Archive for March, 2010

First Quarter Revisions

As March closes out, I can proudly hold my head up and know that for three solid months, I’ve been an A+ budget crafter AND tracker. I know where money went, and have a plan for where it’s  going for the remainder of the calendar year.

With three months under my belt, I have learned and re-learned a few things. These learnings will be reflected in amendments to the budget plan for the remainder of the year.

Lesson 1:

I don’t need $550 for the monthly grocery budget, we’ll try $510. I’ve been underspent by $40-$60 for both February and March. Watch the flyers for sales, stock up when appropriate, and create meal plans around the bargains of the week.

Lesson 2:

Variable expenses (grocery, transportation, gifts, dining out, entertainment) can be moved around from one category to another. When stuff happens, and there’s a need in one of the other categories, it’s okay to move money around, as long as you don’t overspend what you’ve allocated for variable expenses.

Lesson 3:

A budget without an amount, any amount for long-term and emergency savings isn’t balanced. If you’ve read my posts over the last couple of months, you’ll know I really struggled with this. I will contribute $100 to my emergency savings (TFSA) every month and boost that amount to $150 in six months (starting in September). I will also contribute $100 toward my retirement savings every month starting in June. Neither of these amounts is enough, but it is something. Every savings account starts with something. Once the debt is retired, both these amounts will be boosted.

Lesson 4:

Don’t focus so much on winning the battles that you lose the big picture. Sure, I had a few missteps and frankly, some dope-head moves. I started the year with $13,579.29 owing in my line of credit, today I owe $9,282.33. I have also made it possible to start each month with a balance in my bank account that I think is the right amount to keep me out of overdraft. These are true victories that I was unable to declare previously.

Lesson 5:

This is the toughest one for me. I set a goal that my line of credit would be retired by the end of 2010. Now that I finally understand that leaving myself without any savings will only set me up for future failure, as well as recognizing that my budget is simply too tight, I have to accept that my debt may not be retired until 2011. It’s difficult for me to calculate when it may be retired in 2011, but it won’t be past the first six months.

Finally, I’ve learned that I can do this. I can say no. For the last three days, our grocery envelope has been empty. Does that mean we have no food? No way. It means that the kids and I are forced to look in the freezer, be creative with the good supply of food we have in the house. Last night we had a beautiful Shepherd’s pie. Some ground turkey in the freezer, some carrots and celery in the fridge, and a bag of potatoes in the cupboard. Lovely meal. In fact, there’s enough leftovers for today too.

While I won’t be ready to weigh in with March’s report card yet, I predict it will be a failing grade.  I’ll give myself top marks on being a good student of the process, and for learning valuable lessons along the way.


I Can’t Ignore the Savings Monster

A number of weeks ago, I mused about the challenges of tackling all the money monsters at once: paying off debt; saving for emergencies; saving for retirement; saving for the kids post-secondary; putting away money for home repairs, etc.

This has really been on my mind. I compared it to a horse race. Imagine being at a horse race when the bell rings, and two horses come screaming out of the gates and the rest are just standing there in their stalls. Wouldn’t you stand up in your seats and yell “hey, what’s going on? This isn’t how it’s supposed to turn out!”

Now, I’m reading Gail Vaz-Oxlade’s book Debt-Free Forever. It’s been on my reading list since it came out a few months ago. I watch her show, ‘Til Debt do us Part religiously, and even watch re-runs incase I pick up one tiny tidbit of advice that I can use.

Last night I picked up the book. I’m almost done it this morning.

It’s more and more clear to me that I must back off my debt-reduction payments, and put a little bit of money into retirement savings, emergency savings, and home repair savings. According to Vaz-Oxlade, if you don’t have savings in your budget, your budget doesn’t balance. No excuses.

My budget has money put aside for both kids’ post-secondary needs. It may not be enough, but I’m a single parent, and there’s still another parent who has a fiscal responsibility to contribute. I’m happy with the amount I’m putting away for them at $250 a month, each. My youngest has almost $11,000 saved on an RESP. While it sounds like a good amount, it’s likely not enough because she’ll be 17 this year. Only one more year of high school left. Still, it’s better than a kick in the teeth.

The eldest has already completed one post-secondary stint, and is now brushing up on a few pre-requisites to pursue her new goal, which could spell another five years of school, starting in September 2011. Since she’s twenty-something, I’m going to be leaning on her pretty hard to earn and save for her own education as well. Yes, I’ll help, but she has to pull her own weight.

At 46, I can’t ignore my retirement needs any longer. I have some savings, and with the help of my financial dude, we’ve just re-jigged things a bit.

