Lessons Learned

If your outgo exceeds your income, your upkeep will be your downfall.

Truer words were never spoken. My grandfather has said that to me many times, but for whatever reason it didn't stick properly. It would have been great if it had! The last year and a half have been a huge learning opportunity for me. It took me a solid month to write the last two posts, because it was a hard pill to swallow. I dug myself into $19,000 of consumer debt in 1 year. 1 STINKING YEAR!

I get nauseated just thinking about it, but I have to do it. If I didn't think about it, I wouldn't learn anything from it, and I'd be setting myself up to fall again. God only knows where the floor would be next time.

Thankfully, I have managed to learn a few things from this experience. Hopefully in sharing them with you all I can prevent someone else from having to learn it the hard way.

You Need A Budget

This is a surprise to no one. At least, it should be a surprise to no one. This doesn't mean that you need to be categorized and itemized down to the cent in a fancy budgeting program, this just means that you need to know how much is coming in, and where it is going. If your income just barely covers your costs, should you really be going on that ski trip or buying a new wardrobe? Probably not. But unless you know where your money is and where its going are you going to be able to turn it down? Again, probably not.


Be Aware Of Your Income

Different incomes can afford different lifestyles, this isn't a surprise for anyone. Readjusting to a lifestyle on a lower income when you've been riding high for a while... that can be a bit of a shock, and not a pleasant one. It requires being cognizant of how much money you have (budget anyone?), and what it will afford. Anyone changing to a job with lower pay, losing hours, or losing a job altogether will have to deal with this at some point, its best to walk into it with your eyes open.

Life Changes Require Buffers

That lifestyle adjustment I mentioned above takes time, and time is money. Getting adjusted before the change, or having some money put aside to help with the change, will be a HUGE asset. Likewise, if there is another major change coming, such as buying a house or welcoming a baby into the world, you'll want a buffer. Chances are it's going to cost you more than you expect.

Get It In Writing

I thought I had learned this lesson while I was working up north, but apparently I didn't. If it's not written into a contract, it's not guaranteed. Overtime, bonuses, and other perks sound fine and dandy when you're negotiating your wage, but unless you get it in writing you can't rely on it. You need to make sure that you can cover your bases using what's on the page, and what's on the page only. Anything else is gravy.

Distinguish Between Needs and Wants

This one really is a gimme.

I NEED enough food that my body can function properly.
I WANT that Starbucks Chai Latte in the morning because they're yummy...

I NEED enough clothing to keep me appropriately dressed for work and the elements.
I WANT that Lululemon top even though I already have a closet full of clothes

I NEED some way of communicating with people
I WANT an iPhone and MacBook Air.

See where I'm going with this?

If You Can't Afford It Now, Chances Are You Can't Afford It Later

What is actually different between now and later? Are you getting a raise? Is there an inheritance coming? Are you going to cut something out of your daily spending habits? Are your expenses suddenly going to drop?

Is anything different? At all?

If nothing is different, and you can't afford something now, how is it you expect to be able to afford it later when the credit card bill comes in? The easiest answer to this is you can't. Especially when the next payday comes around and there is something else you want...

Find Healthy Outlets For Stress

I use shopping as an outlet for stress. It's a horrible fall back, and I'm actually not sure when it started. I can pinpoint when I started using debt for consumer spending, but I can't pinpoint when I started using shopping as an outlet for stress.

I know there are many, healthier, ways of dealing with it. Exercise it one of the better ones, and I find going to a yoga class or going for a run definitely help me cope with things better. So does getting a hug from a loved one. Seriously, hugs are my emotional/mental saviour. I'd probably be a total nut case if it wasn't for the occasional personal contact.
If I don't deal with the stress issue, my spending goes through the roof. Funny enough though, I don't always have to buy consumer items to get that relief. A little while back I was feeling stressed about my finances, so I put a little more money on one of my debts. It's like I'm slowly buying back my freedom, and it worked to sooth my nerves. Any action that reduces the stress levels without getting you further into trouble is good in my books.

