Goal Review End April

I would like to take this chance to apologize to any of my neighbors who saw me in my front yard last week dancing like a loon.  I’m not crazy, just happy . . . promise. 

Financial

- Set up RRSP investments with my return of value pension from the military and contribute $359 a month for the year, along with any tax refunds. CHECK [Savings are happening as planned.  The return of value has arrived and was promptly invested. See how here.]

- Pay off house in 5 years.  I should be able to accomplish this by doubling up every payment and paying a 10% lump sum every year.  CHECK [Made my double up for the month.  Also got $4,300 of scholarship money for my upcoming Master’s Degree which frees up some of the money I had previously put aside for my education.]

Educational

-Start Masters of Science / Masters of Science in Nursing in the fall.  CHECK [I have been officially accepted, hence the impromptu dance in my front yard last week.  I even have my supervisors all ready assigned.]

Social

-Join two new clubs in the local area.  CHECK [Quilting club is going strong and the writing group is meeting at my place every month to avoid paying for a venue.] 

Other

-Have my novel accepted to be published.  I plan to have it ready by the end of the month (January), so I can start sending it out. CHECK [The whole manuscript is done (and I’m avoiding making huge changes except for grammar, and I’ve sent out a query letter.)  Now comes the waiting.] 

-Become a respite foster parent. CHECK [I’m meeting with my Social Worker tomorrow and have been loaded on the next course.  I do need to follow up on getting the medical side sorted.]

-Take a big backpacking trip solo. CHECK [Saving is going as planned and I haven’t touched my vacation days yet.] 

-Finish my current crafting projects.  CHECK [The important one is being worked on almost every night.] 

I’ve seen progress on each of my goals for a lovely 100%.  In May I want to focus on a couple of things.  1.Set an appointment with my family doctor to get my medical forms for my foster care application filled out. 2. Review my Mortgage Plan and continue to work towards saving the extra money I’ll need for my 10% payments.  3. Keep up the good progress on my embroidery.  

Have a question?  I'd love to hear it!

Investment Proportions

I've finally done it.  All the hemming and hawing is done and I've come up with a plan for my retirement portfolio.  It stands as follows:

25% - Canadian Bond Index Fund
10% - US Stock Index Fund
20% - International Stock Index Fund
45% - Canadian Stock Index Fund

Which means I have 30% of my portfolio in foreign markets, 75% in Stocks and 25% in Bonds.  I am planning on keeping this ratio until at least halfway to retirement at which point I will start slowly moving towards a higher percentage of fixed income.  All of the Funds that I chose follow well known and established Indexes.

I chose this set up because:

- It will be 10+ years before I need to touch this money (perhaps as long as 40 years depending on how long I feel like working)
- I have a moderate to high risk tolerance, which means that I won't sell if my portfolio suddenly drops
- I have no desire to try and beat the market, I would prefer to match it
- If the economy in one area of the world plummets I have investments in other parts of the world*

*Of course all the markets in the world could plummet at the same time, the earth could also be hit by a meteorite, the odds though are fairly low.

Have a question?  I'd love to hear it!

Investment Rules

I'm a rules person.  Not in that I like people imposing rules on me.  That doesn't always go over so well.  I am, however fond of structures and guidelines on my own terms.  I make my own rules so that I know  that everything is in order.  Which means I have investment rules, of course.  While these rules are not hard and fast they give me a good guide of what to look for when buying investments and are the compilation of many many books that I have read.  They are as follows:

- Don't try to beat the market, match it using Index Funds.
- Never hold more than 75% of your total portfolio in Stocks or Bonds
- Never hold less than 25% of your total portfolio in Stocks or Bonds
- Keep at least 30% of your portfolio in foreign investments
- Use monthly dollar cost averaging instead of trying to time the markets
- Always look at the mutual fund/index fund's annual operating expenses, they should not be more than:*

·      Taxable and municipal bonds-------------------0.75%

·      U.S. Equities (large and mid-sized stocks)---1.0%

·      High-yield (junk) bonds-------------------------1.0%

·      U.S. equities (small stocks)---------------------1.25%

·      Foreign stocks-------------------------------------1.50%

There are guide lines that I try to follow with all investments.  These guidelines do still offer a lot of flexibility depending on when you intend to use your money and what your risk tolerance is.

**Maximum annual operating expenses are courtesy of Benjamin Graham's "The Intelligent Investor"

Have a question?  I'd love to hear it!

Raise a Little Hell of Your Own

It probably doesn't come as a shock that I am a big fan of Gail Vaz-Oxlade and subsequently have been watching her new show Money Moron.  Just as good as her other shows ('Til Debt do us Part and Princess) Money Moron illuminates the mistakes that so many in our society make on a daily basis.

One of the aspects that really struck me was how hard the people in the show looked for some place to put the blame, they certainly didn't want the blame to fall on their shoulders.  Sometimes it was their partner's fault for not being strict enough, or the world's fault for judging them too harshly, or the government whose tax laws were simply unreasonable.

