll both be paid on the same day, but these will be few and far between.

It's easy to dismiss this as a negligible change, as this really only means that she will be paid slightly more on a less frequent basis. However, our mortgage and student loan payments are currently synchronised with our pay schedule, so that the payments come out of our accounts on the same day we get paid. This means that, two weeks from today, our payments will be due a few days before Ms. Loonie's paycheque goes into her account.

This serves as a huge reminder of the importance of having some liquid savings on hand. Between Ms. Loonie's student loan and her contribution to our housing/utilities expenses, she shells out about $850 every two weeks. That translates directly to a $850 shortfall in our income that we need to cover on July 10.

When I started this blog, we would have had little choice but to use my ULOC to cover this interruption of cash flow. Today, however, we have a few more options:
  • Ms. Loonie can "borrow" from her tax savings account to cover the shortfall. When she gets paid mid-July, she can then move the money back into savings.

  • I can "borrow" from the Emergency Fund, for the same short-term period.

  • I can postpone some of my Freedom Account contributions for a few days to cover the shortfall.
Ideally, we'll use the first option, and leave all of her pre-authorized transfers in place. However, any of the three options simply represent a temporary re-allocation of cash savings to fill a gap in our income.

Once she has a couple of paycheques under her belt, Ms. Loonie will have more than enough savings cushion accumulated to cover future mismatched pay periods, and this will cease to be an issue. In the interim, however, it feels good to know that we have a choice in how we'll address this issue.

Just goes to show the difference that even $1,000 in liquid savings can make: borrowing from yourself feels a lot better than borrowing from the bank.

The importance of maintenance: a near miss

Ms. Loonie and I live in a high-rise condominium complex. The units in our building are all equipped with en-suite laundry machines, and our washer and dryer are approximately four years old. These appliances are the first we've ever actually owned, as we rented an apartment before purchasing our current home. As a result, this is the first time we've ever had to worry about household maintenance.

So far (touch wood), we've had a pretty smooth run with our condo. Our corporation's reserve fund covers the bulk of the maintenance to the common elements, and our appliances are really our chief concern when it comes to keeping things in good working order.

Over the past month or so, we watched our dryer become progressively less effective at drying a load of laundry. It continued to generate plenty of heat, and spin the clothes quite well, but it was taking much longer than usual to get the clothing completely dry. We had checked the lint screen and a few other things, and we were starting to think that something might be wrong with the unit's moisture sensor.

So, we got on the phone to Sears, and scheduled an appointment with a technician. This being our first service call, we were a bit surprised to hear that the cost would be $80 just for the diagnosis, and then the cost of labour and parts would be added on top of that when the actual repairs were carried out.

I was annoyed to have an expense like this to deal with, but gradually managed to talk myself into tapping our Emergency Fund (sitting at the time just below $1,400) to cover the repairs. I knew this was the sort of thing that money was meant to cover, but it was painful to think of so much of it going out the door.

I decided to get the laundry area tidied up to facilitate access to the dryer, and while I was doing this, I noticed our in-wall dryer trap panel. I already knew it was there, but since it spends most of its time obscured by our cache of household cleaning products, I had mostly forgotten about it. This trap essentially filters the air coming out of the dryer hose before venting it into the building's common exhaust system.

We clean out the dryer's built-in lint screen after every load, so I wasn't expecting to find a lot of lint build-up in this secondary trap. However, when I pulled it out to inspect it, I found a thick layer of very damp lint coating the exhaust screen. I quickly cleaned out the trap, and replaced it in the wall, and lo and behold, the next load of wet laundry to go through the dryer was finished (and bone dry) in record time.

After a few more dryer loads to confirm the improvement in performance, we called up Sears to cancel our appointment.

I don't know how much the technician would have charged us to scoop some wet lint out of the wall, but given that we were looking at a minimum $80 charge before any work was done, and the possibility of some unnecessary repairs due to a misdiagnosis, this five minutes of basic household cleaning saved us a nice chunk of money, and left our emergency savings intact for the time being.