Speak Up

Chances are if you have/had a high paying job, you also have friends with high paying jobs. They may want to do things they automatically assume you can afford, because they can afford to. They're not going to know otherwise until you actually speak up that you can't afford it, so do it! You just might find that some of them are in the same boat as you, and are grateful you spoke up.

Control Your Impulses

And for that matter your daily habits. Do you cave and buy something every time you walk past a bakery or coffee shop? This week try just walking past it once. Maybe on a Tuesday. Just see if you can do it once (I know you can). Once you've done it, try it again next week. Maybe on a Thursday. The point of this is to show yourself that you don't NEED to cave every time you walk by. You are strong enough to say no. Willpower is like a muscle; the more you use it the stronger it gets. You might find after doing it for a while you won't have to make a conscious effort anymore and it will just come naturally.

Plan For The Future

Long story short: it's coming, so get ready.

Whether it's an old jar you put your recycling money into, or an investment account you throw half of your paycheck into, everyone needs to save something. Retirement, investments and emergencies all require money, and it doesn't appear out of nowhere. Despite how it may feel every little bit helps, so snowflake away. You'll be glad you did one day.


Anyway, that's what I've learned over the last year and a half. I'm sure there are more lessons in my future, but for now I'm doing my best to apply these ones.

Tipping Point (A Confession) - Part 2

Continued

For those of you who are new to this blog, I'd suggest checking out yesterday's post before reading this one. It will make more sense all together. But for the rest of you, continuing on:

April 2010

Having put well over $10,000 into my RRSPs the year before, along with the new homebuyer's tax credit, renovation tax credit and professional dues tax credit, I figured I'd be in for a pretty solid tax return. Imagine the nasty surprise I got when I found out that not only was I not getting a tax return, but I OWED the government money. My former employer did not take off even CLOSE to the amount of tax they should have been taking off. 

Oh to have been a fly on the wall in my room that day...

All of those RRSP credits and other tax deductions went towards my balance owing, and I ended up paying the government several hundred dollars. On top of this, I was now carrying a debt I had been expecting would disappear when tax time came around.

The only upside to this month is that I got a small raise at the end of my probationary period, and my salary was now sitting at $54,100.

May 2010

Despite the financial slap I got in April, I stayed the course of spending without paying attention to my accounts in May. Nothing really noteworthy happened this month.

June 2010

The tax assessment for my house came in, and it was higher than the previous year. My biweekly accelerated mortgage payments went up another $50, which really sucked. However, I wish that's all that had happened this month.

I had an emotional upheaval in the relationship department on the order of: boyfriend's other girlfriend sends me a message on Facebook basically saying "Hey, I've been dating _____ for a few months. He's met my friends and family, I'd like us to be friends too :)"

Yeah, you read that right.

She had no idea he'd been seeing me for years, and that I was waiting for his work to run it's course so that he could come home again. He had made it sound like I was a really close friend to her, and he had made her sound like "the guys from work" to me. He was working out of province at the time.

I soothed that pain and rage with personal spending like nobody's business.

July 2010

July was a lot of carry over from June. I had emotionally shut down and start culling my emotionally draining/toxic friendships. My now pseudo-boyfriend was trying his best to perform damage control on the relationship, and I just couldn't care less. Needless to say I didn't really pay attention to my finances this month other than my month end update. I can tell you that update wasn't pretty, but I still maintained the position of the proverbial ostrich with my head in the sand.

August 2010

My boyfriend came home for a couple weeks and tried frantically to patch things up with me. I was still pretty checked out and emotionally spent, but I let him try. I wanted to believe things could get better again. I was naive, and it did a huge number on me.

Outside of the relationship realm, I wanted to finish the renovating my kitchen before the snow hit, so I bought more construction supplies for my home. I also pre-paid a hotel room in Vancouver for a couple days in the next month. I needed to be within a reasonable distance of Stanley Park for the Vancouver Triathlon, and there really wasn't much in that area that was either a) cheap, or b) not booked full.

September 2010

I knew at this point that I had to do something about my money, I was beginning to feel the pinch when it came to paying the bills every payday.

