Big day

There was something significant that was supposed to happen today, but I'm having trouble remembering what it was. :)

Congratulations to our friends in the US on your new president. Whatever your political leaning, it's a fascinating time to be alive. The next four years should generate some great discussion, and hopefully a good deal of positive change in North America and the world at large.

Back on our side of the border, the Bank of Canada today cut its interest rate to 1.00%. In the fastest response I've seen to date, all five of the big Canadian banks immediately matched the rate drop, lowering their prime rates by 0.50% to 3.00%. This puts the banks 0.25% behind overall in terms of passing on the rate cuts to the customer. Not too shabby, when you consider that interest rate spread is a bank's bread and butter.

As always, interest rate news is good for some, and bad for others. Borrowers are finding that their cost of borrowing is reduced even further (my line of credit currently sits at 3.25%), but savers will no doubt also be hit with a drop in the APR on their savings accounts. Now might be a good time to lock in any mid-term savings in a GIC before the rates get any lower.

An excellent metaphor for credit

For a while now, I've been a fan of the show 'Til Debt Do Us Part. It's a highly addictive reality show about couples trying to right their financial ship and salvage their relationship in the face of out-of-control spending and spiraling debt. The host, Gail Vaz-Oxlade, is a very entertaining, no-nonsense personality, who also maintains a great blog with tips, tricks and diatribes on all things financial. Scanning through her articles this morning, I found a fantastic post likening the age of easy credit to having a bottomless cookie jar:

The problem with the bottomless cookie jar is that eventually you begin to take the cookies for granted. It’s human nature. And so when a couple of weeks passed and none of the cookies had been eaten, I stopped filling the jar. Several weeks later, after the jar had been emptied, washed and put back in place, Alex dipped her fingers into the jar to find it empty. She was very disappointed. The cookies were gone. It was the end of the world.

This serves as a very effective metaphor for people's relationship with their credit. Just look at the mystery surrounding the calculation of credit scores and credit limit assignment criteria, and it's not hard to see why most of us don't really understand how we got the credit we have. When a bank first hands you a $10,000 credit line, it's difficult to imagine how you could ever spend that much money, and you can develop a false sense of your ability to manage the ensuing debt. "They wouldn't have given me the limit if I couldn't handle it!"

I remember when I first started digging my way into my hole of consumer debt, I looked into the option of getting a line of credit to pay off my credit cards. At the time, my utilization was so high that I didn't qualify (thankfully), and I spent a good deal of time thinking over how to approach the problem of my debt. I'm a smart person, but I found myself grappling with the idea of whether consolidating my cards onto a line of credit would solve the problem. A small voice in the back of my mind tried to explain that shuffling and adding to the pile wouldn't get me anywhere, but I still didn't get it.

I find this disconnect fascinating. The "math" of personal finance really couldn't be simpler: you need to earn more than you spend, and you need to pay off more than you add to your debts. There's not even any multiplication or division here; it's straight addition and subtraction. Heck, you can even reduce it to the point of "is this number bigger than that number?" All the same, however, we all seem to struggle at some point with this dilemma. We just don't understand how the cookie jar works.

Goals for January 2009

On the first business day of every month, I post my update for the previous month's progress, and set goals for the month to come.

Here are my goals for January:

• Reduce my revolving debt to $14,800 - Since my CPP contributions and EI premiums are about to start again, my cash flow will drop a bit over the next several months. This means less money to throw at debt reduction (especially given my focus on saving for our wedding), but a $400 reduction in my revolving debt should be realistic.


• Grow my Emergency Fund to $1,650 - I have an incentive bonus coming into my Canadian Tire savings account this month, so this target should be in line with my regular contributions.


• Grow our Wedding Fund to $1,260 - I was fortunate enough to receive a year-end bonus this year, and when it arrives later this month, I should be able to get this "seed" amount set aside, and then go from there in the coming months.