I’m in charge of my own cash flow. I drafted my budget, and I can re-draft it. Even if I contribute a pathetic amount, it must be at least $100 a month, and that expense must be fixed. Non-negotiable. Immovable. Carved-in-stone.

Once the debt is paid off, I can put more towards retirement and emergencies to bring-up the rear. Meanwhile, I’m convinced the cost is too great to focus solely on debt retirement, at the exclusivity of putting money away for me for the future. After all, it’s my future (and my kids) that I’m trying to make more stable. Why jeopardize my future self by not ensuring that I have enough to live on for the estimated 22 years I may live without working for a living?

So, as March comes to a close, I realize that I have learned a lot in the first three months of the year. I can live without a lot of stuff (that I don’t really need anyway), I can create a budget and stick to it, and I can change that budget when I realize I’ve been a dope and I need to have a more balanced view.

So what if the debt is paid off in 18 months instead of 12? The goal here is to pay off the debt and stay the hell out of it. How can I stay out of it if I don’t at least start to create a cushion for myself? Truth is, I can’t. I need to start now to create success for myself when the debt is gone.

Phew. It took a lot of whining for me to get to here! It truly is a journey.

Letter to my 10 year older self…

I was inspired by Stay at home Mom CFO‘s recent letter to herself, which was inspired by Ninja’s letter to himself, to be opened in ten years.

At my age, this was quite an introspective task. Will my kids have left home? Will they leave and come back? Will there be grandchildren? Will I be managing issues with aging parents? Will I still have parents? Will I be dealing with a role as executor of an estate? Will I still be single.  Wow, ten years can spell a lot of change.

In the most recent ten years I’ve been divorced, sold three houses, bought three houses, moved three times, lost one parent, both children were diagnosed with chronic diseases they’ll have for life, started a new relationship, ended it, changed jobs twice. Looking ahead, for me, is a bit daunting. I like the exercise though – here goes:

Hello future self. You’re 56. Are you thinking more about retirement. Have the girls moved out on their own? Likely. Did they come back home, I guess that’s the big question!

The girls have completed their post-secondary studies. Aren’t you so proud of them? They’re smart ladies. Hope you get to see them as often as seems reasonable. Are there significant others in their lives? Grandchildren? Wow, it doesn’t take long does it, for the cycle to begin again. I hope you’re enjoying every moment and being supportive. Hope they’re healthy and happy.

How’s work going? Are you still working hard? Ten years ago you were hopeful that you wouldn’t be working quite so hard. But you’ve still got a mortgage to pay (I presume), although you’ve made some serious headway against it by now. What’s that property worth now? In 2010 it was worth about $500,000. Isn’t that ridiculous?

You’ve been dreaming about that big renovation when you turn 60. I trust you have a nest-egg set aside for that by now. Are you starting to draw up the plans? The garden must look spectacular by now. After all, the renovation was all about having great garden views. You’ve had 10 years to make that view magnificent.

How was Florence? I really hope you’ve managed to get there and stay for a few weeks and soak up the culture there.  Did you take the girls? Did you take a friend? Are you going back?

Speaking of friends, how’s your circle of friends in Toronto now? Ten years ago you were single (again) and without a circle of close friends to draw upon, at least, in Toronto. Sure, you had lovely neighbors and some great colleagues and former colleagues. Hope you’ve branched out a bit and found some great new pals.

How’s the love life? If there is one, I really hope it’s good for you. If there isn’t a love life, are you okay with that?

Have you mastered your budget by now? Are you still tracking everything religiously, or have you arrived at a system where you know that you’re not spending more than you earn and you’re managing to put the right amounts into the right pockets? I presume you’ve mastered managing your investments. You’ve got a little more disposable income and I hope you’re having fun with it.

Are you taking care of your parents? I can’t imagine what may have happened in the last ten years, but no doubt there would be lots of significant change. <hugs> Hope you’re being good to your Mother. She really loves you. If she’s starting to show signs of dementia, support her. She’s been there for you and for her Mother.

Hope you’re being creative again. Whether it’s drawing, painting, photography or just rearranging plants in the dirt, don’t let your need to be creative be put on the back burner. You should have the time to be active at creating beauty.

Remember all those times you thought you’d go to hell in a fiscal hand-basket? You still thinking that way? I hope not. I hope the path you’ve travelled so far means that you can relax and have a bit more fun. Enjoy it. Share the fun with those you love.

The 76 cent Miracle

I’m in shock this morning. In a good way.

Ever since I realized I couldn’t hide from my December visa charges and accepted that March would be a fiscal disaster zone, I’ve been dreading looking at the month end numbers. It’s been about six weeks of dread.