I was also freaking out in the personal department, because there was a distinct possibility that I was carrying a little mini me. This was causing me a LOT of stress.

After finishing the triathlon in Stanley Park I went back to my hotel for a bath, some soup and some tea. After warming up a bit, and taking my bike apart again for the plane ride, I made the misguided decision to walk around the shops in Vancouver for a while.

Now, I'm in love with trench coats. I have wanted a Burberry trench coat, no word of a lie, since I was 12 years old. God only knows what a 12 year old knows about clothes or what they cost, but I've been stuck on this coat since then. Through all of the seasons and different styles, it has never changed: beige, knee length, dark buttons. I had been looking for one in my size since university, with no success. I searched for it like Bridget did in her the hunt for the Herve Leger dress over at hithatsmybike.

I found one.

In a moment of sheer stupidity fueled by high running emotions, I emptied out what savings I had to pay for it. It wasn't enough. Despite swearing up and down to myself that I would never do this, I called my credit card company and had them increase the limit. For a coat.

That afternoon I bought a Burberry Manston Trench. $1595+HST. I've kept the price tag as a painful reminder of that; it's sitting on my dressing table at home.

What should have been an exciting purchase (I've wanted it for over a decade...), made me sick to my stomach. What the hell did I just do? I couldn't return it, the store was closed and my flight left before it opened again in the morning. I sat on my hotel room bed staring at the bag wanting to be sick. I was having a hard enough time paying the bills, how was I going to pay for this too? What if I am pregnant, how am I going to find the money to raise a kid? What if I have to do it by myself? What am I doing??

I had a problem, and I needed to do something about it. My money was out of control. Seriously, a year ago the only debt I had was my car, what on earth had gotten into me?

I promised myself I was going to turn this around.

October 2010

I started this blog.

Now I'm digging my way out and up.

I'm Dreaming

Because the last couple days have been a little stressful, I really wanted to do something light and fluffy. Something fun and semi-useless. I say semi-useless instead of useless, because this exercise can give you real insight into where your priorities actually lie. Sometimes that's just as useful as money. So, inspired by Money Rabbit's What I Would Do With $100,000, and Krystal at Give Me Back My Five Bucks' What I Would Do If I Won $1,000,000: 4 Years Later, here is what I would do if I had $100,000:
Credit Card - $4,300 ($95,700 left)

So long sucker. Like a bad ex-boyfriend, I won't miss you when you're gone.

LOC - $11,000 ($84,700 left)

This is like the annoying kid brother to the aforementioned bad ex-boyfriend. Less directly spiteful, but I'll be happy to not have to deal with it again either.

Car - $9000 ($75,700 left)

I still plan to sell my silvery little lemon, but in the mean time I'd rather not have the monthly payments or inflated insurance on it either. Hello extra $450 a month...

Mortgage - $48,000 ($27,700 left)

My mortgage, while it is fixed, has multiple pre-payment options including one allowing me to put up to 20% of the total mortgage down on the balance every year. That chunk right there takes my mortgage out of the oh please don't let the rates get too high category into the *breathe* category. Ah the things you learn when you're young and dumb.

New Homebuyer's Repayment - $15,000 ($12,700 left)

Because when I put money into RRSPs, I want my tax money back dammit.

Emergency Fund - $5,300 ($7,400 left)

I'd plunk the money for my goal of $4000 in there, along with a little extra just for good measure. That puts my combined cash savings and investments between $9,000 and $10,000. I'd feel pretty good about that for the time being, as that gives me several months living expenses should I need it. Or a new furnace in January. You never know.

Renovations - $5,000 ($2,400 left)

I need to finish the flooring on my staircase, and the tile in the kitchen. After that, I should have enough money left to put up the other half of the fence in my back yard.

Pantry Restock - $400 ($2,000 left)

Assorted dried/canned odds and ends, as well as 1/2 a lamb from a farming friend of mine up north. Some containers to hold dried goods in an orderly fashion would be nice too.