• Run an average of twice per week, and play squash at least once per week - I really need to get back into an exercise routine, so let's start here.


• Try two new recipes, with a focus on doing as much as possible from scratch - I have a few slow cooker recipes that I'm excited to try out, so we may be hosting some dinners this month as I experiment.


• Write detailed posts on the following three subjects:
  
  1. My TFSA plans
  
  
  2. My pension contribution plans
  
  
  3. My asset allocation

That should get me nicely back on track this month.

Goals for 2009

Last January I posted a set of goals for 2008, so here is my list of what I hope to accomplish this year:

• Save $6,500 toward our wedding - Ms. Loonie and I will both be aggressively saving for this throughout the year, and I should be able to pull this together without hampering my other financial goals. A cash-only Christmas is one thing, but I really don't know how well we'll do with having a cash-only wedding. Only one way to find out, I suppose...


• Reduce my revolving debt to $7,500 - With the increased savings in our Wedding Fund, there will be a bit less cash to throw at my debt, but this number should be manageable. That will leave me with 27.3% of my $27,610.74 starting debt.


• Grow my Emergency Fund to $2,000 - I really just want to repeat the success that I had in 2008, and get this savings cushion back up to where it was in October.


• Give $2,000 to charity - I'm not increasing this from my 2008 goal, but I want to make sure that we give at least as much as we did last year.


• Weigh 195 pounds - I've got the hunger for getting in shape. I have shoes that are kind to my feet, convenient access to a gym and a squash court, and a fiancée who's also excited to get back into an exercise regimen. With all that going for me, losing some weight should be child's play.


• Write at least three "researched" posts each month - My posting frequency really fell apart in the last half of 2008, so this is an attempt to get things back on track. In addition to my month-end and payday updates (which are highly cookie-cutter affairs), I intend to have at least three posts each month for which I need to do some background research. Hopefully, this will lead into far more than three a month, but it's a manageable goal that will get me started.


• Be promoted to the next job level - I usually prefer to list goals over which I have control, so this one is a bit of a stretch. This really puts a concrete success measure around my wishy-washy "be productive" goal. I've recently transitioned into a sort of "pre-management" role at work, and I can leverage this opportunity by showing my aptitude for the next job level (i.e. actually leading a team). It will take a lot of work on my organizational and project management skills, but I can do it. Even if I don't actually get the promotion, I'll be very well positioned in my career development.

That's what I'm looking to get done in 2009. What are your goals for the year?

December update; 2008 in review

Happy New Year! I don't know about you, but I'm happy to see the end of 2008, and I certainly hope that 2009 has a little more sunshine to offer.

This is the my second New Year's post, and the end of my first complete year of blogging, so let's take a look at how I did with my 2008 goals:

• Propose to Ms. Loonie - I did this in November, and we are now engaged to be married in 2010. We couldn't be happier; this was probably my most important goal for the year, and the only reason it took so long was that I really wanted to pay cash for the ring. Long story short, I now have a beautiful fiancée with a paid-for ring, a tentative wedding date, and a whole lot of planning to do.


• Reduce my revolving debt to $14,000 - Not quite. I ended the year with $15,204.77 in revolving debt, a drop of $8,192.94 that put me at 87.2% of my debt reduction goal for the year. I would have liked to hit this target, but 87% is a lot better than the 75% of progress I made last year. The good news regarding my debt reduction is that I managed to have my second cash-only Christmas, thanks to my Freedom Account. It's amazing how good it feels to start the year without a holiday debt hangover.


• Grow my Emergency Fund to $1,500 - My Emergency Fund is meant to be small for the time being, until I pay off my revolving debt. However, I'm still looking to make continuous, small contributions to this cushion, just to keep the saving-for-saving's-sake habit alive and well. I closed the year with $1,588.90 in emergency savings, an increase of $425.94 that put me at 126.4% of my savings goal for the year. This is the net increase in my Emergency Fund, after taking out a few hundred dollars toward the end of the year to top-up Ms. Loonie's engagement ring fund and some car repairs.