Although I re-drafted my March budget in order to take into consideration what a dufus I was at the beginning of the year, a few extras have made the bottom line sink below zero on my spreadsheet. It’s called life in the real world, I guess. Stuff happens. As usual, some stuff is more valid than other stuff.

This morning I got paid from my part-time gig. I’ve been putting in a few extra shifts, but not a lot. After all, my part-time gig is not my priority, my full-time gig is, and it requires lots of my brain power and time. Still, I like my little part-time job for a lot of reasons. It’s simple to do and requires very little brain trust – so it’s kinda the anti-real job for me. The job means that I interact with people and give them some encouragement, and I like that. I like to help people.

I got paid about $90 more than I expected today. After I put that number in my spreadsheet, my bottom line moved to .76 cents in the black. It’s nothing short of a mini-miracle.

There are lots of people who can’t be bothered tracking their revenue and expenditures. Perhaps they’re better at eyeballing things than I am. When I hit a projected month-end balance of .76 (the difference between expenditures and revenues, not my bank balance) I know I must keep tracking things this diligently. No doubt a lot of people would read this and think “man, that chick is a bit nuts, or obsessive, knowing she earned .76 more than she allocated elsewhere.” That’s fine with me. This is working for me now, and I’m happy to know, with rock solid confidence, that for the first quarter of 2010, I did not spend more than I earned.

I get that March isn’t over yet. But, for the first time in six weeks, I feel a bit optimistic again. I really needed that.

Learning to negotiate

The renewal for my home insurance came in the mail last week. For the record, I pay my house insurance every six months.

Because I’m reasonably organized, I pulled my house insurance file, with my last renewal notice and price, and my notes on my phone conversation with the insurance agent from last September. Then, I opened up my handy-dandy budget spreadsheet to see what I had budgeted for home insurance.

What I quickly determined was my trusted insurance company was telling me (in this ever so subtle way) that they were putting my rate up by 35%. I’m a non-smoker and claim free. I make a reasonable living, and on top of that, I have a part-time job just to try and stay ahead of the eight-ball. Frankly, I’m a little put-off that this company just sends along a notice, no explanation, and would like 35% more please.

Honestly, where do these guys get off? I guess they figure we, the consumer, are too dense to notice? Perhaps lots of people just open the bill and figure “oh, that’s the price” and don’t ask questions, compare with their last bill and they pay it. Despite my reasonable income, I really don’t need my expenditures going up by 35%. I don’t have a cushion now!

Naturally, I called the insurance company. I asked the agent “what’d I do to cause you to put my rate up by 35%” and he gave me some lame answer. I kept at him. Finally he says “it’s the increase in storm activity in North America. There’s an increase in dramatic weather, and the insurance companies are taking a hit, and rates are going up”. Great, so there’s my answer. I’m paying for the Mother Nature’s wrath. At least I can understand that. I don’t like it, but I understand.

I told the agent I’d be shopping around. So I’m in the process of doing that. Not sure if it will do me any good or not.

Last week I was also at the dentist. I don’t have any coverage for this kind of thing. I said no to a few x-rays just because I was told “it would be nice for the dentist to look at them.” Not a good enough reason to have me part with another $150.00. When I was checking out, I mentioned (again) to the receptionist that I didn’t have coverage. Without me asking she offered to reduce my rates. Dentists charge a ridiculous amount. They’re good to bill the insurance companies their ridiculous rate, but when it’s just the consumer, it’s slightly less than ridiculous?

Is all this a service to me when I have to go pay my insurance bill and question why they’ve gone up 35%. Man, it’s a crazy world. I’m starting to think it’s just a matter of pay now, or pay later. We’ll still pay. So I saved $15 at the dentist, I’ll be paying that to the insurance company, plus a bunch more.

Maybe I’m just crabby because I know the end of March is coming, and I’m not likely to balance my budget this month. It’s a drag. I’m disappointed in myself. Still, I can’t ignore the big picture here. I’m budgeting way better than I have in years, I’m not using credit for credit’s sake, I’m paying down my line-of-credit and I’m keeping things going here at home.

Last week has taught me a powerful lesson though – I have to negotiate more. I will negotiate more. What’s the worst thing that could happen?

Renewing a Mortgage – what would you do?

Sorry it’s been quiet here last week. It’s been one of those weeks.

I’ve been toying with an upcoming mortgage renewal, and I think I’ve finally made a decision about what I’m going to do.

Anybody who has a mortgage or who wants one knows that mortgage rates are at an all time low right now. In Canada, the Bank of Canada chief announced last year that he’d hold the line on the rock bottom interest rate until June of 2010. My mortgage is up for renewal in July.