Grandfather's Birthday Present - $250 ($1,750 left)

Because he deserves it. I don't know yet what the exact gift would be, but I can assure you it likely includes a large Tim Horton's gift card.

Grandmother's Birthday - $750 ($1,000 left)

It's my grandmother's 80th birthday this year, and the family is all getting together in BC to celebrate. That means flights and accommodation, along with a gift for my grandmother.

Wardrobe Restock - $995 ($5)

Right now the thing I'm most in need of are a pair of gum boots (rain boots, wellies, whatever you call them). The snow is melting around my place, and the water on the sidewalks gets quite deep in some places. Other than that, some good quality work clothes to kick a couple items off my list would be great.

Starbucks Chai Latte - $5 (I'm Out!)

Because, you know, I want one.

;)


*Missed a couple several others - Oops*
Paying Myself
Finance Say What
Debt Free Kid
Fabulously Frugirl
Little Miss Money Bags
Figuring Money Out
Hi That's My Bike

Interesting Rate

I received an anonymous comment a couple days ago on my month end review telling me that my line of credit interest rate was exceptionally high. I hadn't actually given my line of credit interest rate any thought at all, it was just something that was there so I accepted it. The comment however spurred me into gear. I didn't expect to get the 4.5% interest rate he/she mentioned, but if my interest rate was high why not look into getting a decrease?

To google I go!

Apparently the internet isn't a very good place to go to find interest rates on lines of credit in Canada, the banks play that information pretty close to their chest. So, I called my bank Tuesday at lunch, and managed to get an appointment for after work on Wednesday. That was fast!

I almost got my hopes up there!

So, I went in and discussed a rate decrease. No dice. Apparently the major banks tie their line of credit rates to the "customer relationship" they have with you, ie: The more financial credit products you have with them, the better the rate they'll give you. So, if you have your mortgage, credit card, line of credit, RRSP, TFSA, and other investments through them, they'll give you a better rate than if you have just a chequing or a savings account with them.

Lovely.

If you wanted my investment business to build our "customer relationship", why did you try to convince me to lock into a 5.5% fixed rate mortgage when I was being offered 3.99% elsewhere? That doesn't sound like good relationship building to me.

Save 1.5% on a $237,000 mortgage, or save... any number... on a $11,000 line of credit balance.

You tell me what to pick.

There was the option of securing my line of credit to my house equity, but that wasn't guaranteed to be successful. Along with the application process there was an assessment cost of just under $200, and other application/closing fees of close to $500. Those fees alone are essentially the same as tacking another 6% onto my interest rate for the year. Why on earth would I want to do that for a drop of a couple percentage points? I'm trying to pay the thing off, not float it.

The other option offered was to look at increasing the limit on my line of credit. Apparently if I bumped the limit up to $20,000 it would put me into a different "relationship" category, and COULD possibly drop my rate 0.1 - 0.15%

Excuse me if I don't jump for joy on that one.

I contemplated the very financially dangerous maneuver of increasing my credit limit and using the money to pay off my credit card to save myself a few percentage points. I thought better of it.

If I'm going to be shopping around for a better rate, I want as few credit inquiries as possible. The financial advisor did offer me a useful piece of advice though. She said that if I have investments with another bank, I should consider looking to them because they might give me a better rate on a line of credit. Definitely something to remember.

I was just hoping to get a better rate through my existing account. The last thing I wanted to be doing was rate shopping with a balance sitting at 90%+. Not good.

Makes me want to rethink my savings vs. debt repayment plan.

Any Canadian guys/gals know what the banks are offering for line of credit or loan rates right now?

My Two Cents

I never expected anyone would ever read my blog, let alone go out of their way to tell other people about it! Yet it's happened a couple times this week. Thank you to The Asian Pear and Saving for Travel, I appreciate the shout outs. I feel all warm and fuzzy now :)

I picked up a couple pennies at the LRT station. One last night, one this morning. You can't actually buy anything with a penny anymore, I'm pretty sure that even penny candy is all five cents and up now (can you still get candy for a nickel?) Those of you in Canada probably remember the announcement back in December that the Bank of Canada is considering abolishing the penny due to the fact that inflation has eroded it's buying power to the point that it's nearly worthless. It costs more to produce them than their face value.