• Give $2,000 to charity - I don't buy into the notion of a religious tithe, but I definitely believe that it's important to give. I contribute to a number of United Way charities through bi-weekly payroll deductions, and also make monthly donations to a local listener-supported radio station. On top of this, we sponsored a few friends in fundraising activities, and bought into casual Fridays at work. All told, we made $2,002.00 in charitable donations this year, which nails my goal for the year, and is a big improvement over the $1,300 we gave in 2007.


• Grow the readership of Loonies And Sense to 100 RSS subscribers - At this point, it starts to look as if I simply stopped reading my list of goals. I currently have 54 RSS subscribers, which is a far cry from 100. That's really my fault, however, because my posting schedule really fell off in the second half of the year.


• Lose 25 pounds - Things looked so promising, as I started running and playing squash on a regular basis, as well as walking consistently to and from work and eating a healthier diet. However, I got laid up with some really bad heel blisters just before the holidays, and coupled with a bounty of Christmas treats I'm back to square one. All is not lost, however; I received a digital scale as a prize through work, and I'm well-equipped to get back into the saddle in January. Let's see those pounds disappear!


• Adopt and maintain a version of Getting Things Done - D'oh! I'm well shy of having this system in place. I have made some improvements in my organizational system at work, including using more folders to manage my paper, but I still struggle with staying on top of my to-do list. This really needs attention in 2009.

A few significant misses on this list, but my finances made significant progress in the right direction, and I've taken my relationship with Ms. Loonie to the next level, so I'm happy with what I got accomplished (especially considering how much bad news was flying around throughout the year).

Now, on to my month-end update:

Assets:
Online Savings - $1,887.35
Self-Directed RSP - $31,092.25
Employer Group RSP - $7,169.25

Debts:
Revolving Debt - $15,204.77
Student Loans - $22,889.27

Net Investable Assets: $2,054.81
Net Liquid Assets: ($36,206.69)

Holiday shopping and car repairs put a $1,661.98 dent in my liquid savings this month. However, my retirement savings finally had a flat month, growing by $2.57 after three straight months of multi-thousand-dollar drops. Combined with debt reduction, my net investable and net liquid assets decreased by $415.59 and $418.16, respectively. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage).

2008 in review

Besides the financial progress detailed above, here are the rest of my 2008 milestones:

• I knocked off 35% of my revolving debt from the beginning of the year. This leaves me with only 55.1% of the $27,610.74 in debt I had in April of 2007. That's a significant chunk of cash, averaging $682.75 per month.


• We've paid off $9,646 in mortgage principal, and $7,209 in student loans. This is all due to our automatic bi-weekly payments, with no lump-sum prepayments.


• My retirement savings have dropped by $3,732, in spite of over $11,000 in RRSP contributions. This rather sizable black cloud has two silver linings: 1) I'm getting my first taste of a serious bear market, and a chance to see how I react to a period of horrible market performance; and 2) I've spent a good chunk of the year buying stock and mutual funds at a deep discount, holding up the "buy-low" side of the investor's mantra. Since I have no need of these investments for at least two decades, I'm content to sit back and enjoy the ride. Besides, it's hard to imagine 2009 being any worse in terms of market performance.


• My net worth has increased by $21,396 (72%), while my net investable and net liquid assets have increased by $11,750 (124%) and $15,482 (30%), respectively.

Goals

I'm getting back on top of posting my monthly goals. Over the next couple of days, I'll be posting my goals for January, as well as my year-long goals for 2009. Stay tuned!

How much are you up or down? One ugly chart, and one that's not so bad

When I calculate my net worth for the month, the data get fed into some dynamic charts that I've created, to provide a visual representation of my progress over time. I've posted these charts a couple of times, but this month's output really stopped me in my tracks. Behold the majesty of my retirement investment performance since I started tracking in April of 2007:

Despite contributing roughly $18,500 to my retirement accounts since April 2007, my investments have gained only $2,171.50 in value.

