300 bits of sense and counting

When you start a blog to chronicle your journey out of debt, odds are your emotions are running a bit rampant. In a highly sensitive and impressionable state, you create an online profile, and have to choose a title for your project. If you're like me, you try to get clever and invoke some wordplay when naming the blog, and you end up with something like Loonies And Sense, hoping like hell that it will still seem even a little bit witty in a year's time.

Of course, having chosen a "clever" title, you also feel the need to revisit the play-on-words from time to time, referencing the pun in your post titles. This leads to posts like these, with milestone posts being especially heinous offenders. Eventually, you find yourself writing your 300^th post, and may decide to buck tradition by focusing on the sense rather than the Loonies.

All of which is to say that this post is the 300^th that I've written here, starting when I burst onto the scene back in 2007.

Let's take a look at the highlights of posts 201-299:

Canadian Stuff

• Loonies And Lexicons: Part 2 - I followed up my initial cross-border cheat sheet with some additional comparisons between Canadian and U.S. financial terminology.


• The P2P Lending Minefield - This industry still has yet to get off the ground in Canada, with at least one false start last year. In this economic climate, it will be interesting to see whether this idea gains any traction in the Canadian market.


• Comparisons In The Air - Four Pillars posted comparisons between Canadian and American retirement accounts and education savings plans, as well as comparing the TFSA to the American Roth IRA. Some good information here to complement my own cross-border comparisons.


• Deposit Insurance at Canadian Credit Unions - With the number of American banks that failed over the past year, deposit insurance has become a real hot topic. I've written in the past about insuring deposits and securities using CDIC and CIPF, respectively, but this post covers the insurance available on deposits at credit unions in each province.

Blogging

• 376 Days And Counting - A slightly belated celebration of my first blogaversary.


• The Worst Financial Advice I Ever Gave - I've been pretty light on the memes here at Loonies And Sense, but I liked this post about all the ways I led myself astray.


• Income From Blogging - I've also been pretty light on the blogging revenue, since I consider it my hobby and don't really run it as a business.

Milestones

• One Year Of Progress: Charting The Trends - I decided to chart my financial progress graphically, and the trends turned out to be very interesting.


• Payday Update: Under $300K Edition - The Loonie mortgage dropped below $300,000 for the first time this month. Since then, accruing interest has twice brought the balance owing back above this threshold, but with this Thursday's payment, we will owe less then $300K, at least for as long as we stay in our condo.

Taxes

• Making Sense Of Income Tax - This is one of the longest posts I've ever written. It takes a very detailed look at how income taxes are calculated, and explains the impact of credits and deductions on taxes payable.


• Getting The Most From A Group RRSP - I make the lion's share of my RRSP contributions into a group plan provided by my employer. As a result, the tax benefit of these contributions is immediately reflected on my paycheque, and I don't wait until April to get my refund.


• Claiming The Tax Credit For Charitable Donations - I took a look at how to optimize the tax benefit of donating to charity.


• Start Getting Your 2008 Taxes Ready Today - Whether it's setting up a folder to hold all your tax-related documentation, or setting aside cash to cover your tax bill next April, you'll be much more relaxed when preparing your next return if you've started thinking about it a year in advance.


• Feeling Some Property Tax Relief - After building up a surplus in our property tax account, the tax portion of our bi-weekly mortgage payment was reduced last August. We're up for renewal this year, at which time we'll look into paying the taxes ourselves.

Investing

• The Market Can Make You Crazy - With the toboggan ride the stock markets have been enjoying, sometimes you just need to step back, breathe, and tell yourself why you're investing in the first place.


• Time Changes Everything - A big rally can actually be as unnerving as a big drop. It's hard to keep your emotions in check.


• Some Perspective On A Month Of -38% Returns - A "terrible" (remember, this was written prior to October 2008) month in the market prompted me to check the data point against a trend line. Turns out it was actually right on target.


• The Loonie Portfolio: Asset Allocation And Half-Year Performance - I took a look at the allocation of my retirement investments, and how they stacked up through the first half of 2008.


• How Much Are You Up Or Down? One Ugly Chart, And One That's Not So Bad - Everyone's investments have taken a beating. That's part of the reason that I put so much emphasis on paying off my revolving debt: $500 of debt repayment will increase my net worth in any market.