Currently, I’m at a variable rate of 1.4%. I’ll never see that again, and I’ve totally accepted that. When I took this mortgage out, the way they calculated the variable rate was different than how they do it now.  If I renewed with my current lender today, the variable rate would be 1.8%. Still not too shabby.

The fixed rate for 5 years is 3.89%.  Naturally I’ve consulted with a few friends.

As you might imagine, the risk averse are seeing the warning signs of increased interest rates in the near future and have advised me to lock in at 5 year fixed. The 5 year rate is a great rate, there’s no question.

A few other friends, the minority, the ones who tend to take a few more chances are advising me to stick with variable. This is where my gut tells me too. I’ve usually gone with a variable mortgage. Many studies have shown that over time, a variable will outperform a fixed rate mortgage most of the time.

Here’s my assumptions:

  • The Bank of Canada chief will increase the interest rate in June
  • That increase will be modest, like one quarter of one percent
  • The interest rate will continue to climb, slowly and cautiously to balance the growth in the dollar

Even if I renew and the variable is 1.8 or 2.05%, will that rate more than double in five years? If so, how long will it take to double? Will it take two years?

However long it takes to double, that’s the amount of time where I’d have the edge on having a variable, and be able to put more money toward the principle and less toward interest. If I pay less than, let’s say 4% for two of those five years, then I’ve made the right bet.  Hell, if I pay less than 4% for one year, I’ve still won – presuming that the rate doesn’t scream along to 6 or 8% in that five years.

The Bank of Canada Governor also knows that many people would be in a very bad way if the interest rate doubles too quickly. Only now is the Bank introducing new lending rules where new borrowers have to qualify for the fixed rate mortgage over five years, regardless of the produce they take out, to boost the odds folks can hold on to their homes when the rate goes up.

I’ll always have the option to lock in my rate, but obviously if I’d be tempted to do that, it’d be at a higher rate.

So, my thinking right now is to stick it out and ride the variable train.

What would you do?

The retirement horse…rounding the bend

Some of you may remember my comparison of managing my budget to a horse race.  I still feel that way. Although a horse race seems like something that’d be exciting to watch. I just get anxious watching and thinking about my budget. Not really the same kind of excitement.

I’m particularly anxious since I’ve spent an hour on the phone with the fella that manages my retirement funds. I say “manage” lightly. Hey, I don’t blame him. I haven’t given him any money for about four or five years, and I have just under $80K invested. I’m not the biggest fish in his professional pond. Plus, I have a responsibility to manage my own money too. After all, it is MY money.

Still, he had some good news for me.  When the market was starting to take a dive in 2008 I gave him a call with my nervous nelly “get me the hell out of risk” voice. We made a few changes.  He suggested I shouldn’t be so nervous nelly way back then.  In retrospect, I was totally right (I have no idea why), but anyway, that was then.  The few moves we made did protect me a bit.  I almost have as much money saved today as I did when I made that call. A lot of people are far worse off.

Now, he reminds me that we need to be a bit less risky.  That’s a fund manager’s way of telling you that you’re not 20-something anymore.  Nice.

He’s a nice man, and I think he does give a damn about my success.  Do all these guys talk a different language? He talked about things that I have no idea what he meant. I must have told him four times – you’ve lost me. Do they get so involved in the industry jargon they forget how to talk to the average person?

I also don’t get how they think that a fund that has netted a pathetic (or below zero) return over the last three years looks like something we should get into. Now there may be logic here, but I’ve failed to hear it explained in a way that makes it compelling.

Despite some frustrating moments in our chat, we resolved to move some things around. I’m happy about that. I’m also committed to looking at it from time-to-time and seeing how we’re doing with those changes.

Lastly, I promised I’d go back to my budget and see if I could find something to turn into a regular contribution again.

Frankly, for 2010, I don’t know how much that regular contribution would be. For most months, $50 looks like too much. Still, I’m convinced I have to contribute something, even if it is $30 a month.  Once this debt monkey is off my back, I can contribute a respectable amount.

If I’m going to give myself choices in the future, I can’t go into it with debt, and a pathetic retirement savings. If I ignore my budget and what I know needs to be done, I’ll be left with no choices. That’s not the life I want to live.

I also don’t want to live a life of being a slave to my spreadsheet. I’m feeling very dull these days. I spent $40 at the thrift store on the weekend, and I’m not sure what to do with my guilt about it. Honestly – $40. My budget is so tight that means I’m really roasted this month. I can’t live like this forever. Well, I probably could, but I don’t want to.

This is the burden that debt has given me. Where’d the debt come from? I did it to myself. I don’t want to go blissfully through my days thinking it isn’t a problem and not paying attention to it. I hope it’s worth it – this journey. It sure isn’t easy.