So why am I picking up a couple dirty coins on my way to the train? Other than because I always have?

Future value.

No, I'm not holding on to them in the hopes that they become rare items and make me a millionaire. They're going in my coin box, the one that goes towards my extra mortgage payment. Those two pennies will save me seven pennies over the life of my mortgage, and that's just assuming that my interest rate doesn't go up. If my rate after renewal went up to 6% and stayed there for the rest of the mortgage, those two pennies would save me about eleven cents. That's eleven cents I don't have to fritter away on my own.

Is seven, or even eleven, cents really going to make a difference on a two hundred and forty some-odd thousand dollar loan? Not really. But if I do it enough times it will. These pennies are my little snowflakes.

Hence the coin jar.

It doesn't take any time, and it doesn't cost anything, so why not?

Waiting For Interest to Work In My Favour

My annual mortgage statement came in the mail last night. I'm glad, I was beginning to wonder where it had gotten off to. That was right about where the glad part ended. There is something rather unfortunate about paying almost $17,000 onto a loan and only seeing the balance improve by about $4,500. It's like having one of those payday loans, only it has a nicer name.

Hey you, yeah you Interest, I've got something to say to you: Bite Me.

I have the sudden urge to empty my wallet into my lump sum payment jar right now. In fact, I'll probably do that as soon as I'm done typing here.

The envelope wasn't entirely filled with suck though. Apparently my mortgage provider is starting a website where I can go to check my balance, review my statements, change my payment frequency or amount, or make lump sum payments. That last one makes me happy, it will make the process much easier come the end of the year.

Home sweet home. One day you'll be all mine.

Interest Introspection

I was looking at my debt balances the other day, and thinking about how much I pay on them in interest every month. My credit card balance currently costs me about $55 a month in interest charges, while my line of credit costs me about $85 a month in interest charges. For a little while there I was thinking "maybe I should pay down the line of credit first, it's costing me more in interest." For a couple days now that's what I'd been thinking I'd do *shakes head*, but I sat down and gave it some thought in terms of investments this morning. The money I put towards paying off the credit card is like investing money and getting a 12.9% return, while putting money towards the line of credit is like getting an 8.52% return. Sure, I'll feel better watching the total interest I'm paying decrease every month, but it will decrease at a much slower rate than if I keep paying off my credit card first, and I'll end up paying more interest overall. If I had applied my slightly confused money sense to all of my debts I would have had myself paying off my mortgage before I paid off my credit card. Doesn't exactly make sense, does it?

Some days I wonder how I got myself into this mess. Then I have moments like these. Then I remember.

*facepalm*

Mish Mash

Today's post is about as jumbled as my mind is right now. Coincidence? I think not.

Canada is changing their mortgage rules:

http://money.ca.msn.com/investing/news/breaking-news/article.aspx?cp-documentid=27283795

There's 3 fairly substantial changes with the new bill:

As of March 18:
Maximum amortization periods for mortgages with less than a 20% downpayment will be reduced from 35 years to 30 years.

The maximum you can borrow when refinancing your home is reduced from 90% of the value of your home to 85%

As of April 18:
home equity lines of credit will no longer be backed by government insurance.

I can understand the government pulling back the amortization period. For a while there the periods were getting longer and longer to the point that a lot of people were taking out mortgages they wouldn't be able to pay off in their lifetime. I could foresee them eventually pulling it back to 25 years from 30. It kind of sucks for young home buyers, especially since housing prices are still so high here, but it's a necessary evil to prevent worse things from happening. *fingers crossed*

Some of you may have read about me slapping my head about being too cheap a couple days ago:

http://diggingoutandup.blogspot.com/2011/01/technology-hates-me.html

Update, I ordered internet service to be set up. I'm waiting for them to call me about an installation appointment.

I also found another place I shouldn't have been cheap on: TISSUES! That's the last time I buy non-lotion tissues just because they're on sale. My poor nose is not happy right now.