From now on, I'll be checking this secondary lint trap at least once a month.

Tuesday, June 17, 2008

376 days and counting...

Ten days ago, with little fuss and no fanfare, Loonies And Sense turned one year old. I celebrated this occasion by waiting ten more days before even logging into my Blogger account.

I guess you could say I've fallen off the wagon.

This omission might not bother me if I weren't such a fan of recognizing milestones. However, I am a fan, and it does bother me. There's been a lot of competition for my attention recently, and I haven't done a good job of balancing my commitments. I'm realizing that, if I'm constantly writing about how I'm going to do a better job of posting on the blog, then I'm really just going through the motions, and that's not what I want to do.

I want to write, and I want you to read, and the only way to do that is to sit down at the keyboard and post my thoughts.

I realize it's only been just over two weeks since my last post, but it feels like about a hundred years have gone by, so I appreciate the number of you that have kept the RSS feed in your readers. It means a lot that you've stuck around. I've got some exciting developments on the horizon, with Ms. Loonie's upcoming career change, and I hope you'll stay and listen to what I have to say.

I've been here a year. I've had times where I've posted several times a day, and I've had times where it's been a struggle to get one post up in a week. I've had months of breezy budgeting, and spent months getting hammered by unexpected expenses.

Let's see what year number two has in store.

Monday, June 2, 2008

May update

May has come and gone, and we're heading toward summer. Although this past month has been a nearly complete hiatus for me, I'm back and ready to tackle the decisions that come with Ms. Loonie's upcoming career change.

To start off the month, let's look at how I did with my May goals:
  • Reduce my revolving debt to $19,850 - I managed to beat this goal, coming in at $19,823.07. It's nice to nail this goal for a change, given the number of times that I've fallen just short of my debt reduction targets in the past few months.

  • Grow my Emergency Fund to $1,370 - Once again, I made this one happen, ending the month with $1,372.95 in dedicated emergency savings.

  • Update my Equifax credit file with my correct postal code - I got pretty badly sidetracked in May, with Ms. Loonie going through her interviews for her new job, and a hectic month of my own at work. I've got the paperwork on my desk, so I'm planning to check this one off this week.

  • Walk to and from work every day, and work out at least three times a week - I've got the walking thing down, but I need to work on actually getting some real exercise on a regular basis.

  • Lose 4 pounds - I got half-way to this goal, dropping two pounds to 205lbs.

  • Blog 31 times in May - I've fallen off the wagon. I posted 7 times in May, with only two of those being actual topical posts, rather than monthly/bi-weekly updates. Fortunately, Ms. Loonie's job decision will give me lots of material to write about this month, as we work through the implications of switching careers and getting a salary bump.

  • Bring my lunch to work every day in May - I nailed this one. I prepare a lunch (usually a simple sandwich, some fruit and yogurt) every day before leaving for work. Combined with free coffee at work, I don't feel the need to spend on lunch or snacks during the workday.
Now, on to my month-end update:

Online Savings - $2,821.77
Self-Directed RSP - $47,149.56
Employer Group RSP - $6,398.21

Credit Cards - $18,038.55
Line of Credit - $1,784.52
Student Loans - $27,091.18

Net Investable Assets: $9,455.29
Net Liquid Assets: ($44,092.48)

Thanks to a three-pay month, my cash savings received a nice bump of $939.25 this month, mostly in contributions to my Freedom Account. The three paydays also translated into nice debt reduction, with $947.16 going toward my revolving debt. My retirement savings were helped out by market performance, increasing by $3,250.48 from their April 30 balance. Overall, I saw an increase of $4,189.73 in my investable assets, and a decrease of $1,774.37 in my non-mortgage debts.

Overall, my net investable and net liquid assets increased by $5,964.10 and $2,713.62, respectively. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage). I've widened the gap nicely since my net investable assets first became positive last month, and if I keep up my debt reduction, I should be able to keep this number above zero from here on out. That's a good motivator.