The joys of merging finances

I'm currently on a kick of improving the level of communication between myself and Ms. Loonie regarding personal finance. As part of this, we're looking at combining our finances. Currently, we hold a joint chequing account, our mortgage is a joint account, and Ms. Loonie is an authorized user on one of my credit cards. Aside from that, however, we have separate accounts.

I don't believe that a couple should only hold joint accounts. It's nice, for example, to be able to use our respective credit cards to shop for gifts for each other, without giving away the surprise. However, I absolutely believe that a couple needs to have transparency around their finances. To have one partner hiding debt from the other is a recipe for disaster.

Ms. Loonie and I have decent communication in this area, but it tends to be mostly in the form of short "did you pay the bill?" conversations, just to make sure we're keeping on top of things. Beyond these basic checkpoints, we don't often discuss our respective budgets.

One thing has come up in our renewed discussions around finances: the two of us have different approaches to paying our credit card bills. Although neither of us carries a revolving balance on our cards*, she uses each month's income to pay off the previous month's bill. I, on the other hand, set aside cash every time I make a credit card purchase, and use this accumulated cash to pay the bill when I receive it.

From what I've read, the ideal approach to budgeting is to use last month's income to cover this month's spending. Neither of us is at this point yet; I'm using this month's income, and she's using next month's income. This poses a problem for developing a consolidated budget, and I'm not sure exactly how to tackle this.

One solution, building on yesterday's post, is to build up a cushion of one month's worth of Ms. Loonie's discretionary income, and use this to get "ahead" on her credit card. It won't get us to the one-month-ahead ideal, but it will at least get us in sync with each other. I think we'll try to go this route. Until we get there, I'm not sure how we can put together an effective household budget.

Do any of you have experience with this?

* I currently have most of my revolving debt on a 0% credit card, and the rest is on my line of credit. Our regular-use credit cards are paid in full at the end of the month.

'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.

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.

What's new?

Yes, I'm still here.

Things have been pretty hectic lately. We had lots of family time over the weekend, with a mixture of positive and negative feelings. Visiting was great, but there's some stuff going on with Ms. Loonie's brother that's pretty frustrating, so we were kind of exhausted when we got back to work.

Yesterday, Ontario re-elected its Liberal government. I'm interested to see what the next few years hold. A lot of promises were made by Dalton McGuinty leading up to the election, and I really hope these are kept. I tend to lean left, so I'm happy about the Liberal victory, but I do expect the government to live up to its campaign promises.

Tomorrow morning, Ms. Loonie and I leave for our road trip. Our friends from Illinois are meeting us in northern Michigan for the weekend. The weather doesn't look promising, but it should be a fun weekend. Whatever else happens, it will be good to get together with our friends. We've saved up for the trip, so I'm hoping we'll be able to stick to the budget.

Loonies And Thanks

This weekend is Thanksgiving in Canada. We're heading up to our family cottage tomorrow, to have a big turkey dinner with extended family. Then, on Sunday, it's back down to celebrate with Ms. Loonie's parents, followed by some much-needed rest on Monday.

It's all too easy to fall into the trap of calling this holiday "Turkey Day", and losing sight of the reason we celebrate. I've certainly been guilty of this enough times. This year, however, as I dine with my family, I'll be reflecting on the things for which I am thankful. There's certainly plenty of stuff on that list:

• Ms. Loonie - Without her love, support and friendship, I don't know where I'd be. I'm truly a lucky man to have such a wonderful woman in my life.


• Family - My parents, my brother, Ms. Loonie's family, and all our close friends, who really make life worth living.


• Home - We love our condo. What more can I say?

At the risk of sounding corny, I also want to extend my thanks to everyone who has visited, commented on, subscribed to, or linked to my blog over the past few months. It's great to know someone is listening when I click that "Publish" button. Thanks for keeping me honest.

If you're traveling this weekend, please be safe. Enjoy the weekend (whether it's a long one where you live, or not), and I'll see you next week.

Happy Thanksgiving!

Welcome back, home cooking and discussing finances

I hope you all enjoyed the long weekend. My better half and I... OK, I've been calling her "my better half" for long enough; let's call her Ms. Loonie (original, I know). Anyway, Ms. Loonie and I had a very relaxing weekend at home, as we were both recovering from a cold we picked up last week. The cold wasn't much fun, but it was nice just spending time together, with nowhere else to be.

For the past week, Ms. Loonie and I have really stuck to our meal plans. Every day, we brew coffee in the morning, eat breakfast at home, take travel-mug coffee and a brown-bag lunch to work, and then come home and cook dinner. Except for Sunday afternoon, when we met a friend at the pub for lunch and then got cheap take-out sushi for dinner, we didn't spend a dime on non-grocery food expenses. That feels fantastic, and we're excited to keep it up.

Ms. Loonie is a very smart lady. She's highly educated, and is one of the sweetest, funniest people that I know. However, she is not really a "numbers person". In the past, she has always become a bit glassy-eyed when I've talked to her about personal finance, especially when I throw out hypothetical scenarios to demonstrate a point.

At her current job, her income tax is not withheld. This means that she will have a hefty tax bill to pay next April, and she knows that she needs to prepare for this. To her credit, she has been keeping a reasonable cushion in her chequing account, but her saving seems to have reached a plateau, and I've been gently nudging her for a while to open an online savings account that she can feed tax money into every payday. She had agreed to look into this, but had not taken any action until last week.

Last Tuesday, she finally agreed to respond to my ING referral e-mail (we each get $13 if she opens an account with $100 or more), and she completed the online form and mailed the cheque, which cleared her main bank account on Thursday. On Saturday morning, she called in and set up her online access, and also set up her bi-weekly contribution plan.

At this point she sat back and said, "That's it?" I think it had suddenly clicked for her just how easy it is to take that first step toward getting your finances in order. Having set up the account and seen the funds transferred so quickly, she suddenly went into organizational overdrive, reconciling all her accounts and even creating a simple spreadsheet budget to keep track of her spending each pay period. I saw that her interest had finally been piqued, and gave her a quick run-through of how I use my ING account, and how I track my income and spending every two weeks.

She is now genuinely excited to save as much as she can in the ING account. The thing that impressed her the most is that, having set aside what is needed to pay her taxes, she now knows that what is left over is really her money. Where in the past she has always had nagging doubts about her spending, she now knows at a glance how much she can actually afford to spend.

We have always been open about money, but although she knows roughly how much we have and how much we owe, she has always relied on me to deal with the specifics. With the "click" that happened this weekend, she has taken a much more active role in our finances. It feels great to be tackling things as a team like this, and I'm really proud of how she's stepped up and decided to learn as much as she can about "this finance stuff".

So I guess you could say it was a good weekend.

Breathe...

My cousin and her husband are having a baby. She was induced at 8:00 last night, and is still in labour. We're expecting to hear news sometime this afternoon, so I'm finding it a little difficult to concentrate on mundane details like work.

While my cousin works through her breathing exercises, I find myself breathing more easily as my retirement portfolio continues to recover. My Employee Savings Plan balance is currently the highest it's been since I started tracking its performance in May. Since April 30, I've contributed about $2,700, and the market value is up about $3,600. Since the index funds I've got my eye on are currently down from when I first started watching them, it's looking like I may actually end up buying into them at a good time.

Finally, I find that I've eaten up some of my breathing room this month, as I had a higher-than-expected wireless bill (roaming charges from our June vacation in Illinois), and also had to renew both my vehicle registration and driver's license. The latter two are meant to be covered by my Freedom Account, but since I only began contributions in May, I only had about $30 saved up toward the $149 fee. Next time around, these expenses will be quite comfortably covered. As a result of the hits in August, my debts have increased slightly (by $184.11).

This debt increase is frustrating, but it is mostly a "hangover" from my previous irresponsible behaviour. Had I been contributing to the Freedom Account a year ago, I wouldn't have batted an eye at the license renewals. The roaming charges indicate that we'll need to keep a closer eye on cell phone usage while traveling, but this will be more than reversed with next month's debt reduction payments, so I'm not too concerned.

I'm learning as I go, and as long as I take a lesson from each mistake, I'm OK with making a few here and there.

One Heck of a Dip

Well, the consolidation loan has funded. I now have $26,000 in "new" debt.

Of course, this is anything but new debt; I just haven't been including my better half's holdings in my net worth calculations. Calculating net worth as a household number will give me a much more accurate picture of where we stand. It also means that including our condo and mortgage in the calculation may make more sense, since "we" can liquidate the asset in a pinch, whereas "I" could not.

This is ultimately a good thing; we have a great rate on the consolidation loan, and we'll have it paid off in less than five years. It also brings four separate loans under one umbrella, making the tracking much easier.

It just makes me a little queasy seeing my total debts jump by 75% in one month.

There's no "I" in "Personal Finance"

Well, technically there is an "I", but I've been reminded this week that the "we" is much more important. It may not be "personal fwenance", but it probably should be.

My better half has decided to consolidate her student loans with my bank, in part to take advantage of the great staff rate she can get by having me as a joint applicant. We're waiting to hear on the decision, but our ratios and credit history are good enough that we shouldn't have any problems.

One direct result of this consolidation is that her student loan amount will suddenly appear in my net worth calculation. I've previously been omitting her student loans from my calculations, and this additional debt will certainly put a dent in the overall number. This is fine, as it is not really new debt, it's just suddenly drawing attention to itself.

Starting this month, I'll be looking at our household net worth when I report on financial progress, rather than just focusing on my own. This means I'm being completely honest with myself, and that the progress I show will not come with any hidden caveats.

I'm not looking forward to seeing our net worth when I factor in the consolidated loans, but I am looking forward to having everything on the table.