Also, I got another Vicks Vapour Rub tip from a friend: put it on the bottom of your feet! Works like a hot damn. Check out more ideas here.

http://diggingoutandup.blogspot.com/2011/01/frugal-health-remedies.html

And finally, thank you to everyone who dropped by for a read today. I just hit 1000 page views. Love you all!

Off to the doctor's office now.

The Acid Test

I've been wondering what would happen to my mortgage if my interest rate was to jump when I have to refinance with a new interest rate in 4 years. I locked my rate in for 5 years, unfortunately I don't keep if for the life of my mortgage (though that would be awesome!) The mortgage calculations are slightly different in the different countries, so I'd recommend finding a local calculator rather than using this link if you're outside of Canada.

http://www.cmhc-schl.gc.ca/en/co/buho/buho_005.cfm

I found a calculator claiming to be Canadian that talked about PMI and based it's tax rate on Massachusetts. Do I think it's calculations are accurate? Not likely. If you don't know interest rates from insurance, I'd suggest really wandering around the CMHC website. Do this before you even go into a bank! A mortgage is the largest loan most of us will take out in our lives, make sure you know what the bankers (or even better, mortgage brokers) are talking about before you sign anything! Even better, check out this site:

http://www.yourfirsthomecanada.ca/

Their website is under reconstruction, so it doesn't look that great, but it is chock full of resources for people looking to buy their first (or second, or third) home.

Anyway, back to what I started rambling on about. My mortgage was ~$242,000 when I started a year ago. I pay on an accelerated biweekly schedule, so instead of making 12 months worth of payments I make 13 months worth per year (1/2 month payment every 2 weeks = 26 1/2 month payments = 13 months worth of payments)

Not counting taxes, my mortgage is ~$533 every 2 weeks on the accelerated schedule. This averages out to ~$1154 a month, and the lifetime interest cost of the mortgage is ~ $169,546. On a regular monthly payment schedule I'd pay ~$1065, and the lifetime interest cost of the mortgage would be ~$205,433. It's a small extra payment every month for a decent savings in interest.

But like I mentioned before, my interest rate will (most likely) be increasing when I renew my mortgage in 4 years. How is this going to affect my ability to pay for the house?

At the end of the first 5 years, at the rate I'm going, my balance will be ~$228,000. Not considerably less than what it is now, thanks to the wonder of interest payments (so much better when it's working for me, not against me).

Interest Rate: 5%    Monthly Payment: $1217    Interest Cost: $210,053
Interest Rate: 6%    Monthly Payment: $1356    Interest Cost: $260,231
Interest Rate: 7%    Monthly Payment: $1502    Interest Cost: $312,582

If the interest rate goes up a percentage, my monthly payment would only go up ~$63 from my biweekly accelerated monthly payment, not too bad. If it goes up 2 percentage points, the monthly payment increases ~$202 a month. Huh... If it goes up 3 percentage points, the monthly payment increases ~$348 a month. Ouch.

But what if I pay off the insurance costs? Then I'd only have ~$220,000 left owing on the mortgage. That should help, eh?

Interest Rate: 5%    Monthly Payment: $1174    Interest Cost: $202,683

Interest Rate: 6%    Monthly Payment: $1309    Interest Cost: $251,100

Interest Rate: 7%    Monthly Payment: $1449    Interest Cost: $301,614

That didn't really seem to help much. The monthly payment at 5% is close to what I'm currently paying on the accelerated biweekly rate, but the other two still kinda hurt. Lets say I really focus my efforts and chip away at this sucker after I dig myself out of the other debts. What would I be looking at if I can get it down to ~$200,000?

Interest Rate: 5%    Monthly Payment: $1067    Interest Cost: $184,257

Interest Rate: 6%    Monthly Payment: $1190    Interest Cost: $228,273

Interest Rate: 7%    Monthly Payment: $1317    Interest Cost: $274,194

That's looking a little more reasonable. What this tells me is that once I've finished taking care of the other debts, I need to really focus on chipping my mortgage down. That way once the economy stabilizes, and mortgage rates go up again, I'll be able to continue paying for it comfortably without needing a huge salary hike. I'm glad I looked at this now rather than 3 and a half years from now; time is still on my side.