Looking Back

• Remember The Tape Deck: A Lesson In Delayed Gratification - When I was 12, I saved up $100 (plus tax) for a dual cassette deck. To this day, $100 stands in my mind as a significant-but-attainable amount of money.


• Financial Archaeology: Unearthing Past Behaviour - A detailed look at the outstanding balance and accrued interest on my credit accounts before I "saw the light" in April of 2007.


• How Do You Think Of The Stock Market? - Gordon Korman introduced me to the stock market in his novel Go Jump In The Pool. It confused me at the time, but I think I'm finally getting the idea.

When you can afford to make the "wrong"choice

Trent at The Simple Dollar recently bought a new 2009 Prius, and took out a loan at 4% to cover the majority of the purchase price. Those who have been reading Trent's blog over the years know him as an advocate of frugality and paying cash, so this decision to finance the purchase has generated a lot of discussion among his readers. He addressed these concerns in a post today justifying his decision.

A lot of the thinking behind the pay-cash-don't-finance argument follows the line of "Won't it feel great when you walk into the dealership, write a cheque for the negotiated price of the car, and drive off the lot without a new loan hanging over your head?" The planning and discipline that it takes to save up enough cold, hard cash to pay for a new (to you) car are the same traits that help people get out of debt, plan for retirement, and become financially independent. When you look at the number of people who still live well beyond their means, spending more each month than they earn and mortgaging their future for today's wants, it's not hard to see that "save up and pay cash" is well-needed advice.

The difference here, though, is that Trent had saved up enough to pay for the car, and chose to finance the purchase (at a very low rate) in order to keep cash on hand for emergencies and any other opportunities that might come up along the way. This is very different than someone living paycheque-to-paycheque signing on for a 7-year loan at 12%. The interest on the loan may well cost him in the long run, but he's worked to put himself in a position where he can find a compromise rather than needing to make the perfect, by-the-numbers decision.

Much like the idea of getting ahead of the treadmill as opposed to getting off it, the message here is that, when you plan and save, you put yourself in a position of choice, and it can be surprising just how many options become available to you.

My life as a hamster

Back in 2007, a post by Trent at The Simple Dollar introduced me to the concept of the financial treadmill. The idea is that, if you're living paycheque to paycheque, and spending every dollar you make (or, worse, dollars you haven't made yet), you're basically running in place (or even falling behind).

I've written about this a couple of times, looking at my financial progress to see whether I can "get off the treadmill". So far, I still feel the treadmill spinning away, even though I've brought my cash flow out of the red, and built up a small savings cushion.

A post today at Generation X Finance put the treadmill dilemma in a slightly different light. The focus here is to "stop running in place and start making progress."

That "start making progress" piece is a subtle but important difference in the approach to the problem. It really suggests that, instead of looking to get off the treadmill (which really only happens at retirement), you should look to keep ahead of the treadmill. When you look at it this way, it takes "no, I'm not off the treadmill yet, but I'm getting closer," and turns it into "yes, I've come so far, and I'm getting better every day."

Forward motion is success, and helps to motivate future success. My debts (consumer, student and mortgage) are getting smaller every month, and my savings are growing consistently over time. If I have an off week, I may lose ground, but I still end up ahead of where I could be.

I'm still on the treadmill, but I'm running at my own pace.

Ah, to be young and naïve again...

Today was payday, and I've updated my progress bars and NCN Network chart. In looking at the chart, I noticed the "goal date" I set for myself when I started the blog.

My goal at the time was to be free of revolving debt by April 30, 2009.

At the risk of spoiling the ending, I have to say I'm not going to make it. A two-year payoff turns out to have been a bit unrealistic. On the one hand, I'm kind of bummed to see myself so far off this goal (I'll still have nearly half of the $27,610.74 I started with when the goal date rolls around). My shortfall is due to the choices I've made; it was possible to meet this goal, but I haven't made debt elimination enough of a priority to get there.

On the other hand, I've now reached a point where I always know exactly what my credit balances are, and I track my (ever increasing) net worth on a monthly basis. I've brought my credit usage under control, and have managed to pull off two consecutive cash-only Christmases. I have a small Emergency Fund, and Ms. Loonie and I are well on our way to saving up for our wedding next year.

Could I have been farther along if I'd made different choices? Absolutely. However, I'm miles ahead of where I was financially two years ago, and that counts for a lot.

