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.

On The Side

So it looks like I'll have a second roommate as of this weekend. This works just fine for me, as it means I'll have 2 people helping out with housing costs, and I won't have to worry about finding people to keep an eye on my house if I go out of town for a while.

Unfortunately that means I'll also have to pay taxes on that money. Bugger.

So, I've been trying to decide what the best way to handle that money is. I could use it to pay off debt and reduce my interest load, but then I'll have to pay taxes on it next spring and may not have the money handy. I could put it directly into RRSPs, which would negate the whole tax issue, but then the money is locked up until retirement. I could put it into my emergency savings account, but it will eventually hit a point where I'd have more in there than really necessary (I don't have anything against savings, I just have other pressing issues that need attention as well). I could invest it, but again I'd be taking a risk of it shrinking and not having the money available to pay taxes.

I could use more dilemmas like this more often. There really is no purely bad outcome here.

I honestly think I'm going to end up splitting the income. Half of the money will go into savings, and half of it will go onto my highest interest debt (the credit card). I'm going to double check, but I don't believe I have to pay 50% tax on rental income, so putting half in the savings account should more than cover me there. I'll probably bump the savings account goal up to $6000 so that I have both emergency savings and tax money. Once that target has been hit I'll divert the excess payments back to debt. Once the credit card is payed off, I'm going to put the money towards the line of credit.

I don't think I'll be able to pay off everything in a year, but hey, what's the harm in trying? ;)

We'll see where my life is sitting at that point. I'd like to pay back the new homebuyer's plan RRSP loan well before my 15 years is up, and I'd love to use up my unused contribution room on my RRSPs as well. At the same time, I want to take a good solid chunk out of my mortgage; I'd like the balance owing to be under $200,000 when it comes time to renew in little under 4 years.

Or maybe I'll sell my house and use the proceeds to start a tea shoppe :)

Realistically, planning this far in advance is a bit of a pipe dream, but it's a fun one. For all I know I could be back to no roommates next month trudging away at my little *cough* pile of debt.

Only time will tell.

In the mean time, I'm going to scope out some sources of side income to help tackle the pile. I'm thinking I might see if there is a need for math tutors here in town.

What do you all do for side/secondary income?

Savings Decision

After giving it a little thought, I'm going to follow the advice that was given to me earlier this week. I'm going to put the debt reduction on hold (beyond minimum payments that is), and focus on building an emergency savings cushion. I'm going to save $4000 in cash to augment my investments. At their present value, that gives me little over $7500 that I can use in case of emergency if I absolutely have to. That gives me at minimum 3 months to work with. If I take in a renter, sell my car and get whatever job I can while looking for a permanent one it will last closer to 6 months. My freezer is already full, so I only have some dried staple stocking to do.

Once the $4000 is built up, I'm going to switch gears back to debt reduction again. As much as I'd love to have 6 months worth of cash savings, I don't want to be letting those balances sit and accumulate interest while I'm doing it. I'm building a cash reserve for the sake of liquidity, but it still makes more sense for me to pay off the debts before focusing on building up savings. Credit isn't supposed to be used as an emergency savings account, but building up a stash of cash to avoid paying interest on your debt while your debt balance sits there generating interest doesn't really make sense. Hence the savings limit.

*shifts gears*

Moving forward again.

The Top 10

While work is known to be a source of stress for many most almost all all of us at one point in time or another, sometimes it's not just the money that keeps us coming back. I know it isn't for me. If I was just in it for the money I'd haul my butt back up to Fort McMurray and get a job as a heavy equipment operator. WAY more money in that line of work. That's a pay off all non-mortgage debts before Christmas and have money left over type of job.

*sigh*

Sometimes the little reminders of why you do your job come just when you need them. Like Wednesday when I got a package from APEGBC (the Engineer's governing body in BC). In it was a bunch of registration related paperwork, and a little card with the Code of Ethics on it. We're held to a high standard of professional conduct in our work, we do more than just number crunching. It's one of the reasons why I feel good about when I do for a living. Despite the inevitable ups and downs, I can sleep well knowing that I'm working toward helping people as a whole.

Now that I'm done with that little sap story, I'll get back to the card. They break the code down into 10 easily manageable bites:

1. Public Interest
2. Know Your Limits
3. Don't Fake It
4. Conflict of Interest
5. Respect Your Value
6. Lifelong Learning
7. Do Unto Others
8. Stand Your Ground
9. Be Brave
10. Spread The Word

I'd go into detail on each one, but let's face it, it's kind of wordy (otherwise why bother with the short form?), and 99% of you would never read anything I write ever again if I did. Seeing as knowing that people do read this is keeping me accountable, I figure I'd like to keep you guys around ;)

The 10 ideas, in their most basic form, can be applied to the concepts of personal finance and frugality, as well as to my work. Think about it:

1. Public Interest - Reducing energy consumption, keeping excess "stuff" out of landfills, growing our own vegetables and not wasting the things we purchase... These not only help ourselves, but are in the interests of the community as a whole. Think of more than just self gratification. 
2. Know Your Limits - Besides the obvious example of credit limits? How about transaction limits? Or drink limits? Or stress limits? Or the limit of your budget? How far can you go before you lose control, whether it be financially or otherwise? Recognizing your limits, and working within them, is crucial to success in all walks of life. 
3. Don't Fake It - You've got it made. You're out in the work world, you're an adult, you should look the part right? High end clothes, condo downtown, brand new car, eating out every night at restaurants, international holidays.... Or should you? The short answer, if you can't afford it in cash after you've stashed some away, is no. Don't fake it. 
4. Conflict of Interest - How does your financial advisor get paid? Do you pay them up front? No? Well they're making money off you somewhere, make sure you know how. Otherwise you'll never know if that awesome fund they're recommending is great for your account... or theirs. 
5. Respect Your Value - You work hard for your money, shouldn't your pay check reflect that? Know what you're worth, and go for it. If your employer isn't paying you what you're worth, they may not respect your value. Show them they're wrong, and get the pay check you deserve. 
6. Lifelong Learning - You are never too old or young to learn a new skill. No one in today's job market can afford to stay stationary and rely on "how things have always been done". Get out there and sponge up every new skill and piece of knowledge you can. You never know when it will come in handy. 
7. Do Unto Others - Be good to others, and they will be good to you. This piece of advice has come in handy more times than I can count. 
8. Stand Your Ground - Store not honouring their return policy? Someone wants to drive after having a few too many? Credit card trying to charge you unreasonable fees? Dealing with a bully? Stand your ground. If you don't, there may not be someone else there to do it for you. 
9. Be Brave - Whether it's going back to school, starting a new job, or *gulp* going without a job, change is scary. Be brave, you'll make it through. 
10. Spread The Word - As all of my fellow PF and lifestyle bloggers are doing, spread the word. You never know if that little nugget of advice you take for granted could be the switch that helps someone and finally sends them in a positive direction. Whether it's a savings tip, an explanation of confusing financal jargon, a cheap dinner recipe, or just a way to deal with stress, you never know who you might help. Likewise, you never know when someone might just reach out and help you.

Who knew work could be so applicable?

Retirement Frustration

As I mentioned a while back, I've started up my retirement contributions again. They're small mind you, but they are there. When I received my last pay raise the entire raise went into retirement savings. No pain no gain? That seems to me like a gain without the pain to me. What really spurred me into action was an e-mail from my employer saying that they were re-instituting part of their contribution matching program. The program had been cut during the downturn as a cost savings measure. Better to keep more people employed with most of their benefits than keep fewer people employed with all of the benefits. For employees working at the company for 1-5 years, they would match up to 2% of your pay, providing you put at least that much into the account. My last raise was 3%, so I met that requirement. My 1 year anniversary was earlier this month, so as of this pay period I'll be receiving their contributions as well.

When I signed up for the contribution matching, they had a little section on the form where you put down which funds you wanted the money dispersed between. I selected a couple funds with low MERs (management expense ratio - the percentage of your fund that goes to them every year), and submitted the form. A couple weeks later I received a letter from the company holding the mutual funds, saying that the funds I selected were not available in my program. I'm not entirely sure if it's because I didn't have the minimum balances for the funds, or if they're not available to my company's plan? They had another form asking for different funds, which I never sent back to them. The money has been sitting in the account making whatever their interest rate for cash is (super low).

Not having the cash in an actual fund isn't going to stop me from getting my employer's contribution, so I've been just letting it sit there. A 67% straight return is better than nothing in the short term.

The reason why I didn't select one of their other funds is because they have absolutely ridiculous MERs (2.5%-3% was common, and even higher). What's really frustrating is that they don't tell you that when they send you the paperwork to fill out.  I received another form this week, with a list of mutual funds again. They list the Gross Annualized Rate of Return for the last 1, 3, 5 and 10 years, but no other information. Besides the fact that you can't predict the future returns based on the past, the Gross ARR is meaningless. If anything, I'd wan't to see the Net ARR. There would be a lot more negatives on this sheet if they did show that, that much I can promise you. It's frustrating that they don't show you the fees, they just mention in small print that you can contact them or find them online.

Grrrrr.

So, for the time being, I'm leaving my money in cash. I'll let it accumulate for a while and see if the other funds open up for me. If they don't, I'll probably just let the money build up and then periodically make a bulk transfer from it to my other institution which has cheaper fees. Better to get free employer money in a crappy account than not.

Mmmmm Chai...

This morning's bus ride was filled with sweet visions of Chai Latte as I read the post over at Fabulously Broke about Starbucks' 1/2 price Tea Latte promotion. *drool* It most certainly helped with the fact that I had to wait 15 minutes for a bus in -25 weather. Thanks FB!


This right here ladies and gentlemen is Chai Porn. Mmmm...

 Unfortunately I can't make it to a Starbucks today between 2-5pm, and frankly in this weather I really don't want to go outside any more often than absolutely necessary. So, I used up the last of a gift card and bought one after class. The spot has been hit, I am now happy(er). When I was working in a camp job, away from civilization for 3 weeks at a time, I would pack boxes of concentrate in my luggage to mix with milk and ice in my water bottle. Needless to say, I was the recipient of more than one jealous stare (and yet no one else just brought the concentrate with them...)

I could wax poetic for a while, but I think that's enough for now. Anyone who loves them as much as I do, and I know there are a lot of you, knows that the cost of them adds up over time. You can get Tazo Chai concentrate in Starbucks and at the grocery store, but you'll probably notice it isn't quite as strong. According to my barista former roommate, the concentrate they use is MUCH stronger. Even after adding water it's still stronger than the store stuff. It works nicely in a pinch though when you have a ridiculous craving, and it's a fair bit cheaper too. The cost of 2 grande chai lattes is approximately the cost of 1 carton of concentrate. Following package directions you'll get 4 lattes out of it.

However, last winter my mom got me a milk frother for Christmas. I have a little too much fun with that thing... I got into making Starbucks style drinks at home for a while. I was making a pretty awesome Cinnamon Dolce Latte that was similar to the one you get in Starbucks. Very similar actually. I've tried making my own copycat Chai Lattes at home as well, though I've never tried to copy the Starbucks one. I think it's time I do try to though. *evil grin* There looks to be some interesting looking recipes here as well. If I come up with a good taste-a-like, I'll post it.

Sometimes it seems like a bit of a shock looking at the sugar contents in these recipes, mostly because we don't know what goes into our drinks when we buy them. According to Starbucks their grande Chai Tea Latte has 42 grams of sugar. This is approximately 10 teaspoons, or little under a 1/4 cup. Suddenly I don't feel so bad for using the occasional teaspoon in my tea at home! lol. That right there is why it's a treat, not a daily indulgence. It's also why a lot of people lose weight when they start cutting out the extra drinks. Oh well, what's the point in living if you can't occasionally enjoy it? I certainly do, and I'm now staring longingly at my empty travel mug. Soon my friend, soon.

A Couple Quick Hacks

Look around any personal finance site, and you will eventually find an article or blog post about frugal hacks. Basically, tricks to can do easily to save yourself money, or get more for your money. There are thousands of them. Here’s a couple of hacks that I use frequently:

At Home:

Out of body scrub and your feet resemble a reptile? Mix granulated sugar, salt, or rice into a squirt of your usual body wash. It works really well in a pinch (and is WAY cheaper than the sugar/salt scrubs you can buy. I’m looking at YOU Fresh Brown Sugar Polish). I wouldn’t suggest using it on your face though. Maybe it’s just me, but I found this to be way too harsh on my skin, and I broke out worse after trying it. It worked really well on my legs through.

While Travelling:

Do you feel like your intelligence is being insulted when you go through airport security and the price of bottled water jumps another $3? I know I do. That’s why I started carrying an empty water bottle though security. On the other side I go to Starbucks and ask the barista to fill it for me. I’ve never had a problem with this. One thing to consider, make sure the water in the country you’re in is safe to drink. I drank tap water in Prague once and was quite sick as a result. In Canada and the US however, it’s perfectly safe to drink. If you go to a fast food joint and they try to tell you their tap water isn’t safe to drink, remind them that the same tap water is being used to make their fountain drinks. TIP: Take the bottle out of your carry on and put it in the tray before putting it through the scanner, otherwise security will rip your bag apart looking for fluids. Or try one of those new collapsible bottles that are popping up everywhere.

At Starbucks

Most Starbucks hacks have to do with coffee, but this one is for the tea drinkers out there. When you order your tea, order the Venti (not a huge price difference from the Grande). The Venti price includes 2 tea bags rather than the standard 1 bag. Ask the barista to leave one of the tea bags out on the side when she’s making your tea. For the extra 20 cents or so you paid for the size upgrade, you now have a second cup of tea. I stash the extra bags in my desk at work. And seriously, use those bags more than once. There is a ton of tea in them, you can easily make 2 or 3 cups. Do that with both bags and you have 4-6 cups of tea for the price of 1.

What are some of your favourite hacks?

Guilty Pleasure

I have an undeniable guilty pleasure that costs me at least $30 a month.

Magazines.

Fashion magazines. Home Décor magazines. Money magazines (Oh, the irony). Real Estate magazines. Business magazines. Cooking magazines. Yoga magazines.

It’s like buying a newspaper everyday, only I read my news online.

I know. I know. If I can read my news online, why can’t I read the rest of it online? Well, it gives me something I can read on the bus. I like reading novels, but I tend to get quite absorbed in what I’m reading. It makes missing my stop a greater likelihood…

I have piles of them. Some, like the cooking magazines, get archived and saved for future use, but most of them end up collecting dust on the floor afterwards. Not good, I know. I’m half considering building a coffee table out of them. Maybe something like this one over at http://www.treehugger.com/

Anyway, more to the point. I know that I would save a considerable amount of money if I just subscribed to them rather than picking them up at the grocery or book stores. I did that last year with one of them; I used my Airmiles to subscribe to Money Sense, a finance magazine I particularly enjoy reading. I also requested a subscription to Fine Cooking magazine for Christmas when my mom inquired.

I received an e-mail last week from my phone company about magazine subscriptions. Normally when they send promotional e-mails I promptly delete them, because they’re usually offering TV bundling packages (I don’t have a TV), or promotions for signing a contract (not going that route again). This time I paused and read it. I completely forgot that my phone company is also a publishing company, and they were offering magazine subscriptions tacked onto existing accounts for about $1/month per magazine. It didn’t make you lock in for a specific amount of time, you can opt out any time, and the shipping was included. I’m still hesitant that I might get slapped with an extra fee somewhere, but I added a couple magazines to my cell phone bill. If spending $4/month on my cell saves me from spending $20 a month in the grocery store (they don’t print all of my favourites), I figure that’s a decent deal.

What's your guilty pleasure?

Taking a page from the Chinese

http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/what-chinas-consumers-can-teach-us.aspx

I rather enjoyed reading this article this morning. A lot of it I already know, just don't necessarily put into practice. I quite enjoyed the idea of listing the wants and having a "beauty pageant" to decide which, if any, get purchased. I also quite enjoy the fact that there is an oriental supermarket that, while not cheap by oriental supermarket standards, is quite cheap compared to the closest one to my house. Positive point, it's on one of my bus routes home. Negative point, it's inside the biggest shopping mecca in Canada. Hmmm.

The tea that I broke my credit card goal with finally came in. Thankfully they are nice large tins, so they ended up being a little cheaper than my usual tea, even after the exchange rate and shipping costs are factored in.

I'm doing a little better than last pay day's budget blowing. Hopefully I can keep it up when my boyfriend gets home and in the days leading up to Christmas....