It got me thinking of a recent blog post that I had read that encouraged finding a theme song for your finances.  And no, "Money, Money" by ABBA is not what they were thinking about.  Like most people I had never really thought about finding a theme song for my money but I was intrigued by the idea.  After all what could be a better way to motivate yourself when tempted by the latest gadget or when you feel like just spending a bit of your savings.  My new money theme song is "Raise a Little Hell"  by Trooper, and the couples on Money Morons could probably use the advice in the song as well.

“In the end it comes down to your thinking

And there’s really nobody to blame

When it feels like your ship is sinking

And you’re too tired to play the game

Nobody’s going to help you

You’ve just got to stand up alone

And dig in your heels

And see how it feels

To raise a little Hell of your own”

I find the idea of no one coming to help me liberating as opposed to frightening.  I have no one to blame for my failures except for myself and no one else can take credit for my success but myself.  It means I can stop waiting for everything to magically sort itself out and work on setting things straight myself.  This attitude is probably the most beneficial attitude with which to face your finances, absolute accountability and infinite will power.

Food Waste - The loss of good intentions

I am generally pretty proud of myself over the last two weeks.  Due to the new room mate situation and some poor planning that was the result of a number of weekends away I ended up eating leftovers for an entire week.  Yes, literally the whole week, lunches and suppers were leftovers from the week before.  It was convenient in that I didn't have to cook, but as fond as I am of leftovers a whole week of them was a tad excessive.  Of that whole time the only thing that got pitched were some refried beans that tasted just a tad funny.  Unfortunately they got dumped unceremoniously in the green pin without a picture for posterity.
I did however snap a picture of the unfortunate eggs which I had the good intention of turning into some sort of baked good.  As you can probably see from the date on the box my good intentions kept on being put off resulting in an unfortunate loss of two eggs.  Oh well, life gets busy and you have to prioritize.

Early Retirement.

The next scenario I am considering is Early Retirement.  Of course this means a lot of different things to a lot of different people.  For the sake of this article it's me retiring as soon as possible while maintaining my current standard of living.  (Which is quite frugal compared to most folks but it works for me.)

Over the next four and a half years I will be concentrating primarily on paying off my mortgage.  Meaning that my contribution rate to my retirement savings will stay at $359 per month.  While earning 7% interest and taking into account the current value of my savings $21,395.72 I can expect to have a retirement portfolio of $51,600 when I'm done paying off my mortgage at the age of 28.

Then things get interesting.  Since I no longer have mortgage payments to make I will have a fair bit of money each month to play with.  Anywhere from between $1,200 per month to $1,900 per month depending on how much of my mortgage I am paying directly from my pay check and how much I am paying from other sources of income.  (See original mortgage plan here.  Though it is due to be updated.)  Looking at my monthly budget I am confident that most, if not all of the $1,900 will come from my monthly pay check.  However, I will go slightly conservative and say that loosing my mortgage payment will free up $1,779 monthly.

At that rate I will have the $700,000 (plus a paid off house) that I need to retire 15 years after my mortgage is gone.  At this point I will be 43 years old.

The advantage of this plan are that I will have the freedom to retire relatively young, certainly before the age of 45.

The disadvantage of this plan is that the budget does not allow for kids in my life either before or after retirement.

Bottled Water

I have been long a fan of bottled water.  It's great for delicate medical devices that need to create humidity and can't risk having sediment in the water.  It's also great for reconstituting certain very delicate medications.

Of course if you're not reconstituting medications or using it with a medical devise, bottled water is a dumb idea.  Yet I see many people (seemingly healthy) drinking bottled water and then tossing the bottle. Apparently it is more convenient to go find some crude oil, dig it up, ship it somewhere to be turned into plastic, shipped elsewhere to be filled with water, and then shipped to a store where you can pay a ridiculous amount of money for it than carry around a refillable bottle or canteen (which you can probably refill at a TAP, because chances are if you're reading this you live in a country with potable water).  Of course I've heard some people complain that tap water tastes funny.  I'll be the first to admit that I'm not a big fan of water, give me milk or juice any day.  However, if you are that sensitive to the taste of water might I suggest that you use a reusable water filter?  It is considerably cheaper than buying bottles.  If, on occasion, you need to drink potable yet unfiltered water might I suggest that though it may not taste the best it is much better than the bitter taste of our planet's resources being wasted?

At a bottle of water a day (about $2.50 per bottle) you are wasting $912.50 a year on something that you pay pennies for out of the tap.  Save yourself some money and go buy a water filter ($20) and fill up that old water bottle that's been gathering dust.  (You know that one you probably got as a promotional item or at a charity even.)  Then, may I suggest, you send the money I just saved you to a charity that digs wells in areas that don't have access to clean water.  That way every body gets what they need and the planet might actually be habitable for our grandchildren.