Home Buying For Dummies, 4th Edition
100 Questions Every First-Time Home Buyer Should Ask: With Answers from Top Brokers from Around the Country
The First-Time Homeowner's Handbook: A Complete Guide and Workbook for the First-Time Home Buyer (Book & CD-ROM)

In Debt We Trust... A Review

I made a point of taking some financial related reading material out of the library to start the year with a little while back. This included a dvd, which I forgot has a shorter rental period than books. Long story short, I'd rather not be paying unnecessary late fees, so I popped it in yesterday evening.

I found Danny Schechter's style to be a lot like Michael Moore's: brief, shocking, and most often lacking in depth. The music was gimmicky and the video was at times hard on the eyes, especially watching it on a laptop. That being said, he touched on some sticky subjects at a time when not enough people were listening for their own good. The copyright on the disk said 2006, and the box says 2007; either way it predicted the credit and housing bubbles before they actually popped.

Danny hopped around touching multiple subjects, ranging from lack of student financial education to predatory lending to capitol hill lobbying to bankruptcy laws. It's more of an eye opener than a financial education. It would have been nice if he had pointed to some places people could educate themselves on the details, rather than just pointing out people didn't have the education. Still, it's good to have your eyes opened from time to time.

One of the scenes that stuck with me throughout the video occurred close to the beginning on a university campus. A new university undergrad asks a credit card pusher what the interest rate on the credit card he's considering applying for is going to be. The credit card pusher says she doesn't know. Seriously? You're convincing kids to make financial decisions and not giving them the proper tools to do it? I know that credit card companies aren't exactly forthcoming with their fees, but that was considerably more blatant than I'm used to. This video is full of slap you in the face scenes and statistics, ranging from the fact that personal debt had more than doubled over the course of the last 10 years (from the time the video was made), to the calculation of interest rates on title loans, to the amount of money lobbyists put into getting capitol hill to change the bankruptcy laws. You'll notice I'm mentioning capitol hill; this video is American based, and does not touch on things happening in the rest of the world (though the credit crisis is applicable to most of us).

In my personal (non-professional) opinion, if you have a financial education, you can skip over this movie. It's a good eye opener for people that a financial education is needed, and that you can't blindly trust that banks and credit card companies care about your interests. They are businesses, and businesses need to make money. They make money off of you and me. Lots of it.

  

New Years Eve... One Last Hoo Rah

End of the month check in, and I'm kind of in shock.


(Forgive the formatting, I usually do this on my lunch hour at work and I'm home on my Mac right now. I'm not quite as good in Numbers as I am in Excel)

31-Mar-10 30-Nov-10 31-Dec-10 Chequing $116.66 $5.35 $1,140.22 Savings 1 $0.24 $0.26 $0.26 Savings 2 $100.00 $0.90 $0.90 Savings 3 $500.00 $120.07 $0.07 Investment $2,189.67 $931.24 $1,182.81 TFSA $0.00 $2,322.60 $2,463.64 RRSP 1 $1,525.96 $1,551.30 $1,594.74 RRSP 2 $3,868.08 $3,985.44 $4,016.84 ASSETS $8,300.61 $8,917.16 $10,399.48 Car Loan ($13,138.27) ($10,272.45) ($9,760.77) LOC ($10,000.00) ($11,745.00) ($11,100.00) Credit Card ($5,155.65) ($5,174.07) ($4,978.23) DEBTS ($28,293.92) ($27,191.52) ($25,839.00) Net Worth ($19,993.31) ($18,274.36) ($15,439.52)

It was a good month for money, as I got 3 pay checks in December, but this was surprising. I managed to finish up the Christmas season with less debt than I started December with, and made some headway in all categories. My net worth, not including my house, improved by almost $3000. That's way more than one pay check's worth. I'm very happy about that! The chequing account will drop shortly when my mortgage payment and vehicle insurance come out, but even so I'm very happy with the progress.


The other nice thing about thing about the progress on here is that it doesn't take into account of money that's outside of my accounts. Earlier in December I bought $200 worth of grocery store gift cards to be used in the upcoming months, and recently I took a bit of money out to start my budget envelopes. That money isn't accounted for up above. Additionally, many of you probably read Trent's post over at the Simple Dollar about cleaning and restocking a pantry:

http://www.thesimpledollar.com/2010/12/17/out-with-the-old-in-with-the-new-clean-out-your-pantry-and-restock-it/

It was something I hadn't done in quite a while, and after looking at my cupboards I realized it was badly needed. Over the last 2 days I've gone to various grocers (2 ethnic grocers and my usual), restocking the things I'll need to make meals over the next few months. It's so nice having a stocked kitchen again!

After a couple very stressful months when it comes to my finances, this feels like a happy end to the year. I have a warm home, full cupboards, and a couple dollars in my pocket to look after my needs. What a great way to ring in the new year. Have a great end to 2010 every one! I look forward to spending 2011 with you all!


  

What If You Weren't Allowed to Pay Down Your Debts?

I was cruising the frugal and money blog circuit when I came across a post by Kelly over at Almost Frugal about saving money when theres nothing left in the budget to save.

http://almostfrugal.com/2009/01/14/saving-money/

What struck me about the post wasn't the solution, but her comment that in France it's incredibly hard to make extra debt payments. I froze when I read that, not because I think it will become my reality, but at the thought of it. I've always paid off debts very aggressively; what if my credit card was like a mortgage? What if I was restricted in my ability to make extra payments? I could have been chipping away at my student debt 20 years, rather than the year and 2 months I actually spent paying it off. What if my credit card forced me to make minimum payments only? I remember opening my credit card statement a little while back and reading their calculation of how long it would take to pay off the balance making only minimum payments:

Almost 30 YEARS.

That's a mortgage in itself. By the time it was paid off I'd have paid for the balance several times in interest alone. That's a scary concept, and unfortunately it's one that people live with all too frequently. I've been to France a couple times, and I love the French lifestyle, but I would not be okay with paying off my debt like the French. At. All.

So why would someone restrict your ability to pay them back? Wouldn't they want their money back as soon as possible? The answer is quite simple really, I've already alluded to it above: they make more money by lending it to you than they do by keeping it in their own pocket. How much interest do you make on your savings account? 1%? How much are you paying on your debt? 20%? You and I quite frankly, are high interest savings accounts to the lenders of the world. How does it feel? I know if I was a lender I'd want to lock that rate in and get as much for my money as I could.

I'm unfortunately painfully aware of how much my debt is costing me in interest every month, and I don't want this albatross hanging around my neck for the rest of my life. I'm going to pay this sucker off as fast as I can. Kelly, I wish you the best of luck, and I hope you can convince them to let you pay a little extra when you can.

And the next time I go to France, I'm paying cash.


The Wealthy Barber: The Common Sense Guide to Successful Financial Planning
Debt Free For Life: The Finish Rich Plan for Financial Freedom
Debt-Free Forever: Take Control of Your Money and Your Life

Red Alert Financial Read

http://money.ca.msn.com/savings-debt/yourmoney/article.aspx?cp-documentid=26728358

A reminder for those borrowing that the rates won't last forever. I know I personally bought a bit more than I should have, and I was definitely enticed by the low rates. I have 4 years left until I have to renew my mortgage, and I have no idea what the rate will be when that day comes. All I know is I want as many things paid off as possible before then.

Bank of Canada Governor Mark Carney is telling people to smarten up. It's like he's talking to me when he's giving his speeches. Actually, he is talking to me. Me and everyone else who has access to cheap credit. When inflation hits again, I'll know full well that I was warned. Hopefully I can get myself into a position where I've properly heeded his warning, the guy knows what he's talking about.

I have a little personal finance crush on Mark Carney. Can you blame me?