The price of micro-managing

Back in 2007, I opened online savings accounts with ING Direct, HSBC Direct, Canadian Tire Financial Services and ICICI. I wrote a series of posts detailing the process of opening and using an account with each of the four institutions, including the transfer and hold times involved with moving funds to or from the savings account.

At the time, Canadian Tire was the only institution to credit the savings account immediately after initiating a transfer in. The other three banks credited the account on the following business day. This is the assumption I've since been using in planning my fund transfers between institutions.

This past Monday, I was working through my beginning-of-month financial shuffle, and I mistakenly requested a transfer of $600 from my chequing account into my ING Freedom Account. I quickly recognized my error, and tried to cancel the transaction. With the one-business-day turnaround time, I should have been able to do this, as the transaction would still have been pending. However, ING had immediately credited my account, so there was nothing for me to do but ensure that the $600 in question was in my chequing account to keep the account from NSF when the transaction went through.

Now I find myself in the slightly annoying position of having $600 that should not have been in my ING account in the first place, which is now on hold for five business days before I can move it back to where it belongs.

I've made my share of money mistakes in the past, and although this one hasn't really cost me anything, it's an annoying "open loop" that I have to keep in mind until it's resolved, and it illustrates the value of automating your finances to prevent errors that come from this kind of financial micro-managing.

Payday update - under $300K edition

I haven't done one of these in a while, but with today being payday, I thought I'd provide a quick update of my financials. My NCN Network chart has been updated with my latest revolving debt numbers.

Revolving debt is down to $14,212.71, which means I've paid off over 48% of the $27,610.74 I had when I started keeping track in April of 2007. Another $407.34, and I will have paid off half of my revolving debt. That's highly motivating.

Student loans are also dropping nicely. I recently renegotiated Ms. Loonie's interest rate, so both our loans are now at a fixed rate of 5%. Two more payments will bring my loan under $4,000, and hers under $17,000. Compare that to the respective $7,687.35 and $26,000 that we started with, and you can see the progress we've made over the past two years.

Finally, the really exciting news is that today's mortgage payment brought our principal down below $300,000, and we currently owe $299,883.42 on our mortgage. Granted, two weeks' accrued interest will boost the amount owing back up above $300K, but this is a huge milestone for us. It seems like only yesterday we finally bid adieu to our CMHC premium, but now we have a new first digit, and with our renewal date approaching and rates at all-time lows, we are in better shape every day.

I think it's safe to say that I'm happy with our progress.

February update

For such a short month, February seemed to last forever. Between work and personal commitments, I felt like I was being pulled in about fifty directions, but I did accomplish a few things since last month:

• Reduced my revolving debt to $14,413.42 - This was just keeping up with my regular bi-weekly payments. The drop of $377.82 was a little lower than last month, because I had to pay off my 0% credit card. This ended the "interest amnesty" I've been enjoying on my revolving debt since last January, and meant that the banks carried more heft in the tug-of-war of my debt reduction. Still, less than $30 in interest is nothing to gripe about. I'm looking into starting a new round of 0% offers this month, so let's see what I can find.


• Grew my Emergency Fund to $1,686.35 - Just a $33.06 increase this month, but even in slow-and-steady mode on this goal, I'm still on track to make $2,000 by year-end.


• Grew our Wedding Fund to $1,684.29 - I have just over $600 of this in a TFSA with ING, but the rest is available for any deposits we need to make over the coming months.
  
  NOTE: Since this money is earmarked to be spent on our wedding next year, any valid wedding expense that we pay for from this account will not reduce my progress on this goal. This may seem like funny accounting, but the real goal here is to pay cash for the wedding, so I don't plan to penalize myself for using these funds as intended.

Now, on to my month-end update:

Assets:
Online Savings - $2,211.34
Self-Directed RSP - $32,949.57
Employer Group RSP - $7,440.61

Debts:
Revolving Debt - $14,413.42
Student Loans - $21,756.26

Net Investable Assets: $6,431.84
Net Liquid Assets: ($33,958.34)

My liquid savings (which don't include our Wedding Fund, since this money is already pretty much spoken for) grew slightly, mostly through contributions to my Freedom Account. This month saw yet another slide in my RRSP, in spite of over $600 in contributions. These changes translated to a net decrease of $2,057.05 in my investable assets, along with a $936.74 drop in my non-mortgage debt.

Overall, my net investable assets decreased by $1,120.31, and my net liquid assets increased by $1,397.63. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage).