First test failed; second passed

This morning, I had a meeting with my "one-up" boss (i.e. my manager's boss) at 9:00. Due to some late-night reading last night, and the general dreariness of the morning weather, I was rather slow to respond to my alarm clock. As a result, I found myself about ten minutes late leaving the condo, and had to jump on the TTC to get to work in time for the meeting. Not exactly a shining moment, when I look at my ongoing goal to walk to and from work every day.

I feel somewhat redeemed, however, by the fact that I brought my lunch to work today, despite a planned outing by several colleagues to a favourite Szechuan restaurant. Now, I loves me some spicy Szechuan food, but I really want to stay focused on my goals for the month. The restaurant is a half-hour walk from the office, so we generally end up taking a taxi to lunch, and walking back from the restaurant. All told, the excursion generally costs about $15 a head, including the cab. By passing on today's lunch, I save myself some money, and I get to stick to at least one of my behavioural goals for the month.

I'll have to see what I can do to make up for the missed walk to work this morning.

Financial Archaeology: Unearthing Past Behaviour

I've been looking through my historical bank balances online, and I've noticed some interesting trends. I've already written about the trends in my overall net worth, but I thought I'd go a little deeper into the details for individual accounts. Whereas my net worth growth indicates whether I'm getting "richer", these finer details should be more indicative of changes in behaviour.

I'm a paper packrat, so I have years' worth of paper statements stockpiled at home. Over time, I'd like to go through old credit card statements to get an idea of where and how I spent my money before and after April 30, 2007 (this date is significant because it represents my first comprehensive balance sheet, and the date when I decided I had to right my financial wrongs). My online account history only goes back to the beginning of November 2006, but this is enough to get us started.

The metrics

In this analysis, I'll be looking at three metrics:

• Monthly credit card statement balance - Since I use my credit card for most of my monthly spending, my monthly statement is an excellent indication of how much I've spent in a given month. This will basically represent my monthly cash outflow.


• Month-end line of credit balance - I use my line of credit to pay off my credit cards every month. Before you bristle at this statement, and tell me that I'm not "paying off" anything at all, merely moving debt around, remember that I make a corresponding payment to my LOC for every purchase I make with my credit card. For example, if I spend $40 at the supermarket using my credit card, I come home and transfer $40 from my chequing account into my LOC. Because I manage my cash flow this way, my LOC balance represents the amount of "old" debt I'm still carrying around. As I dig myself out of debt, this number should go down.


• Monthly line of credit interest - As my LOC gets paid off, the amount of interest I'm charged each month will also go down. There's an added wrinkle here in that I've got the lion's share of my "LOC" debt sitting on a 0% credit card, but this really just means that more of my monthly LOC payments actually goes toward principal. My monthly LOC interest represents the amount that my "old" debt is costing me each month.

With these three metrics in mind, let's have a look at the history I have available. I currently have data from November 2006 through March 2008, so I really have two options:

• Compare the Apr'07-Mar'08 numbers to the Nov'06-Oct'07 numbers - This will provide me with two "year-in-review" summaries that I can compare to each other. The concern here is that I have substantial overlap between the two periods being compared (Apr'07-Oct'07), so I'm not comparing distinct time periods.


• Compare the Nov'07-Mar'08 numbers to the Nov'06-Mar'07 numbers - This gives me two distinct time periods to compare, but I'm not looking at a full 12 months' history.

I prefer the second option, since it gives me a "clean" comparison of this year vs. last year, even if it's not a full 12-month picture.

The numbers

Now let's see how the three metrics stack up year-over-year.

Credit card spending

From November 2006 through March 2007, I spent $19,229.60 on my credit cards. As I type that number, I get a bit of a queasy feeling in my stomach. That's an average of $3,845.92 per month in credit card purchases, sustained over a 5-month period. I wish I could at least attribute this to one event skewing the results, like Christmas gifts or major car repairs, but the lowest monthly spending I had during this period was $2,818 in January, so this was indeed a consistent trend.

Fast forward to the past few months, where my total spending from November 2007 to March 2008 came in at a mere $10,163.05, or 53% of last year's spending over the same period. Note that the numbers for both years cover the Christmas shopping season, so this represents a huge change in behaviour.

Whatever challenges I may still have with sticking to a budget, my habits have clearly changed a lot from a year ago.

Line of credit balance

Throughout most of 2006, my LOC balance had held reasonably steady, in the low teens. Then, from November 2006 through March 2007, the balance started a period of rapid growth, going from $12,446.82 to $18,260.50, an increase of $5,813.68, or 47%. Comparing this number to my $19,229.60 in credit card spending during the same period, I'm actually amazed that this balance increase wasn't a lot higher.

Looking at the same period this year, my LOC balance dropped from $21,040.90 to $20,044.16, a reduction of $996.74, or 5%. That's another huge improvement.

Line of credit interest

Finally, let's look at how much my revolving debt has actually been costing me. Every dollar that I pay in interest on my LOC is a dollar subtracted from my debt payments, so minimizing this number is important in paying off the debt as soon as possible.

From November 2006 to March 2007, I paid $425.24 in interest on my LOC. Compare this with the $366.68 that I paid during the same period this year, and I'm making good headway. With more of my payments going toward principal, my debt reduction will move a lot more quickly.

Conclusion

There are really three conclusions to be drawn from this dig into my recent financial past. Strangely enough, this works out to be one conclusion per metric:

• My credit card spending (and therefore my general spending) is dramatically reduced from this time a year ago. Forcing myself to spend less than I earn has really paid off. Even though I'm still using my credit card for the vast majority of purchases (as well as some utility bills), my current spending is just over half as high as it was last year. No matter how you slice it, that is a major step in the right direction.


• My LOC is being steadily paid off. The beginning of 2007 was really the time when the balance started to skyrocket, and I've managed to reverse that trend, and actually bring the balance down. This is due to a consistent focus on debt reduction, combined with some basic saving for the unexpected (as well as the expected). Balances are moving consistently in the right direction, which is a great motivation to keep things that way.


• I'm paying far less in interest on my revolving debt. This is largely due to moving the bulk of my debt to a 0% card, but regardless of the reason, it means that the majority of my debt payments are going directly toward principal. By taking steps to slow my interest accrual, I've really accelerated my debt paydown.

As I unearth more history over the next little while, I'll try to dive a little more deeply into the credit card spending in particular, but this quick analysis of my recent past has really opened my eyes to some significant behavioural changes that I've made.

Payday update

I had to delete three spammy comments today. That's the most I've ever had to clean out in a single day. I guess in a way it's a nice sign that my blog's "on the radar", but it's annoying having to patrol the comments for this kind of junk. I can only imagine what Trent and JD deal with on a daily basis. I've added a CAPTCHA to validate commenters; let's see if this does the trick.

Ms. Loonie and I got paid today, so I've updated the progress bars and my NCN Network chart.

I think the 3^rd of the month may be too early to make much of a forecast on my April performance, but I've made my regular savings contributions and debt payments, so I currently sit with $21,541.86 in revolving debt and $1,300.00 in my Emergency Fund. Provided I stick to the plan, this puts me on track to meet my financial goals for the month.

Of course, there are still 27 out of 30 days left to go, so stay tuned to see how I do with all my April goals.

Another look at my NetworthIQ chart

Back in October, I posted a review of the first six months' worth of data from my NetworthIQ profile. With my March results added to the list, I now have twelve month-end snapshots on file with NetworthIQ. Here's my current chart:

I thought I'd follow up my earlier review with a look at the changes in my finances since the end of September.

• October - Ms. Loonie and I took a road trip with friends, and I hosted a bachelor party, both of which put a dent in liquid savings and revolving debt paydown. However, overall debt reduction led to a 14% increase in net worth.


• November - A three-pay month helped to build up a cushion of savings, and stay on top of debt reduction, while market volatility ate away at my retirement savings in spite of continued bi-weekly contributions. In the end, net worth grew by 12%.


• December - Bring on the holidays! My first-ever cash-only Christmas drained my liquid savings, but debt reduction kept me on track. Net result: 7% growth.


• January - My year-end bonus came in this month, so retirement savings saw a bump, as I deferred a big chunk of the incentive into my RRSP. I also moved the bulk of my ULOC balance onto a 0% credit card. Markets dove in January, but I ended up with a 20% increase in net worth.


• February - The market staged a late-February comeback, which bolstered my retirement savings. Good movement on debt reduction gave me a 7% net worth boost.


• March - The markets held on by their fingernails this month, so most of the 6% growth in March was due to debt reduction.

Overall, my net worth has increased by 85% since September 30, finally breaking the $40,000 mark. A couple of things stand out from this analysis:

• I continue to see large percentage growth, although not as high as in my first few months. This is more or less common sense: as my net worth increases, a $2,000 increase in a given month becomes less and less significant in percentage terms. However, I'm still at the point where I'm growing by about 10% each month, which is very encouraging.


• "Special" spending takes its toll. As I saw before, vacations, special "night out" activities, and holiday shopping can really put a dent in my cash savings. However, this can be looked at as a good thing, since I'm managing to pay for these things with money I've saved, rather than relying exclusively on credit. That's a big change from where I was a year ago.


• You have to love those three-pay months. Being on a bi-weekly pay schedule, there are two months a year where I get three paycheques. This has proven to be an absolute godsend in accelerating my savings and debt reduction. This year, May and October are three-pay months, and I'm really looking forward to them.

In addition to the dollar growth in my net worth, I've seen a number of positive changes in behaviour that are really helping me to turn my financial ship around. Almost a year into this financial revolution, I'm ecstatic to see such consistent forward progress.

Bring on the next six months!

Goals for April 2008

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 April:

• Reduce my revolving debt to $21,250 (currently at $21,841.86) - At my usual rate of payment, this should be pretty much where I come out. If I reach this goal, it will put me at 23% of my total revolving debt paid off. Note: I'm expecting a tax refund this year, but I don't know when I'll receive it, so I'm not counting on my refund to meet this goal. Any lump-sum payments that I make from my tax refund will be ignored when I determine whether I hit my April debt reduction target.


• Grow my Emergency Fund to $1,310 (currently at $1,283.16) - All I'm looking for here is to keep up my bi-weekly $10 contributions, with a little gravy.


• Update my Equifax credit file with my correct postal code - Equifax has an incorrect digit in my postal code, so this should be a fairly simple thing to change (famous last words). By April 30, I aim to have this one error fixed.


• Walk to and from work every day, and work out at least three times a week - I'm really on a push to get in shape, and with spring upon us, I think I'll be able to meet this easily.


• Lose 4 pounds - I actually lost 7 pounds in March, so if I continue regular cardio exercise (walking, running, and playing squash) as well as picking up my strength training, I'm guessing the trade-off between fat loss and muscle gain should come in at about 4 pounds.


• Blog 30 times in April - With tax season wrapping up this month, I have a feeling there will be plenty to write about. One post per day shouldn't be a problem.


• Bring my lunch to work every day in April - There's not a lot of new or exciting stuff in the goals above; they're mostly repetitions of previous months' goals, so I thought I'd try something new. Similar to Krystal's February-March Lunch Challenge, my goal is not to spend any money on food at work during the month of April. We get free coffee at work, so this basically amounts to not snacking during the work day on anything I haven't brought from home. Let's see how it goes...

That list should make for a productive month.

March update

March has come and gone, which brings us to April Fool's Day, and all the associated shenanigans that flood the internet every April 1^st. Apologies for this morning's lame attempt at humour, and thanks to Brian Biggs at BBspot for his creation, Esenam Ayele. Be sure to remember to take any financial "advice" you received this morning with the appropriate grain of salt.

Let's look at how I did with my March goals:

• Reduce my revolving debt to $21,800 - I missed this one by $41.86. Costco continues to be a thorn in the side of my grocery budget, repeatedly forcing me well above my allotted amount for food. We were actually pretty circumspect this month with respect to eating out, but I wasn't quite able to meet the $21,800 mark. Still, this month I crossed both the 20% mark and the $22,000 mark, so I definitely made some headway.


• Grow my Emergency Fund to $1,280 - Once again, I hit this target without relying on interest. Once interest had posted to all my accounts, my Emergency Fund stood at $1,283.16. One change this month is that $200 of this money is now in the form of around-the-house emergency cash, tucked away in a safe hiding spot.


• Walk to and from work every day, and work out at least three times a week - I came close to this one, but didn't quite make it. I had three days where I needed to take the TTC to work (due to tardiness), and I only averaged just over two workouts per week. However, I've started running again the last couple of weeks, so that should help this goal in the future.


• Lose 4 pounds - Given that I missed the mark on the walking/workout goal above, I was sure I had missed this one as well. However, when I weighed myself this morning (for the first time in a while), I was shocked to see that I currently weigh in at 207lbs. That's 20% of my weight loss goal for the year! 207lbs puts me at a BMI of 27.3, which is down from my start of 28.0 in February. This unexpected success is a great motivator to keep this up in the months to come. Look for my weekly weigh-ins to resume next Wednesday.


• Blog 31 times in March - For the first time in 2008, I missed my target post count: only 27 posts for the month of March. Still, that comes to 0.87 posts per day (or 1.29 posts per weekday, since I rarely post on weekends). Room for improvement, but still not a bad result.

Now, on to my month-end update:

Assets:
Online Savings - $1,897.43
Self-Directed RSP - $43,271.32
Employer Group RSP - $4,039.04

Debts:
Credit Cards - $16,575.74
Line of Credit - $5,266.12
Student Loans - $28,466.94

Net Investable Assets: ($1,101.01)
Net Liquid Assets: ($48,411.37)

There wasn't a lot of movement this month. My liquid savings dropped slightly, and my retirement savings once again grew by less than my monthly contributions. My investable assets increased by $374.65, and my debts decreased by $1,061.60.

Overall, my net investable and net liquid assets increased by $1,436.25 and $1,039.97, respectively. My NetworthIQ profile has also been updated (including loose cash, home, car and mortgage), showing that my net worth finally cracked $40,000 this month. A nice little milestone to cap off the month.

Sell the blog: pay off the debt

I've seen lots written about different ways to monetize a blog, but other than a single text ad sale, I haven't had much luck with generating passive income from Loonies And Sense. Yesterday, however, I found a link to a tool to calculate the value of a blog, based on its Technorati authority. A quick URL submission, and here's what I saw:

My blog is worth $23,710.68.
How much is your blog worth?

Nearly $24,000 for my little blog? It sounded too good to be true. However, some quick Googling showed me that this was not out of line for a blog with a decent number of posts. This amount would more than wipe out my revolving debt, so who am I to turn up my nose at such a sure thing? The only task that remained was to find a buyer.

I wasn't sure how easy it would be to track down someone with $23,710.68 to burn and a penchant for blogging, so I hit the social networks with my proposed sale. After less than half an hour of making my pitch, I received an offer for more than double my asking price. Needless to say, I accepted; I would have been a fool not to. The buyer is a Nigerian philanthropist, and once my cheque for $15,000 is deposited into his bank account, he'll be wiring me the agreed-upon purchase price of $65,000, for a cool $50,000 profit. I can't wait!

Starting next week, your host here at Loonies And Sense will be Mr. Esenam Ayele. He has a wealth of personal finance tips and tricks, and I'm sure you'll enjoy what he has to say. I just need to take care of some April business before I hand over the reins.