Yippee.

Now, I need to point out a couple of things here:

• This chart only shows the month-end value of my investments - I haven't done any adjustments to show "what $10,000 invested on April 30 of 2007 would be worth today", or the like. This is a very basic "what was my investment portfolio worth on X date?" view of my RRSP's value over time.


• This graph starts at a value of $36,087.43 - Although a quick look at the chart makes it look like I've come full circle, there is actually another 6 years of progress prior to April 2007 that got me up to that point. I have to keep in mind that I'm really "up" by $38,258.93 over where I was at the beginning of my career (namely $0).

Since the beginning of the year, my retirement investments are down by 7.9%. I'm OK with that, since this money is for the long term, but it still hurts to see such a pronounced drop-off over such a short period.

A post at Clever Dude made me stop and think about how I'm really doing this year. True, my investments are down (by a lot), and my net worth has been slowly declining the last couple of months as a result. However, I've been making consistent progress on paying off my revolving debt, and tucking some cash away in my Emergency Fund and Freedom Account. As a result, my net worth is actually up by 71.8% over where it was at the end of 2007, my revolving debt is down by 32.1%, and my cash savings are up by 96.0%:

There's no question in my mind that I'm moving in the right direction, and although net worth has been stagnant the past few months, I'm laying a very solid groundwork for the future. By starting with a small base, and sticking to the plan, I've survived a huge drop in the market and actually grown my net worth by over 70%. That's not too shabby.

How is your big picture looking? Is market performance overshadowing the rest of your financial life, or are you seeing small changes add up to something better?

November update

Somehow, December is already here. I'm not entirely sure how this happened, but the holiday season is upon us, and we're in the final stretch of 2008. How are your holiday savings coming along? Have you been planning ahead for the shopping season? Are you scaling back on your purchases this year?

I didn't set specific goals in November (two months in a row equals a big slap on the wrist for Mr. Loonie), but here's a summary of my progress for the month:

• I reduced my revolving debt to $15,892.86 - This $498.99 drop pales in comparison to the $1,041.94 I paid off in October, but it's still a good-sized chunk of debt that's now gone. Not much new to see here, but it's movement in the right direction.


• My Emergency Fund dropped from $2,067.70 to $1,701.46 - What happened??? Did I have car repairs? Did I need to cover a health emergency out of pocket? No, things are fine in the Loonie household, which brings us to the third point...


• I proposed to Ms. Loonie, and she said yes! - The slowdown in debt repayment and the slight dip in my Emergency Fund are due to my purchase of an engagement ring last month. For most of the year, I've had some money stashed away in a savings account, and I finally put it to good use to pop the question to the woman of my dreams. We're looking at dates in early 2010 for the actual wedding, but for now we're just basking in the glow of being engaged.

Now, on to my month-end update:

Assets:
Online Savings - $3,549.33
Self-Directed RSP - $31,128.93
Employer Group RSP - $7,130.00

Debts:
Revolving Debt - $15,892.86
Student Loans - $23,445.00

Net Investable Assets: $2,470.40
Net Liquid Assets: ($35,788.53)

My liquid savings grew slightly in November, which reflects some substantial contributions to my Freedom Account, offset by the withdrawal from my Emergency Fund. This month had a much smaller drop in my RRSP, which shed only $2,789.20 (as opposed to $6,200.26 in October). Still, the last time my retirement savings were this low was July 2007. These changes translated to a net decrease of $2,590.82 in my investable assets, more than offsetting the $1,066.52 of progress I made in reducing my non-mortgage debt.

Overall, my net investable assets decreased by $1,524.30, and my net liquid assets increased by $1,264.90. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage). The market took a much smaller bite out of my retirement savings this month, which is a relief. The continuing forward motion in my net liquid assets is good to see, considering that the Loonies have a wedding to plan. Let's keep building those savings and shrinking that debt!